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ASSET PURCHASE AGREEMENT
DATED AS OF OCTOBER 6, 1997
BETWEEN
BMC WEST CORPORATION,
AS THE PURCHASER,
AND
LONE STAR PLYWOOD & DOOR CORP.,
AS THE SELLER
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CONTENTS
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . 1
SECTION 1.02. Certain Additional Defined Terms . . . . . . . . . . . 5
ARTICLE II. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.01. Purchase and Sale . . . . . . . . . . . . . . . . . . 6
SECTION 2.02. Assumption of Liabilities; Liabilities Retained
by Seller . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.03. Purchase Price; Adjustments to Purchase Price . . . . 10
SECTION 2.04. Closing . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . . . 16
SECTION 3.01. Incorporation and Qualification of the Seller;
Authority . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.02. Subsidiaries . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.03. No Conflict . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.04. Consents and Approvals . . . . . . . . . . . . . . . . 18
SECTION 3.05. Financial Information . . . . . . . . . . . . . . . . 18
SECTION 3.06. Litigation . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.07. Compliance with Laws; Licenses and Permits . . . . . . 19
SECTION 3.08. Environmental Compliance . . . . . . . . . . . . . . . 19
SECTION 3.09. Intellectual Property Rights . . . . . . . . . . . . . 20
SECTION 3.10. Real Property . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.11. Tangible Personal Property . . . . . . . . . . . . . . 21
PAGE i
SECTION 3.12. Material Contracts . . . . . . . . . . . . . . . . . . 21
SECTION 3.13. Employee Benefit Matters . . . . . . . . . . . . . . . 22
SECTION 3.14. Labor Matters . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.16. Insurance . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.17. Brokers . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3.18. Disclaimer of Warranties . . . . . . . . . . . . . . . 24
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER . . . . . . . 24
SECTION 4.01. Incorporation and Authority of the Purchaser . . . . . 24
SECTION 4.02. No Conflict . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.03. Consents and Approvals . . . . . . . . . . . . . . . . 25
SECTION 4.04. Absence of Litigation . . . . . . . . . . . . . . . . 26
SECTION 4.05. Financing . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.06. Brokers . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.07. Registered Shares . . . . . . . . . . . . . . . . . . 26
ARTICLE V. ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . 26
SECTION 5.01. Conduct of Business Prior to the Closing . . . . . . . 26
SECTION 5.02. Investigation . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.03. Access to Information . . . . . . . . . . . . . . . . 28
SECTION 5.04. Books and Records . . . . . . . . . . . . . . . . . . 28
SECTION 5.05. Confidentiality . . . . . . . . . . . . . . . . . . . 29
SECTION 5.06. Regulatory and Other Authorizations; Consents . . . . 29
PAGE ii
SECTION 5.07. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.08. Bulk Transfer Laws . . . . . . . . . . . . . . . . . . 30
SECTION 5.09. Employees . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.10. Further Action . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.11. Sales of Registered Shares . . . . . . . . . . . . . . 31
SECTION 5.12. Change of Name . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VI. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.01. Conditions to Obligations of the Seller . . . . . . . 31
SECTION 6.02. Conditions to Obligations of the Purchaser . . . . . . 32
ARTICLE VII. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 7.01. Survival . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 7.02. Indemnification by the Purchaser . . . . . . . . . . . 34
SECTION 7.03. Indemnification by the Seller . . . . . . . . . . . . 35
SECTION 7.04. General Provisions . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . 38
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.02. Effect of Termination . . . . . . . . . . . . . . . . 38
SECTION 8.03. Waiver . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IX. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 38
SECTION 9.01. Expenses . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 9.03. Public Announcements . . . . . . . . . . . . . . . . . 40
SECTION 9.04. Headings . . . . . . . . . . . . . . . . . . . . . . . 40
PAGE iii
SECTION 9.05. Severability . . . . . . . . . . . . . . . . . . . . . 40
SECTION 9.06. Entire Agreement . . . . . . . . . . . . . . . . . . . 41
SECTION 9.07. Assignment . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9.08. No Third-Party Beneficiaries . . . . . . . . . . . . . 41
SECTION 9.09. Amendment; Waiver . . . . . . . . . . . . . . . . . . 41
SECTION 9.10. Governing Law . . . . . . . . . . . . . . . . . . . . 41
SECTION 9.11. Counterparts . . . . . . . . . . . . . . . . . . . . . 41
EXHIBITS
Exhibit A Form of Xxxx of Sale, Assignment and Assumption Agreement
Exhibit B Form of Deeds
Exhibit C Form of Deeds of Trust
Exhibit D Form of Escrow Agreement
Exhibit E Form of Noncompetition Agreement
Exhibit F Reference Balance Sheet
Exhibit G Form of Subordinated Note
Exhibit 6.01(e) Form of Legal Opinion of Counsel to the Purchaser
Exhibit 6.02(e) Form of Legal Opinion of Counsel to the Seller
SCHEDULES
Schedule 2.01(a)(i) Machinery, Equipment, etc.
Schedule 2.01(a)(ii) Vehicles
Schedule 2.01(a)(vi) Contracts
Schedule 2.01(a)(xi) Real Property
Schedule 2.03(c) Asset Allocation
Schedule 3.13 Plans
Schedule 3.14 Employees
Schedule 3.16 Insurance
Schedule 5.09 Certain Employees
Schedule of Exceptions
PAGE iv
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of October 6, 1997, between BMC WEST
CORPORATION, a Delaware corporation (the "Purchaser"), and LONE STAR PLYWOOD &
DOOR CORP., a Delaware corporation (the "Seller").
RECITALS
The Seller desires to sell to the Purchaser, and the Purchaser desires to
purchase from the Seller, certain of the assets of the Seller on the terms and
subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the Purchaser and the Seller
hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS
As used in this Agreement, the following terms shall have the following
meanings (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"ADJUSTMENT ESCROW ACCOUNT" has the meaning ascribed thereto in the Escrow
Agreement.
"ADJUSTMENT ESCROW AMOUNT" means $500,000.
"ANCILLARY AGREEMENTS" means, collectively, the Xxxx of Sale, Assignment
and Assumption Agreement, the Deeds, the Noncompetition Agreement, the Escrow
Agreement, the Subordinated Note, and the Deeds of Trust.
"ASSET VALUE" means the total assets (other than Excluded Assets) of the
Seller reflected on the Reference Balance Sheet or the Closing Balance Sheet, as
the case may be, without reduction for any bad debt or other accounts receivable
reserves. For purposes of determining the Asset Value as reflected on the
Closing Balance Sheet, Inventory shall be valued as provided in Section 2.03(a)
and Inventory represented by goods covered by the Novax Agreement shall be
included. Inventory represented by goods covered by the Novax Agreement shall
be excluded for purposes of determining the Asset Value as reflected on the
Reference Balance Sheet.
PAGE 1
"ASSUMED LIABILITIES VALUE" means, without duplication, all Assumed
Liabilities to the extent reflected on the Closing Balance Sheet, excluding any
bad debt or other accounts receivable reserves; PROVIDED, HOWEVER, that any and
all obligations relating to claims of constructive or actual termination being
assumed by the Purchaser pursuant to Section 2.02(a)(vi) shall not be included
in the Assumed Liabilities Value. The Seller's contingent obligation under the
Novax Agreement to purchase goods covered thereby shall be included, without
duplication, for purposes of determining the Assumed Liabilities Value.
"XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT" means a Xxxx of Sale,
Assignment and Assumption Agreement substantially in the form of Exhibit A.
"BUSINESS" means the business of the Seller as currently conducted.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or any other
day on which banks generally are required or authorized to be closed in Dallas,
Texas.
"DEEDS" means, collectively, deeds substantially in the form of Exhibit B
with respect to the real property of the Seller being transferred to Purchaser.
"DEEDS OF TRUST" means, collectively, those Deeds of Trust substantially in
the form of Exhibit C, with respect to the real property being transferred to
Purchaser hereunder which secures the obligations under the Subordinated Note.
"DESIGNATED AMOUNT" means $10,000.
"ENVIRONMENTAL LAWS" means any federal, state or local law relating to
(a) releases or threatened releases of Hazardous Substances or (b) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means TICOR Title Insurance, or such other Escrow Agent as
agreed by the Seller and the Purchaser.
"ESCROW AGREEMENT" means an Escrow Agreement substantially in the form of
Exhibit D.
"ESCROW AMOUNTS" means, collectively, the Adjustment Escrow Amount and the
Indemnity Escrow Amount.
PAGE 2
"ESTIMATED CLOSING NET ASSET VALUE" means an amount equal to the Estimated
Closing Asset Value less the Estimated Closing Assumed Liabilities Value.
"ESTIMATED CLOSING ASSET VALUE" means the Asset Value of the Seller as of
the close of business on the date immediately preceding the Closing Date, as
estimated in good faith by the Seller no more than two Business Days prior to
the Closing Date. For purposes of determining the Estimated Closing Asset
Value, Inventory shall be valued as provided in Section 2.03(a).
"ESTIMATED CLOSING ASSUMED LIABILITIES VALUE" means the Assumed Liabilities
Value as of the close of business on the date immediately preceding the Closing
Date, as estimated in good faith by the Seller no more than two Business Days
prior to the Closing Date.
"GAAP" means United States generally accepted accounting principles.
"HAZARDOUS SUBSTANCES" means (a) substances which contain substances
defined in or regulated under the following federal statutes and their state
counterparts, as well as such statutes' implementing regulations as amended from
time to time and as interpreted by administering agencies: the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Toxic
Substances Control Act, the Federal Insecticide, Fungicide, and Rodenticide Act,
and the Clean Air Act; (b) petroleum and petroleum products including crude oil
and any fractions thereof; (c) natural gas, synthetic gas and any mixtures
thereof; and (d) any substances with respect to which a federal, state or local
agency requires environmental investigation, monitoring, reporting or
remediation.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder.
"INDEMNITY ESCROW ACCOUNT" has the meaning ascribed thereto in the Escrow
Agreement.
"INDEMNITY ESCROW AMOUNT" means an amount equal to $3.7 million, which
amount shall be evidenced by the aggregate principal amount of the Subordinated
Note.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended.
PAGE 3
"KNOWLEDGE" means with reference to (a) the Seller, the actual knowledge of
Xxxxxxx X. Xxxxx, Xxxxx XxXxxxx, Xxxxx Xxxxxxx, Xxxxx Xxxxxx, Xxxx Xxxxxxxx,
Xxxxx Xxxxxxx and Xxx Xxxxxxx and (b) the Purchaser, the actual knowledge of the
executive officers of the Purchaser. "To the knowledge of," or any similar
phrase with respect to, any person or entity means that such person or entity
has no actual knowledge contrary to the facts or matters so referenced.
