PURCHASE AGREEMENT
This PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of March 29, 2000, by and between THE ELLISON COMPANY, INC., a North
Carolina corporation ("Seller"), and D and W Holdings, Inc., a Delaware
corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, substantially all of the operating assets of Seller's
Windows and Doors Division ("EWD") on the terms and subject to the conditions
set forth in this Agreement; and
WHEREAS, Seller, the owner of all of the issued and outstanding
shares of capital stock of VES, INC., a Delaware corporation doing business
in North Carolina as ELLISON EXTRUSION SYSTEMS, INC. ("EES"), desires to sell
to Buyer, and Buyer desires to purchase from Seller, such shares on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained in this Agreement, Seller and Buyer hereby
agree as follows:
ARTICLE 1. DEFINITIONS
1.1 "AFFILIATE" shall mean, with respect to any person, any other person
that, directly or indirectly, through one or more intermediaries, controls,
is controlled by or is under common control with, such person. For purposes
of this definition, "control" (including, with its correlative meanings, the
terms "controlling," "controlled by" and "under common control with"), as
applied to any person, shall include the possession, directly or indirectly,
of the power to vote more than fifty percent (50%) of the securities having
voting power for the election of directors of such person or otherwise to
direct or cause the direction of the management and policies of that person,
whether through the ownership of voting securities, by contract or otherwise.
1.2 "ANTITRUST DIVISION" means the Antitrust Division of the United
States Department of Justice.
1.3 "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the Assignment and
Assumption Agreement dated as of the Closing Date between Buyer and Seller
relating to the Assumed Agreements and the Assumed Liabilities, substantially
in the form of Exhibit A hereto.
1.4 "ASSUMED AGREEMENTS" shall mean those agreements, contracts, real
estate leases, equipment leases, and commitments listed on Schedule 1.5,
together with
all of the open purchase orders and sales contracts of EWD issued or entered
into in the ordinary course of business as of the Closing Date.
1.5 "ASSUMED LIABILITIES" shall mean all liabilities and obligations of
Seller arising in the ordinary course of business of EWD (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including, without limitation: (i) all liabilities and
obligations of Seller under agreements that have been validly assigned to
Buyer as of the Closing Date or under which the other party or parties
thereto continue to do business with Buyer (or with Seller for the exclusive
benefit of Buyer) following the Closing on the terms specified in the
Agreement notwithstanding the absence of any formal consent needed thereunder
for the assignment (collectively, the "Transferred Agreements"), (ii) all
liabilities and obligations of Seller with respect to warranty and product
liability claims (including liabilities and obligations for personal injury
and property damage as well as for repair and replacement) based upon or
alleged to arise out of the sale of EWD Products by Seller on or before the
Closing Date, (iii) all liabilities and obligations of Seller arising in the
ordinary course of the EWD Business under any federal, state, local, or
foreign law or any rule, regulation or other requirement of any governmental
or quasi-governmental authority, (iv) all liabilities and obligations of
Seller for Taxes, other than income and franchise taxes, arising in the
ordinary course of business of EWD to the extent reflected (without regard to
deferred Tax assets and liabilities) on the Closing Balance Sheet, (v) all
accounts payable, accrued wages and other expenses and all other current
liabilities reflected on the Closing Balance Sheet to the extent such
liabilities arose in the ordinary course of business, it being the intent of
the parties, subject to the limitations set forth herein, that Buyer shall
succeed to and assume the ordinary course liabilities and obligations of
Seller with respect to the EWD Business to the same extent as if EWD were a
separately incorporated entity and Buyer purchased the stock of that entity,
(vi) subject to Sections 11.1 and 11.7 hereof, all liabilities and
obligations of Seller relating to environmental conditions existing on or
prior to the Closing Date of the property leased to Seller by Ken Chilton and
located at Shorefair Drive and 32nd Street in Winston-Salem, North Carolina
(the "Leased Real Estate"), (vii) subject to Sections 11.1 and 11.7 hereof,
all liabilities and obligations of Seller relating to the use of the
"WeatherLok" name, trademarks and/or service marks, and any variations or
derivations thereof (the "WeatherLok Mark") prior to the Closing Date, and
(viii) the capital expenditures described on Schedule 8.1(a); provided,
however, that the Assumed Liabilities shall in no event include (a) except as
described in clause (iv) of this Section 1.5, any federal, state, local or
foreign Taxes of any kind payable by, or attributable to, Seller or its
shareholders, (b) indebtedness of EWD owed to Seller, (c) indebtedness for
borrowed money and any guarantee of indebtedness for borrowed money
(excluding amounts owed to AmeriMark Building Products d/b/a Reynolds
Building Products in respect of indebtedness under the promissory note dated
February 18, 1998, which amounts are Assumed Liabilities), (d) subject to
clause (v) above (but with the understanding that Buyer will not assume
sponsorship of any Plan in whole or in part), any liability or obligation
under or related to any Plan, (e) fees and expenses of
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Seller relating to the Contemplated Transactions, (f) any liability or
obligation arising in connection with or relating to the property located at
645 Montroyal Road in Rural Hall, North Carolina, (g) any liabilities or
obligations of EWD in respect of any agreement, contract, lease or commitment
other than Transferred Agreements, (h) any liability or obligation under the
Worker Adjustment and Retraining Notification Act with respect to EWD arising
prior to the Closing Date, (i) any liabilities or obligations relating to the
Excluded Assets or not arising out of the EWD Business, (j) any obligation
under the leases with JE as such leases existed prior to their amendment
pursuant to Section 6.21 hereof in connection with the Contemplated
Transactions, (k) any liabilities or obligations arising out of any
litigation or proceeding with Vinyl Products, Inc in connection with events
occurring on or prior to the Closing Date, or (l) any liability for severance
pay to any employees of EWD who are offered employment by Buyer.
1.6 "BILL OF SALE" shall mean the Bill of Sale and Assignment dated as
of the Closing Date evidencing the transfer of the Purchased Assets from
Seller to Buyer, substantially in the form of Exhibit B hereto.
1.7 "BREACHING PARTY" shall have the meaning assigned to such term in
Section 9.1(b) hereof.
1.8 "BUY/SELL AGREEMENT" shall have the meaning assigned to such term in
Section 6.17 hereof.
1.9 "CASH AND CASH EQUIVALENTS" shall mean currency, certificates of
deposit, commercial paper, money market mutual funds, repurchase agreements
in respect of any of the foregoing, bank accounts and other similar
investments.
1.10 "CLAIM NOTICE" shall have the meaning assigned to such term in
Section 11.3(a) hereof.
1.11 "CLOSING" shall mean the consummation of the transactions
contemplated by this Agreement and the Related Agreements (the "Contemplated
Transactions") to be held at the New York offices of Paul, Hastings, Janofsky
& Walker LLP, at 10:00 a.m. on April 27, 2000, or such other date and time as
may be mutually agreed upon by Buyer and Seller.
1.12 "CLOSING BALANCE SHEET" shall have the meaning assigned to such
term in Section 2.4 hereof.
1.13 "CLOSING DATE" shall mean the date on which the Closing actually
takes place.
1.14 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
All citations to provisions of the Code, or to the Treasury regulations
promulgated
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thereunder, shall include any amendments thereto and any substitute or
successor provisions thereto.
1.15 "COMPANIES" shall mean Seller and EES.
1.16 "CONFIDENTIAL INFORMATION" shall have the meaning assigned to such
term in Section 4.32 hereof.
1.17 "CONTEMPLATED TRANSACTIONS" shall have the meaning assigned to such
term in Section 1.11 hereof.
1.18 "DEDUCTIBLE" shall have the meaning assigned to such term in
Section 11.7 hereof.
1.19 "EES AGREEMENTS" shall have the meaning assigned to such term in
Section 4.29 hereof.
1.20 "EES BOOKS AND RECORDS" shall mean all books and records, whether
in physical, electronic or other media, related to the business of EES, the
assets of EES, or the employees of EES, including, without limitation, (i)
financial books and records, (ii) mailing, distribution, customer and
supplier lists, (iii) records with respect to pricing, production, product
development, sales volume, payment history, costs and legal, Tax and
environmental matters, (iv) employment records, and (v) records relating to
Intellectual Property Rights.
1.21 "EES FIXED ASSETS" shall mean all leasehold improvements,
machinery, equipment, auxiliary equipment, fixtures attached to or associated
with the equipment or machinery, machine parts, shop tools and equipment,
spare parts, supplies, office equipment, computers, furniture, furnishings,
office supplies, sales and promotional materials and motor vehicles owned by
EES and used by EES on the Closing Date, including, but not limited to those
listed on Schedule 1.21; provided, however, that EES Fixed Assets shall not
include any Excluded Assets (as defined in Section 1.39 hereof).
1.22 "EES PRODUCTS" shall have the meaning assigned to such term in
Section 10.1(b) hereof.
1.23 "EES SHARES" shall mean all of the issued and outstanding shares of
EES, consisting of 50 shares of common stock, par value $.01 per share.
1.24 "ELLISON MARK" shall have the meaning assigned to such term in
Section 8.16 hereof.
1.25 "ELLISON SUBSCRIPTION AGREEMENT" shall have the meaning assigned to
such term in Section 6.15 hereof.
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1.26 "EMPLOYMENT AGREEMENTS" shall have the meaning assigned to such
term in Section 6.19 hereof.
1.27 "ENCUMBRANCES" shall have the meaning assigned to such term in
Section 2.6 hereof.
1.28 "ENVIRONMENTAL AND SAFETY LAWS" means any and all federal, state
and local laws (including but not limited to common law), statutes,
ordinances, judgments, decrees, licenses, permits, rules and regulations, or
other binding requirement relating to pollution or protection of human health
and the environment, worker health and safety, emissions, discharges,
releases or threatened releases of any Hazardous Material (as defined in
Section 1.43), or otherwise relating to the use, treatment, storage,
disposal, transport or handling of any Hazardous Material.
1.29 "ENVIRONMENTAL OR SAFETY CLAIM" means any claim, demand, complaint,
action, suit, proceeding, investigation or notice by any person or entity
alleging potential liability arising out of, based on, or relating to
Environmental and Safety Laws or the presence of any Hazardous Material at
any location.
1.30 "ESCROW AGENT" shall have the meaning assigned to such term in
Section 2.2(a) hereof.
1.31 "ESCROW AGREEMENT" shall have the meaning assigned to such term in
Section 2.2(a) hereof.
1.32 "EWD ACCOUNTS RECEIVABLE" shall mean all amounts owed to EWD by its
customers and others as of the Closing Date that are classified as "accounts
receivable" in accordance with GAAP as applied in the preparation of the
Financial Statements.
1.33 "EWD BOOKS AND RECORDS" shall mean all books and records, whether
in physical, electronic or other media, related to the business of EWD, the
Purchased Assets or the employees of EWD to whom Buyer makes offers of
employment, including, without limitation, (i) financial books and records,
(ii) mailing, distribution, customer and supplier lists, (iii) records with
respect to pricing, production, product development, sales volume, payment
history, costs and legal, Tax and environmental matters, (iv) employment
records, and (v) records relating to Intellectual Property Rights, but
excluding EWD Books and Records solely related to the Excluded Assets (as
defined in Section 1.39 hereof).
1.34 "EWD BUSINESS" shall mean the business of producing and selling the
EWD Products.
1.35 "EWD FIXED ASSETS" shall mean all leasehold improvements,
machinery, equipment, auxiliary equipment, fixtures attached to or associated
with the equipment or machinery, machine parts, shop tools and equipment,
spare parts, supplies, office
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equipment, computers, furniture, furnishings, office supplies, sales and
promotional materials and motor vehicles owned by Seller and necessary for
the conduct of business as currently conducted by EWD on the Closing Date,
including but not limited to those listed on Schedule 1.35; provided,
however, that EWD Fixed Assets shall not include any Excluded Assets.
1.36 "EWD INTELLECTUAL PROPERTY RIGHTS" shall mean all Intellectual
Property Rights (as defined in Section 1.48 hereof) used by Seller or EWD in
connection with the business of EWD (excluding the Ellison Mark, which is
being licensed to Buyer pursuant to Section 8.16 hereof).
1.37 "EWD INVENTORY" shall mean all raw materials and supplies, work in
process, finished goods, packaging and other manufacturing supplies owned by
Seller as of the Closing Date that is used in connection with the business of
EWD and is classified as "inventory" in accordance with GAAP as applied in
the preparation of the Financial Statements.
1.38 "EWD PRODUCTS" shall have the meaning assigned to such term in
Section 10.1(a) hereof.
1.39 "EXCLUDED ASSETS" shall mean the Cash and Cash Equivalents of
Seller and EES as of the Closing Date net of checks outstanding as of the
Closing Date, all monies or damages awarded by any court, arbitrator, or
administrative body to EWD or Seller in connection with any litigation or
proceeding with Vinyl Products, Inc. brought in connection with events
occurring on or prior to the Closing Date, all accounts receivable
outstanding as of the Closing Date which are the subject of the litigation
titled ELLISON WINDOWS & DOORS, INC. V. VINYL PRODUCTS, INC., TIMOTHY L.
RICH, SEAN DORAN AND RICH EVANS, 99 CIV. 00689 (M.D.N.C.), all tangible and
intangible assets of Seller set forth on Schedule 1.39, and all tangible and
intangible assets of Seller used exclusively in its Specialty Manufacturing
Division and Properties Division.
1.40 "FINANCIAL STATEMENTS" shall mean, collectively, (i) the audited
combined balance sheets of EWD and EES and related statements of earnings,
retained earnings and cash flows at and for the fiscal years ended December
31, 1999 and December 31, 1998, (ii) the audited combined balance sheet of
EWD and EES at December 31, 1997, and in the case of clauses (i) and (ii),
together with the reports thereon by KPMG, independent certified public
accountants, (iii) the unaudited combined balance sheets of EWD and EES and
related interim statements of earnings, retained earnings and cash flows at
and for the fiscal year ended December 31, 1996, and (iv) the unaudited
combined statements of earnings, retained earnings and cash flows of EWD and
EES for the year ended December 31, 1997. The term "Financial Statements"
shall include all financial statements required to be delivered to Buyer
pursuant to Section 4.6(c) hereof.
1.41 "FTC" means the United States Federal Trade Commission.
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1.42 "GAAP" shall mean United States generally accepted accounting
principles, in effect from time to time, consistently applied.
1.43 "HAZARDOUS MATERIAL" means any material, substance or compound
which is, or the emission, discharge, transport, storage, treatment or
release of which is, regulated under Environmental and Safety Laws, whether
constituting a useful product or otherwise, including without limitation any
pollutant, contaminant, waste, hazardous waste, hazardous substance, toxic
substance, hazardous material, extremely hazardous material, asbestos,
polychlorinated biphenyl, petroleum, or any refined product, fraction,
byproduct or constituent thereof.
1.44 "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
1.45 "INDEMNIFIED LOSSES" shall have the meaning assigned to such term
in Section 11.1 hereof.
1.46 "INDEMNIFIED PARTY" shall have the meaning assigned to such term in
Section 11.3(a) hereof.
1.47 "INDEMNIFYING PARTY" shall have the meaning assigned to such term
in Section 11.3(a) hereof.
1.48 "INTELLECTUAL PROPERTY RIGHTS" shall have the meaning assigned to
such term in Section 4.32 hereof.
1.49 "JE" shall mean John Ellison, Jr., the majority shareholder of
Seller.
1.50 "KNOWLEDGE OF SELLER" shall mean the actual knowledge, after due
inquiry, of JE, Douglas Cross, Michael Cornwell, Keith Barnes, Erwin Hartel,
Doug Harden, William Orr, Brenda Cathcart and Roy Hoffman.
1.51 "LEASED REAL ESTATE" shall have the meaning assigned to such term
in Section 1.5 hereof.
1.52 "MANAGEMENT SUBSCRIPTION AGREEMENT" shall have the meaning assigned
to such term in Section 6.16 hereof.
1.53 "MATERIAL ADVERSE EFFECT" shall mean, individually or in the
aggregate, a material adverse effect upon the business, operations,
properties, assets, liabilities, prospects or financial condition of EES and
EWD, taken as a whole.
1.54 "NON-BREACHING PARTY" shall have the meaning assigned to such term
in Section 9.1(b) hereof.
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1.55 "PARENT COMMON STOCK" shall mean the common stock, par value $.01
per share, of Buyer.
1.56 "PERMITS" shall have the meaning assigned to such term in Section
4.23 hereof.
1.57 "POST-CLOSING RETURNS" shall have the meaning assigned to such term
in Section 8.5(b) hereof.
1.58 "PURCHASED ASSETS" shall mean the EWD Accounts Receivable, EWD
Inventory, EWD Fixed Assets, EWD Intellectual Property Rights, EWD Books and
Records, the Assumed Agreements, any and all monies or damages awarded by any
court, arbitrator or administrative body to EWD or to Seller in connection
with the business of EWD (other than those relating to any litigation or
proceeding with Vinyl Products, Inc. brought in connection with events
occurring on or prior to the Closing Date), Cash and Cash Equivalents in an
amount equal to the aggregate amount of checks outstanding as of the Closing
Date, all amounts outstanding under the note payable relating to the
intercompany indebtedness described on Schedule 1.58, all rights against
third parties arising out of the EWD Business, all key man insurance policies
relating to employees of EWD and all other assets used in or arising out of
the conduct of business as currently conducted by EWD, but excluding the
Excluded Assets.
1.59 "PURCHASED SHARES" shall mean the EES Shares.
1.60 "PURCHASE PRICE" shall have the meaning assigned to such term in
Section 2.2 hereof.
1.61 "REAL ESTATE" shall mean the real property described on Schedule
4.16, together with the improvements thereon and the leasehold interests
therein.
1.62 "RELATED AGREEMENTS" means the agreements listed as exhibits to
this Agreement.
1.63 "RELEASE" means any release, threatened release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching, migrating or presence of any Hazardous Material in the environment.
1.64 "SAFETY AND ENVIRONMENTAL PERMITS" shall have the meaning assigned
to such term in Section 4.27 hereof.
1.65 "SCHEDULES" shall mean the Schedules to this Agreement, as referred
to herein, that have been delivered to the parties and initialed or otherwise
signed by the parties to confirm their receipt thereof.
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1.66 "STRADDLE PERIOD" shall have the meaning assigned to such term in
Section 8.5(b) hereof.
1.67 "TAX RETURNS" means any return, report, statement, election,
information return or other document (including any related or supporting
information) filed or required to be filed with any governmental entity in
connection with the determination, assessment, collection or administration
of any Taxes or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
1.68 "TAX" OR "TAXES" means taxes, charges, fees, imposts, levies,
interest, penalties, fines, additions to tax or other assessments or fees of
any kind, including, but not limited to, income, corporate, capital,
estimated, excise, property, real property, sales, use, turnover,
environmental, gross receipts, ad valorem, transfer, gains, profits,
inventory, capital stock, license, payroll, employment, unemployment, social
security, workers' compensation, stamp, value added and franchise taxes,
required deposits, deductions, withholdings and customs duties, imposed by
any governmental entity, together with any obligations under Treas. Reg. ss.
