Exhibit 10.2
ASSET PURCHASE AGREEMENT
BETWEEN
VIKING BUILDING PRODUCTS, INC.
and
AMERICAN BUILDERS & CONTRACTORS SUPPLY CO., INC.
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into as of this 12/th/ day of April, 1997,
by and between Viking Building Products, Inc., a Connecticut corporation with
principal offices at 33-39 John Street, New Britain, CT 06051 ("Seller") and
American Builders & Contractors Supply Co., Inc., a Texas corporation with
principal offices at One ABC Parkway, Beloit, WI 53511 ("Buyer").
W I T N E S S E T H:
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WHEREAS, Seller is engaged in the distribution and sale of roofing,
windows, siding, building products and related accessories (the "Business"); and
WHEREAS, Buyer desires to purchase, and Seller desires to sell
substantially all of the assets and properties identified on the books and
records of, or used in connection with, the Business, which assets and
properties are currently held by Seller and more particularly described herein
below, and, as part of such purchase and sale, Buyer is willing to assume
certain specific obligations and liabilities of the Business, subject, in each
case, to the exceptions provided for herein; and
WHEREAS, in connection with the transactions contemplated herein, Buyer
desires to purchase and Viking Aluminum Products, Inc. ("VAP"), Seller's
affiliate, desires to sell certain of its assets used in connection with its
distribution business in Berlin, Connecticut, its Andersen and Windsor Windows
fabrication assets and its business related to the production of gutter
accessories ("Rain Ware") (but excluding any assets associated with VAP's other
manufacturing facilities or other businesses); and
WHEREAS, contemporaneously with the transactions contemplated herein, and
as a condition to the sale by Seller to Buyer of substantially all of the assets
of the Business, Buyer has agreed directly or through affiliates to acquire the
real estate properties used by the Seller in connection with the Business
(identified below as the "Trachten Real Estate Properties") or, under
circumstances specifically set forth in the contracts of sale being entered into
with respect to each of the Trachten Real Estate Properties in the form of
Exhibit A annexed hereto (collectively the "Trachten Real Estate Contracts"), to
lease rather than acquire any one or more of the Trachten Real Estate
Properties;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements as to which the parties
acknowledge the sufficiency thereof, and upon the terms and subject to the
conditions hereinafter set forth, the parties do hereby agree as follows;
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ARTICLE I
SALE AND PURCHASE OF ASSETS
1.01. Transfer of Assets. Subject to the terms and conditions of this
Agreement, and except as otherwise specifically provided herein, on the Closing
Date (as defined in Article 3.01 hereof), Seller shall sell, assign, transfer
and convey to Buyer, and Buyer shall purchase, acquire and accept from Seller,
free and clear of all Liens (as defined in Article 4.01 hereof), all of the
Seller's right, title and interest in and to all the assets, properties,
contracts and rights identified on the books and records of, or used in
connection with, the Business, of every kind and description, wherever located,
whether tangible or intangible, real or personal or mixed, as the same shall
exist as of the Closing (as defined in Article 3.01 hereof) (collectively, the
"Assets"). The Assets shall include all assets, properties, contracts and rights
described in the following paragraphs (i) through (xiv):
(i) all leasehold improvements used in the operation of the Business
listed in Schedule 1.01 (i) of this Agreement and as more fully described in
Article 4.04 hereof ("Leasehold Improvements"), but excluding leasehold
improvements which have become affixed to and part of the Trachten Real Estate
Properties which are the subject of the Trachten Real Estate Contracts;
(ii) all furnishings, furniture, office equipment and supplies,
commercial vehicles, spare parts, tools, machinery, equipment, personal property
and other tangible property wherever located that are identified on the books
and records of, or used in connection with, the Business, including, without
limitation, those listed in Schedule 1.01(ii) of this Agreement (except as
disposed of in the ordinary course of business consistent with past practice and
not in violation of any provision of this Agreement) (together with the Assets
described in clause (iv), the "Equipment");
(iii) all computer systems, computer hardware, databases and software
programs, source codes and user manuals used in the operation of the Business
wherever located, including, without limitation, those listed in Schedule 1.01
(iii) of this Agreement, together with dedicated telephone lines and telephone
numbers used in connection with such computer systems;
(iv) all fixed assets, other than the items described in clause (ii),
that are identified on the books and records of, or used in connection with, the
Business (including, without limitation, those listed in Schedule 1.01 (iv) of
this Agreement);
(v) all quantities of inventory, including raw materials, bulk,
components, work-in-process, finished goods, promotional items, packaging
materials and supplies as more fully defined in Article 2.04 ("Inventory") and
identified on the books and records of, or used in connection with, the Business
and all purchase orders for Inventory ordered by Seller in the ordinary course
of business but not received as of the Closing Date (Seller shall deliver at
Closing, a Schedule of pending purchase orders);
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(vi) all rights of the Seller under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers and contractors
in any way related to the Business or affecting the Assets described above
(except to the extent relating to or affecting the Excluded Assets or the
Excluded Liabilities);
(vii) all rights, title and interests, if any, of the Seller in and
to patents and patent applications owned by the Seller or licensed to the Seller
by third parties and used or held by Seller in connection with the Business, and
all rights and interests of the Seller in and to research, development,
processes, trade secrets, knowhow, inventions, formulae, process technology,
confidential information and engineering and other technical information
(whether in hard copy or computer format or any other tangible form), whether
owned by Seller or licensed from third parties by Seller, in any way related to
the Business (including, without limitation, in each case, those listed in
Schedule 1.01(vii) of this Agreement, and trade secrets and know-how which have
no physical embodiments);
(viii) subject to the provision below in this paragraph (viii) with
respect to the name "Viking," the name "Viking Building Products" and the Viking
logo, all rights, title and interests of the Seller in all jurisdictions in and
to names, tradenames, trademarks and service marks used or adopted, whether
registered or unregistered, and copyrights, and registrations of and
applications to register the same, owned by Seller or licensed to Seller by
third parties and identified on the books and records of, used in connection
with, or in any way related to, the Business, including, without limitation, in
each case, those listed in Schedule 1.01 (viii) of this Agreement, and any and
all goodwill represented by or pertaining to any of the foregoing (collectively,
together with the rights and interests described in clause (vii) above, the
"Proprietary Rights"). With respect to the "Viking" name, the name "Viking
Building Products" and the Viking logo, the Seller hereby grants to Buyer an
exclusive license for a term of five (5) years, commencing the date of Closing,
of all of Seller's right, title and interest in and to the name "Viking," the
name "Viking Building Products" and the Viking logo, for use in conjunction with
the Buyer's continuation of the Business being acquired herein, provided,
however that nothing herein shall be deemed to prevent or in any way limit the
use of the name "Viking" or the Viking logo by VAP or any of its affiliated
entities after the Closing in any business which does not violate Article 8.01
of this Agreement;
(ix) all contracts (excluding collective bargaining agreements,
pension and profit sharing plans), agreements, licenses, rights to receive
royalties, arrangements and/or commitments of any kind in any way related to the
Business or Assets, and listed in Schedules 1.01(ix) and 4.04 of this Agreement,
and all customer purchase orders ordered in the ordinary course of business or
other commitments to purchase products from Seller which have not been shipped
as of the Closing Date, whether or not listed in Schedules 1.01 (ix) or 4.04 of
this Agreement;
(x) all customer and vendor lists in any way related to the Business,
and all files and documents (including credit information) to the extent
relating to customers and vendors of the Business and other business and
financial records, files, books and documents (whether in hard copy or computer
format or any other tangible form) in any way related to the
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Assets and/or the Business, including sales and advertising materials, sales,
distribution and purchase correspondence, personnel and employment records, any
information relating to taxes imposed on Assets and trade association
memberships (including, without limitation, those listed in Schedule 1.01(x) of
this Agreement);
(xi) all of Seller's rights, claims, credits, causes of action or
rights of setoff against third parties in any way related to the Business or
affecting the Assets or Assumed Liabilities (except those relating solely to
Excluded Assets or Excluded Liabilities);
(xii) all licenses, permits, certificates, franchises or other
governmental authorizations in any way related to the Business or any of the
Assets (including those listed in Schedule 1.01 (xii) of this Agreement),
subject to the provisions of Article 1.03;
(xiii) all goodwill associated with the Seller, the Business and the
Assets; and
(xiv) all accounts receivable from customers of the Business and all
associated credit rights (including, without limitation, all joint check
agreements, personal or other guaranties, third party payment arrangements, bond
and lien rights), together with any security or collateral therefor, ("Accounts
Receivable") (including without limitation, those accounts receivable to be
identified on Schedule 1.01 (xiv)(A) to be attached hereto at Closing and
incorporated herein by this reference), but excluding those accounts receivable
(other than "Post February 28 Write-offs" defined below in Article 8.04) which
have, prior to the date of Closing, been turned over by Seller for collection to
an attorney or collection agency, and those accounts receivable that have been
or, prior to Closing, will be, written off Seller's books as bad debt (together,
the "Excluded Accounts Receivable"). A portion of those receivables in the
total amount of Six Hundred Seventy Nine Thousand Dollars ($679,000.00) which
Seller will write-off prior to Closing are identified on Schedule 1.01 (xiv)(B)
which is attached hereto and incorporated herein by reference.
(xv) all other useful assets of Seller not identified as Excluded
Assets.
1.02. Excluded Assets. The parties to this Agreement expressly understand
and agree that Seller is not selling, assigning, transferring or conveying to
Buyer pursuant to this Agreement the following assets, rights and properties
(the "Excluded Assets"):
(i) the assets of Seller listed in Schedule 1.02(i) of this Agreement,
and those items of personal property owned by any of the shareholders of Seller
and listed on Schedule 1.02(i);
(ii) except as otherwise set forth in Article 1.03(c) hereof, any
right, title and interest under all contracts, agreements, licenses, waivers,
consents, approvals and other nongovernmental authorizations which are not
transferable, whether by their terms or applicable law;
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(iii) all cash, bank accounts, certificates of deposit, treasury
bills, promissory notes, marketable securities, and other investments unrelated
to the Business other than the assets identified in Article 1.01 (xiv);
(iv) the Excluded Accounts Receivable;
(v) the Excluded Inventory (as defined in Article 2.04 below), if
any;
(vi) Seller's pension and retirement plans;
(vii) Seller's collective bargaining agreements;
(viii) all rights, claims, credits or causes of action against third
parties to the extent solely related to the Excluded Liabilities or the Excluded
Assets; and
(ix) Subject to adjustment pursuant to Article 2.05(c) below with
respect to purchases made by Seller from January 1, 1997 to the Closing Date,
all of Seller's rights to vendor rebates and discounts on purchases made by
Seller prior to the Closing pursuant to any vendor rebate programs in which
Seller participates (hereinafter referred to as "Vendor Rebate Programs").
1.03. Assignment of Assets. (a) Prior to the Closing, Seller shall use its
best efforts, and Buyer shall cooperate with Seller, to obtain all non-
governmental approvals, consents or waivers (including all Required Third Party
Consents (as defined in Article 1.03(b)) necessary to assign to Buyer all
leases, contracts, licenses, agreements, sales or purchase orders, commitments,
property interests, qualifications or other assets described in Section 1.01
hereof and any claim, right or benefit arising thereunder or resulting therefrom
(the "Interests"), all of which Required Third Party Consents are identified on
Schedule 1.03(a).
(b) As used herein, "Required Third Party Consent" means each
consent required as a result of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, under any
Commitment (as defined in Article 4.04(a) hereof that involves an annual payment
by or to Seller exceeding $2,500.00;
(c) To the extent any of the approvals, consents or waivers
referred to in Article 1.03(a) hereof have not been obtained by Seller as of the
Closing, and Buyer waives the condition precedent in Article 9.05, if Buyer so
requests, Seller, for a period of eighteen (18) months after the Closing Date,
shall continue to use its best efforts, and Buyer shall cooperate with Seller
(without the payment of any consideration by Seller or Buyer), to obtain such
approval, consents or waivers. Regardless of any request by Buyer, Seller shall
use its best efforts during the remaining term of any Interest to, with Buyer
reimbursing Seller for any out-of-pocket expense: (i) cooperate with Buyer in
any reasonable and lawful arrangements under which Buyer would obtain the
benefits of, and assume the post-Closing obligations under, such Interest (other
than obligations resulting from Seller's breach ' thereof or default
thereunder); and (ii) enforce, at the request of Buyer and for the account of
Buyer, any rights of Seller arising
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from such Interest against the issuer thereof or the other party or parties
thereto (including the right to elect to terminate any such Interest in
accordance with the terms thereof upon the written advise of Buyer). Seller will
promptly pay (or cause to be paid) to Buyer when received all amounts received
by Seller under any Interest.
(d) No provision of this Article 1.03 shall be deemed to be a
waiver or release of, or otherwise affect any condition, right or obligation
under Article 9.05.
1.04. Obtaining Permits and Licenses. Seller shall use its best efforts,
and Buyer shall cooperate with Seller, to obtain as of the Closing Date the
Required Governmental Consents described below in this Article 1.04-provided
that Seller will assign, transfer or convey to Buyer at the Closing those
governmental permits and licenses described in Schedule 1.01 (xii) of this
Agreement to the extent assignable. No provision of this Article 1.04 shall be
deemed to be a waiver or release of, or otherwise affect any condition, right or
obligation under Article 9.05.
As used herein, "Required Governmental Consent" means each approval or
consent required as a result of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby, to obtain
or transfer (whether by assignment, renewal, amendment or otherwise) the Permits
listed on Schedule 4.13 of this Agreement (with the only change being the
identity of Buyer as the holder thereof).
"Required Consent" means any Required Third Party Consent and any Required
Governmental Consent.
