SECOND AMENDED AND RESTATED PURCHASE AGREEMENT
This SECOND AMENDED AND RESTATED PURCHASE AGREEMENT (the "Agreement")
is made and entered into as of October 17, 2000, by and between THE XXXXXXX
COMPANY, INC., a North Carolina corporation ("Seller"), Atrium Companies, Inc.,
a Delaware corporation ("Buyer"), and D and W Holdings, Inc., a Delaware
corporation ("Holdings").
W I T N E S S E T H:
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, substantially all of the operating assets of Seller's Windows and
Doors Division ("EWD") on the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS, Seller, the owner of all of the issued and outstanding shares
of capital stock of VES, INC., a Delaware corporation doing business in North
Carolina as XXXXXXX EXTRUSION SYSTEMS, INC. ("EES"), desires to sell to Buyer,
and Buyer desires to purchase from Seller, such shares on the terms and subject
to the conditions set forth in this Agreement; and
WHEREAS, Seller and Holdings entered into a Purchase Agreement dated as
of March 29, 2000 (the "Original Agreement"); and
WHEREAS, Seller and Holdings entered into an Amended and Restated
Purchase Agreement dated as of July 28, 2000 (as amended by certain Side Letters
dated August 31 and September 29, the "Amended Agreement"); and
WHEREAS, Seller, Buyer and Holdings wish to amend and restate the
Amended Agreement as described herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained in this Agreement, Seller and Buyer hereby
agree as follows:
ARTICLE 1. DEFINITIONS
1.1 "AFFILIATE" shall mean, with respect to any person, any other
person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with, such person. For
purposes of this definition, "control" (including, with its correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as applied to any person, shall include the possession, directly or
indirectly, of the power to vote more than fifty percent (50%) of the securities
having voting power for the election of directors of such person or otherwise to
direct or cause the direction of the management and policies of that person,
whether through the ownership of voting securities, by contract or otherwise.
1.2 "ANTITRUST DIVISION" means the Antitrust Division of the United
States Department of Justice.
1.3 "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the Assignment and
Assumption Agreement dated as of the Closing Date between Buyer and Seller
relating to the Assumed Agreements and the Assumed Liabilities, substantially in
the form of Exhibit A hereto.
1.4 "ASSUMED AGREEMENTS" shall mean those agreements, contracts, real
estate leases, equipment leases, and commitments listed on Schedule 1.5,
together with all of the open purchase orders and sales contracts of EWD issued
or entered into in the ordinary course of business as of the Closing Date.
1.5 "ASSUMED LIABILITIES" shall mean all liabilities and obligations of
Seller arising in the ordinary course of business of EWD (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including, without limitation: (i) all liabilities and obligations
of Seller under agreements that have been validly assigned to Buyer as of the
Closing Date or under which the other party or parties thereto continue to do
business with Buyer (or with Seller for the exclusive benefit of Buyer)
following the Closing on the terms specified in the Agreement notwithstanding
the absence of any formal consent needed thereunder for the assignment
(collectively, the "Transferred Agreements"), (ii) all liabilities and
obligations of Seller with respect to warranty and product liability claims
(including liabilities and obligations for personal injury and property damage
as well as for repair and replacement) based upon or alleged to arise out of the
sale of EWD Products by Seller on or before the Closing Date, (iii) all
liabilities and obligations of Seller arising in the ordinary course of the EWD
Business under any federal, state, local, or foreign law or any rule, regulation
or other requirement of any governmental or quasi-governmental authority, (iv)
all liabilities and obligations of Seller for Taxes, other than income and
franchise taxes, arising in the ordinary course of business of EWD to the extent
reflected (without regard to deferred Tax assets and liabilities) on the Closing
Balance Sheet, (v) all accounts payable, accrued wages and other expenses and
all other current liabilities reflected on the Closing Balance Sheet to the
extent such liabilities arose in the ordinary course of business, it being the
intent of the parties, subject to the limitations set forth herein, that Buyer
shall succeed to and assume the ordinary course liabilities and obligations of
Seller with respect to the EWD Business to the same extent as if EWD were a
separately incorporated entity and Buyer purchased the stock of that entity,
(vi) subject to Sections 11.1 and 11.7 hereof, all liabilities and obligations
of Seller relating to environmental conditions existing on or prior to the
Closing Date of the property leased to Seller by Xxx Xxxxxxx and located at
Shorefair Drive and 32nd Street in Winston-Salem, North Carolina (the "Leased
Real Estate"), (vii) subject to Sections 11.1 and 11.7 hereof, all liabilities
and obligations of Seller relating to the use of the "WeatherLok" name,
trademarks and/or service marks, and any variations or derivations thereof (the
"WeatherLok Xxxx") prior to the Closing
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Date, and (viii) the capital expenditures described on Exhibit V to Schedule
1.5; provided, however, that the Assumed Liabilities shall in no event
include (a) except as described in clause (iv) of this Section 1.5, any
federal, state, local or foreign Taxes of any kind payable by, or
attributable to, Seller or its shareholders, (b) indebtedness of EWD owed to
Seller, (c) indebtedness for borrowed money and any guarantee of indebtedness
for borrowed money, including, without limitation, amounts owed to AmeriMark
Building Products d/b/a Xxxxxxxx Building Products ("Xxxxxxxx") in respect of
indebtedness under the promissory note dated February 18, 1998 (the "Xxxxxxxx
Note"), (d) subject to clause (v) above (but with the understanding that
Buyer will not assume sponsorship of any Plan in whole or in part), any
liability or obligation under or related to any Plan, (e) fees and expenses
of Seller relating to the Contemplated Transactions, (f) any liability or
obligation arising in connection with or relating to the property located at
000 Xxxxxxxxx Xxxx in Rural Hall, North Carolina, (g) any liabilities or
obligations of EWD in respect of any agreement, contract, lease or commitment
other than Transferred Agreements, (h) any liability or obligation under the
Worker Adjustment and Retraining Notification Act with respect to EWD arising
prior to the Closing Date, (i) any liabilities or obligations relating to the
Excluded Assets or not arising out of the EWD Business, (j) any obligation
under the leases with JE as such leases existed prior to their amendment
pursuant to Section 6.21 hereof in connection with the Contemplated
Transactions, (k) any liabilities or obligations arising out of any
litigation or proceeding with Vinyl Products, Inc in connection with events
occurring on or prior to the Closing Date, (l) any liability for severance
pay to any employees of EWD who are offered employment by Buyer, (m) $395,000
of rebates and allowances owed to Xxxxxxxx by Seller as of the Closing (the
"Xxxxxxxx Payables"), or (n) $205,000 of rebates and allowances owed to
Xxxxxxxx by Seller as of the Closing (the "Xxxxxxxx Rebate").
1.6 "XXXX OF SALE" shall mean the Xxxx of Sale and Assignment dated
as of the Closing Date evidencing the transfer of the Purchased Assets from
Seller to Buyer, substantially in the form of Exhibit B hereto.
1.7 "BREACHING PARTY" shall have the meaning assigned to such term
in Section 9.1(b) hereof.
1.8 "BUY/SELL AGREEMENT" shall have the meaning assigned to such
term in Section 6.17 hereof.
1.9 "CASH AND CASH EQUIVALENTS" shall mean currency, certificates of
deposit, commercial paper, money market mutual funds, repurchase agreements
in respect of any of the foregoing, bank accounts and other similar
investments.
1.10 "CLAIM NOTICE" shall have the meaning assigned to such term in
Section 11.3(a) hereof.
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1.11 "CLOSING" shall mean the consummation of the transactions
contemplated by this Agreement and the Related Agreements (the "Contemplated
Transactions") to be held at the New York offices of Paul, Hastings, Xxxxxxxx
& Xxxxxx LLP, at 10:00 a.m. on October 25, 2000, or such other date and time
as may be mutually agreed upon by Buyer and Seller.
1.12 "CLOSING BALANCE SHEET" shall have the meaning assigned to such
term in Section 2.4 hereof.
1.13 "CLOSING DATE" shall mean the date on which the Closing
actually takes place.
1.14 "CODE" shall mean the Internal Revenue Code of 1986, as
amended. All citations to provisions of the Code, or to the Treasury
regulations promulgated thereunder, shall include any amendments thereto and
any substitute or successor provisions thereto.
1.15 "COMPANIES" shall mean Seller and EES.
1.16 "CONFIDENTIAL INFORMATION" shall have the meaning assigned to
such term in Section 4.32 hereof.
1.17 "CONTEMPLATED TRANSACTIONS" shall have the meaning assigned to
such term in Section 1.11 hereof.
1.18 "DEDUCTIBLE" shall have the meaning assigned to such term in
Section 11.7 hereof.
1.19 "EES AGREEMENTS" shall have the meaning assigned to such term
in Section 4.29 hereof.
1.20 "EES BOOKS AND RECORDS" shall mean all books and records,
whether in physical, electronic or other media, related to the business of
EES, the assets of EES, or the employees of EES, including, without
limitation, (i) financial books and records, (ii) mailing, distribution,
customer and supplier lists, (iii) records with respect to pricing,
production, product development, sales volume, payment history, costs and
legal, Tax and environmental matters, (iv) employment records, and (v)
records relating to Intellectual Property Rights.
1.21 "EES FIXED ASSETS" shall mean all leasehold improvements,
machinery, equipment, auxiliary equipment, fixtures attached to or associated
with the equipment or machinery, machine parts, shop tools and equipment,
spare parts, supplies, office equipment, computers, furniture, furnishings,
office supplies, sales and promotional materials and motor vehicles owned by
EES and used by EES on the Closing Date,
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including, but not limited to those listed on Schedule 1.21; provided,
however, that EES Fixed Assets shall not include any Excluded Assets (as
defined in Section 1.39 hereof).
1.22 "EES PRODUCTS" shall have the meaning assigned to such term in
Section 10.1(b) hereof.
1.23 "EES SHARES" shall mean all of the issued and outstanding
shares of EES, consisting of 50 shares of common stock, par value $.01 per
share.
1.24 "XXXXXXX XXXX" shall have the meaning assigned to such term in
Section 8.16 hereof.
1.25 "XXXXXXX SUBSCRIPTION AGREEMENT" shall have the meaning
assigned to such term in Section 6.15 hereof.
1.26 "EMPLOYMENT AGREEMENTS" shall have the meaning assigned to such
term in Section 6.19 hereof.
1.27 "ENCUMBRANCES" shall have the meaning assigned to such term in
Section 2.6 hereof.
1.28 "ENVIRONMENTAL AND SAFETY LAWS" means any and all federal,
state and local laws (including but not limited to common law), statutes,
ordinances, judgments, decrees, licenses, permits, rules and regulations, or
other binding requirement relating to pollution or protection of human health
and the environment, worker health and safety, emissions, discharges,
releases or threatened releases of any Hazardous Material (as defined in
Section 1.43), or otherwise relating to the use, treatment, storage,
disposal, transport or handling of any Hazardous Material.
1.29 "ENVIRONMENTAL OR SAFETY CLAIM" means any claim, demand,
complaint, action, suit, proceeding, investigation or notice by any person or
entity alleging potential liability arising out of, based on, or relating to
Environmental and Safety Laws or the presence of any Hazardous Material at
any location.
1.30 "ESCROW AGENT" shall have the meaning assigned to such term in
Section 2.2(a) hereof.
1.31 "ESCROW AGREEMENT" shall have the meaning assigned to such term
in Section 2.2(a) hereof.
1.32 "EWD ACCOUNTS RECEIVABLE" shall mean all amounts owed to EWD by
its customers and others as of the Closing Date (other than the Xxxxxxxx
Receivables) that are classified as "accounts receivable" in accordance with
GAAP as applied in the preparation of the Financial Statements.
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1.33 "EWD BOOKS AND RECORDS" shall mean all books and records,
whether in physical, electronic or other media, related to the business of
EWD, the Purchased Assets or the employees of EWD to whom Buyer makes offers
of employment, including, without limitation, (i) financial books and
records, (ii) mailing, distribution, customer and supplier lists, (iii)
records with respect to pricing, production, product development, sales
volume, payment history, costs and legal, Tax and environmental matters, (iv)
employment records, and (v) records relating to Intellectual Property Rights,
but excluding EWD Books and Records solely related to the Excluded Assets (as
defined in Section 1.39 hereof).
1.34 "EWD BUSINESS" shall mean the business of producing and selling
the EWD Products.
1.35 "EWD FIXED ASSETS" shall mean all leasehold improvements,
machinery, equipment, auxiliary equipment, fixtures attached to or associated
with the equipment or machinery, machine parts, shop tools and equipment,
spare parts, supplies, office equipment, computers, furniture, furnishings,
office supplies, sales and promotional materials and motor vehicles owned by
Seller and necessary for the conduct of business as currently conducted by
EWD on the Closing Date, including but not limited to those listed on
Schedule 1.35; provided, however, that EWD Fixed Assets shall not include any
Excluded Assets.
1.36 "EWD INTELLECTUAL PROPERTY RIGHTS" shall mean all Intellectual
Property Rights (as defined in Section 1.48 hereof) used by Seller or EWD in
connection with the business of EWD (excluding the Xxxxxxx Xxxx, which is
being licensed to Buyer pursuant to Section 8.16 hereof).
1.37 "EWD INVENTORY" shall mean all raw materials and supplies, work
in process, finished goods, packaging and other manufacturing supplies owned
by Seller as of the Closing Date that is used in connection with the business
of EWD and is classified as "inventory" in accordance with GAAP as applied in
the preparation of the Financial Statements.
1.38 "EWD PRODUCTS" shall have the meaning assigned to such term in
Section 10.1(a) hereof.
1.39 "EXCLUDED ASSETS" shall mean (i) all monies or damages awarded
by any court, arbitrator, or administrative body to EWD or Seller in
connection with any litigation or proceeding with Vinyl Products, Inc.
brought in connection with events occurring on or prior to the Closing Date,
(ii) all accounts receivable outstanding as of the Closing Date which are the
subject of the litigation titled XXXXXXX WINDOWS & DOORS, INC. V. VINYL
PRODUCTS, INC., XXXXXXX X. XXXX, XXXX XXXXX AND XXXX XXXXX, 99 CIV. 00689
(M.D.N.C.), (iii) the Xxxxxxxx Receivables, (iv) all tangible and intangible
assets of Seller set forth on Schedule 1.39, and (v) all tangible and
intangible assets of Seller used exclusively in its Specialty Manufacturing
Division and Properties Division.
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1.40 "FINANCIAL STATEMENTS" shall mean, collectively, (i) the
audited combined balance sheets of EWD and EES and related statements of
earnings, retained earnings and cash flows at and for the fiscal years ended
December 31, 1999 and December 31, 1998, (ii) the audited combined balance
sheet of EWD and EES at December 31, 1997, and in the case of clauses (i) and
(ii), together with the reports thereon by KPMG, independent certified public
accountants, (iii) the unaudited combined balance sheets of EWD and EES and
related interim statements of earnings, retained earnings and cash flows at
and for the fiscal year ended December 31, 1996, (iv) the unaudited combined
statements of earnings, retained earnings and cash flows of EWD and EES for
the year ended December 31, 1997, and (v) the unaudited combined balance
sheet of EWD and EES and related interim statements of earnings, retained
earnings and cash flows at and for the quarters ended March 31 and June 30,
2000. The term "Financial Statements" shall include all financial statements
required to be delivered to Buyer pursuant to Sections 4.6(b) and 4.6(c)
hereof.
1.41 "FTC" means the United States Federal Trade Commission.
1.42 "GAAP" shall mean United States generally accepted accounting
principles, in effect from time to time, consistently applied.
1.43 "HAZARDOUS MATERIAL" means any material, substance or compound
which is, or the emission, discharge, transport, storage, treatment or
release of which is, regulated under Environmental and Safety Laws, whether
constituting a useful product or otherwise, including without limitation any
pollutant, contaminant, waste, hazardous waste, hazardous substance, toxic
substance, hazardous material, extremely hazardous material, asbestos,
polychlorinated biphenyl, petroleum, or any refined product, fraction,
byproduct or constituent thereof.
1.44 "HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
1.45 "INDEMNIFIED LOSSES" shall have the meaning assigned to such
term in Section 11.1 hereof.
1.46 "INDEMNIFIED PARTY" shall have the meaning assigned to such
term in Section 11.3(a) hereof.
1.47 "INDEMNIFYING PARTY" shall have the meaning assigned to such
term in Section 11.3(a) hereof.
1.48 "INTELLECTUAL PROPERTY RIGHTS" shall have the meaning assigned
to such term in Section 4.32 hereof.
1.49 "JE" shall mean Xxxx Xxxxxxx, Jr., the majority shareholder of
Seller.
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1.50 "KNOWLEDGE OF SELLER" shall mean the actual knowledge, after
due inquiry, of JE, Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxxx, Xxxxx Xxxxxx, Xxxxx
Xxxxx, Xxxx Xxxxxx, Xxxxxxx Xxx, Xxxxxx Xxxxxxxx and Xxx Xxxxxxx.
1.51 "LEASED REAL ESTATE" shall have the meaning assigned to such
term in Section 1.5 hereof.
1.52 "MANAGEMENT SUBSCRIPTION AGREEMENT" shall have the meaning
assigned to such term in Section 6.16 hereof.
1.53 "MATERIAL ADVERSE EFFECT" shall mean, individually or in the
aggregate, a material adverse effect upon the business, operations,
properties, assets, liabilities, prospects or financial condition of EES and
EWD, taken as a whole.
1.54 "NON-BREACHING PARTY" shall have the meaning assigned to such
term in Section 9.1(b) hereof.
1.55 "PERMITS" shall have the meaning assigned to such term in
Section 4.23 hereof.
1.56 "POST-CLOSING RETURNS" shall have the meaning assigned to such
term in Section 8.5(b) hereof.
1.57 "PURCHASED ASSETS" shall mean the EWD Accounts Receivable, EWD
Inventory, EWD Fixed Assets, EWD Intellectual Property Rights, EWD Books and
Records, the Assumed Agreements, any and all monies or damages awarded by any
court, arbitrator or administrative body to EWD or to Seller in connection
with the business of EWD (other than those relating to any litigation or
proceeding with Vinyl Products, Inc. brought in connection with events
occurring on or prior to the Closing Date), Cash and Cash Equivalents of
Seller and EES as of the Closing Date (after giving effect to the
adjustments, distributions and uses described in Section 8.1(u) hereof), all
amounts outstanding under the note payable relating to the intercompany
indebtedness described on Schedule 1.58, all rights against third parties
arising out of the EWD Business, all key man insurance policies relating to
employees of EWD and all other assets used in or arising out of the conduct
of business as currently conducted by EWD, but excluding the Excluded Assets.
1.58 "PURCHASED SHARES" shall mean the EES Shares.
1.59 "PURCHASE PRICE" shall have the meaning assigned to such term
in Section 2.2 hereof.
1.60 "REAL ESTATE" shall mean the real property described on
Schedule 4.16, together with the improvements thereon and the leasehold
interests therein.
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1.61 "RELATED AGREEMENTS" means the agreements listed as exhibits to
this Agreement.
1.62 "RELEASE" means any release, threatened release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching, migrating or presence of any Hazardous Material in the
environment.
1.63 "XXXXXXXX" shall have the meaning assigned to such term in
Section 1.5 hereof.
1.64 "XXXXXXXX NOTE" shall have the meaning assigned to such term in
Section 1.5 hereof.
1.65 "XXXXXXXX PAYABLES" shall have the meaning assigned to such
term in Section 1.5 hereof.
1.66 "XXXXXXXX REBATE" shall have the meaning assigned to such term
in Section 1.5 hereof.
1.67 "XXXXXXXX RECEIVABLES" shall mean $2,912,527 of accounts
receivable of the Seller as of October 4, 2000 related to the Xxxxxxxx Supply
Agreement and sales to Exterior Systems, Inc.
