# **EXHIBIT 2.1**

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# **ASSETPURCHASE AGREEMENT**

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This Asset Purchase Agreement (this “Agreement”) ismade and entered into effective as of January 15, 2004 by and between CentralValley Manufacturing, Inc., a California corporation (“Buyer”) and wholly-ownedsubsidiary of Agricultural Products, Inc. (“Parent”), and R.M. Wade & Co.,an Oregon corporation (“Seller”).

 

# **RECITALS**

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WHEREAS, Seller isengaged, through one of its unincorporated divisions, “Wade Rain MicroIrrigation “, in the business of designing, manufacturing, marketing andselling plastic micro irrigation products, principally to the agricultural(Wade Rain) and commercial (Pepco) markets, but also through the MiningBusiness (as defined in Section 1.2(a) below) (collectively, the “MicroIrrigation Business”);

 

WHEREAS, the MicroIrrigation Business division  uses aportion of that certain facility and improvements thereon located at 2851 EastFlorence Avenue, Fresno, California, (the “Facility”) (the “Existing Use”),which Facility is currently used as the primary location for the MicroIrrigation Business, and a portion of which is currently leased to a thirdparty (the “Third Party Lease”);

 

WHEREAS, Sellerowns, leases or licenses all of the Transferred Assets (as defined in Section1.1), which Transferred Assets are used in the conduct of the MicroIrrigation Business; and

 

WHEREAS, Sellerdesires to sell and assign to Buyer, and Buyer desires to purchase and assumefrom Seller, the Transferred Assets and certain Assumed Obligations (as definedin Section 1.4), except for the Retained Assets (as defined in Section1.2), all on the terms and subject to the conditions set forth herein.

 

## **NOW,THEREFORE, in consideration of the foregoing recitals and the mutual covenantsset forth herein and for other good and valuable consideration, the receipt andsufficiency of which is hereby acknowledged, the parties hereto, intending tobe legally bound, hereby agree as follows:**

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# **ARTICLEI**

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# **SALEAND TRANSFER OF ASSETS**

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1.1                                 TransferredAssets.  Subject to the terms and conditionsset forth herein, at the Closing (as defined in Section 2.4), Sellershall sell, convey, transfer, assign and deliver to Buyer, and Buyer shallpurchase, assume and acquire from Seller all of the assets, properties andrights of every kind, character and description used or useful in the conductof the Micro Irrigation Business, whether tangible or intangible and whereverlocated, except for the Retained Assets (as defined in Section 1.2), asof the Closing Date (as defined in Section 2.4) (collectively referredto herein as the “Transferred Assets”), including, without limiting theforegoing, the following Transferred Assets not listed as Retained Assets in Section1.2 (as described in detail in the “Transferred Assets Schedule” attachedhereto as Schedule 1.1, with Transferred Assets not located at theFacility designated with an asterisk on Schedule 1.1):

 

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(a)                                  Allmachinery, equipment, tooling, molds, dies, fixtures, vehicles, fork lifts, tables,spare parts and tools;

 

(b)                                 Allcustomer lists and contact information;

 

(c)                                  Alloffice supplies and equipment, computers, furniture, maintenance supplies andother similar items;

 

(d)                                 Allinventories;

 

(e)                                  Allprepaid assets to be prorated as set forth on Schedule 1.1(e);

 

(f)                                    Thedomain name www.pepcoirrigation.com, catalogs and other advertising materials;

 

(g)                                 AllSeller’s right, title and interest in and to those contracts and agreements(including proprietary agreements with suppliers) set forth on Schedule1.1(g), and all right, title and interest in and to purchase or salesorders, quotes or commitments related to the Transferred Assets or the MicroIrrigation Business, whether written or oral;

 

(h)                                 Accessto and the right to copy all of Seller’s books, records, accounts,correspondence, production records, employment, payroll, personnel and workers’compensation records, environmental control records and any other documentsrelating to the Transferred Assets or the Micro Irrigation Business;

 

(i)                                     Allof Seller’s rights under any and all express or implied warranties fromsuppliers with respect to the Transferred Assets to the extent such warrantiesare transferable;

 

(j)                                     Allof Seller’s right, title and interest in and to patents, trademarks, servicemarks, trade names (including “Pepco”) and service names and all variantsthereof, copyrights, inventions, customer lists, trade secrets (includingprocesses and software programs owned by Seller or used or licensed by Sellerand transferable), registrations and all applications for any of the foregoingand works in progress relating thereto, and all past, present and future causesof action and remedies therefor relating to the Micro Irrigation Business(excluding those listed as Retained Assets, including, without limitation, theNibco and patent lawsuits listed therein), as such are set forth on Schedule3.9;

 

(k)                                  Alimited, worldwide royalty-free right and license to use the trade name “WadeRain” in connection with the on-going Micro Irrigation Business, as set forthin Section 5.12 below);

 

(l)                                     Allof Seller’s right, title and interest in computer programs to the extentassignable, and other intangibles owned or used by Seller, relating to theTransferred Assets or the Micro Irrigation Business and all of the relatedgoodwill;

 

(m)                               Allclaims to which Seller is a judgment creditor relating to the Micro IrrigationBusiness (except those listed as Retained Assets); and

 

(n)                                 Tothe extent assignable, all of Seller’s licenses, permits and governmental authorizationsrelating to the Transferred Assets or the Micro Irrigation Business.

 

1.2                                 RetainedAssets.  Notwithstanding the termsof Section 1.1, the following assets (collectively, the “RetainedAssets”) shall be retained by Seller and shall not be sold, transferred orassigned to Buyer:

 

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(a)                                  Certainassets owned by Seller used and usable solely and exclusively in the businessof designing, manufacturing, marketing and selling drip or flow rate controlledleaching systems using the name Ore’Max to the mining industry (the “MiningBusiness”), as all such assets are set forth on Schedule 1.2(a), andthose two certain Max Emitter molds used both in the Mining Business and forother applications set forth on Schedule 1.2(a);

 

(b)                                 Allcash and cash equivalents received prior to the Closing Date;

 

(c)                                  Allaccounts receivable existing prior to the Closing Date;

 

(d)                                 Allprepaid assets to be prorated as set forth on Schedule 1.2(d);

 

(e)                                  Allreal estate, leasehold improvements and permanent fixtures as set forth on Schedule1.2(e);

 

(f)                                    Allof Seller’s right, title and interest in and to the trade names “Wade Mfg.Co.”, “Wade Rain” and “R.M. Wade & Co.” (subject to the limited license for“Wade Rain” referenced in Section 1.1(k) above);

 

(g)                                 Certaincomputer hardware and software listed on Schedule 1.2(g), located atSeller’s Oregon facility and used for operating multiple businesses (subject toa limited information management and accounting support services agreementbetween Seller and Buyer as set forth in Section 5.14 below);

 

(h)                                 Thatcertain Wade Rain tradeshow booth;

 

(i)                                     Allbooks and other ownership records of Seller;

 

(j)                                     Allinsurance policies of Seller obtained in connection with the Micro IrrigationBusiness and all rights of Seller under and arising out of such insurancepolicies, including right to receive refunds of prepaid insurance; providedthat, Seller shall deliver copies of all such policies to Buyer and shall usebest efforts to assist Buyer in obtaining reimbursement under such policiesthat pertain to the Micro Irrigation Business following the Closing for claimsthat may be covered thereunder;

 

(k)                                  Allrights to receive refunds with respect to any taxes paid by Seller inconnection with the Micro Irrigation Business;

 

(l)                                     Anyrights of Seller under this Agreement and any related agreement; and

 

(m)                               Notwithstandinganything to the contrary in this Agreement, all Mining Business assets listedon Schedule 1.2(a).

 

1.3                                 CustomerAssets.  Notwithstanding the termsof Section 1.1, Seller shall sell, convey, assign and transfer only suchrights as it may have at the Closing, if any, to those molds, toolings andinserts used in the Micro Irrigation Business which are owned by customers ofSeller (“Customer Assets”), all of which are described on Schedule 1.3.

 

1.4                                 AssumedObligations.  Effective as of theClosing Date, Buyer shall assume and shall thereafter pay, discharge or performonly the following specific liabilities and obligations (collectively, the“Assumed Obligations”), other than which Buyer shall not assume nor beobligated to pay, discharge or perform any liability or obligation of Seller orits affiliates, whether direct or indirect, known or unknown, absolute orcontingent, and all such liabilities and obligations shall remain with and bethe sole obligation of Seller:

 

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(a)                                  Seller’sobligations arising under those contracts and agreements included in theTransferred Assets as set forth on Schedule 1.1(g) (includingcontractual obligations to pay on-going royalties for the Pulsator product, theChristy flow control and Western Designs Quick Punch product) and under thosepurchase or sales orders, binding quotes or commitments which arise hereafterin the ordinary course of business and are open as of the Closing Date; and

 

(b)                                 Obligationsof the Micro Irrigation Division arising under that certain use  of the Facility to be entered into atClosing in replacement of the Existing Use pursuant to a lease to be entered into between Buyer and Seller (the“Lease”), in substantially the form attached hereto as Exhibit A.

 

1.5                                 NoOther Debts, Obligations or Liabilities Assumed.  Buyer does not assume and shall not be liable for, and Sellershall indemnify Buyer pursuant to Article IX against, any debts,obligations or liabilities of Seller of any nature whatsoever other than theAssumed Obligations (the “Retained Obligations”).

 

# **ARTICLEII**

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# **PURCHASEPRICE AND PAYMENT**

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2.1                                 PurchasePrice. In exchange and as consideration for the Transferred Assets and infull payment of the purchase price therefore (and for any and allnoncompetition covenants and licenses contemplated herein), Buyer shall pay, inthe manner provided in Section 2.3, an aggregate purchase priceequal to the sum of: One Million Dollars ($1,000,000.00), the InventoryValuation (as defined in Section 2.3(c) below), and the AdditionalConsideration (as defined in Section 2.3(b) below), subject toexercise of the indemnification rights set forth in Article IX(collectively, the “Purchase Price”).

 

2.2                                 Allocationof Purchase Price.  The partiesshall allocate the Purchase Price for tax purposes amongst the TransferredAssets as set forth on Schedule 2.2.  The parties shall file their respective tax returns in accordancewith such allocation and shall not take any position or action inconsistentwith such allocation.

 

2.3                                 Paymentof Purchase Price.  The PurchasePrice shall be paid as follows:

 

(a)                                  AtClosing, Buyer shall pay to Seller in cash, by wire transfer of immediatelyavailable funds, the aggregate amount equal to One Million Dollars($1,000,000.00) plus the Inventory Valuation (as defined in Section 2.3(c)below) (the “Cash”).

 

(b)                                 Followingthe Closing, Buyer shall pay Seller additional consideration (the “AdditionalConsideration”) calculated as follows: Three percent (3%) of the net, collected“Irrigation Segment” sales in excess of $24,000,000 in the twelve (12) monthtime period commencing July 1, 2004 and ending June 30, 2005, and five percent(5%) of the net, collected “Irrigation Segment” sales in excess of $25,750,000in the twelve (12) month time period commencing July 1, 2005 and ending June30, 2006.  Payments hereunder shall bemade within sixty (60) days of the end of each twelve-month period.  For purposes of this calculation,“Irrigation Segment” sales shall include sales of Buyer and Ny-Glass Plastics,Inc., including Micro Irrigation Business sales acquired hereunder, all MiningBusiness and other sales made to Seller, and invoiced freight charges, butexcluding inter-company sales among Buyer affiliate business units, sales ofsubsequently acquired businesses and asset divestitures.

