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Exhibit 2.2
ASSET PURCHASE AGREEMENT
AMONG
DCI/DWC ACQUISITION CORP.
(BUYER)
AND
DANVID COMPANY, INC.
AND
DANVID WINDOW COMPANY
(SELLERS)
NOVEMBER 10, 1997
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TABLE OF CONTENTS
Page
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1. Definitions........................................................ 1
2. Purchase and Sale of Danvid and DWC Assets......................... 7
(a) Basic Transaction......................................... 7
(b) Purchase Price............................................ 7
(c) The Closing, Pre-Closing.................................. 11
(d) Deliveries at the Closing................................. 11
3. Representations and Warranties Concerning the Transaction.......... 11
(a) Representations and Warranties of the Sellers............. 11
(b) Representations and Warranties of the Buyer............... 13
4. Representations and Warranties Concerning Danvid and DWC........... 14
(a) Organization, Qualification, and Corporate Power.......... 14
(b) Capitalization............................................ 14
(c) Noncontravention.......................................... 15
(d) Brokers' Fees............................................. 15
(e) Title to Assets........................................... 15
(f) Subsidiaries.............................................. 16
(g) Financial Statements...................................... 16
(h) Events Subsequent to Most Recent Fiscal Year End.......... 16
(i) Undisclosed Liabilities................................... 18
(j) Legal Compliance.......................................... 18
(k) Tax Matters............................................... 18
(l) Real Property............................................. 20
(m) Intellectual Property..................................... 20
(n) Tangible Assets........................................... 21
(o) Inventory................................................. 22
(p) Contracts................................................. 22
(q) Notes and Accounts Receivable............................. 23
(r) Powers of Attorney........................................ 24
(s) Insurance................................................. 24
(t) Litigation................................................ 24
(u) Product Warranty.......................................... 25
(v) Product Liability......................................... 25
(w) Employees................................................. 25
(x) Employee Benefits......................................... 25
(y) Guaranties................................................ 25
(z) Environment, Health, and Safety........................... 25
(aa) Certain Business Relationships with Danvid................ 26
(ab) Disclosure................................................ 26
(ac) Schedules................................................. 26
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5. Pre-Closing Covenants.............................................. 26
(a) General................................................... 26
(b) Notices and Consents...................................... 26
(c) Operation of Business..................................... 27
(d) Preservation of Business.................................. 27
(e) Full Access............................................... 27
(f) Notice of Developments.................................... 27
(g) Exclusivity............................................... 27
6. Incidental Transactions and Post-Closing Covenants................. 28
(a) General................................................... 28
(b) Litigation Support........................................ 28
(c) Transition................................................ 28
(d) Confidentiality........................................... 29
(e) Covenant Not to Compete................................... 29
(f) Sellers' Cessation of Business............................ 30
(g) Nature of Transactions, Payments to Creditors............. 30
7. Conditions to Obligation to Close.................................. 31
(a) Conditions to Obligation of the Buyer..................... 31
(b) Conditions to Obligation of the Sellers................... 34
(a) Survival of Representations and Warranties................ 34
(b) Indemnification Provisions for Benefit of the Buyer....... 34
(c) Indemnification Provisions for Benefit of the Sellers..... 35
(d) Matters Involving Third Parties........................... 35
(e) Determination of Adverse Consequences..................... 36
(f) Escrow Arrangement and Right to Setoff.................... 36
(g) Other Indemnification Provisions.......................... 37
9. Tax Matters........................................................ 37
(a) Tax Returns............................................... 37
(b) Certain Taxes............................................. 37
10. Termination........................................................ 38
(a) Termination of Agreement.................................. 38
(b) Effect of Termination..................................... 38
11. Miscellaneous...................................................... 38
(a) Nature of Certain Obligations............................. 38
(b) Press Releases and Public Announcements................... 38
(c) No Third Party Beneficiaries.............................. 39
(d) Entire Agreement.......................................... 39
(e) Succession and Assignment................................. 39
(f) Counterparts.............................................. 39
(g) Headings.................................................. 39
(h) Notices................................................... 39
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(i) Governing Law............................................. 40
(j) Amendments and Waivers.................................... 40
(k) Severability.............................................. 40
(l) Expenses.................................................. 41
(m) Construction.............................................. 41
(n) Incorporation of Exhibits, Annexes, and Schedules......... 41
(o) Specific Performance...................................... 41
(p) Stockholders of Sellers Bound............................. 41
(q) Good Faith................................................ 41
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into on November 10, 1997, by
and among DCI/DWC Acquisition Corp., a Delaware corporation in formation (the
"Buyer"), Danvid Company, Inc., a Texas corporation ("Danvid"), and Danvid
Window Company, a Texas corporation ("DWC"). The Buyer, Danvid, DWC, and the
Stockholders are referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which the Buyer will
purchase from Danvid and DWC, and Danvid and DWC will sell to the Buyer, all of
the assets of Danvid and DWC in return for cash and the other consideration
referred to herein. Danvid and DWC may be referred to herein collectively as the
"Sellers."