"MARKET PRICE" of Registered Shares means the average of the daily closing
prices per share of the Purchaser's common stock for the 10 consecutive trading
days immediately preceding the day as of which "Market Price" is being
determined. The closing price for each day shall be the last sale price regular
way or, in case no such sale takes place on such day, the average of the closing
bid and asked prices regular way on the principal national securities exchange
on which the shares are listed or admitted to trading.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on the Assets,
taken as a whole, or any change in, or effect on, the Business that is or is
reasonably likely to be materially adverse to the results of operations, the
financial condition or the prospects of the Business, taken as a whole.
"NET ASSET VALUE" means an amount equal to the Asset Value of the Seller
less the Assumed Liabilities Value as of a given date.
"NONCOMPETITION AGREEMENT" means a Noncompetition Agreement, substantially
in the form of Exhibit E, between the Purchaser and the Seller, Xxxxxxx X.
Xxxxxx, Xxxx X. Xxxxx and The Endeavour Capital Fund Limited Partnership.
"NOVAX AGREEMENT" means the Agreement for Sale on Consignment dated
January 24, 1997 between C. E. Cabinets, a division of Novax Modular Group,
Inc., and the Seller.
"REFERENCE BALANCE SHEET" means the unaudited balance sheet of the Seller
as of June 30, 1997, attached hereto as Exhibit F.
"REGISTERED SHARE AMOUNT" means $3.3 million.
"REGISTERED SHARES" means shares of common stock of Building Materials
Holding Corporation, the Purchaser's parent company, that are registered under
the Securities Act of 1933, as amended, and registered or qualified under such
state securities or blue sky laws of such jurisdictions as the Seller has
requested prior to the Closing Date.
PAGE 4
"SELLER'S REPRESENTATIVE" means Xxxx X. Xxxxx, or such other person as
designated by the Seller or the Seller's Representative by written notice to the
Purchaser.
"SUBORDINATED NOTE" means the Subordinated Secured Promissory Note of the
Purchaser in favor of the Seller in the aggregate principal amount of
$3.7 million, dated the Closing Date, the obligations under which shall be
secured by the Deeds of Trust. The Subordinated Note shall be held by the
Escrow Agent pursuant to the terms of the Escrow Agreement and shall be
substantially in the form of Exhibit G.
"TAX" or "TAXES" means all income, gross receipts, sales, use, employment,
franchise, profits, property or other taxes, fees, stamp taxes and duties,
assessments or charges of any kind whatsoever, whether payable directly or by
withholding (together with any interest and any penalties, additions to tax or
additional amounts imposed with respect thereto), imposed by any governmental or
taxing authority.
"TERMINATED EMPLOYEES" means the Seller's employees as of the date
immediately preceding the Closing Date who are not hired, or to be hired, by the
Purchaser as of the Closing Date.
"THIRD QUARTER BRANCH EBIT" means the sum of the earnings before interest
and taxes of the Seller's Houston, Dallas, Seattle and Portland branches during
the period beginning July 1, 1997 and ending September 30, 1997, prepared on a
basis and with such adjustments that are consistent with the calculation of EBIT
for such branches which is contained in the Confidential Offering Memorandum of
the Seller, dated June 1997, the financial information for the six month period
ended June 30, 1997 presented to the Purchaser as part of management
presentations on July 23, 1997, and the Lone Star/Hillsdale Performance Summary
Update, dated September 16, 1997.
SECTION 1.02. CERTAIN ADDITIONAL DEFINED TERMS
In addition to terms defined in Section 1.01, the following capitalized
terms are used as defined in the Sections set forth opposite such terms:
PAGE 5
Defined Terms Section Reference
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Assets Section 2.01(a)
Assumed Liabilities Section 2.02(a)
Base Purchase Price Section 2.03(a)
Closing Section 2.04(a)
Closing Balance Sheet Section 2.03(b)(i)
Closing Date Section 2.04(a)
Collection and Returns Report Section 2.03(b)(i)
Confidentiality Agreement Section 6.05
Contracts Section 2.01(a)(vi)
Employees Section 3.15
Escrow Agreement Section 2.03(b)
Excluded Assets Section 2.01(b)
Financial Statements Section 3.05
Independent Accounting Firm Section 2.03(a)
Intellectual Property Rights Section 3.09
Inventory Section 2.01(a)(iii)
Last Bulk Cost Section 2.03(a)
Losses Section 7.02(a)
Material Contracts Section 3.12
Multiemployer Plan Section 3.13(b)
Multiple Employer Plan Section 3.13(b)
Plans Section 3.13(a)
Purchase Price Section 2.03(a)
Retained Liabilities Section 2.02(b)
Schedule of Exceptions Introduction to Article III
Seller's Accountants Section 2.03(b)(i)
Xxxxx Agreement Section 2.02(a)
Trade Accounts Receivable Section 2.03(b)(i)
ARTICLE II. PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE
(a) On the terms and subject to the conditions set forth in this
Agreement, the Seller shall, on the Closing Date, sell, assign, transfer, convey
and deliver to the Purchaser, and the Purchaser shall, on the Closing Date,
purchase from the Seller, all of the Seller's right, title and interest in and
to the following assets (all such assets, other than the Excluded Assets
referred to in Section 2.01(b), being referred to herein, collectively, as the
"Assets"):
PAGE 6
(i) all the Seller's machinery, equipment, furniture and other
similar property, including, without limitation, those assets described in
Schedule 2.01(a)(i);
(ii) all the Seller's vehicles and rolling stock, including without
limitation, those vehicles described in Schedule 2.01(a)(ii);
(iii) all the Seller's inventories of raw materials, work in process
and finished goods, including, without limitation, those goods covered by
the Novax Agreement (collectively, "Inventory");
(iv) all the Seller's accounts receivable as at the Closing Date,
other than accounts receivable arising with respect to the Seller's
operations in the State of Colorado;
(v) all the Seller's patents, trade names (including, without
limitation, "Lone Star Plywood & Door," "Lone Star," "Hillsdale Sash &
Door," "Hillsdale" and "Heritage Architectural Moulding"), trademarks,
service marks and copyrights;
(vi) all the Seller's assignable rights and interest in the
contracts, agreements, instruments, leases, licenses, purchase or customer
orders, commitments and other binding arrangements of the Seller,
including, without limitation, those described in Schedule 2.01(a)(vi)
(collectively, the "Contracts");
(vii) all the Seller's sales and promotional literature, customer
lists and other sales-related materials;
(viii) all the Seller's general, financial and other records
pertaining to the Business as in existence on the Closing Date;
(ix) all the Seller's computer software, including, without
limitation, source code, operating systems and specifications, data, data
bases, files, documentation and other materials related thereto;
(x) all municipal, state and federal franchises, permits,
licenses, agreements, waivers and authorizations held or used by the Seller
in connection with, or required for, the conduct of the Business, as
currently conducted, to the extent transferable;
(xi) all the Seller's real property described on
Schedule 2.01(a)(xi), including the improvements and fixtures located
thereon;
PAGE 7
(xii) all the Seller's xxxxx cash and, other than with respect to
Excluded Assets or Retained Liabilities, prepaid expenses and deposits;
(xiii) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind pertaining to, and arising out
of, the Business as of the Closing Date;
(xiv) claims for refunds of Taxes paid by the Seller imposed on
property, income or payrolls arising prior to or on the Closing Date, to
the extent such refunds are reflected on the Reference Balance Sheet or the
Closing Balance Sheet;
(xv) Plan assets to the extent transferable and not related to the
Terminated Employees; and
(xvi) all other assets of the Seller (other than Excluded Assets),
including, without limitation, goodwill and other intangible assets.
(b) The following (the "Excluded Assets") are specifically excepted from
the Assets to be transferred to the Purchaser pursuant to Section 2.01(a):
(i) all insurance policies of the Seller and all rights of the
Seller of every nature and description under or arising out of such
insurance policies;
(ii) claims for refunds of Taxes paid by the Seller imposed on
property, income or payrolls arising prior to or on the Closing Date, to
the extent such refunds are not reflected on the Closing Balance Sheet;
(iii) all the Seller's assets related to its operations in the State
of Colorado, including, without limitation, all real property located in
the State of Colorado (including the improvements and fixtures located
thereon), all the Seller's rights and interests in leases with respect to
such real property, all the Seller's accounts receivable arising with
respect to such operations and all goodwill associated with such
operations;
(iv) the Seller's records pertaining solely to the Excluded Assets,
the Retained Liabilities or the Terminated Employees, and the Seller's
minute books, stock ledgers and Tax records;
(v) Plan assets to the extent related to the Terminated Employees;
(vi) all the Seller's cash held in banks or money market or other
similar accounts; and
(vii) all rights of the Seller under this Agreement and the
Ancillary Agreements to which it is a party.
PAGE 8
SECTION 2.02. ASSUMPTION OF LIABILITIES; LIABILITIES RETAINED BY SELLER
(a) On the terms and subject to the conditions set forth in this
Agreement, the Purchaser shall execute and deliver, on the Closing Date, the
Assumption Agreement, pursuant to which the Purchaser shall agree to pay,
perform and discharge, if and when due, to the extent not paid, performed or
discharged on or prior to the Closing Date, the following liabilities and
obligations of the Seller (collectively, the "Assumed Liabilities"):
(i) all the Seller's trade liabilities, including, without
limitation, all accounts payable;
(ii) all the Seller's liabilities and obligations arising under the
Seller's contracts, agreements, instruments, leases, licenses, purchase or
customer orders, commitments and other binding arrangements, including,
without limitation, those described in Schedule 2.01(a)(vi);
(iii) all the Seller's liabilities and obligations arising in
connection with the computer software and related items described in
Section 2.01(a)(ix);
(iv) all the Seller's liabilities and obligations arising under the
franchises, permits, licenses, agreements, waivers and authorizations
described in Section 2.01(a)(x);
(v) the Seller's liabilities and obligations, if any, arising with
respect to the Seller's patents, trademarks, service marks and copyrights;
(vi) all the Seller's liabilities and obligations to its employees
(including, without limitation, liabilities and obligations with respect to
vacation pay, sick pay, and the Plans and obligations relating to any
claims of constructive or actual termination arising in connection with the
transactions contemplated hereby or the Purchaser's actions subsequent to
the Closing, PROVIDED, HOWEVER, that the Seller will pay all severance
payments due to Xxxxxxx X. Xxxxx pursuant to that certain Change of Control
Agreement between the Seller and Xx. Xxxxx, dated as of June 5, 1997 (the
"Xxxxx Agreement")), other than (x) any of such liabilities or obligations
to the extent constituting Retained Liabilities and (y) any liabilities or
obligations of the Seller to its employees (A) other than in their capacity
as employees or (B) with respect to violations or alleged violations of
law; and
(vii) all the Seller's other current liabilities to the extent
reflected on the Closing Balance Sheet and not constituting Retained
Liabilities.
PAGE 9
Notwithstanding anything to the contrary, it is agreed that the Purchaser
does not, and by this Agreement or any Ancillary Agreement shall not, assume or
agree to pay, perform, defend or discharge any liabilities and obligations of
Seller of any and every kind whatsoever, other than the Assumed Liabilities.
