exv10w14



 





Exhibit 10.14



 



ASSET PURCHASE AGREEMENT



by and among



UNITED COMPONENTS, INC.;



NEAPCO INC.;



AND



NEAPCO, LLC



Dated as of June 30, 2006



 




 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I CERTAIN DEFINITIONS
	 	 	1	 
	1.1 Definitions
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II PURCHASE AND SALE OF ASSETS
	 	 	8	 
	2.1 Agreement to Purchase and Sell
	 	 	8	 
	2.2 Enumeration of Purchased Assets
	 	 	9	 
	2.3 Excluded Assets
	 	 	10	 
	2.4 Certain Consents to Assignment
	 	 	11	 
	 
	 	 	 	 
	ARTICLE III ASSUMPTION OF LIABILITIES
	 	 	11	 
	3.1 Agreement to Assume
	 	 	11	 
	3.2 Description of Assumed Liabilities
	 	 	11	 
	3.3 Excluded Liabilities
	 	 	12	 
	3.4 No Expansion of Third Party Rights
	 	 	12	 
	 
	 	 	 	 
	ARTICLE IV PRICE AND CLOSING
	 	 	12	 
	4.1 Closing
	 	 	12	 
	4.2 Purchase Price
	 	 	12	 
	4.3 Allocation of Total Consideration
	 	 	14	 
	 
	 	 	 	 
	ARTICLE V CLOSING DELIVERIES
	 	 	14	 
	5.1 Conditions to the Obligations of Buyer
	 	 	14	 
	5.2 Conditions to the Obligations of Parent and Seller
	 	 	16	 
	 
	 	 	 	 
	ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
	 	 	16	 
	6.1 Organization and Power
	 	 	16	 
	6.2 Authorization; No Breach
	 	 	17	 
	6.3 Sole Shareholder; No Subsidiaries
	 	 	17	 
	6.4 Financial Statements
	 	 	17	 
	6.5 Absence of Undisclosed Liabilities
	 	 	18	 
	6.6 No Material Adverse Change
	 	 	18	 
	6.7 Absence of Certain Developments
	 	 	18	 
	6.8 Assets
	 	 	19	 
	6.9 Owned Real Property
	 	 	20	 
	6.10 Leased Real Property
	 	 	20	 
	6.11 Real Property
	 	 	20	 
	6.12 Tax Matters
	 	 	21	 
	6.13 Contracts and Commitments
	 	 	21	 
	6.14 Intellectual Property
	 	 	22	 
	6.15 Litigation
	 	 	24	 
	6.16 Employees; Employee Benefit Plans; ERISA and Labor
	 	 	24	 
	6.17 Compliance with Laws; Licenses
	 	 	26	 
	6.18 Environmental Matters
	 	 	26	 
	6.19 Customers and Suppliers
	 	 	27	 
	6.20 Insurance
	 	 	28	 
	6.21 Governmental Consents
	 	 	28	 






 i




 









 





	 	 	 	 	 
	6.22 Affiliated Transactions
	 	 	28	 
	6.23 Inventory
	 	 	28	 
	6.24 Product Warranty
	 	 	28	 
	6.25 Product Liability
	 	 	28	 
	6.26 Brokers and Bonuses
	 	 	28	 
	 
	 	 	 	 
	ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER
	 	 	29	 
	7.1 Organization and Power
	 	 	29	 
	7.2 Authorization; No Breach
	 	 	29	 
	7.3 Litigation
	 	 	29	 
	7.4 Brokers and Bonuses
	 	 	29	 
	7.5 Buyer Acknowledgment
	 	 	30	 
	 
	 	 	 	 
	ARTICLE VIII INDEMNIFICATION; SURVIVAL
	 	 	30	 
	8.1 Indemnification by Parent and Seller
	 	 	30	 
	8.2 Indemnification by Buyer
	 	 	30	 
	8.3 Manner of Payment
	 	 	31	 
	8.4 Defense of Third-Party Claims
	 	 	31	 
	8.5 Additional Indemnification Procedures
	 	 	32	 
	8.6 Intentionally Omitted
	 	 	32	 
	8.7 Survival of Representations and Warranties
	 	 	32	 
	8.8 Sole Remedy and Limitations
	 	 	32	 
	 
	 	 	 	 
	ARTICLE IX ADDITIONAL AGREEMENTS
	 	 	33	 
	9.1 Mutual Assistance
	 	 	33	 
	9.2 Non-Competition; Non-Solicitation
	 	 	33	 
	9.3 Confidentiality
	 	 	34	 
	9.4 Specific Performance
	 	 	34	 
	9.5 Tax Matters
	 	 	35	 
	9.6 Payment of Debts
	 	 	35	 
	9.7 Name Following the Closing
	 	 	35	 
	9.8 Certain Employee Benefits Matters
	 	 	35	 
	9.9 Accounts Receivable
	 	 	36	 
	9.10 Environmental
	 	 	37	 
	9.11 Refunds and Remittances
	 	 	37	 
	 
	 	 	 	 
	ARTICLE X MISCELLANEOUS
	 	 	38	 
	10.1 Expenses
	 	 	38	 
	10.2 Arbitration
	 	 	38	 
	10.3 Consent to Amendments; Waiver
	 	 	38	 
	10.4 Successors and Assigns
	 	 	38	 
	10.5 Severability
	 	 	39	 
	10.6 Counterparts
	 	 	39	 
	10.7 Descriptive Headings
	 	 	39	 
	10.8 Notices
	 	 	39	 
	10.9 No Third-Party Beneficiaries
	 	 	40	 
	10.10 Entire Agreement
	 	 	40	 
	10.11 Exhibits and Schedules
	 	 	40	 
	10.12 Governing Law
	 	 	40	 
	10.13 Delivery by Facsimile
	 	 	40	 
	10.14 Further Assurances
	 	 	41	 
	10.15 Construction
	 	 	41	 






ii





 









 








EXHIBITS AND SCHEDULES




	 	 	 	 	 
	Exhibits:	 	 	 	 
	Exhibit A

	 	-
	 	Form of Opinion of Seller’s Counsel
	Exhibit B

	 	-
	 	Form of Secretary’s Certificate of Seller
Exhibit C-Form of Bill of Sale
	Exhibit D

	 	-
	 	Form of Assignment Agreement
	Exhibit E

	 	-
	 	Form of Assignment and Assumption Agreement
	Exhibit F

	 	-
	 	Form of Transition Services Agreement
	Exhibit G

	 	-
	 	Form of Secretary’s Certificate of Buyer






	 	 	 	 	 
	Schedules	 	Section Reference
	Excluded Contracts

	 	 	2.3	(c)
	Excluded Agreement

	 	 	2.3	(k)
	Excluded Assets

	 	 	2.3	(l)
	Working Capital

	 	 	4.2	(c)
	Allocation Statement

	 	 	4.3	 
	Employment Agreements

	 	 	5.1	(f)
	Authorization; No Breach

	 	 	6.2	 
	
Financial Statements

	 	 	
6.4	 
	Undisclosed Liabilities

	 	 	6.5	 
	Certain Developments

	 	 	6.7	 
	Assets

	 	 	6.8	 
	Owned Real Property

	 	 	6.9	 
	Leased Real Property

	 	 	6.10	 
	Real Property Permits and Agreements

	 	 	6.11	 
	Material Contracts

	 	 	6.13	 
	Intellectual Property

	 	 	6.14	 
	Litigation

	 	 	6.15	 
	Employees

	 	 	6.16	 
	Environmental Matters

	 	 	6.18	 
	Customers and Suppliers

	 	 	6.19	 
	Insurance

	 	 	6.20	 
	Affiliated Transactions

	 	 	6.22	 
	Accounts Receivable

	 	 	6.23	 
	Inventory

	 	 	6.24	 
	Product Warranty

	 	 	6.25	 
	Product Liability

	 	 	6.26	 
	Buyer and VEMI’s Brokers and Bonuses

	 	 	6.27	 
	Seller and Parent’s Brokers and Bonuses

	 	 	7.4	 
	Special Indemnification Schedule

	 	 	8.1	 






iii





 









 








ASSET PURCHASE AGREEMENT




          THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of June
30, 2006, by and among United Components, Inc., a Delaware corporation (“Parent”); Neapco
Inc., a Pennsylvania corporation (“Seller”); and Neapco, LLC, a Delaware limited liability
company (“Buyer”).




R E C I T A L S




     A. Seller designs, manufactures and distributes universal joints, constant velocity joints,
steering shafts and the individual components that collectively constitute such products for both
original equipment and aftermarket applications (as presently conducted, the “Business”).



     B. Seller desires to sell to Buyer substantially all of Seller’s assets and the Business, and
Buyer desires to purchase said assets and the Business, all on the terms and subject to the
conditions contained in this Agreement.



          NOW, THEREFORE, in consideration of the foregoing premises (which constitute an integral part
of this Agreement) and the mutual covenants, agreements and understandings hereinafter set forth,
and for other good and valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:




ARTICLE I

CERTAIN DEFINITIONS




     1.1 Definitions. For the purposes of this Agreement, the following terms have the
meanings set forth below:



          “Accounting Firm” has the meaning set forth in Section 4.2(d).




          “Accounts Payable” has the meaning set forth in Section 3.2.




          “Accounts Receivable” has the meaning set forth in Section 2.2.




          “Accrued Expenses” has the meaning set forth in Section 3.2.




          “Affiliate” of any particular Person means any other Person controlling, controlled by
or under common control with such Person, any partner of such Person and any partner or member of a
Person that is a partnership or limited liability company. For purposes of this definition,
“control” (including the terms “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 such “control” will be presumed if
any Person owns fifty percent (50%) or more of the voting Equity Interests or other ownership
interests, directly or indirectly, of any other Person.






1









 







          “Affiliated Group” means any affiliated group as defined in Section 1504 of the Code
(or any analogous combined, consolidated or unitary group defined under state, local or foreign
income Tax law).




          “Agreement” has the meaning set forth in the Preamble.




          “Applicable Rate” means seven percent (7%) per annum calculated on the basis of the
actual number of days elapsed over a three hundred sixty (360) day year.




          “Assumed Liabilities” has the meaning set forth in Section 3.1.




          “Assumed Taxes” has the meaning set forth in Section 3.2(d).




          “Business” has the meaning set forth in the Recitals.




          “Buyer” has the meaning set forth in the Preamble.




          “Buyer Parties” means Buyer and its Affiliates and its shareholders, officers,
directors, employees, agents, partners, representatives, successors and assigns.




          “Buyer’s Defined Benefit Plan” has the meaning set forth in Section 9.8(e).




          “Closing” has the meaning set forth in Section 4.1.




          “Closing Date” has the meaning set forth in Section 4.1. 




          “Closing Statement” has the meaning set forth in Section 4.2(c).




          “COBRA Continuation Coverage” has the meaning set forth in Section 9.8(c).




          “Code” means the Internal Revenue Code of 1986, as amended, and any reference to any
particular Code section shall be interpreted to include any revision of or successor to that
section regardless of how numbered or classified.




          “Confidential Information” means all information of a confidential or proprietary
nature (whether or not specifically labeled or identified as “confidential”), in any form or
medium, to the extent that it relates to the Business. Confidential Information includes the
following, to the extent that it relates to the Business: (i) internal business information
(including historical and projected financial information and budgets and information relating to
strategic and staffing plans and practices, business, training, marketing, promotional and sales
plans and practices, cost, rate and pricing structures and accounting and business methods); (ii)
identities of, individual requirements of, specific contractual arrangements with, and other
confidential or proprietary information about, Seller’s suppliers, distributors, customers,
independent contractors or other business relations and their confidential or proprietary
information; (iii) trade secrets, know-how, compilations of data and analyses, techniques, systems,
formulae, research, records, reports, manuals, documentation, models, data and data bases relating
thereto; and (iv) inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not patentable). Confidential
Information shall not include any information that is or becomes generally known to and available
for use by the public other than as a result of a breach of this Agreement by Seller or Parent.




2









 





          “Continuation Period” has the meaning set forth in Section 9.8(a).




          “COTS” means computer software programs that are widely available to the public on
standard terms, provided that the annual license fee does not exceed $25,000.00.




          “Employee Pension Benefit Plan” has the meaning set forth in Section 3(2) of
ERISA.




          “Environmental Law” means all applicable domestic and foreign federal, state and local
laws, statutes, ordinances, regulations, judicial orders and common law that impose liability or
standards of conduct concerning: (i) the regulation and protection of human health and safety,
worker health and safety, the environment and natural resources, including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation; or (ii) the manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport, presence, testing, discharging or handling of Hazardous Substances.




          “Environmental Permit” means any permit, license, approval, consent or other
authorization required by, or pursuant to, any Environmental Law.




          “EPA” means the United States Environmental Protection Agency.




          “Equipment” has the meaning set forth in Section 2.2(b).




          “Equity Interests” means (i) any and all shares, membership interests, interests,
participations or other equivalents (however designated) of capital stock of a corporation and (ii)
any and all ownership interests in a Person (other than a corporation), including shares
(restricted or unrestricted), membership interests, partnership interests, participation interests
and beneficial interests (however designated) and any and all warrants, options, securities or
other rights convertible into, or exercisable or exchangeable for, any of the foregoing.




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




          “Estimated Working Capital” has the meaning set forth in Section 4.2(a).




          “Excluded Assets” has the meaning set forth in Section 2.3.




          “Excluded Liabilities” has the meaning set forth in Section 3.1.




          “Executives” means Robert Hawkey, J. Robert Mangini, Keith Sanford and John Lion.




          “Financial Statements” has the meaning set forth in Section 6.4.




          “Final Working Capital” has the meaning set forth in Section 4.2(c).




          “FIRPTA” means the Foreign Investment in Real Property Tax Act.




3









 








          “GAAP” means United States generally accepted accounting principles, as in effect from
time to time, consistently applied during all periods covered by the Financial Statements.




          “Governmental Authority” means any court or any agency, commission, department
(including the executive department) or body of any municipal, township, county, local, state,
federal or foreign governmental, regulatory, administrative, judicial or quasi-governmental unit,
entity or authority.




          “Hazardous Substances” means any: (i) substance, waste or material that constitutes a
“hazardous substance,” “toxic substance,” “hazardous waste,” “extremely hazardous waste,”
“restricted hazardous waste,” “contaminant,” “hazardous constituent,” “special waste,” or
“pollutant” (as such terms are defined by any Environmental Law) or any similar term or phrase;
(ii) petroleum or any fraction or by-product thereof, asbestos, polychlorinated byphenyls (PCBs) or
any radioactive substance, waste or material; or (iii) substance, waste or material that is
regulated as a hazardous substance, toxic substance, hazardous waste, extremely hazardous waste,
restricted hazardous waste, contaminant, hazardous constituent, special waste or pollutant pursuant
to any Environmental Law.