1.68 "XXXXXXXX SUPPLY AGREEMENT" shall mean that certain Supply
Agreement, dated as of February 18, 1998, entered into by and between
Xxxxxxxx and Xxxxxxx Windows & Doors a Division of The Xxxxxxx Company, Inc.,
as amended from time to time.
1.69 "SAFETY AND ENVIRONMENTAL PERMITS" shall have the meaning
assigned to such term in Section 4.27 hereof.
1.70 "SCHEDULES" shall mean the Schedules to this Agreement, as
referred to herein, that have been delivered to the parties and initialed or
otherwise signed by the parties to confirm their receipt thereof.
1.71 "SERIES A PARENT COMMON STOCK" shall mean the Series A common
stock, par value $.01 per share, of Holdings.
1.72 "STRADDLE PERIOD" shall have the meaning assigned to such term
in Section 8.5(b) hereof.
1.73 "TAX RETURNS" means any return, report, statement, election,
information return or other document (including any related or supporting
information) filed or required to be filed with any governmental entity in
connection with the determination,
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assessment, collection or administration of any Taxes or the administration
of any laws, regulations or administrative requirements relating to any Taxes.
1.74 "TAX" OR "TAXES" means taxes, charges, fees, imposts, levies,
interest, penalties, fines, additions to tax or other assessments or fees of
any kind, including, but not limited to, income, corporate, capital,
estimated, excise, property, real property, sales, use, turnover,
environmental, gross receipts, ad valorem, transfer, gains, profits,
inventory, capital stock, license, payroll, employment, unemployment, social
security, workers' compensation, stamp, value added and franchise taxes,
required deposits, deductions, withholdings and customs duties, imposed by
any governmental entity, together with any obligations under Treas. Reg. ss.
1.1502-6 (or comparable provisions of state, local or foreign Tax law) or any
agreement or arrangement with any Person with respect to the liability for,
or sharing of, Taxes, and including any liability as a successor or
transferee, by contact or otherwise, in respect of Taxes.
1.75 "TRANSACTION DEADLINE DATE" means October 25, 2000.
1.76 "TRANSFERRED AGREEMENTS" shall have the meaning assigned to
such term in Section 1.5 hereof.
1.77 "WEATHERLOK XXXX" shall have the meaning assigned to such term
in Section 1.5 hereof.
1.78 "YEAR 2000 DATA" shall have the meaning assigned to such term
in Section 4.39 hereof.
ARTICLE 2. PURCHASE AND SALE OF ASSETS AND SHARES
2.1 PURCHASED ASSETS AND PURCHASED SHARES. Subject to the terms and
conditions of this Agreement, at the Closing, Seller hereby agrees to sell,
convey, transfer and assign all of Seller's right, title and interest in and
to the Purchased Assets and the Purchased Shares (other than those shares
being purchased by Holdings) to Buyer or an entity designated by Buyer and
23.700817 of the Purchased Shares to Holdings (which 23.700817 Purchased
Shares, the parties agree, have a value that is approximately equal to the
value of the Series A Parent Common Stock transferred to Seller by Holdings
on behalf of Buyer pursuant to Section 2.2(a) hereof) and Buyer hereby
agrees, in accordance with Section 2.2(a) hereof, to purchase, or cause such
entity to purchase, the Purchased Assets and the Purchased Shares. Holdings
hereby directs Seller to deliver its portion of the Purchased Shares to
Buyer. The parties to this Agreement acknowledge and agree that neither Buyer
nor Holdings shall have any obligations under this Agreement if Buyer does
not procure the consent of its lenders under the credit agreement described
in item one of Schedule 5.4.
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2.2 PURCHASE PRICE. The purchase price for the Purchased Assets and
the Purchased Shares shall be as set forth below (the "Purchase Price"):
(a) At the Closing, subject to Sections 2.2(c) and 2.2(d)
hereof, Buyer shall deliver or cause to be delivered to Seller a payment
equal to $125,466,259 less (i) one-half of the cost of the representation and
warranty insurance policy described on Schedule 2.2(a) up to $206,250, less
(ii) the aggregate amount of all capitalized lease obligations of EWD and EES
(other than the capitalized lease obligations in respect of the Equipment
Lease Agreement dated April 30, 1998, with Crown Credit Company not exceeding
$4,000) as of the Closing Date; PROVIDED, HOWEVER, that $22,278,767 of such
payment shall be payable to Seller in the form of Series A Parent Common
Stock (based on a value of $1.30 per share), which $22, 278,767 of Series A
Parent Common Stock shall be payable to Seller by Holdings on behalf of Buyer
in exchange for 23.700817 Purchased Shares that, the parties agree, has a
value of $22, 278,767, and the remaining amount of such payment (other than
the $5 million described in Section 2.2(c) hereof) shall be made in cash. In
order to secure the Seller's obligations to indemnify Buyer, if so required,
pursuant to Article 11 hereof, $7 million of the Purchase Price shall be held
by the Escrow Agent, subject to the terms and conditions of, and for the
period set forth in, an Escrow Agreement substantially in the form of Exhibit
C hereto (the "Escrow Agreement"), with the remaining cash portion of the
Purchase Price being paid by the Escrow Agent as set forth in the Escrow
Agreement in the amounts set forth opposite such parties' names.
(b) The parties acknowledge and agree that in connection
with the Contemplated Transactions, (i) Xxxx Xxxxx, Xxxx Xxxxxxxx and Xxxxx
Xxxxxx will purchase, in the aggregate, $5 million of Series A Parent Common
Stock from Holdings pursuant to the terms of the Management Subscription
Agreement, (ii) Seller will make deferred compensation payments and loans in
the aggregate amount of $5 million to the above named persons so that they
may purchase such common stock, and (iii) $5 million of the Purchase Price
due to Seller shall be retained by Buyer in satisfaction of the obligations
described in clause (i) above.
(c) In the event that, prior to December 31, 2000, Xxxxxxxx
assumes and affirms its obligations pursuant to the terms of the Xxxxxxxx
Supply Agreement, and such assumption and affirmation is approved by a final
and nonappealable order of the Bankruptcy Court having jurisdiction over the
bankruptcy proceeding filed by Exterior Systems, Inc. and related entities
(the "Bankruptcy Proceeding"), promptly following such final order, Buyer
shall cause Holdings to issue to Seller, as additional Purchase Price,
$500,000 of Series A Parent Common Stock (based on a value of $1.30 per
share), pursuant to the terms of a subscription agreement substantially
similar to the Xxxxxxx Subscription Agreement. Seller shall use reasonable
efforts to cause Xxxxxxxx to assume and affirm its obligations pursuant to
the terms of the Xxxxxxxx Supply Agreement as described in the preceding
sentence.
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(d) In the event that, prior to December 31, 2000, Xxxxxxxx
grants to Buyer, for a term ending no sooner than February 18, 2003, either
(i) an exclusive branding right reasonably acceptable to Buyer pursuant to
which Buyer shall have the exclusive right to manufacture products described
on Exhibit A to the Xxxxxxxx Supply Agreement branded with the Xxxxxxxx
trademarks, tradenames and logos described in Section 1(c) of the Xxxxxxxx
Supply Agreement, and such exclusive grant by Xxxxxxxx is approved by a final
and nonappealable order of the Bankruptcy Court having jurisdiction over the
Bankruptcy Proceeding or (ii) an exclusive right reasonably acceptable to
Buyer pursuant to which Buyer shall have the exclusive right to supply vinyl
windows and doors to the Xxxxxxxx branches as described in Annex B hereto,
and such exclusive grant by Xxxxxxxx is approved by a final and nonappealable
order of the Bankruptcy Court having jurisdiction over the Bankruptcy
Proceeding, Buyer shall, promptly following either such final order, cause
Holdings to issue to Seller, as additional Purchase Price, $250,000 of Series
A Parent Common Stock (based on a value of $1.30 per share), pursuant to the
terms of a subscription agreement substantially similar to the Xxxxxxx
Subscription Agreement; PROVIDED, HOWEVER, that in no event shall any Parent
Common Stock be issued under this Section 2(d) if Parent Common Stock is
issued pursuant to Section 2(c).
(e) In the event that, prior to December 31, 2000, Xxxxxxxx
does not assume and affirm its obligations pursuant to the terms of the
Xxxxxxxx Supply Agreement as described in Section 2.2(c) hereof or Seller
does not pay to Xxxxxxxx an amount equal to the Xxxxxxxx Payables, Seller
shall promptly, but in any event within 5 business days, pay to Buyer an
amount equal to the Xxxxxxxx Payables.
2.3 ASSUMED LIABILITIES. Subject to Section 8.5(i) hereof, at the
Closing, Buyer shall assume and agree to pay the Assumed Liabilities pursuant
to the terms of the Assignment and Assumption Agreement.
2.4 CLOSING BALANCE SHEET.
(a) As soon as practicable, but in no event later than
ninety (90) days after the Closing Date, Buyer shall prepare a combined
balance sheet of EES and EWD as of the open of business on the Closing Date
(the "Closing Balance Sheet"). The Closing Balance Sheet shall be prepared in
accordance with GAAP, including all normal year-end adjustments based on
methodologies consistent with those used in connection with preparing the
audited combined balance sheet of EES and EWD dated as of December 31, 1999.
Buyer shall promptly deliver to Seller when available a copy of the Closing
Balance Sheet.
(b) If Seller does not object to the Closing Balance Sheet
within twenty (20) business days of receipt thereof, Seller shall be deemed
to have accepted the Closing Balance Sheet as final.
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(c) If Seller objects to the Closing Balance Sheet, Seller
shall notify Buyer within twenty (20) business days following Seller's
receipt thereof, setting forth in specific detail the basis for such
objection and a proposal for any adjustments to the Closing Balance Sheet.
Buyer and Seller shall seek in good faith to reach agreement as to any such
proposed adjustment, or that no such adjustment is necessary, within thirty
(30) days following Buyer's receipt of notice of Seller's objection. If
agreement is reached in writing within such period as to all proposed further
adjustments, or that no adjustments are necessary, the parties shall make
such adjustments, if any, and the Closing Balance Sheet shall be deemed to be
final. If Buyer and Seller are unable to reach agreement within thirty (30)
days following Buyer's receipt of notice of Seller's objection, then Deloitte
& Touche in Charlotte, North Carolina, or any other mutually agreed upon
office of Deloitte & Touche or other accounting firm (the "Third Party
Accounting Firm"), shall be engaged to review the proposed Closing Balance
Sheet, and shall make a determination as to the resolution of any adjustments
necessary to cause the Closing Balance Sheet to have been properly prepared
in accordance with this Agreement. All such resolutions shall relate only to
such matters as are still in dispute and shall represent either agreement
with the position taken by Buyer or Seller or a compromise between such
positions. The determination of the Third Party Accounting Firm shall be
delivered as soon as practicable following selection of the Third Party
Accounting Firm and shall be final, conclusive and binding upon Buyer and
Seller. The non-prevailing party shall pay the fees and expenses of the Third
Party Accounting Firm; provided, that in the event of a compromise between
the positions of the parties, such fees and expenses shall be prorated based
on the relative success of the parties in prevailing on their positions.
(d) Seller and accountants and representatives designated
by Seller (which shall not, in any event, be employees of EES or EWD) shall
be permitted full access to examine the books and records of EES and EWD upon
their reasonable request in connection with their review of the Closing
Balance Sheet, at such reasonable times and in a reasonable manner mutually
acceptable to Buyer and Seller during the twenty (20) business day period
following delivery by Buyer to Seller of the Closing Balance Sheet.
2.5 ALLOCATION OF PURCHASE PRICE. Unless otherwise required by
applicable law: (i) forty-seven million dollars ($47,000,000) of the total
Purchase Price shall be allocated to the Purchased Shares in accordance with
Sections 2.1 and 2.2(a) hereof and (ii) the balance shall be allocated among
the Purchased Assets as shall be agreed to between the parties as soon as
practicable following the Closing and which allocation among the Purchased
Assets shall be in accordance with Section 1060 of the Code and the
regulations promulgated thereunder and all applicable provisions of state,
local and foreign law. Unless required by applicable law, no party hereto
will, and each party will cause its respective Affiliates not to, take a
position on any federal, state, local or foreign Tax Return (including any
Asset Acquisition Statement required by Code Section 1060 (Form 8594 (or any
successor form)) filed in connection therewith), before any
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governmental agency charged with the collection of any income tax or in any
judicial proceeding that is in any way inconsistent with the purchase price
allocation set forth in this Section 2.5. Schedule 2.5 sets forth Buyer's
good faith estimate of the allocation of the Purchase Price with respect to
the Purchased Assets to plant, property and equipment of EWD based on
information available as of December 31, 1999.
2.6 DELIVERY OF PURCHASED ASSETS AND PURCHASED SHARES. Subject to
the terms and conditions of this Agreement, at the Closing, Seller shall
deliver, or cause to be delivered, to Buyer, free and clear of all claims,
pledges, security interests, liens, charges and all other encumbrances of any
kind (collectively, "Encumbrances"), (i) the Purchased Assets, and (ii) a
stock certificate representing the Purchased Shares in negotiable form for
valid transfer, duly endorsed in blank or with separate executed stock
transfer powers attached.
2.7 ASSIGNMENT OF CONTRACTS AND RIGHTS. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall not constitute an
agreement to assign any claim, contract, license, lease, commitment, sales
order, purchase order or any claim or right, or any benefit arising
thereunder or resulting therefrom, if an attempted assignment thereof without
the consent of a third party thereto would constitute a breach thereof or in
any way affect the rights of Buyer or Seller thereunder. Seller shall
cooperate with Buyer in obtaining the benefits of such claims, contracts,
licenses, leases, commitments, sales orders or purchase orders.
2.8 FURTHER DOCUMENTS AND STATEMENTS. Seller hereby agrees to
execute and deliver, without further consideration, such documents and
instruments in addition to those provided for herein as may be reasonably
requested by Buyer to effectuate the provisions hereof, whether at or after
the Closing, including but not limited to such confirmatory conveyances and
assignments as may be reasonably requested.
ARTICLE 3. CLOSING
3.1 SIMULTANEOUS ACTIONS. All actions to be taken and all documents
to be executed and delivered by the parties at the Closing shall be deemed to
have been taken and executed simultaneously, and no action shall be deemed
taken nor any document executed and delivered until all have been taken,
executed and delivered.
3.2 CLOSING TRANSACTIONS. At the Closing, subject to all of the
terms and conditions of this Agreement:
(a) Seller and Buyer will execute and deliver the
Assignment and Assumption Agreement;
(b) Seller will execute and deliver to Buyer the Xxxx of
Sale and Assignment and any other documents of transfer reasonably requested
by Buyer with respect to the Purchased Assets;
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(c) Seller, Buyer and the Escrow Agent will execute and
deliver the Escrow Agreement;
(d) Seller and Holdings will execute and deliver the
Xxxxxxx Subscription Agreement and consummate the transactions contemplated
thereby;
(e) Xxxx Xxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxx and Holdings
will execute and deliver the Management Subscription Agreement and consummate
the transactions contemplated thereby;
(f) Xxxx Xxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxx and Holdings
will execute and deliver the Buy/Sell Agreements;
(g) Xxxx Xxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxxx
and Buyer will execute and deliver the Employment Agreements;
(h) Seller will deliver or make available to Buyer the EWD
Books and Records and the EES Books and Records, provided, that in the case
of financial books and records that contain information relating to both the
Excluded Assets and the Purchased Assets, Seller may provide Buyer with
copies of such books and records from which information relating solely to
the Excluded Assets has been deleted so long as such deletion does not result
in such books and records not being complete and correct as to information
relating to EWD and Seller need not provide consolidated financial
information of Seller;
(i) The certificates, documents and opinions of counsel
required by Articles 2, 6 and 7 hereof will be delivered;
(j) Buyer will transfer the Purchase Price in accordance
with and subject to Article 2 hereof and the terms and conditions of the
Xxxxxxx Subscription Agreement; and
(k) The parties shall take such other action as may be
necessary or appropriate to consummate the Contemplated Transactions.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State
of North Carolina, and EES is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Complete and
accurate copies of (i) the Articles of Incorporation of Seller and all
amendments thereto,
15
certified by the Secretary of State of the State of North Carolina, (ii) the
By-Laws of Seller and all amendments thereto, certified by Seller's
Secretary, (iii) the Certificate of Incorporation of EES and all amendments
thereto, certified by the Secretary of State of the State of Delaware, and
(iv) the By-Laws of EES and all amendments thereto, certified by EES's
Secretary, have been delivered to Buyer. Each of Seller and EES has full
power and authority to own, lease and operate its properties and assets
(including the Purchased Assets) and to carry on its business as presently
conducted and is duly qualified and in good standing as a foreign corporation
in each jurisdiction in which the character of properties owned or leased by
it or the nature of its business requires such qualification, which
jurisdictions are set forth on Schedule 4.1, except where the failure to so
qualify would not, individually or in the aggregate, have a Material Adverse
Effect.
4.2 DUE AUTHORIZATION; BINDING OBLIGATION.
(a) Seller has all requisite corporate power and authority
to enter into and deliver this Agreement and the Related Agreements and to
perform its obligations hereunder and thereunder and has duly authorized the
execution, delivery and performance of this Agreement and the Related
Agreements by all necessary corporate action.
(b) This Agreement and the Related Agreements have been
duly and validly authorized, executed and delivered by Seller and constitute
Seller's legal, valid and binding obligation, enforceable in accordance with
their respective terms, except as enforceability is limited by (i) principles
of equity that may restrict the availability of specific performance and
other equitable remedies (whether such enforceability is considered in a
proceeding in equity or at law) and (ii) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, fraudulent transfer and
other laws applicable to creditors' rights generally.
4.3 EQUITY OWNED BY EES. EES, directly or indirectly, owns no equity
interest in any corporation and has no interest in any partnership, limited
liability company, joint venture or other legal entity.
4.4 GOVERNMENTAL APPROVALS AND NOTICES. Except for the requirements
of the HSR Act and as set forth on Schedule 4.4 or 4.5, the execution,
delivery and performance of this Agreement and the Related Agreements by
Seller, and consummation of the Contemplated Transactions are not subject to
the jurisdiction, approval, notification of or consent of any governmental,
regulatory or administrative agency or other third party.
4.5 APPROVALS AND NOTICES REQUIRED; CONFLICT WITH OTHER INSTRUMENTS.
Except as described on Schedule 4.5, the execution, delivery and performance
of this Agreement and the Related Agreements by Seller and consummation of
the Contemplated Transactions will not (a) violate (with or without the
giving of notice or the lapse of time or both) or require any consent or
approval, filing or notice under and will not conflict with, or result in the
breach or termination of any provision of, or constitute a default under, or
result in the acceleration of the performance of the obligations of either of
the
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Companies under, their respective Articles or Certificate of Incorporation or
Bylaws or under any indenture, mortgage, deed of trust, lease, license
agreement, contract, instrument or other agreement, or any law, statute,
order, judgment or decree, to which either of the Companies is a party or by
which either of them or any of the Purchased Assets or EES's assets is
subject or bound or (b) result in the creation of any Encumbrance upon any of
the Purchased Assets, EES's assets or the Purchased Shares.
4.6 FINANCIAL CONDITION.
(a) The audited Financial Statements, correct and complete
copies of which are attached hereto as Schedule 4.6(a), were prepared in
accordance with GAAP applied on a consistent basis, except as may be
indicated in the notes thereto, and present fairly the financial position,
results of operations, retained earnings and cash flows of EWD and EES on a
combined basis as of December 31, 1999 and 1998, and for the years then
ended, and the financial position of EWD and EES on a combined basis as of
December 31, 1997.