1.1502-6 (or comparable provisions of state, local or foreign Tax law) or any
agreement or arrangement with any Person with respect to the liability for,
or sharing of, Taxes, and including any liability as a successor or
transferee, by contact or otherwise, in respect of Taxes.
1.69 "TRANSACTION DEADLINE DATE" means May 15, 2000.
1.70 "TRANSFERRED AGREEMENTS" shall have the meaning assigned to such
term in Section 1.5 hereof.
1.71 "WEATHERLOK MARK" shall have the meaning assigned to such term in
Section 1.5 hereof.
1.72 "YEAR 2000 DATA" shall have the meaning assigned to such term in
Section 4.39 hereof.
ARTICLE 2. PURCHASE AND SALE OF ASSETS AND SHARES
2.1 PURCHASED ASSETS AND PURCHASED SHARES. Subject to the terms and
conditions of this Agreement, at the Closing, Seller hereby agrees to sell,
convey, transfer and assign all of Seller's right, title and interest in and
to the Purchased Assets and the Purchased Shares to Buyer or an entity
designated by Buyer and Buyer hereby agrees, in accordance with Section
2.2(a) hereof, to purchase, or cause such entity to purchase, the Purchased
Assets and the Purchased Shares. The parties to this Agreement acknowledge
and agree that Buyer shall have no obligations under this Agreement if Buyer
does not procure the consent of its lenders under the credit agreement
described in item one of Schedule 5.4.
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2.2 PURCHASE PRICE. The purchase price for the Purchased Assets and the
Purchased Shares shall be as set forth below (the "Purchase Price"):
(a) At the Closing, subject to Section 2.2(c) hereof, Buyer shall
deliver or cause to be delivered to Seller a payment equal to $125 million
less (i) the amount outstanding as of the Closing Date due under the
promissory note due to AmeriMark Building Products described in Section
1.5(c) hereof, less (ii) one-half of the cost of the representation and
warranty insurance policy described on Schedule 2.2(a) up to $206,250, less
(iii) the aggregate amount of all capitalized lease obligations of EWD and
EES (other than the capitalized lease obligations in respect of the Equipment
Lease Agreement dated April 30, 1998, with Crown Credit Company not exceeding
$4,000) as of the Closing Date; PROVIDED, HOWEVER, that $18 million of such
payment shall be payable to Seller in the form of Parent Common Stock (based
on a value of $1.30 per share), which $18 million of Parent Common Stock
shall be payable to Seller in exchange for 19.148935 of Purchased Shares
that, the parties agree, has a value of $18 million, and the remaining amount
of such payment (other than the $5 million described in Section 2.2(c)
hereof) shall be made in the form of a promissory note (the "Note")
substantially in the form of Exhibit C hereto. The Note shall be secured by a
pledge of Buyer common stock or common stock of Atrium Corporation in a form
reasonably satisfactory to Seller. In order to secure the Seller's
obligations to indemnify Buyer, if so required, pursuant to Article 11
hereof, following repayment of the Note, $7 million of the Purchase Price
shall be held by the Escrow Agent, subject to the terms and conditions of,
and for the period set forth in, an Escrow Agreement substantially in the
form of Exhibit D hereto (the "Escrow Agreement"), with the remaining cash
due to Seller upon repayment of the Note being paid by the Escrow Agent as
set forth in the Escrow Agreement in the amounts set forth opposite such
parties' names.
(b) The parties hereto agree that, notwithstanding anything
contained in this Agreement to the contrary, if after the Closing Date,
Buyer fails (other than as a result of setting off such amount against
amounts due from Reynolds Building Products) to pay any amount under the
promissory note in favor of Reynolds Building Products described in Section
1.5(c) when due, Buyer shall promptly pay to Seller an amount equal to the
amount not paid to Reynolds Building Products.
(c) The parties acknowledge and agree that in connection with the
Contemplated Transactions, (i) Doug Cross, Mike Cornwell and Keith Barnes
will purchase, in the aggregate, $5 million of common stock from Buyer
pursuant to the terms of the Management Subscription Agreement, (ii) Seller
will loan $5 million to the above named persons so that they may purchase
such common stock, and (iii) $5 million of the Purchase Price due to Seller
shall be retained by Buyer in satisfaction of the obligations described in
clause (i) above.
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2.3 ASSUMED LIABILITIES. Subject to Section 8.5(i) hereof, at the
Closing, Buyer shall assume and agree to pay the Assumed Liabilities pursuant
to the terms of the Assignment and Assumption Agreement.
2.4 CLOSING BALANCE SHEET.
(a) As soon as practicable, but in no event later than ninety (90)
days after the Closing Date, Buyer shall prepare a combined balance sheet of
EES and EWD as of the close of business on the Closing Date (the "Closing
Balance Sheet"). The Closing Balance Sheet shall be prepared in accordance
with GAAP, including all normal year-end adjustments based on methodologies
consistent with those used in connection with preparing the audited combined
balance sheet of EES and EWD dated as of December 31, 1999. Buyer shall
promptly deliver to Seller when available a copy of the Closing Balance Sheet.
(b) If Seller does not object to the Closing Balance Sheet within
twenty (20) business days of receipt thereof, Seller shall be deemed to have
accepted the Closing Balance Sheet as final.
(c) If Seller objects to the amount of the Closing Balance Sheet,
Seller shall notify Buyer within twenty (20) business days following Seller's
receipt thereof, setting forth in specific detail the basis for such
objection and a proposal for any adjustments to the Closing Balance Sheet.
Buyer and Seller shall seek in good faith to reach agreement as to any such
proposed adjustment, or that no such adjustment is necessary, within thirty
(30) days following Buyer's receipt of notice of Seller's objection. If
agreement is reached in writing within such period as to all proposed further
adjustments, or that no adjustments are necessary, the parties shall make
such adjustments, if any, and the Closing Balance Sheet shall be deemed to be
final. If Buyer and Seller are unable to reach agreement within thirty (30)
days following Buyer's receipt of notice of Seller's objection, then Deloitte
& Touche in Charlotte, North Carolina, or any other mutually agreed upon
office of Deloitte & Touche or other accounting firm (the "Third Party
Accounting Firm"), shall be engaged to review the proposed Closing Balance
Sheet, and shall make a determination as to the resolution of any adjustments
necessary to cause the Closing Balance Sheet to have been properly prepared
in accordance with this Agreement. All such resolutions shall relate only to
such matters as are still in dispute and shall represent either agreement
with the position taken by Buyer or Seller or a compromise between such
positions. The determination of the Third Party Accounting Firm shall be
delivered as soon as practicable following selection of the Third Party
Accounting Firm and shall be final, conclusive and binding upon Buyer and
Seller. The non-prevailing party shall pay the fees and expenses of the Third
Party Accounting Firm; provided, that in the event of a compromise between
the positions of the parties, such fees and expenses shall be prorated based
on the relative success of the parties in prevailing on their positions.
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(d) Seller and accountants and representatives designated by Seller
(which shall not, in any event, be employees of EES or EWD) shall be
permitted full access to examine the books and records of EES and EWD upon
their reasonable request in connection with their review of the Closing
Balance Sheet, at such reasonable times and in a reasonable manner mutually
acceptable to Buyer and Seller during the twenty (20) business day period
following delivery by Buyer to Seller of the Closing Balance Sheet.
2.5 ALLOCATION OF PURCHASE PRICE. Unless otherwise required by
applicable law: (i) forty-seven million dollars ($47,000,000) of the total
Purchase Price shall be allocated to the Purchased Shares in accordance with
Sections 2.1 and 2.2(a) hereof and (ii) the balance shall be allocated among
the Purchased Assets as shall be agreed to between the parties as soon as
practicable following the Closing and which allocation among the Purchased
Assets shall be in accordance with Section 1060 of the Code and the
regulations promulgated thereunder and all applicable provisions of state,
local and foreign law. Unless required by applicable law, no party hereto
will, and each party will cause its respective Affiliates not to, take a
position on any federal, state, local or foreign Tax Return (including any
Asset Acquisition Statement required by Code Section 1060 (Form 8594 (or any
successor form)) filed in connection therewith), before any governmental
agency charged with the collection of any income tax or in any judicial
proceeding that is in any way inconsistent with the purchase price allocation
set forth in this Section 2.5. Schedule 2.5 sets forth Buyer's good faith
estimate of the allocation of the Purchase Price with respect to the
Purchased Assets to plant, property and equipment of EWD based on information
available as of December 31, 1999.
2.6 DELIVERY OF PURCHASED ASSETS AND PURCHASED SHARES. Subject to the
terms and conditions of this Agreement, at the Closing, Seller shall deliver,
or cause to be delivered, to Buyer, free and clear of all claims, pledges,
security interests, liens, charges and all other encumbrances of any kind
(collectively, "Encumbrances"), (i) the Purchased Assets, and (ii) a stock
certificate representing the Purchased Shares in negotiable form for valid
transfer, duly endorsed in blank or with separate executed stock transfer
powers attached.
2.7 ASSIGNMENT OF CONTRACTS AND RIGHTS. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall not constitute an agreement
to assign any claim, contract, license, lease, commitment, sales order,
purchase order or any claim or right, or any benefit arising thereunder or
resulting therefrom, if an attempted assignment thereof without the consent
of a third party thereto would constitute a breach thereof or in any way
affect the rights of Buyer or Seller thereunder. Seller shall cooperate with
Buyer in obtaining the benefits of such claims, contracts, licenses, leases,
commitments, sales orders or purchase orders.
2.8 FURTHER DOCUMENTS AND STATEMENTS. Seller hereby agrees to execute
and deliver, without further consideration, such documents and instruments in
addition to
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those provided for herein as may be reasonably requested by Buyer to
effectuate the provisions hereof, whether at or after the Closing, including
but not limited to such confirmatory conveyances and assignments as may be
reasonably requested.
ARTICLE 3. CLOSING
3.1 SIMULTANEOUS ACTIONS. All actions to be taken and all documents to
be executed and delivered by the parties at the Closing shall be deemed to
have been taken and executed simultaneously, and no action shall be deemed
taken nor any document executed and delivered until all have been taken,
executed and delivered.
3.2 CLOSING TRANSACTIONS. At the Closing, subject to all of the terms
and conditions of this Agreement:
(a) Seller and Buyer will execute and deliver the Assignment and
Assumption Agreement;
(b) Seller will execute and deliver to Buyer the Bill of Sale and
Assignment and any other documents of transfer reasonably requested by Buyer
with respect to the Purchased Assets;
(c) Seller, Buyer, the Escrow Agent and the other parties thereto
will execute and deliver the Escrow Agreement;
(d) Seller and Buyer will execute and deliver the Ellison
Subscription Agreement and consummate the transactions contemplated thereby;
(e) Doug Cross, Mike Cornwell, Keith Barnes and Buyer will execute
and deliver the Management Subscription Agreement and consummate the
transactions contemplated thereby;
(f) Doug Cross, Mike Cornwell, Keith Barnes and Buyer will execute
and deliver the Buy/Sell Agreements;
(g) Doug Cross, Mike Cornwell, Erwin Hartel and Keith Barnes will
execute and deliver the Employment Agreements;
(h) Seller will deliver or make available to Buyer the EWD Books and
Records and the EES Books and Records, provided, that in the case of
financial books and records that contain information relating to both the
Excluded Assets and the Purchased Assets, Seller may provide Buyer with
copies of such books and records from which information relating solely to
the Excluded Assets has been deleted so long as such deletion does not result
in such books and records not being complete and correct as to information
relating to EWD and Seller need not provide consolidated financial
information of Seller;
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(i) The certificates, documents and opinions of counsel required by
Articles 2, 6 and 7 hereof will be delivered;
(j) Buyer will transfer the Note and the Parent Common Stock in
accordance with and subject to Article 2 hereof and the terms and conditions
of the Ellison Subscription Agreement ; and
(k) The parties shall take such other action as may be necessary or
appropriate to consummate the Contemplated Transactions.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State
of North Carolina, and EES is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Complete and
accurate copies of (i) the Articles of Incorporation of Seller and all
amendments thereto, certified by the Secretary of State of the State of North
Carolina, (ii) the By-Laws of Seller and all amendments thereto, certified by
Seller's Secretary, (iii) the Certificate of Incorporation of EES and all
amendments thereto, certified by the Secretary of State of the State of
Delaware, and (iv) the By-Laws of EES and all amendments thereto, certified
by EES's Secretary, have been delivered to Buyer. Each of Seller and EES has
full power and authority to own, lease and operate its properties and assets
(including the Purchased Assets) and to carry on its business as presently
conducted and is duly qualified and in good standing as a foreign corporation
in each jurisdiction in which the character of properties owned or leased by
it or the nature of its business requires such qualification, which
jurisdictions are set forth on Schedule 4.1, except where the failure to so
qualify would not, individually or in the aggregate, have a Material Adverse
Effect.
4.2 DUE AUTHORIZATION; BINDING OBLIGATION.
(a) Seller has all requisite corporate power and authority to enter
into and deliver this Agreement and the Related Agreements and to perform its
obligations hereunder and thereunder and has duly authorized the execution,
delivery and performance of this Agreement and the Related Agreements by all
necessary corporate action.
(b) This Agreement and the Related Agreements have been duly and
validly authorized, executed and delivered by Seller and constitute Seller's
legal, valid and binding obligation, enforceable in accordance with their
respective terms, except as enforceability is limited by (i) principles of
equity that may restrict the availability of specific performance and other
equitable remedies (whether such enforceability is considered in a proceeding
in equity or at law) and (ii) bankruptcy, insolvency,
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reorganization, moratorium, fraudulent conveyance, fraudulent transfer and
other laws applicable to creditors' rights generally.
4.3 EQUITY OWNED BY EES. EES, directly or indirectly, owns no equity
interest in any corporation and has no interest in any partnership, limited
liability company, joint venture or other legal entity.
4.4 GOVERNMENTAL APPROVALS AND NOTICES. Except for the requirements of
the HSR Act and as set forth on Schedule 4.4 or 4.5, the execution, delivery
and performance of this Agreement and the Related Agreements by Seller, and
consummation of the Contemplated Transactions are not subject to the
jurisdiction, approval, notification of or consent of any governmental,
regulatory or administrative agency or other third party.
4.5 APPROVALS AND NOTICES REQUIRED; CONFLICT WITH OTHER INSTRUMENTS.
Except as described on Schedule 4.5, the execution, delivery and performance
of this Agreement and the Related Agreements by Seller and consummation of
the Contemplated Transactions will not (a) violate (with or without the
giving of notice or the lapse of time or both) or require any consent or
approval, filing or notice under and will not conflict with, or result in the
breach or termination of any provision of, or constitute a default under, or
result in the acceleration of the performance of the obligations of either of
the Companies under, their respective Articles or Certificate of
Incorporation or Bylaws or under any indenture, mortgage, deed of trust,
lease, license agreement, contract, instrument or other agreement, or any
law, statute, order, judgment or decree, to which either of the Companies is
a party or by which either of them or any of the Purchased Assets or EES's
assets is subject or bound or (b) result in the creation of any Encumbrance
upon any of the Purchased Assets, EES's assets or the Purchased Shares.
4.6 FINANCIAL CONDITION.
(a) The audited Financial Statements, correct and complete copies of
which are attached hereto as Schedule 4.6(a), were prepared in accordance
with GAAP applied on a consistent basis, except as may be indicated in the
notes thereto, and present fairly the financial position, results of
operations, retained earnings and cash flows of EWD and EES on a combined
basis as of December 31, 1999 and 1998, and for the years then ended, and the
financial position of EWD and EES on a combined basis as of December 31, 1997.
(b) The unaudited Financial Statements, correct and complete copies
of which are attached hereto as Schedule 4.6(b), were prepared in accordance
with GAAP applied on a basis consistent with that used in the preparation of
the audited Financial Statements and present fairly (i) the financial
condition, results of operations, retained earnings and cash flows of EWD and
EES on a combined basis as of December 31, 1996 and for the year then ended,
and (ii) the results of operations, retained earnings and cash flows of EWD
and EES on a combined basis for the year ended December 31, 1997;
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provided however, that Seller used its best efforts to ensure that the
accruals set forth in the unaudited balance sheets described above are based
on reasonable estimates.
(c) Within twenty-five (25) days following the end of each month,
Seller shall deliver to Buyer correct and complete copies of the unaudited
combined balance sheet of EWD and EES as of the end of each month ending
subsequent to the date hereof and prior to the Closing Date and the related
statements of earnings, retained earnings and cash flows for each month then
ended. The unaudited Financial Statements furnished to Buyer after the date
hereof pursuant to this Section 4.6(c) will be (i) prepared in accordance
with GAAP applied on a basis consistent with that used in the preparation of
the audited Financial Statements except for the lack of footnotes and other
presentation items and except that there will be no physical inventory count
or updating of depreciation or accruals for vacation pay, medical claims and
similar items, and (ii) subject to the foregoing, will present fairly the
financial condition, results of operations and cash flows of EWD and EES on a
combined basis as of and for the month then ended.
(d) All inventory of EWD and all inventory of EES as set forth in
the Financial Statements consisted of, and all such inventory as of the
Closing Date as set forth on the Closing Balance Sheet will consist of, raw
materials, supplies, work-in-process, goods in transit and finished goods of
a quality and quantity usable or salable in the ordinary course of business
of EWD and EES. The value at which inventories were reflected in the
Financial Statements was the lower of cost or market value adjusted to
conform to FIFO inventory valuation principles, all in accordance with GAAP
applied on a basis consistent with that of the preceding fiscal year.
(e) All accounts receivable of EWD (other than the accounts
receivable outstanding as of the Closing Date which are the subject of the
litigation titled ELLISON WINDOWS & DOORS, INC. V. VINYL PRODUCTS, INC.,
TIMOTHY L. RICH, SEAN DURAN AND RICH EVANS, 99 CIV. 00689 (M.D.N.C.)) and all
accounts receivable of EES as set forth in the Financial Statements are, and
all such accounts receivable which arise between the date hereof and the
Closing Date will be, genuine, valid, binding and subsisting, having arisen
or arising out of bona fide sales and deliveries of products or the
performance of services in the ordinary course of business consistent with
past practice and are collectible in the ordinary course of business, subject
to no defenses, counterclaims or set-offs (other than in the ordinary
course), but subject to allowances and accruals for bad debt as reflected in
the Financial Statements and the Closing Balance Sheet. Such allowances and
accruals are in accordance with GAAP applied on a basis consistent with that
of the preceding fiscal year.
(f) Neither EWD nor EES has any indebtedness or capitalized lease
obligations other than as described on Schedule 4.6(f).