          “Indebtedness” means with respect to any Person at any particular date, without
duplication: (i) all obligations of such Person for borrowed money; (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments or debt securities; (iii)
all obligations arising from cash/book overdrafts; (iv) all capital lease obligations; (v) all
amounts due or which may become due in connection with the purchase of any assets, businesses,
properties or services acquired as of such date, contingent or otherwise (other than trade payables
incurred in the ordinary course of business); and (vi) all accrued interest, prepayment premiums,
penalties or similar amounts related to any of the foregoing (assuming all of the foregoing amounts
were prepaid at such particular date).




          “Indemnitee” has the meaning set forth in Section 8.4.




          “Indemnitor” has the meaning set forth in Section 8.4.




          “Insurance Policies” means all of the insurance policies held or maintained by or for
the Seller with respect to its properties, assets and business.




          “Intellectual Property” means all of the following in any jurisdiction throughout the
world: (i) all inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereof and all patents, patent applications and patent disclosures,
together with all reissuances, continuations, continuations-in-art, revisions, extensions and
reexaminations thereof; (ii) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names and rights in telephone numbers, together with all
translations, adaptations, derivations and combinations thereof and including all goodwill
associated therewith and all applications, registrations and renewals in connection therewith;
(iii) all copyrightable works, all copyrights and all applications, registrations and renewals in
connection therewith; (iv) all mask works and all applications, registrations and renewals in
connection herewith; (v) all trade secrets and confidential business information (including
research and development; methods; systems; engineering; models; formulas; compositions;
manufacturing, servicing, repair, production and other proprietary processes and techniques;
technical data; designs; drawings; specifications; customer and supplier lists; pricing and cost
information; and business and marketing plans and proposals); (vi) all computer software




4









 







(including source code, executable code, data, databases, uniform resource locators and related
documentation); (vii) all advertising and promotional materials; (viii) all other proprietary
rights; and (ix) all copies and tangible embodiments thereof (in whatever form or medium).




          “Inventory” has the meaning set forth in Section 2.2.




          “Investment” as applied to any Person means (i) any direct or indirect purchase or
other acquisition by such Person of any notes, obligations, instruments or Equity Interests of any
other Person and (ii) any capital contribution by such Person to any other Person.




          “Knowledge” means, when referring to the “knowledge” of any of the Seller Parties, or
any similar phrase or qualification based on knowledge, the actual knowledge of any of David
Barron, Charles Dixon, David Forbes or George Milano and, with respect to Sections
6.11, 6.14, 6.15, 6.16, 6.17 and 6.18 only, Keith
Zar.




          “Latest Financial Statements” has the meaning set forth in Section 6.4.




          “Lien” means any mortgage, security deed, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, restriction, claim, security interest, security
title, easement, encumbrance, preference, priority or other security agreement, and any financing
lease having substantially the same economic effect as any of the foregoing, and the filing of, or
agreement to give, any financing statement.




          “Losses” means, collectively, all damages, claims, liabilities, fines, penalties,
levies, fees, costs or expenses (including reasonable expenses and disbursements of accountants and
legal counsel), but not including any punitive, consequential or special damages (or losses of
revenue or business opportunity) other than to the extent such may be payable to third parties as a
result of a final adjudication.




          “Material Adverse Effect” means any event or occurrence that has or would reasonably
be expected to have an effect that is materially adverse to the assets, liabilities, financial
condition, or results of operations of the Business, taken as a whole.




          “Multiemployer Plan” has the meaning set forth in ERISA Section 3(37).




          “Notice of Closing Statement Disagreement” has the meaning set forth in Section
4.2(d).




          “OSHA” means the occupational Safety and health Administration.




          “Outstanding Receivables” has the meaning set forth in Section 9.9.




          “Owned Real Property” has the meaning set forth in Section 2.2.




          “Parent” has the meaning set forth in the Preamble.




          “Permit” means any permit, license, approval, consent or other authorization.




          “Permitted Liens” means (i) any Liens expressly reflected in the Financial Statements;
(ii) zoning laws, easements and other land use restrictions that do not materially impair the
present or anticipated use or occupancy of the property subject thereto; (iii)




5









 







mechanic’s, materialmen’s, workmen’s, repairmen’s, warehousemen’s, carriers’ or other similar Liens which are
being contested in good faith or (iv) Liens for Taxes not yet due and payable or which are being
contested in good faith.




          “Person” means an individual, a partnership, a limited partnership, a limited
liability partnership, a corporation, a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization or a Governmental Authority.




          “Plans” has the meaning set forth in Section 6.16.




          “Prepaid Taxes” has the meaning set forth in Section 2.2(m).




          “Purchase Price” has the meaning set forth in Section 4.2(a).




          “Purchased Assets” has the meaning set forth in Section 2.1.




          “Real Property” means the Owned Real Property and the Leased Real Property.




          “Real Property Permits” has the meaning set forth in Section 6.11.




          “Restrictive Covenants” has the meaning set forth in Section 9.2(c).




          “Restricted Amount” has the meaning set forth in Section 8.1.




          “Revised Two Year Quantities” has the meaning set forth in the definition of Working
Capital.




          “Seller” has the meaning set forth in the Preamble.




          “Seller Parties” means Seller and its Affiliates, employees, agents, partners,
representatives, successors and permitted assigns (other than Buyer).




          “Seller’s Defined Benefit Plan” has the meaning set forth in Section 9.8(e).




          “Special Indemnification Schedule” has the meaning set forth in Section 8.1.




          “Subsidiary” means, with respect to any Person, any corporation, partnership, limited
liability company, association or other business entity of which: (i) if a corporation, a majority
of the total voting power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that
Person, or a combination thereof; or (ii) if a partnership, limited liability company, association
or other business entity, a majority of the partnership or other similar ownership interest thereof
is at the time owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person, or a combination thereof. For purposes of clause (ii) of this
definition, a Person or Persons will be deemed to have a majority ownership interest in a
partnership, limited liability company, association or other business entity if such Person or
Persons are allocated a majority of partnership, limited liability company, association or other
business entity gains or losses or control the managing director or general partner of such
partnership, limited liability company, association or other business entity.




6









 








          “Target Working Capital” has the meaning set forth in Section 4.2.




          “Tax” means any: (i) federal, state, local or foreign income, gross receipts,
franchise, alternative minimum, add-on minimum, sales, use, transfer, registration, value added,
excise, natural resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, capital stock, social
security, unemployment, disability, payroll, license, employee or other withholding or other tax,
of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts
in respect of the foregoing; (ii) liability of Seller for the payment of any amounts of the type
described in clause (i) above arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included (or required to be included) in any Tax Return relating
thereto); and (iii) liability of Seller for the payment of any amounts of the type described in
clause (i) above as a result of any express or implied obligation to indemnify or otherwise assume
or succeed to the liability of any other Person.




          “Tax Asset” means any net operating loss, net capital loss, investment tax credit,
foreign tax credit, charitable deduction, refund of Taxes, prepayment or claim for refund of Taxes
or any other credit or Tax attribute which could reduce Taxes (including, without limitation,
deductions and credits related to alternative minimum taxes) other than any tax incentives to which
Seller is entitled pursuant to the Employment and Investment Growth Act Project Agreement, Number
24-7981023 (the “Nebraska Agreement”).




          “Tax Returns” means returns, declarations, reports, claims for refund, information
returns or other documents (including any related or supporting schedules, statements or
information), including any amendment thereto, filed or required to be filed in connection with the
determination, assessment or collection of any Taxes of any party or the administration of any
laws, regulations or administrative requirements relating to any Taxes.




          “Third-Party Approvals” has the meaning set forth in Section 5.1(b).




          “Threshold Amount” has the meaning set forth in Section 8.1.




          “Transaction Documents” means all documents, agreements, instruments and certificates
executed and delivered in connection with the Closing, this Agreement and the transactions
contemplated hereunder.




          “Transferred Employee” means each employee of Seller, who is, immediately prior to the
Closing, actively employed, on vacation or on leave of absence, short-term disability or sick
leave.




          “Two Year Quantities” has the meaning set forth in the definition of Working Capital.




          “Two Year Usage” has the meaning set forth in the definition of Working Capital.




          “Union Employees” has the meaning set forth in Section 9.8(e).




          “Working Capital” means, as of any date of determination, the excess of the total
current assets of Seller included in the Purchased Assets as of such date over the total current
liabilities of Seller included in the Assumed Liabilities, determined on a basis consistent with
the methodologies, practices and principles used in the preparation of the Latest Financial





7









 







Statements; provided, (i) that the calculation of Working Capital and Final Working Capital
shall not include current liabilities relating to the categories of bonus plans, medical insurance
and general insurance; (ii) notwithstanding the fact that such assets were capitalized in the
Latest Financial Statements, the calculation of Working Capital and Final Working Capital shall
include as current assets the categories of small tools and supplies of the type that were
capitalized by Seller for the first time in December 2005; and (iii) the reserve for excess, obsolete and
slow moving inventory included in the calculation of Working Capital and Final Working Capital
shall be determined in accordance with Seller’s policy for establishing such reserve and shall be
determined consistently with the methodologies, practices, principles and application of judgment
used in the Latest Financial Statements. The Seller’s policy for establishing a reserve for
excess, obsolete and slow moving inventory is as follows:




          (i) determine quantities of finished product sold during the most recently available 24-month
period (“Two Year Usage”);




          (ii) at the determination date, determine quantities of finished product and related work in
process and raw materials (collectively, “Working Capital Inventory”) with book value on
hand greater than Two Year Usage (“Two Year Quantities”);




          (iii) subtract from Two Year Quantities the following quantities of Working Capital Inventory:
(a) Working Capital Inventory related to finished goods that have been first introduced into the
market within the past 24 months and (b) Working Capital Inventory related to Working Capital
Inventory that management is certain will be used within 12 months;




          (iv) the results of the calculation as set forth in (iii) above is referred to as “Revised
Two Year Quantities”; and




          (v) the reserve as of the determination date for slow moving, excess and obsolete Working
Capital Inventory is the book value of the Revised Two Year Quantities.




          At Buyer’s election, all Inventory not written off in the Working Capital shall be subject to
a physical count as of the Closing Date, in which Seller and its representatives shall be provided
an opportunity to participate, in order to: (i) verify and, if necessary, adjust the quantity of
inventory included in Final Working Capital and (ii) inspect and, if necessary, adjust for
defective Inventory. Buyer shall have responsibility for uncleared checks reflected in Working
Capital and Final Working Capital.




          “Working Capital Inventory” has the meaning set forth in the definition of Working
Capital.




ARTICLE II

PURCHASE AND SALE OF ASSETS




     2.1 Agreement to Purchase and Sell. On the terms and subject to the conditions
contained in this Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell to
Buyer, all of the assets, properties, rights and business as a going concern as of the Closing
Date, of whatever kind or nature and wherever situated or located and whether reflected on Seller’s
books and records or previously written-off or otherwise not shown on Seller’s books and records,
of Seller which are primarily used in or primarily relate to the conduct of the Business (other
than the items set forth in Section 2.3 (the “Excluded Assets”)). All of said
assets, properties, rights and business (other than the Excluded Assets) are collectively referred



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to in this Agreement as the “Purchased Assets”. All of the Purchased Assets shall be sold
to Buyer free and clear of any Liens other than Permitted Liens.




     2.2 Enumeration of Purchased Assets. The Purchased Assets include the following items
of Seller as they exist at Closing:



          (a) all inventory (including raw materials, work in process, finished goods, service parts and
supplies), including supplies and parts which have historically been expensed or are not valued on
Seller’s financial statements (collectively, the “Inventory”);




          (b) all furniture, fixtures, equipment (including office equipment), machinery, parts,
computer hardware, tools, dies, jigs, patterns, molds, automobiles and trucks and all other
tangible personal property (other than Inventory) (collectively, the “Equipment”);




          (c) that certain real property commonly known as 740 Queen Street, Pottstown, Pennsylvania and
501 Sargent Street, Beatrice, Nebraska (the “Owned Real Property”), and all appurtenances,
easements and other rights, buildings and other improvements located thereon or relating thereto;




          (d) all leasehold interests and leasehold improvements created by all leases, including
capitalized leases, of real property or personal property under which Seller is a lessee or lessor;




          (e) all trade accounts receivable, notes receivable, negotiable instruments and chattel paper
(collectively, the “Accounts Receivable”);




          (f) all deposits and rights with respect thereto in connection with the Business and all
rebates due to Seller from vendors;




          (g) subject to Section 2.4, all contracts, claims and rights (and benefits arising
therefrom) primarily relating to or arising out of the Business, all rights against suppliers under
warranties covering any of the Inventory or Equipment or other tangible assets of the Business and
all transferable rights relating to Permits and Environmental Permits;




          (h) all sales orders and sales contracts, purchase orders and purchase contracts, quotations
and bids generated by the operation of the Business;




          (i) all Intellectual Property that is primarily relating to the Business;




          (j) subject to Section 2.4, all license agreements, distribution agreements, sales
representative agreements, service agreements, supply agreements, franchise agreements, computer
software agreements and technical service agreements to which Seller is a party;




          (k) all customer lists, customer records and information to the extent relating to the
Business;




          (l) except as provided in Section 2.3(h), all books and records to the extent relating
to the Business, including blueprints, drawings and other technical papers, payroll, employee
benefit, accounts receivable and payable, inventory, maintenance and asset history




9









 







records, ledgers and books of original entry and OSHA and EPA files, all to the extent allowable under applicable
law;




          (m) all rights in connection with prepaid expenses with respect to the Purchased Assets,
including any prepaid Taxes other than prepaid income or franchise Taxes (“Prepaid Taxes”);




          (n) subject to Section 2.4, all letters of credit issued to Seller;




          (o) all sales and promotional materials, catalogues and advertising literature primarily
relating to the Business;




          (p) all rights under the Nebraska Agreement arising out of events or actions following
Closing, but only to the extent such rights are transferable to Buyer under applicable Law, it
being understood that Parent and Seller make no representation or warranty of any kind regarding
whether, or to what extent such rights are transferable to Buyer; and




          (q) all telephone numbers and internet uniform resource locators owned by Seller and all lock
boxes relating to the Business to which Seller’s account debtors remit payments.