1.05. Assumed Liabilities: Excluded Liabilities. (a) Upon the terms and
subject to the conditions of this Agreement, Buyer agrees, effective at the
Closing, to assume the following liabilities (the "Assumed Liabilities"):
(i) all liabilities of Seller arising in connection with the
Assets referred to in Section 1.01 (ix) to the extent arising out of the conduct
of the Business after the Closing Date or otherwise specifically assumed by
Buyer in this Agreement;
(ii) all liabilities and obligations arising in respect of earned
and or/accrued vacation pay (and all related payroll and other taxes and
assessments) of the employees employed by Seller in connection with the Business
and hired by Buyer as of the Closing ("Assumed Vacation Pay"), which shall be
scheduled as of the Closing Date and attached hereto as Schedule 1.05 (a)(ii),
identifying each employee, his/her hire date and vacation earned and/or accrued;
(iii) all liabilities and obligations arising in respect of
Seller's stated trade payables as of the. Date of Closing, to those vendors
identified on Schedule 4.23(A) (hereinafter collectively referred to as "Major
Vendors") provided that, with respect to each such Major Vendor so identified on
Schedule 4.23(A), Buyer delivers to Seller at Closing an Assumption and Release
Agreement in the form of Exhibit B annexed hereto executed by Buyer
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acknowledging its assumption of the payable and each such Major Vendor releasing
the Seller from the obligation (the "Assumed Trade Payables"); any liabilities
and obligations arising in respect of Major Vendors as of the Date of Closing
for which Buyer does not deliver to Seller at Closing an Assumption and Release
Agreement and all other vendors not identified on Schedule 4.23(A), shall remain
the liability and obligation of Seller and shall not be assumed by the Buyer
(the "Non-Assumed Trade Payables"); provided that Seller shall arrange for VAP
to consent to Buyer assuming the trade payables due from Seller to VAP to be
paid by Buyer in accordance with Seller's ordinary terms, i.e., payment due on
the tenth (10th) day of each month, for invoices dated prior to the 26th of the
previous month;
(iv) all liabilities and obligations for all stated customer deposits
with respect to any Accounts Receivable or pending contracts for customer orders
("Customer Deposits");
(v) all liabilities and obligations for Seller's current bonus
program with its salesmen pursuant to which each salesman is entitled to a bonus
equal to two percent (2%) of the salesman's gross sales from March 1, 1997 to
the Closing Date, less draw paid to that date (the "Salesmen Bonuses"), subject
to Buyer receiving a credit against the Purchase Price in an amount equal to
fifty percent (50%) of the Salesmen Bonuses earned as of the Closing Date or, in
the event the Closing occurs after May 27, 1997, in an amount (when aggregated
with the Salesmen Bonuses earned by VAP salesmen) equal to the lesser of fifty
percent (50%) of the Salesmen Bonuses earned as of the Closing Date or Forty
Thousand Dollars ($40,000.00) (the Salesman Bonus Credit") allocated by Seller
as between Seller and VAP; and
(vi) all liabilities and obligations to Seller's customers identified
on Schedule 4.23(B) pursuant to Seller's rebate and discount programs which
commenced March 1, 1997 for those customers and are unpaid as of the Closing
(the "Customer Discounts"), subject to Buyer receiving a credit from Seller at
the Closing for these Customer Discounts accrued as at the Closing, but further
subject to the parties adjusting these Customer Discounts post-Closing, at the
end of the calendar year, as provided in Article 2.05(d).
(b) Except as set forth in Article 1.05(a), Buyer shall not assume
any other liability or obligation of Seller (or any predecessor owner of all or
part of the Business) of whatever nature whether existing at any time in the
past, presently in existence or arising hereafter. All such other liabilities
and obligations shall be retained by and remain obligations and liabilities of
Seller, all such liabilities and obligations not being assumed being herein
referred to as the "Excluded Liabilities". Notwithstanding anything to the
contrary in Article 1.05(a) or this Article 1.05(b), the following shall
constitute, without limitation, the Excluded Liabilities:
(i) all liabilities and obligations associated with the Excluded
Assets;
(ii) all lawsuits, claims and other liabilities and obligations
arising in connection with all actions, suits, claims, investigations or
proceedings pending on the Closing Date or arising after the Closing and
relating to the conduct of the Business or the ownership of the Assets prior to
the Closing (nothing in this paragraph shall be deemed to supersede, modify
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or nullify the exception to the Excluded Liability relating to collective
bargaining agreements set forth in Article 1.05(b)(viii) or Buyer's
indemnification of Seller with respect thereto as set forth in Article
12.02(d));
(iii) except the Assumed Vacation Pay and the Salesmen Bonuses, all
liabilities or obligations relating to Seller's employee benefits or
compensation arrangements existing on or prior to the Closing Date, including,
without limitation, any payroll obligations, earned and accrued vacation pay,
fringe benefits, employee benefits, bonuses, commissions on sales of products
delivered prior to the Closing Date, worker's compensation or other insurance
premiums, severance pay, payroll taxes, Social Security or any other tax,
penalty or assessment relating thereto, and any liabilities or obligations under
any of Seller's employee benefit agreements, plans or other arrangements,
including without limitation, those listed on Schedule 4.11. Seller shall
deliver to Buyer at Closing an accurate schedule of earned and/or accrued
vacation pay, fringe benefits, bonuses and commissions on sale of products
delivered prior to Closing, to which Seller's employees listed on Schedule
3.03(h) are entitled;
(iv) all liabilities or obligations (including any contra asset or
negative amount in respect of cash or other assets) owed by Seller or any other
business affiliated with Seller by common ownership ("Affiliate");
(v) all liabilities and obligations under any indebtedness for
borrowed money or under any guarantees made by Seller or Seller's shareholders;
(vi) all liabilities relating to products sold by Seller prior to
the Closing Date, including, without limitation, product warranty claims,
product returns and related credits or offsets against Accounts Receivable;
(vii) all Non-Assumed Trade Payables and liabilities and obligations
other than, or in excess of, the Assumed Trade Payables;
(viii) all liabilities related to collective bargaining agreements
(except to the extent of any liability which arises, on or after the Closing,
out of Buyer's nonassumption of the collective bargaining agreements or its
failure to reach agreements with the respective collective bargaining units);
(ix) all liabilities related to Seller's pension and retirement
plans (including all underfunded and unfunded liabilities); and
(x) all other liabilities and obligations of Seller, whether known
or unknown, contingent or absolute, determined or determinable, not expressly
assumed pursuant to Article 1.05(a).
1.06. Certain Filings. Seller and Buyer shall cooperate with one another
in determining whether any action by or in respect of, or filing with, any
governmental body, agency, official or authority is required, or any actions,
consents, approvals or waivers are
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required to be obtained from parties to any Commitments (as defined in Article
4.04 hereof in connection with the consummation of the transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, if
applicable, Buyer and Seller shall file any notification and report forms and
related materials that may be required to be filed with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the Hart-Scott-Rodino Act (as amended) ("HSR"), and any further filings
pursuant thereto that may be necessary in connection therewith; any and all
filing fees required by each governmental authority in connection with such
filings shall be paid for by the Buyer and at the Closing, Buyer shall be
entitled to a credit for one-half of the fees so paid.
ARTICLE II
PURCHASE PRICE
2.01. Purchase Price. The purchase price of the Assets shall be the sum of
the following (collectively referred to as the "Purchase Price"):
(a) All Leasehold Improvements (other than those affixed to or part
of the Trachten Real Estate Properties and Equipment and all other acquired
Assets (other than Inventory and Accounts Receivable) valued at Seller's net
book value as of the Closing Date;
(b) Inventory valued at the lesser of Seller's average invoice cost
or replacement cost available to Seller, less all cash discounts, rebates,
winter dating incentives (with respect only to Inventory purchased through
winter.dating incentives) and volume incentive credits of any kind (whether
earned or accrued);
(c) Gross Accounts Receivable, which shall include all interest and
service charges accrued on the Accounts Receivable, all of which as set forth on
Schedule 1.01 (xiv)(A) to be delivered by Seller at Closing, all provided,
however that the purchase price for such interest and service charges to be paid
by Buyer (inclusive of interest and service charges on VAP Accounts Receivable)
shall not exceed $260,000.00 (the amount paid by Buyer for such interest is
hereinafter referred to as the "Accounts Receivable Interest Payment");
(d) Non-competition agreements of the Seller and the Principals as
per Article 8.01 at $2,900,000.00; and
(e) The sum of $2,000,000.00; less
(f) The amount of the Assumed Trade Payables; less
(g) The amount of the Assumed Vacation Pay; less
(h) The amount of the Customer Deposits; less
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(i) The Salesmen Bonus Credit, if any; less
(j) The Customer Discounts.
2.02. Payment of the Purchase Price. The Purchase Price shall be paid as
follows: $250,000.00 has been paid prior to the execution of this Agreement by
wire transfer (the "Initial Deposit") to "Kudman, Trachten & Kessler" ("Escrow
Agent"). Upon execution hereof, Buyer shall pay $500,000.00 ("Additional
Deposit") by wire transfer to the Escrow Agent, and the Initial Deposit and the
Additional Deposit and the Adjournment Deposit (as defined below in Article
3.01), if any, shall be held and disbursed in accordance with the terms of the
Escrow Agreement annexed hereto and incorporated herein by reference as Exhibit
C, which shall supersede the Initial Escrow Agreement. The Initial Deposit and
Additional Deposit are collectively referred to herein as the "Purchase Price
Deposit". At Closing, Buyer shall execute a promissory note, in the form of
Exhibit D (the"Note"), to be jointly and severally guaranteed by Kenneth A.
Hendricks and Diane Hendricks in the form of Exhibit E (the "Hendricks'
Guaranty"), in the principal amount of $3,000,000.00 which shall accrue interest
at a rate of eight and one-half percent (8.5%) per annum; interest shall be due
and payable quarterly and the entire principal balance with interest accrued and
unpaid shall be due and payable in full two (2) years from the Date of Closing;
and the balance of the Purchase Price shall be paid at the Closing in U.S.
Dollars by wire transfer of immediately available funds to such accounts as
Seller may designate. In the event of the willful failure of Buyer to close
and/or any other breach by Buyer of its obligations under this Agreement, Seller
shall have, as its sole remedy, the right to retain the Purchase Price Deposit.
All interest accruing on the Purchase Price Deposit shall be applied towards the
Purchase Price at Closing; if the Closing does not occur for any reason,
interest shall be paid pro-rata to the party entitled to the Purchase Price
Deposit; interest on the Adjournment Deposit, if any, shall be payable to the
Seller in all events.
2.03. Allocation of Purchase Price.
(a) Buyer shall secure at its expense (exclusive of Inventory which
shall be valued in accordance with Article 2.04 hereof and the value of the Non-
Competition covenants) an appraisal or opinion of value of the tangible and
intangible property included in the Assets (the "Allocation") for purposes of
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Allocation shall be delivered to Seller at the Closing.
(b) Seller and Buyer agree to report an allocation of the Purchase
Price among the Assets in a manner entirely consistent with the Allocation and
agree to act in accordance with such Allocation in the preparation of financial
statements and filing of all tax returns, reports and claims (including, without
limitation, filing on a timely basis of Form 8594 with its Federal income tax
return for the taxable year that includes the date of the Closing) and in the
course of any tax audit, tax review, or tax litigation relating thereto. Neither
Seller nor Buyer will assert that the Allocation was not separately bargained
for at arm's length and in good faith, Seller and Buyer agree not to assert, in
connection with any tax return, audit or other similar proceeding, any
allocation of the Purchase Price which differs from the Allocation agreed to
herein.
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(c) If a reduction is made with respect to the Purchase Price, the
Allocation shall be adjusted in accordance with Section 1060 of the Code, as
mutually agreed by Seller and Buyer. Seller and Buyer agree to file any
additional information return required to be filed pursuant to the regulations
under Section 1060(b) of the Code and to treat the Allocation as adjusted in the
manner described for purposes of the immediately preceding paragraph.
(d) Not later than thirty (30) days after Closing, Buyer shall
deliver to Seller a copy of its Form 8594. Seller shall notify Buyer in writing
within fifteen (15) calendar days of any objections to Buyer's Form 8594.
(e) Each party shall notify the other within fifteen (1 5) calendar
days after receiving notice that the Internal Revenue Service or any other
taxing authority proposes to reallocate the Purchase Price.
2.04. Inventory.
(a) Within four (4) business days prior to the Closing Date, Buyer
and Seller, together with their respective auditors and agents if either so
desires, shall conduct a joint physical inspection and complete item-by-item
count of the Inventory for purposes of valuing the Inventory as of the Closing
Date. During such count, Buyer and Seller shall make appropriate record of (i)
any damaged inventory, (ii) any obsolete inventory (any inventory not currently
being offered by the original manufacturer in its line), and (iii) subject to
the provisions of paragraph (b) of this Article 2.04, slow-moving inventory
(inventory of a particular product other than Rain Ware products, which exceeds
a supply of more than 180 days based upon sales of the product during the period
from July 1, 1996 through December 31, 1996) purchased after January 1, 1997,
and (iv) decking materials and related accessories (including but not limited to
TREX decking), and Buyer shall, at the Closing, advise Seller which of such
Inventory it does not intend to purchase (the "Excluded Inventory").
(b) Anything to the contrary notwithstanding, particular products
purchased by Seller after January 1, 1997 which would, in accordance with the
foregoing definition of slow moving inventory, be deemed to be slow moving
inventory, shall not be deemed to be Excluded Inventory provided that the
aggregate cost of such purchases does not exceed the sum of Twenty Five Thousand
Dollars ($25,000.00) and the overall supply of slow moving inventory of all
products as at the Closing is less than such supply as at January 1, 1997.
(c) Seller shall have the right to sell or in any other manner
dispose of the Excluded Inventory within ninety (90) days of the Closing and any
and all proceeds realized therefrom shall be the sole property of Seller. Buyer
agrees to permit Seller to store the Excluded Inventory at Seller's present
warehouses during this ninety (90) day period at no cost to Seller. Seller shall
retain the risk of loss with respect to any Excluded Inventory stored at
Seller's warehouses after the Closing. Any Excluded Inventory not removed from
the warehouses on the ninety-first (91st) day shall, at Buyer's election, become
the property and responsibility of Buyer; in the event Buyer does not elect to
own any remaining Excluded Inventory, the removal or disposal of such Excluded
Inventory shall be at Seller's sole expense and in Seller's name.
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(d) As to the Excluded Inventory, no value will be assigned thereto
for purposes of determining the payment due Seller from Buyer for Inventory.
The allocation of the Purchase Price among the Assets described in Article 2.01
(b) hereof shall include an allocation to the Inventory as of the Closing Date
based upon the results of the physical inspection and count of the Inventory
described in this Article 2.04 and a valuation thereof performed in accordance
with the provisions of this Article 2.04 and based upon the lesser of Seller's
average invoice cost or current replacement cost available to Seller, less all
cash discounts, rebates, winter dating incentives (with respect only to
inventory purchased through winter dating incentives) and volume incentive
credits of any kind (whether earned or accrued).
