PURCHASE AGREEMENT BY AND BETWEEN ELK PREMIUM BUILDING PRODUCTS, INC. AND JOSEPH PRESSUTTI AND SUSAN PRESSUTTI, BOTH INDIVIDUALLY AND AS TRUSTEES OF THE PRESSUTTI FAMILY TRUST AUGUST 25, 2005
Exhibit 10.7
BY AND BETWEEN
ELK PREMIUM BUILDING PRODUCTS, INC.
AND
XXXXXX XXXXXXXXX AND
XXXXX XXXXXXXXX, BOTH INDIVIDUALLY
AND AS TRUSTEES OF
THE PRESSUTTI FAMILY TRUST
XXXXX XXXXXXXXX, BOTH INDIVIDUALLY
AND AS TRUSTEES OF
THE PRESSUTTI FAMILY TRUST
AUGUST
25, 2005
TABLE OF CONTENTS
Page | ||||||||||
1. | DEFINITIONS | 1 | ||||||||
2. | PURCHASE AND SALE OF COMPANY SHARES, PURCHASED REAL ESTATE AND PURCHASED INTELLECTUAL PROPERTY | 7 | ||||||||
(a) | Basic Transaction | 7 | ||||||||
(b) | Purchase Price | 7 | ||||||||
(c) | Allocation | 8 | ||||||||
(d) | The Closing | 8 | ||||||||
(e) | Deliveries at the Closing | 8 | ||||||||
(f) | Inventory Valuation and Adjustment of Purchase Price | 9 | ||||||||
3. | REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION, THE PURCHASED REAL ESTATE, AND THE PURCHASED INTELLECTUAL PROPERTY | 10 | ||||||||
(a) | Representations and Warranties of the Sellers | 10 | ||||||||
(i) | Organization; Authorization of Transaction | 10 | ||||||||
(ii) | Noncontravention | 11 | ||||||||
(iii) | Brokers’ Fees | 11 | ||||||||
(iv) | Company Shares | 11 | ||||||||
(v) | Purchased Real Estate | 11 | ||||||||
(vi) | Purchased Intellectual Property | 13 | ||||||||
(b) | Representations and Warranties of the Buyer | 16 | ||||||||
(i) | Organization of the Buyer | 16 | ||||||||
(ii) | Authorization of Transaction | 16 | ||||||||
(iii) | Noncontravention | 16 | ||||||||
(iv) | Brokers’ Fees | 16 | ||||||||
(v) | Investment | 16 | ||||||||
(vi) | Tax Elections | 17 | ||||||||
4. | REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES | 17 | ||||||||
(a) | Organization, Qualification, and Corporate Power | 17 | ||||||||
(b) | Capitalization | 17 |
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TABLE OF CONTENTS
(Continued)
(Continued)
Page | ||||||||||
(c) | Xxxxxxxxxxxxxxxx | 00 | ||||||||
(x) | Brokers’ Fees | 18 | ||||||||
(e) | Title to Assets | 18 | ||||||||
(f) | Subsidiaries | 18 | ||||||||
(g) | Financial Statements | 19 | ||||||||
(h) | Events Subsequent to Most Recent Fiscal Year End | 19 | ||||||||
(i) | Undisclosed Liabilities | 22 | ||||||||
(j) | Legal Compliance | 22 | ||||||||
(k) | Tax Matters | 22 | ||||||||
(l) | Real Property | 24 | ||||||||
(m) | Intellectual Property | 25 | ||||||||
(n) | Tangible Assets | 26 | ||||||||
(o) | Inventory | 26 | ||||||||
(p) | Contracts | 27 | ||||||||
(q) | Notes and Accounts Receivable | 28 | ||||||||
(r) | Powers of Attorney | 28 | ||||||||
(s) | Insurance | 28 | ||||||||
(t) | Litigation | 29 | ||||||||
(u) | Product Warranty and Advertising | 29 | ||||||||
(v) | Product Liability | 29 | ||||||||
(w) | Employees | 30 | ||||||||
(x) | Employee Benefits | 30 | ||||||||
(y) | Guaranties | 32 | ||||||||
(z) | Environment, Health, and Safety | 32 | ||||||||
(aa) | Certain Business Relationships with the Company and its Subsidiaries | 33 | ||||||||
(bb) | Off-site Disposal of Hazardous Materials | 33 | ||||||||
(cc) | Customers and suppliers | 34 | ||||||||
(dd) | Projections | 34 | ||||||||
(ee) | Disclosure | 34 |
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TABLE OF CONTENTS
(Continued)
(Continued)
Page | ||||||||||
(ff) | Disclaimer | 34 | ||||||||
5. | PRE-CLOSING COVENANTS | 35 | ||||||||
(a) | General | 35 | ||||||||
(b) | Notices and Consents | 35 | ||||||||
(c) | Operation of Business | 35 | ||||||||
(d) | Preservation of Business | 36 | ||||||||
(e) | Access | 36 | ||||||||
(f) | Notice of Developments | 36 | ||||||||
(g) | Exclusivity | 36 | ||||||||
(h) | Key Employee Agreements | 36 | ||||||||
(i) | Releases | 37 | ||||||||
6. | POST-CLOSING COVENANTS | 37 | ||||||||
(a) | General | 37 | ||||||||
(b) | Litigation Support | 38 | ||||||||
(c) | Transition | 38 | ||||||||
(d) | Confidentiality | 38 | ||||||||
(e) | Covenant Not to Compete | 39 | ||||||||
(f) | Non-solicitation of Employees | 39 | ||||||||
(g) | Termination of Agreement with ABMT | 39 | ||||||||
7. | CONDITIONS TO OBLIGATIONS TO CLOSE | 39 | ||||||||
(a) | Conditions to Obligation of the Buyer | 39 | ||||||||
(b) | Conditions to Obligation of the Sellers | 41 | ||||||||
8. | REMEDIES FOR BREACHES OF THIS AGREEMENT | 42 | ||||||||
(a) | Survival of Representations and Warranties | 42 | ||||||||
(b) | Indemnification Provisions for Benefit of the Buyer | 42 | ||||||||
(c) | Indemnification Provisions for Benefit of the Sellers | 43 | ||||||||
(d) | Matters Involving Third Parties | 43 | ||||||||
(e) | Determination of Adverse Consequences | 45 | ||||||||
(f) | Exclusive Remedy | 45 |
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TABLE OF CONTENTS
(Continued)
(Continued)
Page | ||||||||||
9. | TAX MATTERS | 45 | ||||||||
(a) | Cooperation on Tax Matters | 45 | ||||||||
(b) | Tax Sharing Agreements | 46 | ||||||||
(c) | Certain Taxes | 46 | ||||||||
10. | TERMINATION | 46 | ||||||||
(a) | Termination of Agreement | 46 | ||||||||
(b) | Effect of Termination | 47 | ||||||||
11. | MISCELLANEOUS | 47 | ||||||||
(a) | Press Releases and Public Announcements | 47 | ||||||||
(b) | No Third Party Beneficiaries | 47 | ||||||||
(c) | Entire Agreement | 47 | ||||||||
(d) | Succession and Assignment | 47 | ||||||||
(e) | Counterparts | 47 | ||||||||
(f) | Headings | 48 | ||||||||
(g) | Notices | 48 | ||||||||
(h) | Governing Law | 49 | ||||||||
(i) | Amendments and Waivers | 49 | ||||||||
(j) | Severability | 49 | ||||||||
(k) | Expenses | 49 | ||||||||
(l) | Construction | 49 | ||||||||
(m) | Incorporation of Exhibits, Annexes, and Schedules | 50 | ||||||||
(n) | Specific Performance | 50 | ||||||||
(o) | Submission to Jurisdiction | 50 | ||||||||
(p) | Joint and Several Obligations | 50 |
Annex 1:
|
Exceptions to the Representations and Warranties of the Sellers | |
Annex 2:
|
Exceptions to the Representations and Warranties of the Buyer | |
Annex 3:
|
Seller’s Personal Property | |
Exhibit A:
|
Form of Escrow Agreement | |
Exhibit B-1:
|
Purchased Intellectual Property | |
Exhibit B-2:
|
Intellectual Property Retained by Seller |
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TABLE OF CONTENTS
(Continued)
(Continued)
Page | ||
Exhibit C:
|
Purchased Real Estate | |
Exhibit D:
|
Forms of Assignments | |
Exhibit E:
|
Form of Assumption Agreement (Note and Deed of Trust) | |
Exhibit F:
|
Financial Statements | |
Exhibit G:
|
Capital Budget of the Company and its Subsidiaries | |
Exhibit H:
|
[Intentionally Omitted] | |
Exhibit I:
|
Agreement of Purchase and Sale of Real Estate and Escrow Instructions | |
Exhibit J:
|
Agreement of Purchase and Sale of Real Estate and Escrow Instructions | |
Exhibit K:
|
Preliminary Title Reports |
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Agreement
entered into as of August 25, 2005, by and between Elk Premium Building Products,
Inc., a Delaware corporation (the “Buyer”), and Xxxxxx Xxxxxxxxx (individually herein so
called) and Xxxxx Xxxxxxxxx (individually herein so called), both individually and as Trustees of
the Pressutti Family Trust (the “Pressutti Family Trust” and, together with Xxxxxx
Xxxxxxxxx and Xxxxx Xxxxxxxxx, the “Sellers”). The Buyer and the Sellers are referred to
collectively herein as the “Parties.”
The Sellers own all of the outstanding capital stock of RGM Products, Inc., a California
corporation (the “Company”), certain real property and improvements on which the Company’s
manufacturing facility in Fresno, California is located and certain real property adjacent thereto,
and certain rights in patents and intellectual property utilized in the Company’s business.
This Agreement contemplates a transaction in which the Buyer will purchase from the Sellers,
and the Sellers will sell to the Buyer, all of the outstanding capital stock of the Company and
certain rights in patents and intellectual property utilized in the Company’s business, and the
Buyer (or its designated Affiliate) will purchase from 3441 South Willow Investments, L.P. (herein
so called), an Affiliate of Sellers, and the Sellers will cause 3441 South Willow Investments, L.P.
to sell to the Buyer (or its designated Affiliate), the Purchased Real Estate.
1. | DEFINITIONS. |
“3441 South Willow Investments, L.P.” has the meaning set forth in the Recitals above.
“Adverse Consequences” means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs of defense and other costs, amounts paid in
settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including court
costs and reasonable attorneys’ fees and expenses.
“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations promulgated
under the Securities Exchange Act.
“Affiliated Group” means any affiliated group within the meaning of Code §1504 or any
similar group defined under a similar provision of state, local, or foreign law.
“Assumed Real Estate Debt” means the indebtedness in the principal amount of
$3,982,269 in favor of The Ohio National Life Insurance Company evidenced by that certain
Promissory Note dated May 31, 2005 executed by 3441 South Willow Investments, L.P., in the
1
original
principal amount of $4,000,000 and secured by the deed of trust liens on the Purchased Real Estate
pursuant to that certain Deed of Trust, Financing Statement, Security Agreement and Fixture Filing
(With Assignment of Rents and Leases) dated May 31, 2005 (the “Deed of Trust”), that Buyer (or its
Affiliate) will assume in accordance with §2 below.
“Basis” means any past or present fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that
forms or could form the basis for any specified consequence.
“Buyer” has the meaning set forth in the preface above.
“CERCLA” has the meaning set forth in §4(z) below.
“Closing” has the meaning set forth in §2 below.
“Closing Date” has the meaning set forth in §2 below.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” has the meaning set forth in the Recitals above.
“Company Share” means any share of the Common Stock, no par value per share, of the
Company.
“Confidential Information” means any information concerning the businesses and affairs
of the Company and its Subsidiaries that is not already generally known to those knowledgeable in
the roofing industry.
“Confidentiality Agreement” means that certain confidentiality agreement dated
___, 2005 between the Buyer and Xxxxxx Xxxxxxxxx.
“Controlled Group of Corporations” has the meaning set forth in Code §1563.
“Deferred Intercompany Transaction” has the meaning set forth in Treas. Reg.
§1.1502-13.
“Disclosure Schedule” has the meaning set forth in §4 below.
“Employee Benefit Plan” means any (a) nonqualified deferred compensation or retirement
plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution
retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe benefit plan or
program.
“Employee Pension Benefit Plan” has the meaning set forth in ERISA §3(2).
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“Employee Welfare Benefit Plan” has the meaning set forth in ERISA §3(1).
“Environment” shall mean soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands),
groundwaters, drinking water supply, surface water sediments, ambient air (including indoor air),
plant and animal life, and any other environmental medium or natural resource.
“Environmental Law” means applicable federal, state, and local laws including, without
limitation, statutes, regulations, ordinances, and judicial and administrative orders relating to
protection of the public health, welfare, and the Environment, including without limitation, those
laws relating to the storage, handling, and use of chemicals and other Hazardous Materials
(including without limitation California Proposition 65), those relating to the generation,
processing, treatment, storage, transport, disposal, investigation and remediation, or other
management of Hazardous Materials or waste materials of any kind, and those relating to the
protection of environmentally sensitive areas.
“Environmental Permits” has the meaning set forth in Section 4(z).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Escrow Agreement” means that certain escrow agreement in the form attached hereto as
Exhibit A to be executed at the Closing by the Sellers, the Buyer, and the escrow agent thereunder.
“Facilities” shall mean any real property, leaseholds, or other interests currently or
formerly owned or operated by the Company.
“Fiduciary” has the meaning set forth in ERISA §3(21).
“Financial Statement” has the meaning set forth in §4(g) below.
“GAAP” means United States generally accepted accounting principles as in effect as of
the date of any document purported to be prepared in accordance with GAAP.
“Hazardous Materials” shall mean any ‘hazardous substance,’ ‘pollutant or
contaminant,’ ‘petroleum’ and ‘natural gas liquids,’ as those terms are defined or used in Section
101 of CERCLA and any other waste or other substance that is listed, defined, designated, or
classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law and any other substances regulated because
of their effect or potential effect on public health and the Environment, including, without
limitation, RCRA 8 metals, aluminum, MEK, PCBs, lead paint, asbestos, vermiculite, urea
formaldehyde, mold, volatile and semi-volatile compounds, radioactive materials, all derivatives of
petroleum or synthetic substitutes for petroleum, and putrescible and infectious materials.