(b) Notwithstanding the Closing, the Seller shall retain, pay, perform and
discharge, if and when due, to the extent not paid, performed or discharged on
or prior to the Closing Date, the following liabilities and obligations of the
Seller (collectively, the "Retained Liabilities"):
(i) all the Seller's bank debt and notes payable;
(ii) all salary, wages and bonuses to Seller's employees to the
extent accruing prior to the Closing Date;
(iii) all Change of Control Bonuses (as defined in certain Change of
Control Agreements between the Seller and certain of its employees) and
similar bonuses the Seller has agreed to pay to certain of its employees in
connection with the transactions contemplated by this Agreement;
(iv) the severance obligations payable to Xxxxxxx Xxxxx pursuant to
the terms of the Xxxxx Agreement;
(v) all obligations to the Seller's employees under the Health and
Welfare Plan for Employees of Lone Star Plywood & Door Corp.; and
(vi) all payroll, sales and franchise taxes to the extent accruing
prior to the Closing Date.
SECTION 2.03. PURCHASE PRICE; ADJUSTMENTS TO PURCHASE PRICE
(a) Subject to the adjustments set forth in Section 2.03(b), the aggregate
purchase price for the Assets (the "Purchase Price") is $36,000,000 (the "Base
Purchase Price") (i) less the amount, if any, by which the Asset Value reflected
on the Reference Balance Sheet exceeds the Estimated Closing Asset Value,
(ii) plus the amount, if any, by which the Estimated Closing Asset Value exceeds
the Asset Value reflected on the Reference Balance Sheet and (iii) less the
Estimated Closing Assumed Liabilities Value. The Seller shall provide written
notice of the Estimated Closing Asset Value and the Estimated Closing Assumed
Liabilities Value to the Purchaser at least one Business Day prior to the
Closing Date. The Purchase Price is payable as provided in Section 2.04(c).
PAGE 10
For purposes of calculating the Estimated Closing Asset Value and the Asset
Value reflected on the Closing Balance Sheet, the value of the Inventory shall
be determined as follows:
(1) A physical inventory count and valuation shall be conducted
jointly by the Purchaser and the Seller on the Friday and weekend immediately
preceding Closing. The value of the Inventory (except as otherwise provided
herein) shall be the Last Bulk Cost per unit thereof. "Last Bulk Cost" means,
with respect to any given items, the per unit price in the latest standard
quantity purchase by the Seller of such type of items from the Seller's primary
supplier thereof in the ordinary course of the Seller's business reduced by a
discount of 1%. Any damaged or obsolete Inventory shall be purchased by the
Purchaser for that amount agreed upon by representatives of the Purchaser and
the Seller during the physical inventory count and valuation described above.
Obsolete Inventory is that Inventory which is not being sold during the ordinary
course of business to the existing customer base of the Purchaser and which is
not being sold during the ordinary course of business to the existing customer
base of the Seller.
(2) Any and all disputes regarding any aspect of the inventory
count and valuation process including determination of Last Bulk Cost shall be
negotiated in good faith between the parties. In the event the parties cannot
agree on the Last Bulk Cost of any item or items, then each party shall promptly
submit such evidence of Last Bulk Cost as such party deems appropriate to the
accounting firm of KPMG or such other independent accounting firm of national
reputation as may be mutually acceptable to the Seller and the Purchaser (the
"Independent Accounting Firm"), who shall be instructed based solely on the
evidence presented by the parties, to determine which party's value most closely
approximates Last Bulk Cost of the disputed items. The value so selected by the
Independent Accounting Firm shall be binding and conclusive.
(3) The actual costs, if any, incurred for the services of the
Independent Accounting Firm pursuant to the preceding paragraph shall be borne
by the party whose proposed value is the furthest from the value selected by the
Independent Accounting Firm. In conducting the inventory count, the Purchaser
shall bear its own costs including wages and overtime of its employees, lodging,
meals, and transportation of its employees and any other expenses incurred by
the Purchaser. In conducting the inventory count, the Seller shall bear its own
costs including wages and overtime of its employees, lodging, meals, and
transportation of its employees and any other expenses incurred by the Seller.
(b) The Purchase Price shall be subject to adjustment, if any, after the
Closing Date as specified in this Section 2.03(b).
PAGE 11
(i) Within 120 calendar days following the Closing Date, the Seller
shall deliver to the Purchaser an unaudited balance sheet of the Seller (the
"Closing Balance Sheet") as of the close of business on the date immediately
preceding the Closing Date. The Closing Balance Sheet shall be prepared (x) in
accordance with GAAP, except that it shall not contain the footnotes required
thereby, and (y) except as otherwise expressly indicated herein, using
procedures substantially similar to those used to prepare the Reference Balance
Sheet.
During the preparation of the Closing Balance Sheet and the period of any
dispute referred to in Section 2.03(b)(iv), the Purchaser shall provide the
Seller and Coopers & Xxxxxxx, independent accountants ("Seller's Accountants"),
full access to the books, records and facilities of the Seller and shall
cooperate fully with the Seller and Seller's Accountants, in each case to the
extent reasonably required by the Seller and Seller's Accountants in order to
prepare the Closing Balance Sheet and to investigate the basis for any such
dispute; PROVIDED, HOWEVER, that any such investigation shall be conducted in
such a manner as not to interfere unreasonably with the operation of the
Purchaser's business.
Except as otherwise set forth in this Section 2.03(b)(i), the value of the
Trade Accounts Receivable on the Closing Balance Sheet shall be the actual
collected value of the Trade Accounts Receivable during the 120 calendar days
following the Closing Date. "Trade Accounts Receivable" means the right to
receive payment on obligations, including those owed but not yet due, as of
Closing, of all customers and other third-party purchasers of goods and services
from the Business in the ordinary course of business prior to Closing, including
any and all past due accounts and notes receivable taken in collection of
routine receivables, but excluding any such obligations which have been written
off the books prior to Closing. During a period of 120 calendar days following
the Closing Date, the Purchaser shall (1) use its reasonable best efforts to
collect such Trade Accounts Receivable consistent with past practice of the
Business, including the processing of returns of goods that are returned and
resalable, and (2) take all reasonable and usual steps requested by the Seller
to create, protect and preserve any applicable deeds of trust, mortgages,
mechanic's liens, materialmen's liens and other security interests that may
secure the Trade Accounts Receivable acquired by the Purchaser hereunder. The
Seller shall reimburse the Purchaser for all reasonable out-of-pocket expenses
incurred by the Purchaser in taking the action requested by the Seller pursuant
to clause (2) above. The Purchaser agrees that it shall not, for a period of
180 days following the Closing Date, make any changes to (a) the personnel used
by the Seller immediately prior to the Closing in the collection of the Trade
Accounts Receivable, (b) the salespersons to whose customers the Trade Accounts
Receivable relate or (c) any incentive compensation or commission structure in
place on the date hereof relating to the collection of the Trade Accounts
Receivable. If any of such Trade Accounts Receivable have not been
PAGE 12
collected by the Purchaser during such 120-day period, the Purchaser shall,
subject to Section 2.03(b)(iv), (x) assign those uncollected Trade Accounts
Receivable (including all related deeds of trust, mortgages, mechanic's liens,
materialmen's liens and other security interests securing such Trade Accounts
Receivable) to the Seller or (y) at the Seller's request, continue to use its
reasonable best efforts to collect such Trade Accounts Receivable consistent
with past practice of the Business and pay to the Seller, promptly upon receipt,
all proceeds therefrom less reasonable collection expenses; PROVIDED, HOWEVER,
that, notwithstanding anything in this Agreement to the contrary, if the
Purchaser shall be in default of its obligations under this paragraph with
respect to a given Trade Account Receivable, the Purchaser shall not be
(1) entitled to any adjustment to the Purchase Price or any indemnification
under this Agreement to the extent such Trade Account Receivable is or proves to
be uncollectible or (2) obligated to assign such Trade Account Receivable (or
any related deeds of trust, mortgages, mechanic's liens, materialmen's liens or
other security interests securing such Trade Account Receivable) to the Seller
hereunder. Upon any return of resalable goods relating to invoices issued prior
to the Closing Date, the Trade Account Receivable corresponding to the returned
items shall be deemed collected in the amount of 70% of the invoiced cost of
such item. Any allowances or adjustments granted to customers with respect to
the Trade Accounts Receivable shall be taken into account; provided such
allowances or adjustments are made by the Purchaser in the ordinary course of
business consistent with past practice of the Business, and, provided further,
that allowances or adjustments aggregating $1,000 or more with respect to a
single customer shall require the approval of the Seller's Representative, which
approval shall not be unreasonably withheld or delayed. The Purchaser shall
provide to the Seller's Representative on a weekly basis a report (the
"Collection and Returns Report") (a) identifying any returned items or any
allowances or adjustments, the date of return or of the granting of such
allowance or adjustment, the customer's name, the applicable invoice number,
invoice date and invoice amount, the action taken by the Purchaser, and the
reasons why the Purchaser accepted such return items or granted or made such
allowances or adjustments and (b) specifying the collection efforts and results
with respect to the Trade Accounts Receivable, including a reconciliation of the
weekly collections by customer, with invoice number, invoice date and invoice
amount. In the event that the Purchaser grants allowances or adjustments to
customers without the approval of the Seller's Representative as provided
herein, or if the Purchaser does not provide to the Seller's Representative the
information relating to any allowances, adjustments or returns of goods as set
forth in this Section 2.03(b), the Trade Accounts Receivable relating to such
allowances, adjustments or returns shall be deemed collected in full.
(ii) Subject to the resolution of any disputes pursuant to
Section 2.03(b)(iv), within 30 Business Days after the date of receipt by the
Purchaser of the Closing Balance Sheet:
PAGE 13
(A) in the event that the Estimated Closing Net Asset Value
exceeds the Net Asset Value reflected on the Closing Balance Sheet by at least
the Designated Amount, the Seller shall pay to the Purchaser, as a downward
adjustment to the Purchase Price, by wire transfer in immediately available
funds, first from the Adjustment Escrow Account and then, to the extent
required, from the Seller, an amount equal to such excess; and
(B) in the event that the Net Asset Value reflected on the
Closing Balance Sheet exceeds the Estimated Closing Net Asset Value by at least
the Designated Amount, the Purchaser shall pay to the Seller, as an upward
adjustment to the Purchase Price, by wire transfer in immediately available
funds, an amount equal to such excess.
Any payment required to be made by the Seller or the Purchaser pursuant to
this Section 2.03(b) shall bear interest from the Closing Date through the date
of payment at the rate of 10% per annum.
(iii) During a period of 120 calendar days following the Closing
Date, the Purchaser shall honor any reasonable claims by customers of the
Business for returns of goods relating to invoices issued prior to the Closing
Date. The Purchaser shall report any returns to the Seller's Representative on
a weekly basis pursuant to the Collection and Returns Report. Any returns of
goods relating to invoices issued prior to the Closing Date that are not of a
quality resalable in the ordinary course of business shall result in a reduction
of the Purchase Price in the amount the customer was credited for the return.
Any returns of goods relating to invoices issued prior to the Closing Date that
are of a quality resalable in the ordinary course of business shall result in
adjustments to the Purchase Price (without duplication of any other adjustments
to the Purchase Price required by this Section 2.03(b)) as follows:
(A) If the returned resalable item is the subject of an unpaid
Trade Account Receivable, then the Seller shall be entitled to a credit in the
manner provided above with respect to the collection of Trade Accounts
Receivable.
(B) If the returned resalable item was paid for prior to the
Closing Date, the Purchaser is entitled to a payment from the Seller in the
amount of 30% of the invoice amount for the item.
(iv) (A) The Purchaser may dispute any amounts reflected on the
Closing Balance Sheet to the extent that the net effect of such disputed amounts
in the aggregate would be to reduce the Net Asset Value reflected on the Closing
Balance Sheet by more than the Designated Amount; PROVIDED, HOWEVER, that the
Purchaser shall have notified the Seller's Representative in writing of each
disputed item, specifying the amount thereof in dispute and setting forth, in
reasonable detail, the
PAGE 14
basis for such dispute, within 20 Business Days of the Purchaser's receipt of
the Closing Balance Sheet. In the event of such a dispute, the Purchaser and
the Seller shall attempt to reconcile their differences. If any such resolution
by the Purchaser and the Seller leaves in dispute amounts the net effect of
which in the aggregate would not affect the Net Asset Value reflected on the
Closing Balance Sheet by more than the Designated Amount, all such amounts
remaining in dispute shall then be deemed to have been resolved in favor of the
Closing Balance Sheet delivered by the Seller to the Purchaser. If the
Purchaser and the Seller are unable to reach a resolution with such effect
within 10 Business Days after receipt by the Seller's Representative of the
Purchaser's written notice of dispute, the Purchaser and the Seller shall submit
the items remaining in dispute for resolution to the Independent Accounting
Firm, which shall, within 30 Business Days of such submission, determine and
report to the Seller and the Purchaser upon such remaining disputed items, and
such report shall be final, binding and conclusive on the Seller and the
Purchaser. The fees and disbursements of the Independent Accounting Firm shall
be allocated between the Purchaser and the Seller in the same proportion that
the aggregate amount of such remaining disputed items so submitted to the
Independent Accounting Firm which is unsuccessfully disputed by each such party
(as finally determined by the Independent Accounting Firm) bears to the total
amount of such remaining disputed items so submitted.
(B) No adjustment to any amount payable by the Seller or the
Purchaser pursuant to Section 2.03(b)(ii) shall be made with respect to amounts
disputed by the Purchaser pursuant to this Section 2.03(b)(iv), unless the net
effect of the amounts successfully disputed by the Purchaser in the aggregate is
to reduce the Net Asset Value reflected on the Closing Balance Statement by at
least the Designated Amount, in which case such adjustment shall be made in an
amount equal to the full amount of such reduction.
(c) The parties agree that the Purchase Price shall be allocated as of the
Closing Date among the Assets in accordance with Schedule 2.03(c) and Internal
Revenue Code Section 1060 and Treasury Regulations thereunder and shall file
such Tax returns and forms as required reflecting such allocation of the
Purchase Price. Any subsequent adjustments to the Purchase Price in accordance
with the terms of this Agreement shall be reflected in the allocation hereunder
in a manner consistent with Treasury Regulation Section 1.1060-1T(f). Neither
the Seller nor the Purchaser shall file any Tax return or form or take a
position with a Tax authority that is inconsistent with such allocation.
SECTION 2.04. CLOSING
(a) Subject to the terms and conditions of this Agreement, the sale and
purchase of the Assets and the assumptions of the Assumed Liabilities
contemplated
PAGE 15
hereby shall take place at a closing (the "Closing") at the offices of Xxxxxxx
Coie, 0000 X.X. Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxx at 10:00 a.m., local
time, on November 3, 1997 or, if later, the fifth Business Day following the
expiration or termination of any applicable waiting periods under the HSR Act,
or at such other time or on such other date or at such other place as the Seller
and the Purchaser may mutually agree upon in writing (the day on which the
Closing takes place being the "Closing Date").
(b) At the Closing, the Seller shall deliver or cause to be delivered to
the Purchaser:
(i) a receipt for the Purchase Price less the Escrow Amounts;
(ii) the Xxxx of Sale, Assignment and Assumption Agreement, the
Deeds and such other instruments executed by the Seller as may reasonably
be requested by the Purchaser to transfer title to the Assets to the
Purchaser;
(iii) executed counterparts of each other Ancillary Agreement to
which the Seller is a party;
(iv) the certificates, opinion and other documents required to be
delivered pursuant to Section 6.02; and
(v) detailed trial balance accounts payable information and other
reasonably detailed information used to determine the Estimated Closing
Assumed Liabilities Value.
(c) At the Closing, the Purchaser shall deliver to the Seller:
(i) the Purchase Price less the sum of (A) the Registered Share
Amount, (B) the Adjustment Escrow Amount and (C) the Indemnity Escrow
Amount , by wire transfer in immediately available funds to an account
designated by the Seller;
(ii) Registered Shares valued at the Market Price in an aggregate
amount equal to the Registered Share Amount;
(iii) executed counterparts of each Ancillary Agreement to which the
Purchaser is a party; and
(iv) the certificates, opinion and other documents required to be
delivered pursuant to Section 6.01.
PAGE 16
Additionally, at or prior to the Closing the Purchaser shall deposit
immediately available funds equal to the Adjustment Escrow Amount into the
Adjustment Escrow Account and the Subordinated Note with the Escrow Agent, to be
held pursuant to the terms of the Escrow Agreement.
(d) Notwithstanding Section 2.03, the sale and purchase of the Assets and
the assumption by the Purchaser of the Assumed Liabilities shall be deemed for
all purposes to have taken place as of 12:01 a.m. on the Closing Date.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER
Subject to the limitations and exceptions set forth in this Agreement,
including, without limitation, in the attached Schedule of Exceptions dated as
of the date hereof (the "Schedule of Exceptions"), the Seller makes the
following representations and warranties to the Purchaser. Notwithstanding
references in the Schedule of Exceptions to specific sections of this Agreement,
the disclosure of any exception set forth in the Schedule of Exceptions shall be
deemed an exception to all representations, warranties and covenants to which
such exception may be applicable.
SECTION 3.01. INCORPORATION AND QUALIFICATION OF THE SELLER; AUTHORITY
The Seller is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power and
authority to enter into and carry out its obligations under this Agreement and
the Ancillary Agreements to which it is a party, to own, operate or lease the
properties and assets now owned, operated or leased by the Seller and to carry
on the Business as it is now being conducted. The Company is duly qualified as
a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its activities makes such qualification necessary, except where
the failure to so qualify could not reasonably be expected to have a Material
Adverse Effect. The execution and delivery by the Seller of this Agreement and
the Ancillary Agreements to which it is a party, the performance of its
obligations hereunder and thereunder and the consummation by the Seller of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of the Seller. This Agreement has been
duly executed and delivered by the Seller, and (assuming due authorization,
execution and delivery by the Purchaser) constitutes a legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with its
terms. At the Closing, the Ancillary Agreements to which the Seller is a party
shall be duly executed and delivered by the Seller, and (assuming due
authorization, execution and delivery by
PAGE 17
the other parties thereto) shall constitute legal, valid and binding obligations
of the Seller enforceable against the Seller in accordance with their terms.
SECTION 3.02. SUBSIDIARIES
The Seller does not own, directly or indirectly, any capital stock or other
equity securities of any corporation or have any other direct or indirect equity
or ownership interest in any corporation, partnership, joint venture or similar
business entity.
SECTION 3.03. NO CONFLICT
Except as may result from any facts or circumstances relating solely to
Purchaser, the execution, delivery and performance by the Seller of this
Agreement and the Ancillary Agreements to which it is a party do not, and will
not (a) violate or conflict with the Certificate of Incorporation or Bylaws of
the Seller, in each case as amended, or (b) conflict with or violate any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to the Seller or any of the Assets or (c) result in any breach
of, or constitute a default (or event which with the giving of notice or lapse
of time, or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any lien or other encumbrance on any of the Assets pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to the Assets or by which any of the
Assets is bound or affected.
SECTION 3.04. CONSENTS AND APPROVALS
The execution, delivery and performance by the Seller of this Agreement and
the Ancillary Agreements to which it is a party do not, and will not, require
any consent, approval, exemption, authorization or other action by, or filing
with or notification to, any court, administrative agency or other governmental
or regulatory authority, except (a) any applicable notification requirements of
the HSR Act, (b) where failure to obtain such consent, approval, exemption,
authorization or action, make such filing or give such notice would not prevent
the Seller from performing any of its material obligations under this Agreement
or the Ancillary Agreements to which it is a party and (c) as may be necessary
as a result of any facts or circumstances relating solely to the Purchaser.
SECTION 3.05. FINANCIAL INFORMATION
The Seller has provided to the Purchaser true and complete copies of
(a) the audited balance sheets of the Seller dated as of December 31, 1996,
1995, and 1994 and the audited income statements and statements of cash flow for
the Seller for the
PAGE 18
years ended December 31, 1996, 1995 and 1994 (collectively, the "Audited
Financial Statements) and (b) the Reference Balance Sheet and an unaudited
income statement for the Seller for the six-month period ended June 30, 1997,
and the unaudited balance sheets and unaudited income statements at and for the
months ended July 31, 1997 and August 31, 1997 (the "Unaudited Financial
Statements") and, together with the Audited Financial Statements, being referred
to herein, collectively, as the "Financial Statements"). The Financial
Statements present fairly, in all material respects, the financial condition and
results of operations of the Seller as of the dates thereof or for the periods
covered thereby and the Financial Statements have been prepared in accordance
with GAAP throughout the periods covered thereby, except as described in the
notes thereto and except that the Unaudited Financial Statements do not contain
the footnotes required by GAAP and are subject to year-end and other non-
material adjustments. The Financial Statements reflect the following in
accordance with GAAP: (x) appropriate reserves and accruals for all taxes and
other liabilities as at the date, and for the period, indicated but not yet
payable, and (y) all other items required to be reserved for or accrued in
accordance with GAAP. Since August 31, 1997 and except as contemplated in this
Agreement or as set forth in the "Lone Star/Hillsdale Performance Summary
Update" dated September 16, 1997, the Seller has not incurred any liability
other than in the ordinary course of business and consistent with past practice,
the Seller has conducted the Business in the ordinary course and consistent with
past practice, and the Seller has not suffered any Material Adverse Effect.
SECTION 3.06. LITIGATION
No claim, action, proceeding or investigation is pending or, to the
Seller's knowledge, threatened against the Seller, before any federal, state or
municipal court, or administrative, governmental or regulatory authority or body
that (a) questions the validity of this Agreement or any Ancillary Agreement to
which the Seller is a party or any action taken or to be taken by the Seller
hereunder or thereunder or (b) individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, and the Seller is not
subject to any order, writ, judgment, injunction, decree, determination or award
that (x) prohibits any action taken or to be taken by the Seller pursuant to
this Agreement or any Ancillary Agreement to which the Seller is a party or
(y) individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
SECTION 3.07. COMPLIANCE WITH LAWS; LICENSES AND PERMITS
The Seller is not in violation of any law, rule, regulation, order,
judgment or decree applicable to it or by which any of the Assets is bound or
affected, except for violations the existence of which could not reasonably be
expected to have a Material
PAGE 19
Adverse Effect. The Seller has all governmental licenses, franchises, permits,
approvals, authorizations, exemptions, certificates, and registrations necessary
to carry on the Business as it is now being conducted, except for such
governmental licenses, permits, approvals, authorizations, exemptions,
certificates and registrations the absence of which could not reasonably be
expected to have a Material Adverse Effect.
SECTION 3.08. ENVIRONMENTAL COMPLIANCE
(a) The Seller holds all the permits, licenses and approvals of
governmental authorities and agencies required under Environmental Laws for the
current use, occupancy or operation of the Assets and the conduct of the
Business as it is now being conducted, except for such permits, licenses and
approvals the absence of which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(b) The Seller is not in violation of any Environmental Laws or any such
permits, licenses and approvals, except for such violations which, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(c) The Seller has received no notice from any governmental agency or
authority alleging that the Seller or any of the Assets is not in compliance
with Environmental Laws and, to the Seller's knowledge, there are no
circumstances that could reasonably be expected to prevent or interfere with
material compliance by the Seller with Environmental Laws in the future.
(d) There is no asserted claim, action, cause of action or investigation
by any person or entity alleging potential liability of the Seller (including,
without limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence or release into the environment of any Hazardous Substance at the
premises owned or leased by the Seller, that is pending or, to the Seller's
knowledge, threatened against the Seller, any of the Assets or any of such
premises.
(e) To the Seller's knowledge, the Seller has not treated, stored, or
disposed of, and the Seller has not released, any Hazardous Substances in
violation of any Environmental Laws on or from any premises owned or leased by
the Seller.
SECTION 3.09. INTELLECTUAL PROPERTY RIGHTS
(a) The Seller owns or otherwise has a right to use all patented
inventions, trademarks, trade names, service marks and copyrights (collectively
"Intellectual Property Rights") used by the Seller in the conduct of the
Business as currently
PAGE 20
conducted, except for those Intellectual Property Rights the lack of which could
not reasonably be expected to have a Material Adverse Effect. No rights have
been granted by the Seller to third parties with respect to the Intellectual
Property Rights.
(b) There is no claim, action or cause of action challenging the Seller's
use of the Intellectual Property Rights or challenging or questioning the
validity or effectiveness of any Intellectual Property Rights.
(c) To the Seller's knowledge, (i) neither the Seller's operations nor the
Intellectual Property Rights infringe upon any issued or pending patent,
trademark, trade name, service xxxx, copyright or other right of any person or
entity, and (ii) there is no infringement by any other person or entity of any
Intellectual Property Right.
SECTION 3.10. REAL PROPERTY
(a) With respect to each lease covering any parcel of real property leased
by the Seller, (i) such lease is valid, binding and enforceable in accordance
with its terms, and (ii) the Seller has performed all obligations imposed upon
it thereunder, and neither the Seller nor, to the Seller's knowledge, any other
party thereto is in default thereunder in any material respect, nor is there any
event which, with the giving of notice or lapse of time or both, would
constitute a default thereunder by the Seller or, to the Seller's knowledge, any
other party thereto.
(b) To the Seller's knowledge, each parcel of real property owned by the
Seller, the improvements thereon, and the use and operation thereof comply, in
all material respects, with all zoning and building laws, ordinances, orders or
requirements of any state, municipal or other governmental departments or
agencies having jurisdiction against or affecting such property. The Seller has
no knowledge that any parcel leased by the Seller, the improvements thereon, or
the use or operation thereof does not comply, in all material respects, with all
such zoning and building laws, ordinances, orders and requirements.
SECTION 3.11. TANGIBLE PERSONAL PROPERTY
Schedules 2.01(a)(i) and 2.01(a)(ii) set forth all equipment and other
tangible personal property of the Seller (other than items having a book
value of $5000 or less individually and Inventory) as of the date hereof.
Each material item of equipment, machinery or other tangible personal
property listed on such Schedules is either: (a) owned by the Seller, free
and clear of all liens, security interests and other charges and
encumbrances, except: (i) liens, security interests and other charges and
encumbrances incurred in the ordinary course of business; (ii) liens for
Taxes, assessments and other governmental changes not yet due and payable;
(iii) liens for
PAGE 21
Taxes, assessments and charges and other claims, the validity of which is
being contested in good faith; and (iv) liens, security interests,
imperfections of title and other charges and encumbrances the existence of
which, individually and in the aggregate, could not reasonably be expected to
have a Material Adverse Effect; or (b) leased pursuant to one or more valid
and enforceable lease agreements that have not been breached by the Seller
or, to the knowledge of the Seller, any other party thereto. Such tangible
personal property is in normal operating condition, ordinary wear and tear
excepted.
SECTION 3.12. MATERIAL CONTRACTS
(a) Schedule 2.01(a)(vi) lists, among other Contracts, each executory
Contract to which the Seller is a party that requires, in accordance with its
terms, future payments in excess of $25,000 and that is not cancelable upon not
more than 60 days' notice and each other written contract, agreement, and
commitment which is material to the Seller and the Business (collectively, the
"Material Contracts").
(b) With respect to the Material Contracts, (i) each Material Contract is
valid, binding and enforceable in accordance with its terms; (ii) the Seller is
not in default under or in violation of any provision of any of the Material
Contracts, which default (with or without the lapse of time or the giving of
notice or both) could reasonably be expected to have a Material Adverse Effect;
(iii) the Seller has not received notice of alleged nonperformance or other
noncompliance with respect to its obligations under any of the Material
Contracts which alleged nonperformance or other noncompliance is currently
unresolved, nor any notice that is currently unresolved that any of the Material
Contracts may be totally or partially terminated or suspended by any other party
thereto; and (iv) the Seller does not have knowledge of any nonperformance,
breach or other noncompliance by any other party to any of the Material
Contracts.
SECTION 3.13. EMPLOYEE BENEFIT MATTERS
(a) Schedule 3.13 contains a true and complete list of all employee
benefit plans (within the meaning of Section 3(3) of ERISA) and all bonus, stock
option, stock purchase, restricted stock, incentive, deferred compensation,
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements with respect to which the Seller has any
obligation or which are maintained, contributed to or sponsored by the Seller
for the benefit of any current employee, officer or director of the Seller or
any former employee of the Seller, other than plans, programs, arrangements,
contracts or agreements for which no benefits are payable after the Closing (the
"Plans"). Each Plan is in writing and the Seller has
PAGE 22
previously made available to the Purchaser a true and complete copy of each Plan
and a true and complete copy of each of the following documents, to the extent
applicable, prepared in connection with each such Plan: (i) a copy of each
trust or other funding arrangement, (ii) the most recently filed Internal
Revenue Service Form 5500, (iii) the most recently received Internal Revenue
Service determination letter, and (ii) the most recently prepared actuarial
report and financial statement. The Seller has no express or implied commitment
to modify, change or terminate any Plan, other than with respect to a
modification, change or termination required by ERISA or the Internal Revenue
Code.
(b) None of the Plans is a multiemployer plan, within the meaning of
Section 3(37) or 4001(a)(3) of ERISA (a "Multiemployer Plan") or a single
employer pension plan, within the meaning of Section 4001(a)(15) of ERISA, for
which the Seller could incur liability under Section 4063 or 4064 of ERISA (a
"Multiple Employer Plan").
(c) With respect to each Plan, the Seller is not currently liable for any
material tax arising under Section 4971, 4972, 4975, 4979, 4980 or 4980B of the
Internal Revenue Code, and no fact or event exists which could reasonably be
expected to give rise to any such liability. The Seller has not incurred any
material liability under, arising out of or by operation of Title IV of ERISA
(other than liability for premiums to the Pension Benefit Guaranty Corporation
arising in the ordinary course), including, without limitation, any liability in
connection with (i) the termination or reorganization of any employee pension
benefit plan subject to Title IV of ERISA or (ii) the withdrawal from any
Multiemployer Plan or Multiple Employer Plan. None of the Assets is the subject
of any lien arising under Section 302(f) of ERISA or Section 412(n) of the
Internal Revenue Code and the Seller has not been required to post any security
under Section 307 of ERISA or Section 401(a)(29) of the Internal Revenue Code
with respect to any Plan, and no fact or event exists which could reasonably be
expected to give rise to any such lien or requirement to post any such security.
(d) Each Plan has been operated in all material respects in accordance
with the requirements of applicable laws, including, without limitation, ERISA
and the Internal Revenue Code. No Plan has incurred an "accumulated funding
deficiency" (within the meaning of Section 302 of ERISA or Section 412 of the
Internal Revenue Code), whether or not waived. All prior contributions,
premiums or payments made with respect to any Plan have been deducted for income
tax purposes and no such deduction previously claimed has been challenged by any
government entity. No transaction prohibited by Section 406 of ERISA and no
"prohibited transaction" under Section 4975(c) of the Internal Revenue Code have
occurred with respect to any Plan.
PAGE 23
SECTION 3.14. LABOR MATTERS
Schedule 3.14 sets forth a list of all employees employed by the Seller as
of the date hereof (the "Employees"). There are no labor controversies pending
or, to the Seller's knowledge, threatened, between the Seller and any of the
Employees or any former employee of the Seller, which controversies could
reasonably be expected to have a Material Adverse Effect; the Seller is not a
party to any collective bargaining agreement or other labor union contract
applicable to any of the Employees; and the Seller has no knowledge of any
strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any of the Employees.
SECTION 3.15. TAXES
The Seller has timely filed, or will timely file, all returns required to
be filed by it with respect to Taxes for any period ending on or before the
Closing Date, taking into account any extension of time to file granted to or
obtained on behalf of the Seller; all such returns are, or shall be when filed,
true, correct and complete in all material respects; all Taxes, if any, shown to
be payable by the Seller on such returns have been paid or will be paid (except
as provided in Section 5.07 hereof); and no deficiency for any material amount
of Tax has been asserted or assessed by a Tax authority against the Seller.
SECTION 3.16. INSURANCE
Schedule 3.16 contains a list of all material liability, property,
accident, casualty, fire, flood, workers' compensation, key man, group life or
health and other insurance policies and arrangements affecting or relating to
the Assets or the Business. All such insurance policies are in full force and
effect.
SECTION 3.17. BROKERS
Except for Green, Xxxxxxx & Bunch, Ltd. ("GM&B"), no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Seller. The Seller is
solely responsible for the fees and expenses of GM&B.
SECTION 3.18. DISCLAIMER OF WARRANTIES
EXCEPT WITH RESPECT TO THE WARRANTIES AND REPRESENTATIONS SPECIFICALLY SET
FORTH IN THIS AGREEMENT, THE SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED,
WHETHER OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR
PAGE 24
PURPOSE, OR QUALITY AS TO THE ASSETS OR ANY PART THEREOF, OR AS TO THE CONDITION
OR WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR
OTHERWISE, AND THE PURCHASER HAS RELIED UPON ITS OWN EXAMINATION THEREOF IN
DECIDING TO PURCHASE THE ASSETS ON THE TERMS AND SUBJECT TO THE CONDITIONS OF
THIS AGREEMENT.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
SECTION 4.01. INCORPORATION AND AUTHORITY OF THE PURCHASER
The Purchaser is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has all necessary
corporate power and authority to enter into and carry out its obligations under
this Agreement and the Ancillary Agreements to which it is a party. The
execution and delivery by the Purchaser of this Agreement and the Ancillary
Agreements to which it is a party, the performance of its obligations hereunder
and thereunder and the consummation by the Purchaser of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of the Purchaser. This Agreement has been duly
executed and delivered by the Purchaser, and (assuming due authorization,
execution and delivery by the Seller) constitutes a legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms. At the Closing, the Ancillary Agreements to which the Purchaser
is a party shall be duly executed and delivered by the Purchaser, and (assuming
due authorization, execution and delivery by the other parties thereto) shall
constitute legal, valid and binding obligations of the Purchaser, enforceable
against the Purchaser in accordance with their terms.
SECTION 4.02. NO CONFLICT
The execution, delivery and performance by the Purchaser of this Agreement
and the Ancillary Agreements to which the Purchaser is a party do not, and will
not (a) violate or conflict with the Certificate of Incorporation or Bylaws of
the Purchaser, in each case as amended, (b) conflict with or violate any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to the Purchaser, or (c) except as could not reasonably be
expected to have a material adverse effect on the ability of the Purchaser to
perform its obligations under this Agreement and the Ancillary Agreements to
which the Purchaser is a party, result in any breach of, or constitute a default
(or event which with the giving of notice or lapse of time, or both, would
become a default) under, or give to others any rights of
PAGE 25
termination, amendment, acceleration or cancellation of, or result in the
creation of any lien or other encumbrance on any of the assets or properties of
the Purchaser pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument relating to
such assets or properties, to which the Purchaser is a party or by which any of
such assets or properties is bound or affected.
SECTION 4.03. CONSENTS AND APPROVALS
The execution, delivery and performance by the Purchaser of this Agreement
and the Ancillary Agreements to which the Purchaser is a party do not, and will
not, require any consent, approval, exemption, authorization or other action by,
or filing with or notification to, any court, administrative agency or other
governmental or regulatory authority, except (a) any applicable notification
requirements of the HSR Act, (b) where failure to obtain such consent, approval,
authorization or action, or to make such filing or notification, would not
prevent the Purchaser from performing any of its material obligations under this
Agreement or the Ancillary Agreements to which the Purchaser is a party and
(c) as may be necessary as a result of any facts or circumstances relating
solely to the Seller.
SECTION 4.04. ABSENCE OF LITIGATION
No claim, action, proceeding or investigation is pending or, to the
Purchaser's knowledge, threatened, which questions the validity of this
Agreement or any of the Ancillary Agreements to which the Purchaser is a party
or any action taken or to be taken by the Purchaser hereunder or thereunder.
SECTION 4.05. FINANCING
The Purchaser has, or as of the Closing will have, all funds necessary to
consummate the transactions contemplated by this Agreement and the Ancillary
Agreements to which it is a party.
SECTION 4.06. BROKERS
Except for Xxxxxx, Xxxx & Co. ("Xxxxxx Xxxx), no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Purchaser. The Purchaser is
solely responsible for the fees and expenses of Xxxxxx Xxxx.
SECTION 4.07. REGISTERED SHARES
The Registered Shares to be issued in connection with the transactions
contemplated hereby will be, when delivered to the Seller or the Escrow Agent in
PAGE 26
accordance with the terms of this Agreement, (a) duly and validly issued, fully
paid and non-assessable, (b) free of any liens, security interests or other
encumbrances or of any preemptive or other similar rights, (c) issued in
compliance with all applicable securities laws and (d) not subject to any
restrictions on resale by the holders thereof, except as otherwise set forth
herein.
ARTICLE V. ADDITIONAL AGREEMENTS
SECTION 5.01. CONDUCT OF BUSINESS PRIOR TO THE CLOSING
(a) The Seller covenants and agrees that, between the date hereof and the
Closing Date, it shall, except as set forth in Section 5.01(b) and except for
the possible sale or transfer of the Seller's real property located in the State
of Colorado, conduct the Business in the ordinary course and consistent with its
prior practice in all material respects.
(b) The Seller covenants and agrees that, without the prior written
consent of the Purchaser (which consent shall not be unreasonably withheld), it
shall not, prior to the Closing, (i) materially change its accounting methods,
principles or practices; (ii) declare, set aside or pay any dividends or other
distribution (whether in cash, stock, property or any combination thereof) in
respect of Seller's capital stock, other than (A) cash dividends declared and
paid to the shareholders of Seller in an amount sufficient to satisfy their
aggregate tax obligations arising with respect to the operation of the Seller
and (B) any distributions to the Seller's shareholders of the Seller's real
property located in the State of Colorado or other assets related to the
Seller's operations in such State, or of the proceeds of the sale of such real
property or other assets; (iii) redeem, repurchase or otherwise acquire any
equity securities issued by the Seller; (iv) sell, transfer or otherwise dispose
of any of the Assets, other than inventory in the ordinary course of business;
(v) create, or permit to be created, any lien, security interest or other charge
or encumbrances on any of the Assets, other than liens, security interests,
charges and encumbrances of the type described in Section 3.11; (vi) establish
or materially increase any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan, or otherwise increase the compensation payable or to
become payable to any officers or key employees of the Seller, except in the
ordinary course of business consistent with past practice or as may be required
by law or applicable collective bargaining agreements; or (vii) enter into any
employment or severance agreement with any of its employees or establish,
adopt, enter into or amend any collective bargaining agreement, except in the
ordinary course of business consistent with past practice or as may be required
by law or applicable collective bargaining agreements.
PAGE 27
SECTION 5.02. INVESTIGATION
(a) The Purchaser acknowledges and agrees that it (i) has made its own
inquiry and investigation into, and, based thereon, has formed an independent
judgment concerning, the Assets, the Assumed Liabilities and the Business, and
(ii) has been furnished with or given adequate access to such information about
the Assets, the Assumed Liabilities and the Business, as it has requested.
(b) In connection with the Purchaser's investigation of the Assets, the
Assumed Liabilities and the Business, the Purchaser has received from the Seller
and its affiliates, agents and representatives certain estimates, projections
and other forecasts for the Seller, including, without limitation, estimated
income statement and balance sheet information for the fiscal year ending in
1997, projected income statement information for the fiscal years ending in
1998, 1999 and 2000 and certain plan and budget information. The Purchaser
acknowledges that there are uncertainties inherent in attempting to make such
estimates, projections, forecasts, plans and budgets; that the Purchaser is
familiar with such uncertainties; that the Purchaser is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
estimates, projections, forecasts, plans and budgets so furnished to it; and
that the Purchaser will not assert any claim against the Seller or any
affiliate, agent or representative of the Seller, or hold the Seller or any such
affiliate, agent or representative liable with respect thereto. Accordingly,
the Seller makes no representation or warranty with respect to any such
estimates, projections, forecasts, plans or budgets.
SECTION 5.03. ACCESS TO INFORMATION
(a) From the date hereof until the Closing, upon reasonable notice, the
Seller shall (i) afford the officers, employees and authorized agents and
representatives of the Purchaser reasonable access, during normal business
hours, to the offices, properties, books and records of the Seller relating to
the Assets, the Assumed Liabilities and the Business and (ii) furnish to the
officers, employees and authorized agents and representatives of the Purchaser
such additional information regarding the Assets, the Assumed Liabilities and
the Business as the Purchaser may from time to time reasonably request;
PROVIDED, HOWEVER, that such investigation shall be conducted in a manner so as
not to interfere unreasonably with the business or operations of the Seller.
(b) In order to facilitate the resolution of any claims made by or against
or incurred by the Seller with respect to the period prior to the Closing, after
the Closing, upon reasonable notice, the Purchaser shall (i) afford the
officers, employees, shareholders and authorized agents and representatives of
the Seller reasonable
PAGE 28
access, during normal business hours, to the offices, properties, books and
records of the Purchaser relating to the Assets, the Assumed Liabilities and the
Business, (ii) furnish to the officers, employees, shareholders and authorized
agents and representatives of the Seller such additional financial and other
information regarding the Assets, the Assumed Liabilities and the Business as
the Seller may from time to time reasonably request and (iii) make available to
the Seller the employees of the Purchaser whose assistance, testimony or
presence is necessary to assist the Seller in evaluating any such claims and in
defending such claims, including the presence of such persons as witnesses in
hearings or trials for such purposes; PROVIDED, HOWEVER, that such investigation
shall be conducted in a manner so as not to interfere unreasonably with any of
the businesses or operations of the Purchaser.
SECTION 5.04. BOOKS AND RECORDS
(a) The Purchaser agrees that it shall send to the Seller or Seller's
Representative (as directed by Seller's Representative) all books and records
relating to the Assets, the Assumed Liabilities and the Business within six
months after the Closing Date.
(b) If, in order properly to prepare documents required to be filed with
governmental authorities or its financial statements, it is necessary that
either party hereto or any successors be furnished with additional information
relating to the Assets, the Assumed Liabilities or the Business, and such
information is in the possession of the other party hereto, such other party
agrees to use its best efforts to furnish such information to such party, at the
cost and expense of the party being furnished such information.
SECTION 5.05. CONFIDENTIALITY
The terms of the letter agreement dated as of June 6, 1997 (the
"Confidentiality Agreement") between the Seller and the Purchaser are hereby
incorporated by reference and shall continue in full force and effect until the
Closing, at which time such Confidentiality Agreement and the obligations of the
Purchaser under this Section shall terminate. If this Agreement is, for any
reason, terminated prior to the Closing, the Confidentiality Agreement shall
continue in full force and effect.
SECTION 5.06. REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS
The Seller and the Purchaser will use their reasonable best efforts to
obtain all authorizations, consents, orders and approvals of all federal, state
and local regulatory bodies and officials that may be or become necessary for
their respective execution and delivery of, and the performance of their
respective obligations pursuant to, this Agreement and the Ancillary Agreements
and will cooperate fully with each other in
PAGE 29
promptly seeking to obtain all such authorizations, consents, orders and
approvals. To the extent applicable, the Seller and the Purchaser agree to make
appropriate filings of Notification and Report Forms pursuant to the HSR Act
with respect to the transactions contemplated hereby within 10 Business Days of
the date hereof and to supply promptly any additional information and
documentary material that may be requested pursuant to the HSR Act. The parties
hereto will not take any action that will have the effect of delaying, impairing
or impeding the receipt of any required approvals. Each party hereto shall pay
its own expenses in connection with the preparation of Notification and Report
Forms, and the Purchaser shall pay the entire amount of the filing fees required
by the HSR Act.
SECTION 5.07. TAXES
(a) The Purchaser shall provide the Seller with such resale exception
certificates as the Seller shall reasonably request.
(b) The Purchaser shall be liable for any and all sales, transfer,
business and occupation, stamp and similar Taxes, levies, charges and fees
incurred by the Seller or the Purchaser as a result of the transactions
contemplated by this Agreement. The Purchaser and the Seller shall cooperate in
the filing of all necessary documentation and all Tax returns, reports and forms
with respect to such Taxes, levies, charges and fees.
(c) The Purchaser shall pay all real and personal property taxes
attributable to the Assets that are due after the Closing Date, whether accruing
prior to, on or after the Closing Date.
SECTION 5.08. BULK TRANSFER LAWS
The Purchaser hereby waives compliance by the Seller with the provisions of
any bulk transfer or similar laws of any jurisdiction in connection with the
sale to the Purchaser of the Assets.
SECTION 5.09. EMPLOYEES
(a) Attached hereto as Schedule 5.09 is a list of all the Seller's
employees who the Purchaser does not intend to hire as of or after the Closing
Date.
(b) The Purchaser agrees to provide all the Seller's employees other than
the Terminated Employees with (a) salaries that in the aggregate are
substantially equivalent to those provided to such employees by the Seller
immediately prior to the Closing and (b) employee benefits that are the same as
for other employees of the Purchaser with similar positions or responsibilities.
To the extent that service is
PAGE 30
relevant for purposes of eligibility, vesting or benefit accrual under any
employee benefit plan, program or arrangement established or maintained by the
Purchaser for the benefit of its employees, such plan, program or arrangement
shall credit such employees of the Seller for service on or prior to the Closing
with the Seller.
SECTION 5.10. FURTHER ACTION
Each of the parties hereto shall execute and deliver such documents and
other papers and take such further actions as may be reasonably required to
carry out the provisions hereof and give effect to the transactions contemplated
hereby.
SECTION 5.11. SALES OF REGISTERED SHARES
Without the prior consent of the Purchaser, Seller agrees that it shall not
sell in excess of 7,500 Registered Shares per day in the public securities
markets.
SECTION 5.12. CHANGE OF NAME
Shortly following the Closing, the Seller agrees that it shall change its
corporate name to a new corporate name which shall not include the words "Lone
Star."
ARTICLE VI. CONDITIONS TO CLOSING
SECTION 6.01. CONDITIONS TO OBLIGATIONS OF THE SELLER
The obligations of the Seller to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment, at or prior to the
Closing, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects as of the Closing, with the same force and
effect as if made as of the Closing, other than such representations and
warranties as are made as of another date, and all the covenants contained in
this Agreement to be complied with by the Purchaser on or before the Closing
shall have been complied with in all material respects, and the Seller shall
have received a certificate of the President of the Purchaser to such effect
signed by a duly authorized officer thereof.
(b) NO ORDER. No governmental authority or other agency or commission or
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and has the
effect of making the
PAGE 31
transactions contemplated by this Agreement or any of the Ancillary Agreements
illegal or otherwise restraining or prohibiting consummation of such
transactions.
(c) CONSENTS. All consents, authorizations and approvals, if any,
necessary for the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements shall have been obtained. All applicable
time periods, if any, under the HSR Act shall have expired or been terminated.
(d) ESCROW AGREEMENT. The Escrow Agent shall have executed and delivered
the Escrow Agreement.
(e) LEGAL OPINION. The Seller shall have received from the Purchaser's
counsel a legal opinion addressed to the Seller and dated the Closing Date,
substantially in the form of Exhibit 6.01(e).
(f) APPROVAL BY COUNSEL. All actions, proceedings, instruments, and
documents required to fulfill the conditions set forth in this Section 6.01 or
incident thereto and all other related legal matters shall have been reasonably
satisfactory to and approved by Xxxxxxx Coie, the Seller's special counsel, and
such counsel shall have been furnished with such certified copies of such
corporate actions and proceedings and such other instruments and documents as
shall have been reasonably requested by such counsel.
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment, at or prior to the
Closing, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and
warranties of the Seller contained in this Agreement shall be true and correct
in all material respects as of the Closing, with the same force and effect as if
made as of the Closing, other than such representations and warranties as are
made as of another date, and all the covenants contained in this Agreement to be
complied with by the Seller on or before the Closing shall have been complied
with in all material respects, and the Purchaser shall have received a
certificate of the President or Chairman of the Seller to such effect.
(b) NO ORDER. No governmental authority or other agency or commission or
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and has the
effect of making the
PAGE 32
transactions contemplated by this Agreement or any of the Ancillary Agreements
illegal or otherwise restraining or prohibiting consummation of such
transactions.
(c) CONSENTS. All consents, authorizations and approvals, if any,
necessary for the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements shall have been obtained. All applicable
time periods, if any, under the HSR Act shall have expired or been terminated.
(d) ESCROW AGREEMENT. The Escrow Agent shall have executed and delivered
the Escrow Agreement.
(e) LEGAL OPINION. The Purchaser shall have received from Xxxxxxx Coie,
the Seller's special counsel, a legal opinion addressed to the Purchaser and
dated the Closing Date, substantially in the form of Exhibit 6.02(e).
(f) THIRD QUARTER BRANCH EBIT. The Seller's Third Quarter Branch EBIT
shall be at least $1,284,300. The Seller shall prepare in good faith and
deliver to the Purchaser the Third Quarter Branch EBIT calculation prior to the
Closing Date. In the event that the Purchaser disagrees with the Third Quarter
Branch EBIT calculation within one (1) Business Day after delivery thereof by
the Seller, the Seller and the Purchaser shall attempt in good faith to
reconcile their differences. If the Seller and the Purchaser are unable to
reach a resolution within five (5) Business Days after delivery of the Third
Quarter Branch EBIT calculation to the Purchaser, they shall submit the Third
Quarter Branch EBIT calculation to the Independent Accounting Firm, which shall,
within ten (10) Business Days of such submission, determine and report to the
Purchaser and the Seller the Third Quarter Branch EBIT. The Third Quarter
Branch EBIT amount determined by the Independent Accounting Firm shall be
binding and conclusive. The actual costs, if any, incurred for the services of
the Independent Accounting Firm pursuant to this paragraph shall be paid by the
party whose calculation of Third Quarter Branch EBIT is the furthest from the
amount determined by the Independent Accounting Firm.
(g) APPROVAL BY COUNSEL. All actions, proceedings, instruments, and
documents required to fulfill the conditions set forth in this Section 6.02 or
incident thereto and all other related legal matters shall have been reasonably
satisfactory to and approved by the Purchaser's counsel, and such counsel shall
have been furnished with such certified copies of such corporate actions and
proceedings and such other instruments and documents as shall have been
reasonably requested by such counsel.
PAGE 33
ARTICLE VII. INDEMNIFICATION
SECTION 7.01. SURVIVAL
Subject to the limitations and other provisions of this Agreement, the
representations, warranties, covenants and agreements of the parties hereto
contained herein shall survive and remain in full force and effect, regardless
of any investigation made by or on behalf of the Seller or the Purchaser, for a
period of 18 months after the Closing Date; PROVIDED, HOWEVER, that such 18-
month limitation shall not be applicable with respect to claims based solely
upon fraud on the part of the Seller.
SECTION 7.02. INDEMNIFICATION BY THE PURCHASER
(a) The Purchaser agrees, subject to the other terms and conditions of
this Section 7.02 and Section 7.04 and without gross-up for Taxes, to indemnify
the Seller against and hold the Seller harmless from any and all liabilities,
losses, costs, expenses (including, without limitation, reasonable attorneys'
fees) of and damages (collectively, "Losses") to the Seller, arising out of or
with respect to (i) the breach of any representation, warranty, covenant or
agreement of the Purchaser herein and (ii) the Assumed Liabilities.
If the transactions contemplated by this Agreement are not consummated, the
Purchaser agrees, subject to the other terms and conditions of this Section 7.02
and Section 7.04 and without gross-up for Taxes, to indemnify the Seller against
and hold the Seller harmless from any and all Losses to the Seller arising out
of or with respect to the breach of any representation, warranty, covenant or
agreement of the Purchaser herein.
(b) Payments by the Purchaser pursuant to Section 7.02(a) shall be limited
to the amount of any liability or damage that remains after deducting therefrom
(i) any Tax benefit to the Seller or any affiliates thereof and (ii) any
insurance proceeds and any indemnity, contribution or other similar payment
recoverable by the Seller or any affiliates thereof from any third party with
respect thereto. A Tax benefit will be considered to be recognized by the
Seller or such affiliates for purposes of this Section 7.02 in the tax period in
which the indemnity payment occurs, and the amount of the Tax benefit shall be
determined by assuming that the Seller and such affiliates are in the maximum
applicable statutory tax brackets after any deductions or other allowances
reportable with respect to a payment hereunder.
(c) No claim may be made against the Purchaser for indemnification
pursuant to this Section 7.02 with respect to any individual item of Loss,
unless such item exceeds $2,500 and unless the aggregate of all such Losses of
the Seller with respect to this Section 7.02 shall exceed $200,000, and the
Purchaser shall not be
PAGE 34
required to pay or be liable for the first $200,000 in aggregate amount of any
such Losses; PROVIDED, HOWEVER, that any Losses arising in connection with
Sections 4.06, 5.06, 5.07 or 9.01 or any Assumed Liabilities shall not be
subject to any of such limitations. The aggregate liability of the Purchaser to
the Seller under this Agreement shall be limited to an amount equal to the
Indemnity Escrow Amount. For the purposes of this Section 7.02(c), in computing
such individual or aggregate amounts of claims, the amount of each claim shall
be deemed to be an amount (i) net of any Tax benefits to the Seller or any
affiliates thereof, and (ii) net of any insurance proceeds and any indemnity,
contribution or other similar payment recoverable by the Seller or any
affiliates thereof from any third party with respect thereto.
SECTION 7.03. INDEMNIFICATION BY THE SELLER
(a) The Seller agrees, subject to the other terms and conditions of this
Section 7.03 and Section 7.04 and without gross-up for Taxes, to indemnify the
Purchaser against and hold it harmless from any and all Losses to the Purchaser
arising out of or with respect to (i) the breach of any representation,
warranty, covenant or agreement of the Seller herein and (ii) the Retained
Liabilities.
If the transactions contemplated by this Agreement are not consummated, the
Seller agrees, subject to the other terms and conditions of this Section 7.03
and Section 7.04 and without gross-up for Taxes, to indemnify the Purchaser
against and hold the Purchaser harmless from any and all Losses to the Purchaser
arising out of or with respect to the breach of any representation, warranty,
covenant or agreement of the Seller herein.
(b) Payments by the Seller pursuant to Section 7.03(a) shall be limited to
the amount of any liability or damage that remains after deducting therefrom
(i) any Tax benefit to the Purchaser or any affiliates thereof, (ii) any
insurance proceeds and any indemnity, contribution or other similar payment
recoverable by the Purchaser or any affiliates thereof from any third party with
respect thereto and (iii) any adjustments to the Purchase Price paid to the
Purchaser pursuant to Section 2.03(b) with respect to the subject matter in
dispute. A Tax benefit will be considered to be recognized by the Purchaser or
any affiliates thereof for purposes of this Section 7.03 in the tax period in
which the indemnity payment occurs, and the amount of the Tax benefit shall be
determined by assuming that the Purchaser and such affiliates are in the maximum
applicable statutory tax brackets after any deductions or other allowances
reportable with respect to a payment hereunder.
(c) No claim may be made against the Seller for indemnification pursuant
to this Section 7.03 with respect to any individual item of Loss, unless such
item exceeds $2,500 and unless the aggregate of all Losses of the Purchaser with
respect to this
PAGE 35
Section 7.03 shall exceed $200,000, and the Seller shall not be required to pay
or be liable for the first $200,000 in aggregate amount of any such Losses;
PROVIDED, HOWEVER, that any Losses arising in connection with Section 3.15,
3.17, 5.06 or 9.01 shall not be subject to any of such limitations. Any and all
claims against the Seller in connection with this Agreement (other than claims
based solely upon fraud) shall be collectible not from the Seller, but solely
(a) by means of reduction, in accordance and only to the extent permitted by the
Escrow Agreement, in the outstanding principal amount of the Subordinated Note
held by the Escrow Agent pursuant to the terms of the Escrow Agreement or
(b) from funds on deposit in the Indemnity Escrow Account to the extent
representing prepayments of principal under the Subordinated Note, and in no
event shall the aggregate liability of the Seller to the Purchaser under this
Agreement exceed the Indemnity Escrow Amount. For purposes of this
Section 7.02(c), in computing the individual or aggregate amounts of claims, the
amount of each claim shall be deemed to be an amount (i) net of any Tax benefit
to the Purchaser or any affiliates thereof, (ii) net of any insurance proceeds
and any indemnity, contribution or other similar payment recoverable by the
Purchaser or any affiliates from any third party with respect thereto and
(iii) net of any adjustments to the Purchase Price paid to the Purchaser
pursuant to Section 2.03(b) with respect to the subject matter in question.
SECTION 7.04. GENERAL PROVISIONS
(a) Anything in Section 7.01 to the contrary notwithstanding, no claim may
be asserted nor any action commenced against the Purchaser or the Seller for
breach of any representation, warranty, covenant or agreement contained herein,
unless written notice of such claim or action is received by such party,
describing in detail the facts and circumstances with respect to the subject
matter of such claim or action on or prior to the date on which the
representation, warranty, covenant or agreement on which such claim or action is
based ceases to survive as set forth in Section 7.01, irrespective of whether
the subject matter of such claim or action shall have occurred before or after
such date.
(b) Each party entitled to indemnification under this Article VII (an
"Indemnified Party") agrees to give the party bearing the related
indemnification obligation hereunder (the "Indemnifying Party") prompt written
notice of any claim, assertion, event or proceeding by or in respect of a third
party of which the Indemnified Party has knowledge concerning any Loss as to
which it may request indemnification hereunder or any liability or damage as to
which the $200,000 amount referred to in Section 7.02(c) or 7.03(c) may be
applied. The Indemnifying Party shall have the right to direct, through counsel
of its own choosing, the defense or settlement of any such claim or proceeding
at its own expense. If the Indemnifying Party elects to assume the defense of
any such claim or proceeding, the Indemnified
PAGE 36
Party may participate in such defense, but in such case the expenses of the
Indemnified Party shall be paid by the Indemnified Party. The Indemnified Party
shall provide the Indemnifying Party with access to its records and personnel
relating to any such claim, assertion, event or proceeding during normal
business hours and shall otherwise cooperate with the Indemnifying Party in the
defense or settlement thereof, and the Indemnifying Party shall reimburse the
Indemnified Party for its reasonable out-of-pocket expenses in connection
therewith. If the Indemnifying Party elects to direct the defense of any such
claim or proceeding, the Indemnified Party shall not pay, or permit to be paid,
any part of any claim or demand arising from such asserted liability unless the
Indemnifying Party consents in writing to such payment (which consent shall not
be unreasonably withheld) or unless the Indemnifying Party, subject to the last
sentence of this Section 7.04(b), withdraws from the defense of such asserted
liability, or unless a final judgment from which no appeal may be taken by or on
behalf of the Indemnifying Party is entered against the Indemnified Party for
such liability. If the Indemnifying Party shall fail to defend or, if after
commencing or undertaking any such defense, shall fail to prosecute or shall
withdraw from such defense, the Indemnified Party shall have the right to
undertake the defense or settlement thereof, at the Indemnifying Party's
expense. If the Indemnified Party assumes the defense of any such claim or
proceeding pursuant to this Section 7.04(b) and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego any appeal with
respect thereto, then the Indemnified Party shall give the Indemnifying Party
prompt written notice thereof and the Indemnifying Party shall have the right to
participate in the settlement or assume or reassume the defense of such claim or
proceeding.
(c) Each of the Seller and the Purchaser hereby acknowledges and agrees
that its sole and exclusive remedy with respect to any and all claims (other
than claims arising in connection with the termination of this Agreement,
breaches of representations and warranties relating to the Registered Shares or
claims based solely upon fraud) relating to the subject matter of this Agreement
shall be pursuant to the indemnification provisions set forth in this Article
VII. In furtherance of the foregoing, each of the Seller and the Purchaser
hereby waives, to the fullest extent permitted under applicable law (except as
provided above), any and all rights, claims and causes of action it may have
against the other party hereto arising under or based upon any Federal, state or
local statute, law, ordinance, rule or regulation (including, without
limitation, any such rights, claims or causes of action arising under or based
upon common law or otherwise).
(d) Except as set forth in this Agreement, neither the Seller nor the
Purchaser is making any representation, warranty, covenant or agreement with
respect to the matters contained herein. Anything herein to the contrary
notwithstanding, no breach of any representation, warranty, covenant or
agreement contained herein shall
PAGE 37
give rise to any right on the part of the Seller or the Purchaser, after the
consummation of the purchase and sale of the Assets contemplated hereby, to
rescind this Agreement or, except as provided by applicable law with respect to
the Registered Shares, any of the transactions contemplated hereby.
(e) In no event shall the Seller or the Purchaser be liable for
consequential damages.
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION
This Agreement may be terminated upon written notice given at any time
prior to the Closing:
(a) by the mutual written consent of the Purchaser and the Seller; or
(b) by the Purchaser or the Seller if the Closing shall not have occurred
prior to December 1, 1997; PROVIDED, HOWEVER, that the right to terminate this
Agreement under this Section 8.01(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the cause
of, or shall have resulted in, the failure of the Closing to occur prior to such
date.
SECTION 8.02. EFFECT OF TERMINATION
In the event of termination of this Agreement as provided in Section 8.01,
this Agreement shall forthwith become void and there shall be no liability on
the part of any party hereto except (a) as set forth in Sections 3.17, 4.06,
5.05 and 9.01 and (b) nothing herein shall relieve any party from liability for
any willful breach hereof.
SECTION 8.03. WAIVER
At any time prior to the Closing, the Purchaser or the Seller may
(a) extend the time for the performance of any of the obligations or other acts
of the other party, (b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of the other party contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party to be
bound thereby.
PAGE 38
ARTICLE IX. GENERAL PROVISIONS
SECTION 9.01. EXPENSES
Unless otherwise indicated in this Agreement or the Ancillary Agreements,
all costs and expenses incurred in connection with this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby,
including, without limitation, fees and disbursements of counsel, financial
advisors and accountants, shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred. The Purchaser shall
pay for all title insurance policies it requests or obtains in connection with
the transactions contemplated hereby.
SECTION 9.02. NOTICES
All notices, requests, claims, demands and other communications given or
made pursuant hereto shall be in writing (and shall be deemed to have been duly
given or made upon receipt) by delivery in person, by telecopy (with
confirmation copy of such telecopied material delivered in person or by
registered or certified mail, postage prepaid, return receipt requested) or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this
Section 9.02):
(a) if to the Seller or the Seller's Representative:
Lone Star Plywood & Door Corp.
000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
Xxxx X. Xxxxx
c/o Endeavour Capital
0000 X.X. Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
PAGE 39
with copies to:
Xxxxxxx Coie
0000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attention: Xxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
and
Xxxxxxx X. Xxxxxx
c/o Scotsco
Suite B
00000 X.X. 00xx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
(b) if to the Purchaser:
BMC West Corporation
0000 Xxxxxx Xxxx
X.X. Xxx 0000
Xxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxx, Xxxxxxx, Rock & Fields
000 Xxxxx Xxxxxxx Xxxxxxxxx, Xxxxx Floor
X.X. Xxx 000
Xxxxx, XX 00000
Attention: Xxxx X. Street, Esq.
Telecopy: (000) 000-0000
SECTION 9.03. PUBLIC ANNOUNCEMENTS
Neither the Purchaser nor the Seller shall make, or cause to be made, any
press releases or public announcements in respect of this Agreement or the
transactions contemplated herein or otherwise communicate with any news media
without at least 24 hours' prior notification to the other party, and the
parties shall cooperate as to the timing and contents of any such announcement,
except as such release, announcement or communication may be required by
governmental authorities, a court of competent
PAGE 40
jurisdiction or applicable law, in which case the party making the release,
announcement or communication shall provide the information contained therein to
the other party in advance of its disclosure.
SECTION 9.04. HEADINGS
The descriptive headings contained in this Agreement are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 9.05. SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.
SECTION 9.06. ENTIRE AGREEMENT
This Agreement, the Ancillary Agreements and the Confidentiality Agreement
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and undertakings, both
written and oral, among the parties hereto with respect to the subject matter
hereof.
SECTION 9.07. ASSIGNMENT
Prior to the Closing, this Agreement shall not be assigned by operation of
law or otherwise without the express written consent of the other party (which
consent shall not be unreasonably withheld). This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
SECTION 9.08. NO THIRD-PARTY BENEFICIARIES
This Agreement is for the sole benefit of the parties hereto and their
successors and permitted assigns, and nothing herein, express or implied, is
intended to or shall
PAGE 41
confer upon any other person or entity any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 9.09. AMENDMENT; WAIVER
This Agreement may not be amended or modified except by an instrument in
writing duly executed by the Seller and the Purchaser. Waiver of any term or
condition of this Agreement shall only be effective if in writing, duly executed
by the party to be bound thereby, and shall not be construed as a waiver of any
subsequent breach or waiver of the same term or condition, or a waiver of any
other term or condition of this Agreement.
SECTION 9.10. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Oregon applicable to contracts executed and to be performed
in that State.
SECTION 9.11. COUNTERPARTS
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
PAGE 42
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be duly executed as of the date first written above.
BMC WEST CORPORATION
By
------------------------------------
Name:
Title:
LONE STAR PLYWOOD & DOOR CORP.
By
------------------------------------
Name:
Title:
PAGE 43