4.7 ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule 4.7 or
as reflected in the audited Financial Statements as of and for the year ended
December 31,
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1999, since January 1, 1999, EWD (or Seller on behalf of EWD) and EES have
each conducted its business only in the ordinary course consistent with past
practice, without extraordinary or unusual transactions, and neither has:
(a) mortgaged, pledged or subjected to any lien, charge or other
encumbrance, any portion of its assets;
(b) suffered any change, event or condition that individually or in
the aggregate has had (or could reasonably be expected to have) a Material
Adverse Effect;
(c) sold, assigned or transferred any Intellectual Property Rights;
(d) suffered any damage, destruction or loss (whether or not covered
by insurance) which, in the aggregate, exceed $50,000;
(e) issued, sold or transferred any capital stock of EES or other
equity securities, securities convertible into capital stock of EES or other
equity securities or warrants, options or other rights to acquire capital
stock of EES or other equity securities, or any bond or debt securities of
EES;
(f) made any declaration, setting aside or payment of any dividend,
or any distribution in respect of capital stock of EES, or any redemption,
purchase or other acquisition of any capital stock of EES;
(g) increased or changed the terms of the compensation or benefits
payable or to become payable to any of its officers, directors, employees or
agents, except increases in the ordinary course of business;
(h) except for purchase orders or sales contracts issued or entered
into in the ordinary course of business, borrowed any amount or incurred any
obligations or liabilities of any kind, absolute, contingent or otherwise,
whether due or to become due, which, in the aggregate, exceed $25,000 in
value;
(i) made any unfunded or committed to make any unfunded capital
expenditures in excess of $50,000;
(j) made any change in the terms of any bonus, insurance, pension or
other benefit plan for or with any of its officers, directors, employees or
agents which increases amounts paid, payable or to become payable thereunder,
other than in the ordinary course of business;
(k) entered into any employment or collective bargaining agreement
with any individual, representative, labor organization and/or union;
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(l) received any written complaints or concerns which relate to its
labor relations;
(m) disposed of any assets, other than the disposal of inventory in the
ordinary course of business, which, in the aggregate, exceed $50,000 in value;
(n) written down, written off, compromised or taken any steps to
accelerate collection of, any of its accounts receivable;
(o) except for purchase orders and sales contracts issued or entered
into in the ordinary course of business, entered into any contracts, leases or
license agreements which, in the aggregate, exceed $25,000 in value;
(p) engaged in, or agreed to engage in, any transaction with any
Affiliate;
(q) made any change in its accounting procedures or practices;
(r) made any unreasonable changes from its past practice with respect
to its credit criteria or failed to make any appropriate changes to its
allowance for doubtful accounts in the event its credit criteria was reasonably
changed;
(s) engaged in, or agreed to engage in, any other transactions, except
in the ordinary course of business, which, in the aggregate, exceed $100,000 in
value;
(t) deferred payment of, or except in the ordinary course of business,
compromised or adjusted any account payable or other liability or obligation; or
(u) since December 15, 1999, caused any "employment loss," as such term
is defined in the Worker Adjustment and Retraining Notification Act.
4.8 TITLE. Except as set forth on Schedule 4.8, Seller has, and as of the
Closing Date will have and will convey and transfer to Buyer, good and
marketable title to the Purchased Assets and the Purchased Shares, free and
clear of all Encumbrances, and EES has, and as of the Closing Date will have
good and marketable title to its assets, including without limitation the EES
Fixed Assets, free and clear of all Encumbrances.
4.9 OUTSTANDING CAPITAL STOCK. EES is authorized to issue 1,000 shares of
common stock, par value $.01 per share, of which only the EES Shares are issued
and outstanding. The EES Shares are owned beneficially and of record by Seller,
free and clear of all Encumbrances, and Seller has full legal power and capacity
and all authorization required by law to transfer and deliver the EES Shares in
accordance with this Agreement. None of the EES Shares is, or at the Closing
will be, subject to restrictions on the transfer thereof, except for
restrictions imposed by applicable Federal and state securities laws. The EES
Shares were duly authorized and validly issued and are
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fully paid, nonassessable and free of all preemptive and other rights. None
of the EES Shares was issued in violation of any preemptive or other right.
None of the Companies are, and, at the Closing, they will not be, a party to
or bound by any contract or agreement which grants to any person or entity an
option or right of first refusal or other right of any character to acquire
at any time, or upon the happening of any stated events, shares of capital
stock or other securities of EES whether or not presently issued and
outstanding.
4.10 OUTSTANDING OPTIONS OR OTHER RIGHTS. There is no outstanding right,
subscription, warrant, call, option, or other agreement of any kind to issue,
purchase or otherwise to receive from EES or Seller any of the outstanding,
the authorized but unissued, the unauthorized or the treasury shares of the
capital stock or any other security of EES, and there is no outstanding
security of any kind convertible or exchangeable into capital stock of EES.
4.11 BUSINESS OF EWD AND EES. Except for the Excluded Assets, the
Purchased Assets include all assets necessary, and EWD does not need to rely
on any asset or service of Seller, to conduct the business of EWD in the
manner such business was conducted by Seller prior to the date hereof. Except
for the Excluded Assets, EES owns, and will own as of the Closing Date, all
assets necessary, and does not need to rely on any asset or service of Seller
other than the Purchased Assets, to conduct its business in the manner such
business was conducted prior to the date hereof.
4.12 "FOREIGN PERSON". The Seller is not a "foreign person" within the
meaning of Code Section 1445(f)(3) and Treasury Regulation Section
1.1445-2(b)(2)(i).
4.13 FIXED ASSETS. The EWD Fixed Assets and the EES Fixed Assets are,
and as of the Closing Date will be, in good operating condition and repair
and capable of continued operation in accordance with applicable permits,
ordinary wear and tear excepted, subject to routine maintenance and repair in
accordance with past practice. The capital expenditures shown on the
Financial Statements have been spent in respect of the EWD Fixed Assets and
the EES Fixed Assets.
4.14 BOOKS AND RECORDS. The EWD Books and Records and the EES Books and
Records have been maintained in the ordinary course of business and reflect
bona fide transactions.
4.15 REAL ESTATE.
(a) Except as set forth on Schedule 4.15, JE has good and marketable
title to the Real Estate located at The Welcome Business Center in Welcome,
North Carolina, and Seller has a valid and subsisting leasehold interest in
and to the Leased Real Estate, free and clear of any Encumbrance, except for
installments of special assessments not yet delinquent, recorded easements,
covenants and other restrictions, and utility easements, building
restrictions, zoning restrictions, and other easements and restrictions
existing generally with respect to properties of a similar character that do
not,
19
individually or in the aggregate, affect materially and adversely the current
use, occupancy, value or marketability of title of the Real Estate.
(b) There are no pending or, to the Knowledge of Seller, threatened
condemnation or eminent domain proceedings, lawsuits or administrative
actions relating to the Real Estate or other matters affecting materially and
adversely the current use, occupancy or value thereof, or, to the Knowledge
of the Seller, any basis therefor.
(c) The buildings and improvements are located within the boundary
lines of the Real Estate, are not in violation of applicable setback
requirements, zoning laws, and ordinances and do not encroach on any
easement, except that with respect to the Leased Real Estate the foregoing is
to the Knowledge of Seller.
(d) All plants, facilities and structures used in the operation of
the business of EWD and/or EES are suitable for the purposes used, are
adequate and sufficient for all current operations of their respective
businesses and, subject to ordinary wear and tear, are in good operating
condition and repair, except that with respect to the Leased Real Estate the
foregoing is to the Knowledge of Seller.
(e) There are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any party or parties other than the
Companies the right of use or occupancy of any portion of the Real Estate,
except that with respect to the Leased Real Estate the foregoing is to the
Knowledge of Seller.
(f) There are no outstanding options or rights of first refusal to
purchase the Real Estate or any portion thereof or interest therein, except
that with respect to the Leased Real Estate the foregoing is to the Knowledge
of Seller.
(g) There are no parties other than the Companies in possession of
the Real Estate, except that with respect to the Leased Real Estate the
foregoing is to the Knowledge of Seller.
(h) Ingress and egress to and from The Welcome Business Center in
which certain Real Estate is located and, to the Knowledge of Seller, to and
from the property on which the Leased Real Estate is located, are provided
over and across publicly dedicated paved streets, which are maintained by the
local municipality and, to the Knowledge of Seller, there are no proposals to
change such access roads adjoining or abutting the Real Estate or to change
the grade of such access roads.
(i) Except as set forth on Schedule 4.15, the Real Estate is
serviced by adequate water, sewer and utility service in connection with the
current and anticipated use thereof, except that with respect to the Leased
Real Estate the foregoing is to the Knowledge of Seller.
20
(j) The Real Estate and the improvements erected thereon are
currently located in an area whose zoning classification permits the
development, use and operation of the Real Estate as currently used without
special exception or permit, except that with respect to the Leased Real
Estate the foregoing is to the Knowledge of Seller, and neither Seller nor
EES has received any notice of any proceeding to change adversely or
down-zone the existing zoning classification as to any portion of the Real
Estate.
(k) Seller has delivered to Buyer copies of all certificates of
occupancy with respect to the Real Estate located at The Welcome Business
Center in Welcome, North Carolina.
(l) The improvements to the Real Estate have been constructed in
accordance with, and comply with, all requirements of all applicable laws,
ordinances, regulations and orders, including without limitation applicable
zoning, building and fire safety codes and all restrictive covenants, if any,
and other easements, encumbrances or agreements affecting title to the Real
Estate, except that with respect to the Leased Real Estate the foregoing is
to the Knowledge of Seller, and no written outstanding notices of violation
of any law, regulation, ordinance, order or requirement has been received by
the Seller or EES or their respective Affiliates. No portion of the Real
Estate is a designated historic property or subject to any laws, ordinances,
regulations or orders which, in the event of total or partial casualty, would
prevent the reconstruction of the improvements to the Real Estate or the
restoration of the current use of such improvements at the time of such
casualty as a matter of right without special exception or permit, except
that with respect to the Leased Real Estate the foregoing is to the Knowledge
of Seller
4.16 LEASES AND FACILITIES. Schedule 4.16 hereto sets forth a true,
correct and complete list of all real property owned or used by EWD or EES in
the operation of their respective businesses, together with a list of each
lease, sublease, license or any other instrument under which Seller, EWD
and/or EES claims or holds a leasehold or other interest or right to the use
thereof, and with respect to the leases, subleases, licenses and other
instruments on Schedule 4.16, identifying which of those leases, subleases,
licenses or other instruments, if any, require that a consent be obtained
(from any lessors, guarantors or any other third parties) before a valid
transfer of such leases, subleases, licenses or other instruments may be
obtained, and identifying in each instance the party which is required to
grant consent thereto, the location of the premises, the date and term of the
agreement, the amount of the monthly rent and any additional material terms
thereof. Such leases, subleases, licenses and other agreements are valid,
subsisting, in full force and effect and binding upon the parties thereto in
accordance with their terms, and there is no default or event which with the
giving of notice or passage of time, or both, would result in a default under
such agreement. All of the facilities set forth on Schedule 4.16 had, and
have, all permits or other authorizations required for their construction and
operation, and are equipped in conformity with all laws and governmental
regulations and authorizations applicable to EWD and EES and to their
respective businesses, and all such permits are validly issued, in good
standing and in full
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force and effect, except that with respect to the Leased Real Estate the
foregoing is to the Knowledge of Seller, and, except as set forth on Schedule
4.23, all such permits will transfer to Buyer as part of the Contemplated
Transactions with no further authorization or consent. Prior to the date
hereof, Seller has delivered to Buyer true, correct and complete copies of
all of the leases, subleases, licenses and other instruments set forth on
Schedule 4.16 and any related agreements. The Seller and/or EES has paid in
full or accrued all amounts due, and has satisfied in full or accrued all
liabilities due and payable under such leases, subleases, licenses and other
agreements. Neither the Seller nor EES is, and as of the Closing Date neither
will be, in default under any of such leases, subleases, licenses or other
agreements, nor to the Knowledge of Seller, is any other party in default
thereunder, and no facts or circumstances have occurred which, with the
giving of notice or the passage of time or both, would constitute a default
under any of such leases, subleases, licenses or other agreements.
4.17 TAX MATTERS.
(a) Each of Seller and EES has timely filed, or caused to be timely
filed, all Tax Returns required to be filed by it with all governmental
entities, including, without limitation, all Tax Returns due on a quarterly
basis, and all such Tax Returns which have been filed are accurate and
complete in all material respects and were prepared in accordance with
applicable law. No extension of time within which to file any Tax Return
which has not been filed has been requested by Seller or EES or granted with
respect to Seller or EES; provided, however, extensions will be requested
with respect to Tax Returns otherwise due to be filed on March 15, 2000 as
set forth on Schedule 4.17(a).
(b) Each of the Seller and EES has timely paid (or there has been
timely paid on its behalf) all Taxes required to be paid, withheld, or
deducted, or for which the Seller or EES is liable, whether or not such Taxes
are shown (or required to be shown) on a Tax Return, including, without
limitation, all quarterly or estimated payments and deposits. The Financial
Statements reflect an adequate accrual or reserve (without regard to deferred
Tax assets and liabilities) for all Taxes not yet due and payable.
(c) The Seller has delivered to, or made available for inspection
by, the Buyer true, correct and complete copies of all Tax Returns, audit and
examination reports, and statements of deficiencies filed by, assessed
against or agreed to by either Seller or EES for all periods and will deliver
to, or make available for inspection by (including providing notice to Buyer
of Seller's receipt thereof), Buyer any such documents received on or before
the Closing Date immediately upon receipt. Except as set forth on Schedule
4.17(c), neither Seller nor EES has received written notice of any
deficiencies for any Taxes asserted or assessed against the Seller or EES
that remain unpaid. Except as set forth on Schedule 4.17(c), neither the
Seller nor EES has received any written notice that the Tax Returns of the
Seller or EES are currently being or may be
22
audited or examined by the Internal Revenue Service or any other state, local
or foreign governmental authority. Except as set forth on Schedule 4.17(c),
no examinations, actions, suits or proceedings with respect to Taxes are
pending or threatened against the Seller or EES. Neither the Seller nor EES
has waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(d) Neither the Seller nor EES has agreed or is required to include
in income any adjustment under either Section 481(a) or Section 482 of the
Code (or an analogous provision of state, local or foreign law) by reason of
a change in accounting method or otherwise and neither the Seller nor EES has
proposed such adjustment or received written notice that the Internal Revenue
Service or another taxing authority has proposed such adjustment. Neither the
Seller nor EES has received written notice of a claim made by any Taxing
authority in a jurisdiction where the Seller or EES, as the case may be, does
not file Tax Returns that the Seller or EES is or may be subject to Tax in
such jurisdiction. Except as set forth on Schedule 4.17(d), neither Seller
nor EES has been a member of an "affiliated group" within the meaning of Code
Section 1504(a)(1) (or affiliated, combined, consolidated, unitary or similar
group for state, local or foreign Tax purposes) other than the affiliated
group which currently consists of only Seller and EES, nor has the Seller or
EES elected or been required to join in any consolidated, combined, unitary
or similar group with respect to Federal, state, local or foreign Tax
filings. EES has not made any payments, is not obligated to make any
payments, and is not a party to any agreement that would reasonably be
expected to obligate it to make any payments that will not be deductible by
reason of Section 280G of the Code. There are no Tax rulings, requests for
rulings or closing agreements with any Tax authority with respect to Seller
or EES. EES has no deferred income reportable for a current tax period (or
portion thereof) or a period (or portion thereof) beginning after the Closing
Date but that is attributable to a transaction (e.g., an installment sale)
occurring in a period (or portion thereof) ending on or prior to the Closing
Date. Except as shown on Schedule 4.17(d), none of the presently outstanding
debt of the Seller or EES is "corporate acquisition indebtedness" within the
meaning of Section 279(b) of the Code. Each of the Seller and EES has
disclosed on its federal income Tax Returns all positions taken therein which
would reasonably be expected to result in any "substantial understatement of
federal income tax" within the meaning of Section 6662 of the Code.
(e) Neither Seller nor EES (i) is, or has ever been, a party to,
bound by or subject to any Tax allocation or Tax sharing agreement (or
similar agreement), (ii) has any current or potential contractual obligation
to indemnify any other person with respect to Taxes, or (iii) is a party to
any joint venture, partnership, contract or other arrangement which is
treated (or could be treated) as a partnership for U.S. federal income Tax
purposes (other than real estate partnerships entered into by Seller through
its Properties Division, none of which is included in the Contemplated
Transactions). Schedule 4.17(e) sets forth a list of states, territories and
jurisdictions (whether foreign or domestic) in which EES and Seller with
respect to EWD are required to file Tax Returns, including,
23
without limitation, sales tax returns. There are no liens for Taxes (other
than for Taxes not yet due and payable) upon any of the assets of EES or
Seller. EES has not disposed of any property in a transaction being accounted
for under the installment method pursuant to Section 453 of the Code pursuant
to which income would be includable by EES after the Closing Date. No power
of attorney with respect to any matter relating to Taxes of EES will be in
effect after the Closing Date. Seller is not a "foreign person" within the
meaning of Code Section 1445(f)(3) and Treasury Regulation Section
1.1445-2(b) (2) (i). Except as set forth on Schedule 4.17(e), none of the
assets of EES or the Purchased Assets is or could be treated as (i) an equity
interest in a corporation (or an entity treated as a corporation for U.S.
federal income tax purposes), (ii) an interest in a partnership (or an entity
treated as a partnership for U.S. federal income tax purposes), or (iii) any
interest in an entity (e.g., a corporation or a trust) for U.S. federal
income tax purposes. Neither Seller nor EES has distributed the stock of any
corporation in a transaction satisfying the requirements of Section 355 of
the Code since April 16, 1997. The stock of neither Seller nor EES has been
distributed in a transaction satisfying the requirements of Section 355 of
the Code since April 16, 1997. There are no outstanding options, warrants,
securities convertible into stock, or other contractual obligations that
might be treated for U.S. federal income tax purposes as stock or another
equity interest in EES. Effective December 1, 1990, Seller with the requisite
consent of its stockholders, validly elected to be treated as an S
corporation under Section 1362 of the Code (or its predecessor Code
provision) and under the corresponding provisions of applicable state and
local laws where it is required to file Tax Returns, which election, except
as set forth on Schedule 4.17(e), was effective for each year of the
existence of Seller (and any predecessor thereof). Seller has provided to
Buyer evidence of the approval of such election by the Internal Revenue
Service. Seller's election to be treated as an S corporation has never been
terminated or revoked, is currently in effect and will continue to be in
effect through the Closing Date. Seller's liability for Taxes under Section
1374 of the Code in connection with any sale, transfer or exchange of any of
its assets (including, without limitation, in connection with any transaction
contemplated hereby) is, or will be after the Contemplated Transactions, less
than $500,000. Except as set forth on Schedule 4.17(c), since September 30,
1999, neither Seller nor EES has (A) changed any practice with respect to
Taxes, (B) made, changed or revoked any Tax election or (C) settled or
compromised any Tax liability. There are no (without regard to the
Contemplated Transactions), and have not been any, limitations on the ability
of EES to use any net operating loss carryovers that were claimed on any Tax
Returns or claim otherwise deductible amounts (including, without limitation,
under Sections 382, 383 and 384 or other applicable provisions of the Code or
the Treasury regulations thereunder).
