PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is entered into as of September 11,
1997, by and among American Builders & Contractors Supply Co., Inc., a Delaware
corporation ("Buyer"), and Perfection Roofing Materials, Inc., a Texas
corporation ("Perfection"), Xxxxxxxx Roofing Supply, Inc., a Texas corporation
("Xxxxxxxx"), Stone Metal Products, Inc., a Texas corporation ("Stone"), SHR
Roofing Supply, Inc., a Texas corporation ("SHR"), and United Building Supply,
Inc., a Delaware corporation ("United") (collectively, the "Target
Corporations"), and Xxxxx X. Xxxxx ("Xxxxx"), Xxxxxx X. Xxxxxxxx ("Xxxxxxxx"),
Xxxxx X. Xxxxxx ("Xxxxxx"), Xxxxxx X. Xxxxxx ("Xxxxxx"), Xxxxx X. Xxxxxxx, III
("Xxxxxxx") and Xxxxxx X. Xxxxxx ("Xxxxxx") (collectively, the "Selling
Shareholders").
WHEREAS, Target Corporations are engaged in the business of selling and
distributing roofing supplies and related materials (the "Business"); and
WHEREAS, Selling Shareholders desire to sell, and Buyer desires to
purchase, all of the issued and outstanding shares of capital stock of
Perfection, Xxxxxxxx, Stone and SHR (the "Shares"); and
WHEREAS, United desires to sell, and Buyer desires to purchase,
substantially all of the assets of United and assume the liabilities of United
as set forth herein.
NOW, THEREFORE, in consideration of the recitals and the respective
representations, warranties and covenants contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.1 Purchase and Sale of Shares. Subject to the terms and
conditions of this Agreement, at the Closing (as defined below), Selling
Shareholders shall sell and transfer the Shares to Buyer, and Buyer shall
purchase the Shares from Selling Shareholders. In consideration of the sale of
the Shares, on the Closing Date Buyer shall pay to Selling Shareholders an
aggregate amount equal to the Cash Consideration allocated to the Shares in
accordance with Section 1.6(a). Subject to the terms of Sections 1.7 and 1.8
hereof, such amount shall be paid by wire transfer to accounts specified by
Selling Shareholders (such amount to be reduced by fees and expenses previously
paid or payable to NBCM (as defined) and Target Corporations' and Selling
Shareholders' counsel pursuant to Sections 10.4 and 10.2, respectively, by
Target Corporations and all amounts to be paid to such parties will be wired
directly to them by Buyer at Closing).
Upon the Closing, Buyer shall cause all obligations of Perfection,
Xxxxxxxx, Xxxxx and SHR for Borrowed Money to be repaid in full; provided, that
Buyer may notify Selling Shareholders that certain specified Borrowed Money
obligations to vendors, capitalized lease obligations or seller
1
notes shall remain as obligations of such companies, so long as Selling
Shareholders shall have no obligation or liability (or Buyer shall furnish
indemnity arrangements satisfactory to Selling Shareholders) after the Closing
Date with respect to any such Borrowed Money obligations.
SECTION 1.2 Purchase and Sale of Assets. Subject to the terms and
conditions set forth in this Agreement, at the Closing, United shall sell,
convey, transfer, assign and deliver to Buyer all of the assets of United
existing on the date of the Closing, whether real, personal, tangible or
intangible, and without limitation of the foregoing, including (i) all items,
whether real, personal, tangible or intangible, which comprise each account
balance under the caption "Assets" in the July 31, 1997 unaudited balance sheet
of United, a copy of which has been provided to Buyer (the "Unaudited Balance
Sheet") (including all such items which were at July 31, 1997 (the "Balance
Sheet Date") carried at no cost), all of which items are hereinafter
collectively referred to as the "Balance Sheet Assets;" (ii) all other assets,
whether real, personal, tangible or intangible, of United in existence at the
Balance Sheet Date relating to the its business, all of which assets are
hereinafter collectively referred to as the "Miscellaneous Assets;" and (iii)
all assets into which the Balance Sheet Assets and Miscellaneous Assets have
been converted, or which otherwise have been acquired, by United in the ordinary
course of business between the Balance Sheet Date and the Closing Date, all of
which are hereinafter collectively referred to as the "Conversion Assets;"
provided, however, that the Balance Sheet Assets, Miscellaneous Assets and
Conversion Assets shall not include any Excluded Assets. As used herein, the
term "Excluded Assets" means (i) all assets in possession of United but owned by
third parties; (ii) the corporate charter, related organizational documents and
minute books of United; and (iii) the consideration paid or payable by Buyer to
United pursuant to the terms of this Agreement. The assets of United purchased
and sold pursuant to this Agreement are referred to herein as the "Purchased
Assets."
SECTION 1.3 Cash Consideration for Purchased Assets. Subject to the
provisions of Sections 1.7 and 1.8 hereof, as consideration for the sale of the
Purchased Assets to Buyer and for the other covenants and agreements of United,
on the Closing Date, Buyer shall pay to United an amount equal to the Cash
Consideration allocated to the Purchased Assets in accordance with Section
1.6(a) in the form of a wire transfer of immediately available funds to an
account designated by United prior to Closing (such amount to be reduced pro
rata for amounts previously paid by Target Corporations and amounts wired
directly to NBCM or Target Corporations' and Selling Shareholders' counsel by
Buyer as payment of the fees and expenses described in Sections 10.4 and 10.2,
respectively).
SECTION 1.4 Assumption of Liabilities.
-------------------------
(a) As additional consideration for the Purchased Assets, on the
Closing Date, Buyer shall assume the "Assumed Liabilities." For purposes of
this Agreement, "Assumed Liabilities" means (i) all items which comprise
each account balance under the caption "Liabilities" in the Unaudited
Balance Sheet, (ii) liabilities incurred by United in the ordinary course
of business subsequent to the Balance Sheet Date for the account or benefit
of the property, other assets and business of United to be transferred to
Buyer pursuant to this Agreement, and (iii) all other liabilities or
obligations of United (including, but not
2
limited to, those arising out of or in connection with contracts,
commitments, engagements and licenses), and any and all extensions or
renewals thereof, in whole or in part, and all other obligations of United
whatsoever, whether known or unknown, direct or indirect, absolute or
contingent, due or to become due, existing or thereafter arising, however
evidenced or acquired, as of the close of business on the Closing Date
(including any claims arising as a result of the consummation of this
Agreement), and in the case of any such liabilities or obligations arising
out of contracts or commitments entered into by United, whether or not such
contracts or commitments are by their terms assignable or whether performed
prior to the Closing Date or to be performed thereafter; provided, however,
the Assumed Liabilities shall not include any Excluded Liabilities. On the
Closing Date, Buyer shall cause all obligations of United for Borrowed
Money to be repaid in full, provided, however, Buyer may assume any such
obligation to vendors, capitalized lease obligations or seller notes, so
long as United and its shareholders are fully released and discharged (or
Buyer shall furnish indemnity arrangements satisfactory to United and its
shareholders) with respect to any such Borrowed Money obligation. As used
herein, the term "Excluded Liabilities" means (a) all income tax liability
of United; (b) all fees and expenses payable to NBCM pursuant to Section
10.4 hereof; (c) any indemnification obligation of United to its directors
or officers, other than with respect to any claims or liabilities of United
disclosed pursuant to this Agreement; (d) all legal fees and expenses of
United incurred in connection with this Agreement; and (e) any amounts
payable by United with respect to "unremitted" funds as described in
Schedule 2.8 hereto under the Aged Receivable Agreement.
(b) Any state, county or local sales, use or other transfer taxes,
including sales tax on vehicles and trailers, and any transfer, recording
or similar fees and charges arising in connection with the transfer of the
Purchased Assets from United to Buyer shall be borne by Buyer.
SECTION 1.5 Additional Agreements (a) At Closing, United, Xxxxx X. Xxxxx
and Xxxxx X. Xxxxxxx, III, respectively, shall enter into Noncompetition
Agreements with Buyer in the form attached as Exhibit A (the "Noncompetition
Agreements").
(b) At Closing, Champ Industries, Inc. and Buyer shall enter into a
Consulting Agreement in the form attached as Exhibit B (the "Consulting
Agreement").
SECTION 1.6 Allocation.
----------
(a) Not later than October 1, 1997, Selling Shareholders shall
provide to Buyer an allocation of the Cash Consideration among the Shares
and the Purchased Assets which shall be binding on the parties for all
purposes, so long as the Cash Consideration allocated to each Target
Corporation is at least equal to the shareholders' equity of such Target
Corporation computed on a federal income tax basis; and
-3-
(b) Not later than 30 days after completion of the Closing Balance
Sheet (including resolution of any disputes pursuant to Section 1.7(b)),
Buyer shall provide an allocation of the deemed sales price of the assets
of each Target Corporation among such assets. The deemed sales price for
the assets of each Target Corporation shall be equal to the Cash
Consideration allocated to such Target Corporation plus the liabilities
assumed of that Target Corporation. Such allocation shall be based on the
residual method of allocation as required by Section 1060 of the Code (as
hereinafter defined), and Buyer shall not allocate any portion of the
consideration to assets described under Section 1245 or 1250 of the Code to
the extent that such allocation would be in an amount greater than a Target
Corporation's adjusted tax basis in any such asset.
SECTION 1.7 Post-Closing Adjustment with Respect to Net Book Value.
------------------------------------------------------
(a) Preparation of Closing Balance Sheet. (i) Not later than 60 days
following the Closing Date, Buyer shall prepare and deliver to Selling
Shareholders for their review in accordance with this section a balance
sheet (the "Closing Balance Sheet") of Target Corporations prepared as of
the October 31, 1997 and prepared in accordance with generally accepted
accounting principles ("GAAP") in a manner consistent with the financial
statements of Target Corporations described in Section 2.7 hereof. The
parties hereto shall cooperate fully with each other in the preparation of
the Closing Balance Sheet, and Selling Shareholders shall have access at
all reasonable times to review workpapers, books and records relating to
the preparation of the Closing Balance Sheet.
(ii) As of October 31, 1997, Target Corporations and Buyer shall take
a joint physical count of the tangible personal property of each such
Target Corporation. Each party shall bear its own expenses incurred in
taking such physical count (provided any expense by Target Corporations
shall be deemed to have been incurred in the ordinary course of business).
Each item of inventory, in commercially reasonable lots (which means a
"SKU" of any Target Corporation or Buyer), shall be valued at one hundred
percent (100%) of the invoice cost paid by the Target Corporation for such
item, less any rebates, cash or other discounts, whether received or
accrued (which assumes continued purchases by Target Corporations after the
Closing Date), together with freight charges and duties, if any. No value
shall be assigned to inventory which is obsolete or damaged. All other
items of tangible personal property shall be valued at the Target
Corporation's net book value therefor.
(b) Right to Dispute Closing Balance Sheet. Selling Shareholders
shall have the right to dispute the Closing Balance Sheet by giving notice
of dispute to Buyer within 30 days after the Closing Balance Sheet has been
provided to Selling Shareholders. Such notice shall set forth in detail the
reasons for the dispute and Selling Shareholders' proposed adjustments to
the Closing Balance Sheet. If Selling Shareholders do not give notice of
dispute to Buyer within such 30 day
4
period, Buyer and Selling Shareholders shall endeavor in good faith to
reach agreement on all of the disputed items. If the parties are unable to
reach an agreement on the disputed items during the 30 days following
provision of the notice of the dispute to Buyer, then the disputed items
which have not been resolved shall be submitted to the accounting firm of
Coopers & Xxxxxxx or Price Waterhouse, Houston, Texas (and if for any
reason either such firm is unwilling or unable to serve, then another
independent accounting firm mutually agreed upon by a majority in interest
of the Selling Shareholders and Buyer will serve) for determination and
resolution on the basis of such procedures as such accounting firm, in its
sole judgement, deems applicable and appropriate, taking into account GAAP
and the terms of this Agreement. Such accounting firm shall review the
disputed matters and as promptly as practicable deliver to Buyer and to
Selling Shareholders a statement setting forth its determination as to the
proper treatment of the matters in dispute, and such determination shall be
final and binding upon Selling Shareholders and Buyer without any further
right of appeal. All charges of such accounting firm and other expenses
directly incurred in making such determination shall be borne by the party
or parties which does not prevail on a majority of the items in dispute
(calculated based on the dollar amount in dispute).