     2.3 Excluded Assets. The Excluded Assets shall consist of:



          (a) all cash on hand and in banks and cash equivalents (exclusive of letters of credit issued
by customers of Seller to Seller);




          (b) Seller’s bank accounts (exclusive of the bank accounts referred to in Section
2.3(c)), checkbooks and cancelled checks;




          (c) those contracts with Seller’s Affiliates set forth on Schedule 2.3(c) hereto;




          (d) rights in and to claims and litigation (and in each case benefits to the extent they arise
therefrom) against third parties to the extent such claims and litigation are not primarily related
to the Purchased Assets or the Assumed Liabilities, and rights in and to claims and litigation (and
benefits to the extent they arise therefrom) that relate to Excluded Liabilities;




          (e) Insurance Policies of Seller and rights in connection therewith;




          (f) rights arising from any refunds due with respect to insurance premium payments to the
extent they relate to Insurance Policies which constitute Excluded Assets and refunds due from
federal, state, local and/or foreign taxing authorities with respect to taxes heretofore paid by
Seller;




          (g) Seller’s rights under this Agreement;




          (h) Seller’s corporate charter and the organizational documents, minute and stock record
books, corporate seal, Tax Returns (including supporting materials but excluding any documents
relating to Seller’s rights under the Nebraska Agreement; provided, that copies of Tax
Returns and such documents may be retained by Sellers), all original financial statements and
supporting materials, all books and records Seller is required by law to retain,




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and all records of Seller relating to the sale of the Purchased Assets and any documents relating to any Excluded
Assets;




          (i) any right or interest in and to any Tax Asset, other than Prepaid Taxes, for periods (or
portions thereof) ending on or before the Closing Date and any rights under the Nebraska Agreement
accruing on or prior to the Closing Date;




          (j) each Plan, including all assets related thereto;




          (k) the agreements set forth on Schedule 2.3(k); and




          (l) the assets, if any, described on Schedule 2.3(l).




     2.4 Certain Consents to Assignment. If any assignment of any material right or
agreement the benefit of which is to be acquired by Buyer pursuant to this Agreement shall require
the consent of any other party and such consent has not been obtained prior to Closing, (a) this
Agreement shall not constitute or be deemed to be a contract to assign or assume the same if an
attempted assignment without such consent, approval or waiver would constitute a breach of such
right or agreement or create in any party thereto the right or power to cancel or terminate such
right or agreement and (b) Seller and Parent will cooperate with Buyer, in any reasonable
arrangement requested by Buyer designed to provide to Buyer the benefit, monetary or otherwise, of
Seller’s rights under such right or agreement, including enforcement of any and all rights of
Seller against the other party thereto arising out of a breach or cancellation thereof by such
other party.



ARTICLE III

ASSUMPTION OF LIABILITIES




     3.1 Agreement to Assume. At the Closing, Buyer shall assume and agree to discharge
and perform when due, the liabilities and obligations of Seller (and only those liabilities of
Seller) with respect to the Business which are enumerated in Section 3.2 (the “Assumed
Liabilities”). Seller shall remain liable for all liabilities and obligations that are not
Assumed Liabilities.



     3.2 Description of Assumed Liabilities. The Assumed Liabilities shall consist of the
following, and only the following, liabilities of Seller with respect to the Business:



          (a) trade accounts payable as of the Closing Date to the extent incurred in the ordinary
course of business and included on the Closing Statement (the “Accounts Payable”);




          (b) all accrued and unpaid expenses as of the Closing Date to the extent incurred in the
ordinary course of business and included on the Closing Statement (the “Accrued Expenses”),
including accrued salaries, wages and vacation pay with respect to those employees of Seller who
become employees of Buyer immediately after the Closing;




          (c) liabilities and obligations of Seller (other than obligations to pay amounts accrued as of
the Closing unless such liabilities and obligations are reflected in the calculation of Final
Working Capital) under any purchase order, sales order, lease, license, agency and distributorship
agreement or other agreement or commitment of any kind (x) by which Seller is bound on the Closing
Date and (y) which is either (i) set forth on Schedule 6.13 or





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Schedule 6.19 of the Disclosure Schedule or (ii) was made in the ordinary course of business (but in each case, only to
the extent such liabilities and obligations relate to performance after the Closing Date or are
reflected in the calculation of Final Working Capital);




          (d) all liabilities of Seller set forth on the face of the balance sheet included in the
Latest Financial Statements (rather than in any notes thereto);




          (e) all liabilities of Seller that have arisen after the Latest Financial Statements in the
ordinary course of business (but in each case only to the extent such liabilities are reflected in
the calculation of Final Working Capital); and




          (f) all obligations of Seller under the agreements, contracts, leases, licenses, and other
arrangements included in Purchased Assets.



Notwithstanding anything else contained in this Agreement to the contrary, Buyer shall not assume
any liabilities relating to the categories of medical insurance or general insurance as described
in the definition of “Working Capital” contained in Section 1.1 above.




     3.3 Excluded Liabilities. Except as specifically provided in Sections 3.1 and
3.2 hereof, Buyer shall not assume, or in any way become liable for, any liabilities or
obligations of Seller, Parent, or the Business of any kind or nature (including any liabilities or
obligations that relate to any Excluded Assets, any bonus plans of Seller or that are owed to any
Affiliate of Seller), whether accrued, absolute, contingent or otherwise, or whether due or to
become due, or otherwise, whether known or unknown, arising out of events, transactions or facts
which shall have occurred, arisen or existed on or prior to the Closing Date (the “Excluded
Liabilities”), which liabilities and obligations, if ever in existence, shall continue to be
liabilities and obligations of Seller or Parent, as the case may be.



     3.4 No Expansion of Third Party Rights. The assumption by Buyer of the Assumed
Liabilities shall not expand the rights or remedies of any third party against Buyer or Seller as
compared to the rights and remedies which such third party would have had against Seller had Buyer
not assumed the Assumed Liabilities. Without limiting the generality of the preceding sentence,
the assumption by Buyer of the Assumed Liabilities shall not create any third party beneficiary
rights.



ARTICLE IV

PRICE AND CLOSING




     4.1 Closing. The closing of the transactions contemplated by this Agreement (the
“Closing”) shall take place at the offices of Barack Ferrazzano Kirschbaum Perlman &
Nagelberg LLP, or at such other place as is mutually agreeable to Buyer and Seller, at 10:00 a.m.
local time on the date hereof (the “Closing Date”). The Closing shall be deemed to be
effective as of 11:59 p.m. Eastern time on the Closing Date.



     4.2 Purchase Price. Subject to the terms and conditions contained herein, Buyer
agrees to pay, and Seller agrees to accept, as the aggregate purchase price for all of the
Purchased Assets and the agreements of Parent and Seller pursuant to Section 9.2 (the
“Purchase Price”) an amount equal to (i) $22,500,000.00; plus (or minus) (ii) the
amount (if any) by which the Final Working Capital is greater than (or less than) $25,375,000.00
(the “Target Working Capital”); plus (iii) $640,000.00, which Buyer shall pay to
Seller at Closing by wire transfer of immediately available funds to a bank account designated by
Seller.



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          (a) At the Closing, Buyer shall pay to Seller an amount equal to $24,512,000.00 by wire
transfer of immediately available funds to a bank account designated by Seller. For purposes of
determining this amount, the Working Capital as of the Closing is estimated to be $26,747,000.00
(“Estimated Working Capital”) and any post-closing adjustment in accordance with Section
4.2(d) shall be determined based upon the difference between the Final Working Capital and the
Estimated Working Capital.




          (b) Intentionally Omitted.




          (c) Within ninety (90) days following the Closing Date, Buyer shall deliver to Seller a
statement (in its final and binding form as determined below, the “Closing Statement”)
setting forth its good faith calculation of (i) the Working Capital as of the Closing Date (the
“Final Working Capital”) and (ii) the Purchase Price that shall be accompanied by
reasonably sufficient back-up or supporting data used in the preparation of the Closing Statement
as is sufficient to reflect how Buyer made such determinations and calculations; provided,
that such statement shall be executed by Buyer’s chief financial officer. Seller shall cooperate
with Buyer as reasonably requested in connection with the preparation of the Closing Statement, and
agrees that the items comprising the Final Working Capital shall consist only of the categories set
forth on Schedule 4.2(c). Seller and its representatives shall be provided access to all
of Buyer’s books, records and employees related to the preparation of the Closing Statement. The
Closing Statement shall become final and binding upon the parties forty-five (45) days following
Seller’s receipt thereof, unless Seller shall give written notice of its disagreement (a
“Notice of Closing Statement Disagreement”) to Buyer prior to such date. Any Notice of
Closing Statement Disagreement shall specify in reasonable detail the nature and dollar amount of
any disagreement so asserted and shall be accompanied by reasonably sufficient back-up or
supporting data used in the preparation of the Notice of Closing Statement Disagreement to reflect
the basis of each such disagreement described therein. Buyer and its representatives shall be
provided access to all of Seller’s books, records and employees related to the preparation of the
Notice of Closing Statement Disagreement. If a timely Notice of Closing Statement Disagreement is
received by Buyer, then the Closing Statement (as revised in accordance with clause (x) or (y)
below) and the Purchase Price shall become final and binding upon the parties on the earlier of:
(x) the date the parties resolve in writing any differences they have with respect to the matters
specified in the Notice of Closing Statement Disagreement; and (y) the date all matters in dispute
are finally resolved in writing by the Accounting Firm. During the twenty (20) days following
delivery of a Notice of Closing Statement Disagreement, Buyer and Seller shall seek in good faith
to resolve in writing any differences which they may have with respect to the matters specified in
the Notice of Closing Statement Disagreement. If, at the end of the twenty (20) day period
referred to above, the matters in dispute have not been fully resolved, then the parties shall
submit to McGladrey & Pullen, LLP or such other mutually satisfactory independent accounting firm
(the “Accounting Firm”) for review and resolution of all matters (but only such matters)
which remain in dispute, and the Accounting Firm shall make a final determination of the Final
Working Capital and the Purchase Price to the extent such amounts are in dispute, in accordance
with the guidelines and procedures set forth in this Agreement. The parties will cooperate with
the Accounting Firm during the term of its engagement. In resolving any matters in dispute, the
Accounting Firm may not assign a value or cost to any item in dispute greater than the greatest
value or cost for such item assigned by Buyer, on the one hand, or Seller, on the other hand, or
less than the smallest value or cost for such item assigned by Buyer, on the one hand, or Seller,
on the other hand. The Accounting Firm’s determination will be based solely on presentations by
Buyer and Seller which are in accordance with the guidelines and procedures set forth in this
Agreement (i.e., not on the basis of an independent review). The Closing Statement and the
determination of the Final Working




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Capital and the Purchase Price shall become final and binding on
the parties on the date the Accounting Firm delivers its final resolution in writing to the parties
(which the Accounting Firm shall be instructed to deliver not more than forty-five (45) days
following submission of such disputed matters). The Accounting Firm’s fees shall be borne by
Seller and Buyer in inverse proportion (as a percent of the absolute dollar amount disputed) as
Seller and Buyer prevail on matters resolved by the Accounting Firm.




          (d) If the Estimated Working Capital amount is greater than the Final Working Capital amount,
Seller shall, and if the Final Working Capital amount is greater than the Estimated Working Capital
amount, Buyer shall, within ten (10) business days after the Closing Statement becomes final and
binding on the parties, make payment by wire transfer to Buyer or Seller, as the case may be, in
immediately available funds of the absolute amount of such difference, together with interest at
the Applicable Rate from the Closing Date to the date of payment. Any such payment shall be
treated as an adjustment to the Purchase Price.




     4.3 Allocation of Total Consideration. The Purchase Price, as adjusted pursuant to
Section 4.2(d), shall be allocated as agreed between the parties as soon as practicable
after the Closing. Buyer shall prepare and deliver to Seller a written statement setting forth
Buyer’s good faith allocation together with such supporting materials as will allow Seller to
reasonably evaluate the proposed allocation and any other materials reasonably requested by Seller
within thirty (30) days after determination of Final Working Capital. The Purchase Price
allocation shall become final and binding upon the parties thirty (30) days following Seller’s
receipt thereof, unless Seller shall give written notice of its disagreement (a “Notice of
Allocation Disagreement”) to Buyer prior to such date. Any Notice of Allocation Disagreement
shall specify in reasonable detail the nature and dollar amount of any disagreement so asserted.
If a timely Notice of Allocation Disagreement is received by Buyer, then the allocation shall
become final and binding upon the date the parties resolve in writing any differences they have
with respect to the matters specified in the Notice of Allocation Disagreement. The parties agree
that the allocations described in this Section 4.3 shall be used by them and respected for
all income tax purposes, if in conformance with the rules and regulations of the Code, and that the
parties shall follow such allocations for all initial income tax reporting purposes, including Form
8594 to be filed pursuant to the Code.