(f) EES is not and has not ever been required to pay or collect, and
has no liability for, sales tax, use tax or other transaction tax on
transactions between EES and Seller.
4.18 EMPLOYMENT AGREEMENTS; EMPLOYEE HANDBOOKS. Except as set forth on
Schedule 4.18, the Companies have no written or oral employment, consulting
or similar
24
agreements or commitments with employees assigned to EWD and/or employees of
EES. Seller has delivered to Buyer copies of the employee handbook applicable
to employees of EWD and EES.
4.19 EMPLOYMENT MATTERS. There are no collective bargaining agreements
covering any employees of the Companies, nor do the Companies have a duty to
bargain with any labor organization. Except as set forth on Schedule 4.19,
there are no controversies pending, or to the Knowledge of Seller, threatened
against the Companies involving their respective employees, former employees,
job applicants, or any association or group of such persons, and neither of
the Companies has acted, or failed to act, in a manner that would provide a
reasonable basis for such a controversy. Each of the Companies has complied
with all laws applicable to them relating to employment, including, without
limitation, any provisions relating to wages, hours, collective bargaining
and the payment of social security and similar taxes, except for failures to
so comply that would not, individually or in the aggregate, result in an
economic cost of $75,000 or more. To the Knowledge of Seller, except as set
forth on Schedule 4.19, there are no activities or proceedings of any labor
union (or representatives thereof) to organize any employees of the
Companies. Neither of the Companies has experienced or, to the knowledge of
Seller, been threatened with any work stoppage. There is not pending any
demand for recognition or any other request or demand from a labor
organization for representative status with respect to any persons employed
by the Companies.
4.20 EMPLOYEE BENEFIT PLANS.
(a) Except as listed and described on Schedule 4.20, with respect to
employees of the Companies or any trade or business required to be aggregated
with either of them under subsections (b), (c) or (m) of section 414 of the
Internal Revenue Code ("ERISA Affiliates"), neither of EWD or EES nor any
ERISA Affiliate maintains or is obligated to contribute to (i) any "employee
pension benefit plans" (the "Pension Plans"), as such term is defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974
("ERISA"), (ii) any "employee welfare benefit plans" (the "Welfare Plans"),
as such term is defined in Section 3(1) of ERISA or (iii) any other bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, educational assistance, vacation, sick pay,
holiday pay or profit-sharing plan, program, agreement or arrangement (other
than arrangements involving the payment of regular wages) for the benefit of
any current or former employee, director or independent contractor of either
of the Companies or any ERISA Affiliate (the "Non-ERISA Plans"). The Pension
Plans, the Non-ERISA Plans, and the Welfare Plans are collectively referred
to as the "Plans." Each of the Pension Plans on Schedule 4.20 that are
intended to be qualified under Internal Revenue Code section 401(a) has
received a favorable determination letter from the IRS that it is so
qualified and that the related trusts are exempt from tax under section
501(a) of the Code, and Seller is not aware of any fact or circumstance that
would jeopardize the qualification of such Pension Plans. Except for
amendments with respect to which the remedial amendment period under
25
section 401(b) of the Code has not expired, the Plans comply in form and in
operation with the requirements of the Internal Revenue Code, ERISA and any
other applicable laws, except for failures to so comply that would not,
individually or in the aggregate, result in an economic cost of $50,000 or
more. Neither of the Companies has any formal plan or commitment to create
any additional Plan or modify or change any existing Plan that would result
in a material increase in the cost of such Plan to either of the Companies.
None of the Pension Plans is subject to section 302 of ERISA, section 412 of
the Code, or Title IV of ERISA, nor has either of the Companies or any ERISA
Affiliate maintained or contributed to any such Plan. None of the Plans is a
"multiemployer plan" as defined in Section 3(37) of ERISA, nor has either of
the Companies or any ERISA Affiliate been required to contribute to or had
any obligation with respect to any such Plan within the five-year period
ending on the Closing Date. Except for any Pension Plan, none of the benefits
under any of the Plans is funded through a trust.
(b) With respect to each of the Plans, (i) the cost of any benefit
arising prior to the Closing Date has been, or will be as of the Closing
Date, paid or properly accrued by Buyer on the EWD Books and Records or the
EES Books and Records, (ii) there are no actions, suits or claims pending or,
to the Knowledge of the Seller, threatened, other than routine claims for
benefits, and (iii) there have been no "prohibited transactions"(as that term
is defined in Section 406 of ERISA or Section 4975 of the Code) that could
result in liabilities in excess of $50,000 to either EWD or EES.
(c) With respect to each Plan, Seller has furnished or made
available to Buyer true, accurate and complete copies of (i) the most recent
determination letter received from the IRS regarding any Plan; (ii) the three
most recent Forms 5500 and financial statements for the Plans; (iii) a copy
of each Plan (including all amendments thereto); (iv) a copy of the most
recent Summary Plan Description, together with each Summary of Material
Modifications, required under ERISA with respect to such Plan; (v) if the
Plan is funded through a trust or any third party funding vehicle, such as an
insurance contract, a copy of the trust or other funding agreement (including
all amendments thereto) and the latest financial statements thereof; (vi) all
contracts relating to the Plans with respect to which either of the Companies
may have any liability, including, without limitation, insurance contracts,
investment management agreements, subscription and participation agreements
and record keeping agreements; and (vii) a copy of all material documents and
correspondence relating to the Plans received from or provided to the
Department of Labor or the IRS during the past three (3) years and any
applicable tax determination letters.
(d) Neither of the Companies and, to the Knowledge of the Seller,
none of their respective directors, officers, employees or any "fiduciary,"
as such term is defined in section 3 of ERISA, has committed any breach of
fiduciary responsibility imposed by ERISA or any other applicable law with
respect to the Plans that would subject Buyer, EWD or EES to liabilities in
excess of $50,000.
26
(e) Except as set forth on Schedule 4.20, no employee of either of
the Companies will be entitled to any additional benefits or any acceleration
of the time of payment or vesting of any benefits under any Plan as a result
of the Contemplated Transactions.
(f) The Companies have properly classified individuals providing
services to either of EWD or EES as employees or non-employees, except to the
extent that misclassifications would not result in liabilities to Buyer in
excess of $50,000. Schedule 4.20 lists all persons who have provided services
to the Companies for more than 500 hours in any 12-month period during the
three-year period ending on the Closing Date in any capacity other than as a
common-law employee.
(g) Except as described on Schedule 4.20, no Plan provides benefits,
including, without limitation, death or medical benefits (whether or not
insured), with respect to current or former employees upon retirement or
other termination of service (other than (i) coverage mandated by applicable
law, (ii) death benefits or retirement benefits under a Pension Plan, (iii)
deferred compensation benefits accrued as liabilities on the respective books
of EWD and EES, or (iv) benefits the full cost of which is borne by the
current or former employee (or his beneficiary)). The list of Plans on
Schedule 4.20 discloses whether each Welfare Plan is insured. No Plan is
subject to laws of a country or jurisdiction other than the United States.
4.21 NON-COMPETITION AGREEMENTS. Except as set forth on Schedule 4.21,
neither EES nor Seller is a party to any agreement or other commitment
imposing any restriction on the manner or in the geographic location in which
it conducts or may conduct its business or uses or may use its properties or
assets in competition with any third party.
4.22 BANK ACCOUNTS AND DIRECTORS AND OFFICERS. Schedule 4.22 contains a
true and complete list of the name and location of each bank in which EES has
an account, each safety deposit box or custody agreement and the names of the
persons authorized to draw thereon or to withdraw therefrom. Schedule 4.22
also sets forth the names of all directors and officers of EES.
4.23 LICENSES AND PERMITS. The Companies have all necessary licenses,
permits, consents, authorizations and approvals from all appropriate
governmental or quasi-governmental authorities required for the operation of
the businesses of EWD and EES and the use and operation of the Real Estate
and all such licenses, permits, consents, authorizations and approvals are
listed on Schedule 4.23 (the "Permits"). The Permits are validly issued, in
good standing and in full force and effect.
4.24 LEGAL PROCEEDINGS. Except as set forth on Schedule 4.24, (a) there
is no litigation, arbitration or other proceeding or governmental
investigation pending or, to the Knowledge of Seller, threatened against the
Companies, the Purchased Assets, the assets of EES, including, without
limitation, the EES Fixed Assets, the Purchased Shares, or the
27
Contemplated Transactions, and, to the Knowledge of Seller, there is no basis
for any such action; (b) there are no actions pending or, to the Knowledge of
Seller, threatened by any governmental or quasi-governmental agency with
respect to compliance by the Companies with applicable laws, ordinances or
regulations and, to the Knowledge of Seller, there is no basis for any such
action; and (c) to the Knowledge of Seller, there is no outstanding
execution, order, writ, injunction, judgment or decree of any court,
government or governmental agency against the Companies, the Purchased
Assets, the assets of EES, including, without limitation, the EES Fixed
Assets, or the Purchased Shares or to which the Companies, the Purchased
Assets, the assets of EES, including without limitation, the EES Fixed
Assets, or the Purchased Shares are subject.
4.25 UTILITIES. Except as set forth on Schedule 4.15 or Schedule 4.25,
each of the Companies has available sufficient power, fuel oil, natural gas
and water supplies and adequate sewage, waste disposal and air emission
systems for the operation of its respective business and, to the Knowledge of
Seller, all such supplies and systems have been and are in full compliance
with all federal, state and local environmental and other regulatory laws and
regulations. To the Knowledge of Seller, the supplies and systems, including
utility services, referred to in this Section 4.25 will be available to Buyer
subsequent to the Closing.
4.26 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.26, the
Companies, and their respective properties and operations, are and have since
inception been in compliance with all applicable federal, state, local and
foreign laws, ordinances, regulations, orders, judgments, injunctions,
awards, decrees and other requirements of any governmental or
quasi-governmental body, court or arbitrator, except failures to so comply
that would not, individually or in the aggregate, result in an economic cost
of $100,000 or more.
4.27 ENVIRONMENTAL MATTERS. Notwithstanding the representations and
warranties set forth in Section 4.26 hereof,
(a) Except as set forth on Schedule 4.27, the Companies are not and
have not been in violation of or delinquent under, nor have they,
individually or together, received any notice of any violation of or
delinquency with respect to any applicable Environmental and Safety Laws.
There are no circumstances or conditions existing at any owned or leased real
property used by either of the Companies that could reasonably be expected to
prevent or interfere with such compliance in the future. Except as set forth
on Schedule 4.27, the Companies have obtained all permits, authorizations or
approvals required under applicable Environmental and Safety Laws
(collectively, "Safety and Environmental Permits"), and all such Safety and
Environmental Permits are valid and in good standing and transferable to
Buyer as part of the Contemplated Transactions without consent of or notice
to the governmental authority issuing the permit, authorization or approval.
28
(b) There is no Environmental or Safety Claim pending or, to the
Knowledge of the Seller, threatened against either of the Companies,
individually or together, or relating to the Purchased Assets, the assets of
EES or the Purchased Shares, or any owned or leased real property used by
either of the Companies.
(c) There are no past or present actions, activities, circumstances,
conditions, events or incidents, including without limitation the Release,
transportation, treatment, storage, recycling or reclamation of any Hazardous
Material at any location, that could reasonably be expected to form the basis
of any Environmental or Safety Claim against either of the Companies, or
relating to the Purchased Assets, the assets of EES or the Purchased Shares,
or any owned or leased real property used, or previously owned, operated or
used, by either of the Companies.
(d) None of the Companies has, and to the Knowledge of the Seller,
no other person has, caused a Release of any Hazardous Material at, on,
under, from or otherwise affecting the soil, surface water or groundwater at
any owned or leased real property used, or previously owned, operated or
used, by either of the Companies.
(e) Except as disclosed on Schedule 4.27, there are no underground
or above ground storage tanks located at any leased or owned real property
used by either of the Companies, and none of the Companies has installed,
owned or operated any underground or above ground storage tanks at any such
properties.
(f) Except as disclosed on Schedule 4.27, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including without limitation the Release, transportation, treatment, storage,
recycling or reclamation of any Hazardous Material, and or otherwise relating
to any violation or alleged violation of law, that could reasonably be
expected to form the basis for any Environmental or Safety Claim relating to
any former properties, assets, operations or business, owned, operated, or
conducted by either of the Companies, individually or together, or any of
their respective predecessors.
(g) Seller has provided Buyer with copies of all surveys, reports,
assessments, audits, evaluations, sampling results, or other documents
relating to compliance with or violation or suspected violation of
Environmental and Safety Laws, or to the handling, storage, transportation or
Release of any Hazardous Material, prepared by, for or at the request of
either of the Companies or in their possession and relating to the Purchased
Assets, the assets of EES or the Purchased Shares, or to any former
properties, assets, operations or business of either of the Companies,
individually or together, or any of their respective predecessors, or in the
possession of any Affiliate of either of the Companies and relating to either
of the Companies or any owned or leased real property used by either of the
Companies.
4.28 ASSUMED AGREEMENTS. Except for purchase orders and sales contracts
issued or executed in the ordinary course of business and except for deferred
29
compensation agreements that are not Assumed Agreements, the Assumed
Agreements listed on Schedule 1.4 are all of the contracts and agreements
that (i) are material to the business of EWD, (ii) involve performance of
services or the delivery of goods or materials of an amount or value in
excess of $50,000, (iii) involve expenditures or receipts in excess of
$50,000, (iv) relate to the borrowing of money or capital expenditures or
relate to mortgaging, pledging or otherwise placing a lien on any portion of
EWD's assets, (v) provide a guaranty of any obligation for borrowed money or
other guaranty; (vi) relate to any lease or agreement with respect to EWD
under which Seller is a lessee or lessor of, or holds or operates, or permits
any third party to hold or operate, any personal or real property for which
the annual rental exceeds $50,000; (vi) restrict a third party from competing
with EWD; (vii) relate to any representative or sales agency contracts or
commitments to which Seller is a party; or (viii) include any Affiliate as a
party. There have been delivered to Buyer true and complete copies of all
Assumed Agreements (and all amendments, waivers and other modifications
thereto). All of the Assumed Agreements are valid, in full force and effect,
binding upon Seller and, to the Knowledge of Seller, binding upon the other
parties thereto in accordance with their terms and, Seller is not in default
under any of them nor, to the Knowledge of Seller, is any other party thereto
in default thereunder, nor does any condition exist that with notice or lapse
of time or both would constitute a default thereunder.
4.29 EES AGREEMENTS. Except for purchase orders and sales contracts
issued or executed in the ordinary course of business, the agreements listed
on Schedule 4.29 (the "EES Agreements") are all of the contracts and
agreements that (i) are material to the business of EES, (ii) involve
performance of services or the delivery of goods or materials of an amount or
value in excess of $50,000, (iii) involve expenditures or receipts in excess
of $50,000, (iv) relate to the borrowing of money or capital expenditures, or
relate to mortgaging, pledging or otherwise placing a lien on any portion of
EES's assets, (iv) provide a guaranty of any obligation for borrowed money or
other guaranty; (v) relate to any lease or agreement under which EES is a
lessee or lessor of, or holds or operates, or permits any third party to hold
or operate, any personal or real property for which the annual rental exceeds
$50,000; (vi) restrict a third party from competing with EES; (vii) relate to
the acquisition by EES of the capital stock of any third party entity or
granting EES an option to purchase any asset, tangible or intangible, or real
or personal property of any third party entity; (viii) relate to any
representative or sales agency contracts or commitments to which EES is a
party; or (ix) include any Affiliate as a party. There have been delivered to
Buyer true and complete copies of the EES Agreements (and all amendments,
waivers and other modifications thereto). All of the EES Agreements are
valid, in full force and effect, binding upon EES and, to the Knowledge of
Seller, binding upon the other parties thereto in accordance with their terms
and EES is not in default under any of them nor, to the Knowledge of Seller,
is any other party thereto in default thereunder, nor does any condition
exist that with notice or lapse of time or both would constitute a default
thereunder.
30
4.30 ABSENCE OF UNDISCLOSED LIABILITIES. There are no liabilities or
obligations of either of EWD or EES, either accrued, absolute, contingent or
otherwise, including, but not limited to, any liabilities for Taxes due or to
become due, except:
(a) to the extent reflected in the December 31, 1999 balance sheet
included as part of Schedule 4.6(a) and not heretofore paid or discharged,
(b) those incurred, consistently with past business practice, in or
as a result of the normal and ordinary course of business since December 31,
1999,
(c) liabilities or obligations specifically disclosed in the
Schedules to this Agreement, and
(d) liabilities or obligations not required by GAAP to be reflected
in the Financial Statements and of which Seller has no Knowledge; provided,
however, that the Financial Statements shall reflect an adequate accrual or
reserve for all Taxes not yet due and payable (without regard to deferred Tax
assets and liabilities).
4.31 DISCLOSURE. Neither (i) this Agreement, (ii) any document or
certificate furnished or to be furnished to Buyer in connection with the
Closing, (iii) any document specifically referenced in this Agreement, (iv)
any of the financial EES Books and Records or any of the financial EWD Books
and Records (other than financial projections and other than financial
information to the extent it has been updated by more recent financial
information), nor (v) any statement made in any Schedule to this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make any statement herein
or therein not misleading. Seller has made available for inspection by Buyer
and its representatives complete and correct copies of the corporate minute
books of the Companies. Such minute books contain the minutes of all meetings
of stockholders, the Board of Directors and any committees thereof of the
Companies that have been held prior to the date hereof and all written
consents to action executed in lieu thereof, except that certain matters have
been approved or adopted informally or without minutes. No matter or
transaction material to EWD, EES or the Contemplated Transactions that has
not been described or disclosed to Buyer in the Disclosure Schedules has been
approved or adopted informally and without written minutes.