(c) Adjustment of Consideration. In the event that Target
Corporations' Net Book Value (as defined) as shown on the Closing Balance
Sheet, as finally prepared and binding upon the parties in accordance with
Sections 1.7(a) and (b) is less than the Baseline Amount (as defined), then
Buyer shall have the right to give notice thereof to Selling Shareholders
and the escrow agent designated pursuant to a "net asset escrow agreement"
to be mutually agreed upon by the parties (the "Net Asset Escrow
Agreement"), whereupon the escrow agent shall refund to Buyer a cash amount
equal to the amount by which the Baseline Amount exceeds the amount of the
Net Book Value as shown on the Closing Balance Sheet. At Closing, Buyer
shall pay $500,000 of the Cash Consideration to the escrow agent pursuant
to the Net Asset Escrow Agreement (such amount to be deducted
proportionally between the purchase of the Shares and the Purchased
Assets). Any balance remaining of the escrowed amount shall be immediately
paid over to Selling Shareholders and United upon final resolution of the
post-closing adjustment, together with the investment interest on the
disbursed amount; any amount disbursed to Buyer shall include investment
interest on such disbursed amount. In the event that Buyer utilizes the
entire $500,000 of escrowed funds for the post-closing adjustment, any
additional claim may be made against the Escrow Funds (as defined) pursuant
to Section 1.8 hereof. The escrow procedure described herein is the
exclusive remedy of Buyer with respect to satisfaction of the post-closing
adjustment.
(d) Agreement on Discounted Obligations. If, upon the Closing, Buyer
or any Target Corporation is able to obtain a discount from the payee with
respect to any Borrowed Money obligation of any Target Corporation, then
the benefit of such discount shall be shared on an equal basis between
Buyer and Selling Shareholders. For example, if a $100,000 discount on a
Borrowed Money obligation is obtained (the "Discount Amount"), then the
Cash Consideration paid at Closing will be increased by $50,000.
5
SECTION 1.8 Indemnification Escrow Agreement. On the Closing Date, the Cash
Consideration which is payable hereunder shall be reduced by the amount of
$2,000,000 (the "Escrow Funds") (such amount to be deducted proportionally
between the purchase of the Shares and the Purchased Assets) which shall be
deposited in escrow as set forth in this Section 1.8. Buyer, Selling
Shareholders and United shall establish an escrow account with an escrow agent
mutually acceptable to the parties hereto (the "Escrow Agent") pursuant to a
mutually acceptable escrow agreement (the "Indemnification Escrow Agreement")
for the purpose of satisfying claims, if any, of Buyer under Article VIII hereof
and for excess claims under Section 1.7 hereof. Among other mutually agreed upon
terms, the Indemnification Escrow Agreement shall provide (i) that upon each
anniversary of the Closing Date, $500,000 (plus pro rata investment income)
shall be disbursed in the same percentages that the Cash Consideration was paid
to Selling Shareholders and United pursuant to this Article I on the Closing
Date (such that, if no claims have been made under Article VIII or Section 1.7
and pursuant to the Indemnification Escrow Agreement, upon the expiration of
four years from the Closing Date, all Escrow Funds shall have been disbursed to
Selling Shareholders and United), unless Buyer shall have exercised its rights
under Article VIII or Section 1.7 and pursuant to the Indemnification Escrow
Agreement with respect to any claims under such article and the amount to be
disbursed shall be reduced by the amount of any outstanding claims, but only to
the extent that such claims in the aggregate would result in the Escrow Funds
being less than (a) $1,500,000 immediately following the first anniversary of
the Closing, (b) $1,000,000 immediately following the second anniversary of the
Closing, and (c) $500,000 immediately following the third anniversary of the
Closing, (ii) the Escrow Agent shall invest the Escrow Funds in a money market
or similar investment specified by Selling Shareholders and United and the
investment income earned on the Escrow Funds shall be disbursed to Selling
Shareholders and United and to Buyer in the percentages that the Escrow Funds
are distributed under the terms of this Agreement and the Escrow Agreement and
(iii) if upon the expiration of any such one year period the parties have not
mutually agreed upon the disbursement of the Escrow Funds because of a claim by
Buyer under Article VIII or Section 1.7, the Escrow Agent shall interplead the
portion of such funds in dispute into a court of competent jurisdiction, pending
final disposition of Buyer's claims.
SECTION 1.9 Closing. (a) Subject to the conditions set forth in Article VI
hereof, the consummation of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Target Corporations' counsel in
Houston, Texas on November 3, 1997, on such other date as Buyer and Target
Corporations may mutually agree, or such earlier date if all conditions to
Closing have been satisfied or waived (so long as Buyer gives at least seven
days' prior written notice to the Target Corporations of the earlier proposed
Closing Date), such date being herein called the "Closing Date." Failure to
close on such date shall not relieve either party hereto of its obligations
under this Agreement.
(b) If the Closing has not occurred by November 3, 1997, the Cash
Consideration shall be increased (on a pro rata basis among the Shares and
Purchased Assets) by the amount of $10,000 per day from November 1, 1997
until the Closing Date, unless the Closing has not occurred for any reason
other than Buyer's fault.
6
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF TARGET CORPORATIONS AND REPRESENTING SHAREHOLDERS
Target Corporations and Representing Shareholders make the representations
and warranties set forth in this Article II to Buyer. Target Corporations and
Representing Shareholders have delivered to Buyer the Schedules to this
Agreement referred to in this Article II on the date hereof, and such Schedules
have been reviewed and accepted by Buyer.
SECTION 2.1 Organization and Qualification.
------------------------------
(a) Each Target Corporation is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Each Target Corporation has all requisite corporate power
and authority to carry on its business as it is now being conducted, and to
own, lease and operate its properties and assets, and to perform all its
obligations under the agreements and instruments to which it is a party or
by which it is bound. Each Target Corporation is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each state or other jurisdiction in which the properties and assets owned,
leased or operated by it or the nature of the business conducted by it make
such qualification necessary. Each such jurisdiction in which each Target
Corporation is so qualified is listed on Schedule 2.1(a).
(b) None of the Target Corporations has a subsidiary or any ownership
interest in any other entity.
(c) True, correct and complete copies of the charter documents and
bylaws of each Target Corporation, with all amendments thereto through the
date of this Agreement, have been delivered by Target Corporations to
Buyer. The books of account, corporate minute books, stock record books,
and other records of Target Corporations are complete and correct and have
been maintained in accordance with sound business practices. The corporate
minute books of Target Corporations contain complete records of all
meetings held of, and corporate action taken by, the stockholders and the
boards of directors, and no meeting of any such stockholders or board of
directors has been held for which minutes have not been prepared and are
not contained in such minute books.
SECTION 2.2 Capitalization. As of the date hereof, the authorized capital
stock of each Target Corporation is set forth on Schedule 2.2. Schedule 2.2
lists each holder of common stock (the "Common Stock") and the number of shares
owned by such holders, which represent all capital stock outstanding of each
Target Corporation. The Selling Shareholders are the record and beneficial
owners of the Common Stock as set forth in such schedule, free and clear of any
Encumbrance. Except as set forth on Schedule 2.2, there are no outstanding
subscriptions, options, phantom stock, convertible securities, rights, warrants,
calls, irrevocable proxies or other agreements or commitments of any kind
directly or indirectly obligating any Target Corporation to issue any security
of or equity interest in such Target Corporation, or irrevocable proxies or any
agreements
7
(including shareholder agreements) restricting the transfer of or otherwise
relating to any security or equity interest in the Target Corporations. All of
the shares of Common Stock have been duly authorized, validly issued and are
fully paid and non-assessable, and are free of preemptive rights.
SECTION 2.3 Authority Relative to the Agreement. Each Target Corporation
has full corporate power and authority to execute, deliver and perform this
Agreement, and no further corporate proceedings on the part of each such Target
Corporation is necessary to consummate the transactions contemplated hereby,
which have been duly and validly authorized by each Target Corporation's board
of directors and shareholders. Each Selling Shareholder has legal capacity and
authority to execute, deliver and perform this Agreement. This Agreement has
been duly and validly executed and delivered by each Target Corporation and
Selling Shareholder, and this Agreement constitutes the valid and binding
obligation of each Target Corporation and Selling Shareholder enforceable
against each Target Corporation and Selling Shareholder in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to creditors' rights generally and
general equitable principles, and subject to such approval of regulatory
agencies as may be required by statute or regulation as described in Section
2.5.
SECTION 2.4 No Violation. Neither the execution, delivery nor performance
of this Agreement, nor the consummation of the transactions contemplated hereby
will, as of the Closing Date (i) violate any law, order, writ, judgment,
injunction, award, decree, rule, statute, ordinance or regulation applicable to
any Target Corporation or Selling Shareholder which in each case would result in
a Material Adverse Effect, (ii) except as set forth on Schedule 2.4, be in
conflict with, result in a breach or termination of any provision of, cause the
acceleration of the maturity of any debt or obligation pursuant to, constitute a
default (or give rise to any right of modification, termination, cancellation or
acceleration) under, or result in the creation of any lien, charge, encumbrance
or security interest (herein, an "Encumbrance") upon any property of any Target
Corporation pursuant to any terms, conditions or provisions of any note,
license, instrument, indenture, mortgage, deed of trust or other agreement or
understanding or any other restriction of any kind or character, to which any
Target Corporation is a party or by which any of the properties of any Target
Corporation are subject or bound, and in which each case would result in a
Material Adverse Effect or (iii) conflict with or result in any breach of any
provision of the charter documents or bylaws or trust agreement of any Target
Corporation or Selling Shareholder.
SECTION 2.5 Consents and Approvals. Except as described on Schedule 2.5
hereto, and except for filing a Notification and Report Form pursuant to the
applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"), no prior consent, approval or authorization
of, or declaration, filing or registration with any person, entity or
governmental agency, domestic or foreign, or any person or entity which is a
party to the agreements disclosed pursuant to Sections 2.2 or 2.18, is required
of or by any Target Corporation or Selling Shareholder in connection with the
execution, delivery and performance by each Target Corporation and Selling
Shareholder of this Agreement and the transactions contemplated hereby.
8
SECTION 2.6 Regulatory Reports. Each Target Corporation and Selling
Shareholder has filed all reports, registrations and statements, together with
any amendments required to be made thereto, that are required to be filed with
any regulatory authority having jurisdiction over it.