2.05. Apportionment of Certain Charges and Post Closing Adjustments.
(a) The parties shall adjust at the Closing, utility charges, rents,
prepaid items, or other similar operating expenses. Such adjustments shall be
apportioned between Buyer and Seller with Seller bearing a portion thereof based
on the number of days in the period on and prior to the Closing Date and Buyer
bearing a portion based on the number of days in such period after the Closing
Date. Any adjustments required under this Article 2.05 shall be made as of the
close of business on the Closing Date.
(b) If any liability arises after the Closing Date in respect of any
utility charges, rents, prepaid items, or other similar operating expenses and
such liability relates to a period which includes (but does not end on) the
Closing Date and has not been adjusted between the parties and paid at the
Closing, or a liability which should have been apportioned at the Closing but
was not so apportioned, such liability shall be similarly apportioned between
Buyer and Seller as of the close of business on the Closing Date. Seller and
Buyer mutually agree that within ninety (90) days after the Closing Date, Buyer
shall submit to Seller a post closing adjustment report (the "Post Closing
Adjustment Report") which shall set forth any adjustment in the Purchase Price
based upon the apportionment of the charges described in Article 2.05(a) above
(the "Purchase Price Adjustment"). If Seller does not object to the Purchase
Price Adjustment within fifteen (15) days after receipt thereof, the Purchase
Price Adjustment shall be deemed final and Seller shall promptly remit to Buyer
in immediately available funds the amount of such Purchase Price Adjustment. If
Seller objects to the Purchase Price Adjustment within the fifteen (15) day
period described herein or if within said fifteen (15) day period Seller advises
Buyer of an adjustment that should have, but was not adjusted for at the Closing
and Buyer objects, any dispute with respect thereto which is not resolved by
Seller and Buyer within thirty (30) days after receipt by Buyer of Seller's
objections shall be submitted to arbitration under Article 14.16.
(c) Seller in its sole discretion may attempt to have those of its
vendors with whom Seller participates in a Vendor Rebate Program, agree to
credit Seller's purchases made from January 1, 1997 to the date of Closing
("Seller's 1997 Purchases") towards Buyer's purchases from such vendors for
purposes of Buyers rebate program (if any) with such vendors. Seller shall
advise Buyer in writing on or before the Closing as to any vendor(s) agreeing to
the foregoing ("Participating Vendor(s)"). If Buyer is entitled to a rebate
from a Participating Vendor (irrespective of whether Sellers 1997 Purchases
enable Buyer to qualify for the rebate),
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to the extent of Seller's 1997 Purchases, Seller shall be entitled as a post-
closing adjustment, to a prorated share of the rebate earned by Buyer in the
amount of the lesser of: (i) the rebate Seller would have received for Sellers
1997 Purchases under its Vendor Rebate Program with the Participating Vendor, or
(ii) the portion of the rebate Buyer receives from the Participating Vendor
under its vendor rebate program allocable to Sellers 1997 Purchases. Such
adjustment shall be paid to Seller within thirty (30) days of receipt of the
rebate by Buyer or the issuance of a credit to Buyer by the Participating
Vendor. Nothing herein shall be deemed to require Buyer to reveal to Seller the
terms of its vendor rebate program with any Participating Vendor; provided,
however, Buyer shall reveal such information in strict confidence only to a
third party certified public accountant in the event of an audit of Buyer with
respect to this provision.
(d) The parties shall, on or before January 31, 1998, adjust the
Customer Discounts credit taken by Buyer at the Closing so that any rebate or
discount for which Buyer received a credit is recalculated and based upon a full
fiscal year. Such adjustment shall be apportioned between Buyer and Seller with
Seller being responsible for the portion of the Customer Discounts based on the
Seller's sales as a percentage of the total sales. Any such adjustment shall be
paid by the appropriate party to the other within fifteen (15) days of the date
the adjustment is calculated.
ARTICLE III
CLOSING
3.01. The Closing.
(a) The closing of the transactions contemplated hereby (the
"Closing") shall take place at the Empire State Building offices of Kudman,
Trachten & Kessler, counsel for Seller, at 10:00 a.m. (New York City time) on
May 6, 1997 (provided that any conditions required herein to be satisfied prior
to the Closing have been satisfied or waived as of such date), time being of the
essence subject only to the provisions of paragraph (b) of this Article 3.01.
For the purpose of this Agreement, "Closing Date" shall mean 12:01 a.m. Eastern
Standard Time on May 6, 1997.
(b) From time to time, Buyer shall have the right to adjourn the
Closing for up to three (3) weeks to a date no later than May 27, 1997 (as to
which date time shall also be of the essence) solely and only in the event
Buyer's affiliates are unable to obtain and close on third party financing for
the acquisition of the Trachten Real Estate Properties by the Closing Date and
subject to Buyer giving the Seller written notice no less than four (4) business
days' prior to the Closing Date and within one (1) business day of such notice,
delivering to the Escrow Agent as an additional deposit towards the Purchase
Price, $75,000.00 for each requested adjourned week (the aggregate amount
delivered to the Escrow Agent being referred to as the "Adjournment Deposit").
Interest on the Adjournment Deposit shall in all events be payable to the
Seller. The failure of the Buyer to timely deliver the appropriate Adjournment
Deposit shall be deemed to be a material breach of this Agreement.
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(c) Anything to the contrary notwithstanding, Seller's willingness to
permit the Buyer to adjourn the Closing Date for the limited reason set forth in
paragraph (b) above, is an accommodation to the Buyer and the ability (or
inability) of Buyers affiliates to finance the acquisition of the Trachten Real
Estate Properties is not, and shall not be deemed to be, a contingency or
condition of this Agreement or the Trachten Real Estate Contracts or to the
Buyers obligation to consummate the transaction contemplated in this Agreement,
the Trachten Real Estate Contracts or any of the other agreements being entered
into contemporaneously herewith or to be entered into at the Closing.
(d) All matters at the Closing shall be considered to take place
simultaneously and no delivery of any document shall be deemed complete until
all transactions and deliveries of documents are completed.
3.02. Deliveries of Seller. At the Closing, Seller shall deliver the
following documents to Buyer:
(a) Bill of Sale and Assignment duly executed on behalf of Seller,
dated the Closing Date in the form attached hereto as Exhibit F, transferring to
Buyer all of the Seller's right, title and interest in and to the Assets (it
being understood that separate transfer documents will be delivered for certain
of the Assets as Buyer may reasonably request);
(b) the certificate referred to in Article 9.01 hereof;
(c) the opinion of Kudman, Trachten & Kessler, Sellers counsel, in
substantially the form of Exhibit G attached hereto;
(d) a receipt for the Purchase Price;
(e) a certificate of existence for Seller from the State of
Connecticut and good standing certificates for Seller with respect to each State
in which the Seller is doing business and qualification to do business in such
State is required by the laws of the State and certificate of the Secretary or
an Assistant Secretary of Seller as to the resolutions adopted by Seller's Board
of Directors and shareholders relating to the transactions contemplated hereby;
(f) the Required Consents;
(g) the guaranty of the Shareholders in the form attached hereto as
part of Exhibit H (the "Shareholder Guaranty");
(h) Intentionally Deleted;
(i) the executed consulting agreement of David Trachten specified in
Article 9.13;
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(j) the executed Non-Competition Agreements of Seller's Shareholders
as specified in Article 8.01;
(k) the executed Assignment of Telephone Number in the form of the
document attached hereto as Exhibit 1;
(l) assignments of all contracts with Seller's employees (other than
collective bargaining agreements and pension and retirement plans);
(m) a list of Customer Deposits;
(n) a list of Assumed Vacation Pay;
(o) a list of the Salesmen Bonuses;
(p) a list of Customer Discounts; and
(q) the Schedule of pending purchase orders referred to in Article
1.01 (v).
3.03. Deliveries of Buyer. At the Closing, Buyer shall deliver, or cause
to be delivered, to Seller the following:
(a) the Purchase Price, in accordance with Article 2.01 hereof,
including the Note and the Hendricks' Guaranty;
(b) the executed Assumption and Release Agreements pursuant to
Article 1.05(a)(iii);
(c) the Allocation pursuant to Article 2.03(a);
(d) the certificate referred to in Article 10.01 hereof;
(e) executed Assumption Agreement duly executed on behalf of Buyer in
the form of Exhibit J attached hereto;
(f) the opinion of Leo and Associates, Buyer's counsel, in
substantially the form of Exhibit K attached hereto;
(g) a good standing certificate for Buyer from the States of Texas
and Connecticut and certificate of the Secretary or an Assistant Secretary of
Buyer as to the resolutions adopted by Buyer's Board of Directors and
shareholders relating to the transactions contemplated hereby; and
(h) a list of all employees of Seller whom Buyer will offer to employ
upon Closing.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
4.01. Corporate Power and Authority; Effect of Agreement. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Connecticut, is qualified to do business and in good standing in
the States of Massachusetts, New Hampshire, New York, and Rhode Island, and has
all requisite corporate power and authority to carry on its business as it is
now being conducted, and to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. Seller has heretofore
delivered to Buyer a true and complete copy of the certificate of incorporation
and bylaws of Seller as currently in effect. The execution, delivery and
performance by Seller of this Agreement and the consummation by it of the
transactions contemplated hereby are within Seller's corporate powers and have
been duly authorized by all necessary corporate action on the part of Seller.
This Agreement has been duly and validly executed and delivered by Seller and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, except to the extent that such enforceability (A) may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally, and (B) is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The execution, delivery and
performance by Seller of this Agreement and the consummation by it of the
transactions contemplated hereby will not, with or without the giving of notice
or the lapse of time, or both, (i) contravene or conflict with the certificate
of incorporation or bylaws, or any resolution adopted by the board of directors
of the shareholders of Seller, (ii) contravene, conflict with or violate any
provision of law, rule or regulation to which Seller, the Assets or the Business
are subject, (iii) violate any order, judgment or decree applicable to Seller,
(iv) subject to obtaining all Required Third Party Consents, constitute a breach
or default under or give rise to any right of revocation, withdrawal,
suspension, modification, termination, cancellation or acceleration of any right
or obligation of Seller or to a loss of any benefit relating to the Business to
which Seller is entitled under any Commitment (as defined in Article 4.04 hereof
or any Permit (as defined in Article 4.13), or provision of any agreement,
contract or other instrument binding upon Seller or the Business, or by which
any of the Assets is or may be bound, or (v) result in the creation or
imposition of any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind ("Lien") on any Asset, other than those expressly
assumed by Buyer hereunder; except, in each case, for violation, cancellation or
acceleration which in the aggregate would not materially hinder or impair the
consummation of the transactions contemplated hereby or reasonably would be
expected to have a material adverse effect on the Business, Assets, condition
(financial or otherwise), or results of operations of the Business taken as a
whole ("Material Adverse Effect").
Except as set forth herein or in any other provision of this Agreement, Seller
is not, nor will Seller be, required to give any notice to or obtain any consent
from any person in connection with the execution and delivery of this Agreement
or the consummation or performance of the transactions contemplated herein.
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4.02. Tangible Personal Property. (a) Schedule 4.02(a) of this Agreement
sets forth a description of all material tangible personal property reflected on
the books and records of, or used in connection with, the Business, together
with the gross book value, accumulated depreciation and net book value as of the
date indicated (collectively, the "Tangible Personal Property").
(b) Seller has, or will as of the Closing Date have, good and
marketable, valid title to all of the Tangible Personal Property to be conveyed,
transferred or assigned by it and will convey, transfer and assign the Tangible
Personal Property to Buyer free and clear of any and all Liens other than
Permitted Liens as set forth on Schedule 4.02(b) of this Agreement.
(c) Upon consummation of the transactions contemplated hereby, Buyer
will have acquired good and marketable, valid title in and to the Tangible
Personal Property, free and clear of all Liens, except for those expressly
assumed by Buyer hereunder.
4.03. Proprietary Rights. (a) Schedule 4.03(a) of this Agreement sets
forth a list of Proprietary Rights owned or licensed by Seller and used in the
Business. Seller has good, marketable and valid title to the Proprietary Rights
and shall convey, transfer and assign the Proprietary Rights to Buyer free and
clear of all Liens other than those expressly assumed by Buyer hereunder. There
are no material licenses, sublicenses or other agreements as to which Seller or
any of its affiliates is a party and pursuant to which any person is authorized
to use such Proprietary Rights. The Seller has no patents, trademarks,
tradenames, copyrights or other Proprietary Rights other than as set forth on
Schedule 4.03(a) or Schedule 1.01(vii). Schedule 4.03(a) sets forth a complete
and accurate list and summary description, including royalties and license fees
paid or received by Seller with respect to the Proprietary Rights owned or
licensed by Seller and used in the Business and all Commitments relating to the
Proprietary Rights to which Seller is a party or by which it is bound, except
licenses implied by sale of a product and perpetual paid-up software licenses
with a value less than $1,000.00. None of the Proprietary Rights are infringed
or, to the best of Seller's knowledge, has been challenged or threatened in any
way, and none of the Proprietary Rights used by Seller infringes or is alleged
to infringe any intellectual property rights of any third party. Upon
consummation of the transactions contemplated herein, Buyer will have acquired
good title to the Proprietary Rights, free and clear of all Liens, except those
expressly assumed by Buyer hereunder.
4.04. Commitments. (a) Schedule 4.04 of this Agreement contains a list of
each written contract or agreement (including any and all written amendments
thereto) with respect to the Business to which Seller is a party, which except
as otherwise noted on Schedule 4.04 or otherwise set forth herein, is being
assigned to Buyer hereunder, which is not cancelable by any party thereto
without penalty or notice in excess of 60 days and which involves the payment to
or from Seller of amounts in excess of $1,000.00 per year (collectively, the
"Commitments"). Seller is not a party to any oral contracts or agreements and
there have been no oral amendments, modifications or waivers with respect to the
Commitments disclosed on Schedule 4.04. Except as disclosed in Schedules
1.01(ix) and 4.04 of this Agreement, with respect to the Business, Seller is not
a party to or subject to:
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(i) any lease;
(ii) any contract for the purchase of materials, supplies, goods,
services, equipment or other assets;
(iii) any sales, distribution or other similar agreement providing for
the sale by Seller of materials, supplies, goods, services, equipment or other
assets;
(iv) any partnership, joint venture or other similar contract
arrangement or agreement;
(v) any contract relating to indebtedness for borrowed money or the
deferred purchase price of property (whether incurred, assumed, guaranteed or
secured by any asset);
(vi) any license agreement, franchise agreement, right to receive or
obligation to pay royalties or any other agreement in respect of similar rights
granted to or held by Seller or any of its affiliates;
(vii) any agency, dealer, sales representative or other similar
agreement;
(viii) any agreement, contract or commitment that substantially limits
the freedom of Seller to compete in any line of business or with any person or
in any area or to own, operate, sell, transfer, pledge or otherwise dispose of
or encumber any Asset or which would so limit the freedom of the Buyer after the
Closing Date;
(ix) any agreement, contract or commitment between Seller and any of
Seller's employees, officers, directors or shareholders; or
(x) any collective bargaining agreement or other agreement,
contract or commitment with any union.