(b) The unaudited Financial Statements, correct and
complete copies of which are attached hereto as Schedule 4.6(b), were
prepared in accordance with GAAP applied on a basis consistent with that used
in the preparation of the audited Financial Statements and present fairly (i)
the financial condition, results of operations, retained earnings and cash
flows of EWD and EES on a combined basis as of December 31, 1996 and for the
year then ended, (ii) the results of operations, retained earnings and cash
flows of EWD and EES on a combined basis for the year ended December 31,
1997, (iii) the financial condition, results of operations, retained earnings
and cash flows of EWD and EES on a combined basis as of and for the quarters
ended March 31, 2000 and June 30, 2000, and (iv) the financial condition,
results of operations, retained earnings and cash flows of EWD and EES on a
combined basis as of and for the months ended July and August, 2000; provided
however, that Seller used its best efforts to ensure that the accruals set
forth in the unaudited balance sheets described above are based on reasonable
estimates. The unaudited balance sheets and related statements described in
clauses (iii) and (iv) of this Section 4.6(b) have been prepared in a manner
consistent with those statements to be furnished to Buyer pursuant to Section
4.6(c) below.
(c) Within twenty-five (25) days following the end of each
month, Seller shall deliver to Buyer correct and complete copies of the
unaudited combined balance sheet of EWD and EES as of the end of each month
ending subsequent to the date hereof and prior to the Closing Date and the
related statements of earnings, retained earnings and cash flows for each
month then ended. The unaudited Financial Statements furnished to Buyer after
the date hereof pursuant to this Section 4.6(c) will be (i) prepared in
accordance with GAAP applied on a basis consistent with that used in the
preparation of the audited Financial Statements except for the lack of
footnotes and other presentation items and except that there will be no
physical inventory count or updating of depreciation or accruals for vacation
pay, medical claims and similar items, and
17
(ii) subject to the foregoing, will present fairly the financial condition,
results of operations and cash flows of EWD and EES on a combined basis as of
and for the month then ended.
(d) All inventory of EWD and all inventory of EES as set
forth in the Financial Statements consisted of, and all such inventory as of
the Closing Date as set forth on the Closing Balance Sheet will consist of,
raw materials, supplies, work-in-process, goods in transit and finished goods
of a quality and quantity usable or salable in the ordinary course of
business of EWD and EES. The value at which inventories were reflected in the
Financial Statements was the lower of cost or market value adjusted to
conform to FIFO inventory valuation principles, all in accordance with GAAP
applied on a basis consistent with that of the preceding fiscal year.
(e) All accounts receivable of EWD (other than the accounts
receivable outstanding as of the Closing Date which are the subject of the
litigation titled XXXXXXX WINDOWS & DOORS, INC. V. VINYL PRODUCTS, INC.,
XXXXXXX X. XXXX, XXXX XXXXX AND XXXX XXXXX, 99 CIV. 00689 (M.D.N.C.) and the
Xxxxxxxx Receivables) and all accounts receivable of EES as set forth in the
Financial Statements are, and all such accounts receivable which arise
between the date hereof and the Closing Date will be, genuine, valid, binding
and subsisting, having arisen or arising out of bona fide sales and
deliveries of products or the performance of services in the ordinary course
of business consistent with past practice and are collectible in the ordinary
course of business, subject to no defenses, counterclaims or set-offs (other
than in the ordinary course), but subject to allowances and accruals for bad
debt as reflected in the Financial Statements and the Closing Balance Sheet.
Such allowances and accruals are in accordance with GAAP applied on a basis
consistent with that of the preceding fiscal year.
(f) Neither EWD nor EES has any indebtedness or capitalized
lease obligations other than as described on Schedule 4.6(f).
4.7 ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule 4.7
or as reflected in the audited Financial Statements as of and for the year
ended December 31, 1999, since January 1, 1999, EWD (or Seller on behalf of
EWD) and EES have each conducted its business only in the ordinary course
consistent with past practice, without extraordinary or unusual transactions,
and neither has:
(a) mortgaged, pledged or subjected to any lien, charge or
other encumbrance, any portion of its assets;
(b) suffered any change, event or condition that
individually or in the aggregate has had (or could reasonably be expected to
have) a Material Adverse Effect;
(c) sold, assigned or transferred any Intellectual Property
Rights;
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(d) suffered any damage, destruction or loss (whether or
not covered by insurance) which, in the aggregate, exceed $50,000;
(e) issued, sold or transferred any capital stock of EES or
other equity securities, securities convertible into capital stock of EES or
other equity securities or warrants, options or other rights to acquire
capital stock of EES or other equity securities, or any bond or debt
securities of EES;
(f) made any declaration, setting aside or payment of any
dividend, or any distribution in respect of capital stock of EES, or any
redemption, purchase or other acquisition of any capital stock of EES;
(g) increased or changed the terms of the compensation or
benefits payable or to become payable to any of its officers, directors,
employees or agents, except increases in the ordinary course of business;
(h) except for purchase orders or sales contracts issued or
entered into in the ordinary course of business, borrowed any amount or
incurred any obligations or liabilities of any kind, absolute, contingent or
otherwise, whether due or to become due, which, in the aggregate, exceed
$25,000 in value;
(i) made any unfunded or committed to make any unfunded
capital expenditures in excess of $50,000;
(j) made any change in the terms of any bonus, insurance,
pension or other benefit plan for or with any of its officers, directors,
employees or agents which increases amounts paid, payable or to become
payable thereunder, other than in the ordinary course of business;
(k) entered into any employment or collective bargaining
agreement with any individual, representative, labor organization and/or
union;
(l) received any written complaints or concerns which
relate to its labor relations;
(m) disposed of any assets, other than the disposal of
inventory in the ordinary course of business, which, in the aggregate, exceed
$50,000 in value;
(n) written down, written off, compromised or taken any
steps to accelerate collection of, any of its accounts receivable;
(o) except for purchase orders and sales contracts issued
or entered into in the ordinary course of business, entered into any
contracts, leases or license agreements which, in the aggregate, exceed
$25,000 in value;
19
(p) engaged in, or agreed to engage in, any transaction
with any Affiliate;
(q) made any change in its accounting procedures or
practices;
(r) made any unreasonable changes from its past practice
with respect to its credit criteria or failed to make any appropriate changes
to its allowance for doubtful accounts in the event its credit criteria was
reasonably changed;
(s) engaged in, or agreed to engage in, any other
transactions, except in the ordinary course of business, which, in the
aggregate, exceed $100,000 in value;
(t) deferred payment of, or except in the ordinary course
of business, compromised or adjusted any account payable or other liability
or obligation; or
(u) since April 28, 2000, caused any "employment loss," as
such term is defined in the Worker Adjustment and Retraining Notification Act.
4.8 TITLE. Except as set forth on Schedule 4.8, Seller has, and as
of the Closing Date will have and will convey and transfer to Buyer, good and
marketable title to the Purchased Assets and the Purchased Shares, free and
clear of all Encumbrances, and EES has, and as of the Closing Date will have
good and marketable title to its assets, including without limitation the EES
Fixed Assets, free and clear of all Encumbrances.
4.9 OUTSTANDING CAPITAL STOCK. EES is authorized to issue 1,000
shares of common stock, par value $.01 per share, of which only the EES
Shares are issued and outstanding. The EES Shares are owned beneficially and
of record by Seller, free and clear of all Encumbrances, and Seller has full
legal power and capacity and all authorization required by law to transfer
and deliver the EES Shares in accordance with this Agreement. None of the EES
Shares is, or at the Closing will be, subject to restrictions on the transfer
thereof, except for restrictions imposed by applicable Federal and state
securities laws. The EES Shares were duly authorized and validly issued and
are fully paid, nonassessable and free of all preemptive and other rights.
None of the EES Shares was issued in violation of any preemptive or other
right. None of the Companies are, and, at the Closing, they will not be, a
party to or bound by any contract or agreement which grants to any person or
entity an option or right of first refusal or other right of any character to
acquire at any time, or upon the happening of any stated events, shares of
capital stock or other securities of EES whether or not presently issued and
outstanding.
4.10 OUTSTANDING OPTIONS OR OTHER RIGHTS. There is no outstanding
right, subscription, warrant, call, option, or other agreement of any kind to
issue, purchase or otherwise to receive from EES or Seller any of the
outstanding, the authorized but unissued, the unauthorized or the treasury
shares of the capital stock or any other security of EES, and there is no
outstanding security of any kind convertible or exchangeable into capital
stock of EES.
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4.11 BUSINESS OF EWD AND EES. Except for the Excluded Assets, the
Purchased Assets include all assets necessary, and EWD does not need to rely
on any asset or service of Seller, to conduct the business of EWD in the
manner such business was conducted by Seller prior to the date hereof. Except
for the Excluded Assets, EES owns, and will own as of the Closing Date, all
assets necessary, and does not need to rely on any asset or service of Seller
other than the Purchased Assets, to conduct its business in the manner such
business was conducted prior to the date hereof.
4.12 "FOREIGN PERSON". The Seller is not a "foreign person" within
the meaning of Code Section 1445(f)(3) and Treasury Regulation Section
1.1445-2(b)(2)(i).
4.13 FIXED ASSETS. The EWD Fixed Assets and the EES Fixed Assets
are, and as of the Closing Date will be, in good operating condition and
repair and capable of continued operation in accordance with applicable
permits, ordinary wear and tear excepted, subject to routine maintenance and
repair in accordance with past practice. The capital expenditures shown on
the Financial Statements have been spent in respect of the EWD Fixed Assets
and the EES Fixed Assets.
4.14 BOOKS AND RECORDS. The EWD Books and Records and the EES Books
and Records have been maintained in the ordinary course of business and
reflect bona fide transactions.
4.15 REAL ESTATE.
(a) Except as set forth on Schedule 4.15, JE has good and
marketable title to the Real Estate located at The Welcome Business Center in
Welcome, North Carolina, and Seller has a valid and subsisting leasehold
interest in and to the Leased Real Estate, free and clear of any Encumbrance,
except for installments of special assessments not yet delinquent, recorded
easements, covenants and other restrictions, and utility easements, building
restrictions, zoning restrictions, and other easements and restrictions
existing generally with respect to properties of a similar character that do
not, individually or in the aggregate, affect materially and adversely the
current use, occupancy, value or marketability of title of the Real Estate.
(b) There are no pending or, to the Knowledge of Seller,
threatened condemnation or eminent domain proceedings, lawsuits or
administrative actions relating to the Real Estate or other matters affecting
materially and adversely the current use, occupancy or value thereof, or, to
the Knowledge of the Seller, any basis therefor.
(c) The buildings and improvements are located within the
boundary lines of the Real Estate, are not in violation of applicable setback
requirements, zoning laws, and ordinances and do not encroach on any
easement, except that with respect to the Leased Real Estate the foregoing is
to the Knowledge of Seller.
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(d) All plants, facilities and structures used in the
operation of the business of EWD and/or EES are suitable for the purposes
used, are adequate and sufficient for all current operations of their
respective businesses and, subject to ordinary wear and tear, are in good
operating condition and repair, except that with respect to the Leased Real
Estate the foregoing is to the Knowledge of Seller.
(e) There are no leases, subleases, licenses, concessions,
or other agreements, written or oral, granting to any party or parties other
than the Companies the right of use or occupancy of any portion of the Real
Estate, except that with respect to the Leased Real Estate the foregoing is
to the Knowledge of Seller.
(f) There are no outstanding options or rights of first
refusal to purchase the Real Estate or any portion thereof or interest
therein, except that with respect to the Leased Real Estate the foregoing is
to the Knowledge of Seller.
(g) There are no parties other than the Companies in
possession of the Real Estate, except that with respect to the Leased Real
Estate the foregoing is to the Knowledge of Seller.
(h) Ingress and egress to and from The Welcome Business
Center in which certain Real Estate is located and, to the Knowledge of
Seller, to and from the property on which the Leased Real Estate is located,
are provided over and across publicly dedicated paved streets, which are
maintained by the local municipality and, to the Knowledge of Seller, there
are no proposals to change such access roads adjoining or abutting the Real
Estate or to change the grade of such access roads.
(i) Except as set forth on Schedule 4.15, the Real Estate
is serviced by adequate water, sewer and utility service in connection with
the current and anticipated use thereof, except that with respect to the
Leased Real Estate the foregoing is to the Knowledge of Seller.
(j) The Real Estate and the improvements erected thereon
are currently located in an area whose zoning classification permits the
development, use and operation of the Real Estate as currently used without
special exception or permit, except that with respect to the Leased Real
Estate the foregoing is to the Knowledge of Seller, and neither Seller nor
EES has received any notice of any proceeding to change adversely or
down-zone the existing zoning classification as to any portion of the Real
Estate.
(k) Seller has delivered to Buyer copies of all
certificates of occupancy with respect to the Real Estate located at The
Welcome Business Center in Welcome, North Carolina.
(l) The improvements to the Real Estate have been
constructed in accordance with, and comply with, all requirements of all
applicable laws, ordinances, regulations and orders, including without
limitation applicable zoning, building and fire
22
safety codes and all restrictive covenants, if any, and other easements,
encumbrances or agreements affecting title to the Real Estate, except that
with respect to the Leased Real Estate the foregoing is to the Knowledge of
Seller, and no written outstanding notices of violation of any law,
regulation, ordinance, order or requirement has been received by the Seller
or EES or their respective Affiliates. No portion of the Real Estate is a
designated historic property or subject to any laws, ordinances, regulations
or orders which, in the event of total or partial casualty, would prevent the
reconstruction of the improvements to the Real Estate or the restoration of
the current use of such improvements at the time of such casualty as a matter
of right without special exception or permit, except that with respect to the
Leased Real Estate the foregoing is to the Knowledge of Seller
4.16 LEASES AND FACILITIES. Schedule 4.16 hereto sets forth a true,
correct and complete list of all real property owned or used by EWD or EES in
the operation of their respective businesses, together with a list of each
lease, sublease, license or any other instrument under which Seller, EWD
and/or EES claims or holds a leasehold or other interest or right to the use
thereof, and with respect to the leases, subleases, licenses and other
instruments on Schedule 4.16, identifying which of those leases, subleases,
licenses or other instruments, if any, require that a consent be obtained
(from any lessors, guarantors or any other third parties) before a valid
transfer of such leases, subleases, licenses or other instruments may be
obtained, and identifying in each instance the party which is required to
grant consent thereto, the location of the premises, the date and term of the
agreement, the amount of the monthly rent and any additional material terms
thereof. Such leases, subleases, licenses and other agreements are valid,
subsisting, in full force and effect and binding upon the parties thereto in
accordance with their terms, and there is no default or event which with the
giving of notice or passage of time, or both, would result in a default under
such agreement. All of the facilities set forth on Schedule 4.16 had, and
have, all permits or other authorizations required for their construction and
operation, and are equipped in conformity with all laws and governmental
regulations and authorizations applicable to EWD and EES and to their
respective businesses, and all such permits are validly issued, in good
standing and in full force and effect, except that with respect to the Leased
Real Estate the foregoing is to the Knowledge of Seller, and, except as set
forth on Schedule 4.23, all such permits will transfer to Buyer as part of
the Contemplated Transactions with no further authorization or consent. Prior
to the date hereof, Seller has delivered to Buyer true, correct and complete
copies of all of the leases, subleases, licenses and other instruments set
forth on Schedule 4.16 and any related agreements. The Seller and/or EES has
paid in full or accrued all amounts due, and has satisfied in full or accrued
all liabilities due and payable under such leases, subleases, licenses and
other agreements. Neither the Seller nor EES is, and as of the Closing Date
neither will be, in default under any of such leases, subleases, licenses or
other agreements, nor to the Knowledge of Seller, is any other party in
default thereunder, and no facts or circumstances have occurred which, with
the giving of notice or the passage of time or both, would constitute a
default under any of such leases, subleases, licenses or other agreements.
23
4.17 TAX MATTERS.
(a) Each of Seller and EES has timely filed, or caused to
be timely filed, all Tax Returns required to be filed by it with all
governmental entities, including, without limitation, all Tax Returns due on
a quarterly basis, and all such Tax Returns which have been filed are
accurate and complete in all material respects and were prepared in
accordance with applicable law. Except as set forth on Schedule 4.17(a), no
extension of time within which to file any Tax Return which has not been
filed has been requested by Seller or EES.
(b) Each of the Seller and EES has timely paid (or there
has been timely paid on its behalf) all Taxes required to be paid, withheld,
or deducted, or for which the Seller or EES is liable, whether or not such
Taxes are shown (or required to be shown) on a Tax Return, including, without
limitation, all quarterly or estimated payments and deposits. The Financial
Statements reflect an adequate accrual or reserve (without regard to deferred
Tax assets and liabilities) for all Taxes not yet due and payable.
(c) The Seller has delivered to, or made available for
inspection by, the Buyer true, correct and complete copies of all Tax
Returns, audit and examination reports, and statements of deficiencies filed
by, assessed against or agreed to by either Seller or EES for all periods and
will deliver to, or make available for inspection by (including providing
notice to Buyer of Seller's receipt thereof), Buyer any such documents
received on or before the Closing Date immediately upon receipt. Except as
set forth on Schedule 4.17(c), neither Seller nor EES has received written
notice of any deficiencies for any Taxes asserted or assessed against the
Seller or EES that remain unpaid. Except as set forth on Schedule 4.17(c),
neither the Seller nor EES has received any written notice that the Tax
Returns of the Seller or EES are currently being or may be audited or
examined by the Internal Revenue Service or any other state, local or foreign
governmental authority. Except as set forth on Schedule 4.17(c), no
examinations, actions, suits or proceedings with respect to Taxes are pending
or threatened against the Seller or EES. Neither the Seller nor EES has
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(d) Neither the Seller nor EES has agreed or is required to
include in income any adjustment under either Section 481(a) or Section 482
of the Code (or an analogous provision of state, local or foreign law) by
reason of a change in accounting method or otherwise and neither the Seller
nor EES has proposed such adjustment or received written notice that the
Internal Revenue Service or another taxing authority has proposed such
adjustment. Neither the Seller nor EES has received written notice of a claim
made by any Taxing authority in a jurisdiction where the Seller or EES, as
the case may be, does not file Tax Returns that the Seller or EES is or may
be subject to Tax in such jurisdiction. Except as set forth on Schedule
4.17(d), neither Seller nor EES has
24
been a member of an "affiliated group" within the meaning of Code Section
1504(a)(1) (or affiliated, combined, consolidated, unitary or similar group
for state, local or foreign Tax purposes) other than the affiliated group
which currently consists of only Seller and EES, nor has the Seller or EES
elected or been required to join in any consolidated, combined, unitary or
similar group with respect to Federal, state, local or foreign Tax filings.
EES has not made any payments, is not obligated to make any payments, and is
not a party to any agreement that would reasonably be expected to obligate it
to make any payments that will not be deductible by reason of Section 280G of
the Code. There are no Tax rulings, requests for rulings or closing
agreements with any Tax authority with respect to Seller or EES. EES has no
deferred income reportable for a current tax period (or portion thereof) or a
period (or portion thereof) beginning after the Closing Date but that is
attributable to a transaction (e.g., an installment sale) occurring in a
period (or portion thereof) ending on or prior to the Closing Date. Except as
shown on Schedule 4.17(d), none of the presently outstanding debt of the
Seller or EES is "corporate acquisition indebtedness" within the meaning of
Section 279(b) of the Code. Each of the Seller and EES has disclosed on its
federal income Tax Returns all positions taken therein which would reasonably
be expected to result in any "substantial understatement of federal income
tax" within the meaning of Section 6662 of the Code.