 

(c)                                  Forpurposes of calculating the Purchase Price, “Inventory Valuation” shall bedetermined by taking a physical inventory as close as practicable to theClosing (the “Physical Inventory”) and calculating its extended value bymultiplying the quantity of each item in

 

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inventory by its cost determinedin accordance with Generally Accepted Accounting Principles (“GAAP”), excluding(i) all Mining Business inventory, excluding only Max Emitter components (whichshall remain the property of Seller), and (ii) any inventory in quantities inexcess of the most recent twenty four (24) months’ sales or usage determinedfor each item in inventory (but such exclusion shall not include certain newproducts which have less than twenty four (24) months’ of sales or usagehistory, provided that all such new products are identified during the PhysicalInventory including description, part number, unit cost, date introduced, salesto date and quantity on hand), and then performing a bring-down of thepreliminary inventory valuation for the time period from the Physical Inventoryto the close of business on the day before the Closing Date, to account for allincoming and outgoing inventory, and then subtracting therefrom an additionalsum equal to Three Hundred and Thirty Thousand Dollars ($330,000.00) forunidentified excess and obsolete inventory (collectively, the “InventoryValuation”).

 

2.4                                 Closing.  The consummation of the transactionscontemplated by this Agreement (the “Closing”) shall take place on January 19,2004 or as soon before or thereafter as possible upon satisfaction of theconditions set forth in Article VII (the “Closing Date”), at theoffices of Buyer, One Park Plaza, Suite 600, Irvine, California 92614, or atsuch other date, time and place as may be mutually agreed upon in writing bythe parties.  All proceedings to takeplace at the Closing shall take place simultaneously, and no delivery shall beconsidered to have been made until all such proceedings have beencompleted.  The Closing shall be deemedto have taken place at 12:01 a.m. PST after the Closing Date.

 

# **ARTICLEIII**

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# **REPRESENTATIONSAND WARRANTIES OF SELLER**

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Seller herebyrepresents and warrants to Buyer as follows:

 

3.1                                 Organizationand Qualification.  Seller is acorporation****duly organized, validly existing and in good standing under thelaws of the State of Oregon, and is duly qualified to do business as a foreignentity and is in good standing in California and in each other jurisdiction inwhich the character of its properties or the nature of its business makes suchqualification necessary.  Seller isqualified as an “S-corporation” for tax purposes.  Seller has the requisite power and authority to own, use or leaseits properties and to carry on its business as it is now being conducted.   Seller is not in default in the performance,observation or fulfillment of any provision of its articles of incorporation orbylaws.  All entities merged with andinto Seller prior to the date hereof were duly organized, validly existing andin good standing under the laws of their states of incorporation until theirrespective dates of merger, were duly qualified to do business as foreigncorporations and were in good standing in each jurisdiction in which thecharacter of their properties or the nature of their business made suchqualification necessary, and had the requisite corporate power and authority toown, use or lease their properties and to carry on their business as conducted.

 

3.2                                 AuthorityRelative to this Agreement.  Sellerhas all requisite power, authority and capacity to execute and deliver thisAgreement and all related agreements and to consummate the transactionscontemplated hereby.  The execution anddelivery of this Agreement and all related agreements and the consummation ofthe transactions contemplated hereby on the part of Seller has been duly andvalidly authorized and no other proceedings on the part of Seller arenecessary, as a matter of law or otherwise, to authorize this Agreement and therelated agreements or to consummate the transactions so contemplated.  This Agreement has been duly and validlyexecuted and delivered by Seller and, assuming this Agreement constitutes avalid and binding obligation of Buyer, this Agreement constitutes a valid andbinding

 

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agreement of Seller, enforceable against Seller inaccordance with its terms, except as such enforcement may be limited byapplicable bankruptcy, insolvency, reorganization, moratorium or other laws ofgeneral application affecting enforcement of creditors’ rights or by generalprinciples of equity.

 

3.3                                 Consentsand Approvals; No Violation.  Exceptas set forth on Schedule 3.3, the execution and delivery of thisAgreement and any related agreements by Seller, the consummation of thetransactions contemplated hereby and/or the performance by Seller of itsobligations hereunder will not:

 

(a)                                  conflictwith any provision of the articles of incorporation, bylaws, or otherorganizational documents of Seller;

 

(b)                                 requireany consent, approval, authorization or permit of, or filing with ornotification to, any governmental or regulatory authority;

 

(c)                                  conflictwith, result in the breach of or constitute a default (or give rise to anyright of termination, cancellation or acceleration or guaranteed payments)under any of the terms, conditions or provisions of any material note, lease,mortgage, license, agreement or other instrument or obligation to which Selleris a party or by which Seller or any of its assets may be bound, including theMicro Irrigation Business, except for such defaults (or rights of termination,cancellation or acceleration or guaranteed payments) as to which requisitewaivers or consents have been obtained in writing;

 

(d)                                 conflictwith or violate the provisions of any order, writ, injunction, judgment,decree, statute, rule or regulation; or

 

(e)                                  resultin the creation of any lien, charge or encumbrance upon any of the TransferredAssets.

 

3.4                                 FinancialStatements.  The unaudited internalbalance sheets of the Micro Irrigation Business as of December 31, 2002, 2001and 2000, and the unaudited internal balance sheet of the Micro IrrigationBusiness as of November 30, 2003 (collectively, hereinafter referred to as the“Balance Sheet”), and the related statements of income for the twelve-monthperiods and the eleven-month period then ended (collectively, the “FinancialStatements”) are attached hereto as Schedule 3.4.  Except as set forth on Schedule 3.4,the Financial Statements have been prepared on a consistent basis throughoutthe periods indicated, and present fairly in all material respects thefinancial position of the Micro Irrigation Business as of the end of suchfiscal periods and the results of operations for such periods.  Thereafter until Closing, Seller shalldeliver to Buyer, within twenty (20) days after each month end, monthlyunaudited internal balance sheets and statements of income which, at the timethey are delivered to Buyer, will present fairly in all material respects theassets and liabilities and results of operations of the Micro IrrigationBusiness as of their respective dates, compiled in the same manner as theFinancial Statements.

 

3.5                                 Absenceof Certain Changes.  Except as setforth on Schedule 3.5, since September 30, 2003, Seller has conductedthe Micro Irrigation Business only in, and since such date, has not engaged inany transaction other than in the ordinary and usual course of such business,and, applying that same standard, there has not been (a) any event,circumstance, condition, development or occurrence causing, resulting in orhaving a material adverse effect on the financial condition, business,prospects, properties or results of operations of the Micro Irrigation Businessor on the Transferred Assets (a “Material Adverse Change”); (b) any changeby Seller in accounting principles, practices or methods; (c) any labordispute or difficulty which is reasonably likely to result in any MaterialAdverse Change, and no such dispute or difficulty is

 

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now threatened; (d) any asset material to theMicro Irrigation Business sold or disposed of (except inventory sold in theordinary course of business), or any material asset mortgaged, pledged orsubjected to any lien, charge or other encumbrance; (e) any increase in excessof $5,000, individually, in the compensation payable or which could becomepayable by Seller to employees, distributors, dealers or sales representativesof the Micro Irrigation Business; (f) any amendment by Seller of anyemployee benefit plan; (g) any indebtedness incurred by Seller withrespect to the Micro Irrigation Business, except for indebtedness that will berepaid in full by Seller prior to the Closing; (h) any loan made or agreedto be made by Seller with respect to the Micro Irrigation Business, nor hasSeller become liable or agreed to become liable as a guarantor with respect toany such loan; or (i) any waiver by Seller of any right or rights ofmaterial value related to the Micro Irrigation Business.

 

3.6                                 Intentionallyleft blank.

 

3.7                                 Titleto Assets. Each Transferred Asset with an original cost in excess of$1,000.00 is set forth and described in detail on  Schedule 1.1. Seller has good and marketable title to all Transferred Assets.  Except as set forth in this Agreement, theTransferred Assets constitute all of the assets and interests in assets thatare owned or used in the conduct of the Micro Irrigation Business as currentlybeing conducted, other than leased or licensed assets identified as such andset forth on Schedule 3.7, the Retained Assets and the CustomerAssets.  All of the Transferred Assetswill be conveyed to Buyer at Closing free and clear of restrictions on orconditions to transfer or assignment, and free and clear of mortgages, liens,leases, security interests, pledges, charges, encumbrances, equities, claims,easements, rights of way, covenants, conditions or restrictions or any otheradverse claims or rights whatsoever (collectively, “Liens”), other than (i)those  items set forth on Schedule3.7, (ii) liens for property taxes not yet due and payable, (iii) rights ofcustomers with respect to work-in-process under orders or contracts enteredinto in the ordinary course of business, and (iv) immaterial imperfections oftitle, easements, restrictions, rights of way and encumbrances (collectively,“Permitted Liens”).  Subject to theconsents set forth on Schedule 3.3, Seller has the absolute andunrestricted right, power, authority and capacity to transfer the TransferredAssets to Buyer and, upon Closing, Buyer will acquire from Seller legal andbeneficial ownership of, good and valid title to, the Transferred Assets, freefrom any Lien other than Permitted Liens. At Closing, except as set forth on Schedule 3.7, none of theTransferred Assets will be subject to any leasing or license arrangement.  Except for shareholder interests in Seller,no partner, agent, owner, employee or affiliate of Seller, nor any affiliate,spouse, child, sibling or other relative of any of these persons, will own orwill have any interest, directly or indirectly, in any of the TransferredAssets at Closing.

 

3.8                                 Facility.  Set forth in Schedule 3.8 is acomplete and accurate description of each parcel or facility owned, leasedand/or occupied or used in any manner by Seller for the Micro Irrigation Business,including any easement, covenants, rights of way or similar restrictions, and,except as set forth in Schedule 3.8, the Micro Irrigation Business doesnot own, lease, sublease, occupy or use any other facility nor is any otherfacility used in or related to the Micro Irrigation Business.  Except as indicated in Schedule 3.8:

 

(a)                                  Sellerhas, and at the Closing Date will have, good and marketable fee simple absolutetitle in and to the Facility, free and clear of all title defects, mortgages,pledges, security interests, easements, conditional sales agreements, liens,restrictions or encumbrances whatsoever other than the Third Party Lease;

 

(b)                                 Sellerdoes not own or lease any other real property used in any manner for the MicroIrrigation Business other than approximately 120,000 square feet of theFacility and the adjoining storage yard;

 

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(c)                                  Eachof the buildings and all fixtures and improvements and roofs located on thefacilities in question are aged, have been heavily used and are being deliveredwith various items of deferred maintenance;

 

(d)                                 Sellerhas not received any notice, nor is any Seller aware, that any of thebuildings, structures or other improvements erected on the real property setforth in Schedule 3.8, or the present use thereof, (i) does not conformin all respects with all applicable zoning and building laws (or does notconstitute a legal nonconforming use), ordinances, rules, regulations or otherlaws and applicable deed restrictions, or (ii) encroach on property of others;

 

(e)                                  Sellerhas not received any written or oral notice of any pending (i) change of suchzoning and building laws, ordinances, rules, regulations or other lawsaffecting any of such properties, or (ii) condemnation of any such properties;

 

(f)                                    Sellerhas not received any notice from any municipal body or other public authorityrequiring work to be done or improvements to be made upon any of suchproperties, and there has been no enactment or adoption of any ordinance orresolution by any such body or authority authorizing work or improvements forwhich any of such properties may be assessed; and

 

(g)                                 Thelessee of the Third Party Lease has no rights of any kind to increase theamount of space in the Facility currently leased by it, or to otherwiseadversely affect the use or enjoyment of the Facility by Buyer after Closing.

 

3.9                                 IntellectualProperty.

 

(a)                                  Schedule3.9 lists all of Seller’s rights, titles and interests in or to anyIntellectual Property (as defined below) relating to the Micro IrrigationBusiness, which is all  IntellectualProperty that is necessary for or used in any manner in the Micro IrrigationBusiness as now conducted and as conducted in the past three (3) years.  With respect to registered patents andtrademarks, Schedule 3.9 contains a list of all jurisdictions inwhich such patents and trademarks are registered or applied for and allregistration and application numbers.