4.32 INTELLECTUAL PROPERTY RIGHTS.
(a) "Intellectual Property Rights" shall mean all patents and patent
applications, trademarks, service marks, logos, trade names, slogans, trade
dress rights (whether registered or unregistered) and applications for
registration and registrations therefore; Internet domain names and 1-800 and
1-888 telephone numbers; all permits, grants, franchises and licenses to or
from either of the Companies; all copyrights, including rights in advertising
and promotional material (whether registered or unregistered) and
applications for registration and registrations therefor; and all
31
Confidential Information (as hereinafter defined), used or developed by
either of the Companies, or in which either of the Companies has an interest,
used in connection with the business of EWD and/or EES, and their respective
actual or potential use or application, including but not limited to those
Intellectual Property Rights set forth on Schedule 4.32. No other patent,
trademark, service mark, trade name, copyright, confidential information or
any other intellectual property right or license under any such patent,
trademark, service mark, trade name, copyright, confidential information or
any other intellectual or intangible property is necessary to permit either
of EWD or EES to be owned by Buyer or their respective businesses to be
conducted as now conducted or as heretofore or proposed to be conducted. To
the Knowledge of Seller, except as set forth on Schedule 4.32 and Schedule
4.5, the Companies own exclusively and/or have the exclusive and unrestricted
right to use, free and clear of all Encumbrances, all Intellectual Property
Rights, and all renewals therefor and claims for infringement thereof, and
after the Closing, to the Knowledge of Seller, the Buyer will own exclusively
and/or have the exclusive and unrestricted right to use, free and clear of
all Encumbrances, all Intellectual Property Rights, and all renewals therefor
and claims for infringement thereof. Except for the license agreements listed
on Schedule 1.5, neither of the Companies is obligated or under any liability
whatsoever to make any payments by way of royalties, fees or otherwise to any
owner or licensee of, or other claimant to, any patent, trademark, service
mark, trade name, copyright, confidential information or other intangible
asset, with respect to the use of any of the Intellectual Property Rights, in
connection with the ownership of their assets, the conduct of their business
or otherwise, and after the Closing, the Buyer will not be obligated or under
any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, trade name, copyright or other intangible asset,
with respect to the use of any of the Intellectual Property Rights, in
connection with the ownership of their assets, the conduct of their business
or otherwise. Neither of the Companies has licensed or transferred any of the
Intellectual Property Rights to any third party. Except as described on
Schedule 4.32, neither of the Companies is in violation or infringement of,
or has violated or infringed, any proprietary or intellectual property rights
of any third party. Neither of the Companies has received any demand, claim,
notice or inquiry from any third party with respect to any of the
Intellectual Property Rights which challenges, threatens to challenge, or
inquires as to whether there is any basis to challenge, the validity of, or
the rights of either of the Companies in, any such Intellectual Property
Rights, and neither of the Companies knows of any basis for any such
challenge. To the Knowledge of Seller, none of the Intellectual Property
Rights is being infringed or potentially infringed.
(b) The Companies have the unrestricted right to use all
Confidential Information required for or incident to the development,
manufacture, operation, advertisement, promotion, distribution and sale of
all products sold and services offered, or proposed to be sold or offered, by
each such Company free and clear of all Encumbrances, including, without
limitation, of any former employer of either of the Companies' employees.
"Confidential Information" shall mean all confidential
32
information, know-how, inventions, designs, customer lists, processes,
computer programs (including source code) and technical data and information.
4.33 INSURANCE. EWD and EES, individually or collectively, are insured
under various policies of fire, liability and other forms of insurance, as
set forth on Schedule 4.33 hereto, which policies are valid and enforceable
in accordance with their terms and which provide adequate insurance for the
respective businesses of EWD and EES, the Purchased Assets and the assets of
EES, in accordance with industry standards. At no time was there a period in
which the Seller and/or EES lacked such insurance coverage. The Seller and
EES shall continue to carry all such policies or similar policies during the
pendency of this Agreement, and all outstanding claims under such policies on
the date hereof are described on Schedule 4.33 hereto. There is no recorded
liability for retrospective insurance premium adjustments for any period
prior to the date hereof, but EWD and EES are subject to routine workers'
compensation audits that may result in adjustments. Seller is not aware of
any fact or circumstances that would lead Seller to believe that any such
adjustment would be in excess of $50,000 or historical adjustments made by
EWD or EES. Schedule 4.33 hereto sets forth a complete and accurate list of
the following, each of which have been made available to Buyer for its review:
(a) All comprehensive general liability and other policies of
insurance under which the Seller and/or EES are or have been insured at any
time within the one (1) year period immediately preceding the date of this
Agreement.
(b) All property and casualty policies of insurance under which the
Seller and/or EES are presently insured.
(c) All obligations of the Seller and/or EES to provide insurance
coverage to third parties (for example under leases or other contracts).
(d) The expiration date of each insurance policy under which Seller
and/or EES are currently insured.
4.34 SOLVENCY. After giving effect to the consummation of the
Contemplated Transactions, Seller is solvent. For purposes of this Section
4.34, "solvent" means that the sum of the value of the person's or entity's
assets, at both fair value or fair saleable value, exceeds its indebtedness
and other probable liabilities (including contingent liabilities); "fair
value" means the value which would be realized in an exchange or series of
exchanges between a willing buyer and a willing seller, within a commercially
reasonable period of time, neither being under compulsion, each having
reasonable knowledge of all relevant facts, and assuming the retention of all
operating assets within the Seller and continuation of the operations as a
going concern; and "fair saleable value" means the value which would be
realized from an interested purchaser aware of all relevant information
relating to the assets or group of assets being sold and who is willing to
purchase under ordinary selling conditions in an existing and not theoretical
market if the assets or group of assets are disposed of within a period of
six (6) months to one (1)
33
year. The cash flow from the operations of Seller, after taking into account
all other anticipated uses of the cash, will be sufficient to provide cash
necessary to repay its indebtedness. In consummating the Contemplated
Transactions, the Seller does not intend to make any transfer or incur any
obligations, with the intent to disturb, delay, hinder or defraud either
present or future creditors. Upon the consummation of the Contemplated
Transactions, Seller will have sufficient capital with which to conduct its
present or proposed business and its property will not constitute
unreasonably small capital with which to conduct its present or proposed
business, and will not engage in a business or transaction for which it has
unreasonably small capital.
4.35 AFFILIATED TRANSACTIONS. Except as set forth on Schedule 4.35,
since January 1, 1998 no present or former officer, director, shareholder,
employee or Affiliate of EES or Seller or, to the Knowledge of Seller, no
individual in such officer's, director's, shareholder's, employee's or
Affiliate's immediate family, is or was a party to any agreement, contract,
commitment or transaction with EES or Seller or has any interest in any
property used by EES or EWD. Except as set forth on Schedule 4.35, to the
Knowledge of Seller, no employee of EES or Seller or any individual in such
employee's immediate family is a party to any agreement, contract, commitment
or transaction with EES or Seller or has any interest in any property used by
EES or EWD.
4.36 BROKERAGE FEES. Except as set forth on Schedule 4.36, no brokerage
commissions, finders' fees or similar compensation will be payable to any
party in connection with the Contemplated Transactions based on any
arrangement or agreement made by or on behalf of Seller or EES.
4.37 CHANGE OF CONTROL PROVISIONS. Except as set forth on Schedule 4.37,
neither the execution and delivery of this Agreement or the Related
Agreements nor the consummation of the Contemplated Transactions will trigger
(i) any obligation of EES to any third party, including without limitation,
the obligation to make payment to any third party pursuant to any contract or
agreement to which EES is a party or by which it or its assets are bound, or
(ii) any termination or other rights under any of the Assumed Agreements or
the EES Agreements.
4.38 CUSTOMERS, SUPPLIERS AND DISTRIBUTORS. Each of the Companies
maintains and has good relationships with its top twenty (20) customers, and
its major suppliers of raw materials and distributors, and neither Seller nor
EES is aware of any facts that would lead to a reasonable expectation of a
material deterioration in any such relationship. Neither of the Companies is
in breach of any representation, warranty, covenant, obligation or other
provision of any outstanding agreement with any such customer, vendor,
supplier or distributor, except for breaches which would not, individually or
in the aggregate, result in an economic cost of $100,000 or more. Schedule
4.38 sets forth a list of the top twenty (20) customers, suppliers of raw
materials and distributors of each of EWD and EES.
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4.39 YEAR 2000. The Companies have fully implemented their plan to
address the ability of their information systems to process date and time
data from, into and beyond the year 2000 ("Year 2000 Data"), and the ability
of such systems to interact with third parties' systems. Seller is not aware
of any instances of the information systems material to the operations of EWD
and EES being unable to accurately process Year 2000 Data.
4.40 RELATIONSHIP WITH GENERAL ELECTRIC COMPANY. Except as set forth on
Schedule 4.40, neither Seller nor EES, nor any equityholder holding at least
five percent (5%) of the equity of Seller has any equity, creditor or similar
relationship, including, without limitation, any investment in, or any
debtor, revolving credit, leasing or creditor relationship, but excluding any
vendor or vendee relationship, with General Electric Company or any entity
known by Seller or such equityholders to be a subsidiary of General Electric
Company.
4.41 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Except as
expressly set forth in this Article 4, Seller makes no representation or
warranty, expressed or implied, including, without limitation, any
representation or warranty in respect of the Purchased Assets, the Purchased
Shares, the Assumed Agreements, the Assumed Liabilities or the businesses of
EWD and EES.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware.
5.2 DUE AUTHORIZATION; BINDING OBLIGATION.
(a) Buyer has all requisite corporate power and authority to enter
into and deliver this Agreement and the Related Agreements and to perform its
obligations hereunder and thereunder and has duly authorized the execution,
delivery and performance of this Agreement and the Related Agreements by all
necessary corporate action.
(b) This Agreement and the Related Agreements have been duly and
validly authorized, executed and delivered by Buyer and constitute Buyer's
legal, valid and binding obligation, enforceable in accordance with their
respective terms, except as enforceability is limited by (i) principles of
equity that may restrict the availability of specific performance and other
equitable remedies (whether such enforceability is considered in a proceeding
in equity or at law) and (ii) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, fraudulent transfer and other laws
applicable to creditors' rights generally.
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5.3 GOVERNMENTAL APPROVALS. Except for the requirements of the HSR Act,
the execution, delivery and performance of this Agreement and the Related
Agreements by Buyer, and consummation of the Contemplated Transactions, are
not subject to the jurisdiction, approval, notification of or consent of any
governmental, regulatory or administrative agency.
5.4 APPROVALS AND NOTICES REQUIRED; CONFLICT WITH OTHER INSTRUMENTS.
Except as described on Schedule 5.4, the execution, delivery and performance
of this Agreement and the Related Agreements by Buyer and the consummation of
the Contemplated Transactions will not violate (with or without the giving of
notice or the lapse of time or both) or require any consent or approval,
filing or notice under and will not conflict with, or result in the breach or
termination of any provision of, or constitute a default under, or result in
the acceleration of the performance of the obligations of Buyer under,
Buyer's Certificate of Incorporation or Bylaws or under any indenture,
mortgage, deed of trust, lease, license agreement, contract, instrument or
other agreement, or any law, order, judgment or decree to which Buyer is a
party or by which Buyer is bound.
5.5 LITIGATION. There is no litigation, arbitration or other proceeding
or governmental investigation pending or, to the knowledge of Buyer,
threatened against the Contemplated Transactions.
5.6 INVESTMENT REPRESENTATION. Buyer is purchasing the Purchased Shares
for its own account for investment purposes and not with a view to or for the
sale in connection with any public distribution of such securities, except in
compliance with applicable federal or state securities laws.
5.7 BROKERAGE FEES. No brokerage commissions, finders' fees or similar
compensation arrangements will be payable to any party in connection with the
Contemplated Transactions based on any arrangement or agreement made by or on
behalf of Buyer.
ARTICLE 6. CONDITIONS TO BUYER'S PERFORMANCE
The obligations of Buyer under this Agreement shall be subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
6.1 FINANCING. Buyer shall have obtained the debt financing and/or
equity financing necessary to repay the Note on the Closing Date and to
consummate the Contemplated Transactions on terms substantially similar to
those described on Schedule 7.7 and Buyer shall be permitted to incur such
financing under the existing financing arrangements of Atrium Companies, Inc.
6.2 COMPLIANCE BY SELLER. Seller shall have complied with and performed
all its agreements and obligations under the terms, covenants and conditions
of this Agreement to be complied with or performed by it on or prior to the
Closing Date.
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6.3 REPRESENTATIONS AND WARRANTIES OF SELLER. The representations and
warranties of Seller contained in this Agreement shall be true and correct as
of the Closing Date, with the same force and effect as if made as of the
Closing Date, except for those representations and warranties that
specifically refer to some other date.
6.4 CERTIFICATE OF SELLER. The Seller's Chief Executive Officer shall
have delivered to Buyer a certificate, stating that the conditions specified
in Sections 6.2 and 6.3 have been fulfilled by Seller dated as of the Closing
Date.
6.5 CONSENTS, PERMITS, AND WAIVERS. The Seller shall have obtained all
of the consents, permits and waivers set forth on Schedule 6.5 in form and
substance reasonably satisfactory to Buyer.
6.6 BUYER'S CONSENTS. The Buyer shall have obtained all of the consents
and waivers set forth on Schedule 5.4.
6.7 DELIVERY OF ARTICLES OF INCORPORATION, BY-LAWS AND OTHER DOCUMENTS.
Each of the Companies shall have delivered to Buyer each of the following:
(a) all minute books, stock books, ledgers and registers and
corporate sealsrelating to the organization, ownership and maintenance of EES;
(b) a certificate of the Secretary of each of the Companies relating
to the incumbency and corporate proceedings in connection with the execution,
delivery and performance of this Agreement and the Related Agreements and the
consummation of the Contemplated Transactions, and the absence of changes in
the Companies' Articles of Incorporation and By-laws, together with copies of
the resolutions duly adopted by the Seller's Board of Directors and
shareholders authorizing the execution, delivery and performance of this
Agreement and the Related Agreements and the consummation of the Contemplated
Transactions;
(c) resignations effective as of the Closing Date from such officers
and directors of EES as Buyer shall have requested in writing not less than
five (5) days prior to the Closing Date;
(d) (i) a copy of the Articles or Certificate of Incorporation and
all amendments thereto, of each of the Companies, certified by the Secretary
of State of the state of its incorporation, as of a date not more than twenty
(20) days prior to the Closing Date, (ii) copies, certified by the Secretary
of each of the each of the Companies, as of the Closing Date, of the By-laws
of each of the Companies, (iii) Certificates of Existence or Good Standing
from the Secretary of State of the state of each company's incorporation as
of a date not more than ten (10) days prior to the Closing Date, accompanied
by bring-down certificates dated as of the Closing Date, evidencing the each
of the Companies' good standing in such jurisdictions, and (iv) Certificates
of Existence or Good Standing from the Secretary of State of each state
wherein each of the Companies are duly
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qualified, as of a date not more than ten (10) days prior to the Closing
Date, accompanied by bring-down certificates dated as of the Closing Date,
evidencing the Companies' existence or good standing therein.
6.8 OPINION OF SELLER'S COUNSEL. Buyer shall have received the opinion
dated as of the Closing Date of Schell Bray Aycock, Abel & Livingston
P.L.L.C., counsel for Seller, substantially in the form of Exhibit E hereto.
6.9 NO LITIGATION OR GOVERNMENTAL PROCEEDING. No action or proceeding
shall have been instituted before any court or governmental body or by any
third party to restrain or prohibit, or to obtain damages in respect of, the
consummation of the Contemplated Transactions. No party to this Agreement
shall have received written notice from any governmental body of (i) its
intention to institute any action or proceeding to restrain or enjoin or
nullify this Agreement, the Related Agreements or the Contemplated
Transactions, or to commence any investigation into the consummation of the
Contemplated Transactions, or (ii) the actual commencement of such an
investigation.
6.10 NO MATERIAL ADVERSE EFFECT. No event shall have occurred which has
or can reasonably be expected to have a Material Adverse Effect.
6.11 HSR ACT. The filing requirements of the HSR Act relating to the
Contemplated Transactions shall have been complied with, neither the FTC nor
the Antitrust Division shall have taken any action (including notifying the
parties of any objection to the Contemplated Transactions) in response to
such filings, and the waiting period prescribed by the HSR Act shall have
expired.
6.12 RELEASES AND PAYOFF LETTERS. All liens and security interests with
respect to the Purchased Assets and the assets of EES (other than the
Equipment Lease Agreement dated April 30, 1998, with Crown Credit Company and
the other liens, pledges and deposits described on Schedule 4.8) and all
guarantees and indebtedness of EES and all promissory notes given by EES to
Seller (other than the promissory note described on Schedule 1.58) or any
third parties shall have been released and terminated. Buyer shall have
received satisfactory evidence that upon disbursement of the Payment Fund (as
defined in the Escrow Agreement) the obligations described in Schedule 6.12
will have been satisfied.
6.13 INTELLECTUAL PROPERTY ASSIGNMENT. The Seller shall have executed
and delivered to Buyer a Patent, Trademark and Copyright Assignment
substantially in the form of Exhibit F hereto.
6.14 ESCROW AGREEMENT. The parties thereto and the Escrow Agent shall
have executed and delivered the Escrow Agreement.
6.15 ELLISON SUBSCRIPTION AGREEMENT. Seller and Buyer shall have
executed a subscription agreement substantially in the form of Exhibit G
hereto (the "Ellison
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Subscription Agreement") and the parties thereto shall be prepared to
consummate the transactions contemplated thereby simultaneously with the
Closing hereunder.
6.16 MANAGEMENT SUBSCRIPTION AGREEMENT. Doug Cross, Mike Cornwell, Keith
Barnes and Buyer shall have executed a subscription agreement substantially
in the form of Exhibit H hereto (the "Management Subscription Agreement") and
the parties thereto shall be prepared to consummate the transactions
contemplated thereby simultaneously with the Closing hereunder.
6.17 BUY/SELL AGREEMENT. Doug Cross, Mike Cornwell, Keith Barnes and
Buyer shall have executed a Buy/Sell agreement substantially in the form of
Exhibit I hereto (the "Buy/Sell Agreement").
6.18 FIRPTA CERTIFICATE. Seller shall have executed and delivered to
Buyer a certificate containing the information, under penalties of perjury,
set forth in Treasury Regulation Section 1.1445-2(b)(2). Such certificate
shall conform to the model certificate provided in Treasury Regulation
Section 1.1445-2(b)(2)(iii)(B).
6.19 EMPLOYMENT AGREEMENTS. Doug Cross, Mike Cornwell, Erwin Hartel and
Keith Barnes shall have executed employment agreements substantially in the
form of Exhibit J hereto (the "Employment Agreements").
6.20 INSURANCE. Buyer shall have obtained the policy of representation
and warranty insurance described on Schedule 2.2(a) from a carrier and on
terms satisfactory to Buyer in its sole discretion in an amount of at least
$25 million.
6.21 NONDISTURBANCE AGREEMENT AND AMENDMENT OF REAL ESTATE LEASES.
Seller or JE shall have obtained and delivered to Buyer an agreement,
substantially in the form of Exhibit K hereto, from any holder of any
mortgage or deed of trust placed upon the Real Estate located at Welcome,
North Carolina, or any part thereof, that the possession, use or enjoyment of
said Real Estate by Buyer or any of its subsidiaries shall not be disturbed
by such holder, its designee or nominee, or a purchaser at foreclosure, or
any of their successors or assigns, provided that Buyer is not in default of
any lease thereon. Further, JE shall have amended and restated Articles VIII
and XIX of the lease agreements related to the Real Estate to read as set
forth on Schedule 6.21.