(e) Neither Seller nor EES (i) is, or has ever been, a
party to, bound by or subject to any Tax allocation or Tax sharing agreement
(or similar agreement), (ii) has any current or potential contractual
obligation to indemnify any other person with respect to Taxes, or (iii) is a
party to any joint venture, partnership, contract or other arrangement which
is treated (or could be treated) as a partnership for U.S. federal income Tax
purposes (other than real estate partnerships entered into by Seller through
its Properties Division, none of which is included in the Contemplated
Transactions). Schedule 4.17(e) sets forth a list of states, territories and
jurisdictions (whether foreign or domestic) in which EES and Seller with
respect to EWD are required to file Tax Returns, including, without
limitation, sales tax returns. There are no liens for Taxes (other than for
Taxes not yet due and payable) upon any of the assets of EES or Seller. EES
has not disposed of any property in a transaction being accounted for under
the installment method pursuant to Section 453 of the Code pursuant to which
income would be includable by EES after the Closing Date. No power of
attorney with respect to any matter relating to Taxes of EES will be in
effect after the Closing Date. Seller is not a "foreign person" within the
meaning of Code Section 1445(f)(3) and Treasury Regulation Section
1.1445-2(b) (2) (i). Except as set forth on Schedule 4.17(e), none of the
assets of EES or the Purchased Assets is or could be treated as (i) an equity
interest in a corporation (or an entity treated as a corporation for U.S.
federal income tax purposes), (ii) an interest in a partnership (or an entity
treated as a partnership for U.S. federal income tax purposes), or (iii) any
interest in an entity (e.g., a corporation or a trust) for U.S. federal
income tax purposes. Neither Seller nor EES has distributed the stock of any
corporation in a transaction satisfying the requirements of Section 355 of
the Code since April 16, 1997. The stock of neither Seller nor EES has been
distributed in a transaction satisfying the requirements of Section 355 of
the Code since April 16, 1997. There are no outstanding options,
25
warrants, securities convertible into stock, or other contractual obligations
that might be treated for U.S. federal income tax purposes as stock or
another equity interest in EES. Effective December 1, 1990, Seller with the
requisite consent of its stockholders, validly elected to be treated as an S
corporation under Section 1362 of the Code (or its predecessor Code
provision) and under the corresponding provisions of applicable state and
local laws where it is required to file Tax Returns, which election, except
as set forth on Schedule 4.17(e), was effective for each year of the
existence of Seller (and any predecessor thereof). Seller has provided to
Buyer evidence of the approval of such election by the Internal Revenue
Service. Seller's election to be treated as an S corporation has never been
terminated or revoked, is currently in effect and will continue to be in
effect through the Closing Date. Seller's liability for Taxes under Section
1374 of the Code in connection with any sale, transfer or exchange of any of
its assets (including, without limitation, in connection with any transaction
contemplated hereby) is, or will be after the Contemplated Transactions, less
than $500,000. Except as set forth on Schedule 4.17(c), since September 30,
1999, neither Seller nor EES has (A) changed any practice with respect to
Taxes, (B) made, changed or revoked any Tax election or (C) settled or
compromised any Tax liability. There are no (without regard to the
Contemplated Transactions), and have not been any, limitations on the ability
of EES to use any net operating loss carryovers that were claimed on any Tax
Returns or claim otherwise deductible amounts (including, without limitation,
under Sections 382, 383 and 384 or other applicable provisions of the Code or
the Treasury regulations thereunder).
(f) EES is not and has not ever been required to pay or
collect, and has no liability for, sales tax, use tax or other transaction
tax on transactions between EES and Seller.
4.18 EMPLOYMENT AGREEMENTS; EMPLOYEE HANDBOOKS. Except as set forth
on Schedule 4.18, the Companies have no written or oral employment,
consulting or similar agreements or commitments with employees assigned to
EWD and/or employees of EES. Seller has delivered to Buyer copies of the
employee handbook applicable to employees of EWD and EES.
4.19 EMPLOYMENT MATTERS. There are no collective bargaining
agreements covering any employees of the Companies, nor do the Companies have
a duty to bargain with any labor organization. Except as set forth on
Schedule 4.19, there are no controversies pending, or to the Knowledge of
Seller, threatened against the Companies involving their respective
employees, former employees, job applicants, or any association or group of
such persons, and neither of the Companies has acted, or failed to act, in a
manner that would provide a reasonable basis for such a controversy. Each of
the Companies has complied with all laws applicable to them relating to
employment, including, without limitation, any provisions relating to wages,
hours, collective bargaining and the payment of social security and similar
taxes, except for failures to so comply that would not, individually or in
the aggregate, result in an economic cost of $75,000 or more. To the
Knowledge of Seller, except as set forth on Schedule 4.19, there
26
are no activities or proceedings of any labor union (or representatives
thereof) to organize any employees of the Companies. Neither of the Companies
has experienced or, to the knowledge of Seller, been threatened with any work
stoppage. There is not pending any demand for recognition or any other
request or demand from a labor organization for representative status with
respect to any persons employed by the Companies.
4.20 EMPLOYEE BENEFIT PLANS.
(a) Except as listed and described on Schedule 4.20, with
respect to employees of the Companies or any trade or business required to be
aggregated with either of them under subsections (b), (c) or (m) of section
414 of the Internal Revenue Code ("ERISA Affiliates"), neither of EWD or EES
nor any ERISA Affiliate maintains or is obligated to contribute to (i) any
"employee pension benefit plans" (the "Pension Plans"), as such term is
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974 ("ERISA"), (ii) any "employee welfare benefit plans" (the "Welfare
Plans"), as such term is defined in Section 3(1) of ERISA or (iii) any other
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, educational assistance, vacation, sick
pay, holiday pay or profit-sharing plan, program, agreement or arrangement
(other than arrangements involving the payment of regular wages) for the
benefit of any current or former employee, director or independent contractor
of either of the Companies or any ERISA Affiliate (the "Non-ERISA Plans").
The Pension Plans, the Non-ERISA Plans, and the Welfare Plans are
collectively referred to as the "Plans." Each of the Pension Plans on
Schedule 4.20 that are intended to be qualified under Internal Revenue Code
section 401(a) has received a favorable determination letter from the IRS
that it is so qualified and that the related trusts are exempt from tax under
section 501(a) of the Code, and Seller is not aware of any fact or
circumstance that would jeopardize the qualification of such Pension Plans.
Except for amendments with respect to which the remedial amendment period
under section 401(b) of the Code has not expired, the Plans comply in form
and in operation with the requirements of the Internal Revenue Code, ERISA
and any other applicable laws, except for failures to so comply that would
not, individually or in the aggregate, result in an economic cost of $50,000
or more. Neither of the Companies has any formal plan or commitment to create
any additional Plan or modify or change any existing Plan that would result
in a material increase in the cost of such Plan to either of the Companies.
None of the Pension Plans is subject to section 302 of ERISA, section 412 of
the Code, or Title IV of ERISA, nor has either of the Companies or any ERISA
Affiliate maintained or contributed to any such Plan. None of the Plans is a
"multiemployer plan" as defined in Section 3(37) of ERISA, nor has either of
the Companies or any ERISA Affiliate been required to contribute to or had
any obligation with respect to any such Plan within the five-year period
ending on the Closing Date. Except for any Pension Plan, none of the benefits
under any of the Plans is funded through a trust.
27
(b) With respect to each of the Plans, (i) the cost of any
benefit arising prior to the Closing Date has been, or will be as of the
Closing Date, paid or properly accrued by Buyer on the EWD Books and Records
or the EES Books and Records, (ii) there are no actions, suits or claims
pending or, to the Knowledge of the Seller, threatened, other than routine
claims for benefits, and (iii) there have been no "prohibited
transactions"(as that term is defined in Section 406 of ERISA or Section 4975
of the Code) that could result in liabilities in excess of $50,000 to either
EWD or EES.
(c) With respect to each Plan, Seller has furnished or made
available to Buyer true, accurate and complete copies of (i) the most recent
determination letter received from the IRS regarding any Plan; (ii) the three
most recent Forms 5500 and financial statements for the Plans; (iii) a copy
of each Plan (including all amendments thereto); (iv) a copy of the most
recent Summary Plan Description, together with each Summary of Material
Modifications, required under ERISA with respect to such Plan; (v) if the
Plan is funded through a trust or any third party funding vehicle, such as an
insurance contract, a copy of the trust or other funding agreement (including
all amendments thereto) and the latest financial statements thereof; (vi) all
contracts relating to the Plans with respect to which either of the Companies
may have any liability, including, without limitation, insurance contracts,
investment management agreements, subscription and participation agreements
and record keeping agreements; and (vii) a copy of all material documents and
correspondence relating to the Plans received from or provided to the
Department of Labor or the IRS during the past three (3) years and any
applicable tax determination letters.
(d) Neither of the Companies and, to the Knowledge of the
Seller, none of their respective directors, officers, employees or any
"fiduciary," as such term is defined in section 3 of ERISA, has committed any
breach of fiduciary responsibility imposed by ERISA or any other applicable
law with respect to the Plans that would subject Buyer, EWD or EES to
liabilities in excess of $50,000.
(e) Except as set forth on Schedule 4.20, no employee of
either of the Companies will be entitled to any additional benefits or any
acceleration of the time of payment or vesting of any benefits under any Plan
as a result of the Contemplated Transactions.
(f) The Companies have properly classified individuals
providing services to either of EWD or EES as employees or non-employees,
except to the extent that misclassifications would not result in liabilities
to Buyer in excess of $50,000. Schedule 4.20 lists all persons who have
provided services to the Companies for more than 500 hours in any 12-month
period during the three-year period ending on the Closing Date in any
capacity other than as a common-law employee.
(g) Except as described on Schedule 4.20, no Plan provides
benefits, including, without limitation, death or medical benefits (whether
or not insured), with respect to current or former employees upon retirement
or other termination of service
28
(other than (i) coverage mandated by applicable law, (ii) death benefits or
retirement benefits under a Pension Plan, (iii) deferred compensation
benefits accrued as liabilities on the respective books of EWD and EES, or
(iv) benefits the full cost of which is borne by the current or former
employee (or his beneficiary)). The list of Plans on Schedule 4.20 discloses
whether each Welfare Plan is insured. No Plan is subject to laws of a country
or jurisdiction other than the United States.
4.21 NON-COMPETITION AGREEMENTS. Except as set forth on Schedule
4.21, neither EES nor Seller is a party to any agreement or other commitment
imposing any restriction on the manner or in the geographic location in which
it conducts or may conduct its business or uses or may use its properties or
assets in competition with any third party.
4.22 BANK ACCOUNTS AND DIRECTORS AND OFFICERS. Schedule 4.22
contains a true and complete list of the name and location of each bank in
which EES has an account, each safety deposit box or custody agreement and
the names of the persons authorized to draw thereon or to withdraw therefrom.
Schedule 4.22 also sets forth the names of all directors and officers of EES.
4.23 LICENSES AND PERMITS. The Companies have all necessary
licenses, permits, consents, authorizations and approvals from all
appropriate governmental or quasi-governmental authorities required for the
operation of the businesses of EWD and EES and the use and operation of the
Real Estate and all such licenses, permits, consents, authorizations and
approvals are listed on Schedule 4.23 (the "Permits"). The Permits are
validly issued, in good standing and in full force and effect.
4.24 LEGAL PROCEEDINGS. Except as set forth on Schedule 4.24, (a)
there is no litigation, arbitration or other proceeding or governmental
investigation pending or, to the Knowledge of Seller, threatened against the
Companies, the Purchased Assets, the assets of EES, including, without
limitation, the EES Fixed Assets, the Purchased Shares, or the Contemplated
Transactions, and, to the Knowledge of Seller, there is no basis for any such
action; (b) there are no actions pending or, to the Knowledge of Seller,
threatened by any governmental or quasi-governmental agency with respect to
compliance by the Companies with applicable laws, ordinances or regulations
and, to the Knowledge of Seller, there is no basis for any such action; and
(c) to the Knowledge of Seller, there is no outstanding execution, order,
writ, injunction, judgment or decree of any court, government or governmental
agency against the Companies, the Purchased Assets, the assets of EES,
including, without limitation, the EES Fixed Assets, or the Purchased Shares
or to which the Companies, the Purchased Assets, the assets of EES, including
without limitation, the EES Fixed Assets, or the Purchased Shares are subject.
4.25 UTILITIES. Except as set forth on Schedule 4.15 or Schedule
4.25, each of the Companies has available sufficient power, fuel oil, natural
gas and water supplies and adequate sewage, waste disposal and air emission
systems for the operation of its respective business and, to the Knowledge of
Seller, all such supplies and systems have
29
been and are in full compliance with all federal, state and local
environmental and other regulatory laws and regulations. To the Knowledge of
Seller, the supplies and systems, including utility services, referred to in
this Section 4.25 will be available to Buyer subsequent to the Closing.
4.26 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.26, the
Companies, and their respective properties and operations, are and have since
inception been in compliance with all applicable federal, state, local and
foreign laws, ordinances, regulations, orders, judgments, injunctions,
awards, decrees and other requirements of any governmental or
quasi-governmental body, court or arbitrator, except failures to so comply
that would not, individually or in the aggregate, result in an economic cost
of $100,000 or more.
4.27 ENVIRONMENTAL MATTERS. Notwithstanding the representations and
warranties set forth in Section 4.26 hereof,
(a) Except as set forth on Schedule 4.27, the Companies are
not and have not been in violation of or delinquent under, nor have they,
individually or together, received any notice of any violation of or
delinquency with respect to any applicable Environmental and Safety Laws.
There are no circumstances or conditions existing at any owned or leased real
property used by either of the Companies that could reasonably be expected to
prevent or interfere with such compliance in the future. Except as set forth
on Schedule 4.27, the Companies have obtained all permits, authorizations or
approvals required under applicable Environmental and Safety Laws
(collectively, "Safety and Environmental Permits"), and all such Safety and
Environmental Permits are valid and in good standing and transferable to
Buyer as part of the Contemplated Transactions without consent of or notice
to the governmental authority issuing the permit, authorization or approval.
(b) There is no Environmental or Safety Claim pending or,
to the Knowledge of the Seller, threatened against either of the Companies,
individually or together, or relating to the Purchased Assets, the assets of
EES or the Purchased Shares, or any owned or leased real property used by
either of the Companies.
(c) There are no past or present actions, activities,
circumstances, conditions, events or incidents, including without limitation
the Release, transportation, treatment, storage, recycling or reclamation of
any Hazardous Material at any location, that could reasonably be expected to
form the basis of any Environmental or Safety Claim against either of the
Companies, or relating to the Purchased Assets, the assets of EES or the
Purchased Shares, or any owned or leased real property used, or previously
owned, operated or used, by either of the Companies.
(d) None of the Companies has, and to the Knowledge of the
Seller, no other person has, caused a Release of any Hazardous Material at,
on, under, from or
30
otherwise affecting the soil, surface water or groundwater at any owned or
leased real property used, or previously owned, operated or used, by either
of the Companies.
(e) Except as disclosed on Schedule 4.27, there are no
underground or above ground storage tanks located at any leased or owned real
property used by either of the Companies, and none of the Companies has
installed, owned or operated any underground or above ground storage tanks at
any such properties.
(f) Except as disclosed on Schedule 4.27, there are no past
or present actions, activities, circumstances, conditions, events or
incidents, including without limitation the Release, transportation,
treatment, storage, recycling or reclamation of any Hazardous Material, and
or otherwise relating to any violation or alleged violation of law, that
could reasonably be expected to form the basis for any Environmental or
Safety Claim relating to any former properties, assets, operations or
business, owned, operated, or conducted by either of the Companies,
individually or together, or any of their respective predecessors.
(g) Seller has provided Buyer with copies of all surveys,
reports, assessments, audits, evaluations, sampling results, or other
documents relating to compliance with or violation or suspected violation of
Environmental and Safety Laws, or to the handling, storage, transportation or
Release of any Hazardous Material, prepared by, for or at the request of
either of the Companies or in their possession and relating to the Purchased
Assets, the assets of EES or the Purchased Shares, or to any former
properties, assets, operations or business of either of the Companies,
individually or together, or any of their respective predecessors, or in the
possession of any Affiliate of either of the Companies and relating to either
of the Companies or any owned or leased real property used by either of the
Companies.
4.28 ASSUMED AGREEMENTS. Except for purchase orders and sales
contracts issued or executed in the ordinary course of business and except
for deferred compensation agreements that are not Assumed Agreements, the
Assumed Agreements listed on Schedule 1.5 are all of the contracts and
agreements that (i) are material to the business of EWD, (ii) involve
performance of services or the delivery of goods or materials of an amount or
value in excess of $50,000, (iii) involve expenditures or receipts in excess
of $50,000, (iv) relate to the borrowing of money or capital expenditures or
relate to mortgaging, pledging or otherwise placing a lien on any portion of
EWD's assets, (v) provide a guaranty of any obligation for borrowed money or
other guaranty; (vi) relate to any lease or agreement with respect to EWD
under which Seller is a lessee or lessor of, or holds or operates, or permits
any third party to hold or operate, any personal or real property for which
the annual rental exceeds $50,000; (vi) restrict a third party from competing
with EWD; (vii) relate to any representative or sales agency contracts or
commitments to which Seller is a party; or (viii) include any Affiliate as a
party. There have been delivered to Buyer true and complete copies of all
Assumed Agreements (and all amendments, waivers and other modifications
thereto). All of the
31
Assumed Agreements are valid, in full force and effect, binding upon Seller
and, to the Knowledge of Seller, binding upon the other parties thereto in
accordance with their terms and, Seller is not in default under any of them
nor, to the Knowledge of Seller, is any other party thereto in default
thereunder, nor does any condition exist that with notice or lapse of time or
both would constitute a default thereunder.
4.29 EES AGREEMENTS. Except for purchase orders and sales contracts
issued or executed in the ordinary course of business, the agreements listed
on Schedule 4.29 (the "EES Agreements") are all of the contracts and
agreements that (i) are material to the business of EES, (ii) involve
performance of services or the delivery of goods or materials of an amount or
value in excess of $50,000, (iii) involve expenditures or receipts in excess
of $50,000, (iv) relate to the borrowing of money or capital expenditures, or
relate to mortgaging, pledging or otherwise placing a lien on any portion of
EES's assets, (iv) provide a guaranty of any obligation for borrowed money or
other guaranty; (v) relate to any lease or agreement under which EES is a
lessee or lessor of, or holds or operates, or permits any third party to hold
or operate, any personal or real property for which the annual rental exceeds
$50,000; (vi) restrict a third party from competing with EES; (vii) relate to
the acquisition by EES of the capital stock of any third party entity or
granting EES an option to purchase any asset, tangible or intangible, or real
or personal property of any third party entity; (viii) relate to any
representative or sales agency contracts or commitments to which EES is a
party; or (ix) include any Affiliate as a party. There have been delivered to
Buyer true and complete copies of the EES Agreements (and all amendments,
waivers and other modifications thereto). All of the EES Agreements are
valid, in full force and effect, binding upon EES and, to the Knowledge of
Seller, binding upon the other parties thereto in accordance with their terms
and EES is not in default under any of them nor, to the Knowledge of Seller,
is any other party thereto in default thereunder, nor does any condition
exist that with notice or lapse of time or both would constitute a default
thereunder.
4.30 ABSENCE OF UNDISCLOSED LIABILITIES. There are no liabilities or
obligations of either of EWD or EES, either accrued, absolute, contingent or
otherwise, including, but not limited to, any liabilities for Taxes due or to
become due, except:
(a) to the extent reflected in the December 31, 1999
balance sheet included as part of Schedule 4.6(a) and not heretofore paid or
discharged,
(b) those incurred, consistently with past business
practice, in or as a result of the normal and ordinary course of business
since December 31, 1999,
(c) liabilities or obligations specifically disclosed in
the Schedules to this Agreement, and
(d) liabilities or obligations not required by GAAP to be
reflected in the Financial Statements and of which Seller has no Knowledge;
provided, however, that
32
the Financial Statements shall reflect an adequate accrual or reserve for all
Taxes not yet due and payable (without regard to deferred Tax assets and
liabilities).