SECTION 2.7 Financial Statements. Target Corporations have provided Buyer
with a true and complete copy of (i) audited combined balance sheets and
statements of income, changes in stockholders' equity, and cash flow as of and
for the years ended December 31, 1995 and 1996 for Champ Industries, Inc. and
Affiliated Companies and (ii) unaudited combined balance sheet (the "Balance
Sheet") and statement of income, changes in stockholders' equity, and cash flow
as of and for the seven months ended July 31, 1997 for Champ Industries, Inc.
and Affiliated Companies (herein, collectively the "Financial Statements"). The
Financial Statements fairly present, in all material respects, the financial
condition of Target Corporations and the results of operations for the
respective periods indicated (in the case of unaudited statements, subject to
year-end audit adjustments and the absence of complete footnotes), and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP"), except as noted therein, and are consistent with
the books and records of Target Corporations. No financial statements of any
person or entity other than the Target Corporations are required by GAAP to be
included in the Financial Statement. Except as otherwise set forth in this
Agreement or in any of the exhibits or schedules hereto, Target Corporations
have no liabilities or obligations, except for (i) liabilities reflected or
reserved against in the Balance Sheet and (ii) liabilities arising after the
Balance Sheet Date in the ordinary course of business.
SECTION 2.8 Absence of Changes. Except as and to the extent set forth on
Schedule 2.8, since December 31, 1996, Target Corporations have conducted their
respective businesses only in the ordinary course of business and none of the
Target Corporations have directly or indirectly;
(a) made any amendment to its charter documents or bylaws or changed
the character of its business in any material manner;
(b) suffered damage to or destruction or loss of any asset or
property, whether or not covered by insurance, which materially and
adversely affects the properties, assets, business, financial condition, or
prospects of Target Corporations, taken as a whole;
(c) entered into or amended any agreement, commitment or transaction,
except in the ordinary course of business or except the agreements entered
into between Target Corporations and Buyer in connection with the
transactions contemplated by this Agreement;
(d) agreed, whether in writing or otherwise, to take or taken any
action the performance of which would change the representations contained
in this Section in the future so that any such representation would not be
true in all material respects as of the Closing;
9
(e) made any declaration, setting aside, or payment of any dividend
or other distribution in respect its capital stock (whether in cash or in
kind), or any direct or indirect redemption, purchase or other acquisition
by it of such stock;
(f) issued, sold, or otherwise disposed of any of its capital stock,
or granted any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its capital
stock;
(g) other than in the ordinary course of business, made any sale,
lease, or other disposition of any asset or property;
(h) made any capital expenditure (or series of related capital
expenditures) outside the ordinary course of business;
(i) made any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other person or entity (or series of
related capital investments, loans and acquisitions) either involving more
than $25,000 or outside the ordinary course of business;
(j) except under Target Corporations' principal credit facilities,
issued any note, bond, or other debt security or created, incurred,
assumed, or guaranteed any indebtedness for borrowed money or capitalized
lease obligation either involving more than $10,000 singly or $50,000 in
the aggregate for all of the Target Corporations;
(k) delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
(l) canceled, compromised, waived, or released any right or claim (or
series of related rights and claims) either involving more than $5,000 or
outside the ordinary course of business;
(m) granted any license or sublicense of any rights under or with
respect to any Intellectual Property (as defined herein);
(n) made any loan to, or entered into any other transaction with, any
of its directors, officers or employees outside the ordinary course of
business;
(o) entered into any employment contract or collective bargaining
agreement, or modified the terms of any existing such contract or
agreement;
(p) granted any increase in the base compensation of any of its
directors, officers or employees outside the ordinary course of business;
10
(q) adopted, amended, modified or terminated any bonus, profit-
sharing, incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers and employees (or taken any
such action with respect to any other employee benefit plan, including
without limitation, any ERISA plan);
(r) made any other change in employment terms for any of its
directors, officers or employees outside the ordinary course of business;
(s) made or pledged to make any charitable or other capital
contribution outside the ordinary course of business;
(t) suffered any Material Adverse Effect;
(u) adopted or implemented any material change in the accounting
methods or procedures used; or
(v) entered into any agreement or commitment to do any of the
foregoing.
SECTION 2.9 Indebtedness. Each Target Corporation has delivered to Buyer
true and complete copies of all loan documents related to the indebtedness of
Target Corporations. Schedule 2.9 hereto lists all indebtedness of Target
Corporations to their respective shareholders.
SECTION 2.10 Litigation. Except as set forth on Schedule 2.10, there are
no actions, suits, claims, investigations, reviews or other proceedings
(collectively, "Proceedings") pending or, to the knowledge of Target
Corporations, threatened against any Target Corporation or involving any of the
properties or assets of any Target Corporation, or that challenges, or that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the transactions contemplated herein, at law or in
equity, or before or by any foreign, federal, state, municipal, or other
governmental court, department, commission, board, bureau, agency, or other
instrumentality or person or any board of arbitration or similar entity. No
Target Corporation is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge ("Order"). To the knowledge of each Target
Corporation, no officer, director, agent or employee of any Target Corporation
is subject to any Order that prohibits such officer, director, agent or employee
from engaging in or continuing any conduct, activity, or practice relating to
the business of any Target Corporation.
SECTION 2.11 Tax Matters.
-----------
(a) All federal, state, county and local tax returns and tax reports
required to be filed by each Target Corporation ("Tax Returns") prior to
the date hereof have been filed with the appropriate governmental agencies
in all jurisdictions in which such returns and reports are required to be
filed. All such Tax Returns were correct and complete in all material
respects. No Target Corporation is currently the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever
been made by an authority in
11
a jurisdiction where any Target Corporation does not file tax returns that
it is or may be subject to taxation by that jurisdiction.
(b) All federal, state, county and local income and other taxes,
including interest and penalties thereon, due from each Target Corporation
has been fully paid or if not yet due has been adequately provided for in
the form of reserves as set forth in the Financial Statements. Except as
otherwise set forth in Schedule 2.11, no sales and use tax audits by any
governmental authority are pending, and no Tax Return of any Target
Corporation has been audited by the Internal Revenue Service or any state
governmental authority, respectively. There are no Encumbrances on any of
the assets of any Target Corporation that arose in connection with any
failure (or alleged failure) to pay any tax.
(c) All taxes that any Target Corporation is or was required by law
to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper governmental authority or
other person or entity, including without limitation, any taxes in
connection with any amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(d) The charges, accruals, and reserves with respect to taxes on the
respective books of each Target Corporation are adequate (determined in
accordance with GAAP) and are at least equal to that Target Corporation's
liability for taxes. There exists no proposed tax assessment against any
Target Corporation except as disclosed in the Balance Sheet.
(e) There is no tax sharing agreement that will require any payment
by any Target Corporation after the date of this Agreement.
(f) No Target Corporation has filed a consent under Code Sec. 341(f)
concerning collapsible corporations. No Target Corporation has made any
payments, is obligated to make any payments, or is a party to any agreement
that under certain circumstances could obligate it to make any payments
that will not be deductible under Code Sec. 280G. 897(c)(1)(A)(ii). No
Target Corporation (A) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return or (B) has any liability for the
taxes of any person or entity under Treas. Reg. Sec. 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
(g) The unpaid taxes of each Target Corporation (A) did not, as of
the Balance Sheet Date, exceed the reserve for tax liability (rather than
any reserve for deferred taxes established to reflect timing difference
between book and tax income) set forth on the face of the Balance Sheet and
(B) do not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of each
such Target Corporation in filing its Tax Returns.
(h) Each of Perfection, Xxxxxxxx, Xxxxx and SHR has been, since
inception, an S corporation under Section 1361 of the Code.
12
SECTION 2.12 Employee Benefit Plans. Target Corporations have delivered to,
or upon request will deliver to, Buyer copies of the health, dental and life
insurance plans, bonus, deferred compensation, pension, profit sharing and
retirement plans and all other employee benefit plans, programs or arrangements
providing benefits for employees of Target Corporations (the "Benefit Plans"); a
copy of the most recent favorable determination letter received with respect to
a Benefit Plan from the Internal Revenue Service (if the plan is a tax-qualified
plan under the Code); the most recent annual report (Form 5500) filed with the
Internal Revenue Service with respect to each Benefit Plan (if any such report
was required); and the most recent summary plan description for each Benefit
Plan for which a summary plan description is required. Each of the Benefit Plans
has been administered and maintained in material compliance with the
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and, if applicable, the Code, and all other applicable laws. There is
no "accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA or Section 412 of the Code) with respect to a Benefit Plan that is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA), and there
has been no application for waiver of the minimum funding standards imposed by
Code Section 412 with respect to any such plan. There are no pending or, to the
knowledge of such Target Corporation, threatened claims by or on behalf of the
Benefit Plans, the United States Department of Labor, the Internal Revenue
Service, or by any current or former employee of the Target Corporations or
beneficiary of such current or former employee alleging a breach of any
fiduciary duties or a violation of applicable state or federal law which could
result in a material liability on the part of any Target Corporation or a
Benefit Plan under ERISA or any other law (other than benefit claims and funding
obligations in the ordinary course of business). Target Corporations have not
suffered or otherwise caused a "complete withdrawal" or "partial withdrawal," as
such terms are respectively defined in Sections 4203 and 4205 of ERISA, from any
Multiemployer Pension Plan, as such term is defined in Section 3(37) of ERISA.
There have been no Prohibited Transactions (as defined by ERISA Sec. 406 and
Code Sec. 4975) with respect to any such Benefit Plans.
SECTION 2.13 Employment Matters.
------------------
(a) Except as disclosed on Schedule 2.13, none of the Target
Corporations is a party to any collective bargaining agreements, contracts
or arrangements granting benefits or rights to employees or consultants, or
any conciliation agreement with the Department of Labor, the Equal
Employment Opportunity Commission or any federal, state or local agency
which requires equal employment opportunities or affirmative action in
employment. There are no unfair labor practice complaints pending, or to
the knowledge of any Target Corporation threatened, against any Target
Corporation before the National Labor Relations Board and no similar claims
pending, or to the knowledge of any Target Corporation threatened, before
any similar state, local or foreign agency. Target Corporations have never
experienced any strike, slowdown, work stoppage, picket, lockout, or to the
knowledge of any Target Corporations, threats thereof, by or with respect
to any of its employees.
(b) Schedule 2.13 contains a complete and accurate list of the
following information for each employee with a base salary of $50,000 or
more of each Target Corporation, including each employee on leave of
absence or layoff; (i) employer; (ii) name;
13
(iii) job title; and (iv) current compensation paid or payable and any
change in compensation since December 31, 1996. The directors of each
Target Corporation receive no compensation for their service in such
capacities.
(c) To the knowledge of Target Corporations and except as otherwise
disclosed herein, no employee or director of any Target Corporation is a
party to, or is otherwise bound by, any agreement or arrangement, including
any confidentiality, noncompetition, or proprietary rights agreement,
between such employee or director and any other person or entity
("Proprietary Rights Agreement") that in any way adversely affects or will
affect (i) the performance of his duties as an employee or director of any
Target Corporation or (ii) the ability of any Target Corporation to conduct
its business, including any Proprietary Rights Agreement with any Target
Corporation by any such employee or director.
(d) Except as disclosed in Schedule 2.13, there is no Proceeding
against or affecting any Target Corporation relating to the alleged
violation of any law pertaining to labor relations or employment matters,
including any charge or compliant filed by an employee or union with the
Equal Employment Opportunity Commission, or any comparable governmental
authority, organizational activity, or other labor or employment dispute
against or affecting any Target Corporation, or any application for
certification of a collective bargaining agreement. Each Target Corporation
has complied in all material respects with all laws relating to wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing. No Target
Corporation is liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for failure to
comply with any of the foregoing laws.
SECTION 2.14 Patents, Trademarks and Copyrights.
----------------------------------
(a) Schedule 2.14 sets forth all tradenames and fictitious business
names (whether registered or unregistered), patents, patent applications,
trademarks and service marks (whether registered or unregistered),
trademark applications, and copyrights (collectively "Intellectual
Property") required or used by Target Corporations in their businesses and
operations. Each Target Corporation owns or licenses or otherwise has the
right to use the items on Schedule 2.14.