“Indemnified Party” has the meaning set forth in §8(d) below.
3
“Indemnifying Party” has the meaning set forth in §8(d) below.
“Intellectual Property” means, currently existing anywhere, (a) all inventions,
technology, processes and methods (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, and any foreign or international patent and patent application taking
priority from any of the foregoing, (b) all trademarks, service marks, trade dress, logos, trade
names, corporate names, and domain names, together with all translations, adaptations, derivations,
and combinations thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrights, all common law rights
similar or equivalent to copyrights, all works (whether or not copyrightable), and all
applications, registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost information, and business
and marketing plans and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies, manifestations,
representations, translations, transliterations and any other tangible embodiments of any kind
thereof (in whatever form or medium).
“IP Purchase Price” has the meaning set forth in §2(b) below.
“Xxxxxx Xxxxxxxxx” has the meaning set forth in the preface above.
“Knowledge” means actual knowledge after reasonable investigation.
“Liability” means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for Taxes.
“Material Adverse Effect” or “Material Adverse Change” means an effect or
change that would be materially adverse on the business, financial condition, results of
operations, properties, profitability, business prospects, or operations of the Company and its
Subsidiaries taken as a whole; provided that none of the following shall be deemed to constitute,
and none of the following shall be taken into account in determining whether there has been, a
Material Adverse Effect: (A) any adverse change, event, development, or effect attributable to
general conditions affecting the United States economy which does not affect the Company and its
Subsidiaries materially disproportionately relative to other participants in the roofing industry,
(B) any adverse change, event, development, or effect affecting the roofing industry generally
which does not affect the Company and its Subsidiaries materially disproportionately relative to
other participants in the roofing industry, or (C) the taking of any action contemplated by this
Agreement or any of the other agreements contemplated hereby (or the omission to take any
4
action if
such omission is required by this Agreement or any of the other agreements contemplated hereby).
“Most Recent Balance Sheet” means the balance sheet contained within the Most Recent
Financial Statements.
“Most Recent Financial Statements” has the meaning set forth in §4(g) below.
“Most Recent Fiscal Month End” has the meaning set forth in §4(g) below.
“Most Recent Fiscal Year End” has the meaning set forth in §4(g) below.
“Multiemployer Plan” has the meaning set forth in ERISA §3(37).
“Non-compete Payment” has the meaning set forth in §2(b) below.
“Occupational Safety and Health Law” shall mean any legal requirement designed to
provide safe and healthful working conditions and to reduce occupational safety and health hazards.
“Off-site Waste Facilities” has the meaning set forth in §4(z) below.
“Ordinary Course of Business” means the ordinary course of business consistent with
past custom and practice (including with respect to quantity and frequency).
“Party” has the meaning set forth in the preface above.
“PBGC” means the Pension Benefit Guaranty Corporation.
“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political subdivision
thereof).
“Pressutti Family Trust” has the meaning set forth in the preface above.
“Process Agent” has the meaning set forth in §11(o) below.
“Prohibited Transaction” has the meaning set forth in ERISA §406 and Code §4975.
“Purchased Intellectual Property” means the Intellectual Property described on Exhibit
B-1 and any and all other Intellectual Property currently owned by any of the Sellers or their
respective Affiliates (but not any other persons or entities) used or useful in the business of the
Company and its Subsidiaries, and all rights, title, and interest in and to all such Purchased
Intellectual Property, but specifically excluding all Intellectual Property owned or created by any
of the Sellers or their respective Affiliates described on Exhibit B-2 and all Intellectual
Property acquired or created after the Closing by any of the Sellers or their respective Affiliates
(other
5
than any improvements on existing Intellectual Property in the form of continuation-in-part
applications).
“Purchased Real Estate” means the real property and improvements described on Exhibit
C.
“Purchased Real Estate Agreements” means those certain Agreements For Purchase and
Sale of Real Estate and Escrow Instructions in the forms attached hereto as Exhibits I and J
executed by Buyer’s Affiliate and 3441 South Willow Investments, L.P., a California limited
partnership, for 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000 and 0000 Xxxxx Xxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxx 00000.
“Purchase Price” has the meaning set forth in §2(b) below.
“Release” shall mean any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, disposing, injecting, pumping, pouring, emptying, or other releasing
into the Environment, whether known or unknown and whether intentional or unintentional.
“Reportable Event” has the meaning set forth in ERISA §4043.
“Securities Act” means the Securities Act of 1933, as amended.
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Security Interest” means any mortgage, pledge, lien, encumbrance, charge, or other
security interest, other than (a) liens for Taxes not yet due and payable or for Taxes which are
being actively contested in good faith by appropriate proceedings, (b) mechanics’, materialmens’,
and similar liens, (c) purchase money liens and liens securing rental payments under capital lease
arrangements, (d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
“Sellers” has the meaning set forth in the preface above.
“Seller’s Affiliates” includes all Affiliates of each Seller, including, without
limitation, the Pressutti Family Trust and 3441 South Willow Investments, L.P., and their
respective partners, owners, beneficiaries, officers, directors, trustees and representatives.
“Share Purchase Price” has the meaning set forth in §2(b) below.
“Subsidiary” means any corporation with respect to which a specified Person (or a
Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors.
“Xxxxx Xxxxxxxxx” has the meaning set forth in the preface above.
6
“Tax” means any federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.
“Tax Return” means any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
“Third Party Claim” has the meaning set forth in §8(d) below.
“Title Reports” means the title reports attached hereto as Exhibit K.
2. | PURCHASE AND SALE OF COMPANY SHARES, PURCHASED REAL ESTATE AND PURCHASED INTELLECTUAL PROPERTY. |
(a) Basic Transaction. For the consideration specified below in this §2, on and subject to
the terms and conditions of this Agreement, the Buyer agrees to purchase from the Sellers, and the
Sellers agree to sell to the Buyer: all of the outstanding Company Shares and the Purchased
Intellectual Property. Concurrently with the Closing, the Buyer agrees to purchase (or cause one
of its Affiliates to purchase), and the Sellers agree to cause 3441 South Willow Investments, L.P.
to sell to the Buyer (or an Affiliate of Buyer designated by Buyer), the Purchased Real Estate in
accordance with the terms and conditions of this Agreement and the Purchased Real Estate
Agreements.
(b) Purchase Price. The Buyer agrees to pay to the Pressutti Family Trust at the Closing, in
cash payable by wire transfer or delivery of other immediately available funds to the Pressutti
Family Trust, for the Company Shares, $17,965,000 (the “Share Purchase Price”);
provided, however, that the Share Purchase Price is subject to adjustment pursuant to §2(f)
below. The Buyer also agrees to pay to Xxxxxx Xxxxxxxxx at the Closing, in cash payable by wire
transfer or delivery of other immediately available funds to Xxxxxx Xxxxxxxxx, $4,500,000 (the
“IP Purchase Price”) for the Purchased Intellectual Property (the Share Purchase Price and
the IP Purchase Price are collectively referred to as the “Purchase Price”); provided
that, notwithstanding the foregoing, $2,300,000 of the Share Purchase Price otherwise payable to
The Pressutti Family Trust at the Closing in accordance with this §2(b) shall be paid to the escrow
agent under, and to be held in accordance with, the Escrow Agreement in order to secure the
indemnification obligations of the Sellers contained in §8(b) (it being understood that $800,000 of
such $2,300,000 may not be used for indemnification obligations other than obligations based on any
purchase price adjustment payable by Sellers with respect to §2(f)). At the Closing, the Buyer
shall also pay to Xxxxxx Xxxxxxxxx $50,000 for his Covenant Not to Compete set forth in §6(e) (the
“Non-compete Payment”). In addition to paying the Purchase Price and Non-compete Payment
as set forth above, at the Closing the Buyer (or an Affiliate of Buyer designated by Buyer) will
pay to 0000 Xxxxx Xxxxxx Investments, L.P. $2,502,279.69 for the Purchased Real Estate, and will
assume the Assumed Real Estate Debt, in each case upon the terms and
7
conditions set forth in this
Agreement and the Purchased Real Estate Agreements (with $575,000 of such amount being allocated to
the Purchased Real Estate at 0000 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx and the balance of such amount
being allocated to the Purchased Real Estate at 0000 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx). The
Company shall distribute to the Sellers immediately prior to Closing all furniture, furnishings and
personal property in the Seller’s suite of offices and described on Annex 3 attached hereto. The
Parties agree that these items have a fair value of $1,000.
(c) Allocation. The Buyer and the Sellers each acknowledge that the amount of Purchase Price
allocated to the Company Shares, Purchased Intellectual Property, Covenant Not to Compete, and
Purchased Real Estate in this §2 represents the fair market value of the assets being purchased,
determined pursuant to arm’s-length negotiation. The Buyer and the Seller each agree to report the
sale of the business for income tax purposes according to the allocations set forth in this Section
2(c) and not to take any position inconsistent with such allocation on its tax returns without the
written consent of the other, and each party will indemnify the other for any inconsistent position
taken.
(d) The Closing. The closing of the transactions contemplated by this Agreement (the
“Closing”) shall take place at the offices of Xxxxx & XxXxxxxx in Palo Alto, California,
commencing at 10:00 a.m. local time, as promptly as reasonably practicable but in no event later
than the earlier of August 30, 2005 or the fifth business day following the satisfaction or waiver
of all conditions to the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Parties may mutually determine (the “Closing
Date”).
(e) Deliveries at the Closing. The closing of the sale or exchange of the Purchased Real
Estate will take place simultaneously with the Closing of the purchase of the Company Shares and
the Purchased Intellectual Property. At the Closing, (i) the Sellers will deliver to the Buyer the
various certificates, instruments, and documents referred to in §7(a) below, (ii) the Buyer will
deliver to the Sellers the various certificates, instruments, releases, and documents referred to
in §7(b) below, (iii) the Sellers will deliver to the Buyer stock certificates representing all of
the outstanding Company Shares, endorsed in blank or accompanied by duly executed assignment
documents, (iv) the Sellers will execute, acknowledge (if appropriate), and deliver to the Buyer
assignments with respect to the Purchased Intellectual Property in the forms attached hereto as
Exhibits D-1 through D-2 and such other instruments of sale, transfer, conveyance and assignment
with respect to the Purchased Intellectual Property as the Buyer may reasonably request, (v) the
Buyer (or one of its Affiliates) will execute, acknowledge (if appropriate), and deliver to the
Seller and 3441 South Willow Investments, L.P. an assumption agreement with respect to the Assumed
Real Estate Debt in the form of Exhibit E and such other instruments of assumption with respect to
the Assumed Real Estate Debt as the Sellers and/or the lender under the Assumed Real Estate Debt
may reasonably request, (vi) the Sellers will cause 3441 South Willow Investments, L.P. to execute
and deliver to the Buyer a deed with respect to the Purchased Real Estate in the form attached
hereto as Exhibit D-3 and such other instruments of transfer, conveyance, and assignment with
respect to the Purchased Real Estate as the Buyer may reasonably request, (vii) the Sellers will
deliver, and will cause the Company to deliver, to Buyer the Assignment and Assumption of Lease,
Termination of Guaranty, and Release of Landlord in
8
the form attached hereto as Exhibit D-4, and
(viii) the Buyer will deliver the consideration specified in §2(b) above.
(f) Inventory Valuation and Adjustment of Purchase Price.
(i) Buyer and Seller, and their respective representatives, will each examine and evaluate the
inventory of the Company as of the Closing Date (including raw materials, manufactured and
purchased parts, goods in process, and finished goods) promptly after the Closing, and each will
submit to the other within forty-five (45) days after the Closing a detailed written list and
description of all items and amounts he or it believes is obsolete, damaged or defective, or slow
moving and the value placed on each. The information exchanged shall be arranged so as to separate
the various items into the three (3) different categories, and the total value for each category,
and shall explain the valuation methodology used and how the values were arrived at. For purposes
of this subsection (f), “value” means the amount of money that is reasonably estimated to be
realized from the orderly disposal of such items in the normal course (not at a fire sale or
distressed proceed sale) and shall be determined in accordance with GAAP, and “slow moving” means
items that are reasonably likely to take more than twelve (12) months from and after the Closing
Date (based on the prior twelve (12) months sales) to dispose of in the normal course of the
Company’s business as presently conducted prior to the Closing (and disregarding any changes or
actions that Buyer makes or may make to the Company’s business or operations after the Closing
(e.g., deciding to terminate the sale of a product or product line).
(ii) The parties will exchange information and discuss each other’s lists and valuations, and
attempt to reach agreement on the value of each category and the adjustment from the amount shown
for such inventory on the Company’s books. If the parties’ respective valuations of the obsolete,
damaged or defective, or slow moving inventories are within 10% of each other, then the agreed
value will be the average of the two. If not within 10%, and the parties cannot otherwise agree on
a value of the obsolete, damaged or defective, or slow moving inventories within five (5) days of
exchanging lists and values, then the parties agree to promptly have an unrelated and independent
third party (who has not worked or consulted for either Buyer or Seller (or any Affiliate) within
the last three (3) years and is employed by a nationally recognized accounting firm) to evaluate
and value the items and amount of obsolete, damaged or defective, and “slow moving” inventory. The
third party is to be mutually agreed upon within five (5) days after the parties cannot reach
agreement on value, and shall have at least five (5) years’ experience in evaluating inventory for
the premium roofing products industry. Each side shall pay one-half of the fees and costs of the
third party evaluator. The decision of the third party as to what is or is not obsolete, damaged
or defective, or slow moving inventory and the value thereof shall be final and binding on all
parties.
(iii) For purposes hereof, Buyer consents to Xxxxxx Xxxx, Xxxxx Xxxxxx and other persons they
select (such as sales managers employed by the Company) providing reasonable assistance to Seller
after the Closing in examining, evaluating and valuing the inventory, and trying to bring to a
conclusion this matter. There shall be no charge to Seller for these persons’ services in this
matter. Buyer and Seller and their representatives shall have reasonable access to all inventory
and relevant information.