4.31 DISCLOSURE. Neither (i) this Agreement, (ii) any document or
certificate furnished or to be furnished to Buyer in connection with the
Closing, (iii) any document specifically referenced in this Agreement, (iv)
any of the financial EES Books and Records or any of the financial EWD Books
and Records (other than financial projections and other than financial
information to the extent it has been updated by more recent financial
information), nor (v) any statement made in any Schedule to this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make any statement herein
or therein not misleading. Seller has made available for inspection by Buyer
and its representatives complete and correct copies of the corporate minute
books of the Companies. Such minute books contain the minutes of all meetings
of stockholders, the Board of Directors and any committees thereof of the
Companies that have been held prior to the date hereof and all written
consents to action executed in lieu thereof, except that certain matters have
been approved or adopted informally or without minutes. No matter or
transaction material to EWD, EES or the Contemplated Transactions that has
not been described or disclosed to Buyer in the Disclosure Schedules has been
approved or adopted informally and without written minutes.
4.32 INTELLECTUAL PROPERTY RIGHTS.
(a) "Intellectual Property Rights" shall mean all patents
and patent applications, trademarks, service marks, logos, trade names,
slogans, trade dress rights (whether registered or unregistered) and
applications for registration and registrations therefore; Internet domain
names and 1-800 and 1-888 telephone numbers; all permits, grants, franchises
and licenses to or from either of the Companies; all copyrights, including
rights in advertising and promotional material (whether registered or
unregistered) and applications for registration and registrations therefor;
and all Confidential Information (as hereinafter defined), used or developed
by either of the Companies, or in which either of the Companies has an
interest, used in connection with the business of EWD and/or EES, and their
respective actual or potential use or application, including but not limited
to those Intellectual Property Rights set forth on Schedule 4.32. No other
patent, trademark, service xxxx, trade name, copyright, confidential
information or any other intellectual property right or license under any
such patent, trademark, service xxxx, trade name, copyright, confidential
information or any other intellectual or intangible property is necessary to
permit either of EWD or EES to be owned by Buyer or their respective
businesses to be conducted as now conducted or as heretofore or proposed to
be conducted. To the Knowledge of Seller, except as set forth on Schedule
4.32 and Schedule 4.5, the Companies own exclusively and/or have the
33
exclusive and unrestricted right to use, free and clear of all Encumbrances,
all Intellectual Property Rights, and all renewals therefor and claims for
infringement thereof, and after the Closing, to the Knowledge of Seller, the
Buyer will own exclusively and/or have the exclusive and unrestricted right
to use, free and clear of all Encumbrances, all Intellectual Property Rights,
and all renewals therefor and claims for infringement thereof. Except for the
license agreements listed on Schedule 1.5, neither of the Companies is
obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant
to, any patent, trademark, service xxxx, trade name, copyright, confidential
information or other intangible asset, with respect to the use of any of the
Intellectual Property Rights, in connection with the ownership of their
assets, the conduct of their business or otherwise, and after the Closing,
the Buyer will not be obligated or under any liability whatsoever to make any
payments by way of royalties, fees or otherwise to any owner or licensee of,
or other claimant to, any patent, trademark, service xxxx, trade name,
copyright or other intangible asset, with respect to the use of any of the
Intellectual Property Rights, in connection with the ownership of their
assets, the conduct of their business or otherwise. Neither of the Companies
has licensed or transferred any of the Intellectual Property Rights to any
third party. Except as described on Schedule 4.32, neither of the Companies
is in violation or infringement of, or has violated or infringed, any
proprietary or intellectual property rights of any third party. Neither of
the Companies has received any demand, claim, notice or inquiry from any
third party with respect to any of the Intellectual Property Rights which
challenges, threatens to challenge, or inquires as to whether there is any
basis to challenge, the validity of, or the rights of either of the Companies
in, any such Intellectual Property Rights, and neither of the Companies knows
of any basis for any such challenge. To the Knowledge of Seller, none of the
Intellectual Property Rights is being infringed or potentially infringed.
(b) The Companies have the unrestricted right to use all
Confidential Information required for or incident to the development,
manufacture, operation, advertisement, promotion, distribution and sale of
all products sold and services offered, or proposed to be sold or offered, by
each such Company free and clear of all Encumbrances, including, without
limitation, of any former employer of either of the Companies' employees.
"Confidential Information" shall mean all confidential information, know-how,
inventions, designs, customer lists, processes, computer programs (including
source code) and technical data and information.
4.33 INSURANCE. EWD and EES, individually or collectively, are
insured under various policies of fire, liability and other forms of
insurance, as set forth on Schedule 4.33 hereto, which policies are valid and
enforceable in accordance with their terms and which provide adequate
insurance for the respective businesses of EWD and EES, the Purchased Assets
and the assets of EES, in accordance with industry standards. At no time was
there a period in which the Seller and/or EES lacked such insurance coverage.
The Seller and EES shall continue to carry all such policies or similar
policies during the pendency of this Agreement, and all outstanding claims
under such policies on the date hereof are described on Schedule 4.33 hereto.
There is no recorded liability for retrospective insurance premium
adjustments for any period prior to the date hereof, but EWD and EES are
subject to routine workers' compensation audits that may result in
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adjustments. Seller is not aware of any fact or circumstances that would lead
Seller to believe that any such adjustment would be in excess of $50,000 or
historical adjustments made by EWD or EES. Schedule 4.33 hereto sets forth a
complete and accurate list of the following, each of which have been made
available to Buyer for its review:
(a) All comprehensive general liability and other policies
of insurance under which the Seller and/or EES are or have been insured at
any time within the one (1) year period immediately preceding the date of
this Agreement.
(b) All property and casualty policies of insurance under
which the Seller and/or EES are presently insured.
(c) All obligations of the Seller and/or EES to provide
insurance coverage to third parties (for example under leases or other
contracts).
(d) The expiration date of each insurance policy under
which Seller and/or EES are currently insured.
4.34 SOLVENCY. After giving effect to the consummation of the
Contemplated Transactions, Seller is solvent. For purposes of this Section
4.34, "solvent" means that the sum of the value of the person's or entity's
assets, at both fair value or fair saleable value, exceeds its indebtedness
and other probable liabilities (including contingent liabilities); "fair
value" means the value which would be realized in an exchange or series of
exchanges between a willing buyer and a willing seller, within a commercially
reasonable period of time, neither being under compulsion, each having
reasonable knowledge of all relevant facts, and assuming the retention of all
operating assets within the Seller and continuation of the operations as a
going concern; and "fair saleable value" means the value which would be
realized from an interested purchaser aware of all relevant information
relating to the assets or group of assets being sold and who is willing to
purchase under ordinary selling conditions in an existing and not theoretical
market if the assets or group of assets are disposed of within a period of
six (6) months to one (1) year. The cash flow from the operations of Seller,
after taking into account all other anticipated uses of the cash, will be
sufficient to provide cash necessary to repay its indebtedness. In
consummating the Contemplated Transactions, the Seller does not intend to
make any transfer or incur any obligations, with the intent to disturb,
delay, hinder or defraud either present or future creditors. Upon the
consummation of the Contemplated Transactions, Seller will have sufficient
capital with which to conduct its present or proposed business and its
property will not constitute unreasonably small capital with which to conduct
its present or proposed business, and will not engage in a business or
transaction for which it has unreasonably small capital.
4.35 AFFILIATED TRANSACTIONS. Except as set forth on Schedule 4.35,
since January 1, 1998 no present or former officer, director, shareholder,
employee or Affiliate of EES or Seller or, to the Knowledge of Seller, no
individual in such officer's, director's, shareholder's, employee's or
Affiliate's immediate family, is or was a party to
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any agreement, contract, commitment or transaction with EES or Seller or has
any interest in any property used by EES or EWD. Except as set forth on
Schedule 4.35, to the Knowledge of Seller, no employee of EES or Seller or
any individual in such employee's immediate family is a party to any
agreement, contract, commitment or transaction with EES or Seller or has any
interest in any property used by EES or EWD.
4.36 BROKERAGE FEES. Except as set forth on Schedule 4.36, no
brokerage commissions, finders' fees or similar compensation will be payable
to any party in connection with the Contemplated Transactions based on any
arrangement or agreement made by or on behalf of Seller or EES.
4.37 CHANGE OF CONTROL PROVISIONS. Except as set forth on Schedule
4.37, neither the execution and delivery of this Agreement or the Related
Agreements nor the consummation of the Contemplated Transactions will trigger
(i) any obligation of EES to any third party, including without limitation,
the obligation to make payment to any third party pursuant to any contract or
agreement to which EES is a party or by which it or its assets are bound, or
(ii) any termination or other rights under any of the Assumed Agreements or
the EES Agreements.
4.38 CUSTOMERS, SUPPLIERS AND DISTRIBUTORS. Each of the Companies
maintains and has good relationships with its top twenty (20) customers, and
its major suppliers of raw materials and distributors, and neither Seller nor
EES is aware of any facts that would lead to a reasonable expectation of a
material deterioration in any such relationship. Neither of the Companies is
in breach of any representation, warranty, covenant, obligation or other
provision of any outstanding agreement with any such customer, vendor,
supplier or distributor, except for breaches which would not, individually or
in the aggregate, result in an economic cost of $100,000 or more. Schedule
4.38 sets forth a list of the top twenty (20) customers, suppliers of raw
materials and distributors of each of EWD and EES.
4.39 YEAR 2000. The Companies have fully implemented their plan to
address the ability of their information systems to process date and time
data from, into and beyond the year 2000 ("Year 2000 Data"), and the ability
of such systems to interact with third parties' systems. Seller is not aware
of any instances of the information systems material to the operations of EWD
and EES being unable to accurately process Year 2000 Data.
4.40 RELATIONSHIP WITH GENERAL ELECTRIC COMPANY. Except as set forth
on Schedule 4.40, neither Seller nor EES, nor any equityholder holding at
least five percent (5%) of the equity of Seller has any equity, creditor or
similar relationship, including, without limitation, any investment in, or
any debtor, revolving credit, leasing or creditor relationship, but excluding
any vendor or vendee relationship, with General Electric Company or any
entity known by Seller or such equityholders to be a subsidiary of General
Electric Company.
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4.41 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Except as
expressly set forth in this Article 4, Seller makes no representation or
warranty, expressed or implied, including, without limitation, any
representation or warranty in respect of the Purchased Assets, the Purchased
Shares, the Assumed Agreements, the Assumed Liabilities or the businesses of
EWD and EES.
4.42 DISCLAIMER REGARDING NORANDEX/XXXXXXXX. The foregoing
representations and warranties are qualified by reference to the Chapter 11
bankruptcy filing on or about October 5, 2000, by Exterior Systems, Inc.
d/b/a Norandex/Xxxxxxxx Distribution Company ("Norandex/Xxxxxxxx") and
related entities, as a result of which contracts between Seller and
Norandex/Xxxxxxxx are subject to being rejected by Norandex/Xxxxxxxx, Seller
has certain setoffs against Norandex/Xxxxxxxx, and the basis on which
Norandex/Xxxxxxxx will continue to do business with Seller and Buyer is
subject to further negotiation.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware.
5.2 DUE AUTHORIZATION; BINDING OBLIGATION.
(a) Buyer has all requisite corporate power and authority
to enter into and deliver this Agreement and the Related Agreements and to
perform its obligations hereunder and thereunder and has duly authorized the
execution, delivery and performance of this Agreement and the Related
Agreements by all necessary corporate action.
(b) This Agreement and the Related Agreements have been
duly and validly authorized, executed and delivered by Buyer and constitute
Buyer's legal, valid and binding obligation, enforceable in accordance with
their respective terms, except as enforceability is limited by (i) principles
of equity that may restrict the availability of specific performance and
other equitable remedies (whether such enforceability is considered in a
proceeding in equity or at law) and (ii) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, fraudulent transfer and
other laws applicable to creditors' rights generally.
5.3 GOVERNMENTAL APPROVALS. Except for the requirements of the HSR
Act, the execution, delivery and performance of this Agreement and the
Related Agreements by Buyer, and consummation of the Contemplated
Transactions, are not subject to the jurisdiction, approval, notification of
or consent of any governmental, regulatory or administrative agency.
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5.4 APPROVALS AND NOTICES REQUIRED; CONFLICT WITH OTHER INSTRUMENTS.
Except as described on Schedule 5.4, the execution, delivery and performance
of this Agreement and the Related Agreements by Buyer and the consummation of
the Contemplated Transactions will not violate (with or without the giving of
notice or the lapse of time or both) or require any consent or approval,
filing or notice under and will not conflict with, or result in the breach or
termination of any provision of, or constitute a default under, or result in
the acceleration of the performance of the obligations of Buyer under,
Buyer's Certificate of Incorporation or Bylaws or under any indenture,
mortgage, deed of trust, lease, license agreement, contract, instrument or
other agreement, or any law, order, judgment or decree to which Buyer is a
party or by which Buyer is bound.
5.5 LITIGATION. There is no litigation, arbitration or other
proceeding or governmental investigation pending or, to the knowledge of
Buyer, threatened against the Contemplated Transactions.
5.6 INVESTMENT REPRESENTATION. Buyer is purchasing the Purchased
Shares for its own account for investment purposes and not with a view to or
for the sale in connection with any public distribution of such securities,
except in compliance with applicable federal or state securities laws.
5.7 BROKERAGE FEES. No brokerage commissions, finders' fees or
similar compensation arrangements will be payable to any party in connection
with the Contemplated Transactions based on any arrangement or agreement made
by or on behalf of Buyer.
ARTICLE 6. CONDITIONS TO BUYER'S PERFORMANCE
The obligations of Buyer under this Agreement shall be subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
6.1 FINANCING. Buyer and/or Holdings shall have obtained the debt
financing and/or equity financing necessary to consummate the Contemplated
Transactions on terms substantially similar to those described on Schedule
7.7 and Buyer shall be permitted to incur such financing under its existing
financing arrangements.
6.2 COMPLIANCE BY SELLER. Seller shall have complied with and
performed all its agreements and obligations under the terms, covenants and
conditions of this Agreement to be complied with or performed by it on or
prior to the Closing Date.
6.3 REPRESENTATIONS AND WARRANTIES OF SELLER. The representations
and warranties of Seller contained in this Agreement shall be true and
correct as of the Closing Date, with the same force and effect as if made as
of the Closing Date, except for those representations and warranties that
specifically refer to some other date.
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6.4 CERTIFICATE OF SELLER. The Seller's Chief Executive Officer
shall have delivered to Buyer a certificate, stating that the conditions
specified in Sections 6.2 and 6.3 have been fulfilled by Seller dated as of
the Closing Date.
6.5 CONSENTS, PERMITS, AND WAIVERS. The Seller shall have obtained
all of the consents, permits and waivers set forth on Schedule 6.5 in form
and substance reasonably satisfactory to Buyer.
6.6 BUYER'S CONSENTS. The Buyer shall have obtained all of the
consents and waivers set forth on Schedule 5.4.
6.7 DELIVERY OF ARTICLES OF INCORPORATION, BY-LAWS AND OTHER
DOCUMENTS. Each of the Companies shall have delivered to Buyer each of the
following:
(a) all minute books, stock books, ledgers and registers
and corporate seals relating to the organization, ownership and maintenance
of EES;
(b) a certificate of the Secretary of each of the Companies
relating to the incumbency and corporate proceedings in connection with the
execution, delivery and performance of this Agreement and the Related
Agreements and the consummation of the Contemplated Transactions, and the
absence of changes in the Companies' Articles of Incorporation and By-laws,
together with copies of the resolutions duly adopted by the Seller's Board of
Directors and shareholders authorizing the execution, delivery and
performance of this Agreement and the Related Agreements and the consummation
of the Contemplated Transactions;
(c) resignations effective as of the Closing Date from such
officers and directors of EES as Buyer shall have requested in writing not
less than five (5) days prior to the Closing Date;
(d) (i) a copy of the Articles or Certificate of
Incorporation and all amendments thereto, of each of the Companies, certified
by the Secretary of State of the state of its incorporation, as of a date not
more than twenty (20) days prior to the Closing Date, (ii) copies, certified
by the Secretary of each of the each of the Companies, as of the Closing
Date, of the By-laws of each of the Companies, (iii) Certificates of
Existence or Good Standing from the Secretary of State of the state of each
company's incorporation as of a date not more than ten (10) days prior to the
Closing Date, accompanied by bring-down certificates dated as of the Closing
Date, evidencing the each of the Companies' good standing in such
jurisdictions, and (iv) Certificates of Existence or Good Standing from the
Secretary of State of each state wherein each of the Companies are duly
qualified, as of a date not more than ten (10) days prior to the Closing
Date, accompanied by bring-down certificates dated as of the Closing Date,
evidencing the Companies' existence or good standing therein.
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6.8 OPINION OF SELLER'S COUNSEL. Buyer shall have received the
opinion dated as of the Closing Date of Xxxxxx Xxxx Xxxxxx, Xxxx & Xxxxxxxxxx
P.L.L.C., counsel for Seller, substantially in the form of Exhibit D hereto.
6.9 NO LITIGATION OR GOVERNMENTAL PROCEEDING. No action or
proceeding shall have been instituted before any court or governmental body
or by any third party to restrain or prohibit, or to obtain damages in
respect of, the consummation of the Contemplated Transactions. No party to
this Agreement shall have received written notice from any governmental body
of (i) its intention to institute any action or proceeding to restrain or
enjoin or nullify this Agreement, the Related Agreements or the Contemplated
Transactions, or to commence any investigation into the consummation of the
Contemplated Transactions, or (ii) the actual commencement of such an
investigation.
6.10 NO MATERIAL ADVERSE EFFECT. No event shall have occurred which
has or can reasonably be expected to have a Material Adverse Effect.
6.11 HSR ACT. The filing requirements of the HSR Act relating to the
Contemplated Transactions shall have been complied with, neither the FTC nor
the Antitrust Division shall have taken any action (including notifying the
parties of any objection to the Contemplated Transactions) in response to
such filings, and the waiting period prescribed by the HSR Act shall have
expired.
6.12 RELEASES AND PAYOFF LETTERS. All liens and security interests
with respect to the Purchased Assets and the assets of EES (other than the
Equipment Lease Agreement dated April 30, 1998, with Crown Credit Company and
the other liens, pledges and deposits described on Schedule 4.8) and all
guarantees and indebtedness of EES and all promissory notes given by EES to
Seller (other than the promissory note described on Schedule 1.58) or any
third parties shall have been released and terminated. Buyer shall have
received satisfactory evidence that upon disbursement of the Payment Fund (as
defined in the Escrow Agreement) the obligations described in Schedule 6.12
will have been satisfied..
6.13 INTELLECTUAL PROPERTY ASSIGNMENT. The Seller shall have
executed and delivered to Buyer a Patent, Trademark and Copyright Assignment
substantially in the form of Exhibit E hereto.
6.14 ESCROW AGREEMENT. The parties thereto and the Escrow Agent
shall have executed and delivered the Escrow Agreement.
6.15 XXXXXXX SUBSCRIPTION AGREEMENT. Seller and Holdings shall have
executed a subscription agreement substantially in the form of Exhibit F
hereto (the "Xxxxxxx Subscription Agreement") and the parties thereto shall
be prepared to consummate the transactions contemplated thereby
simultaneously with the Closing hereunder.
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6.16 MANAGEMENT SUBSCRIPTION AGREEMENT. Xxxx Xxxxx, Xxxx Xxxxxxxx,
Xxxxx Xxxxxx and Holdings shall have executed a subscription agreement
substantially in the form of Exhibit G hereto (the "Management Subscription
Agreement") and the parties thereto shall be prepared to consummate the
transactions contemplated thereby simultaneously with the Closing hereunder.
6.17 BUY/SELL AGREEMENT. Xxxx Xxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxxx and
Holdings shall have executed a Buy/Sell agreement substantially in the form
of Exhibit H hereto (the "Buy/Sell Agreement").