(b) None of the Target Corporations is in receipt of any notice of
any violation of, and to the knowledge of each such Target Corporation, it
is not violating or infringing upon the rights of any other person or
entity in the use of any Intellectual Property. To the knowledge of each
Target Corporation, no other person or entity is infringing any
intellectual property rights of such Target Corporation with respect to the
Intellectual Property.
SECTION 2.15 Environmental Matters.
---------------------
As used in this Section 2.15, the following terms have the meanings set
forth below.
14
"Environmental Laws" means the Occupational Safety and Health Act of 1970,
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C. (S) 9601 et seq.), the Resource Conservation and Recovery Act of
1976, Toxic Substances Control Act of 1988, the Hazardous Materials
Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (17
U.S.C. (S) 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. (S) 201 and (S)
300f et seq.), the Rivers and Harbors Act (33 U.S.C. (S) 401 et seq.), the Oil
Pollution Act (33 U.S.C. (S) 2701 et seq.) and analogous, foreign, state and
local provisions, as any of the foregoing may have been amended or supplemented
from time to time, together with all other laws (including rules, regulations,
codes plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof) concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes into ambient air,
surface water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
"Environmental Liabilities" means any cost, damages, expense, liability,
obligation, or other responsibility arising from or under Environmental Laws and
consisting of or relating to:
(i) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(ii) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Laws;
(iii) financial responsibility under Environmental Laws for cleanup
costs or corrective action, including any investigation, cleanup, removal,
containment, or other remediation or response actions ("Cleanup") required
by applicable Environmental Laws (whether or not such Cleanup has been
required or requested by any governmental authority or any other person or
entity) and for any natural resource damages; or
(iv) any other compliance, corrective, investigative, or remedial
measures required under Environmental Laws.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., as amended
("CERCLA").
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
release, storage, transfer, transportation,
15
treatment, or use (including any withdrawal or other use of groundwater) of
Hazardous Materials in, on, under, about, or from the facilities or any part
thereof into the environment.
"Hazardous Materials" means any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
(a) Environmental Conditions. Except as set forth on Schedule 2.15,
there are no Hazardous Materials present on or in the environment at the
facilities owned or leased by any Target Corporation, including any
Hazardous Materials contained in barrels, above or underground storage
tanks, landfills, land deposits, dumps, or other containers, either
temporary or permanent, and deposited or located in land, water, sumps, or
any other part of the facilities which condition might reasonably result in
a Material Adverse Effect. No Target Corporation, or to the knowledge of
any Target Corporation, any other person or entity, has permitted or
conducted, or is aware of, any Hazardous Activity conducted with respect to
the facilities owned or leased by any Target Corporation, except in
compliance with all applicable Environmental Laws. There has been no
release or, to the knowledge of any Target Corporation, threat of release,
of any Hazardous Materials at or from such facilities.
(b) Permits, etc. Each Target Corporation has in full force and
effect all material environmental permits, licenses, approvals and other
authorizations required by each federal, state, county or municipal
governmental authority to conduct their operations and are operating in
material compliance thereunder;
(c) Compliance. Each Target Corporation is, and at all times has
been, in material compliance with, and has not been and is not in violation
of or liable under, any Environmental Law. No Target Corporation has
received any Order, notice, or other communication from (i) any
governmental authority or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any facilities used by any
Target Corporation in connection with its business, of any actual or
potential violation or failure to comply with any Environmental Law, or of
any actual or threatened obligation to undertake or bear the cost of any
Environmental Liabilities with respect to any of Target Corporations'
facilities.
(d) Past Compliance. To the knowledge of each Target Corporation,
none of its operations or assets has ever been conducted or used by it in
such a manner as to constitute a violation of any Environmental Laws; and
(e) Environmental Claims. No notice has been served on any Target
Corporation from any entity, governmental agency or individual regarding
any existing, pending or threatened investigation or inquiry related to
alleged violations under any Environmental
16
Laws. There are no pending or, to the knowledge of any Target Corporation,
threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental Liabilities or arising under or pursuant
to any Environmental Laws, with respect to or affecting any of the Target
Corporations' facilities.
SECTION 2.16 Title to Properties; Encumbrances. Each Target Corporation
has good and indefeasible title to all of its properties, interests in
properties and assets, real and personal, reflected in the Financial Statements.
The Purchased Assets taken as a whole are in reasonable operating condition,
subject to normal use and wear and tear, and are sufficient to conduct Target
Corporations' business as historically conducted. None of Purchased Assets are
subject to any Encumbrance, except as described in Schedule 2.16 and except for
Permitted Encumbrances.
SECTION 2.17 Permits and Licenses. Except as set forth in Schedule 2.17,
each Target Corporation has all permits, licenses, certificates and authorities
from governmental agencies required to conduct its business as now being
conducted, and the consummation of the transactions contemplated by this
Agreement will not constitute a violation of any permit, license, certificate or
authority from a governmental agency which would result in a Material Adverse
Effect. Such permits are in full force and effect unimpaired by any act or
omission of any Target Corporation, or its employees or agents, have not been
suspended or revoked, and each Target Corporation has complied with, and will
continue to comply with, their terms until Closing, except for any failure to
comply which would not result in a Material Adverse Effect.
SECTION 2.18 Agreements, Contracts and Commitments.
-------------------------------------
(a) Except as described in Schedule 2.18, none of the Target
Corporations is a party to or bound by (i) any written or oral contract,
agreement or commitment (except for contracts or commitments to sell or buy
inventory in the ordinary course of business) which involves or may involve
aggregate future payments (whether in payment of a debt, as a result of a
guarantee or indemnification, for goods or services or otherwise) by or to
such Target Corporation of $100,000 or more and which is not, by its terms,
terminable by such Target Corporation without penalty or payment on 30 days
notice or less, or (ii) any non-competition or secrecy agreement, any loan
or credit agreement, security agreement, indenture, mortgage, pledge,
conditional sale or title retention agreement, lease purchase agreement or
other instrument evidencing indebtedness, or any sales representative,
partnership, joint venture, joint operating or similar agreement. None of
the Target Corporations has breached any provision of, and is not in
default under the terms of, any such contract, agreement or commitment
described in Schedule 2.18 and to the knowledge of such Target Corporation,
no event has occurred which, after notice or lapse of time or both, would
constitute such a default under the terms of any such contract, agreement
or commitment. To the knowledge of Target Corporations, each such
contract, agreement or commitment is the valid and binding obligation of
the other party or parties thereto, enforceable by Target Corporations in
accordance with the terms of such agreements.
17
(b) Schedule 2.18 contains a complete and accurate list, and each
Target Corporation has delivered or will deliver to Buyer true and complete
copies, of:
(i) except with respect to sales of inventory in the ordinary
course of business, each contract, agreement or arrangement that
involves performance of services or delivery of goods or materials by
one or more Target Corporations of an amount or value in excess of
$100,000;
(ii) except with respect to purchases of inventory in the
ordinary course of business, each contract, agreement or arrangement
that involves performance of services or delivery of goods or
materials to one or more Target Corporations of an amount or value in
excess of $100,000;
(iii) each contract, agreement or arrangement that was not
entered into in the ordinary course of business and that involves
expenditures or receipts of one or more Target Corporation in excess
of $100,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other contract,
agreement or arrangement affecting the ownership of, leasing of, title
to, use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $100,000);
(v) each licensing agreement or other contract, agreement or
arrangement with respect to patents, trademarks, copyrights, or other
intellectual property including agreements with current or former
employees, consultants, or contractors regarding the appropriation or
the non-disclosure of any of the Intellectual Property;
(vi) other than sales commission arrangements entered into in the
ordinary course of business, each joint venture, partnership, and
other contract, agreement or arrangement (however named) involving a
sharing of profits, losses, costs, or liabilities by any Target
Corporation with any other person or entity;
(vii) each contract, agreement or arrangement containing
covenants that in any way purport to restrict the business activity of
any Target Corporation or any affiliate of any Target Corporation or
limit the freedom of any Target Corporation or any affiliate of any
Target Corporation to engage in any line of business or to compete
with any person or entity;
(viii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any
Target Corporation other than in the ordinary course of business;
18
(ix) each power of attorney that is currently effective and
outstanding, other than those in favor of employees of Target
Corporations;
(x) each agreement pursuant to which a Target Corporation is
under any obligation to pay any portion of its revenues or profits to
any person; and
(xi) each amendment, supplement and modification in respect of
any of the foregoing.
(c) Except as set forth in Schedule 2.18, no shareholder of any Target
Corporation has or may acquire any rights under, and no Target Corporation
has or may become subject to any obligation or liability under, any
contract, agreement or arrangement that relates to the business of, or any
of the assets owned or used by, any Target Corporation; and
(d) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to
any Target Corporation under current or completed contracts, agreements or
arrangements with any person or entity which could result in a Material
Adverse Effect and, to the knowledge of Target Corporations, no such person
or entity has made written demand for such renegotiation.
SECTION 2.19 Real Property. Schedule 2.21 lists all real property that any
Target Corporation owns or leases.
SECTION 2.20 Compliance with Laws; Governmental Authorizations.
(a) Except as set forth in Schedule 2.22:
(i) each Target Corporation is, and at all times since inception
has been, in material compliance with each law that is or was
applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets; and
(ii) no Target Corporation has received any written notice from
any governmental authority or any other person or entity regarding (A)
any actual, alleged, possible, or potential violation of, or failure
to comply with, any law, or (B) any actual alleged, possible, or
potential obligation on the part of any Target Corporation to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
(b) The governmental authorizations held by Target Corporations
collectively constitute all of the governmental authorizations reasonably
necessary to permit the Target Corporations to lawfully conduct and operate
their businesses in the manner they currently conduct and operate such
businesses and to permit the Target Corporations to own and use their
assets in the manner in which they currently own and use such assets.
19
SECTION 2.21 Certain Payments. No Target Corporation, or to any Target
Corporation's knowledge, any other person or entity associated with or acting
for or on behalf of any Target Corporation, has directly or indirectly (a) made
any illegal contribution, illegal gift, bribe, illegal payoff, or other illegal
payment to any person or entity, private or public, regardless of form, whether
in money, property, or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of any Target Corporation or any affiliate of any Target Corporation,
or (iv) in violation of any law; (b) established or maintained any fund or asset
for any such purpose that has not been recorded in the books and records of
Target Corporations.
SECTION 2.22 Disclosure. No representation or warranty of Target
Corporations made in this Agreement and no statement in the Schedules omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
SECTION 2.23 Relationships with Related Persons. No Target Corporation or
any affiliate of any Target Corporation has any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used in
or pertaining to the Target Corporations' businesses. No Target Corporation or
any affiliate of any Target Corporation has owned (of record or as a beneficial
owners) an equity interest or any other financial or profit interest in, a
person or entity that has (i) had business dealings or a material financial
interest in any transaction with any Target Corporation (other than business
dealings or transactions conducted in the ordinary course of business with the
Target Corporations at substantially prevailing market prices and on
substantially prevailing market terms), or (ii) engaged in competition with any
Target Corporation with respect to any line of the products or services of such
Target Corporation (a "Competing Business") in any market presently served by
such Target Corporation (except for less than one percent of the outstanding
capital stock of any Competing Business that is publicly traded on any
recognized exchange or in the over-the-counter market). Except as set forth in
the other schedules to this Agreement, no Target Corporation or any affiliate of
any Target Corporation is a party to any contract, agreement or arrangement
with, or has any claim or right against, any other Target Corporation.