9
(iv) The amount payable by Sellers to Buyer (which shall be an adjustment to the Share
Purchase Price) with respect to obsolete, damaged or defective, and slow moving inventory shall
equal the difference between (x)the cost of the Company’s inventory items as of the Closing Date
determined to be obsolete, damaged or defective, or slow-moving in accordance with this subsection
(f) less inventory reserves, in each case as reflected in the books of the Company as of the
Closing Date and [y] the agreed value (or the value determined by the third party evaluator) of the
Company’s obsolete, damaged or defective, and slow moving inventory as of the Closing Date, in each
case determined as provided in the subsection (f)).
For example, if (A) the agreed value for all obsolete, damaged and slow moving
inventory is $400,000, and such inventory items are reflected on the Company’s books
at $825,000 (i.e., the parties agree that the value of such inventory items
are $425,000 less than the cost reflected on the books of the Company as of the
Closing Date), and (B) if the Inventory Reserve on such books is $75,000, then the
Buyer would get a Purchase Price adjustment of $350,000 [$825,000 less
$400,000 less $75,000]. $350,000 would be payable to Buyer from the
Sellers, and the parties would direct the escrow agent under the Escrow Agreement to
deliver such $350,000 to Buyer and would direct the escrow agent under the Escrow
Agreement to deliver to Sellers the difference between $800,000 and $350,000.
(v) The parties shall use their best efforts to conclude this matter and have funds disbursed
from Escrow within ninety (90) days of the Closing. The parties shall promptly sign instructions
to the escrow agent under the Escrow Agreement in accordance with this subsection (f).
Notwithstanding the foregoing, Buyer shall be entitled to make a claim under the Escrow Agreement
for the amount it believes is owing to it in accordance with this subsection (f) even though the
agreed value for all obsolete, damaged and defective, and slow-moving inventory has not yet been
established in accordance with this subsection (f).
3. | REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION, THE PURCHASED REAL ESTATE, AND THE PURCHASED INTELLECTUAL PROPERTY. |
(a) Representations and Warranties of the Sellers. Except as set forth in Annex 1 attached
hereto, each of the Sellers represents and warrants to the Buyer that the statements contained in
this §3(a) are correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this §3(a)).
(i) Organization; Authorization of Transaction. The Pressutti Family Trust is duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its formation and has
full power and authority to execute and deliver this Agreement and to perform its obligations
hereunder. Each of the Sellers has full power and authority to execute and deliver this Agreement
and to perform his, her, or its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of each of the Sellers, enforceable in accordance with its terms and
conditions. None of the Sellers need give any notice to, make any
10
filing with, or obtain any
authorization, consent, or approval of any government or governmental agency or other third party
in order to consummate the transactions contemplated by this Agreement, except as set forth on
Annex 1 attached hereto.
(ii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any of the Sellers is subject or (B) conflict
with, result in a breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which any of the Sellers
is a party or by which he, she, or it is bound or to which any of his, her, or its assets is
subject, except as set forth on Annex 1 attached hereto or §4(c) of the Disclosure Schedule.
(iii) Brokers’ Fees. None of the Sellers, the Company or any of its Subsidiaries has incurred
any Liability or obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(iv) Company Shares. The Pressutti Family Trust holds of record and owns beneficially 401,818
Company Shares, free and clear of any restrictions on transfer (other than any restrictions under
the Securities Act and state securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. The Pressutti Family Trust
is not a party to any option, warrant, purchase right, or other contract or commitment that could
require it to sell, transfer, or otherwise dispose of any capital stock of the Company (other than
this Agreement). The Pressutti Family Trust is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of the Company. Upon
delivery of the 401,818 Company Shares to the Buyer at the Closing, the Buyer will be the absolute
owner of all outstanding Company Shares free, clear, and discharged of and from any and all liens,
encumbrances, and marital rights and interests other than any liens or encumbrances created by the
Buyer.
(v) Purchased Real Estate. The Purchased Real Estate is described on Exhibit C and is the
only real property that is owned by any of the Sellers or any of their respective Affiliates that
is utilized by the Company and its Subsidiaries. With respect to each parcel of the Purchased Real
Estate:
(A) 3441 South Willow Investments, L.P. has good and marketable title to the
parcel of real property, free and clear of any Security Interest, easement,
covenant, or other restriction, except as described on the Title Reports or on Annex
I attached hereto and except for real estate taxes, assessments, and other
governmental levies, fees, or charges imposed with respect to such Purchased Real
Estate that are not due and payable as of the Closing and except for recorded
easements, covenants, and other restrictions which do not and will not materially
impair the use or occupancy of the property subject thereto in the operation of the
business of the Company and its Subsidiaries as currently
11
conducted thereon, and
except for zoning, building codes, and other land use laws regulating the use or
occupancy of such Purchased Real Estate or the activities conducted thereon that are
imposed by any governmental authority having jurisdiction over such Purchased Real
Estate and are not violated by the current use or occupancy of such Purchased Real
Estate or the operation of the business of the Company and its Subsidiaries as
currently conducted thereon (all such exceptions are referred to as “Permitted
Encumbrances”) and upon Closing the Buyer will acquire good and marketable title to
the parcel of real property, free and clear of any Security Interest, ownership
interest, easement, covenant, marital rights and interests, or other restriction,
except as described on the Title Report or Annex I attached hereto and except for
Permitted Encumbrances;
(B) there are no pending or, to the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for real estate matters)
of the Company and its Subsidiaries, threatened condemnation or zoning proceedings,
lawsuits, or administrative actions relating to the property or other matters that
could have a material adverse effect on the current use, occupancy, or value
thereof;
(C) the buildings and improvements are located within the boundary lines of the
described parcels of land, are not in violation of applicable setback requirements,
zoning laws, and ordinances (and none of the properties or buildings or improvements
thereon are subject to “permitted non-conforming use” or “permitted non-conforming
structure” classifications), and do not encroach on any easement which may burden
the land, and the land does not serve any adjoining property for any purpose
inconsistent with the use of the land, the property is not located within any flood
plain or subject to any similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained where not having obtained any
such permits or licenses could have a Material Adverse Effect, and the property is
not located within a delineated earthquake fault zone;
(D) all facilities have received all approvals, which are listed on Annex I
attached hereto, of governmental authorities (including licenses and permits)
required in connection with the ownership or operation as currently conducted
thereof and have been constructed, operated, and maintained in accordance with
applicable laws, rules, and regulations;
(E) there are no leases, subleases, licenses, concessions, or other agreements,
written or oral, granting to any party or parties the right of use or occupancy of
any portion of the parcel of real property (other than in favor of the Company and
its Subsidiaries, which lease will be assigned to the Buyer free and clear of all
Security Interests (other than in favor of the lender under and to secure the
Assumed Real Estate Debt) at the Closing at no additional cost to the Buyer), and no
party (other than the Company and its Subsidiaries) is in possession of the parcel
of real property;
12
(F) there are no outstanding options or rights of first refusal to purchase the
parcel of real property, or any portion thereof or interest therein;
(G) all facilities located on the parcel of real property are supplied with
utilities and other services necessary for the operation of such facilities, in the
manner the Company and its Subsidiaries are presently using them in the conduct of
their business; and
(H) the parcel of real property abuts on and has direct vehicular access to a
public road, or has access to a public road via a permanent, irrevocable,
appurtenant easement benefiting the parcel of real property, and access to the
property is provided by paved public right-of-way.
(vi) Purchased Intellectual Property.
(A) Except as set forth on §4(m) of the Disclosure Schedule, Xxxxxx Xxxxxxxxx
owns all rights, title, and interest in and to each and every item of the Purchased
Intellectual Property, free and clear of any restrictions on transfer, ownership or
license or other rights of any third party (including, without limitation, marital
rights and interests) (except in favor of the Company or its Subsidiaries), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. Xxxxxx Xxxxxxxxx is not a party to any option,
warrant, purchase right, or other contract or commitment that could require him to
sell, transfer or otherwise dispose of any of the Purchased Intellectual Property
(other than this Agreement). Each item of Purchased Intellectual Property owned or
used by Xxxxxx Xxxxxxxxx immediately prior to the Closing will be owned or available
for use by the Buyer to the same extent and on identical terms and conditions
immediately subsequent to the Closing. Except as set forth on §4(m) of the
Disclosure Schedule, each current and former employee or contractor of Xxxxxx
Xxxxxxxxx who has worked on, created, developed, or is or was involved in or has
assisted with or contributed to the creation or development of, any Purchased
Intellectual Property has executed and delivered to Xxxxxx Xxxxxxxxx an agreement
(containing no exceptions to or exclusions from the scope of its coverage) assigning
to Xxxxxx Xxxxxxxxx all of such employee’s or contractor’s rights, title, and
interest in and to any such Purchased Intellectual Property. Except as set forth on
§4(m) of the Disclosure Schedule, each such employee or contractor, and any other
employee or contractor who has received or to whom was disclosed any trade secrets
or other confidential information that is part of any Purchased Intellectual
Property, has executed and delivered to Xxxxxx Xxxxxxxxx an agreement agreeing to
keep confidential and not disclose, or use for any purpose other than as permitted
by Xxxxxx Xxxxxxxxx, any such trade secrets or other confidential information.
(B) Except as set forth on §4(m) of the Disclosure Schedule, none of the
Sellers with respect to the Purchased Intellectual Property has interfered with,
13
infringed upon, misappropriated, or otherwise come into conflict with any rights,
title, or interest in or to any Intellectual Property of any third parties. Except
as set forth on §4(m) of the Disclosure Schedule, none of the Sellers and the
directors and officers (and employees and agents with responsibility for
Intellectual Property matters) of the Company and its Subsidiaries (i) has ever
received any charge, complaint, claim, threat, demand, or notice alleging that any
such interference, infringement, misappropriation or violation (including, without
limitation, any offer to license, or claim that any Seller, the Company or any of
its Subsidiaries must license or refrain from using, any Intellectual Property
rights of any third party), or (ii) has any Knowledge that the continued operation
of the Company and its Subsidiaries or their business after the Closing would cause
or result in any such interference, infringement, misappropriation, or violation.
(C) To the Knowledge of any of the Sellers and the directors and officers (and
employees and agents with responsibility for Intellectual Property matters) of the
Company and its Subsidiaries, except as set forth on §4(m) of the Disclosure
Schedule, (i) no third party has interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any rights of the Sellers with respect to the
Purchased Intellectual Property, and (ii) there are no circumstances indicating that
any third party will or may be likely to interfere with, infringe upon,
misappropriate, or otherwise come into conflict with any rights with respect to the
Purchased Intellectual Property.
(D) None of the Sellers and their respective Affiliates (i) has been issued any
patent, has obtained or acquired any patent or patent application, or has pending
applications for any patents or registrations that are part of the Purchased
Intellectual Property except as described on Exhibit B-1, (ii) has granted to any
third party any license, agreement or other permission with respect to any of the
Purchased Intellectual Property (other than the Company and its Subsidiaries), (iii)
has registered, has obtained or acquired any application or registration for, or has
pending any application for registration of any trademarks or copyrights included in
the Purchased Intellectual Property, or (iv) has sold, licensed, transferred, or
otherwise disposed of any Intellectual Property used or useful in the business of
the Company and its Subsidiaries or rights therein or thereto within the last two
years.
(E) The Purchased Intellectual Property does not use, pursuant to license,
sublicense, agreement, or permission, any Intellectual Property that any third party
owns. None of the Sellers has disclosed or made available outside the operation of
the Company and its Subsidiaries’ business or without a confidentiality or
non-disclosure obligation, or failed to take all reasonable action to maintain and
protect, each item of the Purchased Intellectual Property, including, without
limitation, the confidentiality and secrecy of any trade secrets or other
confidential information that is part of any Purchased Intellectual Property.
14
(F) To the Knowledge of any of the Sellers and the directors and officers (and
employees and agents with responsibility for Intellectual Property matters) of the
Company and its Subsidiaries, no product, system, program, or software module
designed, developed, sold, licensed, or otherwise used or made available by any of
the Sellers contains any “back door,” “time bomb,” “Trojan horse,” “worm,” “drop
dead device,” “virus,” or other software routines or hardware components designed to
permit unauthorized access or to disable or erase software, hardware, or data
without the consent of the user, or contains any open source code or software that
may be subject to an open source or general public license.
(G) Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY
AGREEMENT OR CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT, SELLERS MAKE
NO REPRESENTATIONS, WARRANTIES, OR GUARANTEES, EXPRESS, IMPLIED, STATUTORY
OR OTHERWISE, AT LAW OR IN EQUITY, IN RESPECT OF THE COMPANY SHARES, THE PURCHASED
INTELLECTUAL PROPERTY, THE COMPANY OR ANY OF ITS ASSETS, LIABILITIES, ON-GOING
CONTRACTS AND OBLIGATIONS, OR ANY OF COMPANY’S OPERATIONS OR BUSINESSES, INCLUDING,
WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE, NON-INFRINGEMENT OR PROJECTED FINANCIAL RESULTS, AND ANY SUCH OTHER
REPRESENTATIONS OR WARRANTIES OR GUARANTEES ARE HEREBY EXPRESSLY DISCLAIMED.
NOTWITHSTANDING ANYTHING TO THE CONTRARY, EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT OR ANY AGREEMENT OR CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT, THE
SELLER IS GIVING NO ASSURANCES THAT ANY MANUFACTURER, SUPPLIER, LESSOR, CUSTOMER, OR
OTHER PARTY WITH WHICH THE SELLERS OR THE COMPANY HAS A RELATIONSHIP WILL CONTINUE
ON AND AFTER THE CLOSING TO MAINTAIN ITS RELATIONSHIP REGARDING THE COMPANY AND ITS
BUSINESS WITH THE BUYER OR THE COMPANY OR MAINTAIN SUCH RELATIONSHIP ON THE SAME
TERMS THAT IT IS NOW CONDUCTED WITH THE SELLERS AND THE COMPANY.