6.22 WAIVER BY BUYER. Buyer may at its option waive in writing the
performance of any of the Seller's covenants or any of the conditions
contained in this Article 6.
ARTICLE 7. CONDITIONS TO SELLER'S PERFORMANCE
The obligations of Seller under this Agreement shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions:
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7.1 COMPLIANCE BY BUYER. Buyer shall have complied with and performed
all its agreements and obligations under the terms, covenants and conditions
of this Agreement to be complied with or performed by it on or prior to the
Closing Date, and Seller shall have received the certificate of an
appropriate officer of Buyer to that effect dated as of the Closing Date.
7.2 BUYER'S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained in this Agreement shall be true and correct as
of the Closing Date, with the same force and effect as if made as of the
Closing Date, except for those representations and warranties that
specifically refer to some other date, and Seller shall have received the
certificate of an appropriate officer of Buyer to that effect dated as of the
Closing Date.
7.3 OPINION OF BUYER'S COUNSEL. Seller shall have received the opinion,
dated as of the Closing Date, of Paul, Hastings, Janofsky & Walker LLP,
counsel for Buyer, substantially in the form of Exhibit L hereto.
7.4 NO LITIGATION OR GOVERNMENTAL PROCEEDING. No action or proceeding
shall have been instituted before any court or governmental body or by any
third party to restrain or prohibit, or to obtain damages in respect of, the
consummation of the Contemplated Transactions. No party to this Agreement
shall have received written notice from any governmental body of (i) its
intention to institute any action or proceeding to restrain or enjoin or
nullify this Agreement, the Related Agreements or the Contemplated
Transactions, or to commence any investigation into the consummation of the
Contemplated Transactions, or (ii) the actual commencement of such an
investigation.
7.5 HSR ACT. The filing requirements of the HSR Act relating to the
Contemplated Transactions shall have been complied with, neither the FTC nor
the Antitrust Division shall have taken any action (including notifying the
parties of any objection to the Contemplated Transactions) in response to
such filings, and the waiting period prescribed by the HSR Act shall have
expired.
7.6 SUBSCRIPTION AGREEMENT, EMPLOYMENT AGREEMENTS AND BUY-SELL
AGREEMENTS. Buyer shall have executed the Subscription Agreement, the
Employment Agreements and the Buy-Sell Agreements.
7.7 FINANCING. Buyer shall have obtained the debt financing and/or
equity financing necessary to repay the Note on the Closing Date and to
consummate the Contemplated Transactions on terms substantially similar to
those described on Schedule 7.7 or on such other terms as Buyer shall
arrange, provided that such other terms, as compared with those set forth on
Schedule 7.7, do not materially and adversely affect the value of Seller's
investment in Buyer.
7.8 LOANS. Doug Cross, Mike Cornwell and Keith Barnes shall have
executed the agreements evidencing the loans described in Section 2.2(b)(ii).
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7.9 OFFICER'S CERTIFICATE. Seller shall have received the certificate of
an appropriate officer of Buyer to the effect that the conditions to the
funding of the financing described on Schedule 7.7 necessary to repay the
Note on the Closing Date, other than the consummation of the Closing and the
steps described in paragraphs 3, 4, 5, 6, 7 and 8 of Annex A hereto, have
been satisfied or waived.
7.10 WAIVER. Seller may at its option waive in writing the performance
of any of Buyer's covenants or any of the conditions contained in this
Article 7.
ARTICLE 8. COVENANTS AND AGREEMENTS
8.1 CONDUCT OF THE BUSINESS. Seller covenants and agrees with Buyer
that, from the date hereof to the Closing, that Seller shall and Seller shall
cause EES to:
(a) conduct and operate the businesses of EWD and EES only in the
ordinary course and in a manner consistent with prior business practices and
operations provided, that, Seller shall be permitted to defer payment of the
capital expenditures provided for on Schedule 8.1(a);
(b) refrain from committing to make any capital expenditures
exceeding $50,000 in the aggregate not provided for in the capital budgets of
EWD and EES for 2000 previously provided to Buyer prior to the Closing Date
without the consent of Buyer;
(c) except for purchase orders or sales contracts issued or entered
into in the ordinary course of business, not enter into any contracts,
agreements or modifications of any contracts or agreements that involve
performance of services or the delivery of goods or materials of an amount or
value in excess of $50,000;
(d) not enter into any transaction involving the disposal of any
properties or assets (other than the sale of inventory in the ordinary course
of business);
(e) not create any Encumbrances on any of the properties or assets
of EWD or EES;
(f) not enter into any transactions with any Affiliates;
(g) preserve intact the business organization of EWD and EES, use
commercially reasonable efforts to keep available the service of their
present employees, and use commercially reasonable efforts to preserve
existing relationships with their customers, suppliers and distributors;
(h) use commercially reasonable efforts to maintain all of the EWD
Fixed Assets and all of the EES Fixed Assets in a state of good repair and in
good working order;
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(i) maintain the Permits and the Safety and Environmental Permits in
good standing and in full force and effect;
(j) maintain the EWD Books and Records and EES Books and Records in
a manner consistent with past practices; and
(k) not make any changes in their accounting procedures and
practices or their credit criteria from those in existence at December 31,
1999;
(l) not (i) issue, sell or deliver any shares of capital stock of
EES or other securities, or issue or sell any securities convertible into, or
options with respect to, or warrants to purchase or rights to subscribe for,
any shares of capital stock of EES or other securities of EES; (ii) effect
any recapitalization, reclassification, stock dividend, stock split or like
change in the capitalization of EES; (iii) amend their Certificate of
Incorporation (or other charter documents) or By-laws; or (iv) make any
redemption or purchase of any shares of capital stock of EES or declare, pay,
set aside or make, any dividends or distribution or payment in respect of
capital stock of EES or other securities of EES;
(m) not sell or transfer the Purchased Shares;
(n) except in the ordinary course of business, not modify any of the
terms or conditions of the Assumed Agreements or the EES Agreements, provided
notice of each such change is given to Buyer at the time such change is made;
(o) not enter into any employment contract;
(p) not (i) make any loans or advances to, or assume, or guarantee
or otherwise become liable for any indebtedness of another person or (ii)
incur any indebtedness, except that, in the ordinary course of business and
consistent with past practice, EWD may make loans and advances to EES and EES
may use its available cash to pay down its indebtedness to EWD;
(q) comply in all material respects with all laws applicable to it
and to the conduct of the business of EWD and EES;
(r) not (i) change any practice with respect to Taxes, (ii) make,
change or revoke any Tax election or (iii) compromise or settle any Tax
liability;
(s) not adopt, terminate, or amend (except as required by applicable
law) any Plan; or
(t) not accelerate the collection of accounts receivable, defer the
payment of accounts payable or otherwise manipulate net working capital.
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8.2 FUTURE LITIGATION. Seller shall promptly advise Buyer in writing of
the commencement or threat against any of the Companies of (i) any claim,
litigation or proceeding, and (ii) any Tax audit.
8.3 EXPENSES. Subject to Section 9.2 hereof, Seller will bear its own
and the Companies' expenses, and Buyer will bear its own, out-of-pocket
expenses in connection with this Agreement and the Contemplated Transactions
(including, without limitation, attorneys' fees, accounting fees and
investment banking fees).
8.4 HSR ACT FILINGS. As soon as may be practicable but in no event more
than five (5) business days after the date hereof, Seller and Buyer shall
each file with the FTC and the Antitrust Division notification and report
forms relating to the Contemplated Transactions, including the transactions
contemplated by the Subscription Agreement, as required by the premerger
notification rules issued under the HSR Act. At the request of either party,
the other party will join in requesting early termination of the waiting
period under the HSR Act and cooperate in the preparation of the filings. All
filing fees will be paid by Buyer.
8.5 TAX MATTERS AND POST-CLOSING COOPERATION.
(a) Each of Seller and EES shall prepare and timely file or cause to
be prepared and timely filed in a manner consistent with past practice, all
Tax Returns that are required to be filed (with extensions) by or with
respect to each of Seller and EES on or before the Closing Date; provided,
however, that EES shall deliver any material income or franchise Tax Return
of EES to Buyer at least fifteen (15) days prior to the due date thereof
(with extensions) and shall not file any such Tax Return without obtaining
the prior written consent of Buyer and, provided further, that EES shall
deliver to Buyer all other Tax Returns of EES as and when filed; provided,
however, that with respect to the estimated (i) U.S. federal income Tax
Returns and (ii) North Carolina income and franchise Tax Returns of EES due
on or about April 15, 2000, such Tax Returns shall be delivered to Buyer at
least four (4) days prior to the due date thereof and such filing consent may
be delivered orally. The stockholders of Seller or EES, as appropriate, shall
pay or cause to be paid all Taxes shown as due, or required to be shown as
due, on such Tax Returns of Seller and EES.
(b) Buyer shall prepare and file or cause to be prepared and filed
all Tax Returns required to be filed by or with respect to EES for all
taxable periods, or portions thereof, ending on, before or including the
Closing Date and with due dates (including extensions) after the Closing Date
(the "Post-Closing Returns"); provided, however, Buyer shall deliver any such
Tax Return of EES (proforma as to EES if consolidated, combined, unitary,
group or other similar Tax Returns that include EES are filed) to Seller at
least fifteen (15) days prior to the due date thereof (with extensions). At
least five (5) business days prior to the due date of any payment required to
be made with respect to any Post-Closing Return, Seller shall pay to Buyer an
amount that is attributable to any taxable period (or portion thereof) ending
on or prior to the Closing
43
Date to the extent such amount exceeds the reserve or accrual (without regard
to deferred tax assets and liabilities) for Taxes of EES not yet due and
payable provided on the Closing Balance Sheet, as appropriately reduced for
any Tax items (including, without limitation, any payment of Taxes). With
respect to any taxable year or period (or portion thereof) beginning before
and ending after the Closing Date (a "Straddle Period"), an allocation of
Taxes shall be made to the part of such Straddle Period which ends on the
Closing Date and based on (i) the closing of the books method, in the case of
income Taxes, (ii) the number of days elapsed between the beginning of such
Straddle Period to and including the Closing Date, in the case of property
Taxes, and (iii) when the relevant transaction occurs, in the case of sales
and gross receipts Taxes. For avoidance of doubt, the parties agree that
under applicable U.S. federal income tax law they expect that upon the end of
the Closing Date, the U.S. federal income tax year of EES shall cease and, at
the beginning of the day following the Closing Date, a new taxable year shall
commence as a member of Buyer's consolidated filing group for Federal income
tax purposes. With respect to all Taxes allocated to the portion of any
Straddle Period ending on or prior to the Closing Date, Seller shall be
responsible for (i) all such Taxes of EES to the extent they exceed the
reserve or accrual for Straddle Period Taxes of EES (without regard to
deferred Tax assets and liabilities) on the Closing Balance Sheet as
appropriately reduced for any Tax items (including, without limitation, any
payment of Taxes) and (ii) the Taxes excluded from Assumed Liabilities under
Section 1.5. If the amount actually owed to all Taxing authorities with
respect to all Tax liabilities attributable to any taxable period (or portion
thereof) ending prior to and including the Closing Date exceeds the amount
accrued or reserved for such Tax liabilities on the Closing Balance Sheet
(without regard to deferred Tax assets and liabilities) as appropriately
reduced for any Tax items (including, without limitation, any payment of
Taxes), Seller shall promptly pay the excess to Buyer upon delivery by Buyer
to Seller of supporting documentation indicating such excess. If the amount
actually owed to all Taxing authorities with respect to all Tax liabilities
attributable to any taxable period (or portion thereof) ending prior to and
including the Closing Date is less than the amount accrued or reserved for
such Tax liabilities on the Closing Balance Sheet (without regard to deferred
Tax assets and liabilities) as appropriately reduced for any Tax items
(including, without limitation, any payment of Taxes), Buyer shall promptly
pay such difference to Seller upon (i) the due date for the filing, including
extensions, of the Federal income tax return related to the tax period of EES
ending on the Closing Date, or (ii) the latest due date, including
extensions, for the filing of any Tax Return for any Straddle Period with
respect to EES or any liability for Taxes assumed by Buyer pursuant to clause
(iv) of Section 1.5, whichever is later.
(c) Any ad valorem, use, real and personal property, intangible and
other similar Taxes, installments or special assessments, utility, water or
similar payments arising from, or relating to, the Purchased Assets, which
become due and payable on or after the Closing Date and relate to periods
beginning before and ending after the Closing Date, shall be prorated and
adjusted between Buyer and Seller as of the Closing Date on a per diem basis
and, except to the extent specifically accrued on the
44
Closing Balance Sheet, Seller shall be responsible for the portion of such
amounts allocable to the period (or portion thereof) ending on or prior to
the Closing Date.
(d) If either Buyer or EES receives any written notice from any
taxing authority proposing any adjustment to any Tax relating to EES, either
Buyer or EES shall give prompt written notice thereof to Seller, which notice
shall describe in detail each proposed adjustment. If either any stockholder
of Seller or Seller receives any written notice from any taxing authority
proposing any adjustment to any Tax relating to EES, such stockholder of
Seller or Seller shall give prompt written notice thereof to either Buyer or
EES, which notice shall describe in detail each proposed adjustment.
(e) EES shall obtain prior to Closing valid and appropriate
certification from Seller that EES is not required to pay sales tax on
transactions between EES and Seller.
(f) Unless required by applicable law, Buyer agrees that, without
the written consent of Seller (which consent shall not be unreasonably
withheld), it will not file or cause to be filed amended Tax Returns on
behalf of EES that would result in an increased Tax liability to Seller with
respect to EES for Taxes attributable to periods (or portions thereof) ending
on or prior to the Closing Date.
(g) Buyer agrees that for a period of seven (7) years after the
Closing, upon the reasonable request of Seller, it shall promptly make
available to Seller, and shall cause any successors or assigns to make
available to Seller, during normal business hours and in a manner which will
not interfere with the normal business operations of Buyer, such EWD Books
and Records relating to the Purchased Assets and such EES Books and Records
as Seller may reasonably request from time to time to enable Seller to (1)
prepare and file any and all Tax Returns, information returns or reports that
Seller is required to file and (2) respond to and conduct all federal, state,
local or foreign Tax audits, or other determinations or proceedings.
(h) The parties hereto agree that a portion of the expenses of
Seller, EES or EWD incurred in connection with the Contemplated Transactions
that are deductible under Section 162 of the Code have been incurred by EES
and shall be allocated to EES in the same ratio of the total of all such
expenses as $47 million bears to the purchase price under Section 2.2 hereof,
but there shall be no accrual of such portion on the Closing Balance Sheet.
Such expenses shall be deemed for purposes of this Section 8.5(h) not to
include deductions attributable to employee bonuses or deferred compensation
paid in connection with the Contemplated Transactions. Seller agrees not to
claim any such expenses allocated to EES as deductions or other offsets on
any Tax Return (or in the course of any Tax audit, claim, appeal or
litigation relating thereto).
(i) Seller shall prepare and timely file, or cause to be prepared
and timely filed, in a manner consistent with past practice, all Tax Returns
that are required to be filed with respect to liabilities for Taxes of Seller
arising in the ordinary course of
45
business of EWD as conducted by Seller that Buyer agrees to assume pursuant
to clause (iv) of Section 1.5 of this Agreement (the "Section 1.5(iv)
Taxes"); provided, however, that Seller shall deliver to Buyer any Tax Return
with respect to Section 1.5(iv) Taxes (including, without limitation, any
additional supporting documentation or computations necessary for Buyer to
determine its liability for Section 1.5(iv) Taxes) at least fifteen (15) days
prior to the due date thereof (with extensions) and shall not file any such
Tax Return without obtaining the prior written consent of Buyer, which
consent shall not be unreasonably withheld. Seller shall remit to the
appropriate Taxing authority any payment received from Buyer with respect to
Section 1.5(iv) Taxes promptly after Seller's receipt thereof and shall
promptly furnish Buyer with written proof of such remittance.
(j) Seller agrees that it will report the Contemplated Transactions
for Tax purposes in accordance with Article 2 hereof, including that the
amount Seller realizes pursuant to its sale of the Purchased Assets and the
Purchased Shares shall be the full amount of the Purchase Price without any
reduction with respect to the transactions described in Section 2.2(c) hereof.
8.6 SELLER'S OBLIGATIONS AND LIABILITIES. Seller shall when due and
payable, pay and discharge, and Seller shall perform, any liabilities and
obligations based upon, arising out of or relating to the business of EWD, or
any of its predecessors, other than the Assumed Liabilities.
8.7 WARRANTIES. As of the Closing, Seller shall be deemed to have
assigned to Buyer, without recourse, all of its right, title and interest in
and to such warranties (express or implied) as are assignable and continue in
effect with respect to any of the Purchased Assets and to have nominated
Buyer as its true and lawful attorney to enforce such warranties against any
manufacturers or vendors, and Seller shall execute and deliver such specific
assignments of such warranty rights as Buyer may reasonably request.
8.8 TRANSFER TAXES. Notwithstanding anything in this Agreement to the
contrary, Seller agrees to pay and discharge, promptly and diligently, when
due all transfer taxes applicable to the transactions contemplated herein.
8.9 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the Closing
Date, Buyer shall be entitled, through its employees, potential investors,
advisors, consultants, representatives, contractors, counsel and independent
accountants, to make such investigation of the assets, properties, business
and operations of EWD and EES and such examination of the books, records and
financial condition of EWD and EES as it wishes, provided that any such
investigation and examination shall be conducted at reasonable times and
under reasonable circumstances and in a manner so as not to interfere with
the normal business operations of the Companies. The Companies shall make
available to such persons during such period all such information and copies
of all such documents concerning the affairs of EWD and EES as such persons
may reasonably request, shall
46
permit such persons access to the properties of EWD and EES and all parts
thereof, and shall cause their respective officers, employees, consultants,
agents, accountants and attorneys to cooperate fully with such persons in
connection with their review and examination.
8.10 EXCLUSIVE DEALING. During the period from the date of this
Agreement through the Closing or the earlier termination of this Agreement
pursuant to Article 9, the Companies shall not, and shall cause their
respective affiliates, stockholders, agents, attorneys, representatives,
directors, employees and advisors not to, directly or indirectly, entertain,
solicit, respond to, discuss or enter into negotiations with respect to any
other offers from prospective buyers of all or any portion of the Purchased
Assets or the capital stock and/or assets of EES (either by merger,
consolidation or otherwise) and shall suspend any discussions with or
dissemination of information to prospective buyers. If either of the
Companies, or any of their respective affiliates, stockholders, agents,
attorneys, representatives, directors, employees or advisors receive any
offers or communications from any new or existing offerees, they will remain
silent or advise the offeror that they are not in a position to negotiate or
accept any offers at that time.