 

(b)                                 “IntellectualProperty” includes United States and foreign inventions, invention disclosures,patents, inventors’ certificates, utility models, trademarks, service marks,trade names, copyrights, mask work registrations, trade secrets (includingprocesses and software programs), registrations and applications therefor andworks in progress, and past, present and future causes of action and remediestherefor, customer lists and proprietary arrangements with vendors of Seller.

 

(c)                                  Exceptas set forth on Schedule 3.9, Seller owns or has the unrestrictedperpetual right to use, free and clear of any rights of others and withoutpayment to any other party, the Intellectual Property listed on such Schedule 3.9plus all trade secrets, customer lists, manufacturing and secret processesowned by Seller or used in the Micro Irrigation Business, and the consummationof the transactions contemplated hereby will not alter or impair any such itemsnor the unrestricted right of the Micro Irrigation Business to use such itemswithout violating any rights of third parties. Seller is not making use of any confidential information or tradesecrets of any present or past employee that has not been fully assigned toSeller.

 

(d)                                 Sellerhas not received any communications alleging that Seller has violated any otherperson’s Intellectual Property rights or has engaged in unfair competitionagainst such person.  Seller does notnow infringe or misappropriate any third party’s Intellectual Property rightsand does not have any liability for any past infringement ormisappropriation.  No dispute ordisagreement involving Seller exists or is threatened with regard to any thirdparty’s

 

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Intellectual Property rights, including any allegationof Intellectual Property infringement or misappropriation or of any breach ordefault of an Intellectual Property license or similar agreement.

 

(e)                                  ToSeller’s Knowledge and except as set forth on Schedule 3.9, (i) no thirdparty is now infringing or misappropriating any Intellectual Property rights ofSeller or the Micro Irrigation Business, and (ii) there has not been any pastsuch infringement or misappropriation.

 

3.10                           AccountsReceivable.  Set forth on Schedule3.10 is a true and complete list of all accounts receivable of the MicroIrrigation Business as of the date stated thereon, other than accountsreceivable fully written off as uncollectible as of such date in accordancewith consistently applied prior practice.

 

3.11                           Inventories.   Except as set forth on Schedule 3.11,Seller has good and marketable title to all of its inventories of rawmaterials, work-in-process and finished goods, free and clear of allLiens.   Except to the extent reservedfor in the Financial Statements, all such inventories consist of items that areusable in the ordinary course of business for an amount at least equal to thebook value thereto plus costs of disposition thereof, except for obsolete andslow moving inventory existing on the Effective Date, and except as existing onthe Closing Date provided all such inventory has been identified as such in thePhysical Inventory and excluded from the Inventory Valuation if required underthe terms of Section 2.3(c).

 

3.12                           Contracts.   Seller does not have any contract,agreement, obligation or commitment, written or oral, expressed or implied,relating in any manner to the Micro Irrigation Business which was not incurredin the ordinary course of business, or involves a commitment or liability inexcess of $10,000, or is for a term of more than one year or whose terms do notpermit cancellation without liability on 30 days’ notice or less (other thanobligations which are included in accounts payable), and has no unioncontracts, employee, representative or consultant contracts, loan, credit orother financing agreements, inventory flooring arrangements, debtor or creditorarrangements, security agreements, licenses, franchise, manufacturing,distributorship or dealership agreements, leases, or bonus, health or stockoption plans, all except for those described in Schedule 3.12 (collectively,the “Contracts”), copies of all of which have been delivered to Buyer prior tothe execution hereof.  As of the datehereof, there exists no circumstances on Seller’s part and, to Seller’sKnowledge, on the part of any third party, which would affect the validity orenforceability of any such Contracts in accordance with their respectiveterms.  Seller has performed andcomplied in all material respects with all obligations required to be performedto date under, and is not in default (without giving effect to any requirednotice or grace period) under, or in breach of, the terms, conditions orprovisions of any Contract.  Except forconsents to assignment required as set forth on Schedule 3.3, thevalidity and enforceability of each Contract described herein has not been andshall not in any manner be affected by the execution and delivery of thisAgreement or any related agreement or the consummation of the transactionscontemplated hereby. There are not any customer sales contracts relating to theMicro Irrigation Business which in the ordinary course would require futureexpenditures (including internal costs and overhead) in excess of reasonablyanticipated receipts.

 

3.13                           Employeeand Labor Matters.

 

(a)                                  Employee.  Except as set forth in Schedule 3.13,no stockholder, director, officer or current or former employee of Seller ispresently a party to any transaction involving the Micro Irrigation Business,including without limitation any contract, loan or other agreement orarrangements providing for the furnishing of services by, the rental of real orpersonal property from or to, or otherwise requiring loans or payments to, anysuch stockholder, director, officer or employee, or to any member of the familyof any of the foregoing or to any corporation,

 

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partnership, trustor other entity in which any partner, stockholder, director, officer oremployee or any member of the family of any of them has a substantial interestor is a partner, officer, director, trustee, or employee.  There is set forth in Schedule 3.13 alist showing (i) the name, title, date and amount of last compensationincrease, and aggregate compensation, including amounts paid or accruedpursuant to any bonus, pension, profit sharing, commission, deferredcompensation or other plans or arrangements in effect as of the date of thisAgreement, of each officer or employee of the Micro Irrigation Business whosesalary and other compensation, in the aggregate, received or accrued is at anannual rate (or aggregated for the most recently completed fiscal year) inexcess of $40,000, as well as any written or oral employment, change-in-controland/or severance agreements relating to any such persons; (ii) a description ofany and all bonus, pension, profit sharing, commission, deferred compensation,retirement, savings, thrift, severance, performance, vacation, holiday,medical, disability, life or other welfare or retiree plan or policy or otherplans or arrangements in effect for any employees of the Micro IrrigationBusiness as of the date of this Agreement, except as may be set forth in Schedule3.14 (ERISA Plans); (iii) a description of any noncompetition or similaragreements to which Seller or the Micro Irrigation Business or any officer oremployee is a party; (iv) all powers of attorney from or relating to the MicroIrrigation Business to any person or entity; and (v) the name of each person orentity authorized to borrow money or incur or guarantee indebtedness on behalfof the Micro Irrigation Business. Seller has delivered to Buyer copies of all written personnel policies,including without limitation vacation, severance, bonus, profit sharing andcommission policies, applicable to any employees or agents of the MicroIrrigation Business.  To Seller’sknowledge all current employees of the Micro Irrigation Business are legallyentitled to work in the United States, and Seller has retained all requireddocumentation in its records related thereto. Neither the execution and delivery of this Agreement by Seller, nor theconsummation by Seller of any of the transactions contemplated hereby, orcompliance by Seller with any of the provisions hereof, shall create anyobligation or liability on the part of the Micro Irrigation Business subsequentto Closing under any bonus, profit sharing, deferred compensation or other planor arrangement in effect as of the date of this Agreement and the Closing Date.

 

(b)                                 Labor.  None of the facilities or operations of theMicro Irrigation Business has been the subject of any strike, work stoppage,boycott, union organizational effort, unfair labor practice charge oremployment discrimination charge in the past four (4) years; and no such actionis pending or threatened.

 

3.14                           ERISAPlans.

 

(a)                                  Thesole  employee pension benefit plan,program, agreement or arrangement maintained or contributed to by Seller andrelated in any manner to the Micro Irrigation Business or the TransferredAssets (“Plan”) which is subject to the Employee Retirement Income Security Actof 1974, as amended (“ERISA”), is the Seller’s 401(k) Savings and RetirementPlan.  Seller’s 401(k) Planconforms in all respects to all applicable federal laws; and full payment hasbeen made of all amounts required to have paid as contributions to such Plan.

 

3.15                           Permits.  Seller holds all permits, licenses,franchises, certificates and authorizations that are required by anygovernmental agency to permit the Micro Irrigation Business to be conducted asnow conducted, and all such permits, licenses, franchises, certificates andauthorizations are valid and in full force and effect.  To Seller’s Knowledge, no suspension,cancellation or termination of any of such permits, licenses, franchises,certificates and authorizations is threatened or imminent.

 

3.16                           Taxes.  Except as set forth on Schedule 3.16:

 

(a)                                  Sellerand its owners (“Filers”) have timely filed all returns, declarations, reports,or information returns or statements relating to Taxes (as defined below) withrespect to the

 

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Micro Irrigation Business or the Transferred Assets,including any schedule or attachment thereto and including any amendmentthereof (“Tax Returns”) that are required to be filed under federal, state,local or foreign law.  All such TaxReturns were complete in all material respects.  All Taxes owed by Filers with respect to the Micro IrrigationBusiness and the Transferred Assets (whether or not shown on any of said TaxReturns) have been paid for all periods for which Tax Returns have beenfiled.  Neither the Micro IrrigationBusiness nor any Filer is currently the beneficiary of any extension of timewithin which to file any Tax Return.  Nooutstanding claim has been made by any authority in a jurisdiction where Filersdo not file Tax Returns that Seller, the Micro Irrigation Business or theTransferred Assets may be subject to taxation by that jurisdiction.

 

(b)                                 Sellerhas withheld and accrued or paid all Taxes required to have been withheld andpaid in connection with amounts paid or owing to any employee, creditor,independent contractor, or other third party relating in any manner to theMicro Irrigation Business or the Transferred Assets.

 

(c)                                  Thereis no dispute or claim concerning any Tax liability relating in any manner tothe Micro Irrigation Business or the Transferred Assets either (i) claimedor raised by any authority or (ii) as to which Seller has Knowledge basedupon personal contact or correspondence with any agent of such authority.

 

(d)                                 Sellerhas not waived in writing any statute of limitations in respect of Taxes oragreed to any extension of time with respect to a Tax assessment or deficiencyrelating in any manner to the Micro Irrigation Business or the TransferredAssets, which waiver or extension is still in effect.  Seller has not received notice or become aware of any pendingincrease in real or personal property taxes applicable to the Micro IrrigationBusiness or the Transferred Assets.

 

(e)                                  Forpurposes of this Agreement, “Tax” or “Taxes” means any federal, state, county,local or foreign income, gross receipts, license, payroll, employment, excise,severance, stamp, occupation, premium, windfall profits, environmental(including taxes under Code Section 59A), customs duties, capital stock,franchise, profits, withholding, social security (or similar), unemployment,disability, facility, personal property, sales, use, transfer, registration,value added, alternative or add-on minimum, estimated, or other tax of any kindwhatsoever, including any interest, penalty, or addition thereto, whetherdisputed or not.