(b) Each Commitment disclosed in Schedule 1.01 (ix) or 4.04(a) of
this Agreement or required to be disclosed pursuant to this Article 4.04 is a
valid and binding agreement of Seller, in full force and effect, and neither
Seller, nor, to the knowledge of Seller, any other party thereto is in default
in any material respect under the terms of any such Commitment, nor, to the
knowledge of Seller, has any event or circumstance occurred that, with notice or
lapse of time or both, would constitute any event of default thereunder.
(c) To Seller's knowledge, no event has occurred or circumstance
exists that (with or without notice or lapse of time) may contravene, conflict
with, or result in a material violation or breach of, or give Seller or any
other person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Commitment; and
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(d) The Commitments relating to the sale, design, manufacture, or
provision of products or services by Seller have been entered into in the
ordinary course of business and to the best of Seller's knowledge, have been
entered into without the commission of any act alone or in concert with any
other person, or any consideration having been paid or promised, that is or
would constitute an illegal act or payment.
4.05. Litigation. Except as set forth in Schedule 4.05 of this Agreement,
there is no action, suit, investigation or proceeding before any court,
arbitrator or before any governmental authority, body, agency or official
pending or, to Seller's knowledge, threatened (a) against or affecting Seller in
connection with the conduct of the Business or the Assets, or (b) which in any
manner seeks to prevent, enjoin, alter or materially delay or obtain damages in
respect of the consummation of the transactions contemplated hereby. To the
Seller's knowledge, the litigation and any claim relating thereto referred to in
Schedule 4.05 has not had and will not have any adverse effect on the Business
(the "Scheduled Litigation"). To Seller's knowledge, no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such proceeding. Seller has delivered to Buyer copies of all
pleadings, correspondence and other documents relating to the Scheduled
Litigation. There is no order, judgment or decree to which Seller, the Business
or any of the Assets is subject, and to the best of Seller's knowledge, no
officer, director, agent, or employee of Seller is subject to any order,
judgment or decree that prohibits such officer, director, agent, or employee
from engaging in or continuing any conduct, activity, or practice relating to
the Business of Seller. Except as set forth Schedule 4.05, to the best of
Seller's knowledge (i) Seller is, and at all times since February 28, 1993 has
been, in material compliance with all of the terms and requirements of each
order, judgment and decree to which it, or any of the Assets is or has been
subject; and (ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a material
violation of or failure to comply with any material term or requirement of any
order, judgment or decree to which Seller or any of the Assets is subject; (iii)
Seller has not received, at any time since February 28, 1993, any notice or
other communication (whether oral or written) from any governmental body or any
other person regarding any actual, alleged, possible, or potential material
violation of, or failure to comply with, any material term or requirement of any
order, judgment or decree to which Seller or any of the Assets is or has been
subject.
4.06. Compliance with Laws. Except as set forth in Schedule 4.06, to the
best of Seller's knowledge, Seller is, and at all times since February 28, 1993
has been, in material compliance with all laws, rules, ordinances, regulations,
orders, judgments and decrees applicable to Seller, the conduct or operation of
the Business or the ownership, use, or sale of the Assets. Seller is not in
violation of, and Seller has not received notice of and, to Seller's knowledge,
Seller is not under investigation with respect to, any actual, alleged, possible
or potential violation of, or failure to materially comply with any law, rule,
ordinance or regulation, or judgment, order or decree entered by any court,
arbitrator or governmental authority, domestic or foreign, applicable to the
Assets or the conduct of the Business which would have an adverse effect on the
Business, the Assets or the consummation of the transactions contemplated
herein, or which would require Seller to undertake, or to bear all or any
portion of the cost of any remedial action of any nature. To Seller's knowledge,
Buyer shall be able to operate the Business as is presently done without the
need of obtaining any additional permits, except as may be
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required due to changes in statutes or regulations after the date of this
Agreement or as may be required with respect to lease agreement for premises
located at 110 Commerce Way, Woburn, Massachusetts, which lease is referenced on
Schedule 4.19.
4.07. Inventories. The Inventory set forth in Schedule 1.01 (v) was
properly stated therein at average invoice cost to Seller (after applying all
available cash discounts, rebates, winter dating incentives (with respect only
to Inventory purchased through winter dating incentives) and volume incentive
credits of every kind). Except as set forth on Schedule 4.07, all Inventory has
been maintained in the ordinary course of business and at sufficient levels to
operate the Business in the ordinary course of business and all Inventory is, or
as at the Closing Date will be, owned by Seller and is transferred to Buyer free
and clear of all Liens and, as of the Closing Date, will have a value as
determined in accordance with Article 2.04 hereof.
4.08. Accounts Receivable. The Accounts Receivable set forth on Schedule
1.01(xiv)(A), to be attached hereto at Closing and incorporated herein by this
reference, arose from bona fide transactions in the ordinary course of business
and were properly reflected thereon in accordance with generally accepted
accounting principles, consistently applied ("GAAP"). All Accounts Receivable at
the Closing Date will have arisen from bona fide transactions in the ordinary
course of business and will be reflected in a Statement of Accounts Receivable
to be delivered by Seller to Buyer at the Closing. Seller represents and
warrants that: (i) it has no knowledge, after due inquiry, of any dispute,
defense, credit or right of setoff with respect to any charge, invoice or
product sold in connection with the Accounts Receivable; (ii) none of the
Accounts Receivable include any attorney's or other collection fees; (iii) the
Accounts Receivable do not include any interest or service charges except as set
forth on Schedule 1.01 (xiv)(A); (iv) Seller owns all right title and interest
in and to the Accounts Receivable, and shall transfer the Accounts Receivable to
Buyer free and clear of all Liens except those expressly assumed by Buyer
hereunder; and (v) all Accounts Receivable shall be documented in accordance
with Seller's ordinary business practices (including appropriate credit and
purchase agreements). Prior to the Closing, Seller has written-off from its
books the accounts receivable identified on Schedule 1.01 (xiv)(B), attached
hereto and incorporated herein by this reference.
4.09. Labor Controversies. Except as disclosed in Schedules 4.04 and/or
4.09 of this Agreement and except for minor difficulties and controversies with
individual employees which have not had and will not have a Material Adverse
Effect:
(a) for a period of three (3) years from the date of this Agreement
there have been no claims, actions or controversies pending against the Seller
relating to Seller's employees, including (i) any strike, slowdown, picketing,
work stoppage, or employee grievance process, or (ii) any proceeding against or
affecting Seller relating to the alleged violation of any legal requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission, OSHA or any comparable governmental
body, organizational activity, or other labor or employment dispute against or
affecting Seller or its facilities and (iii) to Seller's knowledge, no event has
occurred or circumstance exists that could
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provide the basis for any work stoppage or other labor dispute. There is no
lockout of any employees by Seller, and no such action is contemplated by
Seller;
(b) No union organizational efforts have been made or threatened
involving any employees of the Business;
(c) To the best of its knowledge, Seller has complied with all laws
relating to the employment of labor, including, without limitation, any
provisions thereof relating to wages, hours, equal employment opportunity,
immigration, nondiscrimination, collective bargaining, occupational safety and
health, employee benefits (including the Employee Retirement and Income Security
Act of 1974, as amended ("ERISA")) and payment of Social Security and other
taxes, and is not liable for any arrears of wages, fringe benefits, employee
benefits, vacation or severance pay or any taxes or penalties for failure to
comply with any of the foregoing which would have a Material Adverse Effect; and
(d) There are no collective bargaining agreements relating to any of
the employees of the Business and Seller is not obligated under any agreement to
recognize or bargain with any labor organization or union on behalf of Seller
employees.
4.10. Employees. (a) Schedule 4.1 0(a) of this Agreement contains a true
and complete list of all current employees, both full time and part time, of the
Business and all current consultants of the Business and discloses the date of
hire of each individual, the annual and/or hourly rate of compensation of each
individual, the amount of all bonus or other similar compensation payments made
to each individual during the calendar years 1996 and 1997, and the bonus and
incentive arrangements with each and all commission arrangements and all fringe
benefits (including, without limitation, severance, vacation and sick-leave
arrangements) to which such employees are entitled.
(b) Except as disclosed in Schedule 4.04, Seller is not party to
any:
(i) management, employment or other contract providing for the
employment or retention of executive services;
(ii) contract for the employment of any employee which is not
terminable by Seller on 30 days' notice without penalty;
(iv) bonus, incentive, deferred compensation, severance pay,
pension, profit-sharing, retirement, stock purchase, stock option, employee
benefit or similar plan, agreement or arrangement (including, without
limitation, Christmas bonuses and similar year end bonuses);
(iv) collective bargaining agreement or other agreement with any
labor union or other employee organization and non such agreement is currently
being requested by, or is under discussion by management with, any group of
employees or others; or
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(v) other employee contract or other compensation agreement or
arrangement affecting or relating to current or former employees of the Company.
(c) Except as disclosed in Schedule 4.10, Seller has received no
notice that any officer or other key employee of Seller intends to terminate
his/her employment with Seller.
4.11. Employee Benefit Plans.
(a) (i) the term "Employees" shall mean all employees employed or
on the payroll of the Business on the day immediately prior to the Closing Date,
including any employees on vacation, but excluding any employees on (A) long-
term disability or (B) short-term disability or workers' compensation until, in
the case of subclause (B), such employee is physically able to return to active
employment with Buyer.
(ii) The term "Employee Benefit Plans" shall mean each and all
"employee benefit plans" as defined in Section 3(3) of ERISA, which is or was
maintained, administered or contributed to by Seller and which provides benefits
to Employees, including (A) any such plans that are "employee welfare benefit
plans" as defined in Section 3(l) of ERISA, including post retirement medical
and life insurance plans, and (B) any such plans that are "employee pension
benefit plans" as defined in Section 3(2) of ERISA ("Pension Plans").
(iii) The term "Benefit Arrangements" shall mean life and health
insurance, hospitalization, bonus, deferred compensation, incentive
compensation, holiday, vacation, severance pay, sick pay, sick leave,
disability, fringe benefit or severance contracts and other policies (whether
written or oral) or practices of Seller providing employee or executive
compensation or benefits to Employees, other than Employee Benefit Plans.
(b) Except for the Assumed Vacation Pay, Seller shall be
responsible for the payment of all earned and/or accrued entitlements under all
Employee Benefit Plans and Benefit Arrangements, up to the Closing Date for
Employees, including but not limited to wages, bonuses, severance and other
compensation.
(c) Buyer shall arrange for the participation of the Employees who
become employees of Buyer in Buyer's Employee Benefit Plans in accordance with
the terms of such plans.
(d) No provision of this Article 4.11 shall create any third party
beneficiary or other rights in any Employee or former employee (including any
beneficiary or dependent thereof of Seller in respect of continued employment
(or resumed employment) with either Buyer or the Business or any of their
affiliates and no provision of this Article 4.1 1 shall create any such rights
in any such persons in respect of any benefits that may be provided, directly or
indirectly, under any Employment Benefit Plan or Benefit Arrangement, or any
plan or arrangement which may be established by Buyer or any of its affiliates.
Notwithstanding anything contained herein to the contrary, no provision of this
Agreement shall constitute a
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limitation on rights to amend, modify or terminate after the Closing Date any
such plans or arrangements of Buyer or any of its affiliates.
(e) Schedule 4.11 of this Agreement sets forth a complete list of all
employee benefit plans or arrangements presently maintained by Seller,
including, but not limited to (i) the severance pay policy for employees who do
not have contractual severance pay arrangements; (ii) any arrangements, policies
or understandings with respect to the payment of health, life, disability or
accidental death and dismemberment or other benefits to employees or their
families; (iii) any bonus, incentive, deferred compensation, vacation and sick
pay policies, pension, profit-sharing, retirement, stock purchase, stock option,
or similar plan, arrangement or agreement (including, without limitation,
Christmas or other year-end bonuses); and (iv) all other fringe benefits or
payment practices maintained by Seller and not otherwise identified in this
Article 4.11.
(f) No actions, suits or claims (other than routine claims for
benefits in the ordinary course of business) are pending or, to the knowledge of
Seller, threatened with respect to any plan or arrangement listed in Schedule
4.11, nor, to the knowledge of Seller, do any facts exist which could give rise
to any such actions, suits or claims (other than routine claims for benefits in
the ordinary course of business).
(g) Except as set forth on Schedule 4.11, all plans and arrangements
listed in Schedule 4.11 have been administered in accordance with their
respective material terms, and all contributions to and payments from all plans
and arrangements listed in Schedule 4.11 that may have been required to be made
in accordance with the terms of such plans and arrangements or any governmental
law, regulation, decree, decision or order have been made.
(h) Except as set forth on Schedule 4.1 1, Seller is not a party to a
multi-employer plan as such term is defined in Section 4001 (a) of ERISA.
(i) With respect to each of the benefit plans and arrangements
identified on Schedule 11.01 (d), except as set forth on Schedule 4.11:
(A) The plans are in substantial compliance with ERISA and each
plan which is intended to be qualified under Section 401 (a) of the Internal
Revenue Code (the "Code") has been determined by the Internal Revenue Service
("IRS") to be so qualified or a request for such determination has been timely
filed with the IRS (and to Seller's knowledge nothing has occurred between the
date of the last such determination and the Closing to cause the IRS to revoke
such determination);
(B) No accumulated funding deficiency, as defined by Section
302(a)(2) of ERISA, exists (whether or not waived) with respect to the plans as
of the date hereof;
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(C) Neither the plans nor Seller, its agents, representatives
or any fiduciaries of the plans have been or are presently engaged in any non-
exempt "prohibited transactions" as defined by Section 406 of ERISA or Section
4975 of the Code;
(D) No liability has been, or is expected by Seller to be,
incurred by the Seller under Section 4062 of ERISA with respect to the Plans;
(E) Seller has not incurred any "withdrawal liability", as
defined in Part 1 of Subtitle 7 of Title IV of ERISA with respect to any plan
which is a "multiemployer plan" as defined in Section 4001 (a) of ERISA.
4.12. Required Consents. The failure to obtain any third party consent to
the transactions contemplated hereby, other than Required Consents, will not
result in a Material Adverse Effect.