8.11 PURCHASE ORDERS AND INQUIRIES. All customer purchase orders and
inquiries received by Seller after the Closing with respect to windows and
doors will be referred to Buyer.
8.12 COLLECTION OF RECEIVABLES. Following the Closing Date, all cash,
checks or other proceeds received by Seller or any of its banks or other
financial institutions in payment of EWD Accounts Receivable shall be paid to
Buyer within five business days after receipt by Seller, which payments shall
be accompanied by a statement identifying the payee, the amount of the
payment and the related invoice number. Seller agrees to endorse and Buyer
shall have the right to endorse the name of Seller on any such checks or
proceeds (whether received directly by Buyer or received from Seller or its
bank) and shall deposit such checks and other proceeds in bank accounts
maintained in Buyer's name. From and after the Closing Date, at Buyer's
expense, Seller shall cooperate with, and provide reasonable assistance to
Buyer in collecting such accounts.
8.13 PAYMENT OF ASSUMED LIABILITIES. On or before their respective due
dates, Buyer shall pay and satisfy in full (or cause to be paid and satisfied
in full) all of the Assumed Liabilities; provided, however, that with respect
to any liability or obligation of Seller assumed by Buyer pursuant to clause
(iv) of Section 1.5, Buyer shall have no obligation pursuant to this Section
8.13 to pay and satisfy in full any such assumed liability or obligation
until Buyer has received and approved any applicable Tax Return in accordance
with Section 8.5(i) hereof.
8.14 EMPLOYEE MATTERS. Although Buyer currently intends to, and knows of
no reason that it would not, for the indefinite future, continue the
employment of essentially all employees on the payroll of EES and hire and
continue the employment of essentially all employees on the payroll of EWD
(such EWD and EES employees hired by Buyer
47
hereinafter referred to as "Transferred Employees"), Buyer reserves the right
at any time to terminate any Transferred Employee and not to hire any EWD
employee. Effective as of the Closing, Buyer shall adopt (or cause to be
adopted), for Transferred Employees, employee welfare benefit plans (as such
term is defined in ERISA Section 3(3)) substantially similar to the Plans
under which such employees were covered immediately prior to the Closing, and
Seller shall, for as long as Buyer shall so request (up to 90 days or, if
reasonably requested by Buyer, 120 days) and so long as Buyer shall not make
substantive changes in such plans, provide administrative services for such
plans after the Closing substantially similar to the administrative services
Seller provided with respect to Seller's employee welfare benefit plans, in
which case Buyer shall bear the full cost of such administrative services, as
agreed upon by Buyer and Seller. Seller shall use reasonable efforts to
assist Buyer in establishing such replacement welfare plans and assigning
Seller's rights under service contracts and insurance policies related to
such welfare plans. Notwithstanding the foregoing, Buyer shall have the right
to determine, in its sole discretion, the compensation and benefits policies
applicable to the Transferred Employees after Closing; provided, however,
that under any welfare, pension or profit sharing plans adopted by Buyer, (i)
service with the Companies and their affiliates prior to the Closing shall be
counted for purposes of determining any period of eligibility to participate
or to vest in benefits, including vacation rights, (ii) any amounts
previously expended by Transferred Employees for purposes of satisfying
deductibles under any medical or dental plans of Seller for the applicable
current plan year shall be credited for purposes of satisfying any
deductibles under Buyer's plans, and (iii) no preexisting condition
limitations (that would not have been applicable under Seller's health
benefit plans) shall be imposed on Transferred Employees upon admittance into
any health benefits plan maintained by Buyer. Buyer or Buyer's employee
welfare benefit plans shall be liable for any medical or dental benefit in
respect of a claim incurred prior to Closing (but not any other employee
benefit in respect of a claim incurred prior to Closing) with respect to any
of the Transferred Employees, but only to the extent incurred but not
reported and reported but not paid claims are properly accrued on the Closing
Balance Sheet. Neither Seller nor any plan sponsored by or contributed to by
Seller shall provide, nor shall Seller nor any Seller plan be liable for, any
welfare benefit in respect of a claim incurred after the Closing. For
purposes of the preceding sentence, a medical or dental claim shall be deemed
to be incurred when the medical or dental care is provided. Buyer shall not
be required to assume the sponsorship of, or any obligation with respect to,
any employee pension benefit plan (as such term is defined in section 3(2))
of ERISA sponsored by or contributed to by Seller or EES. In addition to
providing group health plan coverage for Transferred Employees, Buyer shall
provide continuation health coverage to those former employees of the
Companies identified on Schedule 8.14, which Schedule may be updated on or
prior to the Closing Date, for the period required under section
4980B(f)(2)(B) of the Code. Seller shall use reasonable efforts to assist
Buyer in the recruitment of those employees identified by Buyer to operate
the business of the Companies following the Closing. All persons (i) actively
employed by Seller in respect of EWD or by EES immediately prior to the
Closing Date, (ii) who will no longer be employed by Seller or an ERISA
Affiliate of Seller as of the Closing Date, and (iii)
48
who are not otherwise vested in their benefit under any Pension Plan as of
the Closing, shall become so vested effective as of the Closing. At the
Closing, Seller shall disclose to Buyer any "employment loss," as such term
is defined in the Worker Adjustment and Retraining Notification Act, incurred
by EWD or EES during the period beginning on the date of this Agreement and
ending on the Closing Date.
8.15 1997 AUDIT COOPERATION. At Buyer's expense, Seller shall cooperate
with Buyer in connection with Buyer's audit of the combined statements of
earnings, retained earnings and cash flows of EWD and EES for the fiscal year
ended December 31, 1997, which cooperation shall include, but not be limited
to, giving Buyer access to the books and records necessary to complete such
audit.
8.16 LICENSE.
(a) Effective on the Closing Date, Seller grants to Buyer, in
perpetuity, a fully-paid, irrevocable, worldwide, exclusive, royalty-free
license to use the "Ellison" name, trademarks and/or service marks, the
pending trademark application Serial No. 75/239,904, and any variations or
derivations thereof (the "Ellison Mark"), for use with windows and doors and
other home improvement or home construction products, and in connection with
the business of extruding raw materials (the "Covered Products"). The right
and license granted to Buyer hereunder shall include the right to sublicense
the Ellison Mark to any affiliate or related company of Buyer for use with
the Covered Products. On the Closing Date, Seller shall execute and deliver
such documents, instruments and certificates, and take such other actions as
reasonably may be required or desirable in order to license to Buyer,
pursuant to this Section 8.16, the Ellison Mark. Seller covenants and agrees
that it shall not use, or license others to use, the Ellison Mark in
connection with any business or product competitive with or related to the
Covered Products.
(b) Buyer recognizes and understands the importance of Seller's
exercise of control over the quality of the use by Buyer of the Ellison Mark
so as to preserve the continued validity of the Ellison Mark and to protect
the goodwill associated therewith and shall cause any products and services
to be provided under the Ellison Mark to be of a quality at least equal to
that provided by Seller prior to the date hereof.
(c) Seller shall, at Buyer's expense, maintain in full force and
effect and shall enforce the application(s) and or registration(s) of the
Ellison Mark and shall file such additional applications for registration of
the Ellison Mark as appropriate and as reasonably requested by Buyer. Without
affecting the foregoing obligations of Seller, Buyer will at all times have
the right to take steps, in its sole discretion and as it deems necessary or
desirable, to protect and maintain the Ellison Mark in connection with the
Covered Products, including but not limited to filing and prosecuting
litigation and other proceedings against, and opposing applications for
trademark or service mark registration for, marks that are confusingly
similar to the Ellison Mark. At Buyer's expense, Seller shall take such
action with respect to the foregoing as Buyer may reasonably request,
49
including joining such litigation or proceeding as a party. Buyer shall be
entitled to any monetary recovery from such litigation or proceeding
following reimbursement to Seller of any costs or fees reasonably incurred by
it in such litigation or proceeding.
8.17 NONSOLICITATION. For a period of one year following the Closing
Date, neither Buyer nor any of its Affiliates shall directly or indirectly
solicit or in any manner attempt to persuade or influence any employee of
Seller's Specialty Manufacturing Division (other than employees that were
previously terminated by Seller) to work for any other person, other than
pursuant to general advertisements in newspapers, periodicals or websites or
any similar publication.
8.18 WATER PRESSURE MODIFICATIONS. Seller or JE shall make and pay
for the water pressure modifications necessary to remedy the deficiencies
described on Schedule 4.15 in the time frame described therein.
ARTICLE 9. TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any time by written
notice given prior to or at the Closing:
(a) by Buyer in the event the condition in Section 6.1 is not
satisfied;
(b) by either Buyer or Seller (the "Non-Breaching Party") if there
is a material violation or breach by the other (the "Breaching Party") of any
covenant, representation, warranty or obligation contained in this Agreement
and such violation or breach has not been waived by the Non-Breaching party
or, cured by the Breaching Party within ten (10) days after written notice
thereof from the Non-Breaching Party;
(c) by either Buyer or Seller if the Contemplated Transactions have
not been consummated (other than through the failure of any party seeking to
terminate this Agreement to comply in all material respects with its
obligations under this Agreement) by the Transaction Deadline Date, or such
later date as the parties may agree in writing; provided that neither Buyer
nor Seller shall be entitled to terminate this Agreement pursuant to this
Section 9.1(c) if such party's knowing or willful breach of this Agreement
has prevented the consummation of the Contemplated Transactions;
(d) by Seller in the event the condition in Section 7.7 is not
satisfied; or
(e) by mutual written consent of Buyer and Seller.
9.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either Buyer or Seller as provided in Section 9.1 , the provisions of this
Agreement shall immediately become of no further force and effect (other than
Section 8.3, this Article 9 and Article 12, each of which shall survive the
termination of this Agreement) without
50
any party being liable to any other party; provided, however, that the
following shall apply:
(a) in the event that this Agreement may be terminated pursuant to
Section 9.1(b) hereof and the Non-Breaching Party elects to close rather than
terminate the Contemplated Transactions despite a breach or violation of this
Agreement, such Non-Breaching Party shall be entitled to seek indemnity from
the Breaching Party pursuant to Article 11 hereof;
(b) in the event that this Agreement is terminated pursuant to
Section 9.1(b) hereof and the violation or breach of this Agreement was
willful or intentional, the Non-Breaching Party shall be entitled to receive
from the Breaching Party an amount equal to all reasonable out-of-pocket fees
and expenses (including reasonable fees and expenses of counsel) incurred by
the Non-Breaching Party and its representatives and Affiliates in connection
with this Agreement and the Contemplated Transactions, and may seek damages
from the Breaching Party and/or equitable relief; and
(c) Buyer shall continue to be bound by the Confidentiality
Agreement dated August 5, 1999, pursuant to its terms.
ARTICLE 10. NONCOMPETITION AND NONSOLICITATION
10.1 ACKNOWLEDGMENTS. Seller and JE acknowledge that:
(a) EWD has been engaged in the business of making vinyl windows and
doors ("EWD Products") for sale throughout the United States;
(b) EES has been engaged in the business of vinyl lineal extrusion
(the "EES Products") for use in commerce throughout the United States;
(c) the agreements and covenants contained in this Article 10 are
essential to protect the goodwill associated with the Purchased Assets and
the Purchased Shares being acquired by Buyer pursuant to this Agreement, and
(d) Buyer would not enter into this Agreement or acquire the
Purchased Assets or the Purchased Shares but for the agreements and covenants
contained in this Article 10.
10.2 COVENANT AGAINST COMPETITION. Seller and JE, jointly and severally,
covenant and agree that, for a period of four (4) years following the Closing
Date, without the consent of Buyer, neither of them nor any of their
Affiliates shall, directly or indirectly, engage in any manner in the
business of making, assembling, selling, distributing or marketing EWD
Products, EES Products or any other windows or doors for sale in the United
States, either for its or his own account or in association with any other
person, firm, corporation, or entity in any capacity, including without
limitation, as
51
a partner, shareholder, investor, member, principal, agent, lender or
consultant; provided, however, that this restriction shall not prevent
Seller, JE or any of their Affiliates from owning securities of Buyer or
owning, directly or indirectly, solely as an investment, securities of any
entity traded on any national securities exchange or market if it or he is
not a controlling person of, or a member of a group which controls, such
entity and does not, directly or indirectly, own 1% or more of any class of
securities of such entity.
10.3 NONSOLICITATION. For a period of four (4) years following the
Closing Date, neither Seller nor JE nor any of their Affiliates shall, within
the United States or elsewhere (a) directly or indirectly solicit or attempt
in any manner to persuade or influence any employees of Buyer, EWD or EES or
any of their respective Affiliates to work for any other person or (b)
directly or indirectly solicit or attempt in any manner to persuade or
influence any present or future customer of Buyer, EWD or EES or any of their
respective Affiliates to divert its purchases of EWD Products, EES Products
or any other windows or doors from Buyer or its Affiliates to any person then
in competition with Buyer or its Affiliates or to cease purchasing from
Buyer, EWD or EES or any of their respective Affiliates.
10.4 RIGHTS AND REMEDIES UPON BREACH. If Seller or JE or any of their
Affiliates breaches, or threatens to breach, any of the provisions of this
Article 10, in addition to any other rights Buyer may have, including a claim
for damages, Buyer shall have the right to have this Article 10 specifically
enforced by any court of competent jurisdiction, it being agreed that any
breach or threatened breach of this Article 10 would cause irreparable harm
to Buyer in that money damages would not provide an adequate remedy to Buyer.
10.5 FURTHER ASSURANCES.
(a) Seller and JE acknowledge and agree that the restrictions
contained in this Article 10 are reasonable and valid in geographical and
temporal scope and in all other respects. If any provision of this Article 10
or the application hereof to any party or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Article 10 and the
application of such provision to other parties or circumstances shall not be
affected thereby and shall be enforced to the maximum extent permitted under
applicable law.
(b) Without limiting the generality of the foregoing, if any court
of competent jurisdiction determines that any part of this Agreement is
unenforceable because of the duration or geographic scope of such provision,
or both, the parties agree that such duration or scope shall be reduced to
the extent determined to be reasonable by such court of competent
jurisdiction and, in its reduced form, such provision shall then be valid,
binding and enforceable.
(c) Seller, JE and Buyer intend to and hereby confer jurisdiction to
enforce this Article 10 upon the courts of any jurisdiction within the United
States. If the
52
courts of any one or more of such jurisdictions hold that all or any part of
this Article 10 is unenforceable for any reason, it is the intention of
Seller, JE and Buyer that such determination shall not bar or in any way
affect Buyer's right to relief in the courts of any other jurisdiction within
the United States as to breaches of this Article 10 in such other
jurisdiction, the provisions of this Article 10 as they relate to each
jurisdiction being, for this purpose, separate and independent covenants.
ARTICLE 11. INDEMNIFICATION
11.1 SELLER'S AGREEMENT TO INDEMNIFY. Subject to the terms and
conditions of this Article 11, Seller hereby agrees to indemnify, defend and
hold harmless Buyer and its officers, directors, employees, stockholders,
representatives, agents, successors and assigns from and against all losses,
damages, demands, claims, assessments, actions, Taxes, penalties, interest,
reasonable attorneys' and accountants' fees, settlement costs and other costs
and expenses (collectively, "Indemnified Losses") arising out of, or incident
to, any of the following:
(a) any breach of any representation or warranty made by Seller
herein or in any certificate or other instrument delivered pursuant hereto,
except that Buyer shall not assert a claim under Section 4.7(b) to the extent
of any Material Adverse Effect arising solely out of changes in general
economic conditions;
(b) any breach or failure by Seller to perform or fulfill any of its
covenants or agreements set forth herein (including, without limitation,
failure by Seller to pay, discharge or perform any of its obligations and
liabilities other than the Assumed Liabilities);
(c) whether or not disclosed on any Schedule hereto, (i) all Taxes
of or with respect to Seller or any of its shareholders (except as set forth
in clause (iv) of Section 1.5) and (ii) all Taxes of EES with respect to any
period (or portion thereof) ending on or prior to the Closing Date, to the
extent such Taxes in clause (ii) of this Section 11.1(c) are in excess of the
amount reflected as an accrual or reserve (without regard to deferred Tax
assets and liabilities) for income tax liabilities payable of EES on the
Closing Balance Sheet as appropriately reduced for any Tax items (including,
without limitation, any payment of Taxes (whether pursuant to Section 8.5 or
otherwise)) and/or by the amount of any payment made by Buyer to Seller
pursuant to the final sentence of Section 8.5(b);
(d) any liabilities resulting from Seller's failure to comply with
the provisions of any state's laws with respect to bulk transfers, or acts of
similar nature, as such laws may be applicable to the Purchased Assets;
(e) whether or not disclosed on any Schedule hereto, any liability
or obligation of EES for (i) Taxes with respect to any period (or portion
thereof) ending on or prior to the Closing Date, to the extent such Taxes are
in excess of the amount
53
reflected as an accrual or reserve (without regard to deferred Tax assets and
liabilities) for income tax liabilities payable of EES set forth on the
Closing Balance Sheet as appropriately reduced for any Tax items (including,
without limitation, any payment of Taxes (whether pursuant to Section 8.5 or
otherwise)) and/or by the amount of any payment made by Buyer to Seller
pursuant to the final sentence of Section 8.5(b), (ii) any indebtedness of
EES to Seller for borrowed money (other than the indebtedness evidenced by
EES's Promissory Note dated January 21, 1997), (iii) any other indebtedness
of EES for borrowed money or any guaranty by EES of indebtedness for borrowed
money, (iv) any fees and expenses of Seller relating to the Contemplated
Transactions, (v) any liabilities or obligations of EES in respect of any
agreement, contract, lease or commitment other than the EES Agreements or any
other agreements under which the other party or parties thereto continue to
do business with EES (or with Seller for the exclusive benefit of EES)
following the closing on the terms specified in the agreement, (vi) any
liability or obligation under the Worker Adjustment and Retraining
Notification Act with respect to EES arising prior to the Closing Date, (vii)
any liabilities or obligations relating to the Excluded Assets or not arising
out of the business of EES, or (viii) subject to clause, or (v) of Section
1.5 (but with the understanding that Buyer will not assume sponsorship of any
Plan in whole or in part), any liability or obligation under or related to
any Plan; or
(f) any of the Assumed Liabilities described in clauses (vi) and
(vii) of Section 1.5 hereof and any liability or obligation of EES of the
type described in clauses (vi) and (vii) of Section 1.5 hereof; or
(g) any and all claims, actions, suits, proceedings, investigations,
demands, assessments and judgments incident to any of the foregoing.