ARTICLE V

CLOSING DELIVERIES




     5.1 Conditions to the Obligations of Buyer. The obligation of Buyer to consummate the
transactions contemplated by this Agreement is subject to the delivery as of the Closing Date of
the following by Seller:



          (a) A certificate duly executed by an authorized officer of Parent to the effect that, to his
knowledge: (i) the representations and warranties set forth in Article VI are true and
correct in all material respects as of the Closing Date and (ii) no suit, action or other
proceeding is pending before any court or governmental or regulatory official, body or authority or
any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would
reasonably be expected to prevent the consummation of any of the transactions contemplated hereby
or cause any of the transactions contemplated by this Agreement to be rescinded following
consummation;




14









 








          (b) Evidence that all third party consents and approvals set forth on Schedule 6.2
(collectively, the “Third-Party Approvals”) have been obtained, in each case on terms and
conditions reasonably satisfactory to Buyer;




          (c) An opinion from Latham & Watkins LLP, counsel for Seller, with respect to the matters set
forth in Exhibit A attached hereto, which shall be addressed to Buyer, dated as of the
Closing Date and in form and substance satisfactory to Buyer;




          (d) (i) certified copies of the resolutions of (A) Seller’s board of directors and (B)
Seller’s shareholder authorizing the execution, delivery and performance of this Agreement and each
of the Transaction Documents and the consummation of the transactions contemplated hereby and
thereby; (ii) good standing certificates for Seller from the Pennsylvania Secretary of State, dated
as of a recent date prior to the Closing Date; and (iii) a Secretary’s certificate of Seller duly
executed in the form of Exhibit B attached hereto dated as of the Closing Date;




          (e) Evidence of releases of all Liens related to the assets and properties of Seller, other
than Permitted Liens;




          (f) A bill of sale conveying all of the Inventory, Equipment and other tangible personal
property included in the Purchased Assets to Buyer, free and clear of all Liens other than
Permitted Liens duly executed in the form of Exhibit C attached hereto dated as of the
Closing Date;




          (g) An assignment to Buyer assigning to Buyer all of the Purchased Assets (other than the
assets conveyed pursuant to the bill of sale, deed, certificate of title or Intellectual Property
instruments of assignment), along with the original instruments (if any) representing, evidencing
or constituting such Purchased Assets, free and clear of all Liens other than Permitted Liens duly
executed in the form of Exhibit D attached hereto dated as of the Closing Date;




          (h) An assignment and assumption agreement pursuant to which Seller assigns all of the Assumed
Liabilities to Seller duly executed in the form of Exhibit E attached hereto dated as of
the Closing Date;




          (i) A general warranty deed (subject only to Permitted Liens), an affidavit of title, a
certificate in compliance with the Foreign Investment in Real Property Tax Act (“FIRPTA”)
certifying that Seller is not a Person subject to withholding under FIRPTA certifying that Seller
is not a Person subject to withholding under FIRPTA, an ALTA statement and all other documents
required by the title insurance company issuing the policies with respect to each parcel of Owned
Real Property, together with any necessary transfer declarations;




          (j) Surveys of the Owned Real Property, prepared by a licensed surveyor;




          (k) Certificates of title or origin (or like documents) with respect to all vehicles included
in the Purchased Assets and other Equipment for which a certificate of title or origin is required
in order for title thereto to be transferred to Buyer;




          (l) One or more duly executed instruments of assignment conveying all of the Intellectual
Property included in the Purchased Assets, which, to the extent necessary to assign such rights,
shall be in recordable form;





15









 








          (m) A transition services agreement duly executed in the form of Exhibit F attached
hereto dated as of the Closing Date; and




          (n) Evidence that Buyer is named as an additional insured, as its interest may appear, on
Parent’s product liability insurance policy, effective as of the Closing, for occurrences arising
prior to the Closing with respect to products manufactured and sold by Seller prior to the Closing.




     5.2 Conditions to the Obligations of Parent and Seller. The obligation of Parent and
Seller to consummate the transactions contemplated by this Agreement is subject to the delivery as
of the Closing Date of the following by Buyer:



          (a) A certificate duly executed by an authorized officer of Buyer to the effect that, to his
knowledge: (i) the representations and warranties set forth in Article VII are true and
correct in all material respects as of the Closing Date and (ii) no suit, action or other
proceeding is pending before any court or governmental or regulatory official, body or authority or
any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would
reasonably be expected to prevent the consummation of any of the transactions contemplated hereby
or cause any of the transactions contemplated by this Agreement to be rescinded following
consummation;




          (b) (i) an officer’s certificate of Buyer in the form of Exhibit G attached hereto
dated as of the Closing and (ii) a good standing certificate for Buyer from the Secretary of State
of the State of Delaware dated as of a recent date prior to the Closing Date;




          (c) An assignment and assumption agreement pursuant to which Buyer assumes all of the Assumed
Liabilities in the form of Exhibit E attached hereto duly executed and dated as of the
Closing; and




          (d) Evidence that Parent is named as an additional insured, as its interest may appear, on
Buyer’s product liability insurance policy, effective as of the Closing, for occurrences arising
after the Closing with respect to products manufactured by Seller prior to the Closing but sold by
Buyer after the Closing.




ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER 




          Seller and Parent hereby jointly and severally represent and warrant to Buyer as of the date
hereof as follows:




     6.1 Organization and Power. Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Pennsylvania and is duly qualified to
do business in each jurisdiction in which the failure to so qualify would reasonably be expected to
have a Material Adverse Effect. Seller has all requisite right, capacity, power and authority to
own and operate its properties, to carry on its business as now conducted, to execute and deliver
this Agreement and all of the Transaction Documents and to perform its obligations hereunder and
thereunder. Seller has furnished to Buyer true, accurate and complete copies of its certificate of
incorporation and by-laws. Parent is a corporation, duly incorporated, validly existing and in
good standing under the laws of Delaware. Parent has all requisite right, capacity, power and
authority to execute and deliver this Agreement and all of the Transaction Documents and to perform
its obligations hereunder and thereunder.



16









 





     6.2 Authorization; No Breach.



          (a) The execution and delivery of this Agreement and all of the Transaction Documents by
Parent and Seller, and the performance by each of Parent and Seller of its respective obligations
hereunder and thereunder, have been duly authorized by Parent and Seller and their respective
directors and Seller’s shareholder. This Agreement and all of the Transaction Documents (upon
execution and delivery thereof by each party thereto) each
constitute, or will constitute as of the Closing, a valid and binding obligation of each of
Parent and Seller, enforceable in accordance with its terms, except as such enforceability may be
limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws in effect that limit creditors’ rights generally; (ii) equitable limitations on the
availability of specific remedies; and (iii) principles of equity.




          (b) The execution and delivery by each of Parent and Seller of this Agreement and all of the
Transaction Documents, and the fulfillment of, and compliance with, the respective terms hereof and
thereof by Parent and Seller, do not and will not conflict with, or result in a breach of, or
constitute a default under or violation of (or would, with the giving of notice or the passage of
time, or both, become a default under), or, require any Permit by or with any Person, or give to
any Person any right of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Lien pursuant to, or would result in or require
any payment or prepayment or new obligation, except in the case of (ii) or (iii) where such
conflict, breach, default or violation would not have a Material Adverse Effect, under: (i) its
charter, bylaws or other organizational document of any of such parties; (ii) any law, statute,
rule, regulation, Permit, order, judgment, ruling, writ or decree to which Parent or Seller is
subject or by which it or any of its respective properties, rights or assets may be bound; or (iii)
except as set forth on Schedule 6.2, any contract, agreement, arrangement or instrument to
which Parent or Seller is subject or by which it or any of its respective properties, rights or
assets may be bound.




     6.3 Sole Shareholder; No Subsidiaries. All of the issued and outstanding capital
stock of Seller is held by Parent. There exist no securities, instruments, options or rights that
are convertible, exercisable or exchangeable for any shares of capital stock of Seller. Seller
does not own, and has not owned at any time since December 31, 2003, any Equity Interests in any
Person.



     6.4 Financial Statements. Attached hereto as Schedule 6.4 are the following
financial statements (the financial statements described in clauses (a) through (c) below,
collectively, the “Financial Statements”):



          (a) the unaudited balance sheet of Seller as of December 31, 2005 and the related unaudited
statement of income for the twelve- (12-) month period then ended, which was consolidated into the
audited consolidated financial statements of Parent as of and for the twelve- (12-) months ended
December 31, 2005;




          (b) the unaudited balance sheet of Seller as of March 31, 2006, and the related unaudited
statement of income for the three (3) month period then ended (the “Latest Financial
Statements”); and




          (c) except as provided on Schedule 6.4, each of the Financial Statements described in
clauses (a) and (b) above: (i) presents fairly, in all material respects, the financial condition
and results of operations of Seller at the dates, and for the periods, stated therein and





17









 







(ii) has been prepared in accordance with GAAP, consistently applied, subject in the case of the financial
statements referred to in Section 6.4(b) to changes resulting from normal year-end audit
adjustments (none of which would be material, alone or in the aggregate).




     6.5 Absence of Undisclosed Liabilities. Seller has no material indebtedness, debt,
obligation or other liability (whether accrued, absolute, contingent, direct, indirect,
unliquidated or otherwise, irrespective of whether known to Seller, whether due or to become due,
and regardless of when asserted) of a type that would be required by GAAP to be set forth on the
balance sheet included in the Financial Statements other than those: (a) set forth on the balance
sheet included in the Financial Statements; (b) that have arisen after December 31, 2005 in the
ordinary course of business and consistent with past practice (none of which would reasonably
expected to have a Material Adverse Effect); (c) Excluded Liabilities or (d) set forth in
Schedule 6.5.



     6.6 No Material Adverse Change. Since December 31, 2005, there has not occurred any
event that has had a Material Adverse Effect.



     6.7 Absence of Certain Developments.



          (a) Except as provided on Schedule 6.7 or pursuant to this Agreement, since December
31, 2005, Seller has not:





               (i) sold, leased, licensed, exchanged or otherwise transferred any of the material rights,
properties or assets of Seller (except sales of inventory in the ordinary course of business and
consistent with past practice);




               (ii) purchased, acquired or leased any material rights, properties or assets outside the
ordinary course of business or inconsistent with past practice;




               (iii) borrowed any amount, received credit or financing or created or incurred or become
subject to any liability, obligation, or Indebtedness, except: (a) liabilities not in excess of
$100,000.00 in aggregate; (b) current liabilities incurred in the ordinary course of business and
consistent with past practice; and (c) liabilities under contracts entered into in the ordinary
course of business and consistent with past practice;




               (iv) made any loans or advances to, extended credit or financing to, made any guarantees for
the benefit of, or made any capital contributions to or investments in any Person in excess of
$100,000.00 in the aggregate, other than routine advances to employees that do not exceed
$5,000.00;




               (v) created, placed or allowed to exist a Lien upon any of the material rights, properties or
assets of Seller, except Permitted Liens;




               (vi) made, or committed or contracted to make, any capital expenditure or series of related
capital expenditures in excess of $100,000.00 above the amounts budgeted therefor in the budget
attached hereto as Schedule 6.7;




               (vii) paid, discharged or satisfied any material claims, liabilities, obligations or other
indebtedness (accrued, mature, contingent, direct or otherwise), other than current liabilities
paid in the ordinary course of business and consistent with past practice;



18









 






               (viii) granted any increase in compensation to or otherwise changed the employment terms for
any of its directors, officers or employees outside the ordinary course of business and consistent
with past practice;




               (ix) amended the charter, bylaws, or other governance documents of Seller in any material
respect;




               (x) adopted a plan of complete or partial liquidation, dissolution, consolidation,
restructuring, recapitalization or other reorganization of Seller, or resolutions providing for any
of the foregoing;




               (xi) failed to pay, satisfy and discharge when due any material liabilities and Indebtedness
of Seller, including the liabilities and Indebtedness as reflected on balance sheet included in the
Latest Financial Statements;




               (xii) incurred any obligation or entered into any contract, agreement, arrangement or
instrument that would be an Assumed Liability and either: (A) requires a payment by or to any
Person in excess of $100,000.00; or (B) has a term of, or requires the performance of any
obligations by Seller over a period in excess of, twelve (12) months;




               (xiii) entered into, authorized, permitted, modified or terminated any contract or agreement
with any Affiliate of Seller involving payment of more than $25,000.00 per year;




               (xiv) experienced any material damage, destruction or loss (whether or not covered by
insurance) to any of its properties or assets;




               (xv) changed any material accounting principles, methods or practices followed by Seller;




               (xvi) taken any steps to incorporate or form or organize or acquire a new Subsidiary;




               (xvii) engaged in any business other than the Business; or




               (xviii) authorized any of the foregoing.



          (b) During the last three years, Seller has not made or authorized any bribes, kickback
payments or other illegal payments.




     6.8 Assets.



          (a) Seller has good and marketable title to, or a valid leasehold interest in, all of the
Purchased Assets, free and clear of all Liens, except for Permitted Liens.




          (b) Except as set forth on Schedule 6.8, the Purchased Assets constitute all material
properties, rights and assets presently utilized by Seller in the conduct of the Business. The
Purchased Assets are in normal operating condition and repair (with the exception of normal wear
and tear) and, other than such minor defects that do not interfere with the intended use thereof or
adversely affect the resale value thereof, are fit for use in the ordinary course of




19









 







business of Seller as presently conducted, except where such condition would not result in a Material Adverse
Effect.




     6.9 Owned Real Property. The Owned Real Property constitutes all real property that
Seller owns. With respect to each such parcel of Owned Real Property, except as set forth on
Schedule 6.9:



          (a) Seller has good and marketable indefeasible fee simple title, free and clear of all Liens,
except for the Liens described on Schedule 6.9 or Permitted Liens;




          (b) the activities conducted in all buildings, plants, facilities, installations, fixtures and
other structures or improvements included as part of, or located on, at or beneath, the Owned Real
Property, and the buildings, plants, facilities, installations, fixtures and other structures or
improvements, are not in material violation of any zoning regulations or ordinances or any other
similar law;




          (c) Seller has not leased or otherwise granted any Person the right to use or occupy such
Owned Real Property;




          (d) there are no outstanding options, rights of first offer or rights of first refusal to
purchase such Owned Real Property or any portion thereof or interest therein; and




          (e) there is no party in possession of any parcel of Owned Real Property, except Seller.




     6.10 Leased Real Property. Except as set forth on Schedule 6.10, there is
currently no real property leased or subleased by or to Seller.



     6.11 Real Property.



          (a) Except as set forth on Schedule 6.11, the Real Property comprises all of the real
property used in the Business.




          (b) There is no condemnation, expropriation or other proceeding in eminent domain, pending or,
to the Knowledge of the Seller Parties, threatened, affecting any parcel of Real Property or any
portion thereof or interest therein. There is no injunction, decree, order, writ or judgment
outstanding or any claim, litigation, administrative action or similar proceeding, pending or, to
the Knowledge of the Seller Parties, threatened, relating to the ownership, lease, use or occupancy
of the Real Property or any portion thereof.




          (c) All material certificates of occupancy, permits, licenses, franchises, approvals and
authorizations (collectively, the “Real Property Permits”) of all Governmental Authorities
having jurisdiction over the Real Property that are required or appropriate to use or occupy the
Real Property or operate the Business as currently conducted have been issued and are in full force
and effect. Seller has not received any written notice from any Governmental Authority relating to
a suspension, revocation, modification or cancellation of any Real Property Permit. Seller is in
compliance in all material respects with the terms and conditions of the Real Property Permits.




          (d) The classification of each parcel of Real Property under applicable zoning laws,
ordinances and regulations permits (i) the use and occupancy of such parcel and the




20









 







operation of the Business and (ii) the Improvements located thereon as currently constructed, used and occupied.
The use or occupancy by Seller of the Real Property or any portion thereof or the operation of the
Business is not dependent on a “permitted non-conforming use” or “permitted non-conforming
structure” or similar variance, exemption or approval from any Governmental Authority.




          (e) The current use and occupancy of the Real Property and the operation of the Business do
not materially violate any easement, covenant, condition, restriction or similar provision in any
instrument of record or other unrecorded agreement affecting such Real Property.




          (f) To the Knowledge of the Seller Parties, there is no pending or threatened increase or
special assessment or reassessment of any such impositions for any Real Property. No parcel of
Real Property is under development as of the date hereof.