6.18 FIRPTA CERTIFICATE. Seller shall have executed and delivered to
Buyer a certificate containing the information, under penalties of perjury,
set forth in Treasury Regulation Section 1.1445-2(b)(2). Such certificate
shall conform to the model certificate provided in Treasury Regulation
Section 1.1445-2(b)(2)(iii)(B).
6.19 EMPLOYMENT AGREEMENTS. Xxxx Xxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxx
and Xxxxx Xxxxxx shall have executed employment agreements substantially in
the form of Exhibit I hereto (the "Employment Agreements").
6.20 INSURANCE. Buyer shall have obtained the policy of
representation and warranty insurance described on Schedule 2.2(a) from a
carrier and on terms satisfactory to Buyer in its sole discretion in an
amount of at least $25 million.
6.21 NONDISTURBANCE AGREEMENT AND AMENDMENT OF REAL ESTATE LEASES.
Seller or JE shall have obtained and delivered to Buyer an agreement,
substantially in the form of Exhibit J hereto, from any holder of any
mortgage or deed of trust placed upon the Real Estate located at Welcome,
North Carolina, or any part thereof, that the possession, use or enjoyment of
said Real Estate by Buyer or any of its subsidiaries shall not be disturbed
by such holder, its designee or nominee, or a purchaser at foreclosure, or
any of their successors or assigns, provided that Buyer is not in default of
any lease thereon. Further, JE shall have amended and restated Articles VIII
and XIX of the lease agreements related to the Real Estate to read as set
forth on Schedule 6.21.
6.22 WING-PREMDOR TRANSACTION. The transactions contemplated by the
Asset Purchase Agreement, dated as of June 30, 2000, by and among Buyer, Wing
Industries, Inc. and Premdor Corporation shall have been consummated.
6.23 WAIVER BY BUYER. Buyer may at its option waive in writing the
performance of any of the Seller's covenants or any of the conditions
contained in this Article 6.
ARTICLE 7. CONDITIONS TO SELLER'S PERFORMANCE
The obligations of Seller under this Agreement shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions:
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7.1 COMPLIANCE BY BUYER. Buyer shall have complied with and
performed all its agreements and obligations under the terms, covenants and
conditions of this Agreement to be complied with or performed by it on or
prior to the Closing Date, and Seller shall have received the certificate of
an appropriate officer of Buyer to that effect dated as of the Closing Date.
7.2 BUYER'S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained in this Agreement shall be true and correct as
of the Closing Date, with the same force and effect as if made as of the
Closing Date, except for those representations and warranties that
specifically refer to some other date, and Seller shall have received the
certificate of an appropriate officer of Buyer to that effect dated as of the
Closing Date.
7.3 OPINION OF BUYER'S COUNSEL. Seller shall have received the
opinion, dated as of the Closing Date, of Paul, Hastings, Xxxxxxxx & Xxxxxx
LLP, counsel for Buyer, substantially in the form of Exhibit K hereto.
7.4 NO LITIGATION OR GOVERNMENTAL PROCEEDING. No action or
proceeding shall have been instituted before any court or governmental body
or by any third party to restrain or prohibit, or to obtain damages in
respect of, the consummation of the Contemplated Transactions. No party to
this Agreement shall have received written notice from any governmental body
of (i) its intention to institute any action or proceeding to restrain or
enjoin or nullify this Agreement, the Related Agreements or the Contemplated
Transactions, or to commence any investigation into the consummation of the
Contemplated Transactions, or (ii) the actual commencement of such an
investigation.
7.5 HSR ACT. The filing requirements of the HSR Act relating to the
Contemplated Transactions shall have been complied with, neither the FTC nor
the Antitrust Division shall have taken any action (including notifying the
parties of any objection to the Contemplated Transactions) in response to
such filings, and the waiting period prescribed by the HSR Act shall have
expired.
7.6 SUBSCRIPTION AGREEMENT, BUY-SELL AGREEMENTS AND EMPLOYMENT
AGREEMENTS. Holdings shall have executed the Subscription Agreement and the
Buy-Sell Agreements and Buyer shall have executed the Employment Agreements.
7.7 FINANCING. Buyer and/or Holdings shall have obtained the debt
financing and/or equity financing necessary to consummate the Contemplated
Transactions on terms substantially similar to those described on Schedule
7.7 or on such other terms as Buyer and/or Holdings shall arrange, provided
that such other terms, as compared with those set forth on Schedule 7.7, do
not materially and adversely affect the value of Seller's investment in
Holdings.
7.8 LOANS. Xxxx Xxxxx, Xxxx Xxxxxxxx and Xxxxx Xxxxxx shall have
executed the agreements evidencing the loans described in Section 2.2(b)(ii).
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7.9 WAIVER. Seller may at its option waive in writing the
performance of any of Buyer's covenants or any of the conditions contained in
this Article 7.
ARTICLE 8. COVENANTS AND AGREEMENTS
8.1 CONDUCT OF THE BUSINESS. Seller covenants and agrees with Buyer
that, from the date hereof to the Closing, that Seller shall and Seller shall
cause EES to:
(a) conduct and operate the businesses of EWD and EES only
in the ordinary course and in a manner consistent with prior business
practices and operations;
(b) refrain from committing to make any capital
expenditures exceeding $50,000 in the aggregate not provided for in the
capital budgets of EWD and EES for 2000 previously provided to Buyer prior to
the Closing Date without the consent of Buyer;
(c) except for purchase orders or sales contracts issued or
entered into in the ordinary course of business, not enter into any
contracts, agreements or modifications of any contracts or agreements that
involve performance of services or the delivery of goods or materials of an
amount or value in excess of $50,000;
(d) not enter into any transaction involving the disposal
of any properties or assets (other than the sale of inventory in the ordinary
course of business);
(e) not create any Encumbrances on any of the properties or
assets of EWD or EES;
(f) not enter into any transactions with any Affiliates;
(g) preserve intact the business organization of EWD and
EES, use commercially reasonable efforts to keep available the service of
their present employees, and use commercially reasonable efforts to preserve
existing relationships with their customers, suppliers and distributors;
(h) use commercially reasonable efforts to maintain all of
the EWD Fixed Assets and all of the EES Fixed Assets in a state of good
repair and in good working order;
(i) maintain the Permits and the Safety and Environmental
Permits in good standing and in full force and effect;
(j) maintain the EWD Books and Records and EES Books and
Records in a manner consistent with past practices; and
(k) not make any changes in their accounting procedures and
practices or their credit criteria from those in existence at December 31,
1999;
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(l) not (i) issue, sell or deliver any shares of capital
stock of EES or other securities, or issue or sell any securities convertible
into, or options with respect to, or warrants to purchase or rights to
subscribe for, any shares of capital stock of EES or other securities of EES;
(ii) effect any recapitalization, reclassification, stock dividend, stock
split or like change in the capitalization of EES; (iii) amend their
Certificate of Incorporation (or other charter documents) or By-laws; or (iv)
make any redemption or purchase of any shares of capital stock of EES or
declare, pay, set aside or make, any dividends or distribution or payment in
respect of capital stock of EES or other securities of EES;
(m) not sell or transfer the Purchased Shares;
(n) except in the ordinary course of business, not modify
any of the terms or conditions of the Assumed Agreements or the EES
Agreements, provided notice of each such change is given to Buyer at the time
such change is made;
(o) not enter into any employment contract;
(p) not (i) make any loans or advances to, or assume, or
guarantee or otherwise become liable for any indebtedness of another person
or (ii) incur any indebtedness, except that, in the ordinary course of
business and consistent with past practice, EWD may make loans and advances
to EES and EES may use its available cash to pay down its indebtedness to EWD;
(q) comply in all material respects with all laws
applicable to it and to the conduct of the business of EWD and EES;
(r) not (i) change any practice with respect to Taxes, (ii)
make, change or revoke any Tax election or (iii) compromise or settle any Tax
liability;
(s) not adopt, terminate, or amend (except as required by
applicable law) any Plan;
(t) not accelerate the collection of accounts receivable,
defer the payment of accounts payable or otherwise manipulate net working
capital; or
(u) take such action as may be necessary so that, for the
period beginning on May 1, 2000 and ending on the Closing Date, (i) no
corporate allocation is charged by Seller to EWD, (ii) the sum of $1 million
is distributed by EWD to Seller (which distribution shall be recorded as a
reduction in Line of Credit/Xxxxxxx on the consolidated balance sheet of EWD
and EES, from $8,182,488 as of April 30, 2000, to $7,182,488 as of the
Closing Date), (iii) an amount equal to 47% of EWD's pretax income for such
period (without reduction for corporate allocation) is distributed by EWD to
Seller, and (iv) the Cash and Cash Equivalents of EWD and EES for such period
is otherwise used only for expenditures and reimbursements made to operate
the
44
businesses of EWD and EES only in the ordinary course and in a manner
consistent with prior business practices and operations, including amounts
paid for previously committed capital expenditures. For purposes of clause
(iii) of this Section 8.1(u), EWD's pretax income for the months of May, June
and July 2000 shall be determined by reference to the internal financial
statements of Seller, as described in Section 4.6(b) of this Agreement, for
such months, and EWD's pretax income for the period beginning on August 1,
2000 and ending on the Closing Date (the "Post-August 1 Period") shall be
based on Seller's good faith estimate thereof; provided, that, promptly
following the Closing, Seller will prepare a financial statement (the
"Post-August 1 Statement") in accordance with Section 4.6(c) for the
Post-August 1 Period. If the actual pretax income of EWD for the Post-August 1
Period, as reflected on the Post-August 1 Statement, is less than the amount
previously estimated by Seller pursuant to this Section 8.1(u), then Seller
shall promptly pay to Buyer an amount equal to 47% of such difference. If the
actual pretax income of EWD for the Post-August 1 Period, as reflected on the
Post-August 1 Statement, is greater than the amount previously estimated by
Seller pursuant to this Section 8.1(u), then Buyer shall promptly pay to
Seller an amount equal to 47% of such difference.
8.2 FUTURE LITIGATION. Seller shall promptly advise Buyer in writing
of the commencement or threat against any of the Companies of (i) any claim,
litigation or proceeding, and (ii) any Tax audit.
8.3 EXPENSES. Subject to Section 9.2 hereof, Seller will bear its own
and the Companies' expenses, and Buyer will bear its own, out-of-pocket
expenses in connection with this Agreement and the Contemplated Transactions
(including, without limitation, attorneys' fees, accounting fees and
investment banking fees).
8.4 [intentionally omitted]
8.5 TAX MATTERS AND POST-CLOSING COOPERATION.
(a) Each of Seller and EES shall prepare and timely file or
cause to be prepared and timely filed in a manner consistent with past
practice, all Tax Returns that are required to be filed (with extensions) by
or with respect to each of Seller and EES on or before the Closing Date;
provided, however, that EES shall deliver any material income or franchise Tax
Return of EES to Buyer at least fifteen (15) days prior to the due date
thereof (with extensions) and shall not file any such Tax Return without
obtaining the prior written consent of Buyer and, provided further, that EES
shall deliver to Buyer all other Tax Returns of EES as and when filed;
provided, however, that with respect to the estimated (i) U.S. federal income
Tax Returns and (ii) North Carolina income and franchise Tax Returns of EES
due on or about April 15, 2000, June 15, 2000 and, if applicable, September
15, 2000, such Tax Returns shall be delivered to Buyer at least four (4) days
prior to the due date thereof and such filing consent may be delivered orally.
The stockholders of Seller or EES, as appropriate, shall pay or cause to be
paid all
45
Taxes shown as due, or required to be shown as due, on such Tax Returns of
Seller and EES.
(b) Buyer shall prepare and file or cause to be prepared and
filed all Tax Returns required to be filed by or with respect to EES for all
taxable periods, or portions thereof, ending on, before or including the
Closing Date and with due dates (including extensions) after the Closing Date
(the "Post-Closing Returns"); provided, however, Buyer shall deliver any such
Tax Return of EES (proforma as to EES if consolidated, combined, unitary,
group or other similar Tax Returns that include EES are filed) to Seller at
least fifteen (15) days prior to the due date thereof (with extensions). At
least five (5) business days prior to the due date of any payment required to
be made with respect to any Post-Closing Return, Seller shall pay to Buyer an
amount that is attributable to any taxable period (or portion thereof) ending
on or prior to the Closing Date to the extent such amount exceeds the reserve
or accrual (without regard to deferred tax assets and liabilities) for Taxes
of EES not yet due and payable provided on the Closing Balance Sheet, as
appropriately reduced for any Tax items (including, without limitation, any
payment of Taxes). With respect to any taxable year or period (or portion
thereof) beginning before and ending after the Closing Date (a "Straddle
Period"), an allocation of Taxes shall be made to the part of such Straddle
Period which ends on the Closing Date and based on (i) the closing of the
books method, in the case of income Taxes, (ii) the number of days elapsed
between the beginning of such Straddle Period to and including the Closing
Date, in the case of property Taxes, and (iii) when the relevant transaction
occurs, in the case of sales and gross receipts Taxes. For avoidance of doubt,
the parties agree that under applicable U.S. federal income tax law they
expect that upon the end of the Closing Date, the U.S. federal income tax year
of EES shall cease and, at the beginning of the day following the Closing
Date, a new taxable year shall commence as a member of Buyer's consolidated
filing group for Federal income tax purposes. With respect to all Taxes
allocated to the portion of any Straddle Period ending on or prior to the
Closing Date, Seller shall be responsible for (i) all such Taxes of EES to the
extent they exceed the reserve or accrual for Straddle Period Taxes of EES
(without regard to deferred Tax assets and liabilities) on the Closing Balance
Sheet as appropriately reduced for any Tax items (including, without
limitation, any payment of Taxes) and (ii) the Taxes excluded from Assumed
Liabilities under Section 1.5. If the amount actually owed to all Taxing
authorities with respect to all Tax liabilities attributable to any taxable
period (or portion thereof) ending prior to and including the Closing Date
exceeds the amount accrued or reserved for such Tax liabilities on the Closing
Balance Sheet (without regard to deferred Tax assets and liabilities) as
appropriately reduced for any Tax items (including, without limitation, any
payment of Taxes), Seller shall promptly pay the excess to Buyer upon delivery
by Buyer to Seller of supporting documentation indicating such excess. If the
amount actually owed to all Taxing authorities with respect to all Tax
liabilities attributable to any taxable period (or portion thereof) ending
prior to and including the Closing Date is less than the amount accrued or
reserved for such Tax liabilities on the Closing Balance Sheet (without regard
to deferred Tax assets and liabilities) as appropriately reduced for any Tax
items (including, without limitation, any
46
payment of Taxes), Buyer shall promptly pay such difference to Seller upon (i)
the due date for the filing, including extensions, of the Federal income tax
return related to the tax period of EES ending on the Closing Date, or (ii)
the latest due date, including extensions, for the filing of any Tax Return
for any Straddle Period with respect to EES or any liability for Taxes assumed
by Buyer pursuant to clause (iv) of Section 1.5, whichever is later.
(c) Any ad valorem, use, real and personal property,
intangible and other similar Taxes, installments or special assessments,
utility, water or similar payments arising from, or relating to, the Purchased
Assets, which become due and payable on or after the Closing Date and relate
to periods beginning before and ending after the Closing Date, shall be
prorated and adjusted between Buyer and Seller as of the Closing Date on a per
diem basis and, except to the extent specifically accrued on the Closing
Balance Sheet, Seller shall be responsible for the portion of such amounts
allocable to the period (or portion thereof) ending on or prior to the Closing
Date.
(d) If either Buyer or EES receives any written notice from
any taxing authority proposing any adjustment to any Tax relating to EES,
either Buyer or EES shall give prompt written notice thereof to Seller, which
notice shall describe in detail each proposed adjustment. If either any
stockholder of Seller or Seller receives any written notice from any taxing
authority proposing any adjustment to any Tax relating to EES, such
stockholder of Seller or Seller shall give prompt written notice thereof to
either Buyer or EES, which notice shall describe in detail each proposed
adjustment.
(e) EES shall obtain prior to Closing valid and appropriate
certification from Seller that EES is not required to pay sales tax on
transactions between EES and Seller.
(f) Unless required by applicable law, Buyer agrees that,
without the written consent of Seller (which consent shall not be unreasonably
withheld), it will not file or cause to be filed amended Tax Returns on behalf
of EES that would result in an increased Tax liability to Seller with respect
to EES for Taxes attributable to periods (or portions thereof) ending on or
prior to the Closing Date.
(g) Buyer agrees that for a period of seven (7) years after
the Closing, upon the reasonable request of Seller, it shall promptly make
available to Seller, and shall cause any successors or assigns to make
available to Seller, during normal business hours and in a manner which will
not interfere with the normal business operations of Buyer, such EWD Books and
Records relating to the Purchased Assets and such EES Books and Records as
Seller may reasonably request from time to time to enable Seller to (1)
prepare and file any and all Tax Returns, information returns or reports that
Seller is required to file and (2) respond to and conduct all federal, state,
local or foreign Tax audits, or other determinations or proceedings.
47
(h) The parties hereto agree that a portion of the expenses
of Seller, EES or EWD incurred in connection with the Contemplated
Transactions that are deductible under Section 162 of the Code have been
incurred by EES and shall be allocated to EES in the same ratio of the total
of all such expenses as $47 million bears to the purchase price under Section
2.2 hereof, but there shall be no accrual of such portion on the Closing
Balance Sheet. Such expenses shall be deemed for purposes of this Section
8.5(h) not to include deductions attributable to employee bonuses or deferred
compensation paid in connection with the Contemplated Transactions. Seller
agrees not to claim any such expenses allocated to EES as deductions or other
offsets on any Tax Return (or in the course of any Tax audit, claim, appeal or
litigation relating thereto).
(i) Seller shall prepare and timely file, or cause to be
prepared and timely filed, in a manner consistent with past practice, all Tax
Returns that are required to be filed with respect to liabilities for Taxes of
Seller arising in the ordinary course of business of EWD as conducted by
Seller that Buyer agrees to assume pursuant to clause (iv) of Section 1.5 of
this Agreement (the "Section 1.5(iv) Taxes"); provided, however, that Seller
shall deliver to Buyer any Tax Return with respect to Section 1.5(iv) Taxes
(including, without limitation, any additional supporting documentation or
computations necessary for Buyer to determine its liability for Section
1.5(iv) Taxes) at least fifteen (15) days prior to the due date thereof (with
extensions) and shall not file any such Tax Return without obtaining the prior
written consent of Buyer, which consent shall not be unreasonably withheld.
Seller shall remit to the appropriate Taxing authority any payment received
from Buyer with respect to Section 1.5(iv) Taxes promptly after Seller's
receipt thereof and shall promptly furnish Buyer with written proof of such
remittance.
(j) Seller agrees that it will report the Contemplated
Transactions for Tax purposes in accordance with Article 2 hereof, including
that the amount Seller realizes pursuant to its sale of the Purchased Assets
and the Purchased Shares shall be the full amount of the Purchase Price
without any reduction with respect to the transactions described in Section
2.2(c) hereof.
8.6 SELLER'S OBLIGATIONS AND LIABILITIES. Seller shall when due and
payable, pay and discharge, and Seller shall perform, any liabilities and
obligations based upon, arising out of or relating to the business of EWD, or
any of its predecessors, other than the Assumed Liabilities.
8.7 WARRANTIES. As of the Closing, Seller shall be deemed to have
assigned to Buyer, without recourse, all of its right, title and interest in
and to such warranties (express or implied) as are assignable and continue in
effect with respect to any of the Purchased Assets and to have nominated Buyer
as its true and lawful attorney to enforce such warranties against any
manufacturers or vendors, and Seller shall execute and deliver such specific
assignments of such warranty rights as Buyer may reasonably request.
48
8.8 TRANSFER TAXES. Notwithstanding anything in this Agreement to the
contrary, Seller agrees to pay and discharge, promptly and diligently, when
due all transfer taxes applicable to the transactions contemplated herein.