IN CONNECTION WITH THE BUYER’S INVESTIGATION OF THE COMPANY, THE COMPANY
SHARES, THE PURCHASED INTELLECTUAL PROPERTY, AND THE PURCHASED REAL ESTATE, THE
BUYER HAS RECEIVED CERTAIN ESTIMATES, PROJECTIONS, AND OTHER FORECASTS REGARDING THE
COMPANY’S FUTURE RESULTS OF OPERATIONS AND FINANCIAL CONDITION. THE BUYER
ACKNOWLEDGES THAT THERE ARE UNCERTAINTIES
15
INHERENT IN ATTEMPTING TO MAKE SUCH
ESTIMATES, PROJECTIONS AND OTHER FORECASTS AND THAT THE BUYER IS FAMILIAR WITH SUCH
UNCERTAINTIES. ACCORDINGLY, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY
AGREEMENT OR CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT, THE SELLERS ARE NOT
MAKING ANY REPRESENTATION OR WARRANTY WITH RESPECT TO SUCH ESTIMATES, PROJECTIONS,
AND OTHER FORECASTS (INCLUDING THE REASONABLENESS OF THE ASSUMPTIONS UNDERLYING SUCH
ESTIMATES, PROJECTIONS, AND FORECASTS OR THAT SUCH ESTIMATES, PROJECTIONS, AND
FORECASTS WILL BE ACHIEVED).
(b) Representations and Warranties of the Buyer. Except as set forth in Annex 2 attached
hereto, the Buyer represents and warrants to the Sellers that the statements contained in this
§3(b) are correct and complete as of the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this §3(b)).
(i) Organization of the Buyer. The Buyer is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has full corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with
its terms and conditions. The Buyer need not give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency or other person in
order to consummate the transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is subject or any provision of its
charter or bylaws or (B) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to which any of its assets is
subject.
(iv) Brokers’ Fees. The Buyer has no Liability or obligation to pay any fees or commissions
to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.
(v) Investment. The Buyer is not acquiring the Company Shares with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities Act.
16
(vi) Tax Elections. The Buyer has not made, and after the Closing the Buyer and the Company
will not make, in each case with respect to the transactions contemplated by this Agreement, any
election under the Internal Revenue Code of 1986, as amended, pursuant to Section 338 or 338(h)(10)
and/or any corresponding provisions of any State Revenue or Taxation Code.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES. The Sellers
represent and warrant to the Buyer that the statements contained in this §4 are correct and
complete as of the date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the date of this Agreement
throughout this §4), except as set forth in the disclosure schedule delivered by the Sellers to the
Buyer on the date hereof and initialed by Xxxxxx Xxxxxxxxx and the Buyer (the “Disclosure
Schedule”). Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein, however, unless the Disclosure Schedule
identifies the exception with reasonable particularity. Without limitation to the foregoing, the
mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the representation or
warranty pertains to the existence of the document or other item itself). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in
this §4.
(a) Organization, Qualification, and Corporate Power. Each of the Company and its Subsidiaries
is a corporation duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Each of the Company and its Subsidiaries is duly authorized to
conduct its business as currently conducted and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the failure to be so qualified
would not have a Material Adverse Effect. Each of the Company and its Subsidiaries has full
corporate power and authority and all licenses, permits, and authorizations necessary to carry on
its businesses as currently conducted and to own and use the properties owned and as currently used
by it, except to the extent the failure to have obtained such license, permit or authorization
would not have a Material Adverse Effect. §4(a) of the Disclosure Schedule lists the directors and
officers of each of the Company and its Subsidiaries. The Sellers have delivered to the Buyer
correct and complete copies of the charter and bylaws of each of the Company and its Subsidiaries
(as amended to date). The minute books (containing the records of meetings of the stockholders,
the board of directors, and any committees of the board of directors), the stock certificate books,
and the stock record books of each of the Company and its Subsidiaries are correct and complete in
all material respects. None of the Company and its Subsidiaries is in violation of any provision
of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Company consists only of
1,000,000 Company Shares, of which 401,818 Company Shares are issued and outstanding and no Company
Shares are held in treasury. No other capital stock or equity securities of the Company are
authorized or outstanding. All of the issued and outstanding Company Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held beneficially and of
record by The Pressutti Family Trust. There are currently no outstanding or authorized
17
options,
warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with respect to the Company.
There are no voting trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of the Company.
(c) Noncontravention. Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which any of the Company and its Subsidiaries is
subject or any provision of the charter or bylaws of any of the Company and its Subsidiaries or
(ii) conflict with, result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, permit, instrument, or other arrangement to
which any of the Company and its Subsidiaries is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Security Interest upon any of its
assets), except as set forth in §4(c) of the Disclosure Schedule or except where the violation,
conflict, breach, default, acceleration, termination, modification, cancellation, failure to give
notice, or Security Interest would not have a Material Adverse Effect. None of the Company and its
Subsidiaries need give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except as set forth in §4(c) of the Disclosure
Schedule or except where the failure to give, make, or obtain any such authorization, consent, or
approval would not have a Material Adverse Effect.
(d) Brokers’ Fees. None of the Company and its Subsidiaries has any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
(e) Title to Assets. The Company and its Subsidiaries have good and marketable title to, or a
valid leasehold interest in, or valid license for, all properties and assets currently used by
them, located on their premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties and assets used or
sold in the Ordinary Course of Business since the date of the Most Recent Balance Sheet.
(f) Subsidiaries. §4(f) of the Disclosure Schedule sets forth for each Subsidiary of the
Company (i) its name and jurisdiction of incorporation, and (ii) the number of issued and
outstanding shares of each class of its capital stock. All of the issued and outstanding shares of
capital stock of each Subsidiary of the Company have been duly authorized and are validly issued,
fully paid, and nonassessable. The Company holds of record and owns beneficially all of the
outstanding shares of each Subsidiary of the Company, free and clear of any restrictions on
transfer (other than restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, option, warrants, purchase rights, contracts, commitments, equities, claims,
and demands. There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or commitments that
18
could require the Company to sell, transfer, or otherwise dispose of any capital stock of any of
its Subsidiaries or that could require any Subsidiary of the Company to issue, sell, or otherwise
cause to become outstanding any of its own capital stock. There are no outstanding stock
appreciation, phantom stock, profit participation, or similar rights with respect to any Subsidiary
of the Company. There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary of the Company. None of the Company
and its Subsidiaries controls directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust, or other business association which is not a
Subsidiary of the Company.
(i) except as contemplated by the penultimate sentence of §2(b) and distributions to the
Sellers disclosed in §4(h)(xiii) of the Disclosure Schedule or as otherwise disclosed in §4(h)(i)
of the Disclosure Schedule, none of the Company and its Subsidiaries has sold, leased, transferred,
or assigned any of its assets, tangible or intangible, other than for fair consideration in the
Ordinary Course of Business;
(ii) none of the Company and its Subsidiaries has entered into any agreement, contract, lease,
or license (or, except for purchase orders to buy raw materials or sell the Company and its
Subsidiaries’ products entered into in the Ordinary Course of Business, series of related
agreements, contracts, leases, and licenses) either involving more than $25,000 or outside the
Ordinary Course of Business;
(iii) no party (including the Company and each of its Subsidiaries) has accelerated,
terminated, modified, or cancelled any agreement, contract, lease, or license (or
19
series of related
agreements, contracts, leases, and licenses) involving more than $25,000 to which the any of the
Company and its Subsidiaries is a party or by which it is bound other than modifications of
purchase order agreements that, in the aggregate, are not material to the business, financial
condition, results of operations, profitability, prospects, or operations of the Company and its
Subsidiaries and are not outside the Ordinary Course of Business or cancellation of purchase order
agreements that are not material to the business, financial condition, results of operations,
profitability, prospects, or operations of the Company and its Subsidiaries and are not outside the
Ordinary Course of Business and in which the Company or one of its Subsidiaries is the seller and
the buyer thereunder has compensated the Company or one of its Subsidiaries for corresponding raw
materials purchases made by the Company or one of its Subsidiaries such that none of the Company
and its Subsidiaries has suffered a Material Adverse Effect;
(iv) none of the Company and its Subsidiaries has imposed any Security Interest upon any of
its assets, tangible or intangible;
(v) none of the Company and its Subsidiaries has made any capital expenditure (or series of
related capital expenditures) either involving more than $25,000 or outside the Ordinary Course of
Business other than as contemplated on the Capital Budget of the Company and its Subsidiaries
attached hereto as Exhibit G;
(vi) none of the Company and its Subsidiaries has made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions) either involving more than $25,000 or outside the Ordinary
Course of Business;
(vii) none of the Company and its Subsidiaries has issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation either involving more than $10,000 singly or $25,000 in the aggregate;
(viii) none of the Company and its Subsidiaries has delayed or postponed the payment of
accounts payable beyond their stated terms or has delayed or postponed the payment of other
Liabilities outside the Ordinary Course of Business;
(ix) none of the Company and its Subsidiaries has cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) either involving more than $25,000 or
outside the Ordinary Course of Business;
(x) none of the Company and its Subsidiaries has granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the charter or bylaws of any of the
Company and its Subsidiaries;
20
(xii) none of the Company and its Subsidiaries has issued, sold, or otherwise disposed of any
of its capital stock, or granted any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its capital stock;
(xiii) none of the Company and its Subsidiaries has declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital stock;
(xiv) none of the Company and its Subsidiaries has experienced any destruction, disappearance,
loss, or material damage (whether or not covered by insurance) to its property;
(xv) none of the Company and its Subsidiaries has made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees either involving more than $5,000
in the aggregate or outside the Ordinary Course of Business, except as set forth on §4(h)(xv) of
the Disclosure Schedule;
(xvi) none of the Company and its Subsidiaries has entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any existing such
contract or agreement, except as set forth on §4(h)(xvi) of the Disclosure Schedule;
(xvii) none of the Company and its Subsidiaries has granted any increase in the base
compensation of any of its directors, officers, and employees;
(xviii) none of the Company and its Subsidiaries has adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the
benefit of any of its directors, officers, and employees (or taken any such action with respect to
any other Employee Benefit Plan);
(xix) none of the Company and its Subsidiaries has made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary Course of Business;
(xx) none of the Company and its Subsidiaries has made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xxi) no officer or key employee has terminated his/her employ or has been terminated from the
employ of the Company or any of its Subsidiaries, or has become disabled or incapacitated;
(xxii) there has not been any other material occurrence, event, incident, action, failure to
act, or transaction outside the Ordinary Course of Business involving the Company or any of its
Subsidiaries and having or reasonably likely to have a Material Adverse Effect; and
(xxiii) none of the Company and its Subsidiaries has committed to any of the foregoing.
21
(i) Except as set forth on §4(k) of the Disclosure Schedule, each of the Company and its
Subsidiaries has timely filed all Tax Returns that it was required to file. All such Tax Returns
were correct and complete in all material respects. All Taxes due and owing by any of the Company
and its Subsidiaries (whether or not shown on any Tax Return) have been paid. None of the Company
and its Subsidiaries currently is the beneficiary of any extension of time within which to file any
Tax Return. No claim has ever been made by an authority in a jurisdiction where the Company or any
of its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of the Company or any of its
Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax.
(ii) Each of the Company and its Subsidiaries has withheld, deposited and paid all Taxes
required to have been withheld, deposited and/or paid by the each of Company and its Subsidiaries
in connection with amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) None of the Sellers or any director or officer (or employee responsible for Tax matters)
of the Company or its Subsidiaries knows or has reason to know of any threatened or potential
additional assessments of Taxes for any period for which Tax Returns have or should have been
filed. There is no dispute or claim concerning any Tax Liability of the Company or any of its
Subsidiaries either (A) claimed or raised by any authority or (B) as to which any of the
22
Sellers
and the directors and officers (and employees responsible for Tax matters) of the Company and its
Subsidiaries has Knowledge. §4(k) of the Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed by the Company and its Subsidiaries for taxable periods for which
the statute of limitations is open, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit. The Sellers have delivered to
the Buyer correct and complete copies of all income Tax Returns, examination reports, statements of
deficiencies assessed against or agreed to by the Company and its Subsidiaries, and any other
written communications to or from a taxing authority for a taxable year for which the statute of
limitations is open.
(iv) None of the Company and its Subsidiaries has waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.
(v) Except as set forth on §4(k) of the Disclosure Schedule, none of the Company and its
Subsidiaries has made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any payments that will not be
deductible under Code §280G. None of the Company and its Subsidiaries has been a United States
real property holding corporation within the meaning of Code §897(c)(2) during the applicable
period specified in Code §897(c)(1)(A)(ii). Except with respect to its wholly-owned subsidiaries,
none of the Company and its Subsidiaries is a party to any Tax allocation, sharing or indemnity
agreement. None of the Company and its Subsidiaries (A) has been a member of an Affiliated Group
filing a consolidated federal income Tax Return or (B) has Liability for the Taxes of any Person
(other than any of the Company and its Subsidiaries) under Treas. Reg. §1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(vi) §4(k)(vi) of the Disclosure Schedule sets forth the following information with respect to
the Company and its Subsidiaries: (A) the basis of the Company and its Subsidiaries in their
assets; (B) the amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to the Company and its
Subsidiaries; and (C) the amount of any deferred gain or loss allocable to the Company and its
Subsidiaries arising out of any Deferred Intercompany Transaction.
(vii) The unpaid Taxes of the Company and its Subsidiaries (A) did not, as of the Most Recent
Fiscal Month End, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the past custom and
practice of the Company and its Subsidiaries in filing their Tax Returns.
(viii) None of the Company and its Subsidiaries has received any notices of increases in the
assessed value of its properties for Tax purposes since January 1, 2005.
23
(ix) None of the Company and its Subsidiaries has participated in any reportable transaction
under Code §6011 and the applicable Treasury Regulations thereunder or any similar provision under
state, local, or foreign law.
(i) None of the Company and its Subsidiaries owns any real property.