     6.12 Tax Matters.



          (a) All Taxes which are due and payable and which could give rise to a Lien on the Purchased
Assets have been duly and timely paid.




          (b) All Tax Returns for Taxes which could give rise to a Lien on the Purchased Assets have
been duly and timely filed, except for those returns for which the time for filing thereof has been
validly extended, and such Tax Returns are correct and complete in all material respects.




          (c) None of the Tax Returns of Seller are being audited by any Governmental Authority.




          (d) There do not exist any Liens upon any of the properties, rights or assets of Seller, other
than Permitted Liens.




          (e) Seller is not a “foreign person” as defined in Section 1445(f)(3) of the Code.




     6.13 Contracts and Commitments.



          (a) Except as provided on Schedule 6.13, Seller is not a party to any currently
effective written:





               (i) contract, agreement or instrument under which Seller has made any loans or advances to, or
extended credit or financing to, or investment in, any Person in excess of $50,000.00 in the
aggregate, other than routine advances to employees that do not exceed $5,000.00;




               (ii) contract, agreement or instrument relating to the borrowing of money, the receipt of
credit or financing or the placing a Lien on any material asset, property or right or group of
assets, properties or rights of Seller;




               (iii) guarantee of, or surety contract for, any Indebtedness;



21









 






               (iv) contract, purchase order, agreement or instrument or group of related contracts,
agreements or instruments with the same party or group of affiliated parties, the performance of
which involves consideration that in the aggregate exceeds $50,000.00;




               (v) assignment, license, indemnification, contract or agreement with respect to any material
Intellectual Property rights that will be transferred to Buyer hereunder;




               (vi) contract, agreement or instrument under which Seller is lessee or lessor of any real
property;




               (vii) contract, agreement or instrument regarding any material indemnification provided to or
by Seller that will be transferred to Buyer hereunder;




               (viii) material contracts, agreements or instruments with a sales representative,
manufacturer’s representative, promoter, sponsor, distributor, dealer, broker, sales agency,
advertising agency or any other Person engaged in sales, distributing or promotional activities to
act on behalf of Seller or for Seller to act of behalf of such person;




               (ix) any partnership or joint venture agreement;




               (x) power of attorney;




               (xi) contract or agreement relating to any merger, acquisition, disposition, consolidation,
liquidation or dissolution of Seller or any interest therein or any of its material rights,
properties or assets;




               (xii) contract or agreement (other than this Agreement) prohibiting Seller in any material
respect from freely engaging in any business or competing anywhere in the world; or




               (xiii) any contract or agreement to enter into any of the foregoing.



          (b) All of the foregoing material contracts, agreements and instruments and those set forth on
Schedule 6.16 are in full force and effect, are valid and binding on Seller and, to the
Knowledge of the Seller Parties, the other person(s) party thereto. Seller is not in default
under, in breach of, or in receipt of any written claim of default or breach under, any such
material contract, agreement, arrangement or instrument. No event has occurred which, with the
passage of time or the giving of notice or both, would result in a default, breach or event of
noncompliance by Seller under any such material contract, agreement, arrangement or instrument.
Seller Parties do not have Knowledge of any breach or anticipated breach by any other party to any
such contract, agreement, arrangement or instrument. Seller has not received any written notice of
cancellation or non-renewal of any such material contract, agreement, arrangement or instrument.




          (c) Seller has provided Buyer access to a true, accurate and complete copy of each of the
written contracts, agreements, arrangements and instruments that are referred to on Schedule
6.13 and Schedule 6.16, together with all amendments, waivers, modifications,
extensions or other changes thereto.




22









 








     6.14 Intellectual Property.



          (a) Seller owns or has the right to use pursuant to a written license, sublicense or agreement
all Intellectual Property necessary for the operation of the Business. Seller has taken all
necessary action to maintain and protect each item of Intellectual Property that it owns, taking
into account the Seller’s reasonable business judgment of the relative importance of such items of
Intellectual Property and the costs and benefits of maintaining and protecting them.




          (b) During the past three (3) years, none of Seller or any of its employees, consultants or
subcontractors acting on their behalf, infringed upon or misappropriated any Intellectual Property
rights of third parties, and none of Parent or Seller has received in the past three (3) years any
written, formal charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or violation (including any claim that Seller must license or
refrain from using any Intellectual Property rights of any third party). To the Knowledge of Seller
Parties, no Person has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of Seller.




          (c) Schedule 6.14 identifies each patent or registration that has been issued to
Seller with respect to any of its Intellectual Property, identifies each pending patent application
or application for registration that Seller has made with respect to any of its Intellectual
Property and identifies each license, sublicense, agreement or other permission that Seller has
granted with respect to any of its Intellectual Property (together with any exceptions). Seller has
made available to Buyer correct and complete copies of all such patents, registrations,
applications, licenses, sublicenses, agreements and permissions (as amended to date). Schedule
6.14 also identifies each registered and unregistered trademark, service mark, trade name,
corporate name or Internet domain name, and material computer software item (other than COTS) that
is owned by Seller and is used in connection with the Business. With respect to each item of
Intellectual Property required to be identified on Schedule 6.14 pursuant to this clause
(c):





               (i) Seller owns and possesses all right, title and interest in and to the item, free and clear
of any Lien, license or other restriction or limitation regarding use or disclosure, other than
Permitted Liens; and




               (ii) to the Knowledge of the Seller Parties, the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge.



          (d) Schedule 6.14 identifies each item of Intellectual Property (other than COTS)
owned by a Person (other than Seller) that Seller uses, or since December 31, 2005 has used,
pursuant to license, sublicense or agreement. Seller has made available to Buyer correct and
complete copies of all such licenses, sublicenses, agreements and permissions (as amended to date).
With respect to each item of Intellectual Property required to be identified on Schedule
6.14 pursuant to this clause (d):





               (i) to the Knowledge of the Seller Parties, no party to the license, sublicense or agreement
is in material breach or default, and, to the Knowledge of the Seller Parties, no event has
occurred that with notice or lapse of time would constitute a material breach or default or permit
termination, modification or acceleration thereunder;




               (ii) to the Knowledge of the Seller Parties, no party to the license, sublicense or agreement
has repudiated any provision thereof; and



23









 






               (iii) Seller has not granted any sublicense or similar right with respect to the license,
sublicense or agreement.



          (e) Seller is the sole owner of all right, title and interest, free and clear of all Liens,
licenses or other restrictions, and has the exclusive right to use, all customer lists described in
Section 2.2(k).




          (f) Seller does not own, use or hold for use any patent in the operation of the Business.




          (g) All right, title and interest in and to (i) Intellectual Property created, conceived,
developed, or produced by each employee or contractor of Seller (in whole or in part, alone or
jointly with others, and regardless of whether conceived on or off the premises of Seller or Parent
or during business hours) and (ii) Intellectual Property related to or used in the Business
created, conceived, developed, or produced by each employee or contractor of Parent (in whole or in
part, alone or jointly with others, and regardless of whether conceived on or off the premises of
Seller or Parent or during business hours) is a work made for hire and is owned by Seller, free and
clear of any and all Liens, licenses or other restrictions other than Permitted Liens and, with
respect to each independent contractor, was created under a valid written agreement with Seller
specifying that such work constitutes work made for hire.




     6.15 Litigation. Except as set forth on Schedule 6.15, there are no material
actions, suits, proceedings, orders, writs, injunctions, judgments or decrees, at law or in equity,
or before or by any Person pending or, to the Knowledge of Seller Parties, threatened against: (a)
Seller; (b) any of the material properties, rights or assets owned by Seller; or (c) any of the
directors, officers, or employees of Seller in their capacities as such. Seller is not subject to
any grievance or arbitration proceedings under collective bargaining agreements or otherwise or, to
the Knowledge of Seller Parties, any proceedings, investigations or inquiries before or by any
Person (including inquiries as to the qualification to hold or receive any Permit) and, to the
Knowledge of the Seller Parties, there is no basis for any of the foregoing.



     6.16 Employees; Employee Benefit Plans; ERISA and Labor.



     (a) Schedule 6.16 correctly sets forth (A) the name and current compensation
(including annual salary, bonus and formal perquisites) of each employee, consultant (who is an
individual) or independent contractor (who is an individual) of Seller receiving more than
$75,000.00 in annual compensation, (B) a summary description of the duties or services provided by
and compensation of such employee or other Persons and (C) a list of any employees that are absent
from active employment, including leave of absence or disability. Except as set forth on
Schedule 6.16, (i) Seller has complied, in all material respects, with all laws relating to
the employment of labor (including provisions thereof relating to wages, hours, equal opportunity,
health, safety, benefits, leave of absence, collective bargaining, workers compensation,
unemployment compensation and the payment of social security and other Taxes); (ii) no unfair labor
practice complaint against Seller is pending before any Governmental Authority; (iii) to the
Knowledge of the Seller Parties there is no organized labor strike, dispute, slowdown or stoppage
organizing efforts or questions concerning representation pending against or involving Seller; (iv)
to the Knowledge of the Seller Parties there are no labor unions representing nor, attempting to
represent the employees of Seller; (v) no claim or grievance nor any arbitration proceeding arising
out of, or under, any collective bargaining agreement is pending, and, to the Knowledge of the
Seller Parties, no such claim or grievance has been threatened; (vi) Seller is not a party to any
collective bargaining agreement and no




24










 






collective bargaining agreement is currently being negotiated by Seller; (vii) Seller has not
experienced any work stoppage or similar organized labor dispute during the last three (3) years;
(viii) there is no material legal action, suit, proceeding or claim pending or, to the Knowledge of
Seller Parties, threatened, between Seller and any of its employees, former employees, freelancers,
independent contractors, agents, former agents, job applicants or any association; and (ix) since
December 31, 2005, there has been no material change in compensation, by means of wages, salaries,
bonuses, gratuities or otherwise, to any officer, director or key employee of Seller, except for
changes in compensation in the ordinary course of business and consistent with past practice.




          (b) To the Knowledge of Seller Parties, none of Seller or any of its employees, consultants or
subcontractors is subject to any noncompete, nondisclosure, confidentiality, employment, consulting
or similar agreements relating to, affecting, or in conflict with, the Business except for
agreements between Seller and its present and former employees, consultants or subcontractors.




          (c) Schedule 6.16 sets forth an accurate and complete list of each “employee benefit
plan” (as such term is defined in Section 3(3) of ERISA) and each other employee benefit plan,
program, agreement or arrangement, oral or written, providing compensation or benefits to current
or former employees (including any bonus plan, plan for deferred compensation, incentive, stock
purchase, stock option, stock appreciation, phantom stock, restricted stock, stock-based
compensation plan, cafeteria, life, disability, retirement, severance, sick leave, employee health
or other welfare benefit plan or other arrangement), that is or was within the past six years
maintained, sponsored or contributed to by Seller, and with respect to which Seller has any
liability or potential liability. Each such item listed on Schedule 6.16 is referred to
herein as a “Plan.”




          (d) Except as set forth on Schedule 6.16, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will result in the
acceleration or creation of any rights of any Person to benefits under any Plan or any employment,
severance, change in control or other agreement or arrangement (including the acceleration of the
vesting or exercisability of stock options, phantom equity rights or other equity-based awards).




          (e) Except as set forth on Schedule 6.16, Seller does not sponsor, maintain,
contribute to, have any obligation to contribute to, or have any liability under or with respect to
any Employee Pension Benefit Plan that is a “defined benefit plan” (as defined in Section 3(35) of
ERISA).




          (f) The Plans and all related trusts, insurance contracts and funds have been maintained,
funded and administered in compliance in all material respects with their terms and with the
applicable provisions of ERISA, the Code and other applicable laws.




          (g) Each of the Plans which is intended to be qualified under Section 401(a) of the Code has
received a current favorable determination from the Internal Revenue Service that such plan is
qualified under Section 401(a) of the Code or is entitled to rely upon an opinion or notification
letter issued to the sponsor of an IRS approved master and prototype or volume submitter plan
document. Each trust established in connection with any Plan is intended to be exempt from federal
income taxation under Section 501(a) of the Code and, to Knowledge of Seller Parties, nothing has
occurred since the date of such determination or application,




25









 




respectively, that would reasonably be expected to materially adversely affect the qualified
status of any such Plan or the exempt status of any such trust.




          (h) Seller has made available to Buyer true and complete copies of all material documents
pursuant to which each of the Plans are maintained, funded and administered, the most recent
summary plan descriptions.




          (i) Seller has not incurred any Losses or other liability on account of a “partial withdrawal”
or a “complete withdrawal” (within the meaning of ERISA Sections 4205 and 4203, respectively) from
any Multiemployer Plan, no such Loss or liability has been asserted against Seller, and there are
no events or circumstances that could result in any such partial or complete withdrawal; and to the
Knowledge of Seller Parties, Seller is not bound by any contract, agreement, arrangement or
instrument or has any Loss or other liability described in ERISA Section 4204.




     6.17 Compliance with Laws; Licenses.



          (a) During the last three years, Seller has complied in all material respects with all laws,
statutes, ordinances, rules and regulations applicable to it, and Seller has not received written
notice of any actual, alleged, potential violation of, or failure to comply with, any such
applicable law, statute, ordinance, rule or regulation by Seller. To Seller’s Knowledge, Seller
has not been subject to any adverse material inspection, finding, investigation, penalty
assessment, audit or other compliance or enforcement action.




          (b) Seller has all material Permits, rights, bonds, accreditations, qualifications and
certifications as may be necessary to enable Seller to own its material properties, rights and
assets and to conduct the Business as currently conducted. Seller is in material compliance with
the terms and conditions of such Permits, right, bonds, accreditations, qualifications and
certifications.




     6.18 Environmental Matters. Notwithstanding any other provision to the contrary, this
Section 6.18 contains Seller’s sole representations and warranties regarding matters
arising under Environmental Laws and Environmental Permits, and with respect to Hazardous
Substances. Except as provided on Schedule 6.18:



          (a) Seller, its predecessors and Parent have complied and are in compliance with all
Environmental Laws in respect of the Business (including Owned Real Property).




          (b) Without limiting the generality of the foregoing, Seller has obtained and is in material
compliance with all Environmental Permits required for the operation of the Business; and a list of
all such Environmental Permits is set forth on Schedule 6.18.




          (c) Seller has not received any written notice, report or other information regarding any
actual or alleged material violation of Environmental Laws or Environmental Permits, or any
liabilities, including any investigatory, remedial or corrective obligations, relating to the
Business (including Owned Real Property) arising under Environmental Laws.