11.2 BUYER'S AGREEMENT TO INDEMNIFY. Subject to the terms and conditions
of this Article 11, Buyer hereby agrees to indemnify, defend and hold
harmless Seller and its successors and assigns from and against all
Indemnified Losses arising out of, or incident to, any of the following:
(a) any breach of any representation or warranty made by Buyer
herein or in any certificate or other instrument delivered pursuant hereto;
(b) any failure by Buyer to perform or fulfill any of its covenants
or agreements set forth herein (including, without limitation, Buyer's
failure to pay, discharge or perform any of the Assumed Liabilities); or
(c) any and all claims, actions, suits, proceedings, investigations,
demands, assessments and judgments incident to any of the foregoing.
54
11.3 NOTICE OF CLAIMS. All claims for indemnification hereunder shall be
resolved in accordance with the following procedures:
(a) If Buyer or Seller, as appropriate, has incurred or reasonably
believes that it may incur any Indemnified Loss (the "Indemnified Party"), it
shall deliver promptly written notice to the other (the "Indemnifying Party")
setting forth in reasonable detail the nature and amount of the Indemnified
Loss or potential Indemnified Loss, if possible, and further referencing the
sections of this Agreement upon which the claim for indemnification for such
Indemnified Loss is based (a "Claim Notice"). If an Indemnified Party
receives notice of a third-party claim for which it intends to seek
indemnification hereunder, it shall give the Indemnifying Party prompt
written notice of such claim, so that the Indemnifying Party's defense of
such claim under Section 11.4 hereof may be timely instituted. The failure by
an Indemnified Party to provide such written notice shall not constitute a
waiver of the Indemnified Party's right to indemnity unless such failure has
resulted in the loss of substantive rights with respect to the Indemnifying
Party's ability to defend such claim, and then only to the extent of such
loss.
(b) If, after receiving a Claim Notice for an Indemnified Loss, the
Indemnifying Party desires to dispute such claim or the amount claimed in the
Claim Notice, it shall deliver to the Indemnified Party a written objection
to such claim or payment setting forth the basis for disputing such claim or
payment. Such notice shall be delivered within thirty (30) days after the
date the Claim Notice to which it relates is received by the Indemnifying
Party. If no such notice is received within the aforementioned 30-day period,
the Indemnified Party shall be entitled to payment for such Indemnified Loss
from the Indemnifying Party within ten (10) days of the end of such 30-day
objection period, subject to the limitations of Section 11.7 hereof.
11.4 DEFENSE OF THIRD-PARTY CLAIMS. The Indemnifying Party under this
Article 11 shall have the right to conduct and control through counsel of its
own choosing, which counsel shall be reasonably acceptable to the Indemnified
Party, any third-party claim, action or suit; provided that the Indemnifying
Party diligently contests and defends such claim. The Indemnified Party shall
be entitled at any time, at its own cost and expense (except that such cost
and expense shall be paid by the Indemnifying Party if (a) the Indemnified
Party reasonably determines that the Indemnifying Party is not adequately
representing or, because of a conflict of interest, may not adequately
represent the interests of any Indemnified Party, or (b) the third party
claim, action or suit seeks damages in excess of the limitations set forth in
Section 11.7(b) hereof), to participate in such contest and defense and to be
represented by attorneys of its or their own choosing. Except with the prior
written consent of the Indemnified Party, which shall not be unreasonably
withheld, no Indemnifying Party, in the defense of such claim or litigation,
shall consent to entry of any judgment or order, interim or otherwise, or
enter into any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnified Party or that does not include as an
unconditional term thereof
55
the giving by each claimant or plaintiff to such Indemnified Party of a
release from all liability with respect to such claim or litigation;
provided, however, that with respect to any claim, audit or litigation
relating to Taxes, the Indemnifying Party shall not consent to entry of any
judgment or order, interim or otherwise, or enter into any settlement, in any
case, of any type whatsoever, except with the prior written consent of the
Indemnified Party, which written consent shall not be unreasonably withheld.
11.5 FAILURE TO DEFEND. In the event that the Indemnifying Party does
not elect to defend against any third-party claim, the Indemnified Party may
defend against such claim in such manner as it may in its good faith
discretion deem appropriate and, to the extent and subject to the limitations
provided in this Article 11, the Indemnifying Party shall be liable for any
legal expenses reasonably incurred in connection with such defense; provided,
however, that the Indemnified Party shall not, without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld, settle
or consent to the entry of judgment with respect to such third-party claim.
11.6 COOPERATION. In the event of any claim by a third party, the
parties hereto agree that they will cooperate fully with each other in
connection with the defense or settlement of such matter.
11.7 LIMITATIONS ON INDEMNIFICATION. The indemnification provided for in
this Article 11 shall be subject to the following limitations:
(a) DEDUCTIBLE. Notwithstanding any provision contained in this
Article 11 or elsewhere herein to the contrary, except as set forth in the
next sentence, Buyer shall have no right to receive any indemnification from
Seller with respect to Indemnified Losses relating to (1) breaches of
representations or warranties, (2) the Assumed Liabilities described in
clauses (vi) and (vii) of Section 1.5 hereof, or (3) any liability or
obligation of EES of the type described in clauses (vi) and (vii) of Section
1.5 hereof until the sum of such Indemnified Losses exceed, in the aggregate,
$450,000 (the "Deductible"), whereupon Seller shall be obligated to pay all
Indemnified Losses in excess of the Deductible. The Deductible shall not
apply to any Indemnified Loss arising out of (i) Seller's breach of a
representation or warranty made in Sections 4.2, 4.8, 4.9 or 4.17 (to the
extent that such Indemnified Losses consist of income or franchise Taxes and
interest, penalties and additions to Tax in respect of such income or
franchise Taxes), (ii) liabilities of EWD other than Assumed Liabilities,
(iii) liabilities described in Section 11.1(e), (iv) Seller's fraud, bad
faith or willful misconduct in connection with this Agreement or the Related
Agreements, or (v) liabilities for Taxes as described in Section 11.1(c)
hereof to the extent such Indemnified Losses relate to or are attributable to
income or franchise Taxes.
(b) CEILING ON INDEMNIFIED LOSSES. Notwithstanding anything in this
Article 11 or elsewhere herein to the contrary, the liability of Seller to
Buyer under this Article 11 for all Indemnified Losses relating to (1)
breaches of representations or warranties, (2) the Assumed Liabilities
described in clauses (vi) and (vii) of Section 1.5
56
hereof, or (3) any liability or obligation of EES of the type described in
clauses (vi) and (vii) of Section 1.5 hereof shall not exceed, in the
aggregate, $7 million, except to the extent that such liability is based upon
(i) Seller's breach of a representation or warranty made in Section 4.2, 4.8,
4.9 or 4.17 (to the extent that such Indemnified Losses consist of income or
franchise Taxes and interest, penalties and additions to Tax in respect of
such income or franchise Taxes), (ii) liabilities of EWD other than Assumed
Liabilities, (iii) liabilities described in Section 11.1(e), (iv) Seller's
fraud, bad faith or willful misconduct in connection with this Agreement or
the Related Agreements, or (v) liabilities for Taxes as described in Section
11.1(c) hereof to the extent that such Indemnified Losses relate to or are
attributable to income or franchise Taxes. In connection with any
indemnification claim by Buyer under this Agreement relating to breaches of
representations or warranties, Buyer shall be required to seek recovery for
Indemnified Losses out of the funds held in the Escrow Account (as defined in
the Escrow Agreement) pursuant to the Escrow Agreement. Upon exhaustion of
the funds held in the Escrow Account, Buyer may seek recovery directly from
Seller, but only to the extent that the $7 million ceiling described in this
Section 11.7(b) does not apply to the Indemnified Loss for which recovery is
sought. In the event that Buyer receives amounts in respect of
Indemnification Losses out of funds held in the Escrow Account pursuant to
the Escrow Agreement for any claim based upon the (i) Seller's breach of a
representation or warranty made in Section 4.2, 4.8, 4.9 or 4.17 (to the
extent that such Indemnified Losses consist of income or franchise Taxes and
interest, penalties and additions to Tax in respect of such income or
franchise Taxes), (ii) liabilities of EWD other than Assumed Liabilities,
(iii) liabilities described in Section 11.1(e), (iv) Seller's fraud, bad
faith or willful misconduct in connection with this Agreement, or (v)
liabilities for Taxes as described in Section 11.1(c) hereof to the extent
such Indemnified Losses relate to or are attributable to income or franchise
Taxes, Seller shall replenish the Escrow Account in an amount equal to the
amount released by the Escrow Agent to Buyer in respect of claims.
(c) OTHER BENEFITS AND DETRIMENTS. In determining the amount of any
Indemnified Loss, there shall be taken into account any tax benefit or
detriment, insurance proceeds (other than proceeds from the representation
and warranty insurance policy described on Schedule 2.2(a)) or other similar
recovery, detriment or offset realized, directly or indirectly, by the
Indemnified Party.
11.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the parties
hereto has the right to rely fully upon the representations, warranties,
covenants and agreements of the other contained herein or in any certificate
delivered with respect to any of the foregoing. Each of the covenants and
agreements shall survive the Closing indefinitely and the representations and
warranties shall survive the execution of this Agreement and the Closing and
shall remain in full force and effect for a period of sixteen (16) months
following the Closing Date; provided, however, that such limitation on
survival shall not apply to (i) any representation or warranty if a Claim
Notice with respect thereto is delivered as provided in this Article 11
hereof prior to expiration of such period, or (ii)
57
any representation or warranty made in Section 4.2, 4.8 or 4.9, or any claim
based upon the Seller's fraud, bad faith or willful misconduct in connection
with this Agreement or the Related Agreements, which shall, in each case,
survive the Closing indefinitely. Notwithstanding the immediately preceding
sentence, the representations, warranties, covenants and agreements contained
herein, or in any certificate delivered with respect to any of the foregoing,
that relate to Taxes shall survive until 60 days after the expiration of the
applicable statute of limitations (including any extension thereof; provided,
however, that no statute of limitations shall be extended without the consent
of Seller which consent shall not be unreasonably withheld.)
11.9 EXCLUSIVE REMEDY. Buyer and Seller acknowledge and agree that the
foregoing provisions of this Article 11 shall be the exclusive remedy of
Buyer and Seller with respect to any dispute or claim arising out of or
related to the Contemplated Transactions if the Contemplated Transactions are
consummated.
ARTICLE 12. ARBITRATION
12.1 BINDING ARBITRATION. Except as provided in Section 2.4(d) hereof,
any dispute or claim between the parties arising out of or related to this
Agreement or the Contemplated Transactions shall be fully and finally
resolved by binding arbitration in Wilmington, Delaware in accordance with
the Commercial Arbitration Rules and practices (the "Rules") of the American
Arbitration Association ("AAA") from time to time in force and effect. This
agreement to arbitrate shall be specifically enforceable and is the exclusive
remedy for the resolution of such disputes under this Agreement. There shall
be a three-arbitrator panel (the "Panel") which shall be chosen in accordance
with the Rules of the AAA. Only individuals who are (i) lawyers engaged
full-time in the practice of law and (ii) on the AAA register of arbitrators
shall be selected as an arbitrator. Within twenty (20) days after the
conclusion of the arbitration hearing, the Panel shall prepare written
findings of fact and conclusions of law. Judgment upon the award determined
by the Panel shall be entered in state or federal court located in
Wilmington, Delaware. The parties hereby submit to the exclusive jurisdiction
of the courts so selected, to the exclusion of any other court which might
have had jurisdiction apart from this Section 12.1, waive any defense of lack
of in personam jurisdiction of such courts and agree that service of process
in any action before such courts may be made by mailing it to the party to be
served at the address provided for in Section 13.6 hereof. The Panel shall
require the non-prevailing party to pay the Panel's full fees and expenses;
provided, that in the event of a compromise between the positions of the
parties, such fees and expenses shall be pro rated based on the relative
success of the parties in prevailing on their positions. Each party to this
Agreement covenants not to institute any action or litigation in any court,
or commence any other proceeding, with respect to any matter under this
Agreement other than as provided for in Section 2.4(d) hereof.
58
ARTICLE 13. GENERAL PROVISIONS
13.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, shall
inure to the benefit of, and be enforceable by, the parties hereto and their
respective personal representatives, heirs, successors and assigns, except
that none of the parties shall have the right to assign any of its or his
obligations hereunder without the consent of the other party hereto.
Notwithstanding the foregoing, Buyer may assign or delegate any or all of its
rights or obligations under this Agreement to any Affiliate of Buyer.
13.2 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits hereto constitutes the entire contract between the parties hereto
with respect to the subject matter hereof and may not be changed, modified or
amended, except by an instrument in writing signed by the party against whom
any such change, modification or amendment is asserted.
13.3 COMMERCIALLY REASONABLE EFFORTS. Each of the parties hereto agrees
to use its commercially reasonable efforts to cause all conditions precedent
to its obligations under this Agreement to be satisfied. Notwithstanding the
foregoing, the obligations to use commercially reasonable efforts shall not
include the obligation to pay monies to any party or the obligation to agree
to any financial arrangement (other than as described on Schedule 7.7) that
any party hereto considers to be not in its best interest.
13.4 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to any
State's conflict of laws principles.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall constitute one and the same agreement.
13.6 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing
and shall be deemed to have been duly given if delivered personally or by a
nationally recognized overnight delivery service, as follows:
If to Seller:
The Ellison Company, Inc.
Suite 406
706 Green Valley Road
Greensboro, NC 27408
Attention: John Ellison, Jr.
59
With a copy to:
Schell Bray Aycock Abel &
Livingston P.L.L.C.
230 North Elm Street, Suite 1500
Greensboro, North Carolina 27401
Attention: Michael R. Abel, Esq.
If to Buyer:
D and W Holdings, Inc.
c/o Ardshiel, Inc.
230 Park Avenue
New York, New York 10169
Attention: Daniel T. Morley
Facsimile Number: (212) 972-1809
With a copy to:
Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Marie Censoplano, Esq.
Joel M. Simon, Esq.
Facsimile Number: (212) 319-4090
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on the date of delivery.
13.7 PRESS RELEASES AND COMMUNICATIONS. No press release or public
announcement related to this Agreement or the Contemplated Transactions or,
prior to the Closing, any other announcement or communication to the
employees, customers or suppliers of Seller, EWD and/or EES shall be issued
or made by Seller, EWD, EES or Buyer or any of their respective officers,
directors, employees, advisors, agents or representatives, without the prior
written consent of the other. If either party is required by law (based on
the advice of counsel), to make an announcement, the other party shall have
the right to review such press release or announcement prior to publication.
13.8 NO THIRD PARTY BENEFICIARIES. Except as expressly stated herein,
nothing in this Agreement expressed or implied, is intended to confer on any
person other than the parties hereto or their respective personal
representatives, heirs, successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
60
13.9 CONSTRUCTION AND INTERPRETATION. This Agreement has been negotiated
by the undersigned and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement, or any
provision of this Agreement, against the party drafting this Agreement will
not apply in any construction or interpretation of this Agreement.
13.10 HEADINGS. The Section headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement. Throughout this Agreement, the masculine gender shall be
deemed to include the feminine and the neuter, the singular the plural, and
the plural the singular, all as the context may require.
13.11 SEVERABILITY. If any provision of this Agreement shall be declared
by any court of competent jurisdiction to be illegal, void or unenforceable,
all other provisions of this Agreement shall not be affected and shall remain
in full force and effect.
13.12 SPECIFIC PERFORMANCE. The parties recognize that in the event the
Companies should refuse to perform under the provisions of this Agreement,
monetary damages along will not be adequate. Buyer shall therefore be
entitled, in addition to any other remedies which may be available, including
money damages, to obtain specific performance of the terms of this Agreement.
In the event of any action to enforce this Agreement specifically, the
Companies hereby waive the defense that there is an adequate remedy at law.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the day and year first above written.
THE ELLISON COMPANY, INC.
By:
--------------------------------
John Ellison, Jr., President
ATTEST:
- -------------------------
Jane R. Ellison, Secretary
D AND W HOLDINGS, INC.
By:
--------------------------------
ATTEST:
- -------------------------
Secretary
JOINDER
John Ellison, Jr., hereby joins in this Agreement for the sole
purpose of agreeing to be bound by the provisions of Section 8.18 and
Articles 10 and 12.
-------------------------
John Ellison, Jr.
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SCHEDULES AND EXHIBITS
Schedule 1.5 Assumed Agreements
Schedule 1.21 EES Fixed Assets
Schedule 1.35 EWD Fixed Assets
Schedule 1.39 Excluded Assets
Schedule 1.58 Promissory Note
Schedule 2.2(a) Indemnification Insurance
Schedule 2.5 Allocation of Purchase Price
Schedule 4.1 Jurisdictions
Schedule 4.4 Governmental Approvals and Notices
Schedule 4.5 Approvals and Notices Required
Schedule 4.6(a) Audited Financial Statements
Schedule 4.6(b) Unaudited Financial Statements
Schedule 4.6(f) Indebtedness
Schedule 4.7 Adverse Changes
Schedule 4.8 Title Exceptions
Schedule 4.15 Real Estate Exceptions
Schedule 4.16 Leases and Facilities
Schedule 4.17 Tax Matters
Schedule 4.18 Employment Agreements
Schedule 4.19 Employment Matters
Schedule 4.20 Employee Benefit Plans
Schedule 4.21 Non-Competition Agreements
Schedule 4.22 Bank Accounts
Schedule 4.23 Licenses and Permits
Schedule 4.24 Legal Proceedings
Schedule 4.25 Utilities
Schedule 4.26 Compliance Exceptions; Safety and Environmental Permits
Schedule 4.27 Environmental Matters
Schedule 4.29 EES Agreements
Schedule 4.32 Intellectual Property Rights
Schedule 4.33 Insurance
Schedule 4.35 Affiliated Transactions
Schedule 4.36 Brokerage Fees
Schedule 4.37 Change of Control Provisions
Schedule 4.38 Customers, Suppliers and Distributors
Schedule 4.40 Relationship with General Electric Company
Schedule 5.4 Approvals and Notices; Conflict with Other Instruments
Schedule 6.5 Required Consents
Schedule 6.12 Releases and Payoffs
Schedule 6.21 Lease Amendments
Schedule 7.7 Financing
Schedule 8.1(a) Deferred Capital Expenditures
Schedule 8.14 Employee Matters
Exhibit A Note
Exhibit B Assignment and Assumption Agreement
Exhibit C Bill of Sale and Assignment
Exhibit D Escrow Agreement
Exhibit E Opinion of Seller's Counsel
Exhibit F Trademark Assignment
Exhibit G Ellison Subscription Agreement
Exhibit H Management Subscription Agreement
Exhibit I Buy/Sell Agreement
Exhibit J Employment Agreement
Exhibit K Nondisturbance Agreement
Exhibit L Opinion of Buyer's Counsel
Annex A Ellison Transaction Outline
2