SECTION 2.24 Brokers or Finders. Except as set forth on Schedule 2.28,
Target Corporations and their agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
SECTION 2.25 Insurance. Target Corporations have delivered or upon request
will deliver to Buyer true and complete copies of all policies of insurance to
which any Target Corporation is a party or under which any Target Corporation is
or has been covered at any time within the two years preceding the date of this
Agreement. Target Corporations have in effect insurance coverage which in
respect of the amounts, types and risks insured, is customary in the type of
business in which they are engaged. On or prior to the date hereof, Target
Corporations have delivered to Buyer copies of "loss runs" which have been
compiled by Target Corporations' insurance carriers.
20
SECTION 2.26 Product Warranty. No products or goods sold by Target
Corporations are subject to any written guaranty, warranty or other indemnity by
Target Corporations, other than applicable standard terms and conditions of sale
and those warranties provided by third-party manufacturers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer makes the representations and warranties set forth in this Article
III to Target Corporations.
SECTION 3.1 Organization and Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has all requisite corporate power and authority to carry on its
business as it is now being conducted, and to own, lease and operate its
properties and assets, and to perform all its obligations under the agreements
and instruments to which it is a party or by which it is bound. Buyer is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which the properties and assets
owned, leased or operated by it or the nature of the business conducted by it
make such qualification necessary.
SECTION 3.2 Authority Relative to the Agreement. Buyer has full corporate
power and authority to execute and deliver this Agreement, and no further
corporate proceedings on the part of the Buyer is necessary to consummate the
transactions contemplated hereby, which have been duly and validly authorized by
the board of directors of Buyer. This Agreement has been duly and validly
executed and delivered by Buyer, and this Agreement constitutes the valid and
binding obligation of Buyer enforceable against Buyer in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to creditors' rights generally and
general equitable principles, and subject to such approval of regulatory
agencies as may be required by statute or regulation.
SECTION 3.3 No Violation. Neither the execution, delivery nor performance
of this Agreement, nor the consummation of all of the transactions contemplated
hereby will, as of the Closing Date, (i) violate any law, order, writ, judgment,
injunction, award, decree, rule, statute, ordinance or regulation applicable to
Buyer which in each case would result in a Material Adverse Effect, (ii) except
with respect to obtaining consent under Buyer's principal credit facility, be in
conflict with, result in a breach or termination of any provision of, cause the
acceleration of the maturity of any debt or obligation pursuant to, constitute a
default (or give rise to any right of termination, cancellation or acceleration)
under, or result in the creation of any security interest, lien, charge or other
encumbrance upon any property or assets of Buyer pursuant to any terms,
conditions or provisions of any note, license, instrument, indenture, mortgage,
deed of trust or other agreement or understanding or any other restriction of
any kind or character, to which Buyer is a party or by which any of its assets
or properties are subject or bound, and which in each case would result in a
21
Material Adverse Effect, or (iii) conflict with or result in any breach of any
provision of the charter documents or bylaws of Buyer.
SECTION 3.4 Consents and Approvals. Except for obtaining consent from its
principal lenders and filing a Notification and Report Form pursuant to the
applicable requirements of the HSR Act, no prior consent, approval or
authorization of, or declaration, filing or registration with any person,
domestic or foreign, is required of or by Buyer in connection with the
execution, delivery and performance by Buyer of this Agreement and the
transactions contemplated hereby.
ARTICLE IV
COVENANTS OF TARGET CORPORATIONS
SECTION 4.1 Affirmative Covenants of Target Corporations. For so long as
this Agreement is in effect, each Target Corporation shall, from the date of
this Agreement to the Closing, except as specifically contemplated by this
Agreement:
(a) operate and conduct its business in the ordinary course of
business;
(b) use good faith and reasonable efforts to preserve intact its
corporate existence, business organization, assets, licenses, permits and
authorizations;
(c) use good faith and reasonable efforts to comply with all material
contractual obligations applicable to its operations;
(d) use good faith and reasonable efforts to maintain all its
properties in good repair, order and condition, reasonable wear and tear
excepted;
(e) in good faith and in a timely manner (i) cooperate with Buyer in
satisfying the conditions in this Agreement, (ii) assist Buyer as promptly
as practicable in obtaining all consents, approvals, authorizations and
rulings whether regulatory, corporate or otherwise, as are necessary for
Buyer and Target Corporations to carry out and consummate the transactions
contemplated by this Agreement, and (iii) furnish information concerning it
not previously provided to Buyer required for inclusion in any filings or
application that may be necessary in that regard;
(f) within seven days after the expiration or waiver of Buyer's right
to terminate this Agreement in accordance with Section 7.3, file the
Notification and Report Form pursuant to the applicable provisions of the
HSR Act; and
(g) give prompt written notice to Buyer of the commencement of any
action, suit, proceeding or investigation or the assertion of any claim or
threat to commence any action, suit, proceeding or investigation that would
result in a Material Adverse Effect, if adversely decided, and keep Buyer
promptly informed as to any developments in any pending action, suit,
proceeding or investigation.
22
SECTION 4.2 Negative Covenants of Target Corporations. Except with the
prior written consent of Buyer or as otherwise specifically permitted by this
Agreement, each Target Corporation will not, from the date of this Agreement to
the Closing, directly or indirectly:
(a) make any amendment to its charter documents or bylaws;
(b) make any change in its accounting practices or policies, except as
may be required by applicable law or regulation;
(c) make any change in the number of shares of the capital stock
issued and outstanding, or issue, reserve for issuance, grant, sell or
authorize the issuance of any shares of its capital stock or subscriptions,
options, warrants, calls, rights or commitments of any kind relating to the
issuance or sale of or conversion into shares of its capital stock;
(d) contract to create any obligation or liability, except in the
ordinary course of business or except to the extent that such obligation or
liability would not have a Material Adverse Effect;
(e) contract to create any mortgage, pledge, lien, security interest
or encumbrances, restrictions, or charge of any kind (other than capital
leases and statutory liens for which the obligations secured thereby shall
not become delinquent), except to the extent that such mortgage, pledge,
lien, security interest or encumbrance, restriction or charge of any kind
would not have a Material Adverse Effect;
(f) except in the ordinary course of business, waive any right under
or cancel any contract, lease, commitment, option or agreement, except to
the extent that such waiver or cancellation would not have a Material
Adverse Effect;
(g) except in the ordinary course of business and as described in
Schedule 4.2(g), sell, transfer, distribute, or otherwise dispose of any of
its properties;
(h) grant any increase in compensation or pay or agree to pay or
accrue any bonus or like benefit to or for the credit of any director or
officer; except in the ordinary course of business, grant any increase in
compensation or pay or agree to pay or accrue any bonus or like benefit to
or for the credit of any employee; enter into any employment, consulting or
severance agreement or other agreement with any director, officer or
employee; or adopt, amend or terminate any Benefit Plan or change or modify
the period of vesting or retirement age for any participant of such a plan;
(i) except with respect to the distribution to the Selling
Shareholders of the Stone Appliance Division and except as otherwise
provided in Schedule 2.8, declare, pay or set aside for payment any
dividend or other distribution or payment in respect of shares of its
capital stock;
23
(j) except as set forth in Schedule 2.8, dissolve, liquidate,
reorganize, recapitalize, merge, consolidate or otherwise make any change
in its capital stock, capital structure, corporate structure or existence;
(k) other than prepayment of Marshall's obligation pursuant to a note
payable to Dell X. Xxxxxx in the original principal amount of $188,085,
without Buyer's consent, discount, accelerate or otherwise prepay any
Borrowed Money obligation of any Target Corporation; or
(l) take any action which would result in a breach of the
representations and warranties contained in Article II hereof, such that
the same will be true and correct on the Closing Date.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Access To, and Information Concerning, Properties and Records.
(a) During the pendency of the transactions contemplated hereby, each
Target Corporation shall, to the extent permitted by law, give Buyer, its
legal counsel, accountants and other representatives access, upon
reasonable request and at reasonable times, throughout the period prior to
the Closing, to all of such Target Corporations' properties, books,
contracts and records, permit Buyer and such representatives to make such
inspections as they may reasonably require and furnish to Buyer and such
representatives during such period all such information concerning such
Target Corporation and its affairs as they may reasonably request.
(b) Notwithstanding any other provisions of this Agreement, neither
Buyer nor any of its respective agents or representatives shall perform any
investigation or study of the real property of any Target Corporation which
may involve the intrusive or destructive sampling or analysis or chemical
testing of any portion of such property or its improvements, including
without limitation, of any soil, water or groundwater on, under or about
such real property ("Phase II Investigation"), without first (a) submitting
to Target Corporations a detailed description of (i) the work to be
performed as part of the Phase II Investigation, (ii) the persons to
undertake such Phase II Investigation, and (iii) the types and amount of
insurance coverage maintained by such persons, and (b) obtaining the prior
written consent of applicable Target Corporation as to such matters, which
shall not be unreasonably withheld. Such Target Corporation may grant such
consent subject to such terms, conditions or restrictions as such Target
Corporation may reasonably require.
(c) All information disclosed by Target Corporations to Buyer shall be
held strictly confidential by Buyer and its representatives and used solely
for purposes of evaluating the transactions contemplated hereby. In the
event this Agreement is terminated pursuant to the provisions of Article
VII, upon the written request of Target Corporations,
24
Buyer agrees to return to Target Corporations all copies of such
confidential information, together with all extracts or other reproductions
thereof in the possession of Buyer or its representatives. It is understood
that confidential information shall not include the following:
(i) Information that becomes generally available to the public
other than as a result of a disclosure by Buyer, its representatives
or its agents;
(ii) Information that was in the possession of Buyer or its
representatives prior to disclosure by any Target Corporation, or its
representatives or its agents;
(iii) Information Buyer is required to disclose pursuant to law
or order of any court of competent jurisdiction, provided in the event
of any such proposed disclosure, Buyer shall give Target Corporations
prior written notice and opportunity to object to any such disclosure
to the extent permitted by law;
(iv) Information relevant to any legal proceeding between Buyer
and any Target Corporation or Selling Shareholder; or
(v) Information that becomes available to Buyer or its
representatives on a non-confidential basis from a source other than a
Target Corporation, its representatives or its agents.
(d) In the event this Agreement is terminated pursuant to the
provisions of Article VII, Buyer agrees that it will not hire any officers,
directors, branch managers or salespersons of Target Corporations for a
period of two years after the date of this Agreement.
(e) Notwithstanding any other provision of this Agreement, Buyer shall
not commence any due diligence investigation of Target Corporations (except
to the extent permitted by Target Corporations) until Buyer shall have
obtained consent of its principal lenders as set forth in Section 7.3 or
has otherwise waived its right to terminate this Agreement under Section
7.3.
SECTION 5.2 Restricted Assets.
(a) With respect to United and the Purchased Assets, Schedule 5.2 sets
forth each material contract, license, lease, permit, right or other
agreement or commitment which is an asset not capable of being validly
assigned, transferred or subleased without the consent or waiver of the
issuer thereof or the other party thereto or any third person (including a
government or governmental unit), or with respect to which such assignment,
transfer or sublease or attempted assignment, transfer or sublease could
constitute a breach thereof or a violation of any law, decree, order,
regulation or other governmental edict (such asset is hereinafter referred
to as a "Restricted Asset"). The receipt of the necessary consents and
25
waivers for the assignment, transfer or sublease of such assets is not a
condition precedent to Buyer's obligations hereunder. If the necessary
consents and waivers are not received on or before the Closing Date, this
Agreement shall not constitute an assignment, transfer or sublease thereof,
or an attempted assignment, transfer or sublease thereof; provided,
however, to the extent United may do so without incurring liability, United
shall assign and Buyer shall assume the beneficial ownership and all rights
and obligations under the Restricted Assets so Buyer can enjoy the
practical benefits of such assets until they can be legally assigned and
assumed by United and Buyer, respectively.