(ii) §4(l) of the Disclosure Schedule lists and describes briefly all real property leased or
subleased to the Company and its Subsidiaries. The Sellers have delivered to the Buyer a correct
and complete copy of each such lease (as amended to date) listed in §4(l) of the Disclosure
Schedule. With respect to each of such leases:
(A) the lease is legal, valid, binding, enforceable, and in full force and
effect;
(B) the lease will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(C) no party to the lease has given or received a currently pending notice of
breach or default, and, to the Knowledge of any of the Sellers and the directors and
officers (and employees with responsibility for real estate matters) of the Company
and its Subsidiaries, no event has occurred which, with notice or lapse of time,
would constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(D) no party to the lease has given or received notice repudiating any
provision thereof;
(E) there are no disputes, oral agreements, or forbearance programs in effect
as to the lease;
(F) none of the Company and its Subsidiaries has assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold;
(G) to the Knowledge of any of the Sellers and the directors and officers (and
employees with responsibility for real estate matters) of the Company and its
Subsidiaries, all Facilities leased and all actions and activities of the Company
and its Subsidiaries thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations, except, in each case, as could not
reasonably be expected to have a Material Adverse Effect; and
24
(H) all Facilities leased thereunder are supplied with utilities and other
services necessary for the operation of said Facilities as such Facilities are
presently being used by the Company and its Subsidiaries in the conduct of their
business.
(i) The Company and its Subsidiaries own or have the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property used in the operation of the
businesses of the Company and its Subsidiaries as presently conducted. None of the Company and its
Subsidiaries is a party to any option, warrant, purchase right, or other contract or commitment
that could require the Company or any of its Subsidiaries to sell, transfer, or otherwise dispose
of any of its Intellectual Property. Each item of Intellectual Property owned or used by the
Company and its Subsidiaries immediately prior to the Closing will be owned or available for use by
the Company and its Subsidiaries to the same extent and on identical terms and conditions
immediately subsequent to the Closing. Each current and former employee or contractor of the
Company and its Subsidiaries who has worked on, created, developed, or is or was involved in or has
assisted with or contributed to the creation or development of, any of their Intellectual Property
has executed and delivered to the Company or its Subsidiaries an agreement (containing no
exceptions to or exclusions from the scope of its coverage) assigning to the Company all of such
employee’s or contractor’s rights, title, and interest in and to any such Intellectual Property.
Each such employee or contractor, and any other employee or contractor who has received or to whom
was disclosed any trade secrets or other confidential information that is part of the Company and
its Subsidiaries’ Intellectual Property, has executed and delivered to the Company an agreement
agreeing to keep confidential and not disclose, or use for any purpose other than as permitted by
the Company and its Subsidiaries, any such trade secrets or other confidential information.
(ii) Neither the Company nor its Subsidiaries or the operation of the Company and its
Subsidiaries or their business have interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any rights, title, or interest in or to any Intellectual Property of any
third parties. None of the Sellers and the directors and officers (and employees and agents with
responsibility for Intellectual Property matters) of the Company and its Subsidiaries (A) has ever
received any charge, complaint, claim, threat, demand, or notice alleging that any such
interference, infringement, misappropriation or violation (including, without limitation, any offer
to license, or claim that the Company or its Subsidiaries must license or refrain from using, any
Intellectual Property rights of any third party), or (B) has any Knowledge that the continued
operation of the Company and its Subsidiaries or their business after the Closing would cause or
result in any such interference, infringement, misappropriation, or violation.
(iii) To the Knowledge of any of the Sellers and the directors and officers (and employees and
agents with responsibility for Intellectual Property matters) of the Company and its Subsidiaries,
(A) no third party has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any rights of the Company and its Subsidiaries with respect to their Intellectual
Property, and (B) there are no circumstances indicating that any third party will
25
or may be likely
to interfere with, infringe upon, misappropriate, or otherwise come into conflict with any rights
with respect to the Company and its Subsidiaries’ Intellectual Property.
(iv) Except as set forth on Section 4(m) of the Disclosure Schedule, none of the Company and
its Subsidiaries (A) has been issued any patent, has obtained or acquired any patent or patent
application, and has pending applications for any patents or registrations, (B) has granted to any
third party any license, agreement, or other permission with respect to any of its Intellectual
Property, (C) has registered, has obtained or acquired any application or registration for, and has
pending application for registration of any trademarks or copyrights, and (D) has sold, licensed,
transferred, or otherwise disposed of any Intellectual Property or rights therein or thereto within
the last two years.
(v) The Company and its Subsidiaries’ Intellectual Property do not use, pursuant to license,
sublicense, agreement, or permission, any Intellectual Property that any third party owns (other
than the Purchased Intellectual Property). None of the Company and its Subsidiaries has disclosed
or made available outside the operation of the Company or its Subsidiaries’ business or without a
confidentiality or non-disclosure obligation, and each of the Company and its Subsidiaries has
taken reasonable actions to maintain and protect, each item of its Intellectual Property,
including, without limitation, the confidentiality and secrecy of any trade secrets or other
confidential information that is part of any of its Intellectual Property.
(vi) To the Knowledge of the Sellers and the directors and officers (and employees and agents
with responsibility for Intellectual Property matters) of the Company and its Subsidiaries, no
product, system, program, or software module designed, developed, sold, licensed, or otherwise used
by the Company or its Subsidiaries contains any “back door,” “time bomb,” “Trojan horse,” “worm,”
“drop dead device,” “virus,” or other software routines or hardware components designed to permit
unauthorized access or to disable or erase software, hardware, or data without the consent of the
user, or contains any open source code or software that may be subject to an open source or general
public license.
26
thereto) as adjusted
for the passage of time through the Closing Date in accordance with the past custom and practice of
the Company and its Subsidiaries except as set forth on §4(o) of the Disclosure Schedule. §4(o) of
the Disclosure Schedule is an inventory list that lists the inventory of the Company and its
Subsidiaries as of the Most Recent Balance Sheet Date.
(i) any agreement (or group of related agreements) for the lease of personal property to or
from any Person providing for remaining lease payments in excess of $25,000 per annum;
(ii) except for non-continuing purchase orders to buy raw materials or sell the Company’s
products entered into in the Ordinary Course of Business, or modifications of purchase order
agreements that, in the aggregate, are not material to the business, financial condition, results
of operations, profitability, prospects, or operations of the Company and are not outside the
Ordinary Course of Business, any agreement (or group of related agreements) for the purchase or
sale of raw materials, commodities, supplies, products, or other personal property, or for the
furnishing or receipt of services, the continued performance of which will extend over a period of
more than one year, or involve consideration in excess of $25,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it has created, incurred,
assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, in
excess of $25,000 or under which it has imposed a Security Interest on any of its assets, tangible
or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the Sellers or any of their respective Affiliates (other than
the Company and its Subsidiaries);
(vii) any profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other material plan or arrangement for the benefit of its current or
former directors, officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a full-time, part-time, consulting,
or other basis providing annual compensation in excess of $25,000 or providing severance benefits
or benefits triggered by a change in control of the Company or its Subsidiaries;
27
(x) any agreement (or series of related agreements) under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary Course of Business or
that involves singly or in the aggregate in excess of $5,000;
(xi) any agreement relating to the disposal of solid waste or Hazardous Materials;
(xii) any other agreement under which the consequences of a default or termination would or is
reasonably likely to have a Material Adverse Effect; or
(xiii) any other agreement (or group of related agreements) the performance of which involves
consideration in excess of $40,000.
The Sellers have delivered to the Buyer a correct and complete copy of each written agreement (as
amended to date) listed in §4(p) of the Disclosure Schedule, and a written summary setting forth
the material terms and conditions of each oral agreement referred to in §4(p) of the Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby (except to the extent it will expire on its own terms (without
regard to the execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby) before such consummation); (C) none of the Company and its Subsidiaries has
given or received notice of breach or default, and to the Knowledge of the Sellers, the Company and
its Subsidiaries, no event has occurred which with notice or lapse of time would constitute a
material breach or default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
28
Company and its Subsidiaries nor, to the
Knowledge of any of the Sellers and the directors and officers (and employees responsible for
insurance matters) of the Company and its Subsidiaries, any other party to the policies is in
breach or default, and no event has occurred which, with notice or lapse of time, would constitute
such a breach or default, or permit termination, modification, or acceleration, under the policy,
and no party to the policy has repudiated any provision thereof. The Company and its Subsidiaries
have been covered during the past ten years by insurance in scope and amount customary and
reasonable for the business in which they have engaged during the aforementioned period for a
company of the size, net worth and with the financial resources of the Company, and manufacturing
and selling the products the Company did, at the various time during the period.
(u) Product Warranty and Advertising. Each product manufactured, sold, leased, or delivered by
the Company and its Subsidiaries has been in conformity with all applicable contractual commitments
and all express and applicable implied warranties, and none of the Company and its Subsidiaries has
any Liability (and, to the Knowledge of the Company and its Subsidiaries, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against them giving rise to any Liability) for replacement or repair thereof or other
damages in connection therewith, subject only to the reserve for product warranty claims set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and practice of the
Company and its Subsidiaries or, except as described in §4(u) of the Disclosure Schedule. None of
the Company and its Subsidiaries has engaged in deceptive or unsubstantiated advertising or other
promotional or other conduct in violation of the California Business and Professions Code or other
applicable Laws. Except as set forth on §4(u) of the Disclosure Schedule, no product manufactured,
sold, leased, or delivered by the Company or its Subsidiaries is subject to any guaranty, warranty,
or other indemnity beyond the applicable standard terms and conditions of sale or lease of and
limited warranty with respect to such product. §4(u) of the Disclosure Schedule includes copies of
the typical standard terms and conditions of sale or lease for the Company and its Subsidiaries
with respect to their principal customers and all forms of limited warranty issued for any and all
of the Company and its Subsidiaries’ products and services.
29
against any of them giving rise to any Liability) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by the Company or its Subsidiaries. None of the Company and its Subsidiaries
has manufactured, marketed, sold or distributed any asbestos or vermiculite or products containing
asbestos or vermiculite.
(i) §4(x) of the Disclosure Schedule lists each Employee Benefit Plan that the Company and its
Subsidiaries maintain or to which the Company or its Subsidiaries contributes.
(A) Each such Employee Benefit Plan (and each related trust, insurance
contract, or fund) complies in all material respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions (including Form 5500 Annual Reports,
Summary Annual Reports, PBGC-1’s, and Summary Plan Descriptions, if applicable) have
been filed if due or distributed appropriately with respect to each such Employee
Benefit Plan. The requirements of Part 6 of Subtitle B of Title 1 of ERISA and of
Code §4980B have been met in all material respects with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer contributions and employee salary
reduction contributions) which are due have been paid to each such Employee Benefit
Plan which is an Employee Pension Benefit Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in accordance with the past custom and
practice of the Company and its Subsidiaries. All premiums or other payments for
all periods ending on or before the Closing Date have been paid or accrued with
respect to each such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
30
(D) Each such Employee Benefit Plan which is an Employee Pension Benefit Plan
meets the requirements of a “qualified plan” under Code §401(a) and has received,
within the last three years, a favorable determination letter from the Internal
Revenue Service that the Employee Pension Benefit Plan satisfies the applicable
requirements of the Tax Reform Act of 1986, as amended.
(E) The market value of assets under each such Employee Benefit Plan which is
an Employee Pension Benefit Plan (other than any Multiemployer Plan) equals or
exceeds the present value of all vested and nonvested Liabilities thereunder
determined in accordance with PBGC methods, factors, and assumptions applicable to
an Employee Pension Benefit Plan terminating on the date for determination.
(F) The Sellers have delivered to the Buyer correct and complete copies of the
plan documents and summary plan descriptions, the most recent determination letter
received from the Internal Revenue Service, the most recent Form 5500 Annual Report,
and all related trust agreements, insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that the Company and its Subsidiaries maintain
or ever has maintained or to which any of them contributes, ever has contributed, or ever has been
required to contribute:
(A) No such Employee Benefit Plan which is an Employee Pension Benefit Plan is
or has ever been subject to Section 302 or Title IV of ERISA.
(B) There have been no Prohibited Transactions with respect to any such
Employee Benefit Plan. No Fiduciary has any Liability for breach of fiduciary duty
or any other failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for employee benefits
matters) of the Company and its Subsidiaries, threatened. None of the Sellers and
the directors and officers (and employees with responsibility for employee benefits
matters) of the Company and its Subsidiaries has any Knowledge of any Basis for any
such action, suit, proceeding, hearing, or investigation.
(iii) None of the Company and its Subsidiaries do contribute to, ever has contributed to, has
been required to contribute to any Multiemployer Plan, or has any Liability (including withdrawal
Liability) under any Multiemployer Plan.
31
(iv) None of the Company and its Subsidiaries maintains, has ever maintained, contributes, has
ever contributed, or ever has been required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type benefits for current or future
retired or terminated employees, their spouses, or their dependents (other than in accordance with
Code §4980B).
Except as set forth in §4(z) of the Disclosure Schedule:
(i) The Company and its Subsidiaries have obtained, and timely applied for renewals of, all
permits, licenses, certificates, approvals, registrations, applications, and other authorizations,
registrations, or exemptions (“Environmental Permits”) that are required in connection with
the conduct of their business as presently conducted under Environmental Law and related orders.
The Environmental Permits are listed in §4(z) of the Disclosure Schedule.
(ii) The Company and its Subsidiaries are in compliance with the Environmental Permits.