4.13. Permits. Schedules 1.01 (xii) and 4.13 of this Agreement sets forth
a list of all material licenses, franchises, permits or similar authorizations
(the "Permits") issued by any federal, state or local governmental agency or
entity in respect of the Business. The Permits constitute all material licenses,
franchises, permits or similar authorizations required by any law, rule,
regulation or order for Seller to own and conduct the Business, and there are no
outstanding material violations of any Permits, Seller has received no notice
from any governmental agency with respect to an alleged or actual violation by
Seller of any Permit and no action is pending or, to the knowledge of Seller,
threatened to cancel, modify or not renew any Permit or which would result
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any Permit. To the best of Seller's
knowledge, Seller has not received, at any time since February 28, 1993, any
notice or other communication (whether oral or written) from any governmental
body or any other person regarding (A) any actual, alleged, possible, or
potential material violation of or failure to materially comply with any term or
requirement of any Permit, or any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Permit. All applications required to have been filed for the
renewal of the Permits have been duly filed on a timely basis with the
appropriate governmental bodies, and all other filings required to have been
made with respect to such Permits have been duly made on a timely basis with the
appropriate governmental bodies. To the best of Sellers' knowledge, the Permits
collectively constitute all of the governmental authorizations and permits
necessary to permit Seller to lawfully conduct and operate the Business in the
manner it is currently conducted and to operate the Businesses and to permit
Seller to own and use the Assets in the manner in which it currently owns and
uses such assets.
4.14. VBP Financial Information. Seller has delivered, or will prior to
Closing deliver, to Buyer: (a) unaudited balance sheets of the Seller as at
February 28 or 29 (as the case may be) in each of the years 1994 through 1997,
including the notes thereto, and the related statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended,
together with the report thereon of Konowitz, Kahn & Company, P.C., independent
certified public accountants, (b) a balance sheet of Seller as at February 28,
1997 (including the
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notes thereto), and the related statements of income, changes in stockholders'
equity, and cash flow for the fiscal year then ended, together with the report
thereon of Konowitz, Kahn & Company, P.C., independent certified public
accountants, and (c) an internally generated balance sheet and statement of
income as at November 30, 1996 for the nine (9) months then ended. Except as set
forth in Schedule 4.14, such financial statements and notes are true and
complete and fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of Seller as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse); the
financial statements referred to in this Article 4.14 reflect the consistent
application of such accounting principles throughout the periods involved,
without regard to the notes to such financial statements. No financial
statements of any person other than Seller are required by GAAP to be included
in the financial statements of Seller. All of the foregoing financial statements
shall be identified in and attached hereto as Schedule 4.14.
4.15. Representations. No other representation or warranty made by Seller
or any of its affiliates in this Agreement, and no statement contained in any
certificate, exhibit, document or other instrument furnished or to be furnished
to Buyer pursuant hereto or in connection with the transactions herein
contemplated, contains or will contain any untrue statement of material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein and therein not misleading. No notice given pursuant to this
Agreement will contain any untrue statement or omit to state a material fact
necessary to make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading. There is no fact known to
Seller or its shareholders that materially adversely affects or materially
threatens the assets, business, prospects, financial condition, or results of
operations of Seller or the Business (on a consolidated basis) that has not been
set forth in this Agreement or the Schedules attached hereto.
4.16. No Material Adverse Change. Since November 30, 1996, there has not
been, and prior to the Closing there will not be, any material adverse change in
the Business, operations, properties, prospects, Assets, or condition of Seller,
and to Seller's knowledge, no event has occurred or circumstance exists that may
result in such a material adverse change or Material Adverse Effect.
4.17. VAP Financial Information. Seller has delivered, or will prior to
the Closing deliver, to Buyer: (a) unaudited consolidated balance sheets of VAP
as at February 28 or 29 (as the case may be) in each of the years 1994 through
1997, and the related consolidated statements of income, changes in
stockholders' equity, and cash flow for each of the fiscal years then ended,
together with the report thereon of Konowitz, Kahn & Company, P.C., independent
certified public accountants, (b) a consolidated balance sheet of VAP as at
February 28, 1997 (including the notes thereto), and the related consolidated
statements of income,' changes in stockholders' equity, and cash flow for the
fiscal year then ended, together with the report thereon of Konowitz, Kahn &
Company, P.C., independent certified public accountants, and (c) an internally
generated balance sheet and statement of income as at November 30, 1996 for the
nine (9) months then ended. Such financial statements and notes fairly present
the financial condition
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and the results of operations, changes in stockholders' equity, and cash flow of
VAP as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP, subject, in the case of
interim financial statements, to normal recurring year-end adjustments (the
effect of which will not, individually or in the aggregate, be materially
adverse); the financial statements referred to in this Section 4.17 reflect the
consistent application of such accounting principles throughout the periods
involved, without regard to the notes to such financial statements. No financial
statements of any person other than the VAP are required by GAAP to be included
in the consolidated financial statements of VAP. All of the foregoing financial
statements shall be identified in and attached hereto as Schedule 4.17.
4.18. Seller's Books and Records. The books of account, minute books,
stock record books, and other records of Seller, all of which have been or will
be made available to Buyer, are complete and correct in all material respects
and have been maintained in accordance with sound business practices. At the
Closing, all of those books and records necessary for the continuing operation
of the Business by Buyer will be transferred to Buyer.
4.19. Seller's Property Interests. Schedule 4.19, attached hereto and
incorporated herein by reference, contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned by Seller. Seller
will make available to Buyer copies of the leases and other instruments by which
Seller acquired such real property leases or interests, and copies of all title
insurance policies, opinions, abstracts, environmental reports and surveys in
the possession of Seller or Seller's shareholders or any related person, and
relating to such property or interests. Seller owns no real property.
4.20. Seller's Equipment. The Equipment of Seller is in good operating
condition and repair, and is adequate for the uses to which they are being put,
and none of such equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost.
4.21. Sales, Use and other Taxes. Seller has filed or caused to be filed
all sales, use, franchise, personal property, occupancy or other tax returns
that are or were required to be filed with respect to the Business or any of the
Assets, pursuant to applicable law ("Taxes"). Seller has delivered or will make
available to Buyer copies of all such tax returns relating to income, sales or
franchise Taxes filed since 1993. Seller has paid, or made provision for the
payment of, all Taxes that have or may have become due pursuant to those tax
returns or otherwise, or pursuant to any assessment received by Seller. Seller
has not been given or requested to given any waivers or extensions (or is or
would be subject to a waiver or extension given by any other person) of any
statute of limitations relating to the payment ' of Taxes or for which Seller
may be liable. The charges, accruals, and reserves with respect to Taxes on the
books of Seller are adequate (determined in accordance with GAAP) and are at
least equal to Sellers liability for Taxes. There exists no proposed tax
assessment against the Business or the Assets, except as disclosed in Schedule
4.21. No consent to the application of Section 341 (f)(2) of the IRC has been
filed -with respect to any property or assets held, acquired, or to be acquired
by Seller in connection with the Business. All Taxes that Seller is or was
required to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper
-27-
governmental body or other person. All Tax returns filed by (or that include on
a consolidated basis) Seller are true, correct, and complete. There is no tax
sharing agreement that will require any payment by Buyer after the date of this
Agreement. Seller is not, or within the ten (10) year period preceding the
Closing Date has not been, an "S" corporation.
4.22. Operation of the Business. Except as set forth in Schedule 4.22,
since November 30, 1996, Seller has conducted the Business only in the ordinary
course of business and there has not been any: (i) payment or increase by Seller
of any bonuses, salaries, or other compensation to any stockholder, director,
officer, or (except in the ordinary course of business) employee or entry into
any employment, severance, or similar contract with any director, officer, or
employee; (ii) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of Seller;
(iii) damage to or destruction or loss of any Asset or property of Seller to be
transferred to Buyer pursuant to this Agreement, whether or not covered by
insurance, materially and adversely affecting the properties, assets, business,
financial condition, or prospects of Seller or the Business, taken as a whole;
(iv) entry into, termination of, or receipt of notice of termination of (a) any
license, distributorship, dealer, sales representative, joint venture, credit,
or similar agreement, or (b) any contract or transaction involving a total
remaining commitment by or to Seller of at least $5,000; (c) sale (other than
sales of inventory in the ordinary course of business), lease, or other
disposition of any asset or property of Seller or mortgage, pledge, or
imposition of any Lien on any Asset or property of Seller to be transferred to
Buyer pursuant to this Agreement, including the sale, lease or other disposition
of the Assets; (d) cancellation or waiver of any claims or rights with a value
to Seller with respect to the Business or the Assets in excess of $5,000; (e)
material change in the accounting methods used by Seller; or (f) agreement,
whether oral or written, by Seller to do any of the foregoing.
4.23. Vendors and Customers of Seller. Schedule 4.23(A) sets forth the top
fifteen (15) vendors (based on total dollars purchased in the calendar year
1996) of products that are sold by Seller as part of its inventory, including
the vendor name, address, telephone number, contact person, products and total
dollar value of calendar year 1996 purchases by Seller from the vendor, and all
rebates, discounts, volume or other incentives given by the vendor to Seller.
Schedule 4.23(6) sets forth the top two hundred (200) customers of Seller and
the top twenty (20) customers of each branch of Seller (in each case based
dollar volume of purchases in the calendar years 1995 and 1996), including the
customer name, address, phone number, contact person, dollar volume purchased by
the customer from Seller in calendar year 1996, and any rebates, volume
discounts, or other incentives provided by Seller to each such customer. Except
as set forth in Schedules 4.23(A) and (B), there are no other rebates, discounts
or other incentives received by Seller from vendors or given by Seller to its
customers. Since January 1, 1997, there has been no material adverse change in
Seller's relationship with any of the vendors or customers set forth in Schedule
4.23(A) or (B), except routine changes in pricing in the ordinary course of
business.
4.24. Product Pricing. The prices set forth in Seller's current computer
generated price code books (which prices are subject to change without notice to
customers) attached hereto and incorporated herein by reference as Schedule
4.24, accurately reflect the prices charged by Seller
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to its customers, except for the rebates, discounts and other incentives
identified in Schedule 4.23(A) and (B).
4.25. Insurance. Seller has delivered to Buyer (i) true and complete
copies of all policies of insurance (other than health insurance policies) to
which Seller is a party, or has been covered at any time within the five (5)
years preceding the date of this Agreement; and (ii) true and complete copies of
all pending applications for policies of insurance (other than health insurance
policies). Schedule 4.25 describes: (A) any self-insurance arrangement by or
affecting the Business or the Assets, including any reserves established
thereunder; (B) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by Seller; and (C) all obligations of
Seller to third parties with respect to insurance (including such obligations
under leases and service agreements) and identifies the policy under which such
coverage is provided. Seller has provided Buyer with true, accurate and complete
summaries of the loss experience under each policy. Except as set forth on
Schedule 4.25, all policies to which Seller is a party or that provide coverage
to Seller are valid, outstanding, and enforceable, will be maintained in full
force and effect until the Closing Date, and are sufficient for compliance with
all legal requirements, Permits and Commitments to which Seller is a party or by
which it is bound. Seller has paid all premiums due, and have otherwise
performed all of its obligations, under each policy to which Seller is a party
or that provides coverage with respect to the Business, Assets or properties of
Seller.
4.26. Broker's Fees. Seller and its agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement or the
contemplated transactions.
4.27. Certain Payments. Since February 28, 1992, except as set forth in
Schedule 4.27, to the best of Seller's knowledge, Seller, nor any director,
officer, agent, or employee or shareholder of Seller, or any other person
associated with or acting for or on behalf of Seller, has directly or
indirectly: (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of Seller or the Business, or any related person or
affiliate of Seller, or (iv) in violation of any law; or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of Seller.
4.28. Environmental Matters. Except as set forth in Schedule 4,28, to the
best of Seller's knowledge:
(a) Seller is, and at all times has been, in material compliance
with, and has not been and is not in violation of or liable under, any
environmental law, rule and regulation ("Environmental Law"). Seller has no
basis to expect, nor has any other person for whose conduct Seller is or may be
held to be responsible received, any actual or threatened order, notice, or
other communication from (i) any governmental body or private citizen acting in
the public interest, or (ii) the current or prior owner or operator of any
facilities of Seller, of any
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actual or potential violation or failure to comply with any Environmental Law,
or of any actual or threatened obligation to undertake or bear the cost of
environmental remediation with respect to any of Seller's facilities or any
other properties or assets (whether real, personal, or mixed) in which Seller
has had an interest, or with respect to any property or facility at or to which
Hazardous Materials (as defined by applicable law) were generated, manufactured,
refined, transferred, imported, used, or processed by Seller or any other person
for whose conduct Seller is or may be held responsible, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled, or received;
(b) There are no pending or threatened claims, Liens, or other
restrictions of any nature, resulting from any environmental, health, and safety
liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the facilities or any other properties and assets
(whether real, personal, or mixed) in which Seller has or had an interest;
(c) Seller has no knowledge of any basis to expect, nor has any other
person for whose conduct Seller is or may be held responsible, received, any
citation, directive, inquiry, notice, order, summons, warning, or other
communication that relates to hazardous activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any environmental, health, and safety liabilities
with respect to any of the facilities or any other properties or assets (whether
real, personal, or mixed) in which Seller had an interest, or with respect to
any property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by Seller or any other person
for whose conduct it is or may be held responsible, have been transported,
treated, stored, handled, transferred, disposed, recycled, or received;
(d) Neither Seller nor any other person for whose conduct Seller is
or may be held responsible, has any environmental, health, and safety
liabilities with respect to the facilities or, to the best of Seller's
knowledge, with respect to any other properties and assets (whether real,
personal, or mixed) in which Sellers or the Business (or any predecessor), has
or had an interest, or at any property geologically or hydrologically adjoining
the facilities or any such other property or assets;
(e) Except for quantities of materials used in the ordinary course of
business and in compliance with applicable laws, there are no Hazardous
Materials present on or in the environment at the facilities or at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the facilities or such adjoining property, or incorporated
into any structure therein or thereon. Neither Seller nor any other person for
whose conduct Seller is or may be held responsible or any other person, has
permitted or conducted, or is aware of, any hazardous activity conducted with
respect to the facilities or any other properties or assets (whether real,
personal, or mixed) in which Seller has or had an interest except in full
compliance with all applicable Environmental Laws;
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(f) There has been no release or threat of release, of any Hazardous
Materials at or from the facilities or at any other locations where any
Hazardous Materials were generated, manufactured, refined, transferred,
produced, imported, used, or processed from or by the facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in which
Seller has or had an interest, or any geologically or hydrologically adjoining
property, whether by Seller or any other person;
(g) Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller, or any person pertaining to Hazardous Materials or
hazardous activities in, on, or under the facilities, or concerning compliance
by Seller or any other person for whose conduct Seller is or may be held
responsible, with Environmental Laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
5.01. Buyer's Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas (provided,
however, that prior to Closing, Buyer may reincorporate in the State of Delaware
which will necessitate revisions to certain Closing documents accordingly), and
has all requisite corporate power and authority to carry on its business as it
is now being conducted, and to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby.