(b) United shall use reasonable efforts, and Buyer shall cooperate
with United (i) to obtain the consents and waivers and other agreements
necessary to convey to Buyer all of the Restricted Assets, and (ii) if
subsequent to Closing, to promptly convey to Buyer the Restricted Assets
for which United has received the necessary consents and waivers; provided,
however, that any consideration paid therefor to the person from whom the
consent or waiver is requested shall be borne by Buyer (upon its approval).
(c) To the extent that the consents and waivers necessary to assign,
transfer or sublease the Restricted Assets are not obtained by United,
United shall, during the six-month period commencing with the Closing Date
or such longer period as United in its sole judgment may desire (but, as to
any particular Restricted Asset, for the current term thereof), use
reasonable efforts to (i) provide to Buyer the benefits of the Restricted
Asset not assigned, transferred or subleased due to United's failure to
obtain such consent or waiver, (ii) cooperate with Buyer to reach a
reasonable and lawful arrangement designed to provide such benefits to
Buyer during the six-month period commencing on the Closing Date, and (iii)
enforce, at the request of Buyer, any rights of United under any Restricted
Asset, against the issuer thereof or the other party or parties thereto
(including the right to elect to terminate such of the foregoing in
accordance with the terms thereof upon the advice of Buyer); provided,
however, that all costs and expenses of United incurred with respect to any
of the actions contemplated under this sub section (c) shall be promptly
paid or reimbursed by Buyer to United. At the end of such six-month period
or the current term of the Restricted Asset (or such longer period, as
United may desire), United shall have no further duties or obligations
hereunder with respect to such Restricted Assets and the failure to obtain
any necessary consent or waiver with respect thereto shall in no event be a
breach of this Agreement.
(d) To the extent that United is provided the benefits pursuant to
this Section 5.2 of any Restricted Asset, United shall perform for the
benefit of the issuer thereof, or the other party or parties thereto, the
obligations of United thereunder or in connection therewith, but only to
the extent that (i) such action by Buyer would not result in any default
thereunder or in connection therewith and (ii) such obligation would have
been a liability of Buyer but for the non-assignability or non-
transferability thereof; provided, however, that if Buyer shall fail to
perform to the extent required herein, United shall thereafter cease to be
obligated under this Section 5.2 in respect of the Restricted Asset which
is the subject of such failure to perform unless and until such situation
is remedied, or, at the sole option of
26
United, Buyer shall promptly pay or reimburse United all costs incurred by
United to remedy such failure to perform during such period of failure of
performance.
SECTION 5.3 Bulk Sales. Target Corporations and Buyer hereby agree that it
is not practicable to comply or attempt to comply with the procedures of the
"Bulk Sales Act" or similar law of any or all of the states or other
jurisdictions in which the Purchased Assets are situated which may be asserted
to be applicable to the transactions contemplated hereby, and none of the
parties shall attempt to comply with such laws.
SECTION 5.4 Misdirected Payments. United agrees to remit to Buyer all
amounts received after the Closing Date which were intended to be transferred as
part of its business; Buyer agrees to remit to Selling Shareholders all amounts
received after the Closing Date which relate to the Stone Appliance Division.
SECTION 5.5 Retention of Records. In light of the parties continuing
obligations with respect to events prior to the Closing Date, Buyer shall retain
for a period of six and one-half years after the Closing Date or longer if
required by any applicable statute of limitations the books and records relating
to the Business transferred pursuant to the terms of this Agreement (unless
Selling Shareholders or United requests a longer period, in which case such
books and records shall be stored by Buyer at Selling Shareholders' or United's
expense), and, during regular business hours, (i) give Selling Shareholders and
United and their authorized representatives reasonable access to all of their
books, records, offices and other facilities and properties, (ii) permit Selling
Shareholders and United to make such inspections (and copies of any documents at
their expense) thereof as Selling Shareholders and United may reasonably
request, and (iii) furnish Selling Shareholders and United with such financial
and operating data and other information for periods prior to the Closing Date
or otherwise relating to the Target Corporations' responsibilities, with respect
to their businesses, operations and properties as Selling Shareholders and
United may from time to time reasonably request, including data and information
needed for financial and tax reporting and statutory filings. Selling
Shareholders and United shall keep such information confidential except for (i)
information in the public domain, (ii) disclosures that may be required by law
or order of any court, provided in the event of any such proposed disclosure,
Target Corporations shall give Buyer prior written notice and opportunity to
object to any such disclosure to the extent permitted by law, (iii) disclosures
to its attorneys and accountants, who shall respect the above restrictions, or
(iv) information relevant to any legal proceeding between Target Corporations or
Selling Shareholders and Buyer.
SECTION 5.6 Good Faith Efforts. All parties hereto agree that the parties
will use their reasonable good faith efforts to secure all third-party or
regulatory approvals necessary to consummate the transactions contemplated
hereby and other transactions provided herein and to satisfy the other
conditions to Closing contained herein as soon as reasonably practicable. Each
party agrees to make copies of its respective regulatory filings and related
correspondence to regulatory agencies available to the other parties.
27
SECTION 5.7 Exclusivity. Target Corporations and Selling Shareholders will
not and will cause their respective officers, directors, employees, agents or
advisors or other representatives or consultants not to, directly or indirectly,
(i) solicit or initiate any proposals or offers from any person relating to any
acquisition or purchase of all or a material amount of the assets of, or any
securities of, or any merger, consolidation or business combination with, any
Target Corporation, or (ii) participate in any negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, any effort or attempt by any other person to do or
seek any of the foregoing.
SECTION 5.8 HSR Filing. Within seven days after the expiration or waiver of
Buyer's right to terminate this Agreement in accordance with Section 7.3, Buyer
shall file, or cause to be filed, the Notification and Report Form pursuant to
the applicable provisions of the HSR Act.
SECTION 5.9 Employee Matters.
----------------
(a) On and after Closing Date, Buyer shall be responsible for
providing and discharging any and all notifications, benefits and
liabilities to employees of Target Corporations, former employees and
government agencies required by the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN Act") or any other applicable law,
including any requirements that may be imposed as a result of the
transactions contemplated by this Agreement. Any liabilities to employees
of Target Corporations which relate to or arise out of the consummation of
the transactions contemplated by this Agreement shall be borne by Buyer. On
and after Closing Date, Buyer shall be responsible for the health
continuation coverage of all "qualified beneficiaries" under any health
care plans sponsored by the Target Corporations and for health continuation
coverage for the employees and former employees of Target Corporations with
respect to the health care continuation coverage requirements under ERISA
or Section 4980B of the Code, including any such requirements that may be
imposed as a result of the transactions contemplated by this Agreement.
(b) Buyer agrees that not later than six months after the Closing
Date, it will pay bonuses to key employees of Target Corporations in an
aggregate amount of not less than $200,000. Buyer will consult with
Representing Shareholders in identifying such key employees and determining
the amount of each such bonus.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS
SECTION 6.1 Conditions to Each Party's Obligation. The respective
obligations of each party to effect the transactions contemplated by this
Agreement are subject to the satisfaction or waiver of the following conditions
prior to the Closing Date:
(a) the receipt of regulatory approvals and the expiration of any
applicable waiting period with respect thereto; and
28
(b) the Closing will not violate any injunction, order or decree of
any court or governmental body having competent jurisdiction.
SECTION 6.2 Conditions to the Obligations of Buyer. The obligations of
Buyer to effect the transactions contemplated by this Agreement are subject to
the satisfaction or waiver of the following conditions prior to the Closing
Date:
(a) all representations and warranties of Target Corporations shall
be true and correct as of the date hereof and at and as of the Closing,
with the same force and effect as though made on and as of the Closing,
except when any failure of a representation or warranty to be true and
correct would not result in a Material Adverse Effect, and the same shall
be certified at Closing by each Target Corporation and Representing
Shareholders;
(b) Target Corporations shall have performed all obligations and
agreements and complied with all covenants and conditions contained in this
Agreement to be performed or complied with by them prior to the Closing
Date, except when any failure to so perform or comply would not result in a
Material Adverse Effect, and the same shall be certified at Closing by each
Target Corporation and Representing Shareholders;
(c) all consents, approvals and waivers from governmental authorities
required to be obtained to consummate the transactions contemplated by this
Agreement shall have been obtained, except to the extent that failure to
obtain such consents, approvals and waivers would not result in a Material
Adverse Effect;
(d) United, Xxxxx X. Xxxxx and Xxxxx X. Xxxxxxx, III, respectively,
shall have entered into the Noncompetition Agreements with Buyer. In
addition, Champ Industries, Inc. shall have entered into the Consulting
Agreement;
(e) on the Closing Date, United will:
(i) execute, acknowledge and deliver to Buyer such deeds, bills
of sale, endorsements, assignments and other good and sufficient
instruments of conveyance, sale, transfer and assignment, as shall be
required in order to effectively vest in Buyer all of United's right,
title and interest in and to the Purchased Assets free and clear of
any Encumbrance, except Permitted Encumbrances; and
(ii) provide Buyer possession of all of the files, documents,
papers, contracts, agreements, books of account or ledgers and
documentation in support thereof, and all other information appearing
in a writing as pertains to the Purchased Assets and which is in
United's possession, custody or control;
(f) Selling Shareholders shall have delivered to Buyer certificates
representing the Shares, duly endorsed (or accompanied by duly executed
stock powers), for transfer and other good and sufficient instruments of
transfer, reasonably satisfactory in form and
29
substance to Buyer as shall be effective to vest in Buyer all right, title
and interest in and to the Shares;
(g) United and each Selling Shareholder shall have executed and
delivered the Net Asset Escrow Agreement and the Indemnification Escrow
Agreement;
(h) Buyer shall have received the opinion of Xxxxxx & Xxxxxx, L.L.P.
with respect to (i) the existence and good standing of each Target
Corporation and (ii) the legal matters set forth in Section 2.3, except
such counsel may assume the legal capacity of the Selling Shareholders who
are natural persons and the opinion will be subject to such other customary
assumptions and qualifications as are appropriate under the circumstances;
and
(i) (a) Selling Shareholders shall have caused the termination of the
contingent consideration (the "Contingent Consideration") payable by
Xxxxxxxx pursuant to the Asset Purchase Agreement dated November 3, 1994 or
(b) Selling Shareholders shall have entered into an agreement whereby they
indemnify Buyer and/or Xxxxxxxx from any costs or losses related to any
obligation to pay the Contingent Consideration, such agreement to be in a
form reasonably acceptable to Buyer.
SECTION 6.3 Conditions to the Obligations of Selling Shareholders and
United. The obligations of Selling Shareholders and United to effect the
transactions contemplated by this Agreement are subject to the satisfaction or
waiver of the following conditions prior to the Closing Date:
(a) all representations and warranties of Buyer contained herein
shall be true and correct as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the
Closing, except when any failure of a representation or warranty to be true
and correct would not result in a Material Adverse Effect, and the same
shall be certified at Closing by Buyer;
(b) Buyer shall have performed all obligations and agreements and
complied with all covenants and conditions contained in this Agreement to
be performed or complied with by it prior to the Closing Date, except when
any failure to so perform or comply would not result in a Material Adverse
Effect, and the same shall be certified at Closing by Buyer;
(c) Buyer shall have caused the release of or otherwise indemnified,
to the reasonable satisfaction of Selling Shareholders, Xxxxx X. Xxxxx and
Xxxxx X. Xxxxxxx, III, respectively, from the personal guaranties described
in Schedule 6.3(c) hereto;
(d) Buyer shall have executed and delivered the Net Asset Escrow
Agreement and the Indemnification Escrow Agreement;
30
(e) Buyer shall have executed and delivered to United an agreement,
in a form reasonably satisfactory to United, whereby Buyer assumes and
agrees to perform, pay and discharge the Assumed Liabilities;
(f) receipt by Selling Shareholders and United of the Cash
Consideration and all other amounts payable by Buyer hereunder;
(g) Buyer and Champ Industries, Inc. ("Champ") shall have entered
into an agreement regarding the conveyance of certain assets and the
assumption by Buyer of the specified liabilities of Champ as set forth in
Schedule 6.3(g) hereto;
(h) Buyer shall have entered into the Consulting Agreement; and
(i) Target Corporations and Selling Shareholders shall have received
the opinion of Xxx and Associates with respect to the legal matters
contained in Section 3.2 hereof, except with respect to the enforceability
opinion, such counsel shall assume that the laws of the State of Alabama
are the same as the laws of the State of Texas, and such opinion shall be
subject to such customary assumptions and qualifications as are appropriate
under the circumstances.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing Date:
(a) by mutual written consent of Buyer, Selling Shareholders and
Target Corporations;
(b) by Buyer, if Buyer learns or becomes aware of a state of facts or
breach or inaccuracy of any representation or warranty of any Target
Corporation or Representing Shareholder contained in Article II which
results in or can reasonably be anticipated to result in a Material Adverse
Effect, provided that Buyer's right to terminate this Agreement in
accordance with this Section 7.1(b) is subject to the right of Target
Corporations to cure any such breach or inaccuracy within 20 days after
written notice thereof by Buyer to Target Corporations;
(c) by Target Corporations or Selling Shareholders, if Target
Corporations or Selling Shareholders learn or become aware of a state of
facts or breach or inaccuracy of any representation or warranty of Buyer
contained in Article III which results in or can reasonably be anticipated
to result in a Material Adverse Effect, provided that such right to
terminate this Agreement in accordance with this Section 7.1(c) is subject
to the right of Buyer to cure any such breach or inaccuracy within 20 days
after written notice thereof by Target Corporations or Selling Shareholders
to Buyer;
31
(d) by Buyer or Target Corporations and Selling Shareholders, if the
Closing Date shall not have occurred, other than through the failure of any
such terminating party or parties to fulfill its obligations hereunder, on
or before the expiration of 60 days from the date of this Agreement or such
later date agreed to in writing by Target Corporations, Selling
Shareholders and Buyer; provided, however, that such 60 day period shall
automatically be extended for a period of 60 days if the delay in the
Closing Date relates to the Notification and Report Form filed pursuant to
the HSR Act; or
(e) by Buyer or Target Corporations and Selling Shareholders if any
court of competent jurisdiction shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby.
SECTION 7.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1 hereof, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party or its directors, officers or shareholders, other than the
provisions of this Section 7.2, Section 5.1 and Section 10.2. Nothing contained
in this Section 7.2 shall relieve any party from liability for any breach or
violation of this Agreement.
SECTION 7.3 Buyer's Additional Right of Termination. Notwithstanding any
other provision hereof, Buyer shall have the right to terminate this Agreement
by written notice to Target Corporations and Selling Shareholders within 35 days
of the date hereof in the event that its principal lenders do not provide
consent to the transactions contemplated hereby, and in such event, and upon
such notice to Target Corporations and Selling Shareholders, Buyer shall pay to
Target Corporations the amount of $2,000,000 in immediately available funds;
upon receipt of such payment, this Agreement shall forthwith become void and
have no effect, without any liability on the part of any party or its directors,
officers, or shareholders, other than the provisions of this Section 7.3,
Section 5.1 and Section 10.2. At Buyer's option, upon payment to Target
Corporations of an additional non-refundable $100,000 prior to the expiration of
such 35-day period, Buyer may extend such 35-day period by seven additional
days.
ARTICLE VIII
REMEDIES AND INDEMNIFICATION
SECTION 8.1 Agreement with Respect to Escrow Funds. In the event Buyer
incurs any losses, damages, liabilities, claims, judgments, settlements, costs
or expenses (including reasonable attorneys' fees) ("Losses") subsequent to the
Closing resulting from or arising out of (i) any breach of any representation or
warranty of any Target Corporation or any Representing Shareholder contained
herein or (ii) any breach of or failure to comply with any covenant or agreement
of any Target Corporation or Selling Shareholder contained herein, Buyer shall
notify the Escrow Agent under the Indemnification Escrow Agreement of such
Losses in accordance with the terms of the Escrow Agreement. No reimbursement or
other payment in respect of such Losses against any party, including the
Representing Shareholders shall be made other than pursuant to the terms of
Section 8.2 hereof.
32
SECTION 8.2 Limitations on Claims.
---------------------
(a) Buyer's right to recover Losses under Section 8.1 hereof shall be
limited as follows:
(i) Buyer shall make no claim under the Indemnification Escrow
Agreement for any Losses except and only to the extent that the amount
of the Losses, when added to the aggregate amount of all other Losses
recoverable under this Article VIII, exceeds $100,000, and only to the
extent of such excess; and
(ii) Buyer shall not recover any Losses exceeding the amount of
the Escrow Funds which remain in escrow, except with respect to (x) a
failure to comply with the covenants and agreements contained in
Sections 5.2, 5.4, 6.2(i), 10.2, 10.3, 10.4 and 10.7 and in Article
IX, (y) a breach of the representations and warranties contained in
Section 2.2 and Section 2.16 with respect to title to the Purchased
Assets or (z) any failure of Selling Shareholders to pay amounts
owing, if any, by United with respect to "unremitted" funds as
described in Schedule 2.8 hereto under the Aged Receivables Agreement.
(b) Any Losses recoverable by Buyer shall be limited to the amount of
the actual Losses sustained by Buyer net of the proceeds of any applicable
insurance coverage.
SECTION 8.3 Indemnification.
---------------
(a) In addition to any other remedies available to Target
Corporations and Selling Shareholders under this Agreement, at law or in
equity, Buyer shall indemnify, defend and hold harmless Target
Corporations, Selling Shareholders and their respective officers,
directors, shareholders, employees and agents against and in respect of any
and all Losses that Target Corporations, Selling Shareholders and their
respective officers, directors, shareholders, employees and agents shall
incur or suffer, which arise, result from or relate to (i) any breach of,
or failure by Buyer to perform, any of its representations, warranties,
covenants or agreements in or under this Agreement, including, but not
limited to, the failure of Buyer to satisfy and discharge the Assumed
Liabilities, (ii) the ownership and operation of the business acquired by
Buyer pursuant to this Agreement, and (iii) any failure of Buyer or Target
Corporations to comply with the "Bulk Sales Act" of any state or
jurisdiction in connection with the transactions contemplated by this
Agreement.
(b) Each Selling Shareholder shall indemnify, defend and hold
harmless Buyer and its officers, directors, shareholders, employees and
agents against and in respect of any and all Losses that Buyer and its
officers, directors, shareholders, employees and agents shall incur or
suffer which arise, result from or relate to (and for which Buyer has
exhausted its remedy against the Escrow Funds in satisfying its claim for
such Losses) (i) a failure to comply with the covenants and agreements
contained in Sections 5.2, 5.4, 6.2(i), 10.2, 10.3, 10.4 and 10.7 and in
Article IX, (ii) a breach of the representations and warranties contained
33
in Section 2.2 and in Section 2.16 with respect to title to the Purchased
Assets or (iii) any failure of Selling Shareholders to pay amounts owing,
if any, by United with respect to "unremitted" funds as described in
Schedule 2.8 hereto under the Aged Receivables Agreement.
(c) Promptly upon the discovery of facts giving rise to a claim for
indemnity under this Section 8.3 or the receipt of notice of any Loss, with
respect to any matter as to which indemnification may be claimed under this
Section 8.3, the indemnified party shall give written notice thereof to the
indemnifying party together with such information respecting such matter as
the indemnified party shall then have; provided, however, that the failure
of the indemnified party to give notice as provided herein shall relieve
the indemnifying party of any obligations, except if the indemnifying party
is only immaterially prejudiced thereby. If indemnification is sought with
respect to a third-party (i.e., one who is not a party to this Agreement)
claim asserted or brought against an indemnified party, the indemnifying
party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party. After such notice from the indemnifying party to such
indemnified party of its election to so assume the defense of such a third-
party claim, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses incurred by the latter in connection
with the defense thereof, unless the indemnifying party has failed to
assume and diligently prosecute the defense of such third-party claim and
to employ counsel reasonably satisfactory to such indemnified person. If
the indemnifying party elects not to assume the defense of a third-party
claim, it shall not be liable for the fees and expenses of more than one
counsel in any single jurisdiction for all parties indemnified by the
indemnifying party with respect to such claim or with respect to claims
separate but similar or related in the same jurisdiction arising out of the
same general allegations. Notwithstanding any of the foregoing to the
contrary, the indemnified party will be entitled to select its own counsel
and assume the defense of any action brought against it if the indemnifying
party fails to select counsel reasonably satisfactory to the indemnified
party or if counsel fails to diligently defend such action, the expenses of
such defense to be paid by the indemnifying party. The indemnifying party
shall not consent to entry of any judgment or enter into any settlement
with respect to a claim without the consent of the indemnified party, which
consent shall not be unreasonably withheld. So long as the indemnifying
party satisfies any judgment or settlement, consent shall not be withheld.
No indemnified party shall consent to entry of any judgment or enter into
any settlement of any such action the defense of which has been assumed by
the indemnifying party without the consent of the indemnifying party, which
consent shall not be unreasonably withheld.
ARTICLE IX
TAX MATTERS
SECTION 9.1 Section 338(h)(10) Election. For the purposes of this Article
IX, the term "Target Corporations" shall mean all Target Corporations other than
United. Each Target
34
Corporation, and each Selling Shareholder with respect to each Target
Corporation whose stock he is selling, will join with Buyer at Closing in making
an election under Section 338(h)(10) of the Code (and any corresponding
provision of state or local tax law) with respect to the sale of the stock of
each Target Corporation (the "Section 338(h)(10) Election"). Each Section
338(h)(10) Election shall be made by completing IRS Form 8023-A and any other
relevant form under federal, state, or local law consistent with the allocations
in Section 1.6. The Selling Shareholders will include any income, gain, loss,
deduction, or other tax item resulting from the Section 338(h)(10) Election on
their income tax returns to the full extent permitted by applicable law.
SECTION 9.2 Allocation of Purchase Price. The parties shall allocate the
purchase price paid under this Agreement in accordance with Section 1.6 for all
tax purposes.
SECTION 9.3 Liability for Taxes. Each Selling Shareholder shall be liable
for all income taxes on his allocable share of S corporation income (including
income from the deemed sale of assets pursuant to the Section 338(h)(10)
election) from each Target Corporation whose stock he is selling for any period
up to and including the Closing. Buyer shall be liable for any taxes imposed on
any of the Target Corporations whose stock Buyer is acquiring for any period
after the Closing. Whenever it is necessary to determine the liability for taxes
of any Target Corporation for a portion of a taxable year or period that begins
before and ends after the Closing, the determination of the taxes of the Target
Corporation for the portion of the year or period ending on, and the portion of
the year or period beginning after, the Closing shall be determined by assuming
that the Target Corporation had a taxable year or period which ended at the
Closing, except that exemptions, allowances or deductions that are calculated on
an annual basis, such as the deduction for depreciation, shall be apportioned on
a daily basis.