          (d) Except as in material compliance with Environmental Laws and except as would not be
expected to result in a material liability under Environmental Laws and except as set forth on
Schedule 6.18, none of the following exists at any property or facility owned or operated
by Seller: (i) underground storage tanks: (ii) asbestos containing material in any form




26









 




or condition; (iii) materials or equipment containing polychlorinated biphenyls; or (iv)
landfills, surface impoundments or disposal areas.




          (e) Seller has not treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, manufactured, distributed or released any substance, including any Hazardous
Substance, in a manner that, to the Knowledge of Seller, reasonably could be expected to give rise
to any current or future liabilities, including any liability for fines, penalties, response costs,
corrective action costs, personal injury, property damage, natural resources damages or attorneys’
fees, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, the Solid Waste Disposal Act, as amended, or any other Environmental Laws.




          (f) Seller has not assumed, or otherwise become subject to, any material liability as of the
date hereof, including any obligation for corrective or remedial action, of any other Person
relating to Environmental Laws or Environmental Permits in connection with the Business.




          (g) Seller is not aware of any facts, events or conditions relating to the Business that will
prevent continued compliance with Environmental Laws or Environmental Permits, and Seller is not
aware of any releases or threatened releases of Hazardous Substances at the Real Owned Property,
and Seller is not aware of any agreement pursuant to which Seller has assumed material pending
liabilities under Environmental Laws or Environmental Permits.




          (h) Seller is not the subject of any actions, suits, proceedings, orders, writs, injunctions,
judgments, decrees, investigations or claims, at law or in equity, pending or, to Seller Parties’
Knowledge, threatened with respect to any violation of any Environmental Law or Environmental
Permit in respect of the Business;




          (i) No Lien has been or, to Seller’s Knowledge, is reasonably expected to be recorded on any
Real Property by any Governmental Authority under any Environmental Law or Environmental Permit.




          (j) Seller has furnished to Buyer copies of all Phase 1 environmental reports and compliance
audits relating to the Business (including Owned Real Property) that are in Seller’s or Parent’s
possession.




     6.19 Customers and Suppliers.



          (a) Schedule 6.19 lists the ten (10) largest customers of Seller for each of the two
(2) most recent fiscal years and sets forth opposite the name of each such customer the dollar
amount of net sales attributable to such customer.




          (b) Since December 31, 2005, no material supplier, vendor or subcontractor of Seller has
provided written notice or, to the Knowledge of the Seller Parties, otherwise notified, Seller that
it will stop, or materially decrease the rate of, supplying materials, products or services to
Seller, and no customer listed on Schedule 6.19 has provided written notice or, to the
Knowledge of the Seller Parties, otherwise notified, Seller that it will stop, or materially
decrease the rate of, buying materials or products from Seller.




27









 





     6.20 Insurance. Schedule 6.20 contains a description of each Insurance
Policy. Each of the Insurance Policies are in full force and effect. The Insurance Policies are
in such amounts and provide coverage that is reasonable in light of the Business, operations and
properties of Seller. Except as set forth on Schedule 6.20, to the Knowledge of Seller
Parties, each Insurance Policy is sufficient for material compliance with: (a) all requirements of
Law for the risks of insured; and (b) all contracts, agreements, arrangements and instruments to
which Seller is a party or by which it or any of its rights, assets or properties may be bound.



     6.21 Governmental Consents. No Permit, consent, approval or authorization of, or
declaration to, or filing with, any Governmental Authority is required in connection with the
execution and delivery by Seller of this Agreement or any of the Transaction Documents, or the
consummation by Seller of the transactions contemplated hereby or thereby, except as would not
result in a Material Adverse Effect.



     6.22 Affiliated Transactions. No officer, director, employee or shareholder of Seller
or any Person related by blood or marriage to any such Person, is a party to any contract or
agreement with Seller that involves (a) payment of more than $5,000.00 per year in the case of any
officer, director or employee of Seller or any Person related by blood or marriage to any such
Person, or (b) payment of more than $25,000.00 per year in the case of any shareholder of Seller,
or has any interest in any property, right or asset owned or used by Seller, except: (i) as
disclosed on Schedule 6.8, Schedule 6.13, Schedule 6.16, or Schedule 6.22 or as otherwise
contemplated by this Agreement; and (ii) standard employee benefits made generally available to all
employees. All of such contracts or agreements are on terms that are no less favorable to Seller
than the terms that could be obtained from an unrelated third party.



     6.23 Inventory. Except as set forth in Schedule 6.23, the Inventory
generally: (i) consists of a quality usable and/or salable in the ordinary course of business
consistent with past practice; (ii) is not defective or damaged, subject in the case of (i) and
(ii) to the reserves for inventory write-downs or defective or damaged inventory reflected in the
Final Working Capital; and (iii) is adequate in amount, consistent with past practices of Seller to
conduct the Business as currently conducted. The reserves reflected in all balance sheets included
in the Financial Statements have been calculated on the basis of Parent’s policy for establishing a
reserve for excess, obsolete and slow moving inventory reflected in the definition of Working
Capital provided in Section 1.1, which policy has been in effect for, and applied in all material
respects by, Parent and each of its subsidiaries since January 1, 2005.



     6.24 Product Warranty. Each product sold by Seller has been in conformity with all
applicable contractual commitments and all express and implied warranties, and except as reflected
in the Final Working Capital, Seller has no liability for replacement or repair thereof or other
damages in connection therewith in excess of $10,000.00 or as set forth in Schedule 6.24.
Schedule 6.24 includes copies of the standard terms and conditions of service or sale for
Seller (containing applicable guaranty, warranty and indemnity provisions).



     6.25 Product Liability. Except as set forth in Schedule 6.25, Seller has no
liability (and there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against any of them giving rise to any liability)
arising out of any injury to individuals or property as a result of the ownership, possession or
use of any product sold or service performed by Seller.



     6.26 Brokers and Bonuses. Except as set forth on Schedule 6.26, there are no,
nor is there any basis for any, claims for brokerage commissions, finders’ fees or similar



28









 







compensation in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon Seller. Except as set forth on Schedule 6.26,
neither Seller, Parent or any Affiliate thereof is obligated to pay any special retention or stay
bonuses or similar compensation (discretionary or otherwise) to any officer, director, or employee
of Seller in connection with or arising out of the transactions contemplated hereby.



ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF BUYER




          Buyer hereby represents and warrants to Seller and Parent as of the date hereof as follows:




     7.1 Organization and Power. Buyer is a limited liability company duly organized,
validly existing and in good standing under the laws of Delaware. Buyer has all requisite power
and authority necessary to execute and deliver this Agreement and all of the Transaction Documents
to which Buyer is a party and to perform their respective obligations hereunder and thereunder.



     7.2 Authorization; No Breach. The execution and delivery of this Agreement and all of
the Transaction Documents to which Buyer is a party and the performance by Buyer of its obligations
hereunder and thereunder, have been duly authorized by Buyer. This Agreement and the Transaction
Documents to which Buyer is or may become a party (upon execution and delivery thereof by each
party thereto) each constitute, or will constitute as of the Closing, a valid and binding
obligation of Buyer, enforceable in accordance with its terms, except as such enforceability may be
limited by: (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws in effect that limit creditors’ rights generally; (b) equitable limitations on the
availability of specific remedies; and (c) principles of equity. The execution and delivery by
Buyer of this Agreement and all of the Transaction Documents, and the fulfillment of, and
compliance with, the respective terms hereof and thereof by Buyer, do not and will not conflict
with, or result in a breach of, or constitute a default under or violation of (or would, with the
giving of notice or the passage of time, or both, become a default under), or, require any Permit
by or with any Person, or give to any Person any right of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any Lien pursuant to, or
would result in or require any payment or prepayment or new obligation under: (i) its certificate
of formation, limited liability company agreement or other organizational document; (ii) any law,
statute, rule, regulation, Permit, order, judgment, ruling, writ or decree to which Buyer is
subject or by which it or any of its respective properties, rights or assets may be bound; or (iii)
any contract, agreement, arrangement or instrument to which Buyer is subject or by which it or any
of its respective properties, rights or assets may be bound.



     7.3 Litigation. There are no material actions, suits, proceedings, orders, writs,
injunctions, judgments, or decrees, at law or in equity, or before or by any Person pending or, to
the knowledge of Buyer, threatened against Buyer which, if determined adversely, could reasonably
be expected to have a material adverse effect on the ability of Buyer to enter into and perform its
obligations under this Agreement and the Transaction Documents. There is no unsatisfied judgment
or any open injunction binding upon Buyer which could reasonably be expected to have a material
adverse effect on the ability of Buyer to enter into and perform its obligations under this
Agreement and the Transaction Documents.



     7.4 Brokers and Bonuses. Except as set forth on Schedule 7.4, there are no,
nor is there any basis for any, claims for brokerage commissions, finders’ fees or similar



29









 







compensation in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon Buyer.



     7.5 Buyer Acknowledgment. Buyer acknowledges that neither Seller nor Parent (or any
of their officers, directors, agents, or advisors) makes or has made any representation or
warranty, either express or implied, other than those representations and warranties expressly set
forth in Article VI of this Agreement or those representations and warranties of Seller or Parent
expressly set out in the Transaction Documents. Buyer acknowledges it has been furnished with or
given access to such information about Seller and the Business as it has requested.



ARTICLE VIII

INDEMNIFICATION; SURVIVAL




     8.1 Indemnification by Parent and Seller. Each of Parent and Seller agree to and
shall, jointly and severally, indemnify the Buyer Parties and hold each of them harmless against
any Losses which the Buyer Parties may suffer, sustain or become subject to, as a result of: (a)
any breach of any representation or warranty made by any of Parent or Seller in this Agreement; (b)
any breach of any covenant or agreement by Parent or Seller under this Agreement or under any
Transaction Document; (c) any Excluded Liabilities or (d) any of the matters set forth on
Schedule 8.1 attached hereto (the “Special Indemnification Schedule”);
provided, that neither Parent nor Seller shall have any liability under Section
8.1(a) (other than with respect to any breach of Section 6.2(a) (Authorization);
Section 6.8(a) (Assets); or Section 6.15 (Litigation); or to any fraud by Parent
or Seller) unless the aggregate of all Losses relating thereto for which Parent and Seller would,
but for this proviso, be liable exceeds on a cumulative basis an amount equal to $250,000.00
(“Threshold Amount”), and then Parent and Seller shall be liable for all such Losses
including the Threshold Amount. Notwithstanding the foregoing, (x) Parent and Seller shall not
have any liability under Section 8.1(a) with respect to any breach of Section 6.18
(Environmental Matters) unless the amount of Losses relating thereto exceeds $250,000.00 and then
Parent and Seller shall be liable only for all such Losses in excess of such $250,000.00 threshold
(and in which event the Threshold Amount shall be met by such Losses); and (y) Parent and Seller
shall not be liable for any Losses pursuant to Section 8.1(a) that exceed in the aggregate
an amount (the “Restricted Amount”) equal to 15% of the Purchase Price (as adjusted by
Section 4.2(d)) plus, with respect to Losses relating to any breaches of Section
6.18 (Environmental) only, an amount equal to the difference of $8 million minus the Restricted
Amount; provided, however, that this limitation shall not be applicable to any
breach of Section 6.2(a) or Section 6.8(a) or to any fraud by Parent or Seller. In
no event (other than with respect to any fraud by Parent or Seller) shall Parent and Seller be
liable for any Losses pursuant to this Article VIII that in the aggregate exceed the
Purchase Price, as adjusted pursuant to Section 4.2(d).



     8.2 Indemnification by Buyer. Buyer agrees to and shall indemnify the Seller Parties
and hold each of them harmless against any Losses which the Seller Parties may suffer, sustain or
become subject to, as the result of: (a) any breach by Buyer of any representation or warranty made
by Buyer in this Agreement; (b) any breach of any covenant or agreement made by Buyer in this
Agreement or in any Transaction Document; or (c) failure of Buyer or any successor thereto to
fulfill its obligations under the Nebraska Agreement; provided, that Buyer shall not have
any liability under Section 8.2(a) (other than with respect to any fraud by Buyer) unless
the aggregate of all Losses relating thereto for which Buyer would, but for this proviso, be liable
exceeds on a cumulative basis an amount equal to $250,000.00, and then Buyer shall be liable for
all such Losses including the $250,000.00 threshold amount. Notwithstanding the



30









 







foregoing, Buyer shall not be liable for any Losses pursuant to this Section 8.2(a)
(other than with respect to any fraud by Buyer) that exceed the Purchase Price (as adjusted by
Section 4.2(c)) in the aggregate; provided, however, that this limitation shall not
be applicable to any breach of Section 7.2 (Authorization; No Breach). In no event (other
than with respect to any fraud by Buyer) shall Buyer be liable for any Losses pursuant to this
Article VIII that in the aggregate exceed the Purchase Price, as adjusted pursuant to
Section 4.2(d).



     8.3 Manner of Payment. Except as otherwise provided herein, any indemnification
pursuant to this Article VIII shall be effected by wire transfer of immediately available
funds to an account designated by the applicable recipient, within ten (10) days after the final
determination thereof. Any such indemnification payments shall include interest at the Applicable
Rate from the date any such Loss is suffered or sustained to the date of payment.