5.02. Due Authorization, Execution and Delivery; Effect of Agreement. The
execution, delivery and performance by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly and validly executed and delivered by Buyer and
constitutes the legal, valid and binding obligation of Buyer, enforceable
against it in accordance with its terms, except to the extent that such
enforceability (a) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors rights generally, and (b)
is subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The
execution, delivery and performance by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby will not, with or
without the giving of notice or the lapse of time, or both, subject to obtaining
any required consents, approvals, authorizations or exemptions referred to in
Article 5.03 hereof, (i) violate any provision of law, rule or regulation to
which Buyer is subject, (ii) violate any order, judgment or decree applicable to
Buyer, or (iii) conflict with, or result in a breach or default under, the
Articles of Incorporation, By-Laws or other similar charter documents of Buyer,
or any agreement or other instrument to which Buyer is a party or by which it
may be bound; except, in each case, for violations, conflicts, breaches or
defaults which in the aggregate would not materially hinder or impair the
consummation of the transactions contemplated hereby.
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5.03. Consents. Except for HSR approval as set forth in Article 9.12, no
consent, approval or authorization of, or exemption by, or filing with, any
governmental or regulatory authority or any other third party is required in
connection with the execution, delivery or performance by Buyer of this
Agreement.
5.04. Availability of Funds. Buyer will have available on the Closing Date
sufficient funds to, enable it to consummate the transactions by Buyer
contemplated by this Agreement.
5.05. Litigation. There is no litigation pending or, to Buyers knowledge,
threatened, against Buyer or any of its affiliates which seeks to enjoin or
obtain damages in respect of the consummation of the transactions contemplated
hereby.
ARTICLE VI
PRE-CLOSING COVENANTS OF SELLER
From and after the date hereof and until the Closing Date, Seller hereby
covenants and agrees with Buyer as follows:
6.01. Cooperation and Assignments. Seller will use its best efforts to
obtain all Required Consents and other third party consents and to cause the
consummation of the transactions contemplated hereby in accordance with the
terms and conditions hereof.
6.02. Conduct of Business. From the date hereof to the Closing Date,
except as otherwise may be contemplated by this Agreement or required by any of
the documents listed in the Schedules annexed hereto and except as Buyer
otherwise may consent to in writing, Seller will cause the Business to be
operated in the ordinary course consistent with past practice in all material
respects and use its best efforts (without the requirement to expend any funds
outside of the ordinary course of business) to: (a) preserve the Business as a
whole intact; (b) continue in effect all material existing policies of insurance
(or comparable insurance) with third-party carriers of or relating to the
Business; (c) keep available the services of the present officers, employees and
agents of the Business; (d) preserve the Business' relationships with its
material suppliers, customers, licensors and licensees and others having
material business dealings with it; (e) continue production and promotional and
sales efforts in accordance with existing plans and forecasts; (D from the date
hereof to the Closing, except to the extent permitted pursuant to Article
2.04(c), Seller shall not make any additional purchase of inventory that is
defined in Article 2.04 as "slow-moving" and shall use its good faith efforts to
liquidate the "slow-moving" Inventory and (g) Seller shall not accelerate or
prepay any of Seller's accounts payable. Seller will not take or agree or commit
to take any action that would make any representation and warranty of Seller
hereunder inaccurate or misleading in any material respect at, or as of any time
prior to, the Closing Date.
6.03. Access. (a) Seller shall continue to provide to Buyer, its counsel,
financial advisors, auditors and other authorized representatives such
reasonable information as such
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person from time to time may request with respect to the Business and the
transactions contemplated by this Agreement, and shall permit Buyer and its
representatives access, upon reasonable notice, to the properties, books and
records of the Business, as Buyer from time to time may request. Seller shall
also provide Buyer with access to its employees. Seller shall fully cooperate
with Buyer if Buyer decides to audit Seller's historic financial performance
(including but not limited to making available its records, personnel and
outside accountants) in connection with Buyer's contemplated Bond Offering
(defined below), all provided, however, that neither the taking of the audit or
the results of the audit shall in any way affect this Agreement or Buyer's
obligations to close the transactions contemplated herein and further provided
that Buyer shall reimburse Seller for any and all direct costs and expenses paid
to third parties (including without limitation, professional fees) incurred by
Seller in connection therewith. No investigation by Buyer pursuant to this
Section shall effect, negate or constitute a waiver of any representation or
warranty given by Seller hereunder.
(b) Buyer further acknowledges that any and all information obtained
about Seller, the Business and the Assets, shall be deemed to be confidential
and proprietary until the Closing and shall be subject to, and shall come within
the scope of, any and all Confidentiality Agreements previously executed by
Buyer. Notwithstanding anything herein to the contrary, from time to time, Buyer
shall have the right to contact Seller's employees, including without
limitation, management employees identified on Schedule 6.03 to investigate
Seller, the Business and the Assets. Furthermore, Buyer shall have the right to
describe and disclose the transactions contemplated herein and the Sellers
business (including sales, profit and other summary financial data) in any
memorandum and/or prospectus in connection with an offering of debt by Buyer
(the "Bond Offering"), all provided, however, that Seller shall have the right
to review and approve such description (which approval shall not be unreasonably
withheld). In addition, in connection with the Bond Offering, Buyer shall have
the right to disclose financial information concerning the Seller, to rating
agencies, underwriters, accountants, attorneys and government agencies on a
confidential and need to know basis.
(c) The Buyer agrees that in the event the transactions contemplated
herein are not consummated as a result of Buyer's breach of this Agreement, it
will not for a period of one (1) year from and after the date the transactions
and this Agreement are terminated: (i) either directly or indirectly, for itself
or any third party, solicit, induce, recruit or cause another person in the
employ of the Seller to terminate his/her employment for the purpose of joining,
associating or becoming employed by the Buyer (or any of its affiliated
entities) or with any business or activity which is in competition with any
business or activity engaged in by the Seller; or (ii) directly or indirectly,
for itself or for or through any subsidiary, affiliated or related entity,
establish or acquire distribution centers for the sale of products sold by
Seller, within the states of Connecticut (exclusive of Buyer's existing branch
in Strafford, Connecticut), Massachusetts, New Hampshire and Rhode Island, and
in the following counties within the state of New York: Rockland, Westchester,
Putnam, Orange, Dutchess, Ulster, Sullivan, Columbia, Greene, Delaware, Broome,
Tioga, Chemung, Rensselaer, Albany, Schoharie, Schenectady, Otsego, Chenango,
Cortland, Tompkins, Schuyler, Madison, Onandaga, Cayuga, Seneca, Yates, Ontario,
Monroe, Wayne, Fulton, Montgomery, Saratoga, Washington, Warren, Hamilton,
Herkimer, Oneida, Oswego, Jefferson, Lewis, St. Lawrence, Franklin, Clinton and
Essex.
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(d) In the event the restrictions on Buyer set forth in paragraph (c)
of this Article 6.03 become operative, Seller agrees that it will not for a
period of one (1) year from and after the date the transactions and this
Agreement are terminated, directly or indirectly, for itself or for or through
any subsidiary, affiliated or related entity, establish or acquire distribution
centers for the sale of products sold by Seller, within the county of Monroe,
State of New York.
6.04. Notices of Certain Events. (a) Between the date of this Agreement
and the Closing Date, Seller will promptly notify Buyer in writing if Seller
becomes aware of:
(i) any notice or other communication alleging that the consent of
any person or governmental or regulatory agency or authority is or may be
required in connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting Seller or the Business or the Assets that, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Article 4.05 or that relate to the consummation of the
transactions contemplated by this Agreement; and
(iv) any fact or condition that causes or constitutes a breach of
any of the representations and warranties set forth in Article IV hereof as of
the date of this Agreement, or if Seller becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition.
(b) Should any such fact or condition require any change in the Schedules
annexed hereto if this Agreement was dated the date of the occurrence or
discovery of any such fact or condition, Seller will promptly deliver to Buyer a
supplement to the Schedule(s) specifying such change. During the same period,
Seller will promptly notify Buyer of the occurrence of any breach of any
covenant in this Article VI, or of the occurrence of any event that may make the
satisfaction of the conditions in Article IX impossible or unlikely.
6.05. Best Efforts. Between the date of this Agreement and the Closing
Date, Seller will use its best efforts to cause the conditions in Article IX
hereof to be satisfied and to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions hereof.
6.06. Insurance. Schedule 6.06 of this Agreement contains a list of all
insurance policies and fidelity bonds covering the Assets, the operations of the
Business and its employees. Seller shall maintain all such insurance policies in
full force and effect through the Closing or until the termination of this
Agreement as provided in Article XIII.
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6.07. Trade Payables. Seller shall deliver to Buyer a schedule of all of
the Assumed Trade Payables, including all service, interest or other charges
thereon as of the Date of Closing.
6.08. Exclusive Dealing. From the date hereof until the earlier of the
date of termination of this Agreement or May 27, 1997, Seller shall deal
exclusively with Buyer regarding the sale of the Assets (other than in the
ordinary course) and/or the Business and Seller shall not contact, solicit,
negotiate or contract with any third party, or entertain any offer or request
for information regarding the sale of the Assets (other than in the ordinary
course) or the Business.
6.09. Licenses, Permits, Required Third Party Consents. Prior to Closing,
Seller will obtain all material licenses, permits and Required Third Party
Consents.
ARTICLE VII
COVENANTS OF BUYER
Buyer hereby covenants and agrees with Seller as follows:
7.01. Cooperation and Assumption. Subject to the fulfillment of the
conditions set forth in Article IX, Buyer will endeavor to cause the
consummation of the transactions contemplated hereby in accordance with the
terms and conditions hereof.
7.02. Intentionally Deleted.
7.03. Intentionally Deleted.
7.04. Books and Records; Personnel. For a period of six (6) years after
the Closing Date (or such longer period as may be required by any governmental
agency or ongoing litigation or in connection with any administrative
proceeding):
(a) Buyer shall not dispose of or destroy any of the business
records and files of the Business transferred from the Seller to the Buyer; and
(b) Buyer shall allow Seller and its representatives access to all
business records and files of the Business which are transferred to Buyer and
which are necessary for Seller to wind-up its business or prepare tax or other
government filing related thereto, during regular business hours and upon
reasonable notice at Buyer's principal places of business or at any location
where such records are stored, and Seller shall have the right, at its own
expense, to make copies of any such records and files.
7.05. Notices of Certain Events. Buyer shall promptly notify Seller of:
(a) any notices or other communication alleging that the consent of
any person or any governmental or regulatory agency or authority is or may be
required in connection
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with the transactions contemplated by this Agreement, other than in respect of
any consent identified as so required in a Schedule to this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting Buyer that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Article
5.05.
7.06. Hiring of Employees. Buyer shall have no obligation to offer
employment to or hire any of Seller's employees; provided, however, in the event
Buyer does not offer employment to that number of Sellers current employees
sufficient to assure that the number of Seller's current employees who are not
offered employment by Buyer does not exceed forty-five (45), then Buyer shall be
responsible for all state and federal plant closing notices and any associated
liability in the event such notices are not given.
ARTICLE VIII
POST-CLOSING COVENANTS OF SELLER
8.01. Non-Competition. (a) Seller agrees that for the periods stated
below, neither Seller, nor its shareholders, David Trachten and Fred Gross
(together the "Shareholders"), nor Morris Trachten (the Shareholders and Morris
Trachten being collectively referred to as the "Principals"), shall engage in
any capacity either directly or indirectly, including, without limitation, as a
principal or agent or for its own account or solely or jointly with others, or
as a stockholder in any corporation, as a member of any limited liability
company, or as a partner in any partnership or joint venture, or as a consultant
or independent contractor, employee, salesperson or manager on behalf of others,
within the states of Connecticut, Massachusetts, New Hampshire, New York or
Rhode Island (together the "Non-Compete Area"),
(i) in the distribution of roofing, siding and related building
materials such as those products presently distributed by the Business for a
period of fifteen (1 5) full years from the Closing Date (the "15 Year Non-
Compete Period"); during the 15 Year Non-Compete Period, Seller and its
Shareholders shall not solicit sales in the Non-Compete Area for a business
which is in competition with the distribution of the types of products that
Seller or any of the Principals were distributing prior to Closing as identified
in this paragraph (a)(i); and
(ii) in the distribution of windows and doors for a period of five
(5) full years from the Closing Date (the "5 Year Non-Compete Period"); during
the 5 Year Non-Compete Period, Seller and the Principals shall not solicit sales
in the Non-Compete Area for a business which is in competition with the
distribution of the types of window products that Seller or any of the
Principals were distributing prior to Closing as identified in this paragraph
(a)(ii);
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provided that nothing herein shall (i) prohibit the acquisition or ownership of
up to 1% of the outstanding voting securities of any corporation or other entity
which is publicly owned; or (ii) prohibit Seller and its Principals from
engaging as a manufacturer, contractor, or lumber yard representative so long as
such businesses do not distribute roofing, windows, siding, doors and related
building materials in competition with the types of distribution channels used
by Seller or any of its Principals prior to Closing.
During the 5 Year Non-Compete Period, neither Seller nor any of the
Principals shall solicit or employ any individual employed by Buyer at any time
during the 5 Year Non-Compete Period; thereafter, during the balance of the 15
Year Non-Compete Period, neither Seller nor any of the Principals shall solicit
any individual while in the employ of Buyer. Seller and Buyer hereby agree that
the consideration paid by Buyer under this Agreement is fair and adequate for
the obligations of Seller and the Principals under this Article 8.01(a). Seller
shall cause the Principals each to execute a covenant not to compete with Buyer
in the form of the document attached hereto as Exhibit L and incorporated herein
by this reference ("Principal's Covenant"). The obligations of the Principals
under this Agreement shall be independent of and in addition to their respective
obligations under any other agreement, including without limitation, the VAP
Asset Purchase Agreement and any consulting or employment agreement.