(iii) The Company and its Subsidiaries are, and at all times have been, in compliance with,
and have not been and are not in violation of or liable under any Environmental Law or Occupational
Safety and Health Law and have no Liability under the common law relating to the Environment. None
of any of the Sellers, the Company, or its Subsidiaries has received any order, notice, or other
communication from (i) any governmental authority or private citizen, or (ii) the current or prior
owner or operator of the Facilities or any facility to which waste from the site has been sent for
storage, transfer, recycling, or disposal (“Off-site Waste Facilities”), of any actual or
alleged violation or liability arising under any Environmental Law or Occupational Safety and
Health Law with respect to any of the Facilities, any other properties or assets (whether real,
personal, or mixed) which the Company or its Subsidiaries has owned or operated, or the Off-site
Waste Facilities. None of the Sellers, the Company, its Subsidiaries or any of their Affiliates
has received notice or is aware of any events, conditions, circumstances, activities, practices,
incidents, actions, or plans which may (i) interfere with or prevent compliance with Environmental
Law or Occupational Safety and Health Law, or (ii) give rise to any common law or legal liability,
including liability under the United States Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. §§9601 et seq., as amended (“CERCLA”), and any successor federal
statute, rule, or regulation or comparable state statute, rule, or regulation or other
Environmental Laws, or otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, or investigation, based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, handling, management, or Release of a Hazardous Material.
(iv) There is not any civil, criminal, or administrative action, suit, demand, claim, hearing,
notice, or demand letter, notice of violation, investigation, or proceeding pending
32
or threatened against either the Company or any of its Subsidiaries in connection with the
conduct of their businesses relating in any way to Environmental Law, Occupational Safety and
Health Law, or the common law relating to the Environment.
(v) The Sellers have delivered to Buyer true and complete copies and results of any reports,
studies, analyses, tests, or monitoring possessed by any of the Sellers, the Company or its
Subsidiaries pertaining to Hazardous Materials in, on, or under the Facilities, or concerning
compliance by the Sellers, the Company, its Subsidiaries or any other Person for whose conduct they
are or may be held responsible, with Environmental Law or Occupational Safety and Health Law.
(vi) The Sellers each agree reasonably to cooperate with Buyer in connection with Buyer’s
application for the transfer, renewal, or issuance of any Environmental Permits and the filing of
any reports or notices or other actions necessary to satisfy any requirements arising under
Environmental Law or Occupational Safety and Health Law involving the Company and its Subsidiaries’
businesses for a period of one year after Closing; provided that, any transfer or application fees
and costs associated with such transfers or applications are to be borne by the Buyer.
(vii) There has been no Release of any Hazardous Materials at or from the Facilities or, to
the Knowledge of any of the Sellers and any director or officer (or employee responsible for
environmental matters) of the Company and its Subsidiaries, at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used,
or processed from or by the Facilities, or from or by any other properties and assets (whether
real, personal, or mixed) in which any of the Sellers, the Company or its Subsidiaries has or had
an interest, or to the Knowledge of any of the Sellers and any director or officer (or employee
responsible for environmental matters) of the Company and its Subsidiaries, from or by any
geologically or hydrologically adjoining property, whether by the Company, its Subsidiaries or any
other Person.
(viii) The Seller has provided to the Buyer a current Phase I Environmental Assessment in a
form acceptable to the Buyer with respect to the Purchased Real Estate. Buyer acknowledges receipt
of the Phase I Environmental Assessment.
(aa) Certain Business Relationships with the Company and its Subsidiaries. None of the
Sellers, the members of Xxxxxx Xxxxxxxxx or Xxxxx Xxxxxxxxx’x immediate family, or their respective
Affiliates has been involved in any business arrangement or relationship with any of the Company
and its Subsidiaries within the past 24 months, and none of the Sellers, the members of Xxxxxx
Xxxxxxxxx or Xxxxx Xxxxxxxxx’x immediate family, or their respective Affiliates owns any asset,
tangible or intangible, which is used in the business of any of the Company and its Subsidiaries.
(bb) Off-site Disposal of Hazardous Materials. The Company and its Subsidiaries have sent
Hazardous Materials for off-site disposal only to those off-site waste management or recycling or
reclamation facilities identified in §4(bb) of the Disclosure Schedule.
33
(cc) Customers and suppliers.
(i) §4(cc) of the Disclosure Schedule lists the 20 largest customers of the Company (on a
consolidated basis) for the most recent fiscal year and sets forth opposite the name of each such
customer the percentage of consolidated net sales attributable to the customer. §4(cc) of the
Disclosure Schedule also lists any additional current customers that the Company anticipated will
be among the 10 largest customers for the current fiscal year.
(ii) Since the date of the Most Recent Balance Sheet, to the knowledge without independent
investigation of any of the Sellers and any director or officer of the Company, no material
supplier of the Company or any of its Subsidiaries has indicated that it will stop, or materially
decrease the rate of, supplying materials, products, or services to the Company or any of its
Subsidiaries. No customer listed on §4(cc) of the Disclosure Schedule has indicated that it will
stop, or materially decrease the rate of, buying materials, products, or services from the Company
or any of its Subsidiaries.
NOTWITHSTANDING ANYTHING TO THE CONTRARY, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR
ANY AGREEMENT OR CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT, THE SELLER IS GIVING NO ASSURANCES THAT ANY MANUFACTURER, SUPPLIER, LESSOR,
34
CUSTOMER, OR OTHER PARTY WITH WHICH THE SELLERS OR THE COMPANY HAS A RELATIONSHIP WILL CONTINUE ON AND AFTER THE CLOSING TO
MAINTAIN ITS RELATIONSHIP REGARDING THE COMPANY AND ITS BUSINESS WITH THE BUYER OR THE COMPANY OR
MAINTAIN SUCH RELATIONSHIP ON THE SAME TERMS THAT IT IS NOW CONDUCTED WITH THE SELLERS AND THE
COMPANY.
IN CONNECTION WITH THE BUYER’S INVESTIGATION OF THE COMPANY, THE COMPANY SHARES, THE PURCHASED
INTELLECTUAL PROPERTY, AND THE PURCHASED REAL ESTATE, THE BUYER HAS RECEIVED CERTAIN ESTIMATES,
PROJECTIONS, AND OTHER FORECASTS REGARDING THE COMPANY’S FUTURE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION. THE BUYER ACKNOWLEDGES THAT THERE ARE UNCERTAINTIES INHERENT IN ATTEMPTING TO MAKE SUCH
ESTIMATES, PROJECTIONS, AND OTHER FORECASTS AND THAT THE BUYER IS FAMILIAR WITH SUCH UNCERTAINTIES.
ACCORDINGLY, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY AGREEMENT OR CERTIFICATE
DELIVERED PURSUANT TO THIS AGREEMENT, THE SELLERS ARE NOT MAKING ANY REPRESENTATION OR WARRANTY
WITH RESPECT TO SUCH ESTIMATES, PROJECTIONS, AND OTHER FORECASTS (INCLUDING THE REASONABLENESS OF
THE ASSUMPTIONS UNDERLYING SUCH ESTIMATES, PROJECTIONS, AND FORECASTS AND FORECASTS OR THAT SUCH
ESTIMATES, PROJECTIONS, AND FORECASTS WILL BE ACHIEVED).
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
(a) General. Each of the Parties will use its reasonable best efforts to take all action and
to do all things necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing
conditions set forth in §7 below).
(b) Notices and Consents. The Sellers will cause each of the Company and its Subsidiaries to
give any notices to third parties, and will cause each of the Company and its Subsidiaries to use
its reasonable best efforts to obtain any third party consents, that the Buyer reasonably may
request in connection with the matters referred to in §3(a)(ii) and §4(c) above. Each of the
Parties will (and the Sellers will cause each of the Company and its Subsidiaries to) give any
notices to, make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies in connection with
the matters referred to in §3(a)(ii), §3(b)(ii), and §4(c) above.
(c) Operation of Business. Unless with the prior express written consent of the Buyer in each
instance, the Sellers will not cause or permit any of the Company and its Subsidiaries to engage in
any practice, take any action, incur any material Liability, or enter into any transaction outside
the Ordinary Course of Business. Without limiting the generality of the foregoing, unless with the prior express written consent of the Buyer, the Sellers will not
cause
35
or permit any of the Company and its Subsidiaries to (i) declare, set aside, or pay any
dividend or make any distribution with respect to its capital stock other than in the Ordinary
Course of Business or redeem, purchase, or otherwise acquire any of its capital stock, or (ii)
otherwise engage in any practice, take any action, or enter into any transaction of the sort
described in §4(h) above.
(d) Preservation of Business. The Sellers will cause each of the Company and its Subsidiaries
to exercise its reasonable best efforts to keep its business and properties substantially intact,
including its present operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(e) Access. The Sellers will permit, and the Sellers will cause each of the Company and its
Subsidiaries to permit, representatives of the Buyer to have access, at mutually agreed times in
accordance with the letter of intent between the parties and in a manner so as not to interfere
with the normal business operations of the Company and its Subsidiaries, and subject to the
Confidentiality Agreement, to all premises, properties, personnel, books, records (including Tax
records), contracts, and documents of or pertaining to each of the Company and its Subsidiaries and
Buyer shall have the right to take samples of various media upon reasonable notice at reasonable
times.
(f) Notice of Developments. The Sellers will give prompt written notice to the Buyer of any
material adverse development causing a breach of any of the representations and warranties in §4
above. Each Party will give prompt written notice to the other of any material adverse development
causing a breach of any of its own representations and warranties in §3 above. No disclosure by
any Party pursuant to this §5(f), however, shall be deemed to amend or supplement Annex 1, Annex 2,
or the Disclosure Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
(g) Exclusivity. The Sellers will not (and the Sellers will not cause or permit any of the
Company and its Subsidiaries or 3441 South Willow Investments, L.P. to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to the acquisition of
any capital stock or other voting securities, or any substantial portion of the assets of, the
Company and its Subsidiaries (including any acquisition structured as a merger, consolidation, or
share exchange) or 3441 South Willow Investments, L.P. or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. The Sellers will notify the Buyer immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing, other than any inquiry made by any Person
that has made any such inquiries, offer, or proposals in advance of the date hereof and to whom the
Sellers reply with only a statement that such Seller is under an obligation not to engage in any
discussions or negotiations concerning such inquiry.
(h) Key Employee Agreements. The Sellers will enter into “double-trigger” change of control
severance or similar agreements with the key employees of the Company listed on §5(h) of the
Disclosure Schedule, as and upon such terms as mutually agreed upon by the Sellers and the Buyer, to provide a specified severance package to such employees
if they are terminated
36
by the Company without cause or leave the Company for good reason before the
eighteen month anniversary of the Closing, and the Sellers shall not take any material action with
respect to such employees without prior consultation with the Buyer.
(i) Releases. The Sellers will, prior to the Closing, cause all accounts receivables and
accounts payables (other than one of the Sellers obligations with respect to the Cadillac lease)
between the Company and its Subsidiaries and the Sellers and any of his, her, or its Affiliates
reflected on the Most Recent Balance Sheet or thereafter incurred in the Ordinary Course of
Business to be extinguished without payment of any kind. The parties will cooperate and use their
best efforts to arrange for a release of the Sellers and their respective Affiliates (other than
the Company and its Subsidiaries) of all personal guarantees and obligations with respect to the
Assumed Real Estate Debt and any other Liabilities of the Company and its Subsidiaries set forth on
§5(i) of the Disclosure Schedule effective at the Closing and, except to the extent the Buyer would
be entitled to indemnification against such Liabilities (without regard to whether such Liabilities
exceed the deductibles and thresholds referenced in the proviso of §8(b)), the Buyer will indemnify
and hold Sellers harmless (including reasonable attorneys fees) with respect to all such
Liabilities..
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the period following the
Closing.
(a) General. In case at any time after the Closing any further action is reasonably necessary
or desirable to carry out the purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such further instruments and documents) as
any other Party reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefore under §8 below). The Sellers
acknowledge and agree that from and after the Closing the Buyer will be entitled to possession of
all documents, books, records (including Tax records), agreements, and financial data of any sort
relating to the Company and its Subsidiaries subject to the Sellers being hereby entitled to review
or request and receive (to the extent such documents, books, records, agreements, and financial
data have not been destroyed) any copies thereof they in good faith believe to be necessary or
prudent in respect of its obligations or Liabilities hereunder or with respect to any domestic or
foreign Tax obligations or Tax Returns. The Buyer acknowledges and agrees that from and after the
Closing the Buyer will keep, maintain, and prevent the destruction of all documents, books, records
(including tax records), agreements, and financial data of the Company and its Subsidiaries for the
same length of time and in the same manner as the Buyer currently keeps and maintains such
materials, but not less than five years after the Closing. To the extent the Sellers have a
reasonable need for any such documents, books, records (including tax records), agreements, and
financial data of the Company at the end of such five year term, they may provide written notice to
the Buyer, within 90 days prior to the expiration of such five year term, specifying such need and
the documents, books (including tax records), agreements, and financial data that they wish for the
Buyer to not destroy, in which event the Buyer, at its sole discretion, may continue to retain such
documents, books, records (including tax records), agreements, and financial data or provide the
Sellers a reasonable opportunity to remove such documents, books, records, agreements, and
financial data at the Sellers’ cost.
37
(b) Litigation Support. In the event and for so long as any Party actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date involving any of
the Company and its Subsidiaries, the other Party will cooperate with it and its counsel in the
contest or defense, making available its personnel, and providing such testimony and access to its
books and records as shall be reasonably necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under §8 below).
(c) Transition. None of the Sellers will, directly or indirectly, take any action that is
designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier,
or other business associate of any of the Company and its Subsidiaries from maintaining the same
business relationships with the Company and its Subsidiaries after the Closing as it maintained
with the Company and its Subsidiaries prior to the Closing, except as set forth on §6(c) of the
Disclosure Schedule. For the first eighteen months following the Closing, the Sellers will refer
all customer inquiries relating to products sold by the Company and its Subsidiaries within the two
year period immediately prior to the Closing to the Buyer, except as set forth on §6(c) of the
Disclosure Schedule.