     8.4 Defense of Third-Party Claims. Any Person making a claim for indemnification
under this Article VIII (an “Indemnitee”) shall notify the indemnifying party (an
“Indemnitor”) of the claim in writing promptly after receiving written notice of any
action, lawsuit, proceeding, investigation or other claim against it (if by a third party),
describing the claim, the amount thereof (if known and quantifiable) and the basis thereof;
provided that the failure to so notify an Indemnitor shall not relieve the
Indemnitor of its obligations hereunder except to the extent that (and only to the extent that) the
Indemnitor has been prejudiced thereby. The parties will fully cooperate in any such action, and
shall make available to each other any books, records or personnel useful for the defense of any
such proceeding. Any Indemnitor shall be entitled to participate in the defense of such action,
lawsuit, proceeding, investigation or other claim giving rise to an Indemnitee’s claim for
indemnification at such Indemnitor’s expense, and at its option (subject to the limitations set
forth below) shall be entitled to assume the defense thereof; provided that, prior
to the Indemnitor assuming control of such defense it shall first verify to the Indemnitee in
writing that such Indemnitor shall be, subject to the limitations set forth herein, responsible
(with no reservation of any rights) for all liabilities and obligations relating to such claim for
indemnification; and provided further that:



          (a) the Indemnitee shall be entitled to participate in the defense of such claim and to employ
counsel of its choice for such purpose; provided that the fees and expenses of such
separate counsel shall be borne by the Indemnitee (other than any fees and expenses of such
separate counsel that are incurred prior to the date the Indemnitor effectively assumes control of
such defense which, notwithstanding the foregoing, shall be borne by the Indemnitor);




          (b) the Indemnitor shall not be entitled to assume control of such defense (unless otherwise
agreed to in writing by the Indemnitee) and shall pay the reasonable fees and expenses of counsel
retained by the Indemnitee if (i) the claim for indemnification is based on any criminal or
quasi-criminal proceeding, action, indictment, allegation or investigation; (ii) the claim seeks an
injunction or equitable relief against the Indemnitee; or (iii) the Indemnitee reasonably believes
at any time that the Loss relating to the claim could exceed 200% of the maximum amount that such
Indemnitee could then be entitled to recover under the applicable provisions of Article
VIII;




          (c) if the Indemnitor shall control the defense of any such claim, the Indemnitor shall obtain
the prior written consent of the Indemnitee (not to be unreasonably withheld or delayed) before
entering into any settlement of a claim or ceasing to defend such claim if, pursuant to or as a
result of such settlement or cessation, injunctive or other adverse equitable relief will be
imposed against the Indemnitee or if such settlement does not expressly and unconditionally release
the Indemnitee from all liabilities and obligations with respect to




31









 




such claim, without prejudice, or if such settlement includes any admission of wrongdoing or
attributes liability to the Indemnitee; and




          (d) in any instances in which Indemnitee controls the defense of a claim, the Indemnitee shall
obtain the prior written consent of the Indemnitor (not to be unreasonably withheld or delayed)
before entering into any settlement that would implicate the indemnification provisions hereof.




     8.5 Additional Indemnification Procedures. Promptly following becoming aware of any
indemnifiable Loss other than with respect to a third-party claim, any Indemnitee shall notify an
Indemnitor in writing, describing the claim, the amount thereof (if known and quantifiable) and the
basis thereof and attach thereto all supporting documents, calculations, correspondence and other
documents related to each item of Loss set forth in such notice; provided that the
failure to so notify an Indemnitor shall not relieve the Indemnitor of its obligations hereunder
except to the extent that (and only to the extent that) the Indemnitor has been prejudiced thereby.



     8.6 Intentionally Omitted.



     8.7 Survival of Representations and Warranties. The representations and warranties in
this Agreement shall survive the Closing as follows:



          (a) the representations and warranties in Section 6.2(a) (Authorization); Section
6.8(a) (Assets) and all representations and warranties applicable to the matters set forth on
the Special Indemnification Schedule shall terminate on the fifth anniversary of the Closing Date;




          (b) the representations and warranties in Section 6.12 (Taxes) shall terminate when
the applicable statute of limitation with respect to the liabilities in question expire (after
giving effect to any extensions or waivers thereof), plus thirty (30) days;




          (c) all other representations and warranties in this Agreement and the Schedules and Exhibits
attached hereto or in any writing delivered by any party to another party in connection with this
Agreement shall expire eighteen (18) months after the Closing Date; provided that
any representation or warranty in respect of which indemnity may be sought under Article
VI, and the indemnity with respect thereto, shall survive the time at which it would otherwise
terminate pursuant to this Section 8.7 if notice of the inaccuracy or breach (or notice of
any actions, claim, suit, proceeding or decision pursuant to which a potential right of
indemnification could be determined) and resulting Loss or potential Loss shall have been given to
the party against whom such indemnity may be sought prior to such time. The representations and
warranties in this Agreement shall in no event be affected by any investigation, inquiry or
examination made for or on behalf of any party prior to the Closing or the knowledge of any party’s
officers, directors, shareholders, members, employees or agents prior to the Closing or the
acceptance by any party of any certificate or opinion hereunder prior to the Closing.




     8.8 Sole Remedy and Limitations.



          (a) After the Closing has occurred, the right to indemnification under this Article
VIII shall be the exclusive remedy of each party hereto for Losses (other than for fraud or the
ability to obtain injunctive relief with respect to any covenant set forth in Section 9.2,
9.3 and




32









 




9.4 of this Agreement) in connection with any matter hereunder, including without
limitation (i) any breach by the other parties of its representations, warranties, or covenants in
this Agreement, (ii) any of the matters set forth on the Special Indemnification Schedule, or (iii)
any Excluded Liabilities. For the avoidance of doubt, the remedies and limitations contained in
this Agreement shall not be applicable to any assembly services provided by Parent or any Affiliate
of Parent, to either Seller or Buyer prior to or after the Closing.




          (b) Each party hereto agrees to take, and to cause its Affiliates to take, all reasonable
steps that do not require the expenditure of out-of-pocket funds (unless such amounts will be
indemnified hereunder) or otherwise do not materially adversely affect such party or its
Affiliates, to mitigate any Losses incurred or to be incurred by such party or its Affiliates upon
and after becoming aware of any event which could reasonably be expected to give rise to any
Losses.




          (c) Notwithstanding any of the foregoing, all payments to each Indemnitee, pursuant to this
Article XIII, shall be reduced by the amount of (i) recovery by counterclaim or otherwise
from any third party based on any claim that the Indemnitee has against any third party that
reduces the Losses that would otherwise be sustained and (ii) any net income Tax benefit actually
realized by the Indemnitee during a tax year in which such indemnification relating to such Loss is
available hereunder.




ARTICLE IX

ADDITIONAL AGREEMENTS




     9.1 Mutual Assistance. Buyer, Parent and Seller agree that they will mutually
cooperate in the expeditious filing of all notices, reports and other filings with any Governmental
Authority required to be submitted jointly by Seller and Buyer in connection with the execution and
delivery of this Agreement and/or the other agreements contemplated hereby and the consummation of
the transactions contemplated hereby or thereby.



     9.2 Non-Competition; Non-Solicitation.



          (a) Each of Parent and Seller hereby acknowledge that it is familiar with the Confidential
Information. Each of Parent and Seller acknowledge and agree that Buyer would be irreparably
damaged if it were to sell products to or otherwise participate in the business of any Person
competing with the Business, and that any such competition by Parent or Seller would result in a
significant loss of goodwill by Buyer. Each of Parent and Seller further acknowledge and agree
that the covenants and agreements set forth in this Section 9.2 were a material inducement
to Buyer to enter into this Agreement and to perform its obligations hereunder, and that Buyer and
its Affiliates would not obtain the benefit of the bargain set forth in this Agreement as
specifically negotiated by the parties hereto if Parent or Seller breached the provisions of this
Section 9.2. Therefore, in further consideration of the amounts to be paid hereunder for
the assets and the goodwill of Seller sold by Seller, each of Parent and Seller agree that until
the second (2nd) anniversary of the Closing Date (or, if earlier, the date of an
acquisition of all or a majority of the stock or assets (including by way of merger or otherwise)
of Parent by a Person that is not an Affiliate of Parent prior to such transaction), each of Parent
and Seller shall not (and shall cause their present or future Subsidiaries to not) own any interest
in, manage, control, participate in (whether as an officer, director, employee, partner, agent,
representative, consultant or otherwise), consult with, render services for or in any other manner
engage in competition with the Business anywhere in the world; provided that
nothing herein shall prohibit Parent or Seller from being a passive owner of not more than five
percent (5%) of




33









 




the outstanding securities of any class of a corporation which is publicly traded so long as
none of such Persons has any active participation in the business of such corporation.




          (b) Until the second (2nd) anniversary of the Closing Date (or, if earlier, the
date of an acquisition of all or a majority of the stock or assets (including by way of merger or
otherwise) of Parent by a Person that is not an Affiliate of Parent prior to such transaction),
each of Parent and Seller shall not (and shall cause their present or future Subsidiaries to not):
(i) induce or attempt to induce any specific Transferred Employee to leave the employ of Buyer, or
in any way interfere with the relationship between Buyer and any such employee, provided that the
foregoing shall not preclude Parent or Seller from general solicitations not targeted at any
Transferred Employee; or (ii) expressly induce or attempt to induce any customer or supplier of the
Business to cease doing or decrease their business with Buyer (including making any negative
statements or communications about Buyer or any of its Affiliates).




          (c) For the avoidance of doubt, this Section 9.2 shall not apply in any way to any
past, current or future stockholders of Parent. If, at the time of enforcement of the covenants
contained in this Section 9.2 (the “Restrictive Covenants”), a court or arbitrator
shall hold that the duration or scope stated herein are unreasonable under circumstances then
existing, the parties agree that the maximum duration or scope reasonable under such circumstances
shall be substituted for the stated duration or scope and that the court shall be allowed and
directed to revise the restrictions contained herein to cover the maximum period or scope permitted
by law. Each of Parent and Seller have consulted with legal counsel regarding the Restrictive
Covenants and based on such consultation have determined and hereby acknowledge that the
Restrictive Covenants are reasonable in terms of duration or scope and are necessary to protect the
goodwill of the Business. Parent and Seller further acknowledge and agree that the Restrictive
Covenants are being entered into by them in connection with the sale by Seller of its assets and
Business pursuant to this Agreement.




          (d) In the event of any breach or violation by Parent or Seller of any of the Restrictive
Covenants, the time period of such covenant shall be tolled until such breach or violation is
resolved.




     9.3 Confidentiality. Each of Parent and Seller agrees not to disclose or use at any
time any Confidential Information, including information regarding the identity of any Affiliates
of Buyer, except to the extent required by applicable law, regulatory requirements and/or exchange
rules. Each of Parent and Seller further agrees to take all commercially reasonable steps to
safeguard such Confidential Information and to protect it against disclosure, misuse, espionage,
loss and theft. In the event any of Parent or Seller is required by law or subpoena to disclose
any Confidential Information, such person shall promptly notify Buyer in writing, which
notification shall include the nature of the legal requirement and the extent of the required
disclosure, and each of Parent and Seller shall use, at sole cost and expense of Buyer, its
reasonable efforts to and shall cooperate with Buyer to preserve the confidentiality of such
information consistent with applicable law and regulatory requirements.



     9.4 Specific Performance. Each of Parent, Seller and Buyer acknowledges and agrees
that the other parties would be damaged irreparably in the event any of the provisions of this
Agreement, including any of the provisions of Article VII, is not performed in accordance
with its specific terms or is otherwise breached. Accordingly, Parent, Seller and Buyer agree that
the other parties shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted pursuant to Section 10.2 or in any court in the
United



34









 







States or in any state having jurisdiction over the parties and the matter in addition to any
other remedy to which they may be entitled pursuant hereto.



     9.5 Tax Matters. All transfer, documentary, sales, use, stamp, registration and other
such Taxes, and all conveyance fees, recording charges and other fees and charges (including any
penalties and interest) incurred in connection with the consummation of the transactions
contemplated by this Agreement shall be borne one-half by Seller and one-half by Buyer. Each of
Seller, Parent and Buyer shall cooperate in the preparation and filing of all necessary Tax Returns
and other documentation with respect to all such Taxes, fees and charges, and each of Seller,
Parent and Buyer shall, and shall cause its Affiliates to, join in the execution of any such Tax
Returns and other documentation, in accordance with applicable law. Seller will reasonably
cooperate with Buyer to obtain any applicable sales tax or other exemption certificates in
connection with the transfer of the Purchased Assets.



     9.6 Payment of Debts. Commencing as of the Closing Date, Parent shall cause Seller to
pay as and when due all of Seller’s debts and obligations existing as of the Closing Date which are
not Assumed Liabilities by Buyer hereunder; provided, however, that the foregoing shall not prevent
Seller from contesting in good faith any such debts or obligations.



     9.7 Name Following the Closing. Promptly following the Closing, Seller shall amend
its articles of incorporation so as to change its name to “UCI Pennsylvania, Inc.” or such other
name which is not, in the judgment of Buyer acting reasonably, confusingly similar to the name
“Neapco,” and none of Seller, Parent or any of their respective Affiliates, successors or assigns
shall thereafter use such name or other names acquired by Buyer hereunder or names confusingly
similar thereto.



     9.8 Certain Employee Benefits Matters.



          (a) Effective as of the Closing Date, Buyer shall offer employment to each Transferred
Employee at the salary or wage level, as applicable, and with employee benefits that, in the
aggregate per employee, are substantially comparable to those provided by Seller and to such
Transferred Employee immediately prior to the Closing Date. For the one-year period following the
Closing Date (the “Continuation Period”), Buyer agrees to (i) provide severance benefits to
Transferred Employees that are no less favorable to Transferred Employees than the severance
benefits program in place immediately prior to the Closing Date for salaried and hourly employees
employed in connection with the operation of the Business and (ii) otherwise provide each
Transferred Employee (whether or not such individual returns to active employment in the Business)
with employee benefits that, in the aggregate per employee, are substantially comparable to those
provided by Seller and its Subsidiaries to such Transferred Employee immediately prior to the
Closing Date. Except to the extent it would result in the duplication of benefits, Buyer shall
cause Buyer’s employee benefit plans to recognize, for the purpose of determining the vesting of
benefits and participation eligibility, all service by Transferred Employees with Seller or any of
its Subsidiaries, including service with predecessor employers to the extent that such service was
recognized by the analogous plans of Seller, any of its Subsidiaries or Seller such that no break
or interruption of employment or participation shall be deemed to have occurred with respect to the
Transferred Employees.




          (b) Buyer agrees that any pre-existing condition exclusions or waiting periods imposed
under Buyer’s welfare benefit plans will be waived with respect to any Transferred Employee and his
or her covered dependents and Buyer (or Buyer’s employee benefit plans) shall assume all
liabilities relating to all claims by Transferred Employees (and their dependents




35









 




and beneficiaries) for benefits after the Closing Date under all medical, dental, employee
assistance, life, accidental death and dismemberment, dependent life, short- and long-term
disability plans.




          (c) Buyer shall provide continuation coverage to Transferred Employees with respect to whom a
qualifying event occurs as a result of or following the Closing of the transaction contemplated by
this Agreement in compliance with the provisions of Code Section 4980B and ERISA Section 601 et
seq.




          (d) Buyer will establish a 401(k) plan and Buyer agrees to cause Buyer’s 401(k) plan to accept
direct rollover contributions on behalf of Transferred Employees from Seller’s and/or its parent’s
401(k) plan, including outstanding loans.