SECTION 9.4 Tax Returns. The Selling Shareholders shall prepare or cause to
be prepared when due all income tax returns with respect to taxes that are
required to be filed by or with respect to any of the Target Corporations for
taxable years or periods ending on or before the Closing. Buyer shall cause an
appropriate officer of each Target Corporation to sign such returns. Buyer shall
file or cause to be filed when due all tax returns with respect to the Target
Corporations for taxable years or periods ending after the Closing and shall
remit any taxes due in respect of such tax returns. The Selling Shareholders
shall pay Buyer pursuant to the Escrow Agreement the taxes for which the Selling
Shareholders are liable pursuant to this Sections 9.1 and 9.3 but which are
payable with tax returns to be filed by Buyer pursuant to the previous sentence.
SECTION 9.5 Contest Provisions. Buyer shall promptly notify the Selling
Shareholders in writing upon receipt by Buyer of written notice of any pending
or threatened tax audit or assessment which could affect the tax liabilities of
the Target Corporations for which the Selling Shareholders would be liable under
this Agreement. The Selling Shareholders shall have the sole right to represent
the Target Corporations' interests in any tax audit or administrative or court
proceeding relating to taxable periods ending on or before the Closing Date, and
to employ
35
counsel of their choice at their expense. Notwithstanding the foregoing, the
Selling Shareholders shall not be entitled to settle, either administratively or
after the commencement of litigation, any claim for taxes that would adversely
affect to any extent the Buyer's or any Target Corporation's liability for taxes
for any period after the Closing (including but not limited to, the imposition
of income tax deficiencies, the reduction of asset basis, the lengthening of any
amortization or depreciation period, the denial of amortization or depreciation
deductions, or the reduction of loss or credit carryforwards without regard to
any limitations on the use of such amounts) without the prior written consent of
Buyer. Such consent shall not be unreasonably withheld, and shall not be
necessary to the extent that the Selling Shareholders have indemnified the Buyer
against the effects of any such settlement.
SECTION 9.6 Assistance and Cooperation. After the Closing, each of the
Selling Shareholders and the Buyer shall:
(i) assist (and cause their respective affiliates to assist) the
other party in preparing any tax returns which such other party is responsible
for preparing and filing in accordance with this Section 9;
(ii) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any tax returns of the Target Corporations;
(iii) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to taxes
of the Target Corporations;
(iv) provide timely notice to the other in writing of any pending or
threatened tax audits or assessments of the Target Corporations for taxable
periods for which the other may have a liability under this Agreement; and
(v) furnish the other with copies of all correspondence received
from any taxing authority in connection with any tax audit or information
request with respect to any taxable period for which the other may have a
liability under this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Survival of Representations, Warranties and Agreements. The
parties hereto agree that their respective representations and warranties shall
survive for a period of one year after the date hereof, except with respect to
(a) Losses resulting from third party claims, which shall survive for the
applicable statute of limitation governing such third party claim, (b) those
contained in Section 2.2 and Section 2.16 with respect to title to the Purchased
Assets, which shall survive indefinitely, and (c) those contained in Section
2.11 (Taxes) which shall survive for the statute of limitations applicable
thereto. All of the covenants and agreements of the parties
36
contained herein shall survive the closing of the transactions contemplated
hereby without limitation.
SECTION 10.2 Expenses. All costs and expenses incurred in connection with
the transactions contemplated by this Agreement shall be paid by the party
incurring such costs and expenses, and the parties agree that Selling
Shareholders shall be responsible for the attorneys' fees and expenses of
counsel to the Target Corporations and the Selling Shareholders, which shall be
paid or credited to Buyer in accordance with Section 1.1 and 1.3 hereof.
SECTION 10.3 Public Announcements. Any public announcement or similar
publicity with respect to this Agreement or the transactions contemplated hereby
shall be issued, if at all, at such time and in such manner as Buyer and Target
Corporations shall jointly determine. Neither party shall unreasonably withhold
consent and Target Corporations consent to a public announcement by Buyer of the
transactions contemplated hereby upon the termination or waiver of Buyer's
rights under Section 7.3. The Buyer and Target Corporations will consult with
each other concerning the means by which the Target Corporations' employees,
customers and suppliers and others having dealings with the Target Corporations
will be informed of the transactions contemplated hereby.
SECTION 10.4 Brokers and Finders. Target Corporations have retained
NationsBanc Capital Markets, Inc., and Target Corporations and/or Selling
Shareholders shall pay any and all fees, costs and expenses in connection with
such engagement of NationsBanc Capital Markets ("NBCM") out of the Cash
Consideration. Except as provided above, all negotiations on behalf of the
parties hereto relating to this Agreement and the transactions contemplated by
this Agreement have been carried on by the parties and their respective agents
directly without the intervention of any other person in such manner as to give
rise to any claim against Buyer or Target Corporations or Selling Shareholders
for financial advisory fees, brokerage or commission fees, finder's fees or
other like payment in connection with the consummation of the transactions
contemplated hereby.
SECTION 10.5 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among the parties or any of them with respect to the subject matter
hereof, and (b) shall not be assigned by operation of law or otherwise.
SECTION 10.6 Amendments; Waiver; Consents. All amendments to this
Agreement must be in writing and signed by all of the parties hereto. The rights
and remedies of the parties to this Agreement are cumulative and not
alternative. Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be waived by the party affected thereby only
by a written instrument signed by the party granting such waiver. No waiver, or
failure to insist upon strict compliance, by any party of any condition or any
breach of any obligation, term, covenant, representation, warranty or agreement
contained in this Agreement, in any one or more instances, shall be construed to
be a waiver of, or estoppel with respect to, any other condition or any other
breach of the same or any other obligation, term, covenant, representation,
warranty or agreement. Whenever this Agreement requires or permits consent by or
on behalf of any party
37
hereto, such consent shall be given in writing in a manner consistent with the
requirements for a waiver.
SECTION 10.7 Further Assurances. From time to time as and when requested
by Buyer, or its successors or assigns, Target Corporations and Selling
Shareholders shall execute and deliver such further agreements, documents,
deeds, certificates and other instruments and shall take or cause to be taken
such other actions, including those as shall be reasonably necessary to vest or
perfect in or to confirm of record or otherwise Target Corporations' title to
and possession of, all of their respective property, interests, assets, rights,
privileges, immunities, powers, franchises and authority, as shall be reasonably
necessary or advisable to carry out the purposes of and effect the transactions
contemplated by this Agreement.
SECTION 10.8 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 10.9 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by telecopy or telex, or by registered or
certified mail (postage prepaid, return receipt requested), to the respective
parties as follows:
if to Purchaser:
American Builders & Contractors Supply Co., Inc.
Xxx XXX Xxxxxxx
Xxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Fax: (000) 000-0000
38
with a copy to:
Xxxx X. Xxx, Esq.
Xxx and Associates
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
if to Target Corporations:
c/o Champ Industries, Inc.
Texas Commerce Tower
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxx
Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Telecopy No. (000) 000-0000
if to Xxxxx or Xxxxxxx:
Texas Commerce Tower
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
if to Cockrell, Curran, Xxxxxx and Xxxxxx:
c/x Xxxxxxxx Interests, Inc.
0000 Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
39
,in the event of a notice to any Selling Shareholder, with a copy to:
Xxxxxxx X. Xxxxx
Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 10.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 10.11 Descriptive Headings. The descriptive headings are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
SECTION 10.12 Parties in Interest; No Third Party Beneficiary. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 10.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 10.14 Incorporation by Reference. Any and all schedules, exhibits,
annexes, statements, reports, certificates or other documents or instruments
referred to herein or attached hereto are incorporated herein by reference
hereto as though fully set forth at the point referred to in the Agreement.
SECTION 10.15 Certain Definitions. For the purposes of this Agreement, the
following terms shall have the meanings specified or referred to below whether
or not capitalized when used in this Agreement.
(a) "Net Book Value" means, with respect to any entity or business
unit, all assets minus all liabilities, determined in accordance with GAAP.
(aa) "Stone Appliance Division" means the business of Perfection
exclusively relating to the sale and service of home appliances which is
conducted in San Antonio, Texas.
40
(b) "Baseline Amount" shall be equal to the sum of
(i) $7,943,000; plus
(ii) net income of the Target Corporations from August 1, 1997
through October 31, 1997; less
(iii) an amount equal to the state and federal income tax
liabilities of the Selling Shareholders for allocable income of the
Target Corporations other than United for the period August 1, 1997
through October 31, 1997, which amount shall be distributed in cash to
such Selling Shareholders prior to the Closing; less
(iv) the net income of the Stone Appliance Division; less
(v) any charges to income outside the ordinary course of
business (provided, adjustments to inventory valuations consistent
with the prior practices of Target Corporations shall not be
considered a charge to income outside the ordinary course of business
but inconsistent inventory valuations shall be a charge to income
outside the ordinary course of business).
(c) "Borrowed Money" means all indebtedness of Target Corporations to
Champ Industries, Inc., Nationsbank of Texas, N.A., Selling Shareholders,
or any other indebtedness evidenced by promissory notes or capitalized
lease obligations or similar agreements, including but not limited to, the
indebtedness referred to on Schedule 2.9 and the promissory notes referred
to on Schedule 2.18.
(d) "Cash Consideration" means the cash consideration of $27,450,000
to be paid to Selling Shareholders and United pursuant to this Agreement.
(e) "Permitted Encumbrances" means (i) liens for current taxes and
assessments not yet due or payable or taxes the validity of which are being
contested in good faith by appropriate proceedings, (ii) liens of
employees, laborers, carriers, warehousemen, mechanics and materialmen for
current wages or accounts payable not yet delinquent, (iii) liens and
charges incident to construction or maintenance, which have either not been
filed of record or have been filed of record and are being contested in
good faith by appropriate action diligently pursued and have not yet
proceeded to judgment, (iv) liens or security interests created as a result
of deposits for workers' compensation, unemployment insurance,
41
surety bonds and leases, (v) landlord liens for rent not yet due and
payable, (vi) liens or security interests created as a result of
capitalized lease obligations assumed pursuant to this Agreement and (vii)
such other imperfections of title, easements, encumbrances or other liens,
if any, as are not substantial in character and otherwise not required to
be disclosed herein.
(f) "Knowledge" or "known" -- a Target Corporation shall be deemed to
have "knowledge" of or to have "known" a particular fact or other matter if
any director or executive officer of such Target Corporation, including
Xxxxx and Xxxxxxx, or X.X. Xxxxx, Xxxxx Xxxx, Xxxxx Xxxxx or Xxxxx X.
Xxxxxx, has actual knowledge of such fact or other matter.
(g) "Material Adverse Effect" shall mean any material adverse change
in the financial condition, assets or liabilities of Target Corporations
taken as a whole (or when the reference is to Buyer, any material adverse
change in the financial condition, assets or liabilities of Buyer.
(h) "Representing Shareholders" means Xxxxx and Xxxxxxx.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
PERFECTION ROOFING MATERIALS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
42
XXXXXXXX BUILDING SUPPLY, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
STONE METAL PRODUCTS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
SHR ROOFING MATERIALS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
UNITED BUILDING SUPPLY, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
-------------------------------------
Xxxxx X. Xxxxx
------------------------------------
Xxxxx X. Xxxxxxx, III
43
-----------------------------------
Xxxxxx X. Xxxxxxxx
-----------------------------------
Xxxxx X. Xxxxxx
-----------------------------------
Xxxxxx X. Xxxxxx
-----------------------------------
Xxxxxx X. Xxxxxx
44