 

3.17                           Litigation.  Except as set forth on Schedule 3.17,there is no claim, action or proceeding pending or, to Seller’s Knowledge,threatened against or relating to Seller, the Micro Irrigation Business or anyof the Transferred Assets before any federal, state, municipal or othergovernmental department, commission, court, board, bureau, agency,instrumentality or other person acting in an adjudicative capacity, domestic orforeign.  To Seller’s Knowledge, thereis no basis for any claim, action or proceeding against or relating to anySeller, the Micro Irrigation Business or any of the Transferred Assets.  Except as set forth on Schedule 3.17,neither Seller nor, to Seller’s Knowledge, any employee of Seller has beenpermanently or temporarily enjoined by any order, judgment or decree of anycourt or any other governmental or regulatory authority from engaging in orcontinuing any conduct or practice in connection with the Micro IrrigationBusiness or the Transferred Assets nor is Seller or, to Seller’s Knowledge, anyemployee of Seller under investigation by any governmental or regulatoryauthority.  Except as set forth on Schedule3.17, there is not in existence any order, judgment or decree of any courtor other tribunal or other agency enjoining or requiring Seller to take anyaction of any kind with respect to the Micro Irrigation Business or theTransferred Assets. To Seller’s Knowledge, neither Seller nor the MicroIrrigation Business has been threatened with any action, suit, proceeding orclaim (including actions, suits, proceedings or claims where its liabilitiesmay be adequately covered by insurance) for personal injuries allegedlyattributable to products sold or services performed by the Micro IrrigationBusiness asserting a particular defect or hazardous

 

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property in any of products of the Micro IrrigationBusiness, services or Micro Irrigation Business practices or methods, nor hasSeller or the Micro Irrigation Business been a party to or, to Seller’sKnowledge, threatened with proceedings brought by or before any federal orstate agency; and, to Seller’s Knowledge, there is no defect or hazardousproperty, claimed or actual, in any such product, service, business practice ormethod, except as reserved for in the Balance Sheet.  Neither Seller nor the Micro Irrigation Business is subject toany voluntary or involuntary proceeding under the United States Bankruptcy Codeand neither has made an assignment for the benefit of creditors.  Except as described on Schedule 3.17,in the past four (4) years Seller has not been a party to or, to Seller’sKnowledge, threatened with any legal claims, actions or proceedings of any typedirectly or indirectly involving, the Micro Irrigation Business or theTransferred Assets, nor has Seller entered into any settlements or agreementsof any kind related in any manner to a dispute directly or indirectlyinvolving, the Micro Irrigation Business or the Transferred Assets.

 

3.18                           Compliancewith Applicable Laws.  Seller holds,and has at all times held, all licenses, permits and authorizations thennecessary for the lawful conduct of the Micro Irrigation Business, and all suchlicenses, permits and authorizations are valid and sufficient for all businessnow conducted by the Micro Irrigation Business.  Seller has complied with, and is in compliance with, allapplicable laws, orders, rules and regulations promulgated by any federal,state, municipal or other governmental authority relating to the operation andconduct of the Micro Irrigation Business and its properties, and there have notbeen and are not any violations of any such law, order, rule or regulation,existing or, to Seller’s Knowledge, threatened.  Seller has not received any notice from any authority or personthat the Micro Irrigation Business has been or is being conducted in violationof any applicable zoning regulation or order, or other law, order, rule,regulation or requirement relating to the operation of its business or to itsproperties.

 

3.19                           EnvironmentalMatters.

 

(a)                                  Exceptas set forth on Schedule 3.19 hereto:

 

(i)                                     Sellerand the Micro Irrigation Business have complied with all applicableEnvironmental Laws;

 

(ii)                                  TheProperty (including soils, groundwater, surface water, buildings or otherstructures) is not contaminated with any Hazardous Substances that maysubject  Buyer, the Micro IrrigationBusiness or the Transferred Assets to liability under any Environmental Law;

 

(iii)                               Allproperties formerly owned or operated relating in any manner to the MicroIrrigation Business are not contaminated with Hazardous Substances that maysubject Buyer, the Micro Irrigation Business or the Transferred Assets toliability under any Environmental Law;

 

(iv)                              TheMicro Irrigation Business is not subject to liability under any EnvironmentalLaw for any Hazardous Substance disposal or contamination on any third partyproperty;

 

(v)                                 TheMicro Irrigation Business has not caused or contributed to any release orthreat of release of any Hazardous Substance that may subject Buyer, the MicroIrrigation Business or the Transferred Assets to liability under anyEnvironmental Law;

 

(vi)                              Sellerhas not received any notice, demand, letter, claim or request for informationalleging that Seller or the Micro Irrigation Business may be in violation of,or liable under, any Environmental Law;

 

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(vii)                           NeitherSeller nor the Micro Irrigation Business are subject to any orders, decrees,injunctions or other arrangements with any governmental entity, nor subject toany indemnity or other agreement with any third party relating to liabilityunder any Environmental Law or relating to Hazardous Substances;

 

(viii)                        There areno circumstances or conditions involving Seller or the Micro IrrigationBusiness that could reasonably be expected to result in any claims, liability,investigations, costs or restrictions on the ownership, use or transfer of anyof Property pursuant to any Environmental Law; and

 

(ix)                              TheProperty has not and does not contain any underground storage tanks,asbestos-containing material, lead-based products, halogenated solvents orpolychlorinated biphenyls.

 

(b)                                 “EnvironmentalLaw” means any federal, state, local or foreign law, statute, ordinance, rule,regulation, or treaty; all judicial administrative, and regulatory orders,judgments, decrees, permits, and authorizations; and common law relatingto:  (i) the protection of human health,the environment or natural resources, (ii) the investigation, remediation orrestoration of the environment or natural resources, (iii) the handling, use,storage, treatment, disposal, release or threatened release of any HazardousSubstance; or (iv) noise, odor, pollution, contamination, land use, or anyinjury or threat of injury to persons or property related thereto.

 

(c)                                  “HazardousSubstance” means any substance, material or waste that is: (i) listed,classified or regulated in any concentration pursuant to any Environmental Law;(ii) any petroleum product or by-product, asbestos-containing material,lead-containing paint or plumbing, polychlorinated biphenyls, radioactivematerials; or (iii) any other substance, material or waste which may be thesubject of regulatory action by any governmental entity pursuant to anyEnvironmental Law.

 

(d)                                 “Property”means any real property, facility and/or improvements owned, leased, used,operated or occupied by the Micro Irrigation Business, including, withoutlimitation, the Facility, or by Seller and related in any manner to the MicroIrrigation Business.

 

3.20                           Relationshipswith Customers and Suppliers.  Nopresent customer or substantial supplier to the Micro Irrigation Business hasindicated any intention to terminate or adversely alter the scope, size ornature of its existing business relationship therewith, and Seller has noreason to believe that any of the present customers of or substantial suppliersto the Micro Irrigation Business intends to do so.

 

3.21                           Warranties;Product Returns.  Except asdescribed in Schedule 3.21 hereto, Seller does not offer any warrantiesfor its products and services.  Schedule3.21 sets forth the warranty expense relating to the Micro IrrigationBusiness for each of the past four (4) years. None of the products manufactured by the Micro Irrigation Business havebeen subject to recall.

 

3.22                           Insurance.  Seller maintains insurance with reputableinsurance companies on all of its equipment, tools, machinery, inventory andproperties, and maintains products and personal liability insurance, and suchother insurance against hazards, risks and liability to persons and property asdescribed on Schedule 3.22.  Schedule3.22 sets forth a true and correct list and a general description of allinsurance policies of any nature whatsoever maintained by Seller pertaining tothe Micro Irrigation Business or the Transferred Assets, including all policiesof life, group medical and/or dental insurance.  Such policies are and will be in full force and effect throughthe Closing Date and, except as otherwise set forth on Schedule 3.22,such policies, or other policies covering the same risks, have been in fullforce and effect, without gaps, continuously for the past four (4) years.  Copies of all current  policies have been delivered

 

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to Buyer for its inspection.  Seller is not in default under any of such policies or bindersnor has either failed to give any notice or to present any material claim underany such policy or binder in a due and timely fashion.

 

3.23                           Broker’sCommission or Finder’s Fees.  Noperson or entity (other than Acquisitions Northwest, Inc.) has acted for Sellerin connection with the transactions provided for in this Agreement in a waywhich would entitle such person to, and no other person or entity is entitledto, any broker’s commissions or finder’s fees (or other similar fees orcommissions) in connection with this Agreement.  Seller shall be solely responsible for payment of all suchcommissions and fees.

 

3.24                           ThirdParty Benefits.  Neither Seller norany other related third party has provided, directly or indirectly, anybenefit, service, good or product to the Micro Irrigation Business other thanas has been fully and fairly allocated to the Micro Irrigation Business andexpensed by the Micro Irrigation Business at fair value in the cost of sales orselling, general and administrative sections of the appropriate incomestatements.

 

3.25                           FullDisclosure; Knowledge.  Allinstruments, agreements and other documents delivered or to be delivered, ormade available, to Buyer pursuant to this Agreement are complete and correct inall material respects.  Norepresentation or warranty made by Seller in this Article III orthe Schedules to this Agreement contains or at Closing will contain any untruestatement of a material fact or omits or will omit to state a material factrequired to be stated herein or therein necessary to make the statements onbehalf of Seller in this Article III and the Schedules to thisAgreement, in light of the circumstances in which they are made, notmisleading.  As used in this Agreement,“Knowledge” means, with respect to an entity, such knowledge as would beobtained after reasonable inquiry by the officers of that entity and, withrespect to an individual, such knowledge as would be obtained by thatindividual after reasonable inquiry.

 

# **ARTICLEIV**

# ** **

# **REPRESENTATIONSAND WARRANTIES OF BUYER**

# ** **

Buyer herebyrepresents and warrants to Seller as follows:

 

4.1                                 Organizationand Qualification.  Buyer is acorporation (a) wholly-owned by Parent, (b) duly organized, validly existingand in good standing in the State of California, and (c) duly qualified to dobusiness as a foreign entity and is in good standing in each jurisdiction inwhich the character of its properties or the nature of its business makes suchqualification necessary.  Buyer has therequisite corporate power to own, use or lease its properties and to carry onits business as such is now being conducted.

 

4.2                                 AuthorityRelative to this Agreement.  Subjectonly to approval and ratification by the board of directors of Summa Industries (“Summa”), Buyer has allrequisite corporate power and authority to execute and deliver this Agreementand any related agreements and to consummate the transactions contemplatedhereby.  Subject only to approval andratification by Summa’s board of directors, the execution and delivery of thisAgreement, any related agreements and the consummation of the transactionscontemplated hereby on the part of Buyer have been duly and validly authorizedby Buyer and no other corporate proceedings on the part of Buyer are necessary,as a matter of law or otherwise, to authorize this Agreement or to consummatethe transactions so contemplated.  ThisAgreement has been duly and validly executed and delivered by Buyer and,assuming this Agreement constitutes a valid and binding obligation of Seller,this Agreement constitutes a valid and binding agreement of Buyer,

 

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enforceable against Buyer in accordance with itsterms, except as such enforcement may be limited by applicable bankruptcy,insolvency, reorganization, moratorium or other laws of general applicationaffecting enforcement of creditors’ rights or by general principles of equity.

 

4.3                                 Consentand Approvals; No Violation.  Theexecution and delivery of this Agreement by Buyer, the consummation of thetransactions contemplated hereby and the performance by Buyer of itsobligations hereunder, will not:

 

(a)                                  conflictwith any provision of the certificate of incorporation or bylaws of Buyer;

 

(b)                                 requireany consent, approval, authorization or permit of, or filing with ornotification to, any governmental or regulatory authority other than thepost-Closing filing by Summa on Form 8-K with the Securities and ExchangeCommission (the “Commission”);

 

(c)                                  conflictwith, result in the breach of or constitute a default (or give rise to anyright of termination, cancellation or acceleration or guaranteed payments)under any of the terms, conditions or provisions of any material note, lease,mortgage, license, agreement or other instrument or obligation to which Buyeris a party or by which Buyer or any of its assets may be bound, except for suchdefaults (or rights of termination, cancellation or acceleration) as to whichrequisite waivers or consents have been obtained; or

 

(d)                                 conflictwith or violate the provisions of any order, writ, injunction, judgment,decree, statute, rule or regulation applicable to Buyer.

 

4.4                                 Broker’sCommission or Finder’s Fees.  Noperson or entity has acted for Buyer and/or Parent and/or Summa in connectionwith the transactions provided for in this Agreement in a way which wouldentitle such person to, and no person or entity is entitled to, any broker’scommissions or finder’s fees (or other similar fees or commissions) inconnection with this Agreement or the transactions contemplated hereby.  Buyer shall be solely responsible forpayment of all such commissions and fees.