(b) If any provision contained in this Article shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Article, but this Article shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. It is the intention of
the parties that if any of the restrictions or covenants contained herein is
held to cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad or to any
extent invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Article to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
contained herein) as shall be valid and enforceable under such applicable law.
Seller acknowledges that Buyer would be irreparably harmed by any breach of this
Article and that there would be no adequate remedy at law or in damages to
compensate Buyer for any such breach. Seller agrees that Buyer shall be entitled
to injunctive relief requiring specific performance by Seller of this Section,
and Seller consents to the entry thereof, without the necessity of proving
actual damages, or posting bond or other security. Nothing herein shall be
deemed an election or remedies or preclude Buyer from seeking any and all other
remedies, both legal and equitable, for a breach of this Article 8.01.
8.02. Further Assurances and Power of Attorney.
(a) Following the Closing, Seller will execute and deliver such
other documents, certificates, agreements and other writings and take such other
actions as may be necessary or desirable in order to consummate or implement the
transactions contemplated by or to fulfill the terms and conditions of this
Agreement and to vest in Buyer good title to the Assets.
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(b) At the request of Buyer on a case by case basis, Seller shall
execute and deliver instruments sufficient to constitute and appoint, effective
as of the Closing Date, Buyer and its successors and assigns as the true and
lawful attorney of Seller with full power of substitution in the name of Buyer
or in the name of Seller, but for the benefit of Buyer (i) to collect for the
account of Buyer any Assets specified in Buyer's request, and (ii) to institute
and prosecute all proceedings which Buyer may in its sole discretion deem proper
in order to assert or enforce any right, title or interest in, to or under such
Assets, and to defend or compromise any and all actions, suits or proceedings in
respect of such Assets or the Assumed Liabilities. Buyer shall be entitled to
retain for its own account any amounts collected pursuant to the foregoing
powers, including any amounts payable as interest in respect thereof.
8.03. Accounts Receivable Collection Guaranty. Seller guarantees Buyer's
collection of the purchased Accounts Receivable and the accounts receivable
purchased by Buyer from VAP under the VAP Agreement ("VAP Accounts Receivable"),
provided, however, that the total aggregate liability of Seller shall be limited
to One Million and 00/100 Dollars ($1,000,000.00) plus (a) any reductions in the
Account Receivables and the VAP Accounts Receivable due to product warranty
claims, product returns, prompt pay discounts and related credits and offset all
in accordance with Sellers and/or VAP's standard policies (the "Maximum Accounts
Receivable Guaranty").
8.04. Post February 28, 1997 Accounts Receivable Collection Guaranty. Any
accounts receivable with respect to sales of products by Seller and/or VAP made
after February 28, 1997 which should be, prior to Closing, in the ordinary
course of business and in accordance with Seller's (or VAP'S, as the case may
be) standard credit/collection practices, written off Sellers (or VAP'S) books
as bad debt or turned over by Seller (or VAP) for collection by an attorney or
collection agency are hereinafter referred to as the "Post February 28 Write-
offs"). The Maximum Accounts Receivable Guaranty shall be increased on the
Closing Date by the amount of Post February 28 Write-Offs in excess of Seventy
Five Thousand Dollars ($75,000.00).
8.05. Accounts Receivable Interest Payment Collection Guaranty. Seller
guarantees Buyer's collection of fifty percent (50%) of the Accounts Receivable
Interest Payment (the "Accounts Receivable Interest Payment Guaranty").
8.06. Termination of Seller's Employees. At Closing, Seller shall
terminate the employment of Seller's employees set forth on the list delivered
pursuant to Article 3.03(h).
8.07. Transition of the Business to Buyer. For a period of sixty (60) days
after the Closing, Seller shall cause the Principals to each use reasonable
efforts to assist Buyer in transition of operation of the Business by Buyer,
including without limitation, contacting customers of the Business for the
purpose of encouraging the customers' continued patronage of the Business after
the Closing.
8.08. Post-Closing Access and Audit. For a period of one (1) year after
the Closing, upon Buyer's request, Seller shall provide access and cooperate
with Buyer with respect to a
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post-closing audit by Buyer of Seller's historic financial performance in
connection with Buyers Bond Offering and related securities regulations which
may require an audit to permit further acquisitions by Buyer of other
businesses, provided that Buyer shall reimburse Seller for any and all direct
costs and expenses paid to third parties (including without limitation,
professional fees) incurred by Seller in connection therewith. Any such access
shall be subject to the limitations set forth in Article 6.03(b).
ARTICLE VIII(A)
POST-CLOSING COVENANTS OF BUYER
8A.01. COD-Plus Accounts/Discount-Rebate Applied Accounts. For a period of
two (2) years after the Closing, Buyer will maintain the past practices of
Seller with respect to "COD-Plus Accounts" (accounts where the account debtor
has a past due balance and makes current purchases on a cash-on-delivery basis
plus an additional amount to be applied to past due balance) and Discount-Rebate
Applied Accounts (accounts where the account debtor has a past due balance and
discounts and/or rebates to which the account debtor is entitled based on
historic practices disclosed to Buyer on Schedule 4.23(B), are applied to the
past due balance). All payments received with respect to COD-Plus Account shall
be applied first to the current payment and then to the oldest item in the past
due account.
8A.02. Accounts Receivable Reporting, Collection and Return.
(a) Buyer will provide reports to Seller every thirty (30) days
regarding the status of the Accounts Receivable and VAP Accounts Receivable.
These reports will include an aged trial balance. Buyer will provide other
information reasonably requested by Seller.
(b) Annexed hereto as Exhibit M is an outline of Buyer's standard
collection procedures (The Collection Procedures"). Buyer agrees to diligently
and in good faith pursue the collection of all Accounts Receivable and VAP
Accounts Receivable in accordance with the Collection Procedures. Anything in
the Collection Procedures to the contrary notwithstanding, Buyer may but shall
have no obligation to commence legal action to collect any Accounts Receivable
or VAP Accounts Receivable. Any and all expenses incurred by Buyer in connection
therewith, including without limitation, attorneys fees, filing fees and costs
of suit, shall be the sole responsibility of Buyer, provided however, that any
recoveries with respect to any Accounts Receivable or VAP Accounts Receivable
shall apply first to all of Buyer's direct out-of-pocket expenses (including
reasonable attorneys' fees), then to legally recoverable interest charges and
last to the principal balance of the debt. In addition,
(i) unless payment is designated as payment for a specific account
as to which there is no accrued interest and/or service charges, the payment
Will be applied first to post-Closing accrued interest and/or service charges,
then to Seller's pre-Closing interest and/or service charges and then to the
principal balance of the debt; and
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(ii) any interest which accrues post-Closing shall not reduce the
Maximum Accounts Receivable Guaranty, all provided, however, that nothing shall
prevent Buyer from asserting or pursuing a claim for such interest against the
account debtor.
(c) Sixty (60) days after the Closing, Seller shall have the right
in its sole discretion at any time to assume from Buyer any Accounts Receivable
or VAP Accounts Receivable which Buyer does not pursue (either by the
commencement of legal action or otherwise) in accordance with the Collection
Procedures as provided in paragraph (b) of this Article 8A.02.
(d) If Buyer wishes to compromise or accept less than full payment
of any Accounts Receivable or VAP Accounts Receivable, Buyer shall notify Seller
and Seller shall within five (5) business days of receipt of such notice advise
Buyer if (i) the proposed compromise or settlement is acceptable to Seller; or
(ii) if Seller wishes to assume the receivable from Buyer.
(e) After twenty four (24) months following the Closing, Buyer may
return any uncollected Accounts Receivable or VAP Accounts Receivable without
the consent of Seller or VAP to the extent of the then current Accounts
Receivable Guaranty Balance.
(f) The Maximum Accounts Receivable Guaranty shall be reduced by and
to the extent of the amounts paid by Seller to Buyer (or at Buyer's option
offset against the Note) pursuant to this Article 8A.02 as follows:
(i) the amount of any Accounts Receivable or VAP Accounts Receivable
which Seller assumes from Buyer pursuant to paragraphs (c) and (e) on a dollar-
for-dollar basis;
(ii) the difference between the face amount of any Accounts
Receivable or VAP Accounts Receivable compromised pursuant to paragraph (d)(i)
and the gross amount paid to Buyer therefor;
(iii) the difference between the face amount of any Accounts
Receivable or VAP Accounts Receivable which Buyer presents to Seller for
compromise and Seller elects to assume pursuant to paragraph (d)(ii) and the
gross amount of the proposed compromised payment.
8A.03. Payment of Salesmen Bonuses. All Salesmen Bonuses shall be paid by
Buyer no more than ten (10) business days after the Closing, provided, however,
that nothing herein shall require Buyer to hire any of Seller's salesmen.
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ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the purchase of the Assets under
this Agreement shall be subject to the satisfaction (or written waiver by Buyer)
on or prior to the Closing Date of all of the following conditions:
9.01. Representations, Warranties and Covenants of Seller. Seller shall
have complied in all material respects with all of its agreements,
representations, warranties and covenants contained herein to be performed at or
prior to the Closing Date (including the delivery to Buyer of all schedules,
exhibits and documents referenced in this Agreement or necessary to the
consummation of the transactions contemplated hereby), and all the
representations and warranties of Seller contained herein must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects on and as of the Closing Date with the same
effect as though made on and as of the Closing Date, except (a) as otherwise
expressly set forth herein, and (b) to the extent that such representations and
warranties were made as of a specified date (and as to such representations and
warranties the same shall continue on the Closing Date to have been true as of
the specified date). Buyer shall have received a certificate of Seller dated as
of the Closing Date and signed by an officer of Seller, certifying as to the
fulfillment of the conditions set forth in this Article 9.01.
9.02. No Prohibition. No federal or state court, arbitrator or
governmental body, agency or official shall have issued any order, and there
shall not be any federal or state statute, rule or regulation, restraining or
prohibiting the consummation of the Closing or the effective operation by Buyer
of the Business after the Closing Date, and no proceeding challenging this
Agreement or the transactions contemplated hereby or seeking to prohibit, alter
or prevent or materially delay the Closing shall have been threatened or
instituted by any federal or state governmental body, agency or official or any
third party.
9.03. Deliveries. Seller shall have delivered or caused to be delivered to
Buyer of all the items set forth in Article 3.02 hereof.
9.04. Leases. Seller shall have obtained the consents of each lessor to
Buyer's assumption of Seller's rights and obligations under each lease of
personal property or real property used in connection with the Business for
which such lessor consent is required pursuant to the terms of such lease. In
each consent, the lessor shall state certain factual matters, including, but not
limited to, whether Seller is in default, rent, term, and security deposit
amounts, if any. Lessor shall also agree that the conditions observed at the
premises are acceptable to the lessor or lessor will look solely to Seller for
any required repairs. The form and substance of the consent shall otherwise be-
acceptable to Buyer.
9.05. Required Consents. All Required Consents, in form and substance
reasonably satisfactory to Buyer, shall have been obtained, and no such Required
Consent shall have been revoked, conditioned or materially impaired.
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9.06. No Material Adverse Effect. From the date of this Agreement to the
Closing Date, no event or occurrence shall have occurred which has a Material
Adverse Effect.
9.07. 1997 Receivables. Buyer has, prior to April 11, 1997, notified
Seller of its objections to the 1997 Receivables for the reasons set forth in
Article 7.02(b) and the parties have not resolved such objections.
9.08. Physical Inventory. The physical inventory provided for in Article
2.04 shall have been taken and Buyer and Seller shall have agreed upon the value
thereof in accordance with the provisions set forth in Article 2.04.
9.09. Real Estate Transactions. Contemporaneously with the Closing,
Seller's affiliates shall enter into leases and contracts of sale with respect
to the Trachten Real Estate Properties.
9.10. VAP Asset Purchase. VAP shall simultaneously close the purchase and
sale of certain VAP assets located at VAP's Berlin, Connecticut center, pursuant
to the Asset Purchase Agreement between Buyer and VAP of even date ("VAP
Agreement").
9.11. VAP Supply Agreement. On or before the Closing, VAP shall enter into
a supply contract with Buyer in the form annexed hereto as Exhibit N (the
"Supply Agreement").
9.12. HSR Approval. Seller and Buyer shall have received all necessary
authorizations, consents and approvals of governmental agencies referred to in
Article 1.06, or all applicable waiting periods (and any extensions thereof
under HSR shall have expired or otherwise have been terminated.
9.13. Employment Matters and Contracts. A consulting agreement with David
Trachten in the form of Exhibit 0 annexed hereto and made a part hereof is
executed and delivered at Closing.
ARTICLE X
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the sale of the Assets under this
Agreement shall be subject to the satisfaction (or written waiver by Seller) on
or prior to the Closing Date of all of the following conditions:
10.01. Representations, Warranties and Covenants of Buyer. Buyer shall
have complied in all material respects with all of its agreements,
representations, warranties and covenants contained herein to be performed at or
prior to the Closing Date, and all of the representations and warranties of
Buyer contained herein must have been accurate in all material respects as of
the date of this Agreement, and must be accurate in all material respects on and
as of the Closing Date with the same effect as though made on and as of the
Closing Date except (a)
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as otherwise contemplated hereby; and (b) to the extent that such
representations and warranties were made as of a specified date (and as to such
representations and warranties the same shall continue on the Closing Date to
have been true as of the specified date). Seller shall have received a
certificate of Buyer, dated as of the Closing Date and signed by an officer of
Buyer, certifying as to the fulfillment of the conditions set forth in this
Article 10.01.
10.02. No Prohibition. No federal or state court, arbitrator or
governmental body, agency or official shall have issued any order, and there
shall not be any federal or state statute, rule or regulation, restraining or
prohibiting the consummation of the Closing, and no proceeding challenging this
Agreement or the transactions contemplated hereby or seeking to prohibit, alter
or prevent or materially delay the Closing shall have been threatened or
instituted by any federal or state governmental body, agency or official or any
third party.
10.03. Deliveries. Buyer shall have delivered or caused to be delivered to
Seller of the items set forth in Article 3.03 hereof.
10.04. Real Estate Acquisitions. Contemporaneously with the purchase of
the Assets, Buyer and its affiliates shall enter into leases and contracts of
sale with respect to the Trachten Real Estate Properties.
10.05. VAP Supply Agreement. Buyer shall execute and deliver the Supply
Agreement.