8.9 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the Closing
Date, Buyer shall be entitled, through its employees, potential investors,
advisors, consultants, representatives, contractors, counsel and independent
accountants, to make such investigation of the assets, properties, business
and operations of EWD and EES and such examination of the books, records and
financial condition of EWD and EES as it wishes, provided that any such
investigation and examination shall be conducted at reasonable times and under
reasonable circumstances and in a manner so as not to interfere with the
normal business operations of the Companies. The Companies shall make
available to such persons during such period all such information and copies
of all such documents concerning the affairs of EWD and EES as such persons
may reasonably request, shall permit such persons access to the properties of
EWD and EES and all parts thereof, and shall cause their respective officers,
employees, consultants, agents, accountants and attorneys to cooperate fully
with such persons in connection with their review and examination.
8.10 EXCLUSIVE DEALING. During the period from the date of this
Agreement through the Closing or the earlier termination of this Agreement
pursuant to Article 9, the Companies shall not, and shall cause their
respective affiliates, stockholders, agents, attorneys, representatives,
directors, employees and advisors not to, directly or indirectly, entertain,
solicit, respond to, discuss or enter into negotiations with respect to any
other offers from prospective buyers of all or any portion of the Purchased
Assets or the capital stock and/or assets of EES (either by merger,
consolidation or otherwise) and shall suspend any discussions with or
dissemination of information to prospective buyers. If either of the
Companies, or any of their respective affiliates, stockholders, agents,
attorneys, representatives, directors, employees or advisors receive any
offers or communications from any new or existing offerees, they will remain
silent or advise the offeror that they are not in a position to negotiate or
accept any offers at that time.
8.11 PURCHASE ORDERS AND INQUIRIES. All customer purchase orders and
inquiries received by Seller after the Closing with respect to windows and
doors will be referred to Buyer.
8.12 COLLECTION OF RECEIVABLES. Following the Closing Date, all cash,
checks or other proceeds received by Seller or any of its banks or other
financial institutions in payment of EWD Accounts Receivable shall be paid to
Buyer within five business days after receipt by Seller, which payments shall
be accompanied by a statement identifying the payee, the amount of the payment
and the related invoice number. Seller agrees to endorse and Buyer shall have
the right to endorse the name of Seller on any such checks or proceeds
(whether received directly by Buyer or received from Seller or its bank) and
shall deposit such checks and other proceeds in bank accounts maintained in
Buyer's
49
name. From and after the Closing Date, at Buyer's expense, Seller shall
cooperate with, and provide reasonable assistance to Buyer in collecting such
accounts.
8.13 PAYMENT OF ASSUMED LIABILITIES. On or before their respective
due dates, Buyer shall pay and satisfy in full (or cause to be paid and
satisfied in full) all of the Assumed Liabilities; provided, however, that
with respect to any liability or obligation of Seller assumed by Buyer
pursuant to clause (iv) of Section 1.5, Buyer shall have no obligation
pursuant to this Section 8.13 to pay and satisfy in full any such assumed
liability or obligation until Buyer has received and approved any applicable
Tax Return in accordance with Section 8.5(i) hereof.
8.14 EMPLOYEE MATTERS. Although Buyer currently intends to, and knows
of no reason that it would not, for the indefinite future, continue the
employment of essentially all employees on the payroll of EES and hire and
continue the employment of essentially all employees on the payroll of EWD
(such EWD and EES employees hired by Buyer hereinafter referred to as
"Transferred Employees"), Buyer reserves the right at any time to terminate
any Transferred Employee and not to hire any EWD employee. Effective as of the
Closing, Buyer shall adopt (or cause to be adopted), for Transferred
Employees, employee welfare benefit plans (as such term is defined in ERISA
Section 3(3)) substantially similar to the Plans under which such employees
were covered immediately prior to the Closing, and Seller shall, for as long
as Buyer shall so request (up to 90 days or, if reasonably requested by Buyer,
120 days) and so long as Buyer shall not make substantive changes in such
plans, provide administrative services for such plans after the Closing
substantially similar to the administrative services Seller provided with
respect to Seller's employee welfare benefit plans, in which case Buyer shall
bear the full cost of such administrative services, as agreed upon by Buyer
and Seller. Seller shall use reasonable efforts to assist Buyer in
establishing such replacement welfare plans and assigning Seller's rights
under service contracts and insurance policies related to such welfare plans.
Notwithstanding the foregoing, Buyer shall have the right to determine, in its
sole discretion, the compensation and benefits policies applicable to the
Transferred Employees after Closing; provided, however, that under any
welfare, pension or profit sharing plans adopted by Buyer, (i) service with
the Companies and their affiliates prior to the Closing shall be counted for
purposes of determining any period of eligibility to participate or to vest in
benefits, including vacation rights, (ii) any amounts previously expended by
Transferred Employees for purposes of satisfying deductibles under any medical
or dental plans of Seller for the applicable current plan year shall be
credited for purposes of satisfying any deductibles under Buyer's plans, and
(iii) no preexisting condition limitations (that would not have been
applicable under Seller's health benefit plans) shall be imposed on
Transferred Employees upon admittance into any health benefits plan maintained
by Buyer. Buyer or Buyer's employee welfare benefit plans shall be liable for
any medical or dental benefit in respect of a claim incurred prior to Closing
(but not any other employee benefit in respect of a claim incurred prior to
Closing) with respect to any of the Transferred Employees, but only to the
extent incurred but not reported and reported but not paid claims are properly
accrued on the
50
Closing Balance Sheet. Neither Seller nor any plan sponsored by or contributed
to by Seller shall provide, nor shall Seller nor any Seller plan be liable
for, any welfare benefit in respect of a claim incurred after the Closing. For
purposes of the preceding sentence, a medical or dental claim shall be deemed
to be incurred when the medical or dental care is provided. Buyer shall not be
required to assume the sponsorship of, or any obligation with respect to, any
employee pension benefit plan (as such term is defined in section 3(2)) of
ERISA sponsored by or contributed to by Seller or EES. In addition to
providing group health plan coverage for Transferred Employees, Buyer shall
provide continuation health coverage to those former employees of the
Companies identified on Schedule 8.14, which Schedule may be updated on or
prior to the Closing Date, for the period required under section
4980B(f)(2)(B) of the Code. Seller shall use reasonable efforts to assist
Buyer in the recruitment of those employees identified by Buyer to operate the
business of the Companies following the Closing. All persons (i) actively
employed by Seller in respect of EWD or by EES immediately prior to the
Closing Date, (ii) who will no longer be employed by Seller or an ERISA
Affiliate of Seller as of the Closing Date, and (iii) who are not otherwise
vested in their benefit under any Pension Plan as of the Closing, shall become
so vested effective as of the Closing. At the Closing, Seller shall disclose
to Buyer any "employment loss," as such term is defined in the Worker
Adjustment and Retraining Notification Act, incurred by EWD or EES during the
period beginning on the date of this Agreement and ending on the Closing Date.
8.15 1997 AUDIT COOPERATION. At Buyer's expense, Seller shall
cooperate with Buyer in connection with Buyer's audit of the combined
statements of earnings, retained earnings and cash flows of EWD and EES for
the fiscal year ended December 31, 1997, which cooperation shall include, but
not be limited to, giving Buyer access to the books and records necessary to
complete such audit.
8.16 LICENSE.
(a) Effective on the Closing Date, Seller grants to Buyer,
in perpetuity, a fully-paid, irrevocable, worldwide, exclusive, royalty-free
license to use the "Xxxxxxx" name, trademarks and/or service marks, the
pending trademark application Serial No. 75/239,904, and any variations or
derivations thereof (the "Xxxxxxx Xxxx"), for use with windows and doors and
other home improvement or home construction products, and in connection with
the business of extruding raw materials (the "Covered Products"). The right
and license granted to Buyer hereunder shall include the right to sublicense
the Xxxxxxx Xxxx to any affiliate or related company of Buyer for use with the
Covered Products. On the Closing Date, Seller shall execute and deliver such
documents, instruments and certificates, and take such other actions as
reasonably may be required or desirable in order to license to Buyer, pursuant
to this Section 8.16, the Xxxxxxx Xxxx. Seller covenants and agrees that it
shall not use, or license others to use, the Xxxxxxx Xxxx in connection with
any business or product competitive with or related to the Covered Products.
51
(b) Buyer recognizes and understands the importance of
Seller's exercise of control over the quality of the use by Buyer of the
Xxxxxxx Xxxx so as to preserve the continued validity of the Xxxxxxx Xxxx and
to protect the goodwill associated therewith and shall cause any products and
services to be provided under the Xxxxxxx Xxxx to be of a quality at least
equal to that provided by Seller prior to the date hereof.
(c) Seller shall, at Buyer's expense, maintain in full force
and effect and shall enforce the application(s) and or registration(s) of the
Xxxxxxx Xxxx and shall file such additional applications for registration of
the Xxxxxxx Xxxx as appropriate and as reasonably requested by Buyer. Without
affecting the foregoing obligations of Seller, Buyer will at all times have
the right to take steps, in its sole discretion and as it deems necessary or
desirable, to protect and maintain the Xxxxxxx Xxxx in connection with the
Covered Products, including but not limited to filing and prosecuting
litigation and other proceedings against, and opposing applications for
trademark or service xxxx registration for, marks that are confusingly similar
to the Xxxxxxx Xxxx. At Buyer's expense, Seller shall take such action with
respect to the foregoing as Buyer may reasonably request, including joining
such litigation or proceeding as a party. Buyer shall be entitled to any
monetary recovery from such litigation or proceeding following reimbursement
to Seller of any costs or fees reasonably incurred by it in such litigation or
proceeding.
8.17 NONSOLICITATION. For a period of one year following the Closing
Date, neither Buyer nor any of its Affiliates shall directly or indirectly
solicit or in any manner attempt to persuade or influence any employee of
Seller's Specialty Manufacturing Division (other than employees that were
previously terminated by Seller) to work for any other person, other than
pursuant to general advertisements in newspapers, periodicals or websites or
any similar publication.
8.18 WATER PRESSURE MODIFICATIONS. Seller or JE shall make and pay
for the water pressure modifications necessary to remedy the deficiencies
described on Schedule 4.15 in the time frame described therein.
ARTICLE 9. TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any time by
written notice given prior to or at the Closing:
(a) by Buyer in the event the conditions in Section 6.1 or
6.22 are not satisfied;
(b) by either Buyer or Seller (the "Non-Breaching Party") if
there is a material violation or breach by the other (the "Breaching Party")
of any covenant, representation, warranty or obligation contained in this
Agreement and such violation or breach has not been waived by the
Non-Breaching party or, cured by the Breaching Party within ten (10) days
after written notice thereof from the Non-Breaching Party;
52
(c) by either Buyer or Seller if the Contemplated
Transactions have not been consummated (other than through the failure of any
party seeking to terminate this Agreement to comply in all material respects
with its obligations under this Agreement) by the Transaction Deadline Date,
or such later date as the parties may agree in writing; provided that neither
Buyer nor Seller shall be entitled to terminate this Agreement pursuant to
this Section 9.1(c) if such party's knowing or willful breach of this
Agreement has prevented the consummation of the Contemplated Transactions;
(d) by Seller in the event the condition in Section 7.7 is
not satisfied; or
(e) by mutual written consent of Buyer and Seller.
9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Buyer or Seller as provided in Section 9.1 , the
provisions of this Agreement shall immediately become of no further force and
effect (other than Section 8.3, this Article 9 and Article 12, each of which
shall survive the termination of this Agreement) without any party being
liable to any other party; provided, however, that the following shall apply:
(a) in the event that this Agreement may be terminated
pursuant to Section 9.1(b) hereof and the Non-Breaching Party elects to close
rather than terminate the Contemplated Transactions despite a breach or
violation of this Agreement, such Non-Breaching Party shall be entitled to
seek indemnity from the Breaching Party pursuant to Article 11 hereof;
(b) in the event that this Agreement is terminated pursuant
to Section 9.1(b) hereof and the violation or breach of this Agreement was
willful or intentional, the Non-Breaching Party shall be entitled to receive
from the Breaching Party an amount equal to all reasonable out-of-pocket fees
and expenses (including reasonable fees and expenses of counsel) incurred by
the Non-Breaching Party and its representatives and Affiliates in connection
with this Agreement and the Contemplated Transactions, and may seek damages
from the Breaching Party and/or equitable relief; and
(c) Buyer shall continue to be bound by the Confidentiality
Agreement dated August 5, 1999, pursuant to its terms.
53
ARTICLE 10. NONCOMPETITION AND NONSOLICITATION
10.1 ACKNOWLEDGMENTS. Seller acknowledges that:
(a) EWD has been engaged in the business of making vinyl
windows and doors ("EWD Products") for sale throughout the United States;
(b) EES has been engaged in the business of vinyl lineal
extrusion (the "EES Products") for use in commerce throughout the United
States;
(c) the agreements and covenants contained in this Article
10 are essential to protect the goodwill associated with the Purchased Assets
and the Purchased Shares being acquired by Buyer pursuant to this Agreement,
and
(d) Buyer would not enter into this Agreement or acquire the
Purchased Assets or the Purchased Shares but for the agreements and covenants
contained in this Article 10.
10.2 COVENANT AGAINST COMPETITION. Seller covenants and agrees that,
for a period of four (4) years following the Closing Date, without the consent
of Buyer, neither it nor any of its Affiliates shall, directly or indirectly,
engage in any manner in the business of making, assembling, selling,
distributing or marketing EWD Products, EES Products or any other windows or
doors for sale in the United States, either for its own account or in
association with any other person, firm, corporation, or entity in any
capacity, including without limitation, as a partner, shareholder, investor,
member, principal, agent, lender or consultant; provided, however, that this
restriction shall not prevent Seller or any of its Affiliates from owning
securities of Holdings or owning, directly or indirectly, solely as an
investment, securities of any entity traded on any national securities
exchange or market if it is not a controlling person of, or a member of a
group which controls, such entity and does not, directly or indirectly, own 1%
or more of any class of securities of such entity.
10.3 NONSOLICITATION. For a period of four (4) years following the
Closing Date, neither Seller nor any of its Affiliates shall, within the
United States or elsewhere (a) directly or indirectly solicit or attempt in
any manner to persuade or influence any employees of Buyer, EWD or EES or any
of their respective Affiliates to work for any other person or (b) directly or
indirectly solicit or attempt in any manner to persuade or influence any
present or future customer of Buyer, EWD or EES or any of their respective
Affiliates to divert its purchases of EWD Products, EES Products or any other
windows or doors from Buyer or its Affiliates to any person then in
competition with Buyer or its Affiliates or to cease purchasing from Buyer,
EWD or EES or any of their respective Affiliates.
10.4 RIGHTS AND REMEDIES UPON BREACH. If Seller or any of its
Affiliates breaches, or threatens to breach, any of the provisions of this
Article 10, in addition to
54
any other rights Buyer may have, including a claim for damages, Buyer shall
have the right to have this Article 10 specifically enforced by any court of
competent jurisdiction, it being agreed that any breach or threatened breach
of this Article 10 would cause irreparable harm to Buyer in that money damages
would not provide an adequate remedy to Buyer.
10.5 FURTHER ASSURANCES.
(a) Seller acknowledges and agrees that the restrictions
contained in this Article 10 are reasonable and valid in geographical and
temporal scope and in all other respects. If any provision of this Article 10
or the application hereof to any party or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Article 10 and the
application of such provision to other parties or circumstances shall not be
affected thereby and shall be enforced to the maximum extent permitted under
applicable law.
(b) Without limiting the generality of the foregoing, if any
court of competent jurisdiction determines that any part of this Agreement is
unenforceable because of the duration or geographic scope of such provision,
or both, the parties agree that such duration or scope shall be reduced to the
extent determined to be reasonable by such court of competent jurisdiction
and, in its reduced form, such provision shall then be valid, binding and
enforceable.
(c) Seller and Buyer intend to and hereby confer
jurisdiction to enforce this Article 10 upon the courts of any jurisdiction
within the United States. If the courts of any one or more of such
jurisdictions hold that all or any part of this Article 10 is unenforceable
for any reason, it is the intention of Seller and Buyer that such
determination shall not bar or in any way affect Buyer's right to relief in
the courts of any other jurisdiction within the United States as to breaches
of this Article 10 in such other jurisdiction, the provisions of this Article
10 as they relate to each jurisdiction being, for this purpose, separate and
independent covenants.
ARTICLE 11. INDEMNIFICATION
11.1 SELLER'S AGREEMENT TO INDEMNIFY. Subject to the terms and
conditions of this Article 11, Seller hereby agrees to indemnify, defend and
hold harmless Buyer and its officers, directors, employees, stockholders,
representatives, agents, successors and assigns from and against all losses,
damages, demands, claims, assessments, actions, Taxes, penalties, interest,
reasonable attorneys' and accountants' fees, settlement costs and other costs
and expenses (collectively, "Indemnified Losses") arising out of, or incident
to, any of the following:
(a) any breach of any representation or warranty made by
Seller herein or in any certificate or other instrument delivered pursuant
hereto, except that Buyer shall
55
not assert a claim under Section 4.7(b) to the extent of any Material Adverse
Effect arising solely out of changes in general economic conditions;
(b) any breach or failure by Seller to perform or fulfill
any of its covenants or agreements set forth herein (including, without
limitation, failure by Seller to pay, discharge or perform any of its
obligations and liabilities other than the Assumed Liabilities);
(c) whether or not disclosed on any Schedule hereto, the
Xxxxxxxx Note, the Xxxxxxxx Rebate and the Xxxxxxxx Payables (unless an amount
equal to the Xxxxxxxx Payables is paid to Buyer pursuant to section 2.2(e)
hereof) and any increase in the amount of the Xxxxxxxx Receivables;
(d) whether or not disclosed on any Schedule hereto, (i) all
Taxes of or with respect to Seller or any of its shareholders (except as set
forth in clause (iv) of Section 1.5) and (ii) all Taxes of EES with respect to
any period (or portion thereof) ending on or prior to the Closing Date, to the
extent such Taxes in clause (ii) of this Section 11.1(d) are in excess of the
amount reflected as an accrual or reserve (without regard to deferred Tax
assets and liabilities) for income tax liabilities payable of EES on the
Closing Balance Sheet as appropriately reduced for any Tax items (including,
without limitation, any payment of Taxes (whether pursuant to Section 8.5 or
otherwise)) and/or by the amount of any payment made by Buyer to Seller
pursuant to the final sentence of Section 8.5(b);
(e) any liabilities resulting from Seller's failure to
comply with the provisions of any state's laws with respect to bulk transfers,
or acts of similar nature, as such laws may be applicable to the Purchased
Assets;
(f) whether or not disclosed on any Schedule hereto, any
liability or obligation of EES for (i) Taxes with respect to any period (or
portion thereof) ending on or prior to the Closing Date, to the extent such
Taxes are in excess of the amount reflected as an accrual or reserve (without
regard to deferred Tax assets and liabilities) for income tax liabilities
payable of EES set forth on the Closing Balance Sheet as appropriately reduced
for any Tax items (including, without limitation, any payment of Taxes
(whether pursuant to Section 8.5 or otherwise)) and/or by the amount of any
payment made by Buyer to Seller pursuant to the final sentence of Section
8.5(b), (ii) any indebtedness of EES to Seller for borrowed money (other than
the indebtedness evidenced by EES's Promissory Note dated January 21, 1997),
(iii) any other indebtedness of EES for borrowed money or any guaranty by EES
of indebtedness for borrowed money, (iv) any fees and expenses of Seller
relating to the Contemplated Transactions, (v) any liabilities or obligations
of EES in respect of any agreement, contract, lease or commitment other than
the EES Agreements or any other agreements under which the other party or
parties thereto continue to do business with EES (or with Seller for the
exclusive benefit of EES) following the closing on the terms specified in the
agreement, (vi) any liability or obligation under the Worker Adjustment and
56
Retraining Notification Act with respect to EES arising prior to the Closing
Date, (vii) any liabilities or obligations relating to the Excluded Assets or
not arising out of the business of EES, or (viii) subject to clause (v) of
Section 1.5 (but with the understanding that Buyer will not assume sponsorship
of any Plan in whole or in part), any liability or obligation under or related
to any Plan;
(g) any of the Assumed Liabilities described in clauses (vi)
and (vii) of Section 1.5 hereof and any liability or obligation of EES of the
type described in clauses (vi) and (vii) of Section 1.5 hereof; or
(h) any and all claims, actions, suits, proceedings,
investigations, demands, assessments and judgments incident to any of the
foregoing.
11.2 BUYER'S AGREEMENT TO INDEMNIFY. Subject to the terms and
conditions of this Article 11, Buyer hereby agrees to indemnify, defend and
hold harmless Seller and its successors and assigns from and against all
Indemnified Losses arising out of, or incident to, any of the following:
(a) any breach of any representation or warranty made by
Buyer herein or in any certificate or other instrument delivered pursuant
hereto;
(b) any failure by Buyer to perform or fulfill any of its
covenants or agreements set forth herein (including, without limitation,
Buyer's failure to pay, discharge or perform any of the Assumed Liabilities);
(c) any decrease in the amount of the Xxxxxxxx Receivables;
or
(d) any and all claims, actions, suits, proceedings,
investigations, demands, assessments and judgments incident to any of the
foregoing.
11.3 NOTICE OF CLAIMS. All claims for indemnification hereunder shall
be resolved in accordance with the following procedures:
(a) If Buyer or Seller, as appropriate, has incurred or
reasonably believes that it may incur any Indemnified Loss (the "Indemnified
Party"), it shall deliver promptly written notice to the other (the
"Indemnifying Party") setting forth in reasonable detail the nature and amount
of the Indemnified Loss or potential Indemnified Loss, if possible, and
further referencing the sections of this Agreement upon which the claim for
indemnification for such Indemnified Loss is based (a "Claim Notice"). If an
Indemnified Party receives notice of a third-party claim for which it intends
to seek indemnification hereunder, it shall give the Indemnifying Party prompt
written notice of such claim, so that the Indemnifying Party's defense of such
claim under Section 11.4 hereof may be timely instituted. The failure by an
Indemnified Party to provide such written notice shall not constitute a waiver
of the Indemnified Party's right to indemnity unless such failure has resulted
in the loss of substantive rights with respect to the
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Indemnifying Party's ability to defend such claim, and then only to the extent
of such loss.
(b) If, after receiving a Claim Notice for an Indemnified
Loss, the Indemnifying Party desires to dispute such claim or the amount
claimed in the Claim Notice, it shall deliver to the Indemnified Party a
written objection to such claim or payment setting forth the basis for
disputing such claim or payment. Such notice shall be delivered within thirty
(30) days after the date the Claim Notice to which it relates is received by
the Indemnifying Party. If no such notice is received within the
aforementioned 30-day period, the Indemnified Party shall be entitled to
payment for such Indemnified Loss from the Indemnifying Party within ten (10)
days of the end of such 30-day objection period, subject to the limitations of
Section 11.7 hereof.
11.4 DEFENSE OF THIRD-PARTY CLAIMS. The Indemnifying Party under this
Article 11 shall have the right to conduct and control through counsel of its
own choosing, which counsel shall be reasonably acceptable to the Indemnified
Party, any third-party claim, action or suit; provided that the Indemnifying
Party diligently contests and defends such claim. The Indemnified Party shall
be entitled at any time, at its own cost and expense (except that such cost
and expense shall be paid by the Indemnifying Party if (a) the Indemnified
Party reasonably determines that the Indemnifying Party is not adequately
representing or, because of a conflict of interest, may not adequately
represent the interests of any Indemnified Party, or (b) the third party
claim, action or suit seeks damages in excess of the limitations set forth in
Section 11.7(b) hereof), to participate in such contest and defense and to be
represented by attorneys of its or their own choosing. Except with the prior
written consent of the Indemnified Party, which shall not be unreasonably
withheld, no Indemnifying Party, in the defense of such claim or litigation,
shall consent to entry of any judgment or order, interim or otherwise, or
enter into any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnified Party or that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim
or litigation; provided, however, that with respect to any claim, audit or
litigation relating to Taxes, the Indemnifying Party shall not consent to
entry of any judgment or order, interim or otherwise, or enter into any
settlement, in any case, of any type whatsoever, except with the prior written
consent of the Indemnified Party, which written consent shall not be
unreasonably withheld.
11.5 FAILURE TO DEFEND. In the event that the Indemnifying Party does
not elect to defend against any third-party claim, the Indemnified Party may
defend against such claim in such manner as it may in its good faith
discretion deem appropriate and, to the extent and subject to the limitations
provided in this Article 11, the Indemnifying Party shall be liable for any
legal expenses reasonably incurred in connection with such defense; provided,
however, that the Indemnified Party shall not, without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld, settle
or consent to the entry of judgment with respect to such third-party claim.
58
11.6 COOPERATION. In the event of any claim by a third party, the
parties hereto agree that they will cooperate fully with each other in
connection with the defense or settlement of such matter.
11.7 LIMITATIONS ON INDEMNIFICATION. The indemnification provided
for in this Article 11 shall be subject to the following limitations:
(a) DEDUCTIBLE. Notwithstanding any provision contained in
this Article 11 or elsewhere herein to the contrary, except as set forth in
the next sentence, Buyer shall have no right to receive any indemnification
from Seller with respect to Indemnified Losses relating to (1) breaches of
representations or warranties, (2) the Assumed Liabilities described in
clauses (vi) and (vii) of Section 1.5 hereof, or (3) any liability or
obligation of EES of the type described in clauses (vi) and (vii) of Section
1.5 hereof until the sum of such Indemnified Losses exceed, in the aggregate,
$450,000 (the "Deductible"), whereupon Seller shall be obligated to pay all
Indemnified Losses in excess of the Deductible. The Deductible shall not
apply to any Indemnified Loss arising out of (i) Seller's breach of a
representation or warranty made in Sections 4.2, 4.8, 4.9 or 4.17 (to the
extent that such Indemnified Losses consist of income or franchise Taxes and
interest, penalties and additions to Tax in respect of such income or
franchise Taxes), (ii) liabilities of EWD other than Assumed Liabilities,
(iii) liabilities described in Sections 11.1(c) or 11.1(f), (iv) Seller's
fraud, bad faith or willful misconduct in connection with this Agreement or
the Related Agreements, or (v) liabilities for Taxes as described in Section
11.1(d) hereof to the extent such Indemnified Losses relate to or are
attributable to income or franchise Taxes.
(b) CEILING ON INDEMNIFIED LOSSES. Notwithstanding anything
in this Article 11 or elsewhere herein to the contrary, the liability of
Seller to Buyer under this Article 11 for all Indemnified Losses relating to
(1) breaches of representations or warranties, (2) the Assumed Liabilities
described in clauses (vi) and (vii) of Section 1.5 hereof, or (3) any
liability or obligation of EES of the type described in clauses (vi) and
(vii) of Section 1.5 hereof shall not exceed, in the aggregate, $7 million,
except to the extent that such liability is based upon (i) Seller's breach of
a representation or warranty made in Section 4.2, 4.8, 4.9 or 4.17 (to the
extent that such Indemnified Losses consist of income or franchise Taxes and
interest, penalties and additions to Tax in respect of such income or
franchise Taxes), (ii) liabilities of EWD other than Assumed Liabilities,
(iii) liabilities described in Sections 11.1(c) or 11.1(f), (iv) Seller's
fraud, bad faith or willful misconduct in connection with this Agreement or
the Related Agreements, or (v) liabilities for Taxes as described in Section
11.1(d) hereof to the extent that such Indemnified Losses relate to or are
attributable to income or franchise Taxes. In connection with any
indemnification claim by Buyer under this Agreement relating to breaches of
representations or warranties, Buyer shall be required to seek recovery for
Indemnified Losses out of the funds held in the Escrow Account (as defined in
the Escrow Agreement) pursuant to the Escrow Agreement. Upon exhaustion of
the funds held in the Escrow Account, Buyer may seek recovery directly from
Seller, but only to
59
the extent that the $7 million ceiling described in this Section 11.7(b) does
not apply to the Indemnified Loss for which recovery is sought. In the event
that Buyer receives amounts in respect of Indemnification Losses out of funds
held in the Escrow Account pursuant to the Escrow Agreement for any claim
based upon the (i) Seller's breach of a representation or warranty made in
Section 4.2, 4.8, 4.9 or 4.17 (to the extent that such Indemnified Losses
consist of income or franchise Taxes and interest, penalties and additions to
Tax in respect of such income or franchise Taxes), (ii) liabilities of EWD
other than Assumed Liabilities, (iii) liabilities described in Sections
11.1(c) or 11.1(f), (iv) Seller's fraud, bad faith or willful misconduct in
connection with this Agreement, or (v) liabilities for Taxes as described in
Section 11.1(d) hereof to the extent such Indemnified Losses relate to or are
attributable to income or franchise Taxes, Seller shall replenish the Escrow
Account in an amount equal to the amount released by the Escrow Agent to
Buyer in respect of claims.
(c) OTHER BENEFITS AND DETRIMENTS. In determining the
amount of any Indemnified Loss, there shall be taken into account any tax
benefit or detriment, insurance proceeds (other than proceeds from the
representation and warranty insurance policy described on Schedule 2.2(a)) or
other similar recovery, detriment or offset realized, directly or indirectly,
by the Indemnified Party.
11.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the parties
hereto has the right to rely fully upon the representations, warranties,
covenants and agreements of the other contained herein or in any certificate
delivered with respect to any of the foregoing. Each of the covenants and
agreements shall survive the Closing indefinitely and the representations and
warranties shall survive the execution of this Agreement and the Closing and
shall remain in full force and effect for a period of sixteen (16) months
following the Closing Date; provided, however, that such limitation on
survival shall not apply to (i) any representation or warranty if a Claim
Notice with respect thereto is delivered as provided in this Article 11
hereof prior to expiration of such period, or (ii) any representation or
warranty made in Section 4.2, 4.8 or 4.9, or any claim based upon the
Seller's fraud, bad faith or willful misconduct in connection with this
Agreement or the Related Agreements, which shall, in each case, survive the
Closing indefinitely. Notwithstanding the immediately preceding sentence, the
representations, warranties, covenants and agreements contained herein, or in
any certificate delivered with respect to any of the foregoing, that relate
to Taxes shall survive until 60 days after the expiration of the applicable
statute of limitations (including any extension thereof; provided, however,
that no statute of limitations shall be extended without the consent of
Seller which consent shall not be unreasonably withheld.)
11.9 EXCLUSIVE REMEDY. Buyer and Seller acknowledge and agree that
the foregoing provisions of this Article 11 shall be the exclusive remedy of
Buyer and Seller with respect to any dispute or claim arising out of or
related to the Contemplated Transactions if the Contemplated Transactions are
consummated.
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ARTICLE 12. ARBITRATION
12.1 BINDING ARBITRATION. Except as provided in Section 2.4(d)
hereof, any dispute or claim between the parties arising out of or related to
this Agreement or the Contemplated Transactions shall be fully and finally
resolved by binding arbitration in Wilmington, Delaware in accordance with
the Commercial Arbitration Rules and practices (the "Rules") of the American
Arbitration Association ("AAA") from time to time in force and effect. This
agreement to arbitrate shall be specifically enforceable and is the exclusive
remedy for the resolution of such disputes under this Agreement. There shall
be a three-arbitrator panel (the "Panel") which shall be chosen in accordance
with the Rules of the AAA. Only individuals who are (i) lawyers engaged
full-time in the practice of law and (ii) on the AAA register of arbitrators
shall be selected as an arbitrator. Within twenty (20) days after the
conclusion of the arbitration hearing, the Panel shall prepare written
findings of fact and conclusions of law. Judgment upon the award determined
by the Panel shall be entered in state or federal court located in
Wilmington, Delaware. The parties hereby submit to the exclusive jurisdiction
of the courts so selected, to the exclusion of any other court which might
have had jurisdiction apart from this Section 12.1, waive any defense of lack
of in personam jurisdiction of such courts and agree that service of process
in any action before such courts may be made by mailing it to the party to be
served at the address provided for in Section 13.6 hereof. The Panel shall
require the non-prevailing party to pay the Panel's full fees and expenses;
provided, that in the event of a compromise between the positions of the
parties, such fees and expenses shall be pro rated based on the relative
success of the parties in prevailing on their positions. Each party to this
Agreement covenants not to institute any action or litigation in any court,
or commence any other proceeding, with respect to any matter under this
Agreement other than as provided for in Section 2.4(d) hereof.
ARTICLE 13. GENERAL PROVISIONS
13.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon,
shall inure to the benefit of, and be enforceable by, the parties hereto and
their respective personal representatives, heirs, successors and assigns,
except that none of the parties shall have the right to assign any of its or
his obligations hereunder without the consent of the other party hereto.
Notwithstanding the foregoing, Buyer may assign or delegate any or all of its
rights or obligations under this Agreement to any Affiliate of Buyer.
13.2 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits hereto, supercedes the Original Agreement and the Amended Agreement
in their entirety and constitutes the entire contract between the parties
hereto with respect to the subject matter hereof and may not be changed,
modified or amended, except by an instrument in writing signed by the party
against whom any such change, modification or amendment is asserted.
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13.3 COMMERCIALLY REASONABLE EFFORTS. Each of the parties hereto
agrees to use its commercially reasonable efforts to cause all conditions
precedent to its obligations under this Agreement to be satisfied.
Notwithstanding the foregoing, the obligations to use commercially reasonable
efforts shall not include the obligation to pay monies to any party or the
obligation to agree to any financial arrangement (other than as described on
Schedule 7.7) that any party hereto considers to be not in its best interest.
13.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to any State's conflict of laws principles.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall constitute one and the same agreement.
13.6 NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall
be in writing and shall be deemed to have been duly given if delivered
personally or by a nationally recognized overnight delivery service, as
follows:
If to Seller:
The Xxxxxxx Company, Inc.
Suite 406
000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx, Jr.
With a copy to:
Xxxxxx Xxxx Xxxxxx Xxxx & Xxxxxxxxxx
P.L.L.C.
000 Xxxxx Xxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
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If to Buyer:
Atrium Companies, Inc.
0000 Xxxx Xxxxxxxxxxx Xxxx
Xxxxx 0000X
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxx
Facsimile Number: (000) 000-0000
and
Atrium Companies, Inc.
c/o Ardshiel, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile Number: (000) 000-0000
With a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxxx, Esq.
Xxxx X. Xxxxx, Esq.
Facsimile Number: (000) 000-0000
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on the date of delivery.
13.7 PRESS RELEASES AND COMMUNICATIONS. No press release or public
announcement related to this Agreement or the Contemplated Transactions or,
prior to the Closing, any other announcement or communication to the
employees, customers or suppliers of Seller, EWD and/or EES shall be issued
or made by Seller, EWD, EES or Buyer or any of their respective officers,
directors, employees, advisors, agents or representatives, without the prior
written consent of the other. If either party is required by law (based on
the advice of counsel), to make an announcement, the other party shall have
the right to review such press release or announcement prior to publication.
13.8 NO THIRD PARTY BENEFICIARIES. Except as expressly stated
herein, nothing in this Agreement expressed or implied, is intended to confer
on any person other than the parties hereto or their respective personal
representatives, heirs, successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
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13.9 CONSTRUCTION AND INTERPRETATION. This Agreement has been
negotiated by the undersigned and their respective legal counsel, and legal
or equitable principles that might require the construction of this
Agreement, or any provision of this Agreement, against the party drafting
this Agreement will not apply in any construction or interpretation of this
Agreement.
13.10 HEADINGS. The Section headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Throughout this Agreement, the masculine
gender shall be deemed to include the feminine and the neuter, the singular
the plural, and the plural the singular, all as the context may require.
13.11 SEVERABILITY. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected
and shall remain in full force and effect.
13.12 SPECIFIC PERFORMANCE. The parties recognize that in the event
the Companies should refuse to perform under the provisions of this
Agreement, monetary damages along will not be adequate. Buyer shall therefore
be entitled, in addition to any other remedies which may be available,
including money damages, to obtain specific performance of the terms of this
Agreement. In the event of any action to enforce this Agreement specifically,
the Companies hereby waive the defense that there is an adequate remedy at
law.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the day and year first above written.
THE XXXXXXX COMPANY, INC.
By:
-----------------------------------
Xxxx Xxxxxxx, Jr., President
ATTEST:
------------------------------------
Xxxxxxx X. Xxxx, Assistant Secretary
ATRIUM COMPANIES, INC.
By:-----------------------------------
Xxxx X. Xxxx, President
ATTEST:
------------------------------------
Xxxx X. Xxxx, Assistant Secretary
D AND W HOLDINGS, INC.
By:-----------------------------------
Xxxx X. Xxxx, President
ATTEST:
------------------------------------
Xxxx X. Xxxx, Assistant Secretary
65
JOINDER
Xxxx Xxxxxxx, Jr., hereby joins in this Agreement for the sole purpose
of agreeing to be bound by the provisions of Section 8.18 and Article 12.
-------------------------
Xxxx Xxxxxxx, Jr.
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SCHEDULES AND EXHIBITS
Schedule 1.5 Assumed Agreements
Schedule 1.21 EES Fixed Assets
Schedule 1.35 EWD Fixed Assets
Schedule 1.39 Excluded Assets
Schedule 1.58 Promissory Note
Schedule 2.2(a) Indemnification Insurance
Schedule 2.5 Allocation of Purchase Price
Schedule 4.1 Jurisdictions
Schedule 4.4 Governmental Approvals and Notices
Schedule 4.5 Approvals and Notices Required
Schedule 4.6(a) Audited Financial Statements
Schedule 4.6(b) Unaudited Financial Statements
Schedule 4.6(f) Indebtedness
Schedule 4.7 Adverse Changes
Schedule 4.8 Title Exceptions
Schedule 4.15 Real Estate Exceptions
Schedule 4.16 Leases and Facilities
Schedule 4.17 Tax Matters
Schedule 4.18 Employment Agreements
Schedule 4.19 Employment Matters
Schedule 4.20 Employee Benefit Plans
Schedule 4.21 Non-Competition Agreements
Schedule 4.22 Bank Accounts
Schedule 4.23 Licenses and Permits
Schedule 4.24 Legal Proceedings
Schedule 4.25 Utilities
Schedule 4.26 Compliance Exceptions; Safety and Environmental Permits
Schedule 4.27 Environmental Matters
Schedule 4.29 EES Agreements
Schedule 4.32 Intellectual Property Rights
Schedule 4.33 Insurance
Schedule 4.35 Affiliated Transactions
Schedule 4.36 Brokerage Fees
Schedule 4.37 Change of Control Provisions
Schedule 4.38 Customers, Suppliers and Distributors
Schedule 4.40 Relationship with General Electric Company
Schedule 5.4 Approvals and Notices; Conflict with Other Instruments
Schedule 6.5 Required Consents
Schedule 6.12 Releases and Payoffs
Schedule 6.21 Lease Amendments
Schedule 7.7 Financing
Schedule 8.14 Employee Matters
Exhibit A Assignment and Assumption Agreement
Exhibit B Xxxx of Sale and Assignment
Exhibit C Escrow Agreement
Exhibit D Opinion of Seller's Counsel
Exhibit E Trademark Assignment
Exhibit F Xxxxxxx Subscription Agreement
Exhibit G Management Subscription Agreement
Exhibit H Buy/Sell Agreement
Exhibit I Employment Agreement
Exhibit J Nondisturbance Agreement
Exhibit K Opinion of Buyer's Counsel
Annex A Xxxxxxx Transaction Outline
Annex B Xxxxxxxx Branches
2