 

# **ARTICLEV**

 

# **PRE-CLOSINGAND POST-CLOSING COVENANTS OF SELLER**

# ** **

Pre-ClosingCovenants of Seller: During the period from the date of this Agreement until the Closing Dateor the earlier termination of this Agreement, Seller agrees (except asexpressly contemplated by this Agreement or to the extent that Buyer shallotherwise consent in writing) as follows:

 

5.1                                 Accessto Information.

 

(a)                                  Sellershall (i) give Buyer and Parent and their authorized representatives reasonableaccess upon reasonable notice during normal business hours in such a manner asnot unduly to disrupt normal business activities to the Transferred Assets andto all plants, offices, warehouses and other facilities of the Micro IrrigationBusiness and to all contracts, internal reports, data processing files andrecords, commitments, books, records and affairs of Seller related to the MicroIrrigation Business whether located on the premises of the Micro IrrigationBusiness, the office facilities of Seller or at another location, (ii) permitBuyer to make such inspections and inquiries as it may require, and (iii) causeits officers to furnish Buyer such financial, operating, technical and productdata and other information with respect to the Micro Irrigation Business andthe Transferred Assets as Buyer from time to time may reasonably request,including without limitation financial statements and schedules; provided,however, that

 

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no investigation pursuant to this Section 5.1shall affect or be deemed to modify any representation or warranty made bySeller herein, and provided further that Buyer shall not contact the customersor suppliers of Seller to discuss the transactions contemplated hereby untilBuyer has substantially completing all other due diligence investigations andhas advised Seller of its continuing intent to complete the transactions.

 

(b)                                 Sellershall give prompt notice to Buyer of any breach of any of its covenantshereunder or the occurrence of any event that is reasonably likely to cause anyof its representations and warranties hereunder to become incomplete or untruein any respect.

 

5.2                                 OrdinaryCourse.  Seller shall (a) carry onits business in the usual, regular and ordinary course, in substantially thesame manner as heretofore conducted and use reasonable efforts consistent withpast practice and policies to preserve its present business organizations, keepavailable the services of its present officers, key employees (other thanemployees terminated for cause) and sales representatives, and preserve itsrelationships with customers, suppliers, lessors, lessees and others havingbusiness dealings with it, (b) maintain its books and records in accordancewith existing practices, (c) not pay distributions of any type, (d) except inthe ordinary course, not hire additional employees nor terminate existingemployees nor become obligated for additional rental payments, (e) notmaterially modify the compensation or benefits paid to any employee, (f) exceptin the ordinary course, not transfer or sell any Micro Irrigation Businessassets, and (g) not undertake material expenditures, including, withoutlimitation, the purchase or lease of equipment, except for tooling requirementsalready committed and disclosed herein; provided that, expenditures less than$10,000 individually and $25,000 in the aggregate shall not be deemed material.

 

5.3                                 ExclusiveNegotiations.

 

(a)                                  Sellershall not, directly or indirectly through any employee, agent or representative(including without limitation investment bankers, attorneys, accountants andconsultants), or otherwise:

 

(i)                                     solicit,initiate, discuss or further the submission of proposals or offers from, orenter into any agreement with, any firm, corporation, partnership, association,group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,as amended) or other person or entity, individually or collectively (includingwithout limitation any managers, employees or independent contractors of Selleror any of its affiliates), other than Buyer (a “Third Party”), relating to anyacquisition or purchase of all or a material portion of the Transferred Assets,or any equity interest in Seller (or the Micro Irrigation Business), or anymerger, consolidation or business combination with Seller;

 

(ii)                                  participatein any discussions or negotiations regarding, or furnish to any Third Party anyconfidential information with respect thereto; or

 

(iii)                               otherwisecooperate in any way with, or assist or participate in, facilitate or encourage,any effort or attempt by any Third Party to do or seek to do any of theforegoing.

 

(b)                                 Sellershall promptly notify Buyer in writing if any such proposal or offer, or anyinquiry or contact with any Third Party with respect thereto, is made.

 

(c)                                  Sellershall immediately cease and cause to be terminated any existing activities,discussions or negotiations with any Third Party conducted prior to the date ofthis Agreement with respect to any of the foregoing.

 

(d)                                 Theterms set forth in this Section 5.3 shall remain in effect from the dateof this

 

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Agreement until such time, if ever, as terminated inwriting by Seller by delivery to Buyer of a termination notice referencing thisSection; provided that, no such termination shall be effective prior to theearlier of (i) the termination of this Agreement by Buyer, or (ii) March 1,2004.

 

5.4                                 NoDispositions.  Except for the saleof inventory in the ordinary course of business and other than as may be requiredby existing contracts, Seller shall not sell, lease or otherwise dispose of ortransfer any Transferred Assets and shall promptly notify Buyer in writingprior to any dispositions or transfers of non-inventory items.

 

5.5                                 Indebtedness.  Seller shall not incur, become subject to,or agree to incur or become subject to any obligation or liability (absolute orcontingent) relating to the Micro Irrigation Business or the TransferredAssets, except current liabilities incurred in the ordinary course of businessconsistent with prior practice, and obligations under existing contracts.

 

5.6                                 BenefitPlans.  Seller shall not:

 

(a)                                  pay,agree to pay or make any accrual or arrangement for payment of any pension,retirement allowance or other employee benefit pursuant to any existing plan,agreement or arrangement to any employee except in the ordinary course ofbusiness and consistent with past practice;

 

(b)                                 commititself to adopt or pay, grant, issue or accrue salary or benefits pursuant toany additional pension, profit-sharing, bonus, extra compensation, incentive,deferred compensation, group insurance, severance pay, retirement or otheremployee benefit plan, agreement or arrangement, or any employment orconsulting agreement with or for the benefit of any employee, agent orconsultant, whether past or present; or

 

(c)                                  amendin any material respect any such existing plan, agreement or arrangement,except where required by law.

 

5.7                                 Maintenanceof Working Capital.  Consistent inall respects with past practices, Seller shall (a) timely pay when due allaccounts payable and other expenses, and (b) collect all accounts receivableand convert or use all other non-cash assets in the ordinary course.

 

5.8                                 Insurance.  Seller shall take all necessary actions tomaintain in force all of its existing insurance policies (or replacementstherefore), subject only to variations in amounts required by the ordinaryoperation of the Micro Irrigation Business, through the Closing Date.

 

Post-ClosingCovenants of Seller: During the period from and after the Closing, Seller agrees (except asexpressly contemplated by this Agreement or to the extent that Buyer shallotherwise consent in writing) as follows:

 

5.9                                 Receivables.  The parties agree to promptly and fullycooperate with each other in collecting their respective receivables from andafter the Closing.  For a period of six(6) calendar months after Closing, Seller agrees to provide Buyer, on a monthlybasis, with a schedule of open pre-Closing accounts receivable relating to theMicro Irrigation Business to enable Seller to track customer paymentperformance.

 

5.10                           Forwardingof Inquiries.  Seller shall promptlyforward to Buyer any and all inquires, orders, and other communications itreceives, whether written or oral, relating in any manner to the MicroIrrigation Business (excluding only Mining Business matters).

 

5.11                           Useof Name; Link to Website; Domain Name. Seller shall take all necessary actions to cease use of the “Pepco”trade name and trademark effective as soon as practicable

 

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after the Closing Date.  Notwithstanding the foregoing, Seller shall provide and maintaina conspicuously located link on www.waderain.com to the website(s) designatedby Buyer until such time as Buyer consents to its removal, provided that suchtime shall not exceed two (2) years from the Closing Date.  In addition, Seller shall take all necessaryactions and make all necessary filings to transfer all right, withoutlimitation, to the domain name “pepcoirrigation.com”, effective as of theClosing Date.

 

5.12                           LimitedLicense - Wade Rain.  At Closing,and without further action, Seller shall grant to Buyer a three (3) year,limited, worldwide, royalty-free right and license to use the trade name “WadeRain” and related trademark in connection with the on-going Micro IrrigationBusiness and for no other purposes.

 

5.13                           TaxMatters.  All Tax Returns whichrelate to any Taxes with respect to the Micro Irrigation Business or theTransferred Assets for periods prior to the Closing Date shall be prepared andfiled by Seller or its owners on a timely basis, and Seller shall beresponsible for the payment of all Taxes related to the Micro IrrigationBusiness or the Transferred Assets attributable to periods prior to theClosing.  Buyer shall pay all sales, useand transfer taxes, if any, payable to the States of California or Oregon, anysubdivision thereof or to any other governmental entity in connection with thetransactions contemplated by this Agreement and the Closing.

 

5.14                           Information Management and Accounting SupportServices.  Seller shall continue to provide some or allof the following existing information management and accounting supportservices currently provided to the Micro Irrigation Business for up to twelve(12) months from Closing (or such shorter period as may be requested by Buyer):hosting of the Micro Irrigation Business books and records, includingaccounting (A/P, A/R, financial), information services (T1 line), and technicalsupport for Pro Man software (to the extent able by Seller’s supportpersonnel).  For services to be renderedhereunder, Buyer will pay to Seller a fee of Two Thousand Five Hundred Dollars($2,500.00) per month for the first six (6) months from Closing, and ThreeThousand Five Hundred Dollars ($3,500.00) per month for the second six (6)months.  In addition, Buyer shall payits portion of related line charge(s) and other similar out-of-pocket expensesas well as reasonable and customary amounts for any services above and beyondthose currently provided. Seller’s responsibility shall be to provide servicesno greater than previously utilized by the Micro Irrigation Division. Buyeragrees to 30 days prior written notice to Seller of its intent to discontinue suchservices. Seller shall not be liable to Buyer for any loss or damage caused byany failure or delay in providing the Services described hereunder resultingfrom causes beyond Seller’s control or any interruption of or other loss of useof the Line. Seller shall not be liable to Buyer for any special damages ofwhatever nature in connection with the provision of the services hereunder.

 

# **ARTICLEVI**

# ** **

# **MUTUALCOVENANTS**

# ** **

6.1                                 Confidentiality.  Between the date hereof and the ClosingDate, the parties hereto agree that no party shall, without the prior writtenconsent of the others as to substance, existence and timing, disclose publiclyor to any third party (except such party’s professional advisors) the existenceof this Agreement or the terms and conditions hereof, or any priorcorrespondence or any subsequent negotiations between the parties, includingany confidential information obtained thereby, except to the extent required bylaw.  The parties will cooperate witheach other to coordinate any and all public statements and releases withrespect to the transactions contemplated hereby.  From the date hereof until the Closing, neither Seller nor any ofits representatives shall purchase, directly or indirectly, in the publicmarketplace or otherwise, any

 

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of Summa’s securities.  Following the Closing, Seller shall keep confidential and shallnot disclose to any third party all information not then in the public domainrelating in any manner to the Micro Irrigation Business.  Buyer agrees that, until the Closing or, ifthis Agreement is terminated for any reason, then, for a period of two (2)years thereafter, all information concerning the Micro Irrigation Business andTransferred Assets obtained during due diligence and not otherwise known oravailable to Buyer shall be used by Buyer and any affiliate or agent of solelyfor the purpose of evaluating this transaction.  If this Agreement is terminated for any reason, Buyer shallreturn to Seller all tangible embodiments, and all copies, of any informationconcerning the Micro Irrigation Business and the Transferred Assets that are inits possession or control obtained during due diligence and not otherwisealready known or available.

 

6.2                                 Satisfactionof Conditions.   Each party will usereasonable efforts to cause all conditions to its obligations under thisAgreement to be timely satisfied and to perform and fulfill all covenants andobligations on its part to be performed and fulfilled under this Agreement, tothe end that the transactions contemplated by this Agreement shall be effectedsubstantially in accordance with its terms as soon as reasonablypracticable.  The parties shallcooperate with each other in such actions and in attempting to secure requisiteapprovals.

 

6.3                                 FurtherAssurances.  Each party shallexecute and deliver, both before and after the Closing, such furthercertificates, agreements and other documents and take such other actions as maybe necessary or appropriate to consummate or implement the transactionscontemplated hereby, including without limitation the transfer of allTransferred Assets to Buyer, or to evidence such events or matters.

 

6.4                                 BulkSales Compliance.  Subject to theindemnities set forth in this Agreement, the parties agree to waive compliancewith all applicable bulk transfer laws. Nothing in this Section 6.4 shall operate or be construed toestop or prevent any party hereto from asserting as a bar or defense to anyaction or proceeding brought under any bulk sales law that such law does notapply to the transfer contemplated under this Agreement.  If required, Seller shall deliver to Buyerany bulk sale stop orders, and Seller shall escrow any funds required thereby,and shall pay such escrowed amounts to the appropriate governmental entity.

 

6.5                                 CertainDefaults.  Seller and Buyer willgive prompt notice to each other of:

 

(a)                                  anynotice of default received by such party subsequent to the date of thisAgreement and prior to the Closing Date under any instrument or agreement towhich any such party is a party or by which it is bound, which default in thecase of Seller, would, if not remedied, result in a Material Adverse Change orwhich, in the case of any such party, would render incomplete or untrue anyrepresentation made herein; and

 

(b)                                 anysuit, action or proceeding instituted or, to the Knowledge of Seller or Buyer,threatened against or affecting any such party subsequent to the date of thisAgreement and prior to the Closing Date which would render incorrect anyrepresentation made herein or result in a Material Adverse Change to such partythat could impair the ability of such party to consummate the transactionscontemplated herein, including payment of the Note and/or the AdditionalConsideration on a timely basis.

 

6.6                                 Brokersor Finders.  Neither Seller norBuyer shall enter into any agreement or arrangement not existing as of the datehereof with any agent, broker, investment banker or other firm or personpursuant to which such person shall be entitled to any broker or finder’s feeor any other commission or similar fee in connection with any of thetransactions contemplated by this Agreement.

 

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6.7                                 NoEquitable Conversion.  Prior to theClosing Date, neither the execution of this Agreement nor the performance ofany provision contained herein shall cause Seller or Buyer to be or becomeliable for or in respect of the operations or business of the other, for thecost of any labor or materials furnished to or purchased by the other, forcompliance with any laws, requirements or regulations of, or taxes, assessmentsor other charges now or hereafter due to, any governmental authority, or forany other charges or expenses whatsoever pertaining to the conduct of the MicroIrrigation Business or the ownership, title, possession, use or occupancy ofthe property of the other.

 

6.8                                 CertainEmployee Issues.  On the ClosingDate, Buyer intends to offer at will employment to substantially all of theemployees of the Micro Irrigation Business, other than those Seller employeeswhose activities are primarily in support of the Mining Business, on such termsand conditions and with such benefits as Buyer shall determine.  Nothing in this Section shall be deemed torequire the employment of any such employee or the continuation of any benefitsfor any particular time after the Closing Date.  Seller covenants that it shall timely (a) pay or cause to be paidall amounts due or to become due prior to, on, in connection with or as aresult of Closing to all current and former employees of the Micro IrrigationBusiness, including without limitation all earned and/or accrued (i) wages,(ii) bonuses, (iii) vacation pay, and (iv) other obligations, and (b) make allrequired deposits, tax and other payments to health and benefit plans, taxingauthorities and others.

 

6.9                                 MiningManufacturing Agreement.  AtClosing, the parties will enter into a five (5) year manufacturing agreement insubstantially the form attached hereto as Exhibit B, whereby Buyer shallbe the exclusive manufacturer of all Mining Business products (excludingbuy-outs) for Seller, including Max Emitters and tubing (the “MiningManufacturing Agreement”).  Selleragrees that Buyer shall have the right to use Seller’s Max Emitter molds toproduce products for sale by Buyer in non-mining applications, and that Sellerand Buyer shall share in the maintenance costs in proportion to sales of MaxEmitters, excluding sales by Buyer to Seller.

 

6.10                           MaxEmitter License.  At Closing, theparties will enter into a license agreement (the “Max Emitter Agreement”) insubstantially the form attached hereto as Exhibit C, whereby Seller willlicense the Max Emitter trade name, trademark, and product design to Buyer foruse in the agricultural and landscape and waste water irrigation marketsworld-wide.

 

6.11                           Lease.  At Closing, the parties will enter into aLease in substantially the form attached hereto as Exhibit A.

 

# **ARTICLEVII**

# ** **

# **CONDITIONSPRECEDENT TO OBLIGATIONS OF THE PARTIES**

# ** **

7.1                                 Conditionsto the Obligations of all Parties. The respective obligations of Buyer, and Seller set forth in thisAgreement shall be subject to the satisfaction on or prior to the Closing Dateof the following conditions, unless waived by each such party in writing:

 

(a)                                  LegalAction.  No temporary restrainingorder, preliminary injunction or permanent injunction or other order preventingthe consummation of the transactions contemplated by this Agreement shall havebeen issued by any federal, state or foreign court or other governmental orregulatory authority and shall remain in effect, and no litigation seeking theissuance of such an order or injunction, or seeking substantial damages againstBuyer or Seller if the transactions contemplated by this Agreement areconsummated, shall be pending which, in the reasonable good faith judgment ofthe party against whom such damages or

 

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injunction is sought, have a reasonable probability ofresulting in such order, injunction or substantial damages.  In the event any such order or injunctionshall have been issued, each party agrees to use its reasonable efforts to haveany such injunction lifted.

 

(b)                                 Statutes.  No federal, state, local or foreign statute,rule or regulation shall have been enacted which would make the consummation ofthe transactions contemplated by this Agreement illegal.

 

(c)                                  Documents.  Each party hereto shall have executed and/ordelivered to the other party each and every document referenced herein to whichsuch party is an intended signatory, including any Exhibit document andschedules hereto.

 

7.2                                 FurtherConditions to the Obligations of Buyer. The obligations of Buyer set forth in this Agreement are subject to thesatisfaction on or prior to the Closing Date of the following conditions,unless waived by Buyer in writing:

 

(a)                                  Representationsand Warranties.  The representationsand warranties of Seller set forth in Article III shall be true andcorrect as of the date of this Agreement and, except as set forth on schedulesto the Seller’s Certificate (as defined below), as of the Closing Date asthough made at and as of the Closing Date, except as otherwise contemplated bythis Agreement, and Buyer shall have received a certificate dated the ClosingDate signed by Seller to such effect (“Seller’s Certificate”).  If the schedules to the Seller’s Certificatereflect an adverse change or changes from the representations made andschedules delivered as of the execution of this Agreement, Buyer shall have noobligation to consummate the transactions contemplated by this Agreement.

 

(b)                                 Performanceof Obligations of Other Party. Seller shall have performed all obligations required to be performed byit under this Agreement at or prior to the Closing Date, and Buyer shall havereceived a certificate to such effect.

 

(c)                                  Receiptof Transfer Documents.  Buyer shallhave received the executed General Instrument of Conveyance, Transfer andAssignment in the form attached hereto as Exhibit D and all such otherinstruments and documents of conveyance and assignment as are requested byBuyer to vest in Buyer title to the Transferred Assets, including withoutlimitation assignments of intellectual property.

 

(d)                                 Opinionof Counsel to Seller.  Buyer shallhave received an opinion dated as of the Closing Date of counsel to Sellercontaining the opinions set forth in Exhibit E attached hereto.

 

(e)                                  NoLitigation.  Since the date hereof,there shall not have been instituted and be continuing or threatened against Seller,any claims, actions or proceedings relating in any manner to the MicroIrrigation Business or the Transferred Assets which, if adversely determined,might, individually or in the aggregate, reasonably be expected to result in aMaterial Adverse Change.

 

(f)                                    NoAdverse Change.  No Material AdverseChange to the Micro Irrigation Business or the Transferred Assets shall haveoccurred since the date of this Agreement.

 

(g)                                 Third-PartyApprovals.  Any and all consentsrequired from third parties relating to licenses, leases and other agreementsand instruments that are part of the Transferred Assets shall have beenobtained.

 

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(h)                                 Noncompetitionand Nonsolicitation Agreement. Seller, its affiliates and Mr. Edward H. Newbegin shall have eachentered into a five-year noncompetition and nonsolicitation agreement withrespect to the types of products of the Micro Irrigation Business (excludingthe Mining Business), with Buyer in substantially the form attached hereto as ExhibitF.

 

(i)                                     Debt;Guarantees.  There shall be noagreements or instruments evidencing loans to or interest bearing indebtednessincurred by Seller related in any manner to the Micro Irrigation Business orthe Transferred Assets, and Seller, on or prior to the Closing, shall have paidin full all such interest bearing indebtedness and loans of any type, includingcurrent portions thereof, provided that, Seller shall not be required tosatisfy any mortgage obligations pertaining to the Facility.

 

(j)                                     Terminationof Encumbrances.  All liens andencumbrances on the Transferred Assets shall have been terminated, and Sellershall have received and delivered to Buyer duly executed UCC terminationstatements with respect to any and all UCC financing statements covering suchassets and property at Closing.

 

(k)                                  Approvalby Board.  The Board of Directors ofSumma shall have approved consummation of the transactions contemplated herebyin its sole and absolute discretion.

 

(l)                                     DueDiligence.  Buyer shall havecompleted its due diligence investigations to its sole and absolutesatisfaction.

 

7.3                                 FurtherConditions to the Obligations of Seller. The obligations of Seller set forth in this Agreement are subject to thesatisfaction on or prior to the Closing Date of the following conditions,unless waived by Seller in writing:

 

(a)                                  Representationsand Warranties.  The representationsand warranties of Buyer set forth in Article IV shall be true andcorrect in all material respects as of the date of this Agreement and, exceptas set forth on schedules to the Buyer’s Certificate (as defined below), as ofthe Closing Date as though made at and as of the Closing Date, except asotherwise contemplated by this Agreement, and Seller shall have received acertificate dated the Closing Date signed by an authorized officer of Buyer tosuch effect (“Buyer’s Certificate”).  Ifthe schedules to the Buyer’s Certificate reflect an adverse change or changesfrom the representations made and schedules delivered as of the execution ofthis Agreement, Seller shall have no obligation to consummate the transactionscontemplated by this Agreement.

 

(b)                                 Performanceof Obligations of Other Party. Buyer shall have performed in all material respects all obligationsrequired to be performed by it under this Agreement at or prior to the ClosingDate, and Seller shall have received a certificate signed by an authorizedofficer of Buyer to such effect.

 

(c)                                  Receiptof Assumption Agreement.  Sellershall have received the executed Assumption Agreement in the form attachedhereto as Exhibit G.

 

(d)                                 Receiptof Cash.  Seller shall have receivedthe Cash as set forth in Section 2.3(a).

 

(e)                                  Opinionof Counsel to Buyer. Seller shall have received an opinion dated as of theClosing Date of counsel to Buyer containing the opinions set forth in ExhibitH attached hereto.

 

(f)                                    Approvalby Board.  The Board of Directors ofSeller shall have approved consummation of the transactions contemplated herebyin its sole and absolute discretion.

 

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(g)                                 Noncompetitionand Nonsolicitation Agreement. Buyer and Parent and Summa shall have each entered into a five-yearnoncompetition and nonsolicitation agreement with respect to the MiningBusiness with Seller in substantially the form attached hereto as Exhibit I.