ARTICLE XI
INTENTIONALLY DELETED
ARTICLE XII
INDEMNIFICATION AND RELATED MATTERS
12.01. Indemnification by Seller. Subject to the provisions of this
Article XII, Seller agrees to indemnify and hold Buyer harmless from and against
any losses, including without limitation, any claims, actions, demands, losses,
costs, expenses, liabilities (joint or several), penalties, taxes, damages, and
reasonable attorneys' fees incurred in connection therewith ("Losses"):
(a) Any and all Losses resulting from or arising out of any
misrepresentation or breach of warranty made by Seller in this Agreement, the
certificate delivered pursuant to Section 9.01 hereof, or any other certificate
or document delivered by Seller pursuant to or in connection with this
Agreement;
(b) Any and all Losses resulting from or arising out of the
failure of Seller to comply with any of the covenants, agreements or other
obligations contained in this Agreement which are required to be performed by
Seller;
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(c) Any and all Losses resulting from or arising out of Excluded
Liabilities;
(d) Any and all Losses of any nature whatsoever resulting from or
arising out of any violation by Seller of any federal, state or other applicable
laws (including ERISA and the Code) relating to labor and employment of persons
employed by Seller on or before the Closing Date in connection with the
Business;
(e) Any and all Losses arising out of or relating to the waiver by
Seller and Buyer of compliance with any applicable bulk sale laws or
regulations, except with respect to any obligation which is an Assumed
Liability;
(f) Any and all Losses resulting from or arising directly or
indirectly from any agreements or commitments, whether oral or written, between
the Seller and any employee, independent contractor or other person who has
provided services on before the Closing Date to the Seller, whether now or
hereafter existing;
(g) Any and all Losses resulting from or arising out of the failure
of the Seller to pay any taxes with respect to the Business, the Assets or the
Employees arising or accruing on or prior to the Closing;
(h) Any and all Losses resulting from or arising out of the Scheduled
Litigation; and
(i) Any and all Losses resulting from or arising out of any of
Seller's pension or retirement plans.
12.02. Indemnification by Buyer. Subject to the provisions of this Article
Xii, Buyer agrees to indemnify and hold Seller harmless from and against any
Losses, as defined in Article 12.01, with respect to:
(a) Any and all Losses resulting from or arising out of any
misrepresentation or breach of warranty made by Buyer in this Agreement;
(b) Any and all Losses resulting from or arising out of the failure
of Buyer to comply with any of the covenants, agreements or other obligations
contained in this Agreement which are required to be performed by Buyer;
(c) Any and all Losses resulting from or arising out of Assumed
Liabilities after the Closing.
(d) Any and all Losses resulting from and arising on or after the
Closing solely out of Buyer's non-assumption of Seller's collective bargaining
agreements or its failure to reach agreements with the respective collective
bargaining units.
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12.03. Determination of Damages and Related Matters. In calculating any
amounts payable to Buyer pursuant to Article 12.01 or payable to Seller pursuant
to Article 12.02, any diminution of value to the Business shall be deemed
damages suffered by Buyer, and Seller or Buyer, as the case may be, shall
receive credit for (i) any actual reduction in tax liability as a result of the
facts giving rise to the claim for indemnification, and (ii) any insurance
recoveries actually received by the party to be indemnified. The right to
indemnification, reimbursement or other remedy based on a breach of any
representations, warranties, covenants, and obligations hereunder will not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) about the accuracy or inaccuracy of, or
compliance with, any such representation, warranty, covenant, or obligation.
12.04. Survival of Representations, Warranties and Covenants and
Obligations. The representations, warranties, covenants and obligations
contained in this Agreement and any other certificate, schedule or document
delivered pursuant to this Agreement will survive the Closing Date. Neither
Seller nor Buyer will have any liability for indemnification under this Article
XII unless notice of a claim for indemnity or notice of facts as to which an
indemnifiable loss is expected to be incurred shall have been given on a date
which is on or before five years from the Closing Date, except for a claim
relating to or with respect to the representations, warranties, covenants,
agreements and obligations contained in Article VIII, Articles 1.05, 4.01,
4.02(b), 4.02(c), 4.03 or 4.11 which may be made at any time on or before the
date which is ten years from the Closing Date.
12.05. Notice of Indemnification. In the event any legal proceeding shall
be threatened or instituted or any claim or demand shall be asserted by any
person in respect of which payment may be sought by one person in respect of
which payment may be sought by one party hereto from the other party under the
provisions of this Article XII, the party seeking indemnification (the
"Indemnitee") shall promptly cause written notice of the assertion of any such
claim of which it has knowledge which is covered by this indemnity to be
forwarded to the other party (the "Indemnitor"); provided that the failure to
give such notice shall not affect the Indemnitee's rights hereunder except to
the extent the lndemnitor is materially prejudiced by such failure. Any notice
of a claim by reason of any of the representations, warranties or covenants
contained in this Agreement shall state specifically the representation,
warranty or covenant with respect to which the claim is made, the facts giving
rise to an alleged basis for the claim, and the amount of the liability asserted
against the Indemnitor by reason of the claim.
12.06. Indemnification Procedure for Third Party Claims. Except as
otherwise provided in Article XII hereof, in the event of the initiation of any
legal proceeding against an Indemnitee by a third party, the Indemnitor shall
have the absolute right after the receipt of notice, at its option and at its
own expense, to be represented by counsel of its choice, and to defend the
Indemnitee against, negotiate, settle or otherwise deal with any proceeding,
claim, or demand which relates to any Losses indemnified against hereunder;
provided, however, that the Indemnitee may participate in any such proceeding
with counsel of its choice and at its expense and the Indemnitor shall not
settle any such proceeding, claim or demand unless lndemnitee is fully released
without any admission of liability. The parties hereto agree to cooperate fully
with each other in connection with the defense, negotiation or settlement of any
such legal proceeding,
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claim or demand. To the extent the Indemnitor elects not to defend such
proceeding, claims or demand, and the Indemnitee defends against or otherwise
deals with any such proceeding, claim-or demand, the Indemnitee may retain
counsel, at the expense of the Indemnitor, and control the defense of such
proceeding. The Indemnitee may not settle any such proceeding without the
consent of the Indemnitor, which shall not be unreasonably withheld or delayed.
ARTICLE XIII
TERMINATION PRIOR TO CLOSING
13.01. Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by either Buyer or Seller if a material breach of any provision of
this Agreement has been committed by the other party and such breach has not
been waived in writing by the non-breaching party;
(b) (i) by Buyer if any of the conditions of Article IX has not been
satisfied as of the Closing Date or if satisfaction of such condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date;
(ii) by Seller if any of the conditions in Article X (including but
not limited to the conditions set forth in Article 10.04 or 10.05) have not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Seller to comply with its
obligations under this Agreement) and Seller has not waived such condition on or
before the Closing Date;
(c) by the mutual written consent of Buyer and Seller.
13.02. Effect of Termination. Each party's right of termination under
Article 13.01 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Article
13.01, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Articles 14.07 and 14.08 and Buyer's
obligations of confidentiality set forth in Article 6.03 (c) will survive;
provided, however, that if this Agreement is terminated by a party because of
the breach of the Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is -not
satisfied as a result of the other party's breach or default with respect to its
obligations under this Agreement, the terminating party's rights and remedies
shall be limited to those set forth in the Escrow Agreement.
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ARTICLE XIV
MISCELLANEOUS
14.01. Entire Agreement. This Agreement and the agreements contemplated
hereby constitute the sole understanding of the parties with respect to the
matters provided for herein and supersede any previous agreements and
understandings between the parties with respect to the subject matter hereof. No
amendment, modification or alteration of the terms or provisions of this
Agreement shall be binding unless the same shall be in writing and duly executed
by the parties hereto.
14.02. Bulk Sales Laws. Buyer and Seller each hereby waive compliance by
Seller with the provisions of the "bulk sales", "bulk transfer" or similar laws
of any state of the United States. Seller agrees to indemnify and hold Buyer
harmless against any and all Losses incurred by Buyer or any of its affiliates
as a result of any failure to comply with any such "bulk sales", "bulk transfer"
or similar laws. Seller hereby agrees to fully comply with and cooperate with
Buyer concerning filing any notices or other information with the States of
Connecticut, Massachusetts, New Hampshire, New York and Rhode Island, prior to
the Closing in accordance with applicable statutes and regulations concerning
bulk sales tax liabilities of Seller, including compliance with any tax escrow
which may be required by the appropriate agency.
14.03. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties hereto. This Agreement may not
be assigned by Buyer without the prior written consent of the Seller.
14.04. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument. This Agreement shall
become effective when each party hereto shall have received a counterpart hereof
signed by the other party hereto.
14.05. Articles and Section Headings; Construction. The headings of
Articles and Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to
"Articles" or "Sections" refer to the corresponding Articles or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
14.06. Amendments; No Waivers. (a) Any provision of this Agreement may
be amended or waived prior to the Closing Date if, and only if, such amendment
or waiver is in writing and signed, in the case of an amendment, by Buyer and
Seller, or in the case of a waiver, by the party against whom the waiver is to
be effective.
(b) No failure or delay by either party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise
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thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by applicable
law or in equity.
14.07. Broker's Fees. Except as disclosed in Schedule 14.07, each of the
parties hereto represents and warrants to the other that it has had no dealings
with any broker or finder in connection with the transactions contemplated by
this Agreement. Seller agrees to indemnify and hold Buyer harmless from and
against any and all liability to which Buyer or the Business may be subjected by
reason of any broker's or finder's fee with respect to the transactions
contemplated hereby to the extent such fee is attributable to any action
undertaken by or on behalf of Seller or is made by any person claiming by,
through or under Seller. Buyer agrees to indemnify and hold Seller harmless from
and against any and all liability to which Seller may be subjected by reason of
any broker's or finder's fee with respect to the transactions contemplated
hereby to the extent such fee is attributable to any action undertaken by or on
behalf of Buyer or is made by any person claiming by, through or under Buyer.
14.08. Expenses. Except as otherwise specifically provided for in this
Agreement, Seller and Buyer shall each pay all costs and expenses incurred by it
or on its behalf in connection with this Agreement and the transactions
contemplated hereby, including fees and expenses of its own financial
consultants, accountants and counsel.
14.09. Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
if to Seller to:
David Trachten
Viking Building Products, Inc.
33-39 John Street
New Britain, CT 06051
Facsimile: (203) 827-1754
with a copy to:
Stuart Kudman, Esq.
Kudman, Trachten & Kessler
The Empire State Building
350 Fifth Avenue
Suite 1423
New York, NY 10118-1487
Facsimile: (212) 868-0013
if to Buyer to:
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Kenneth A. Hendricks, President
American Builders & Contractors Supply Co., Inc.
One ABC Parkway
Beloit, WI 53511
Facsimile: (608) 362-6529
with a copy to:
Karl W. Leo, Esq.
Leo and Associates
200 Randolph Avenue
Suite 200
Huntsville, AL 35801
Facsimile: (205) 539-6000
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice which is
addressed and mailed in the manner herein provided shall be deemed to have been
duly given to the party to which it is addressed at the close of business, local
time of the recipient, on the fifth (5th) business day after the day it is so
placed in the mail.
14.10. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York applicable to agreements
made and to be performed in such jurisdiction. Any action to enforce, which
arises out of or in any way relates to, any of the provisions of this Agreement
or the Closing documents shall be brought and prosecuted in the Courts of the
State of New York or any federal court with jurisdiction in the State of New
York. Each party irrevocably: (i) submits to the exclusive jurisdiction of the
Courts of New York and any federal court with general jurisdiction in the State
of New York; and (ii) waives any objection which it may have at any time to the
laying of venue of any suit, action or proceeding ("Proceeding") brought in any
such court, waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with respect to such
Proceedings, that such court does not have jurisdiction over such party. The
parties irrevocably consent to service of process given in the manner provided
for notices in Section 14.09. Nothing in this Agreement will affect the right of
any party to serve process in any other manner permitted by law.
14.11. Public Announcements. Neither Seller (nor any of its affiliates)
nor Buyer (nor any of its affiliates) shall make any public statements,
including any press releases, with respect to this Agreement and the
transactions contemplated hereby without the prior written consent of the other
party (which consent may not be unreasonably withheld), except as may be
required by law or pursuant to a listing agreement with a national securities
exchange.
14.12. Further Assurances. At any time or from time to time after the
Closing Date, either party shall, at the request of the other party and at such
other party's expense, execute and
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deliver any further instruments or documents and take all such further action as
such party reasonably may request in order to consummate and make effective the
sale contemplated by this Agreement.
14.13. Severability. If any provisions hereof shall be held by any court
of competent jurisdiction to be illegal, void or unenforceable, such provision
shall be of no force and effect, but the illegality or unenforceability shall
have no effect upon and shall not impair the enforceability of any other
provision of this Agreement.
14.14. Sales and Transfer Taxes. All applicable sales, transfer,
documentary, use filing and other similar taxes and fees (including smog
certificates due on vehicle transfer and excluding any income taxes of any kind)
that may be due or payable as a result of the purchase of the Assets by Buyer
from Seller contemplated in this Agreement, whether levied on the Seller or
Buyer, shall be borne by the Buyer. Ad valorem taxes on tangible personal
property for the year 1997 shall be prorated from the Date of Closing. Ad
valorem taxes on equipment and inventory for the year 1997 shall be prorated as
of the date of sale and a credit or deficit against the Purchase Price shall be
provided through the Date of Closing. In the event actual ad valorem taxes have
not been determined, the ad valorem taxes for 1997 shall be based upon the ad
valorem taxes for 1996, subject to future adjustments when actual ad valorem
taxes are determined.
14.15. Third Party Beneficiary. Nothing expressed or referred to in this
Agreement or any Schedule hereto is intended to or shall be construed to give
any person or entity other than the parties to this Agreement any legal or
equitable right, remedy or claim under or with respect to this Agreement, or any
provision hereof, it being the intention of the parties hereto that this
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement, their successors and
permitted assigns, and for the benefit of no other person or entity.
14.16. Arbitration. Any controversies or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in New
York, New York, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. In the
event of arbitration and/or litigation regarding this Agreement or the subject
matter hereof, the prevailing party shall be entitled to recover from the other
party its actual costs and expenses, including reasonable attorney's fees and
arbitration costs; provided, however, that nothing in this Article 14.16 shall
require any award of costs and expenses if there is no "prevailing" party in the
discretion of the adjudicator.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first above written.
BUYER:
AMERICAN BUILDERS & CONTRACTORS
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SUPPLY CO., INC.
By:_______________________________
Jeff Stentz
SELLER:
------
VIKING BUILDING PRODUCTS, INC.
By:_______________________________
David Trachten, President
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