(d) Confidentiality. Each of the Sellers will treat and hold as such all of the Confidential
Information, refrain from using any of the Confidential Information except in connection with this
Agreement, and deliver promptly to the Buyer or destroy, at the request and option of the Buyer,
all tangible embodiments (and all copies) of the Confidential Information which are in any of their
possession. For purposes of this §6(d), Confidential Information does not include information
which is generally available to the public or generally known to persons knowledgeable in the
roofing industry immediately prior to the time of disclosure or use. If Buyer has knowledge that
Seller has or will be in breach of this §6(d), without in any way limiting any of Buyer’s rights
otherwise resulting or arising from any such breach, Buyer, as promptly as practicable, shall send
written notice to Seller of any such breach or alleged breach of this §6(d) specifying in
reasonable detail the breach or alleged breach. In the event that a Seller is requested or
required (by oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, the Seller will notify the Buyer promptly of the request or requirement
so that the Buyer may seek an appropriate protective order or waive compliance with the provisions
of this §6(d). If, in the absence of a protective order or the receipt of a waiver hereunder, the
Seller is, on the advice of counsel, compelled to disclose any Confidential Information to any
tribunal, the Seller may disclose the Confidential Information to the tribunal; provided, however,
that the Seller shall use his reasonable best efforts to obtain, at the request of the Buyer and at
Buyer’s sole expense, an order or other assurance that confidential treatment will be accorded to
such portion of the Confidential Information required to be disclosed as the Buyer shall designate.
The foregoing provisions shall not apply to any Confidential Information which is generally
available to the public or generally known to persons knowledgeable in the roofing industry
immediately prior to the time of use or disclosure for reasons other than a disclosure by the Seller not permitted by this §6(d). The obligations under this §6(d) shall
38
survive for seven years from the Closing Date, except for Confidential Information constituting
trade secrets of the Company and its Subsidiaries, for which such obligations shall survive until
such information becomes part of the public domain.
(e) Covenant Not to Compete. For a period of five (5) years from and after the Closing Date,
each Seller agrees that such Seller will not, and will cause his, her, or its Affiliates not to,
compete with the Company and its Subsidiaries or the Buyer by directly or indirectly owning,
engaging in, operating, controlling, or participating in the ownership, management, operation, or
control of, or being connected as a stockholder, agent, partner, joint venturer, or otherwise, with
any business engaged in any of the manufacture, sale, marketing, or distribution of any products
competitive with what the Company and its Subsidiaries currently sell, market, or distribute
anywhere in North America; provided, however, that the ownership of less than 2% of the outstanding
stock of any publicly traded corporation by the Sellers and their Affiliates shall not be deemed to
violate this sentence. If Buyer has knowledge that Seller has or will be in breach of this §6(e),
without in any way limiting any of Buyer’s rights otherwise resulting or arising from any such
breach, Buyer, as promptly as practicable, shall send written notice to Seller of any such breach
or alleged breach of this §6(e) specifying in reasonable detail the breach of alleged breach. If
the final judgment of a court of competent jurisdiction declares that any term or provision of this
§6(e) is invalid or unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the
term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within which the judgment may
be appealed.
(f) Non-solicitation of Employees. Between the date hereof and the fifth anniversary of the
Closing Date, none of the Sellers or their respective Affiliates will directly or indirectly
attempt to hire, solicit, or hire any officer, employee, or independent individual contractor of
the Company or its Subsidiaries, without the prior written consent of Buyer.
(g) Termination of Agreement with ABMT. In the event at any time within 90 days after the
Closing Date Buyer terminates, or provides notice of termination of, the agreement between the
Company and Advanced Building Materials Technology as in effect immediately prior to the Closing,
at the request of Buyer, Sellers shall promptly pay Buyer 50% of any costs incurred by Buyer as a
result of any such termination.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the
transactions to be performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in §3(a) and §4 above shall be true and
correct in all material respects at and as of the Closing Date;
39
(ii) the Sellers shall have performed and complied with all of their covenants hereunder in
all material respects through the Closing;
(iii) the Sellers, the Company and its Subsidiaries shall have procured all of the third party
consents specified in §5(b) above;
(iv) no action, suit, or proceeding shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause
any of the transactions contemplated by this Agreement to be rescinded following consummation, (C)
affect adversely the right of the Buyer to own the Company Shares, the Purchased Real Estate, or
the Purchased Intellectual Property and to control the Company and its Subsidiaries and use the
Purchased Real Estate and the Purchased Intellectual Property, or (D) affect adversely the right of
the Company and its Subsidiaries to own their assets and to operate their businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(v) the Sellers shall have delivered to the Buyer a certificate to the effect that each of the
conditions specified above in §7(a)(i)-(iii) is satisfied in all respects and that to the Knowledge
of the Sellers no contingency of the type referred to in §7(a)(iv) has occurred or is threatened;
(vi) the Company and its Subsidiaries shall have received all authorizations, consents, and
approvals of governments and governmental agencies referred to in §3(a)(ii), §3(b)(ii), and §4(c)
above;
(vii) the Sellers and the escrow agent thereunder shall have entered into the Escrow
Agreement;
(viii) [intentionally omitted];
(ix) the Buyer shall have received the resignations, effective as of the Closing, of each
director and officer of the Company and its Subsidiaries other than those whom the Buyer shall have
specified in writing at least five business days prior to the Closing, and the Buyer shall have
received evidence reasonably satisfactory to the Buyer that the authority of any and all directors,
officers, and employees of the Company and its Subsidiaries other than those whom Buyer shall have
specified in writing at least five (5) business days prior to the Closing to conduct bank
transactions on behalf of the Company has been terminated;
(x) the Buyer shall have obtained a title insurance policy with respect to the Purchased Real
Estate in form and substance satisfactory to the Buyer;
(xi) the Buyer shall be reasonably satisfied with the key employment contracts required
pursuant to §5(i) above;
40
(xii) the concurrent closing between Buyer (or an Affiliate of Buyer designated by Buyer) and
3441 South Willow Investments, L.P. of the transactions contemplated by the Purchased Real Estate
Agreements;
(xiii) the gross fixed assets of the Company and its Subsidiaries plus their current assets,
less trade accounts payable and other current liabilities (other than current maturities or other
elements of indebtedness for borrowed money), calculated consistently with and in the same manner
and with the same methodology as in the past, are not less than reflected on the Company’s March
31, 2005 Balance Sheet; and
(xiv) all actions to be taken by the Sellers in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments, and other documents
reasonably required to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to the Buyer.
The Buyer may waive any condition specified in this §7(a) if it executes a writing so stating at or
prior to the Closing.
(i) the representations and warranties set forth in §3(b) above shall be true and correct in
all material respects at and as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of its covenants hereunder in all
material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded following consummation
(and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a certificate to the effect that each of
the conditions specified above in §7(b)(i) and (ii) is satisfied in all respects and that to the
actual Knowledge of the Buyer no contingency of the type referred to in §7(b)(iii) has occurred or
is threatened;
(v) the Buyer and the escrow agent thereunder shall have entered into the Escrow Agreement;
41
(vi) the Sellers and their respective Affiliates shall be released from any guarantees or
other obligations under the Assumed Real Estate Debt and the other Liabilities set forth on the
Disclosure Schedule in a manner acceptable to the Sellers;
(vii) the concurrent closing between the Buyer (or an Affiliate of Buyer designated by Buyer)
and 3441 South Willow Investments, L.P. of the Purchased Real Estate Agreements and the payment of
the Purchase Price and assumption of the Real Estate Debt by Buyer and release of Seller and
Seller’s Affiliates with respect thereto; and
(viii) all actions to be taken by the Buyer in connection with consummation of the
transactions contemplated hereby and all certificates, instruments, and other documents reasonably
required to effect the transactions contemplated hereby will be reasonably satisfactory in form and
substance to the Sellers; and
(ix) Seller is paid the Purchase Price and all other amounts due under §2 of this Agreement.
The Sellers may waive any condition specified in this §7(b) if they execute a writing so stating at
or prior to the Closing.
(a) Survival of Representations and Warranties. All of the representations and warranties of
the Sellers contained in §3(a) and §4 (other than §§3(a)(i), 3(a)(ii), 3(a)(iii), 3(a)(iv),
3(a)(v)(A), 4(b), 4(k), and the first three sentences of 3(vi)(A)) shall survive the Closing
hereunder (even if the Buyer knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect for a period of two (2)
years thereafter, after which all such representations and warranties shall expire and be of no
force or effect. All of the other representations and warranties of the Parties contained in this
Agreement (including the representations and warranties of the Sellers contained in §3(a)(i),
3(a)(ii), 3(a)(iii), 3(a)(iv), 3(a)(v)(A), 4(b), 4(k), and the first three sentences of 3(vi)(A))
shall survive the Closing (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in full force and
effect forever thereafter (subject to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of the Buyer. In the event any of the Sellers
breaches any of his, her, or its representations, warranties, and covenants contained herein
(ignoring for purposes of determining whether or not any such breach has occurred, or the amount of
Adverse Consequences associated therewith, any materiality qualifiers in such representations,
warranties, and covenants or any language in such representations, warranties, and covenants
providing that a breach will only occur if it could reasonably be expected to have a Material
Adverse Effect or any similar language), and, if there is an applicable survival period pursuant to
§8(a) above, provided that the Buyer makes a written claim for indemnification against the Sellers
within the applicable survival period stated in §8(a), then the Sellers jointly and severally agree
to indemnify the Buyer from and against the entirety of any Adverse Consequences the Buyer suffers
through and after the date of the claim for indemnification
42
(including any Adverse Consequences the Buyer may suffer after the end of the
applicable survival period) resulting from, arising out of, relating to, in the nature of, or
caused by such breach; provided, however, that the Sellers shall not have any
obligation to indemnify the Buyer from and against any Adverse Consequences resulting from, arising
out of, relating to, in the nature of, or caused by the breach of any representation or warranty of
the Sellers except to the extent the Adverse Consequences resulting from, arising out of, relating
to, in the nature of, or caused by such breach of a representation or warranty exceed a deductible
of $10,000 (at which point the Sellers will be obligated to indemnify only for amounts in excess of
the $10,000) and then not until the Buyer has suffered Adverse Consequences by reason of all such
breaches of all representations and warranties in excess of a $300,000 aggregate threshold (at
which point the Sellers will be obligated to indemnify the Buyer from and against all such Adverse
Consequences beyond such $300,000 threshold); provided further, that the Sellers’
and Seller’s Affiliates’ maximum aggregate liability to Buyer, collectively, under this Agreement
and ancillary documents, agreements, assignments and certificates (including, without limitation,
the Purchased Real Estate Agreements and the documents related to the Purchased Intellectual
Property) for breaches of any representations, warranties, covenants, or agreements shall not
exceed $1,500,000 (the “Liability Cap”) under any circumstance; provided further
that, notwithstanding the foregoing, the Liability Cap shall not apply to breaches of covenants and
agreements set forth in §§6 or 9 or as contemplated in the parenthetical contained in §8(d)(ii)(A)
and amounts paid by Sellers with respect to breaches of §§6 or 9 and the first $800,000 of any
purchase price adjustment payable by Sellers with respect to §2(f) shall not be counted in
determining whether the Liability Cap has been met (e.g. a purchase price adjustment payment
pursuant to §2(f) of $800,000 will not result in only $700,000 being available with respect
to breaches of this Agreement as a result of the Liability Cap).
(c) Indemnification Provisions for Benefit of the Sellers. In the event the Buyer breaches any
of its representations, warranties, and covenants contained herein (even if one or more of the
Sellers knew or had reason to know of any misrepresentation or breach of warranty or covenant at
the time of Closing), and, if there is an applicable survival period pursuant to §8(a) above,
provided that the Sellers make a written claim for indemnification against the Buyer within the
applicable survival period stated in §8(a), then the Buyer agrees to indemnify the Sellers from and
against the entirety of any Adverse Consequences the Sellers may suffer through and after the date
of the claim for indemnification (including any Adverse Consequences the Sellers may suffer after
the end of the applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach.
(d) Matters Involving Third Parties.
(i) If any third party notifies any Party (the “Indemnified Party”) with respect to
any matter (a “Third Party Claim”) that may give rise to a claim for indemnification
against any other Party (the “Indemnifying Party”) under this §8, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party is thereby prejudiced. Notification of any claims for indemnity hereunder
43
shall be provided regardless of whether the claimed amounts are above or below the $300,000
aggregate threshold amount.
(ii) Any Indemnifying Party will have the right to defend the Indemnified Party against the
Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so
long as (A) the Indemnifying Party notifies the Indemnified Party in writing within 15 days after
the Indemnified Party has given notice of the Third Party Claim that, notwithstanding any other
provision of this Agreement to the contrary (including without limitation the limitation on
liability set forth in §8(b)), the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations hereunder, (C) the Third Party
Claim involves only money damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a precedential custom or practice
adverse to the continuing business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in
accordance with §8(d)(ii) above, (A) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the Indemnifying Party (not to be
withheld unreasonably), and (C) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in §8(d)(ii) above is or becomes unsatisfied, however,
(A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the
Indemnifying Party in connection therewith), (B) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending against the Third Party
Claim (including reasonable attorneys’ fees and expenses), and (C) the Indemnifying Party will
remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest
extent provided in this §8, but, in the case of both clause (B) and (C) immediately above, subject
to the limits on such liability set forth in §8(b). The Indemnifying Party may retain separate
counsel at its sole cost and expense and participate in the defense of the Third Party Claim.
44
(e) Determination of Adverse Consequences. The Parties shall make appropriate adjustments for
tax benefits and insurance coverage and take into account the time cost of money in determining
Adverse Consequences for purposes of this §8. All indemnification payments under this §8 shall be
deemed adjustments to the Purchase Price.
(f) Exclusive Remedy. The Buyer and the Sellers acknowledge and agree that the foregoing
indemnification provisions in this §8 shall be the sole and exclusive monetary remedy and monetary
recourse (whether based in contract, tort, or on any other grounds) of the Buyer and the Sellers
with respect to this Agreement, any agreement, document, or certificate delivered pursuant hereto,
and the transactions contemplated by this Agreement and any agreement, document, or certificate
delivered pursuant hereto, including without limitation, with respect to the Purchased Real Estate
and the Purchased Intellectual Property. Without limiting the generality of the foregoing, the
Buyer and the Sellers hereby waive any statutory, equitable, or common law rights or remedies
relating to any environmental, health, or safety matters, including without limitation any such
matters arising under any Environmental Law, Occupational Safety and Health Law, including, without
limitation, CERCLA. Each Seller hereby agrees that he, she, or it will not make any claim for
indemnification against the Company by reason of the fact that he, she, or it was a director,
officer, employee, or agent of the Company or was serving at the request of the Company as a
partner, trustee, director, officer, employee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise) with respect to any action, suit, proceeding, complaint, claim, or demand brought by the
Buyer against such Seller (whether such action, suit, proceeding, complaint, claim, or demand is
pursuant to this Agreement, applicable law, or otherwise).
9. TAX MATTERS. The following provisions shall govern the allocation of responsibility as between
the Buyer and the Sellers for certain tax matters following the Closing Date:
(a) Cooperation on Tax Matters.
(i) The Parties shall cooperate fully, as and to the extent reasonably requested by any other
Party, in connection with the filing of Tax Returns pursuant to this Section and any audit,
litigation, or other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon a Party’s reasonable request) the provision of records and information which
are reasonably relevant to any such audit, litigation, or other proceeding and making employees or
themselves available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
(ii) Buyer and Sellers further agree, upon request, to use their reasonable best efforts to
obtain any certificate or other document from any governmental authority or any other Person as may
be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(iii) Buyer and Sellers further agree, upon request, to provide the other party with all
information that either party may be required to report pursuant to Section 6043 of the Code and
all Treasury Department Regulations promulgated thereunder.
45
(iv) The Sellers shall prepare or cause to be prepared and timely file all income Tax Returns
for the Company and its Subsidiaries required to be filed for taxable periods ending at or prior to
the Closing and shall, except to the extent the Buyer and the Sellers may otherwise agree, control
and conduct all tax examinations involving income Taxes for any period ending at or prior to the
Closing; provided that the Sellers shall not take any actions, or fail to take any actions, that
would cause the Company to not be an S corporation within the meaning of §1361 of the Code at all
times prior to the Closing. The Company and its Subsidiaries shall prepare or cause to be prepared
all Tax Returns for the Company and its Subsidiaries required to be filed covering periods ending
after the Closing Date.
(b) Tax Sharing Agreements. All tax sharing agreements or similar agreements with respect to
or involving the Company and its Subsidiaries shall be terminated as of the Closing Date and, after
the Closing Date, the Company and its Subsidiaries shall not be bound thereby or have any liability
thereunder.
(c) Certain Taxes. All transfer, documentary, sales, use, stamp, registration and other such
Taxes and governmental fees (including any penalties and interest) incurred in transferring the
Company Shares, the Purchased Real Estate and the Purchased Intellectual Property from Sellers to
Buyer, shall be paid by Buyer when due, and Buyer will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and governmental fees, and, if required by applicable law, Sellers
will, and will cause their respective affiliates to, join in the execution of any such Tax Returns
and other documentation.
10. TERMINATION.
(a) Termination of Agreement. The Parties may terminate this Agreement as provided below:
(i) the Buyer and the Sellers may terminate this Agreement by mutual written consent at any
time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice to the Sellers at any
time prior to the Closing (A) in the event any of the Sellers has breached any material
representation, warranty, or covenant contained in this Agreement in any material respect, the
Buyer has notified the Sellers of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach; or (B) if the Closing shall not have occurred on or
before August 30, 2005 by reason of the failure of any condition precedent under §7(a) hereof
(unless the failure results primarily from the Buyer itself breaching any representation, warranty,
or covenant contained in this Agreement); and
(iii) the Sellers may terminate this Agreement by giving written notice to the Buyer at any
time prior to the Closing (A) in the event the Buyer has breached any material representation,
warranty, or covenant contained in this Agreement in any material respect, the Sellers have
notified the Buyer of the breach, and the breach has continued without cure for a
46
period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before August 30,
2005 by reason of the failure of any condition precedent under §7(b) hereof (unless the failure
results primarily from any of the Sellers itself breaching any representation, warranty, or
covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement pursuant to §10(a) above,
all rights and obligations of the Parties hereunder shall terminate without any Liability of any
Party to any other Party (except for any Liability of any Party then in breach); provided that the
terms and provisions of the Confidentiality Agreement shall survive any such termination pursuant
to §10(a) above.
11. MISCELLANEOUS.
(a) Press Releases and Public Announcements. Neither party shall issue any press or news
release or make any similar public announcement relating to the subject matter of this Agreement
without the prior written approval of the other party; provided, however, that Buyer or its
Affiliate may make any public disclosure it believes in good faith is required by applicable law or
regulation (in which case the Buyer will use its reasonable best efforts to advise the Sellers
prior to making the disclosure).
(b) No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon
any Person other than the Parties and their respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes
the entire agreement among the Parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they related in any way to
the subject matter hereof; provided, however, the Confidentiality Agreement shall survive in it
entirety except to the extent the Closing occurs, in which case the Confidentiality Agreement shall
have no further force or effect.
(d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit
of the Parties named herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Party; provided, however, that the Buyer may (i) assign any or
all of its rights and interests hereunder to one or more of its Affiliates and (ii) designate one
or more of its Affiliates to perform its obligations hereunder (in any or all of which cases the
Buyer nonetheless shall remain responsible for the performance of all of its obligations
hereunder). Notwithstanding the foregoing, from and after the Closing, the Buyer may assign its
rights (but not its obligations) under this Agreement to any other Person that buys all or
substantially all of the business of the Company and its Subsidiaries from the Buyer.
(e) Counterparts. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together will constitute one and the same instrument.
47
(f) Headings. The section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other communications hereunder will
be in writing. Any notice, request, demand, claim, or other communication hereunder shall be
deemed duly given if (and then five business days after) it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set
forth below:
If to the Sellers:
0000 X. Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxx Xxxxxxxxx
Facsimile No. (000) 000-0000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxx Xxxxxxxxx
Facsimile No. (000) 000-0000
with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
11777 Xxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
(000) 000-0000
11777 Xxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
(000) 000-0000
If to the Buyer:
Elk Premium Building Products, Inc.
00000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
00000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx & XxXxxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
If to the Process Agent:
GKL Corporate Search
000 X. Xxxxxx, Xxx. 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000-0000
000 X. Xxxxxx, Xxx. 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000-0000
48
Facsimile No. (000) 000-0000
Any Party may send any notice, request, demand, claim, or other communication hereunder to the
intended recipient at the address set forth above using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended recipient. Any Party may
change the address to which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other Parties notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of California without giving effect to any choice or conflict of law
provision or rule (whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of California.
(i) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by the Buyer and the Sellers. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear his or its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby. The Sellers agree that none of the Company and its Subsidiaries has borne or
will bear any of the Sellers’ costs and expenses (including any of their legal fees and expenses)
in connection with this Agreement or any of the transactions contemplated hereby. Without
limitation to the foregoing, the Buyer will be responsible for the costs and expenses of the Title
Policy and related Surveys (not to exceed $20,000) and the Taxes and other governmental fees
specified in §9(c).
(l) Construction. The Parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The word “including” shall mean including without
limitation. The Parties intend that each representation, warranty, and covenant contained herein
shall have independent significance.
49
(m) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits, Annexes, and Schedules
identified in this Agreement are incorporated herein by reference and made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and agrees that the other Parties
would be damaged irreparably in the event any of the provisions of this Agreement are not performed
in accordance with their specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United States or any state
thereof having jurisdiction over the Parties and the matter (subject to the provisions set forth in
§11(o) below), in addition to any other remedy to which they may be entitled, at law or in equity.
(o) Submission to Jurisdiction. Each of the Parties submits to the jurisdiction of any state
or federal court sitting in Dallas County, Texas, in any action or proceeding arising out of or
relating to this Agreement and agrees that all claims in respect of the action or proceeding may be
heard and determined in any such court. Each of the Parties waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or
other security that might be required of any other Party with respect thereto. Each Party appoints
GKL Corporate Search (the “Process Agent”) as his or its agent to receive on his or its
behalf service of copies of the summons and complaint and any other process that might be served in
the action or proceeding. Any Party may make service on the other Party by sending or delivering a
copy of the process (i) to the Party to be served at the address and in the manner provided for the
giving of notices in §11(g) above or (ii) to the Party to be served in care of the Process Agent at
the address and in the manner provided for the giving of notices in §11(g) above. Nothing in this
§11(o), however, shall affect the right of any Party to bring any action or proceeding arising out
of or relating to this Agreement in any other court or to serve legal process in any other manner
permitted by law or at equity. Each Party agrees that a final judgment in any action or proceeding
so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
(p) Joint and Several Obligations. The Sellers’ obligations under this Agreement
shall be joint and several obligations.
*****
50
BUYER:
ELK PREMIUM BUILDING PRODUCTS, INC.
By: | ||||||
Name: | ||||||
Title: | ||||||
SELLERS:
Xxxxxx Xxxxxxxxx |
||
Xxxxx Xxxxxxxxx |
||
The Pressutti Family Trust |
By:
|
||||
By:
|
||||
51
ANNEX 1
EXCEPTIONS TO THE REPRESENTATIONS
AND WARRANTIES OF THE SELLERS
AND WARRANTIES OF THE SELLERS
Annex 1 to Stock Purchase Agreement
ANNEX 2
EXCEPTIONS TO THE REPRESENTATIONS
AND WARRANTIES OF THE BUYER
AND WARRANTIES OF THE BUYER
None.
Annex 2 to Stock Purchase Agreement
EXHIBIT B-1
PURCHASED INTELLECTUAL PROPERTY
A. Issued U.S. Patents
U.S. Patent | ||
Number | Title | |
RE 36,858
|
Low-Cost Highly Aesthetic and Durable Shingle | |
5,365,711
|
Low-Cost Highly Aesthetic and Durable Shingle | |
4,920,721
|
High Profile Fiberglass Shingle |
B. Patent Applications Still in Progress (not yet filed with USPTO)
Subject Matter of Patent Application | Inventors | |
Continuation-in-part application to be prepared to cover improvements to
U.S. Application No. 10/453,699
|
Xxxxxx Xxxxxxxxx, Xxxxxxxx Xxxxxx, Xxxxx Xxxxxxxxx and Xxxxxx Xxxxxx | |
Methods and machines for making the King Ridge and Chancellor products
– related to U.S. Application No. 10/288,202
|
Xxxxxxxx Xxxxxx |
Exhibit B to Stock Purchase Agreement
EXHIBIT C
PURCHASED REAL ESTATE
0000 X. Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx
THE LAND REFERRED TO ABOVE IS SITUATED IN THE COUNTY OF FRESNO, STATE OF CALIFORNIA, AND IS
DESCRIBED AS FOLLOWS:
Parcel 2 of Parcel Map NO. 6421, according to the map thereof recorded in Book 41, Page 74 of
Parcel Maps, in the Office of the County Recorder of said County.
Excepting therefrom all oil, gas, minerals, and other hydrocarbon substances from the property
conveyed in Book 7056, Page 177 of Official Records, Document No. 66065, that portion thereof lying
below a depth of 500 feet, measured vertically, from the contour of the surface of said property
however, Grantor or its successors and assigns shall not have the right for any purpose whatsoever
to enter upon, into or through the surface of said property or any part thereof lying between said
surface and 500 feet below of said surface.
AND
0000 X. Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx
THE LAND REFERRED TO ABOVE IS SITUATED IN THE COUNTY OF FRESNO, STATE OF CALIFORNIA, AND IS
DESCRIBED AS FOLLOWS:
That portion of Xxx 00 xx Xxxxxx Xxxxx, according to the map thereof recorded in Book 2 Page 17, of
Plats, Fresno County Records, described as follows:
Beginning at the Southeast corner of said Lot 30, thence North 89° 37’ 06” West, along the
Southerly line of said Lot 30, 766.33 feet; thence North 0° 13’16” East, 507.82 feet; thence South
89° 46’ 44” East, 776.29 feet to a point in the Easterly line of said Lot 30; thence South 0° 13’
01” West, along said Easterly line 510.00 feet to the point of beginning.
EXCEPTING THEREFROM all of the minerals and mineral ores of every kind and character now known to
exist or hereafter discovered upon, within or underlying said land or that may be produced
therefrom, including, without limiting the generality of the foregoing, all petroleum, oil, natural
gas and other hydrocarbon substances and products derived therefrom together with the exclusive
perpetual right of ingress and egress beneath the surface of said land to explore for, extract,
mine and remove the same, and to make such use of the said land beneath the surface as is necessary
or useful in connection therewith, which use may include lateral or slant drilling, boring, digging
or sinking of xxxxx, shafts or tunnels, provided, however, that said grantor, its successors and
assigns, shall not use the surface of said land in the exercise of any of aid rights, and shall not
disturb the surface of said land or any improvements thereof, as reserved by Southern Pacific
Company, a Corporation, in the Deed recorded October 25, 1966, as Document No. 75882 in Book 5370,
Page 204 of Official Records.
Exhibit C to Stock Purchase Agreement
EXHIBIT E
FORM OF ASSUMPTION AGREEMENT
(NOTE AND DEED OF TRUST)
(NOTE AND DEED OF TRUST)
Exhibit E to Stock Purchase Agreement
EXHIBIT F
FINANCIAL STATEMENTS
Exhibit F to Stock Purchase Agreement
EXHIBIT G
CAPITAL BUDGET OF THE COMPANY AND ITS SUBSIDIARIES
Exhibit G to Stock Purchase Agreement
EXHIBIT H
[Intentionally Omitted]
Exhibit H to Stock Purchase Agreement
EXHIBIT I
AGREEMENT OF PURCHASE AND SALE OF REAL ESTATE
AND ESCROW INSTRUCTIONS
AND ESCROW INSTRUCTIONS
Exhibit I to Stock Purchase Agreement
EXHIBIT J
AGREEMENT OF PURCHASE AND SALE OF REAL ESTATE
AND ESCROW INSTRUCTIONS
AND ESCROW INSTRUCTIONS
Exhibit J to Stock Purchase Agreement
EXHIBIT K
PRELIMINARY TITLE REPORTS
Exhibit K to Stock Purchase Agreement