          (e) On the Closing Date, Buyer shall establish a defined benefit retirement plan that complies
with Sections 401(a) and 501(a) of the Code (“Buyer’s Defined Benefit Plan”) for the
benefit of the Transferred Employees that are members of the United Steel, Paper and Forestry,
Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union,
AFL-CIO-CLC on behalf of Local Union No. 9455-05 (the “Union Employees”) and that
participated in a defined benefit plan maintained by Seller (“Seller’s Defined Benefit
Plan”) immediately prior to the Closing. The Union Employees shall be eligible to participate
in Buyer’s Defined Benefit Plan in accordance with the terms set forth in the Agreement by and
between Seller and United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied
Industrial and Service Workers International Union, AFL-CIO-CLC on behalf of Local Union 9455-05,
effective April 22, 2006 through April 20, 2009, and the terms of this Agreement; taking into
account the value of each Union Employee’s frozen accrued benefit under Seller’s Defined Benefit
Plan as of the Closing Date.




          (f) Buyer shall be liable for all obligations with respect to claims of Transferred Employees
for workers compensation for incidents arising after the Closing Date.




          (g) Within thirty (30) days after Closing, Parent shall pay to certain Transferred Employees,
the identities and the individual amounts of which have been agreed to between Parent and the
President of Buyer, an aggregate amount of $189,600.00 as one-time bonus compensation.




          (h) Nothing contained in this Agreement shall confer upon any Transferred Employee any rights
with respect to continuance of employment by Buyer, nor shall any provision of this Agreement
create any third party beneficiary rights in any Transferred Employee, any beneficiary or
dependents thereof, or any collective bargaining representative thereof.




     9.9 Accounts Receivable. After the Closing, Buyer shall in good faith use
commercially reasonable efforts (which, in any event, shall not be less than the efforts used in
the ordinary course of business previously by Seller) to collect the accounts receivable of Seller
included in the Final Working Capital (the “Outstanding Receivables”); and Buyer shall
perform and discharge its obligations under each written agreement that it has with each account
debtor represented by an Outstanding Receivable in accordance with the terms of each such
agreement. Without limiting the foregoing, Buyer shall not be deemed to be in good faith using
commercially reasonable efforts to collect the Outstanding Receivables if it shall forgive,
discharge or compromise, in whole or in part, any Outstanding Receivable and the purpose for such
forgiveness, discharge or compromise was not to resolve a bona fide customer dispute



36









 







solely resulting from any act or omission by Seller prior to Closing; provided, that
if Buyer desires to forgive, discharge or compromise, in whole or in part, an Outstanding
Receivable, and pursuant to this Section 9.9 such forgiveness, discharge or compromise
would not constitute the good faith use of commercially reasonable efforts to collect the
Outstanding Receivables, Buyer may nonetheless effect such forgiveness, discharge or compromise so
long as it provides Seller with prior written notice of such forgiveness, discharge or compromise,
which written notice shall include a written agreement by Buyer that the amount so forgiven,
discharged or compromised shall be considered an amount collected by Buyer for purposes hereof.
Following each of the date that is forty-five (45) days after the Closing Date, the date that is
ninety (90) days after the Closing Date, the date that is one hundred thirty-five (135) days after
the Closing Date, the date that is one hundred eighty (180) days after the Closing Date and the
date that is two hundred and twenty-five (225) days after the Closing Date, Buyer shall prepare and
provide Seller with an accounting of the collection status of all of the Outstanding Receivables.
If the amounts collected by the Buyer in respect of the Outstanding Receivables through the date
that is two hundred and twenty-five (225) days after the Closing Date are less than the value
reported for those Outstanding Receivables in Final Working Capital (net of any reserve thereof),
then (x) Parent or Seller shall pay Buyer the difference between the amounts so collected and the
value of such Outstanding Receivables so reported, and (y) any Outstanding Receivable for which any
such payment is made to Buyer shall be transferred to Seller. If following the 225th day after the
Closing Date but on or prior to the first anniversary of Closing, Buyer collects any Outstanding
Receivable that remained uncollected on the 225th day after the Closing, Buyer shall forward such
amount to Seller promptly. All amounts received by Seller or Parent after the Closing with respect
to any Outstanding Receivable that has not been transferred to Seller pursuant to this Section
9.9, shall be forwarded by Seller or Parent, as the case may be, to Buyer within five (5) days
of the receipt thereof.



     9.10 Environmental. Notwithstanding any provision herein to the contrary, Buyer shall
not be entitled to indemnification with respect to a breach of Section 6.18 relating to any
releases of Hazardous Substances with respect to or arising from any (i) voluntary investigations,
including any physically invasive testing procedures such as soil or groundwater sampling, (ii)
construction or maintenance activities (including expansion of any Owned Real Property), (iii) due
diligence investigation performed by a potential acquirer, directly or indirectly (including
through an acquisition of Buyer), of all or substantially all of the Owned Real Property (or parcel
thereof), (iv) due diligence investigation performed by Buyer or a lender in connection with any
financing arrangements, or (v) closure or shutting down of, or material suspension or modification
of the historical operations at, the Owned Real Property (or parcel thereof). Buyer’s entitlement
to indemnification with respect to a breach of Section 6.18 shall terminate upon the
earlier of (a) the survival period set forth in Section 8.7 and (b) an assignment of this
Agreement by Buyer to any Person other than an Affiliate of Buyer.



     9.11 Refunds and Remittances. Except as otherwise set forth in the Agreement, after
the Closing: (i) if Seller or any of its Affiliates receive any refund or other amount that is a
Purchased Asset or is otherwise properly due and owing to Buyer in accordance with the terms of
this Agreement, Seller shall promptly remit, or shall cause to be remitted, within thirty (30)
business days, such amount to Buyer, and (ii) if Buyer or any of its Affiliates receives any refund
or other amount that is an Excluded Asset, Purchaser shall promptly remit, or shall cause to be
remitted, within thirty (30) business days, such amount to Parent.



37









 





ARTICLE X

MISCELLANEOUS




     10.1 Expenses. Each of Parent, Seller and Buyer shall bear its own costs and expenses
(including legal fees and expenses) associated with the negotiation, execution and delivery of this
Agreement and the Transaction Documents and the consummation of the transactions contemplated
hereunder and thereunder. Notwithstanding the foregoing, Seller shall pay one-half of the cost to
Buyer (which portion payable by Buyer shall not exceed $35,000.00 in the aggregate) of an American
Land Title Association owner’s title insurance policy and an American Land Title Association survey
with respect to each parcel of Owned Real Property issued to Buyer at or promptly following
Closing.



     10.2 Arbitration. Subject to the provisions of Section 9.4, any claim or
dispute arising hereunder shall be resolved by arbitration before a single arbitrator in the
Chicago, Illinois metropolitan area, in accordance with the Streamlined Arbitration Rules of JAMS,
including the rules thereof pertaining to the production of documents and other information. No
demand for arbitration shall, however, be instituted after the date after which legal proceedings
on the same claim would have been barred by the applicable statute of limitations or by this
Agreement. The arbitrator shall take such steps as he may deem necessary or desirable to avoid
delay and to achieve a just, speedy and cost-effective resolution of the matter. The award
rendered in such arbitration may provide for equitable remedies, an accounting and/or reimbursement
for attorneys’ accountants’ or consultants’ fees, as the arbitrator shall see fit. Such award
shall be final, and judgment on it may be entered in or enforced by any court, state, federal or
foreign, with competent jurisdiction. Any party may apply to the arbitrator or an appropriate
court of law for a preliminary injunction, attachment or other provisional remedy available to it
in aid of the arbitration proceeding provided for herein. This provision shall not preclude the
impleading or joining of one of the parties hereto by the other in an action brought by a third
party.



     10.3 Consent to Amendments; Waiver. Except as otherwise expressly provided herein,
the provisions of this Agreement and any of the other Transaction Documents may be amended only by
a written instrument signed by each of Parent, Seller and Buyer. The rights and remedies of the
parties to this Agreement and the Transaction Documents are cumulative and not alternative.
Neither the failure nor any delay by any party in exercising any right, power or privilege under
this Agreement or the Transaction Documents shall operate as a waiver of such or other right, power
or privilege, and no single or partial exercise of any such right, power or privilege shall
preclude any other or further exercise of such or other right, power or privilege.



     10.4 Successors and Assigns. This Agreement and all of the covenants and agreements
contained herein and rights, interests or obligations hereunder, by or on behalf of any of the
parties hereto, shall bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not, except that neither this Agreement nor any of the
covenants and agreements herein or rights, interests or obligations hereunder may be assigned or
delegated by Seller after the Closing, without the prior written consent of Buyer. Buyer may
assign its rights and obligations hereunder, in whole or in part, to any of their respective
Affiliates without the consent of any of the other parties hereto. In addition, Buyer may assign
its rights and obligations pursuant to this Agreement, in whole or in part, in connection with any
disposition or transfer of all or any portion of Buyer or its Business in any form of transaction
without the consent of any of the other parties hereto; provided that Buyer remains liable
for its obligations hereunder. Parent may assign its rights and obligations hereunder, in whole or
in part, to any of its respective Affiliates or in connection with any disposition or transfer of
all or any portion of Parent or its assets (whether in connection with a



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merger or otherwise) without the consent of any of the other parties hereto provided that
Parent remains liable for its obligations hereunder. Each of Buyer, Seller and Parent may assign
any or all of their respective rights pursuant to this Agreement, including its rights to
indemnification, to any of their respective lenders as collateral security.



     10.5 Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.



     10.6 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, any one of which need not contain the signatures of more than one party, but all such
counterparts taken together will constitute one and the same Agreement.



     10.7 Descriptive Headings. The descriptive headings of this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.



     10.8 Notices. Any notice, request, instruction or other document to be given
hereunder shall be in writing and shall be deemed to have been given: (a) two (2) days after
delivery to the courier, if sent by overnight courier; (b) upon receipt, if given in person; (c) on
the date of transmission, if sent by telecopy or other wire transmission; or (d) ten (10) days
after being deposited in the mail, certified or registered mail, postage prepaid, as follows:


Notices to Seller and Parent:



United Components, Inc.

14601 Highway 41 North

Evansville, IN 47725

Attn: Keith Zar, Esq.

Telecopy No.: (812) 867-4157



with a copy to (which shall not constitute notice):



Latham & Watkins LLP

555 Eleventh Street, N.W.

Suite 1000

Washington, D.C. 20004-1304

Attention: Daniel T. Lennon

                    Paul F. Sheridan, Jr.

Telecopy No.: (202) 637-2201



Notices to Buyer:



Neapco, LLC

740 Queen Street

Pottstown, PA 19464

Attention: Robert Hawkey

Telecopy No: (610) 705-8662




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With a copy to (which shall not constitute notice):



Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP

333 West Wacker Drive

Suite 2700

Chicago, Illinois 60606

Attention: Alexander Lourie

                    William E. Turner II

Telecopy No: (312) 984-3150



or to such other address or to the attention of such other Person as the recipient party has
specified by prior written notice to the sending party.




     10.9 No Third-Party Beneficiaries. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any Person other than the parties hereto and their
respective permitted successors and assigns, any rights or remedies under or by reason of this
Agreement, such third parties specifically including employees and creditors of Seller.



     10.10 Entire Agreement. This Agreement and the Transaction Documents constitute the
entire agreement among the parties and supersede all prior understandings, agreements, arrangements
or representations by or among the parties, written or oral, that may have related in any manner to
the subject matter hereof.



     10.11 Exhibits and Schedules. The exhibits and schedules identified in this Agreement
are incorporated herein by reference and made a part hereof. Any capitalized terms used in any
exhibit or schedule attached hereto and not otherwise defined therein shall have the meanings set
forth in this Agreement. No exceptions to any representations or warranties disclosed on one
schedule attached hereto shall constitute an exception to any other representations or warranties
made in this Agreement unless the exception is disclosed as provided herein on each such other
applicable schedule or unless the relevance of such exception to such other representation and
warranty is reasonably apparent based upon a plain reading of such exception and not on any
information not specifically included in such exception. Nothing set forth in any exhibit or
schedule identified in this Agreement shall expand or be interpreted to expand any representations
or warranties contained herein. Certain agreements and other matters listed in the schedules are
listed for informational purposes only, as they do not rise above applicable materiality thresholds
or their disclosure is not otherwise required under the terms of this Agreement. In no event shall
the listing of such agreements or other matters contained in the schedules be deemed or interpreted
to broaden or otherwise amplify or influence the construction or interpretation of the
representations and warranties, covenants or agreements contained in this Agreement.



     10.12 Governing Law. This Agreement shall be governed by, and construed and enforced
in accordance with, the substantive laws of the State of Illinois, without regard to the conflicts
of laws principles thereof.



     10.13 Delivery by Facsimile. This Agreement and any signed agreement or instrument
entered into in connection with this Agreement, and any amendments hereto or thereto, to the extent
signed and delivered by means of a facsimile machine, shall be treated in all manner and respects
as an original agreement or instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At the request of
any party hereto or to any such agreement or instrument, each other party hereto or



40









 







thereto shall re-execute original forms thereof and deliver them to all other parties. No
party hereto or to any such agreement or instrument shall raise the use of a facsimile machine to
deliver a signature or the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine as a defense to the formation of a contract and
each such party forever waives any such defense, except to the extent such defense related to lack
of authenticity.



     10.14 Further Assurances. Each of the parties hereto shall take any and all actions,
and shall execute and deliver any and all documents and instruments, that shall be necessary to
give full force and effect to this Agreement, the Transaction Documents and the transactions
contemplated hereby and thereby. In addition, Parent and Seller agree to take all reasonable steps
requested by Buyer after the Closing to cause all Permitted Liens of the types described in
subsections (i), (iii) and (iv) of the definition of Permitted Liens contained in Section
1.1, to be satisfied or otherwise released with respect to the Purchased Assets.



     10.15 Construction. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rule of strict construction
will be applied against any party. Any reference to any federal, state, local or foreign statute
or law, statute, rule or regulation will be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The use of the word “including” and
similar expressions means “including without limitation” and unless the context otherwise requires,
“neither,” “nor,” “any,” “either” and “or” shall not be exclusive. Unless otherwise noted, all
references to sections, exhibits and schedules are to sections, exhibits and schedules to this
Agreement. All words used in this Agreement shall be construed to be of such gender or number as
the circumstances require. The parties hereto intend that each representation, warranty and
covenant contained herein shall have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any respect, the fact that there exists
another representation, warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which such party has not breached shall not detract from or
mitigate the fact that such party is in breach of the first representation, warranty or covenant.



[SIGNATURE PAGE FOLLOWS]




41









 





     IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase Agreement on the date
first written above.



	 	 	 	 	 
	 	UNITED COMPONENTS, INC.

 	 
	 	By:  	/s/  Authorized Person	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	NEAPCO INC.

 	 
	 	By:  	/s/  Authorized Person	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	NEAPCO, LLC

 	 
	 	By:  	/s/  Authorized Person	 
	 	 	Name:  	 	 
	 	 	Title: