ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of May 17, 2024, is entered into by and among Star Equity Holdings, Inc., a Delaware corporation (“Buyer”), Timber Technologies, LLC, a Wisconsin limited liability...
ASSET PURCHASE AGREEMENT by and among STAR EQUITY HOLDINGS, INC., TIMBER TECHNOLOGIES, LLC, and XXX XXXXX AND XXXX XXXXXXXX Dated as of May 17, 2024 i TABLE OF CONTENTS Page ARTICLE I PURCHASE AND SALE; CLOSING ...................................................................1 Section 1.1. Purchase and Sale of the Purchased Assets .................................................1 Section 1.2. Excluded Assets ...........................................................................................1 Section 1.3. Assumed Liabilities .....................................................................................2 Section 1.4. Excluded Liabilities .....................................................................................2 Section 1.5. The Closing ..................................................................................................2 Section 1.6. Purchase Price ..............................................................................................2 Section 1.7. Working Capital Adjustment ......................................................................3 Section 1.8. Allocation of Purchase Price ........................................................................5 Section 1.9. Earn-Out Payment ........................................................................................6 Section 1.10. Non-Assignable Assets ................................................................................8 Section 1.11. Deliveries by Seller and the Members .........................................................8 Section 1.12. Deliveries by Buyer .....................................................................................9 ARTICLE II REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLER ...............................................................................................................10 Section 2.1. Organization, Standing and Power ............................................................10 Section 2.2. Authority ....................................................................................................10 Section 2.3. Title to Purchased Assets ...........................................................................11 Section 2.4. Noncontravention; Governmental Approval ..............................................11 Section 2.5. Capital Structure ........................................................................................12 Section 2.6. Financial Statements; Liabilities ................................................................12 Section 2.7. Indebtedness ...............................................................................................13 Section 2.8. Absence of Certain Changes or Events ......................................................13 Section 2.9. Litigation ....................................................................................................15 Section 2.10. Contracts ....................................................................................................15 Section 2.11. Compliance with Laws; Permits ................................................................17 Section 2.12. Properties ...................................................................................................17 Section 2.13. Intellectual Property ...................................................................................19 Section 2.14. Tax Matters ................................................................................................21 Section 2.15. ERISA Compliance ....................................................................................23 Section 2.16. Labor and Employment Matters ................................................................25 Section 2.17. Environmental Matters...............................................................................26 Section 2.18. Customers and Suppliers............................................................................28 Section 2.19. Bank Accounts, Letters of Credit and Powers of Attorney .......................28 Section 2.20. Affiliate Transactions.................................................................................29 Section 2.21. Insurance ....................................................................................................29 Section 2.22. Accounts Receivable ..................................................................................30 Section 2.23. Products and Services ................................................................................30 Section 2.24. Guaranties ..................................................................................................30 Section 2.25. Absence of Restrictions on Business Activities.........................................31 ii Section 2.26. Brokers and Other Advisors.......................................................................31 Section 2.27. Fixed Assets ...............................................................................................31 Section 2.28. Disclosure ..................................................................................................32 ARTICLE III REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE MEMBERS ..................................................................................................32 Section 3.1. Authority ....................................................................................................32 Section 3.2. Noncontravention; Governmental Approval ..............................................33 Section 3.3. Brokers and Other Advisors.......................................................................33 ARTICLE IV REPRESENTATIONS AND WARRANTIES WITH RESPECT TO BUYER.................................................................................................................33 Section 4.1. Organization, Standing and Power ............................................................33 Section 4.2. Authority ....................................................................................................33 Section 4.3. Noncontravention; Governmental Approval ..............................................34 Section 4.4. Brokers and Other Advisors.......................................................................34 Section 4.5. Buyer Stock ................................................................................................34 ARTICLE V COVENANTS ......................................................................................................34 Section 5.1. Further Assurances.....................................................................................34 Section 5.2. Public Announcements ..............................................................................35 Section 5.3. Taxes ..........................................................................................................35 Section 5.4. Non-Competition; Non-Solicitation; Non-Interference .............................35 Section 5.5. Transferred Employees ..............................................................................37 Section 5.6. Regulatory and Other Authorizations; Notices and Consents ...................37 Section 5.7. Name Change .............................................................................................38 Section 5.8. Post-Closing Cooperation ..........................................................................38 ARTICLE VI INDEMNIFICATION ..........................................................................................38 Section 6.1. Escrow Fund ..............................................................................................38 Section 6.2. Survival ......................................................................................................38 Section 6.3. Indemnification by Seller and the Members ..............................................39 Section 6.4. Indemnification by Buyer ..........................................................................40 Section 6.5. Escrow Fund, Release of Escrow............... Error! Bookmark not defined. Section 6.6. Claims Upon Escrow .................................................................................41 Section 6.7. Notification of Claims................................................................................41 Section 6.8. Additional Indemnification Provisions ......................................................42 Section 6.9. Tax Treatment of Indemnity Payments ......................................................43 ARTICLE VII GENERAL PROVISIONS ...................................................................................44 Section 7.1. Fees and Expenses .....................................................................................44 Section 7.2. Amendments ..............................................................................................45 Section 7.3. Waiver ........................................................................................................46 Section 7.4. Notices .......................................................................................................46 Section 7.5. Interpretation ..............................................................................................47 Section 7.6. Counterparts ...............................................................................................47 iii Section 7.7. Entire Agreement; Third-Party Beneficiaries ............................................47 Section 7.8. GOVERNING LAW ..................................................................................47 Section 7.9. Assignment ................................................................................................48 Section 7.10. Specific Enforcement; Consent to Jurisdiction ..........................................48 Section 7.11. Severability ................................................................................................48 Section 7.12. Effect of Investigation................................................................................48 Section 7.13. Definitions..................................................................................................48 EXHIBITS: Exhibit A – Form of Bill of Sale, Assignment and Assumption Agreement Exhibit B – Form of Employment Agreement Exhibit C – Form of Real Estate Sales Agreement Exhibit D – Escrow Agreement SCHEDULES: Schedule A – Disclosure Schedule Schedule B – Adjusted EBITDA Calculation Illustration Schedule C – Purchase Price Closing Settlement Statement
ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of May 17, 2024, is entered into by and among Star Equity Holdings, Inc., a Delaware corporation (“Buyer”), Timber Technologies, LLC, a Wisconsin limited liability company (“Seller” or the “Company”), and Xxx Xxxxx, Xxxx Xxxxxxxx, Xxxxxx Xxxx, Xxxx Xxxxxx and Xxxx Xxxxxxxx (each, a “Member” and collectively, the “Members”). Buyer, Seller and the Members are referred to herein collectively as the “Parties” and individually as a “Party.” Defined terms not defined within the section the terms appear, are defined in Section 7.13. RECITALS: A. Seller is engaged in the business of producing high-end engineered wood products for post frame builders, including treated and untreated columns for sidewalls and end walls in post frame buildings, glue-laminated headers and beams, and architectural-grade beams for high- end commercial structures (the “Business”); and B. Seller desires to sell to Buyer, and Xxxxx desires to purchase from Seller, the Business and substantially all of the assets of Seller used in or relating to the Business or otherwise, and Seller desires to transfer to Buyer, and Buyer desires to assume from Seller, certain limited liabilities of Seller as hereinafter specified. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, and agreements set forth herein and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: ARTICLE I PURCHASE AND SALE; CLOSING Section 1.1. Purchase and Sale of the Purchased Assets. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, transfer, convey, assign and deliver to Buyer or cause to be sold, transferred, conveyed and delivered to Buyer, and Buyer shall purchase and acquire from Seller, free and clear of all Liens, subject to Permitted Encumbrances, all of Seller’s right, title and interest in, to and under all of the assets and properties of Seller, or otherwise used in the Business and owned by Seller of every kind, character and description, tangible or intangible, real, personal or mixed, and wherever located (other than the Excluded Assets), including but not limited to those listed on Section 1.1 of the Seller Disclosure Schedule (collectively, the “Purchased Assets”). Section 1.2. Excluded Assets. The Purchased Assets to be purchased and sold hereunder, and the term “Purchased Assets” as used herein, shall not include the specified assets of Seller listed on Section 1.2 of the Seller Disclosure Schedule (collectively, the “Excluded Assets”). The Excluded Assets listed on Section 1.2 of the Seller Disclosure Schedule shall include, but shall not be limited to, all Excluded Accounts Receivable, listing (i) all parties, (ii) amounts owed, and (iii) a detailed description of the Company’s performance underlying the receivable. 2 Section 1.3. Assumed Liabilities. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer shall assume and agree to pay, perform and discharge when due (a) all liabilities and obligations of Seller under the contracts listed on Section 1.3 of the Seller Disclosure Schedule (collectively, the “Assumed Contracts”) to the extent such liabilities and obligations are to be performed after the Closing and do not arise out of or relate to a breach of any Assumed Contract or this Agreement; provided, that Buyer shall not assume any liability or obligation arising out of or relating to any occurrence, event or other condition existing or happening on or prior to the Closing Date, and (b) only such liabilities listed on Section 1.3 of the Seller Disclosure Schedule (collectively, the “Assumed Liabilities”). Section 1.4. Excluded Liabilities. Other than the Assumed Liabilities, Seller shall retain, and shall be responsible for paying, performing and discharging when due, and Buyer shall not assume or have any responsibility for, any and all liabilities and obligations of Seller of any nature whatsoever, whether past, current or future, whether accrued, contingent, known or unknown, including but not limited to the liabilities listed on Section 1.4 of the Seller Disclosure Schedule (collectively, the “Excluded Liabilities”). Section 1.5. The Closing. Consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place simultaneously with the execution of this Agreement on the date hereof (the “Closing Date”) at such time and place as the parties hereto shall agree (including by conference call and electronic (i.e., email/PDF) or facsimile delivery of signatures and other closing deliverables). The Closing shall be deemed to have become effective as of 12:01 a.m., local time, on the Closing Date. Section 1.6. Purchase Price. (a) Upon the terms and subject to the conditions set forth in this Agreement, in consideration of the sale by Seller of the Business and Purchased Assets to Buyer, in addition to the assumption of the Assumed Liabilities, the purchase price to be paid by Buyer shall be paid as follows: (i) $17,000,000 in cash (the “Cash Payment”), minus the Preliminary Working Capital Adjustment set forth in Section 1.6(b), shall be paid by Buyer at the Closing. (ii) $3,000,000 shall be paid by Buyer concurrently with the closing of that certain Real Estate Sales Agreement (as defined herein). The dollar amounts set forth in (i) and (ii) collectively make up the “Initial Purchase Price”, The Initial Purchase Price shall be subject to adjustment pursuant to Section 1.7 and Section 1.9 (as so adjusted, the “Purchase Price”), and the Escrow requirements set forth herein. (b) On or prior to the Closing, the Seller shall have delivered to the Buyer a written statement (the “Purchase Price Closing Settlement Statement”), provided for in Schedule C, setting forth (i) the Seller’s good faith estimate, based upon its most recently available April 2024 financial statements prior to the Closing, of the amount of the Closing Working Capital (the 3 “Preliminary Working Capital”) and the amount by which the Preliminary Working Capital exceeds or is less than the Target Working Capital (such difference, the “Preliminary Working Capital Adjustment”), (ii) the aggregate amount of Seller’s Indebtedness as of the Closing Date (which shall be the same as the amount thereof specified in the payoff letters described in Section 1.11(d)), together with a listing of the individual accounts, their payees and amounts due to each in respect thereof, (iii) the aggregate amount of Seller Transaction Expenses unpaid as of the Closing Date, together with a listing of the individual accounts, their payees and amounts due to each in respect thereof, and (iv) based on the foregoing, the amount to be paid to Seller by Xxxxx at the Closing. (c) At the Closing, the Buyer shall pay, or cause to be paid, by wire transfer of immediately available funds, an amount equal to (A) the Escrow Fund to such account provided for in the Escrow Agreement; (B) Seller’s Indebtedness, if any, in such amounts and to such accounts as set forth on the Purchase Price Closing Settlement Statement; (C) the unpaid Seller Transaction Expenses, if any, in such amounts and to such accounts as set forth on the Purchase Price Closing Settlement Statement; and (D) after payment of (A), (B) and (C) above, the balance of the Cash Payment will be paid to the Seller in the amount and to such account set forth on the Purchase Price Closing Settlement Statement. Section 1.7. Working Capital Adjustment. The Initial Purchase Price shall be adjusted after the Closing in accordance with the following procedures: (a) Within ninety (90) days following the Closing Date, Buyer shall prepare and deliver to Seller a statement (the “Initial Statement”) calculating and setting forth the actual Working Capital as of the Closing Date (the amount calculated and set forth on such Initial Statement, the “Initial Working Capital”), which statement shall be in substantially the same format as set forth in Section 1.7(a) of the Seller Disclosure Schedule and include a worksheet setting forth in reasonable detail how such amount was calculated. The Initial Statement, the Target Working Capital and the Initial Working Capital shall be prepared in accordance with GAAP, consistent with, but subject to, the methodologies and non-GAAP treatment as set forth on Section 1.7(a) of the Seller Disclosure Schedule. (b) During the thirty (30) days immediately following Seller’s receipt of the Initial Statement (the “Purchase Price Adjustment Review Period”), Seller shall be permitted to review Buyer’s working papers and any working papers of Buyer’s independent accountants relating to the preparation of the Initial Statement and the calculation of the Initial Working Capital, as well as all of the books, records and other relevant information relating to the Initial Working Capital with respect to the period up to and including the Business Day immediately prior to the Closing Date, and Buyer shall make reasonably available to Seller the individuals responsible for and knowledgeable about the information used in, and the preparation or calculation of, the Initial Statement and the Initial Working Capital; provided, however, that the independent accountants of Buyer shall not be obligated to make any working papers available to Seller unless and until Seller has signed a customary confidentiality and hold harmless agreement relating to such access to working papers in form and substance reasonably acceptable to such independent accountants. 4 (c) Seller shall notify Buyer in writing (the “Adjustment Notice”) prior to the expiration of the Purchase Price Adjustment Review Period if Seller disagrees with the Initial Statement or the Initial Working Capital. The Adjustment Notice shall set forth in reasonable detail the basis for such disagreement, the amounts involved and Seller’s determination of the amount of the Initial Working Capital. Any items not disputed in the Adjustment Notice shall be deemed to have been accepted by Seller. If no Adjustment Notice is received by Buyer on or prior to the expiration date of the Purchase Price Adjustment Review Period, then the Initial Statement and the Initial Working Capital set forth in the Initial Statement shall be deemed to have been accepted by Seller and shall become final and binding upon Seller and Buyer in accordance with the last sentence of Section 1.7(e). (d) During the thirty (30) days immediately following the delivery of an Adjustment Notice (the “Purchase Price Adjustment Consultation Period”), Seller and Buyer shall seek in good faith to resolve any disagreement that they may have with respect to the matters specified in the Adjustment Notice. (e) If, at the end of the Purchase Price Adjustment Consultation Period, Seller and Buyer have been unable to resolve all disagreements that they may have with respect to the matters specified in the Adjustment Notice, then Seller and Buyer shall submit all matters that remain in dispute with respect to the Adjustment Notice (along with a copy of the Initial Statement marked to indicate those line items that are in dispute) to a regional or national firm of independent accountants mutually acceptable to Seller and Buyer (the “Independent Accountant”). Within thirty (30) days after the submission of such matters to the Independent Accountant, or as soon as practicable thereafter, the Independent Accountant, acting as an expert and not as an arbitrator, will make a final determination, binding on Seller and Buyer, in accordance with this Section 1.7(e), of the appropriate amount of each of the line items in the Initial Statement as to which Seller and Buyer disagree as specified in the Adjustment Notice. With respect to each disputed line item, such determination, if not in accordance with the position of either Seller or Buyer, shall not be in excess of the higher, nor less than the lower, of the amounts advocated by Seller in the Adjustment Notice or Buyer in the Initial Statement with respect to such disputed line item. For the avoidance of doubt, the Independent Accountant shall not review any line items or make any determination with respect to any matter other than those matters in the Adjustment Notice that remain in dispute. The statement of the Working Capital as of the Closing and the determination of the Working Capital set forth therein that are final and binding on Seller and Buyer, as determined either through agreement of Seller and Buyer (deemed or otherwise) pursuant to Section 1.7(a) or (c) or through the determination of the Independent Accountant pursuant to this Section 1.7(e), are referred to herein as the “Final Statement” and the “Final Working Capital”, respectively. The date on which the Final Working Capital is finally determined in accordance with this Section 1.7(e) is hereinafter referred to as the “Determination Date.” (f) The cost of the Independent Accountant’s review and determination shall be shared equally by Seller and Buyer. Seller and Xxxxx shall each bear the fees of their respective counsel, auditors and other representatives incurred in connection with the determination and review of the Initial Statement. During the review by the Independent Accountant, Buyer and Seller shall each make available to the Independent Accountant such individuals and such information, books, records and work papers, as may be reasonably required by the Independent
9 (a) a duly executed Bill of Sale, Assignment and Assumption Agreement, substantially in the form attached hereto as Exhibit A (the “Bill of Sale, Assignment and Assumption Agreement”); (b) a duly executed employment agreement, between Buyer or its Subsidiaries and each of Xxx Xxxxx and Xxxx Xxxxxxxx, in the form attached as Exhibit B (each, an “Employment Agreement”); (c) a duly signed copy of the Real Estate Sales Agreement wherein signatures are to be held in escrow, between Timber Properties, LLC, an affiliate of Seller, and Buyer, in the form attached as Exhibit C (the “Real Estate Sales Agreement”); (d) (i) copies of payoff letters, in form and substance reasonably satisfactory to Buyer, with respect to all Indebtedness, including but not limited to the Indebtedness set forth on Section 1.11(d) of the Seller Disclosure Schedule, which payoff letters shall discharge fully the then outstanding balance, including all accrued and unpaid interest thereon and any other fees, costs and expenses payable to the holders in connection therewith, of such obligations, and (ii) copies of releases, in form and substance reasonably satisfactory to Buyer, of all Liens and other security over Seller’s properties and assets securing all such obligations; (e) duly executed assignments of all Intellectual Property owned by Seller, including any and all domain names; (f) all documents containing or relating to know-how to be acquired by Buyer pursuant to this Agreement; (g) a duly and properly authorized and executed evidence (in form and substance reasonably satisfactory to Buyer) as to the amendment of Seller’s articles of organization (the “Organizational Amendment”) changing Seller’s name to another name that does not include any of the following words “Timber Technologies”, or any variation thereof; (h) an IRS Form W-9 properly completed by the Company and each Member; (i) a duly executed Escrow Agreement, substantially in the form attached hereto as Exhibit D (the “Escrow Agreement”), pursuant to which the Escrow Fund will be held in escrow to satisfy certain potential obligations of Seller and will be released to Seller or Buyer when and as provided therein; and (j) all such other documents, certificates, instruments of assignment and transfer as are reasonably necessary to consummate the transactions contemplated by this Agreement and the Ancillary Agreements, including but not limited to all such documents effecting the transfer to Buyer of all of Seller’s right, title and interest in, to and under the Purchased Assets, free and clear of all Liens, subject to Permitted Encumbrances, in accordance with this Agreement, in form and substance reasonably satisfactory to Buyer, and to assist Xxxxx in exercising all rights with respect thereto. Section 1.12. Deliveries by Buyer. At the Closing, Buyer shall deliver to Seller and to Escrow, as applicable: 10 (a) the Initial Purchase Price in accordance with Section 1.6(c); (b) each of the following documents, duly executed by Buyer: (i) the Bill of Sale, Assignment and Assumption Agreement, (ii) the Real Estate Sales Agreement, (iii) the Employment Agreements and (iv) assignments with respect to the transfer of any Intellectual Property, and (v) the Escrow Agreement; and (c) such other documents as are required to be delivered by Buyer to Seller pursuant to this Agreement. ARTICLE II REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLER Except as set forth in the disclosure schedule delivered by Seller to Buyer concurrently with the execution of this Agreement (the “Seller Disclosure Schedule”), Seller and the Members hereby, jointly and severally, represent and warrant to Buyer as of the date hereof and as of the Closing Date as follows: Section 2.1. Organization, Standing and Power. (a) Seller is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Wisconsin and is duly organized as a foreign limited liability company in all other states in which it is active. Seller has all requisite limited liability company power and authority necessary to enable it to use its name and to own, lease or otherwise hold and operate its properties and other assets and to carry on its business as it has been and is now currently being conducted. Seller is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions that recognize that concept) in each jurisdiction in which the conduct or nature of its business or the ownership, leasing or operation of its properties or other assets makes such qualification, licensing, or good standing necessary. (b) True, correct and complete copies of the Organizational Documents of Seller, as currently amended and in effect, have been made available to Buyer prior to the date hereof, and Seller is not in default under or in violation of any provision thereof. (c) Seller does not, and has never, owned, directly or indirectly, any capital stock or other equity interests in any Person (except for investments in securities not exceeding 1% of the issued and outstanding equity of any publicly held company, or as disclosed in Section 2.1(c) of the Seller Disclosure Schedule). Seller is not subject to any obligation (by Law, contract or otherwise) to make any investment or otherwise acquire capital stock or other equity interests in any other Person. Section 2.2. Authority. Seller has all requisite limited liability company power and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform its obligations under this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Ancillary Agreements by Seller and the consummation by Seller of the transactions contemplated by this Agreement and the Ancillary Agreements have been duly 11 authorized by all necessary action on the part of Seller and no other proceedings on the part of Seller are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement has been, and, when executed and delivered, each of the Ancillary Agreements will have been, duly executed and delivered by Seller and, assuming the due authorization, execution and delivery by the other Parties hereto and thereto, constitutes (and in the case of the Ancillary Agreements, will constitute) a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Laws affecting the rights of creditors generally and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing (the “Bankruptcy and Equity Exception”). Section 2.3. Title to Purchased Assets. Seller has good, valid, and marketable title to, or other legal rights to possess or use, the Purchased Assets, free and clear of all Liens other than Permitted Encumbrances. The Purchased Assets (other than the Excluded Assets) (a) constitute all of the assets and properties, including all real property, tangible personal property and intangible personal property, used to conduct the Business as such business is currently conducted, and, are sufficient to conduct the Business from and after the Closing in the same manner as currently conducted by Seller and (b) are in the exclusive possession and control of Seller and no Person other than Seller is entitled to possession of any portion of the Purchased Assets (except under those circumstances where the nature of the conduct of the Business in the ordinary course thereof requires possession and/or control thereof by third persons). Seller has conveyed to Buyer at and effective upon the Closing good, valid, and marketable title to, and ownership of, all of its properties and assets constituting the Purchased Assets and the enforceable right to receive and/or use such Purchased Assets, free and clear of all Liens. Section 2.4. Noncontravention; Governmental Approval. (a) Except as contemplated by Section 1.10 of the Seller Disclosure Schedule, the execution, delivery and performance of this Agreement and the Ancillary Agreements by Seller do not and will not, and the consummation by Seller of the transactions contemplated by this Agreement and the Ancillary Agreements and compliance by Seller with the provisions of this Agreement and the Ancillary Agreements will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, modification, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties, rights or assets of Seller under, or require any consent or approval by, or any notice to, any person under, (i) the Organizational Documents of Seller; (ii) any loan or credit agreement, bond, debenture, note, mortgage, indenture, lease, supply agreement, license agreement, distribution agreement or other contract, agreement, obligation, commitment or instrument (each, including all amendments, modifications and supplements thereto, a “Contract”), to which Seller is a party or any of its properties, rights or assets is subject; (iii) any (A) Law applicable to Seller or any of its properties, rights or assets or (B) order, writ, injunction, decree, judgment, award, summons, notice of violation, directive, warning, notice or demand letter or request for information, settlement or stipulation issued, promulgated or entered into by or with any Governmental Entity (each, an “Order”) applicable to Seller or its properties, rights or assets; (iv) breach any Assumed 12 Contract; or (v) result in the imposition or creation of any Lien upon or with respect to any of the Purchased Assets. (b) No consent, approval, license, permit, order, qualification or authorization of, action by or in respect of, or registration, declaration or filing with any Governmental Entity is required by or with respect to Seller in connection with the execution, delivery and performance by Seller of this Agreement or the Ancillary Agreements or the transactions contemplated hereby and thereby. Except as contemplated by Section 1.10 of the Seller Disclosure Schedule, no consent, waiver, approval or authorization of, or action by, or any notice given to, any third party other than a Governmental Entity pursuant to a Seller Contract or Real Property Lease must be obtained or made by Seller in connection with the execution, delivery and performance by Seller of this Agreement or the Ancillary Agreements or the transactions contemplated hereby and thereby, including, without limitation, as a result of a change of control of Seller. Section 2.5. Capital Structure. Section 2.5 of the Seller Disclosure Schedule sets forth all of the issued and outstanding membership interests of Seller as of the date of this Agreement, and such membership interests constitute all of the issued, outstanding and authorized Equity Securities of Seller. The membership interests of Seller are free of any restriction on the right to vote such membership interests. Except as set forth in Section 2.5 of the Seller Disclosure Schedule, there are no options, convertible securities, warrants or convertible obligations of any nature to acquire Equity Securities of Seller. Section 2.6. Financial Statements; Liabilities. (a) Section 2.6(a) of the Seller Disclosure Schedule sets forth (i) the unaudited balance sheets of Seller as of December 31, 2022 and 2023 (the balance sheet as of December 31, 2023, the “2023 Balance Sheet”), (ii) the unaudited balance sheet of Seller as of March 31, 2024 (the “Reference Balance Sheet”), (iii) the unaudited statements of operations and cash flows of Seller for the years ended December 31, 2022 and 2023, (iv) the unaudited statements of operations and cash flows of Seller for the three months ended March 31, 2024 (the balance sheets and statements of operations and cash flows referred to in clauses (i) and (iii) above, together with any notes thereto, being collectively referred to as the “Annual Financial Statements”; the balance sheets and statements of operations and cash flows referred to in clauses (ii) and (iv) above, together with any notes thereto, being collectively referred to as the “Interim Financial Statements”; and the Annual Financial Statements and the Interim Financial Statements being collectively referred to as the “Financial Statements”). Except as set forth on Section 2.6(a) of the Seller Disclosure Schedule, the Interim Financial Statements have been prepared on the same basis as the Annual Financial Statements. Except as set forth in Section 2.6(a), the Financial Statements have been derived from the books and records of Seller, were prepared in accordance with GAAP, have been prepared in accordance with the historical accounting principles of Seller applied on a consistent basis (except as may be set forth in the notes thereto or as otherwise noted therein), and present fairly, in all respects, the financial position and the results of operations and cash flows of Seller as of the respective dates thereof or for the periods then ended (subject, in the case of the Interim Financial Statements, to the absence of notes and normal year-end adjustments, the effect of which adjustments have not been and will not be material).
37 Section 5.5. Transferred Employees. (a) Subject to and in accordance with the provisions of this Section 5.5, Buyer may, in its sole discretion, effective upon the Closing, offer full-time employment to the Employees who are employed by Seller as of the Closing Date on compensation and benefit terms substantially similar to those afforded by Seller to such Employees immediately prior to Closing. Effective as of the Closing, Seller shall terminate, and Buyer shall hire all of the Employees who accept such offer and legally permitted to work. Each of the Employees who becomes a full-time employee of Buyer upon the Closing is hereinafter referred to as a “Transferred Employee.” (b) The employment of each Transferred Employee by Seller shall end effective as of the close of business on the Closing Date and the employment of the Transferred Employees by Buyer shall commence at or after 12:01 a.m. the next Business Day, local time. (c) Buyer shall have no responsibility for Employees of Seller who are not Transferred Employees. Seller shall be responsible for, among other things (i) payments due to all Employees of Seller (whether or not they become Transferred Employees) under any Law as a result of the execution, delivery and performance by Seller of this Agreement and the consummation of the transaction contemplated herein and (ii) the payment of any termination or severance payments. (d) Buyer shall be liable for the provision of health plan continuation coverage to all “M&A Qualified Beneficiaries” to the extent required by Code Section 4980B and Treasury Regulation Section 54.4980B-9, regardless of whether such individuals are Transferred Employees. Section 5.6. Regulatory and Other Authorizations; Notices and Consents. (a) Seller shall use its commercially reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under any applicable Law or otherwise to consummate the transactions contemplated by this Agreement as promptly as reasonably practicable; and (ii) obtain all of the consents contemplated by Section 1.10 of the Seller Disclosure Schedule and will cooperate fully with Buyer in promptly seeking to obtain all such consents. Buyer shall cooperate and use its commercially reasonable efforts to assist Seller in giving such notices and obtaining such consents; provided, however, that Buyer shall have no obligation to give any guarantee or other consideration of any nature in connection with any such consent or to consent to any change in the terms of any agreement or arrangement which Buyer in its sole discretion may deem adverse to the interests of Buyer. (b) Buyer and Seller agree that, in the event that any consent, approval or authorization necessary or desirable to preserve for Seller any right or benefit under any lease, license, contract, commitment or other agreement or arrangement to which Seller is a party is not obtained prior to the Closing, Seller will, subsequent to the Closing, cooperate with Buyer in attempting to obtain such consent, approval or authorization as promptly thereafter as practicable. If such consent, approval, or authorization cannot be obtained, Seller shall use its commercially reasonable efforts to provide Buyer with the rights and benefits of the affected lease, license, 38 contract, commitment or other agreement or arrangement to the extent permitted under applicable Laws for the term of such lease, license, contract or other agreement or arrangement. Section 5.7. Name Change. Upon the Closing, Seller hereby irrevocably authorizes Buyer to file the Organizational Amendment (as agreed by the parties) with the Department of Financial Institutions of the State of Wisconsin and in each state in which Seller is qualified to do business on Seller’s behalf. Furthermore, after the Closing, Seller shall discontinue the use of its current name (and any other tradenames currently utilized by Seller) and shall not subsequently change its name to or otherwise use or employ any name that includes the words “Timber Technologies” or any variation thereof, without the prior written consent of Buyer. From and after the Closing, Seller covenants and agrees not to use or otherwise employ any of the trade names, corporate names, dba’s or similar Intellectual Property rights utilized by Seller in the conduct of the Business, which right are included in the Purchased Assets purchased hereunder. Section 5.8. Post-Closing Cooperation. For a period of fifteen (15) months after the Closing, Seller shall cause its officers, managers, employees, consultants, agents, accountants, attorneys and other Representatives to cooperate with Buyer and its Representatives in connection with Buyer’s year-end audits, the transfer of Assumed Contracts to Buyer, and the preparation of any reports required to be filed with the Securities and Exchange Commission or otherwise by Buyer or its Affiliates, including, without limitation, providing any management representation letters reasonably requested by Xxxxx; provided that Seller shall not be required to incur any additional fees, expenses or personal liability (other than for fraud or gross negligence) in order to comply with this Section. ARTICLE VI INDEMNIFICATION Section 6.1. Escrow Fund. On the Closing Date, Buyer shall cause to be deposited in an interest bearing account, a portion of the Purchase Price equal to one million dollars ($1,000,000) dollars (the “Escrow Fund”), such deposit to be governed by the terms set forth herein and in the Escrow Agreement for a period of one year from the Closing Date. Section 6.2. Survival. All representations and warranties contained in Articles II, III and IV will survive the Closing and will remain in full force and effect until the date that is twelve (12) months after the Closing Date, at which time they will terminate (and no claims with respect to such representations and warranties shall be made by any Person for indemnification under Sections 6.2 or 6.3 thereafter), except that (a) the Fundamental Representations shall survive the Closing indefinitely and (b) the Special Representations shall survive the Closing until the twelve- month anniversary of the expiration of the applicable statute of limitations (after giving effect to any extensions or waivers thereof). A representation or warranty which is not a Fundamental Representation, or a Special Representation is referred to herein as a “Non-Fundamental Representation.” All covenants and agreements that by their terms apply or are to be performed in whole or in part after the Closing will survive indefinitely or for the period provided in such covenants and agreements, if any, or until fully performed. All covenants and agreements that by their terms apply or are to be performed in their entirety on or prior to the Closing shall terminate at the Closing. 39 Section 6.3. Indemnification by Xxxxxx and the Members. (a) After the Closing and subject to this Article VI, Seller and the Members, jointly and severally, shall indemnify, defend and hold harmless Buyer and its Subsidiaries and its and their Affiliates, and their respective officers, directors, managers, shareholders, partners, employees, agents, advisors and Representatives (each, a “Buyer Indemnified Party”) against, and reimburse any Buyer Indemnified Party for, all Losses that such Buyer Indemnified Party suffers or incurs or becomes subject to as a result of, arising out of, relating to or in connection with: (i) The inaccuracy or breach of any representation or warranty made by Seller or the Members in this Agreement or any of the Ancillary Agreements (other than the representations and warranties made in Article III); (ii) any breach or failure by Seller or the Members to perform any of their covenants or obligations contained in this Agreement or any of the Ancillary Agreements; (iii) any Excluded Liabilities; (iv) any liability arising out of the performance or lack of performance by Seller concerning an Excluded Accounts Receivable; (v) the ownership, use or operation of any of the assets or properties of the Business (including any of the Purchased Assets) prior to the Closing; (vi) any and all Company Taxes for all periods ending on or before the Closing Date; (vii) any Environmental Claims and the investigation, remediation or correction of Environmental Conditions caused by, relating to or arising out of (A) any conditions prior to the Closing at properties currently or previously owned, leased or operated by Seller (B) the operations prior to the Closing of Seller, including without limitation arising out of the disposal, Release or threatened Release of any Hazardous Material owned, controlled or possessed by Seller, and (C) any Release or threatened Release of any Hazardous Material by a third party during periods prior to the Closing onto any Real Property; (viii) any failure of Seller to comply with Environmental Laws prior to the Closing, including the installation of any pollution control equipment or other equipment to bring their businesses into compliance with Environmental Law if such equipment is installed because their businesses were not in compliance with any Environmental Laws as of the Closing; (ix) any liability, obligation or legal responsibility arising under Environmental Laws assumed by Seller prior to the Closing pursuant to the terms 40 of any Contract, settlement or other written and legally binding arrangement between Seller and any other Person; (x) all actions, suits, proceedings, claims or demands incident to any of the foregoing or initiated to enforce the indemnification provisions herein; and (xi) any Losses incurred as a result of Seller’s failure to obtain the Required Consents. (b) After the Closing and subject to this Article VI, the Members shall indemnify, defend and hold harmless the Buyer Indemnified Parties against, and reimburse any Buyer Indemnified Party for, all Losses that such Buyer Indemnified Party suffers or incurs or becomes subject to as a result of, arising out of, relating to or in connection with the inaccuracy or breach of any representation or warranty made by the Members in Article III. Notwithstanding the foregoing: (i) except in regard to any claim based on, resulting from, relating to, or arising directly or indirectly out of or by reason of a (1) breach of the Fundamental Representations or (2) fraud or willful misconduct of Seller or its Members, Seller or its Members shall not be liable to one or more Buyer Indemnified Party(ies) for claims made under Section 6.2(a) until the aggregate amount of all Losses in respect of claims made under Section 6.2(a) exceeds $30,000.00 (the “Basket”), in which event Seller or its Members shall be required to pay or be liable for Losses only in excess of the Basket, which shall not be limited to the Escrow Fund; and (ii) In no event shall the aggregate liability of Seller or its Members exceed an aggregate amount equal to (i) $5,000,000.00, except for claims or Losses based on, resulting from, relating to, or arising directly or indirectly out of or by reason of breach of any of the Fundamental Representations, Fraud, or Intentional Misrepresentations. (c) Xxxxx has no knowledge of any facts or circumstances that would serve as the basis for a claim by Xxxxx against Sellers based upon a breach of any of the representations or warranties of Sellers and Members contained in this Agreement. Section 6.4. Indemnification by Xxxxx. (a) After the Closing and subject to this Article VI, Xxxxx shall indemnify, defend and hold harmless Seller and its Affiliates and Representatives (each, a “Seller Indemnified Party”) against, and reimburse any Seller Indemnified Party for, all Losses that such Seller Indemnified Party suffers or incurs or becomes subject to as a result of, arising out of, relating to or in connection with (i) the inaccuracy or breach of any representation or warranty made by Buyer in this Agreement or (ii) the Assumed Liabilities.
41 (b) Notwithstanding anything to the contrary contained herein, in no event shall the rights of the Seller Indemnified Parties under Section 6.3(a) be limited by any knowledge of the Seller Indemnified Parties, or any disclosure made by Buyer. Section 6.5. Escrow Period; Release of Escrow Fund. The Escrow Fund shall commence on the Closing Date and terminate (the “Escrow Termination Date”) on the date that is twelve (12) months from the Closing Date (the “Escrow Period”), subject to the limitations set forth in this Section 6.5. On the Escrow Termination Date, all assets then remaining in the Escrow Fund shall be released as set forth herein; provided, that assets representing the amount of any claim made pursuant to Section 6.6, and Section 1.7 during the Escrow Period shall be withheld and remain in the Escrow Fund pending resolution of such claim. Any portion of the Escrow Fund at the Escrow Termination Date for which there is no claim pursuant to this Article VI or pursuant to Section 1.7 (the “Remaining Escrow Amount”) shall be promptly delivered by the Buyer in accordance with the terms of the Escrow Agreement to Seller. Section 6.6. Claims Upon the Escrow Fund. Subject to the provisions of this Article VI, a Person that may be entitled to be indemnified under this Agreement (the “Indemnified Party”), other than in respect of a Third Party Claim, shall provide written notice to the Party or Parties liable for such indemnification (the “Indemnifying Party”) and the Buyer, specifying in reasonable detail the individual items of Losses for which indemnification is being sought, the date each such item was paid, or properly accrued or arose, and the nature of the misrepresentation, breach of warranty or claim to which such item or category is related (the “Indemnity Notice”). The Indemnity Notice shall be delivered by the Indemnified Party to the Indemnifying Party and the Buyer on or before the last day of the Escrow Period. If the Indemnifying Party, within a period of ten (10) days after the giving of the Indemnity Notice, shall not give written notice to the Indemnified Party announcing its intention to contest such assertion of the Indemnified Party, such assertion of the Indemnified Party shall be deemed accepted and the amount of the Losses shall be deemed established. If, however, the Indemnifying Party contests the assertion of the Losses, within the 10-day period, the Indemnified Party shall have the right to bring suit to resolve the contested assertion. The Indemnified Party and the Indemnifying Party may agree in writing, at any time, as to the existence and the amount of the Losses, and upon the execution of such agreement, such Losses shall be deemed established. Section 6.7. Notification of Claims. (a) An Indemnified Party shall promptly notify the Indemnifying Party in writing to Buyer or to Seller and the Members, as applicable, of any third party claim in respect of which indemnity may reasonably be sought under this Article VI, including any pending claim or demand by a third party that the Indemnified Party has determined has given or could reasonably give rise to a right of indemnification under this Agreement (including a pending claim or demand asserted by a third party against the Indemnified Party) (each, a “Third-Party Claim”), describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or demand; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article VI except to the extent that the Indemnifying Party is materially prejudiced by such failure. 42 (b) Upon receipt of a notice of a claim for indemnity from an Indemnified Party pursuant to Section 6.7(a) in respect of a Third Party Claim, the Indemnifying Party may, by notice to the Indemnified Party delivered within ten (10) Business Days of the receipt of notice of such Third Party Claim, assume the defense and control of any Third Party Claim, with its own counsel and at its own expense, provided the Indemnifying Party shall (i) acknowledge in writing its indemnity obligations under this Article VI in full for such Third Party Claim and pay such Third Party Claim in full, agree to defend such Third Party Claim and prosecute such defense diligently and (ii) allow the Indemnified Party a reasonable opportunity to participate in the defense of such Third Party Claim with its own counsel and at its own expense. The Indemnified Party may take any actions reasonably necessary to defend such Third Party Claim prior to the time that it receives a notice from the Indemnifying Party as contemplated by the immediately preceding sentence. Each of Seller, the Members or Buyer (as the case may be), shall, and shall cause each of their Affiliates and Representatives to, cooperate fully with the Indemnifying Party in the defense of any Third Party Claim. The Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which shall not be unreasonably withheld or delayed), consent to a settlement, compromise or discharge of, or the entry of any judgment arising from, any Third Party Claim, and the Indemnifying Party shall (i) pay or cause to be paid all amounts arising out of such settlement or judgment concurrently with the effectiveness of such settlement or judgment (unless otherwise provided in such judgment), (ii) not encumber any of the assets of any Indemnified Party or agree to any restriction or condition that would apply to or affect any Indemnified Party or the conduct of any Indemnified Party’s business and (iii) obtain, as a condition of any settlement, compromise, discharge, entry of judgment (if applicable), or other resolution, a complete and unconditional release of each Indemnified Party from any and all liabilities in respect of such Third Party Claim. Provided that the Indemnifying Party has assumed the defense and control of a claim or demand in accordance with this Section 6.7(b), the Indemnified Party shall not settle, compromise or consent to the entry of any judgment with respect to such claim or demand or admit to any liability with respect to such claim or demand without the prior written consent of the Indemnifying Party (which shall not be unreasonably withheld or delayed). In the event that the Indemnifying Party does not assume the defense and control of any Third Party Claim in accordance with this Section 6.7(b), the Indemnified Party shall be entitled to defend and control such claim as it deems appropriate, without prejudice to any other rights of the Indemnified Party under this Article VI. Section 6.8. Additional Indemnification Provisions. (a) Each of Seller and Buyer agree that with respect to each indemnification obligation set forth in this Article VI: (i) all Losses shall be net of any Eligible Insurance Proceeds, and (ii) in no event shall an Indemnifying Party have any liability to an Indemnified Party for any punitive, unforeseeable consequential, or special damages other than punitive or special damages payable to third parties in connection with a Third Party Claim. (b) Any amount payable by an Indemnifying Party pursuant to this Article VI shall be paid promptly and payment shall not be delayed pending any determination of Eligible Insurance Proceeds. In any case where an Indemnified Party recovers any Eligible Insurance Proceeds in respect of any Loss for which an Indemnifying Party has actually reimbursed it pursuant to this Article VI, such Indemnified Party shall promptly pay over to the Indemnifying Party the amount of such Eligible Insurance Proceeds, but not in excess of the sum of (i) any 43 amount previously paid by the Indemnifying Party to or on behalf of the Indemnified Party in respect of such claim and (ii) any amount expended by the Indemnifying Party in pursuing or defending any claim arising out of such matter. (c) If any portion of Losses to be reimbursed by the Indemnifying Party shall be covered, in whole or in part, by third party insurance coverage (including the insurance policies maintained for the benefit of Seller prior to the Closing), then any such insurance proceeds actually received by the Indemnified Party, net of costs reasonably incurred by the Indemnified Party in seeking such collection, shall be considered “Eligible Insurance Proceeds”, it being understood that such Indemnified Party shall use its reasonable efforts to make any such insurance claim. Section 6.9. Tax Treatment of Indemnity Payments. Seller, the Members and Buyer agree to treat any indemnity payment made pursuant to this Article VI as an adjustment to the Purchase Price for all income tax purposes. If, notwithstanding the treatment required by the preceding sentence, any indemnification payment under this Article VI (including this Section 6.6) is determined to be taxable to the Party receiving such payment by any Governmental Entity, the paying Party shall also indemnify the Party receiving such payment for any Taxes incurred by reason of the receipt of such payment and any Losses incurred by the party receiving such payment in connection with such Taxes (or any asserted deficiency, claim, demand, action, suit, proceeding, judgment or assessment, including the defense or settlement thereof, relating to such Taxes), which amount shall be determined by the Independent Accountant. ARTICLE VII GENERAL PROVISIONS Section 7.1. Fees and Expenses. Except as expressly provided otherwise in this Agreement, all fees, costs, and expenses, including fees and disbursements of counsel, financial advisers and accountants, incurred in connection with this Agreement, the sale of the Purchased Assets and the Ancillary Agreements shall be paid by the Party incurring such fees, costs or expenses. Section 7.2. Amendments. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of Xxxxx and Seller. Section 7.3. Waiver. Any agreement on the part of a Party to any waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party. The failure of any Party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights nor shall any single or partial exercise by any Party to this Agreement of any of its rights under this Agreement preclude any other or further exercise of such rights or any other rights under this Agreement. 44 Section 7.4. Notices. Except for notices that are specifically required by the terms of this Agreement to be delivered orally, all notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given personally; by electronic mail, read receipt requested; certified mail, return receipt requested; or sent by overnight courier (providing proof of delivery) to the Parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Seller: Timber Technologies, LLC 000 Xxxxxx Xxx Xxxxxx, Xxxxxxxxx 00000 E-mail: xxxxxxxxxx@xxxxxx-xxxxxxxxxxxx.xxx and timberdale@timber- xxxxxxxxxxxx.xxx with a copy to: Xxxxx Ware, L.L.S.C. Attn: Xxxx X. Xxxx, Esq. P.O. Box 000 000 Xxxxxx Xxxxxx Xxx Xxxxxx, XX 00000-0187 E-mail: xxxxx@xxxxxxxxx.xxx (b) if to the Members: Xxx Xxxxx 000 Xxxxxx Xxx Xxxxxx, Xxxxxxxxx 00000 Email: xxxxxxxxxx@xxxxxx-xxxxxxxxxxxx.xxx Xxxx Xxxxxxxx 000 Xxxxxx Xxx Xxxxxx, Xxxxxxxxx 00000 Email: xxxxxxxxxx@xxxxxx-xxxxxxxxxxxx.xxx (c) if to Buyer: Star Equity Holdings, Inc. 00 Xxxxxx Xxxxxx, Xxxxx 000 Xxx Xxxxxxxxx, Xxxxxxxxxxx 00000 Attention: Xxxxxxx X. Xxxxxxx, Xx. E-mail: xxxxx@xxxxxxxxxx.xxx
45 with a copy to: Xxxxxx Frome Xxxxxxx LLP 0000 Xxxxxx xx xxx Xxxxxxxx Xxx Xxxx, XX 00000 Attention: Xxxxxxx X. Xxxxxxxxxxx, Esq. and Xxxxxxx X. Xxxxx, Esq. E-mail: xxxxxxxxxxxx@xxxxxxxxx.xxx; xxxxxx@xxxxxxxxx.xxx Notices shall be deemed given upon receipt. Section 7.5. Interpretation. When a reference is made in this Agreement to an Article, a Section, an Exhibit or a Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to “this Agreement” shall include the Seller Disclosure Schedule. The word “will” shall be construed to have the same meaning and effect as the word “shall.” The word “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.” All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. All Exhibits and Schedules annexed hereto or referred to herein, and the Seller Disclosure Schedule, are hereby incorporated in and made a part of this Agreement as if set forth in full herein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any Contract, instrument or Law defined or referred to herein means such Contract, instrument, or Law as from time to time amended, modified, or supplemented, including (in the case of Contracts or instruments) by waiver or consent and (in the case of Laws) by succession of comparable successor Laws and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. This Agreement is the product of negotiation by the Parties having the assistance of counsel and other advisers. It is the intention of the Parties that this Agreement not be construed more strictly with regard to one party than with regard to the others. Section 7.6. Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties (including by facsimile or other electronic image scan transmission). Section 7.7. Entire Agreement; Third-Party Beneficiaries. This Agreement (including the Exhibits and the Seller Disclosure Schedule) and the Ancillary Agreements (a) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof and thereof and (b) are not intended to and do not confer upon any person other than the Parties hereto any legal or equitable rights or 46 remedies. Notwithstanding the foregoing clause (b), the provisions of Article VI shall be enforceable by the Indemnified Parties and other Persons referred to therein. Section 7.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF WISCONSIN REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. Section 7.9. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of law or otherwise by any of the Parties without the prior written consent of the other Parties, and any assignment without such consent shall be null and void; provided, however, that Buyer may assign its rights under this Agreement to any Affiliate, but such assignment shall not relieve Buyer of its obligations or liabilities under this Agreement. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns. Section 7.10. Specific Enforcement; Consent to Jurisdiction. (a) The Parties agree that irreparable damage would occur and that the Parties would not have any adequate remedy at law if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Delaware state court, without proof of actual damages or otherwise (and each party hereby waives any requirement for the securing or posting of any bond in connection with such remedy), this being in addition to any other remedy to which they are entitled at law or in equity (b) In addition, each of the Parties hereto (i) consents to submit itself, and hereby submits itself, to the personal jurisdiction of any Wisconsin state court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement and the Ancillary Agreements, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and agrees not to plead or claim any objection to the laying of venue in any such court or that any judicial proceeding in any such court has been brought in an inconvenient forum, (iii) agrees that it will not bring any action relating to this Agreement or the Ancillary Agreements or any of the transactions contemplated hereby and thereby in any court other than a Delaware state court or, if under applicable Law exclusive jurisdiction is vested in the federal courts, any court of the United States located in the State of Delaware and (iv) consents to service of process being made through the notice procedures set forth in Section 7.4. Section 7.11. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an 47 acceptable manner to the end that the transactions contemplated by this Agreement and the Ancillary Agreements are fulfilled to the extent possible. Section 7.12. Reserved. Section 7.13. Definitions. As used in this Agreement, the terms set forth below shall have the following meanings: “Acquired Business” means the Business being acquired under this Agreement. “Actions” mean any criminal, civil or administrative actions, suits, claims, hearings, proceedings, arbitrations, mediations, audits, inquiries, or investigations. “Adjusted EBITDA” means, with respect to the Acquired Business and for the applicable period, earnings before interest income/expense, income taxes, depreciation, and amortization, adjusted for non-recurring and one-time expenses, as illustrated on Schedule B attached hereto. “Adjusted EBITDA Target” means, with respect to the First Earn-Out Period, $5,400,000, and with respect to the Second Earn-Out Period, $6,000,000. “Audited Financial Statements” means the financial statements required to be filed under Rule S-X Rule 3-05, for which an audit will be performed at the request and the responsibility of the Companies (and where applicable Related Sellers), which the Buyer shall be financially responsible. An “Affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first person. For the purposes of this definition, “Control” means, as to any person, the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract or otherwise. The term “Controlled” shall have a correlative meaning. “Ancillary Agreements” mean, collectively, the Bill of Sale, Assignment and Assumption Agreement, Real Estate Sales Agreement, Escrow Agreement, Employment Agreements, and assignments with respect to the transfer of any Intellectual Property. “Business Day” means any day that is not a Saturday, Sunday or other day on which banking institutions are required or authorized by law to be closed in New York, New York. “Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder as in effect on the date hereof. “Commonly Controlled Entity” means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Code. “Company Tax” means any Tax, if and to the extent that the Company and any Subsidiary is or may be potentially liable under applicable law, under contract or on any other grounds (including, but not limited to, as a transferee or successor, under Code Section 6901 or Treasury 48 Regulation Section 1.1502-6, as a result of any Tax sharing or other agreement, or by operation of law) for any such Tax. “Company Tax Return” means any return, election, declaration, report, schedule, information return, document, information, opinion, statement, or any amendment to any of the foregoing (including, without limitation, any consolidated, combined or unitary return) filed or required to be filed with any Governmental Entity, if, in any manner or to any extent, relating to or inclusive of the Company, any Subsidiary, or any Company Tax. “Current Assets” means (i) accounts receivable (excluding intercompany receivables and Excluded Accounts Receivable) other than accounts receivables that are more than 90 days past due unless collected from and after the Closing Date until the date a statement is delivered by Buyer to Seller in accordance with Section 1.7(a) of this Agreement, and (ii) inventory of Seller, other than any such assets that are Excluded Assets (including, without limitation, cash). “Current Liabilities” means accounts payable and accrued expenses, including all Tax liabilities and all employee benefits accrued through the Closing Date, other than any such liabilities that are Excluded Liabilities. “Environment” means all, or any part, of the air (including the air within buildings and natural or man-made structures above or below ground), sediment, soils, water and land. “Environmental Claims” means any and all directives, administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations or requests for information by a Governmental Entity, proceedings, consent orders or consent agreements relating in any way to any Environmental Law, Hazardous Material or any Environmental Permit, including, without limitation, (i) any and all claims by Governmental Entities for enforcement, investigation, cleanup, removal, response, corrective, remedial, monitoring, or other actions, damages, fines or penalties pursuant to any applicable Environmental Law, and (ii) any and all claims by any one or more Persons seeking damages, contribution, indemnification, cost recovery, compensation, injunctive or other relief resulting from a Release or threatened Release of Hazardous Materials or arising from alleged injury or threat of injury to health, safety, property, natural resources or the Environment. “Environmental Condition” means any and all conditions and circumstances of any property, including, without limitation, any property currently or formerly owned, operated or leased by Seller, relating to or arising or resulting from a failure to comply with any applicable Environmental Law or Environmental Permit or from a Release or threatened Release of Hazardous Materials into the indoor or outdoor Environment. “Environmental Law” means CERCLA, the Resource Conservation and Recovery Act of 1976, as amended, and any Law now or previously in effect regulating, relating to, or imposing liability or standards of conduct concerning any Hazardous Material, drinking water, surface and groundwater, wetlands, landfills, open dumps, above ground storage tanks, underground storage tanks, solid waste, waste water, storm water run-off, waste emissions, xxxxx, air emissions, water discharges, noise emissions, or otherwise relating to pollution or protection of the outdoor or indoor environment or health or safety as related to exposure to Hazardous Materials.