 

# **ARTICLEVIII**

# ** **

# **TERMINATION,AMENDMENT AND WAIVER**

# ** **

8.1                                 Termination.  This Agreement may be terminated at any timeprior to the Closing Date:

 

(a)                                  ByMutual Consent.  By the mutualwritten consent of Buyer and Seller;

 

(b)                                 ByBuyer or Seller.  By either Buyer orSeller:

 

(i)                                     ifthe transactions contemplated by this Agreement shall not have been consummatedon or before January 31, 2004; provided that the failure of the transactions tobe consummated by such date is not caused by any breach of this Agreement bythe party seeking such termination;

 

(ii)                                  ifa court of competent jurisdiction or other governmental or regulatory authorityshall have issued an order, decree or ruling or taken any other action, in eachcase permanently restraining, enjoining or otherwise prohibiting theconsummation of the transactions contemplated by this Agreement; or

 

(iii)                               ifany statute, rule or regulation is enacted, promulgated or deemed applicable tothe transactions contemplated by this Agreement by any competent governmentalor regulatory authority which makes the consummation of the transactionsillegal.

 

(c)                                  ByBuyer.  By Buyer, if a materialdefault under or a material breach of this Agreement by Seller shall haveoccurred and be continuing ten (10) days after receipt of written noticethereof from Buyer; provided that a Closing condition would not otherwise besatisfied.

 

(d)                                 BySeller.  By Seller, if a materialdefault under or a material breach of this Agreement by Buyer shall haveoccurred and be continuing ten (10) days after receipt of written noticethereof from Seller; provided that a Closing condition would not otherwise besatisfied.

 

Any action takento terminate this Agreement pursuant to this Section 8.1 shall becomeeffective when written notice of such termination is delivered by theterminating party to the other party in accordance with the provisions of Section10.1 below.

 

8.2                                 Effectof Termination.  In the event oftermination of this Agreement by any party in accordance with Section 8.1above, this Agreement shall forthwith become void and there shall be noliability or obligation on the part of any party hereto or its respectiveaffiliates, officers, directors or employees, except that (a) Section6.1 relating to the obligations to keep confidential certain informationand data, (b) Section 10.3 relating to certain expenses, (c) Section10.10 relating to arbitration of disputes, (d) Sections 3.24 and 4.4relating to finder’s fees and broker’s fees, (e) Section 10.9 relatingto jurisdiction and forum selection, and (f) this Article VIIIshall survive any termination. Nothing set forth herein shall relieve a partyhereto from liability for its willful breach of this Agreement.  Without limitation, if all of the conditionsto a party’s obligations set forth in Article VII have been satisfied orwaived by January 31, 2004, the failure of such party to perform itsobligations on or before such date shall be deemed to be a willful breach ofthis Agreement by such party.

 

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8.3                                 Amendment.  This Agreement may not be amended except byan instrument in writing signed on behalf of each of the parties hereto.

 

8.4                                 Extension;Waiver.  At any time prior to or onthe Closing Date, to the extent legally allowed, any party hereto (a) mayextend the time for the performance of any of the obligations owed to suchparty by the other parties hereto, (b) may waive any inaccuracies in therepresentations and warranties made to such party contained herein or in anydocument delivered pursuant hereto, or (c) may waive compliance with any of theagreements or conditions for the benefit of such party contained herein.  Any agreement on the part of a party heretoto any such extension or waiver shall be valid if set forth in a writteninstrument signed on behalf of such party and shall be effective only to theextent set forth in such instrument.  Noextension or waiver of any single condition, covenant, agreement,representation, warranty, breach, default or other matter hereunder shall bedeemed an extension or waiver of such or any other condition, covenant,agreement, representation, warranty, breach, default or other mattertheretofore or thereafter occurring. The rights, remedies, powers and privileges provided in this Agreementare exclusive of any other rights, remedies, powers and privileges provided bylaw.  The failure of any party to insistupon a strict performance of any of the terms or provisions of this Agreement,or to exercise any option, right or remedy herein contained, shall not beconstrued as a waiver or as a relinquishment for the future of such term,provision, option, right or remedy, but the same shall continue and remain infull force and effect.

 

# **ARTICLEIX**

# ** **

# **INDEMNIFICATION**

# ** **

9.1                                 Indemnification.

 

(a)                                  Indemnificationby Seller.  Seller agrees toindemnify and hold harmless Buyer, its affiliates (including without limitationSumma, Parent and sister corporations), and their respective directors,officers, employees, agents and assigns from and against any and all “Losses”(as defined below) incurred by, imposed on, borne by or asserted against any ofsuch indemnified parties in any way relating to, arising out of or resultingfrom (i) any inaccuracy in or the breach or nonperformance of any of therepresentations, warranties, covenants or agreements made by Seller in thisAgreement or in any agreement delivered in connection herewith or pursuanthereto (each, a “Related Agreement”), and/or (ii) the failure by Seller to dischargeor perform any Retained Obligations (including, without limitation, warrantyclaims arising from sales made by Seller prior to Closing).

 

(b)                                 Indemnificationby Buyer.  Buyer shall indemnify andhold harmless Seller and its respective affiliates (including withoutlimitation, their directors, officers, employees, agents and assigns) from andagainst any and all “Losses” (as defined below) incurred by, imposed on, borneby or asserted against any of such indemnified parties in any way relating to,arising out of or resulting from (i) any inaccuracy in or the breach ornonperformance of any of the representations, warranties, covenants oragreements made by Buyer in this Agreement or in any Related Agreement, and/or(ii) the failure by Buyer to discharge or perform any Assumed Obligation.

 

(c)                                  Definitionof Losses.  For purposes of thisAgreement, “Losses” shall mean any and all liabilities, obligations, losses,damages, claims, deficiencies, penalties, taxes, levies, actions, judgments,settlements, suits, costs, legal fees, accountants’ fees, experts’ fees,disbursements and expenses but shall exclude consequential damages, such asdamages to customer relationships, and excluding individual losses of less than$10,000, or aggregate losses of less than $50,000.

 

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9.2                                 ThirdParty Claims, Notice and Opportunity to Settle.

 

(a)                                  Withintwenty (20) days after the receipt by the party entitled to indemnity hereunder(the “Indemnified Party”) of any claim or demand (including but not limited to,notice of any action, suit or proceeding) by any third party against anIndemnified Party which gives rise to a right to indemnification for a Losshereunder (a “Third Party Claim”), the Indemnified Party shall give each partywho may be obligated to provide indemnity hereunder (the “Indemnifying Party”)written notice of such claim or demand; provided, however, that the failure togive such notice shall not relieve the Indemnifying Party of its obligationshereunder.

 

(b)                                 TheIndemnifying Party shall (without prejudice to the right of any IndemnifiedParty to participate at its own expense through counsel of its own choosing)defend against such claim or demand at its sole expense and through counsel ofits own choosing (the choice of such counsel to be subject to the consent ofthe Indemnified Parties, which consent shall not be unreasonably withheld) andshall give written notice confirming its assumption of the defense withintwenty (20) days of the receipt of the notice referred to in Section 9.2(a)above.  If the Indemnifying Party failsto assume the defense of such claim or demand, the Indemnified Parties shallhave the right to assume control of such defense at the sole expense of theIndemnifying Party.  The IndemnifiedParties shall fully cooperate in the defense of such claim or demand, at theIndemnifying Party’s expense, and shall, among other things, make available tothe Indemnifying Party or its counsel pertinent information and personnel undertheir control relating thereto.  TheIndemnifying Party agrees to cooperate with the Indemnified Parties in order toenable their counsel to participate in the defense and to deliver to theIndemnified Parties copies of all pleadings and other information within the IndemnifyingParty’s knowledge or possession reasonably requested by the Indemnified Partiesthat is relevant to the defense of any such claim or demand.

 

(c)                                  TheIndemnifying Party shall not consent to the entry of a judgment or enter intoany settlement with respect to a Third Party Claim without the prior writtenconsent of the Indemnified Parties (not to be unreasonably withheld), unlessthe judgment or proposed settlement involves only the payment of money damagesand does not impose any injunction or other equitable relief upon anyIndemnified Party or its assets.

 

9.3                                 Non-ThirdParty Claims.  In the event anyIndemnified Party should have a claim against any Indemnifying Party hereunderwhich does not involve a Third Party Claim, the Indemnified Party shalltransmit to the Indemnifying Party a written notice (the “Indemnity Notice”)describing in reasonable detail the nature of the claim, an estimate of theamount of damages attributable to such claim, and the basis of the IndemnifiedParty’s request for indemnification under this Agreement, and such furtherinformation as may be reasonably requested by the Indemnifying Party.  If the Indemnifying Party does not notifythe Indemnified Party within ten (10) days from the Indemnifying Party’sreceipt of the Indemnity Notice that the Indemnifying Party either disputessuch claim and the reasons therefor, or reasonably needs further information,the claim specified by the Indemnified Party in the Indemnity Notice shall bedeemed admitted in full and a liability of the Indemnifying Partyhereunder.  If the Indemnifying Partyrequests further information and then does not dispute such claim and set forththe reasons therefor within ten (10) days after receipt of such information,then the claim specified by the Indemnified Party in the Indemnity Notice shallbe deemed admitted in full and a liability of the Indemnifying Party hereunder.The Indemnifying Party and the Indemnified Party shall negotiate in good faithto resolve any such claim for indemnification within thirty (30) days ofreceipt of the Indemnity Notice (the “Negotiation Period”). If such claim isnot settled within the Negotiation Period, the dispute shall then be resolvedthrough binding arbitration in accordance with the applicable provisions of ArticleX.

 

9.4                                 Payments.  Payments of all amounts owed by anIndemnifying Party pursuant to

 

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this Article IX relating to a Third Party Claimshall be made within ten (10) days after the latest of (i) the settlement ofsuch Third Party Claim, (ii) the final adjudication of such Third Party Claimor (iii) the final adjudication of the Indemnifying Party’s liability to theIndemnified Party under this Agreement. Payments of all amounts owed by an Indemnifying Party pursuant to Section9.3 shall be made within ten (10) days after the later of (i) theexpiration of the 20-day Indemnity Notice period, or, if applicable, the 10-dayextension thereof for further information, or (ii) the agreement or finaladjudication of the Indemnifying Party’s liability to the Indemnified Party.

 

9.5                                 Survivalof Representations and Warranties. The representations and warranties and covenants of each of the partiesto this Agreement shall survive the execution of this Agreement and theconsummation of the purchase and sale herein described for the following timeperiods: (a) twenty-four months for claims made under Sections 3.3(consents; no violation); 3.4 (financials); 3.5 (absence ofcertain changes); 3.8 (Facility); Sections 3.10 (accountsreceivable); 3.11 (inventory); 3.12 (contracts); 3.13(employees); 3.20 (customers); 3.21 (warranties), and 3.24(third party benefits), (b) the longer of thirty-six months or applicablestatute of limitations period for claims made under Sections 3.9(intellectual property); 3.15 (permits); 3.17 (litigation); 3.18(compliance with law); and 3.22 (insurance), (c) the longer offorty-eight months or applicable statute of limitations period for claims madeunder Sections 3.1 (organization), 3.2 (authority), 3.7(title to assets), 3.14 (ERISA); and 3.23 (brokers’ fees); and(d) the longer of perpetually or applicable statute of limitations period for 3.16(taxes); 3.19 (environmental), covenants, and for claims based on fraud;provided that, a representation or warranty related to any claim assertedpursuant to Article IX within the applicable time period set forth inthis Section shall survive as to such claim until resolved.

 

9.6                                 Adjustmentto Purchase Price; Insurance.  Anyindemnification received under this Article IX shall be, to the extentpermitted by law, an adjustment to the Purchase Price. The amount of any andall damages for which indemnification is provided pursuant to this ArticleIX shall be net of any amounts actually received by the Indemnified Partyunder insurance policies with respect to such damages.  In the event that any claim forindemnification asserted under this Article IX is, or is likely to be,the subject of the Indemnified Party’s insurance coverages, the Indemnified Partyagrees to notify the insurance carrier of any such claim.  The Indemnified Party agrees to pursue andcooperate, at the sole cost of the Indemnifying Party, such claims diligentlyand to reasonably cooperate, at the sole cost of the Indemnifying Party, withany claim the Indemnifying Party may have against any insurance carrier.

 

9.7                                 Soleand Exclusive Remedy.  After theClosing, the rights set forth in this Article IX shall be each party’ssole and exclusive remedy against the other parties hereto for any claim ordispute relating to the subject matter of this Agreement.

 

# **ARTICLEX**

# ** **

# **GENERALPROVISIONS**

# ** **

10.1                           Notices.  All notices and other communicationshereunder shall be in writing and shall be deemed given upon personal delivery,facsimile transmission (with written or facsimile confirmation of receipt), oron the first day following delivery by a reputable overnight commercialdelivery service (delivery, postage or freight charges prepaid), or on thethird day following deposit in the United States mail (if sent by registered orcertified mail, return receipt requested, delivery, postage or freight chargesprepaid), addressed to the parties at the following addresses (or at such otheraddress for a party as shall be specified by like notice):

 

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| If to Buyer:                              |   | With copy to:                        |
|-------------------------------------------|--------|--------------------------------------|
|                                      |   |                                 |
| Central Valley  Manufacturing, Inc.       |   | Summa Industries                     |
| c/o Summa  Industries                     |   | One Park Plaza,  Sixth Floor         |
| 21250 Hawthorne  Blvd., Suite 500         |   | Irvine, CA 92614                     |
| Torrance, CA 90503                        |   | Fax: (949)  852-7316                 |
| Fax: (310)  792-7079                      |   | Attn:  Trygve  M. Thoresen |
| Attn:  James  R. Swartwout |   |                                 |
|                                      |   |                                 |
| If to Seller:                             |   | With copy to:                        |
|                                      |   |                                 |
| R.M. Wade &  Co.                      |   | Andrew Kerr,  Esq.                   |
| P.O. Box 23666                            |   | Brownstein Rask  Sweeney Kerr LLP    |
| Portland, Oregon  97281                   |   | 1200 Southwest  Main St.             |
| Fax: (503)  692-5358                      |   | Portland, Oregon  97205              |
| Attn:  Edward  H. Newbegin      |   | Fax: (503)  221-1074                 |

 

10.2                           Interpretation.  When a reference is made in this Agreementto an Article, Section, Exhibit or Schedule, such reference shall be to an Article,Section, Exhibit or Schedule to this Agreement unless otherwise indicated.  The words “include,” “includes” and“including” when used herein shall be deemed in each case to be followed by thewords “without limitation.” The table of contents and headings contained inthis Agreement are for reference purposes only and shall not affect in any waythe meaning or interpretation of this Agreement.  This Agreement was drafted by all the parties hereto and shallnot be interpreted against any party as the drafter.

 

10.3                           Expenses.  Whether or not the transactions contemplatedhereby are consummated, and except as otherwise specifically provided in thisAgreement, all fees, costs and expenses incurred in connection with thisAgreement and the transactions contemplated hereby shall be paid by the partyincurring such fees, costs or expenses.

 

10.4                           Integration.  This Agreement and the Exhibits, Schedules,documents, instruments and other agreements among the parties hereto that arereferred to herein constitute the entire agreement among the parties withrespect to the subject matter set forth herein or therein and supersede allprior agreements and understandings, both written and oral, among the partieswith respect to the subject matter hereof or thereof, including, withoutlimitation, any term sheets or letters of intent.

 

10.5                           Assignment.  No party hereto shall assign or transfer orpermit the assignment or transfer of this Agreement without the prior writtenconsent of the other parties; provided, however, that Buyer may assign any ofits rights and obligations hereunder to any entity that, directly orindirectly, through one or more intermediaries, controls, or is controlled by,or is under common control with Buyer.

 

10.6                           Severability.  Any portion or provision of the Agreementwhich is invalid, illegal or unenforceable in any jurisdiction shall, as tothat jurisdiction, be ineffective to the extent of such invalidity, illegalityor unenforceability, without affecting in any way the remaining portions or provisionshereof in such jurisdiction or, to the extent permitted by law, rendering thator any other portion or provision of the Agreement invalid, illegal orunenforceable in any other jurisdiction.

 

10.7                           GoverningLaw.  This Agreement and the rightsand obligations of the parties hereunder shall be governed in all respects,including validity, interpretation and effect, by the laws of the State ofCalifornia, without regard to its rules of conflicts of law.

 

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10.8                           Attorneys’Fees.  If any party to thisAgreement shall bring any arbitration, action, suit, counterclaim or appeal forany relief against any other party, declaratory or otherwise, to enforce theterms hereof or to declare rights hereunder (collectively, an “Action”), theprevailing party shall be entitled to recover as part of any such Action itsreasonable attorneys’ fees and costs, including any fees and costs incurred inbringing and prosecuting such Action and/or enforcing any order, judgment,ruling or award granted as part of such Action.  “Prevailing party” within the meaning of this section includes,without limitation, a party who agrees to dismiss an Action upon the otherparty’s payment of all or a portion of the sums allegedly due or performance ofthe covenants allegedly breached, or who obtains substantially the reliefsought by it.

 

10.9                           Consentto Jurisdiction; Forum Selection. The parties agree that all arbitrations, actions or proceedings arisingin connection with this shall be tried and/or heard exclusively in the  County of Los Angeles, State ofCalifornia.  The aforementioned choiceof venue is intended by the parties to be mandatory and not permissive innature, thereby precluding the possibility of arbitration or litigation betweenthe parties with respect to or arising out of this Agreement in anyjurisdiction other than those specified in this section.  Each party hereby waives any right it mayhave to assert the doctrine of forum non conveniens or similar doctrine or toobject to venue with respect to any proceeding brought in accordance with thissection, and stipulates that the County of Los Angeles, State of Californiashall have in personam jurisdiction and venue over each of them for the purposeof arbitrating or litigating any dispute, controversy or proceeding arising outof or related to this Agreement.  Eachparty hereby authorizes and accepts service of process sufficient for personaljurisdiction in any action against it as contemplated by this section byregistered or certified mail, return receipt requested, postage prepaid, to itsaddress for the giving of notices as set forth in this Agreement, or in themanner set forth in Section 10.1 of this Agreement for the giving ofnotice.  Any final judgment rendered againsta party in any action or proceeding shall be conclusive as to the subject ofsuch final judgment and may be enforced in other jurisdictions in any mannerprovided by law.

 

10.10                     DisputeResolution.

 

(a)                                  Negotiation.  The parties will attempt in good faith toresolve any claim or controversy arising out of or relating to the execution,interpretation and performance of this Agreement (including the validity, scopeand enforceability of this mediation and arbitration provision) promptly bynegotiations between the parties.

 

(b)                                 Mediation.  If any claim or controversy is not fullyresolved through negotiation within thirty (30) days after a party firstnotifies the other party of a claim or controversy, the parties will attempt ingood faith to resolve the controversy or claim in accordance with the Centerfor Public Resources (“CPR”) Model Procedure for Mediation of BusinessDisputes.  Any such mediation shall beheld in the County of Los Angeles, State of California unless the partiesotherwise agree to another location.

 

(c)                                  Arbitration.

 

(i)                                     Anycontroversy or claim arising out of or relating to the execution,interpretation and performance of this Agreement that is not fully resolvedpursuant to Sections 10.10(a) or 10.10(b) within thirty (30) daysafter a party first notifies the other party of a claim or controversy, and anydispute arising under Section 9.3 and not resolved thereunder, shall besolely and finally settled by arbitration in accordance with the CPRNon-Administered Arbitration Rules as then in effect (“CPR Rules”).  The arbitration shall be conducted by oneindependent and impartial arbitrator, appointed by CPR (the “Arbitrator”).  The arbitration shall be governed by theprovisions of the Arbitration Act, 9 U.S.C. § 1, et seq., and judgmentupon the award rendered by the Arbitrator may be entered by any court havingjurisdiction thereof.

 

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The arbitration proceedings shall be held in County ofLos Angeles, State of California unless the parties otherwise agree to anotherlocation.

 

(ii)                                  Tothe extent permissible under applicable law, the parties agree that the awardof the Arbitrator shall be final and shall be subject only to the judicialreview permitted by the Arbitration Act. It is the intent of the parties that the arbitration provisions hereofbe enforced to the fullest extent permitted by applicable law.

 

10.11                     NoThird-Party Beneficiaries.  Exceptas provided in Article IX as to Indemnified Parties, this Agreement isfor the sole benefit of the parties hereto and their permitted assigns andnothing herein expressed or implied shall give or be construed to give to anyperson or entity, other than the parties hereto and such assigns, any legal orequitable rights hereunder.

 

10.12                     Counterparts.  This Agreement may be executed incounterparts, each of which shall be deemed an original, and all of which takentogether shall constitute one and the same instrument.

 

10.13                     FacsimileSignatures.  Signatures to thisAgreement received by a party via facsimile shall be deemed to be originalsignatures for all purposes.

 

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IN WITNESS WHEREOF, the parties hereto have executedthis Agreement as of the day and year first above written.

 

 
| BUYER:                                                        | SELLER:                                     |
|---------------------------------------------------------------|---------------------------------------------|
|                                                          |                                        |
| CENTRAL VALLEY MANUFACTURING,  INC., a California corporation | R.M. WADE & CO.,  an Oregon corporation |
|                                                          |                                        |
|                                                          |                                        |
| By:                                                           |                                        | /s/ Trygve M. Thoresen |   | By: |   | /s/ Edward H. Newbegin |   |
|                                                          | Trygve M. Thoresen, President               |   | Edward H. Newbegin, President |
|                                                               |                                             |  |  |  |  |  |  |  |  |

 

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**SCHEDULES**

 

1.1                                 TransferredAssets

 

1.1(e)                   Buyer PrepaidAssets

 

1.1(g)                  AssumedContracts

 

1.2(a)                   Mining BusinessAssets

 

1.2(d)                  Seller PrepaidAssets

 

1.2(e)                   LeaseholdImprovements, Fixtures and Real Estate

 

1.2(g)                  Computerhardware and software

 

1.3                                 CustomerAssets

 

2.2                                 Allocationof Purchase Price

 

3.3                                 Consentsand Approvals; No Violation

 

3.4                                 FinancialStatements

 

3.5                                 Absenceof Certain Changes

 

3.7                                 Leasedand Licensed Transferred Assets

 

3.8                                 Facility

 

3.9                                 IntellectualProperty

 

3.10                           AccountsReceivable

 

3.11                           Inventory

 

3.12                           Contracts

 

3.13                           Employmentand Labor Matters

 

3.16                           Taxes

 

3.17                           Litigation

 

3.19                           EnvironmentalMatters

 

3.21                           Warranties;Product Returns

 

3.22                           Insurance

 

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**EXHIBITS**

 

A.                                   Formof Lease

 

B.                                     Formof Mining Manufacturing Agreement

 

C.                                     Formof License for Max Emitter

 

D.                                    Formof General Instrument of Conveyance, Transfer and Assignment

 

E.                                      Formof Opinion of Counsel to Seller

 

F.                                      Formof Noncompetition and Nonsolicitation Agreement – Seller

 

G.                                     Formof Assumption Agreement

 

H.                                    Formof Opinion of Counsel to Buyer

 

I.                                         Formof Noncompetition and Nonsolicitation Agreement – Buyer

 

 

The foregoing Schedulesand Exhibits to this Agreement have been omitted from this filing, and theissuer agrees to furnish supplementally a copy of any omitted schedule orexhibit to the Securities and Exchange Commission upon request.

 

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