49 “Environmental Permit” means any permit, license, approval, consent, or other authorization by a Governmental Entity pursuant to any Environmental Law. “Equity Interests” means capital stock, partnership or membership interests or units (whether general or limited), subscription rights, conversion rights, exchange rights, stock appreciation rights, profit participation, and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing entity. “Equity Securities” means (i) Equity Interests, (ii) subscriptions, calls, warrants, options or commitments of any kind or character relating to, or entitling any Person to acquire, any Equity Interests and (iii) securities convertible into or exercisable or exchangeable for shares of Equity Interests. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended. “Excluded Accounts Receivable” means all accounts receivable as listed on Section 1.2 of the Seller Disclosure Schedule for which all work due to the payor, underlying the receivable has been performed by the Company prior to the Closing Date. “Fundamental Representations” means the representations and warranties of Seller and the Members made in Sections 2.1 (relating to Organization, Standing and Power), 2.2 (relating to authority), 2.3 (that portion thereof relating to title to assets), 2.4 (Noncontravention; Governmental Approvals), 2.6, 2.18, 2.20, 2.22, 2.26, 2.27 (in respect of matters concerning title), 3.1, 3.2, and 3.3. “GAAP” means United States generally accepted accounting principles. “Governmental Entity” means any international, national, regional, state, local or other government, any court, administrative, regulatory, or other governmental agency, commission or authority or any organized securities exchange. “Hazardous Material” means any element, compound, chemical, contaminant, pollutant, material, waste or other substance or constituent that is defined or regulated as such in, or for purposes of any Environmental Law, determined or identified as hazardous, toxic, biohazardous or dangerous under any applicable Environmental Law, or the Release of which is prohibited or regulated under any applicable Environmental Law, including, any asbestos, any petroleum, oil (including crude oil or any fraction thereof), any radioactive substance, any polychlorinated biphenyls, any toxin, chemical, infectious and medical waste, microbial matter, greenhouse gas and any other substance that may give rise to liability under any Environmental Law. “Indebtedness” shall mean as at any date of determination, the sum of the following items of Seller, without duplication: (i) obligations of Seller created, issued or incurred for borrowed money, including all fees and obligations thereunder (including interest and similar charges however denominated, late fees, and any prepayment or termination fees arising or which will arise out of the prepayment of such Indebtedness prior to its maturity and termination), (ii) obligations of Seller to pay the deferred purchase price or acquisition price of property or services, other than trade or accounts payable arising, and accrued expenses incurred, in the ordinary course 50 of business consistent with past practice, (iii) the face amount of all letters of credit issued for the account of Seller and all drafts thereunder, (iv) capital lease obligations of Seller, if any, (v) any obligation guaranteeing any Indebtedness or other obligations of any other Person (including any obligations under any keep well or support agreements), and (vi) all accounts payable on the balance sheet as of the Closing Date. “Independent Accountant” means, a firm to be determined within a subsequent writing between the Seller and Buyer. “Intellectual Property” shall mean all intellectual property rights, including without limitation Patents, inventions, technology, discoveries, utility models, processes, formulae and know-how, copyrights and copyrightable works (including software, databases, applications, code, systems, networks, website content, documentation and related items), trademarks, service marks, trade names, logos, domain names, corporate names, trade dress and other source indicators, and the goodwill of the business appurtenant thereto, trade secrets, customer data and other confidential or proprietary information, and applications for and registrations of the foregoing (including divisionals, provisionals, continuations, continuations-in-part, reissues, re-examinations, foreign counterparts and renewals). “IRS” means the United States Internal Revenue Service. “Knowledge of Seller” or “To Seller’s Knowledge” means the actual or constructive knowledge of Seller based upon the actual or constructive knowledge of Seller’s employees, managers, officers, directors, and the Members. “Law” means any state, local or foreign statute, law (including common law), ordinance, rule or regulation (domestic or foreign) issued, promulgated or entered into by or with any Governmental Entity. “Lien” means any mortgage, pledge, lien (statutory or other), defect of title, charge, option, restriction on transfer (such as a right of first offer or refusal), third-party right, conditional or installment sale agreement, encroachment, survey exception, encumbrance, liability, obligation, security interest or other claim of any kind or nature whatsoever; provided, however, that Liens shall exclude liens for Taxes which are not yet due and payable. “Loss” or “Losses” means any and all losses, damages, costs, fees, expenses, debts, charges, liabilities, settlement payments, awards, judgments, penalties, fines, interest, obligations, and claims of any kind. “Multiemployer Plan” shall mean a “multiemployer plan” as defined in Section 3(37) of ERISA or Section 4001(a)(3) of ERISA, and to which Seller, or any entity which is or was a Commonly Controlled Entity with Seller is making, is obligated to make, or has made or been obligated to make during the last six years, contributions on behalf of participants who are or were employed by any of them. “Organizational Documents” means, with respect to any Person, the articles or certificate of incorporation or organization and by-laws, the limited partnership agreement, the partnership agreement or the limited liability company agreement, or such other organizational documents of 51 such Person, including those that are required to be registered or kept in the place of incorporation, organization or formation of such Person and which establish the legal personality of such Person. “Past Due” means any customer accounts receivable more than thirty-one days past the due date specified on the invoice and vendor accounts payable over the longer of (i) thirty-one days past the invoice date; (ii) thirty-one days past the end of the applicable service period or (iii) the stated due date on the vendor invoice. “Patents” means worldwide patents, patent applications, invention disclosures, and other rights of invention, and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof and all reexamined patents or other applications or patents claiming the benefit of any of the foregoing. “Permitted Encumbrances” means (i) Liens for Taxes and other governmental charges and assessments which are not yet due and payable; (ii) all covenants, conditions, easements, and restrictions of record not interfering in any material respect, individually or in the aggregate, with the ordinary use or operation of the Real Property or conduct of the Business; (iii) landlords’, workers’, carriers’ and mechanic and other like Liens incurred in the ordinary course of the Business with respect to amounts that are not Past Due; and (iv) zoning, building and land use Laws, ordinances, orders, decrees, restrictions and conditions imposed by any Governmental Entity that do not interfere with the present or proposed use of the properties they affect. “person” or “Person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity or a Governmental Entity. “Pre-Closing Period” means any Tax period (or portion thereof) ending on or before the Closing Date. “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, injecting, depositing, disposing, discharging, dispersal, escaping, dumping, or leaching into the indoor or outdoor Environment. “Representatives” means, with respect to any person, such person’s directors, managers, shareholders, partners, officers, employees, agents, and representatives, including any investment banker, financial advisor, attorney, accountant or other advisor, agent, representative or Affiliate. “Seller Benefit Plan” means (other than a Multiemployer Plan) each “employee pension benefit plan” (as defined in Section 3(2) of ERISA) (whether or not subject to ERISA), each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) (whether or not subject to ERISA) and any other plan, program, agreement, arrangement, policy, practice, contract, fund or commitment providing for pension, severance or retention benefits, profit-sharing, fees, bonuses, retention, stock ownership, stock options, stock appreciation, stock purchase, phantom stock or other stock-related benefits, incentive or deferred compensation, vacation benefits, life or other insurance (including any self-insured arrangements), health or medical benefits, dental benefits, employee assistance programs, salary continuation, unemployment benefits, disability or sick leave benefits, workers’ compensation benefits, tuition, company car, club dues, maternity, paternity or family leave, health care reimbursement, dependent care assistance, cafeteria plan, 52 employment agreement, consulting agreement, retainer agreement, golden parachute agreement, benefit contingent upon a change in control, relocation or post-employment or retirement benefits (including compensation, pension, health, medical and life insurance benefits) or other form of benefits which is or has been maintained, administered, participated in or contributed to by Seller, which covers any employee or former employee of Seller by virtue of their current or former employment with Seller, or in connection with which Seller has any liability. “Seller Transaction Expenses” means all expenses of Seller and the Members incurred or to be incurred in connection with the preparation and execution of this Agreement and the consummation of the transactions contemplated hereby to be consummated on or before the Closing, including fees and expenses incurred in connection with the repayment of Indebtedness, and fees and disbursements of Seller’s attorneys, accountants, investment bankers and other advisors and service providers, payable by Seller or the Members and that, in each case, have not been paid as of the Closing Date. “Special Representations” means the representations and warranties of Seller and the Members made in Sections 2.9 (Litigation); 2.14 (Tax Matters); 2.15 (ERISA Compliance); and 2.17 (Environmental Matters). A “Subsidiary” of any person means another person, an amount of the voting securities, other voting rights or voting membership or partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the Equity Interests of which) is owned directly or indirectly by such first person. “Tax” means any tax, charge, deficiency, duty, fee, levy, toll or other amount (including, without limitation, any net income, gross income, profits, gross receipts, escheat, excise, property, sales, ad valorem, withholding, social security, retirement, excise, employment, unemployment, minimum, alternative, add-on minimum, estimated, severance, stamp, occupation, environmental, premium, capital stock, disability, windfall profits, use, service, net worth, payroll, franchise, license, gains, customs, transfer, recording, registration or other tax) assessed or otherwise imposed by any Governmental Entity or under applicable law, together with any interest, penalties or any other additions or increases. “Tax Return” means any return, election, declaration, report, schedule, information return, document, information, opinion, statement, or any amendment to any of the foregoing (including, without limitation, any consolidated, combined, or unitary return) filed or required to be filed with any Governmental Entity. [signature page follows]
Signature Page to Asset Purchase Agreement IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above. STAR EQUITY HOLDINGS, INC. By: Name: Xxxxxxx X. Xxxxxxx, Xx. Title: Chief Executive Officer TIMBER TECHNOLOGIES LLC By: Name: Xxxxxx Xxxxx Title: Manager MEMBERS: XXXXXX XXXXX XXXX XXXXXXXX ____________________________________________ XXXXXX XXXX ____________________________________________ XXXX XXXXXX ____________________________________________ XXXX XXXXXXXX DocuSign Envelope ID: 5FA274E8-B7B5-4C89-B3C9-52DDDFBF39BCEDBCBC74-D864-41F8-8DE3-5F20AEEE 412 /s/ Xxxxxxx X. Xxxxxxx Xx. /s/ Xxxxxx Xxxxx /s/ Xxxxxx Xxxxx /s/ Xxxx Xxxxxxxx /s/ Xxxxxx Xxxx /s/ Xxxx Xxxxxx /s/ Xxxx Xxxxxxxx