NOW, THEREFORE, in consideration of the premises and the mutual
promises in this Agreement, and in consideration of the representations,
warranties, and covenants in this Agreement, and other good, valuable and
adequate consideration the Parties agree as follows.
1. Definitions.
"Accredited Investor" has the meaning set forth in Rule 501 adopted as
part Regulation D promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504.
"Applicable Rate" means the corporate base rate of interest announced
from time to time by Banc One Ohio, N.A.
"Acquired Assets" or "Assets" means all right, title, and interest in
and to all of the assets of Danvid and DWC, specifically, for example, all of
their respective (a) real property interests, leaseholds and subleaseholds
therein, improvements, fixtures, and fittings thereon, and easements,
right-of-way, and other appurtenants thereto (such as appurtenant rights in and
to public streets), including the real property which is identified on the Real
Property Schedule, (b) tangible personal property (such as machinery, equipment,
inventories of raw materials and supplies, manufactured and purchased parts,
goods in process and finished goods, furniture, automobiles, trucks, tractors,
trailers, tools, jigs, and dies), including, by way of example, the inventory
and equipment identified on the Inventory Schedule and Equipment Schedule,
respectively, (c) Intellectual Property, goodwill associated therewith, licenses
and sublicenses granted and obtained with respect thereto, and rights
thereunder, remedies against infringements
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thereof, and rights to protection of interests therein under the laws of all
jurisdictions, (d) leases, subleases, and rights thereunder, (e) agreements,
contracts, indentures, mortgages, instruments, Security Interests, guaranties,
other similar arrangements, and rights thereunder, including those set forth on
the Schedule of Material Contracts, (f) accounts, notes, and other receivables,
including those set forth on the Receivable Schedule, (g) securities, (h)
claims, deposits, prepayments, refunds, causes of action, choses in action,
rights of recovery, rights of set off, and rights or recoupment (including any
such item relating to the payment of Taxes), (i) franchises, approvals, permits,
licenses, orders, registrations, certificates, variances, and similar rights
obtained from governments and governmental agencies, and (j) files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials; provided, however, that the Acquired Assets
shall not include (i) the corporate charter, qualifications to conduct business
as a foreign corporation, arrangements with registered agents relating to
foreign qualifications, taxpayer and other identification numbers, seals, minute
books, stock transfer books, blank stock certificates, and other documents
relating to the organization, maintenance, and existence of Danvid or DWC as a
corporation, (ii) any of the rights of Danvid or DWC under this Agreement, or
(iii) any assets of Danvid or DWC to be excluded by election of the Buyer, such
excluded assets shall be identified by Buyer prior to the Closing and all
identified on the "Schedule of Excluded Assets" to be completed prior to and
delivered at the Closing by Buyer (the "Excluded Assets").
"Assumed Liabilities" has the meaning set forth in Section 2(b) hereof.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Securities" has the meaning set forth in Section 2(b) below.
"Closing" has the meaning set forth in Section 2(c) below.
"Closing Balance Sheet" shall mean a balance sheet of each of Danvid
and DWC to be complete and accurate as of the Closing and to be dated as of the
Closing Date showing all the assets and liabilities of each of Danvid and DWC.
"Closing Date" has the meaning set forth in Section 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of Buyer, Danvid or DWC that is not already generally
available to the public.
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"DWC" has the meaning set forth in the preface above.
"Danvid" has the meaning set forth in the preface above.
"Discharged Liabilities" has the meaning set forth in Section 6(g)
below.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Employee Benefit Plan" means with respect to Danvid, DWC, and all
ERISA Affiliates, any (a) nonqualified deferred compensation or retirement plan
or arrangement which is an Employee Pension Benefit Plan, (b) qualified
retirement plan or arrangement which is an Employee Pension Benefit Plan, (c)
Multiemployer Plan, or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"Equipment Schedule" means the Schedule of the items of equipment used
in the businesses of Danvid and DWC and to be assigned and conveyed to Buyer at
the Closing and which Equipment Schedule shall be prepared by the Sellers, be in
form, content and substance acceptable to Buyer, and delivered at the Closing,
together with possession of the equipment identified thereon.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, with respect to Danvid and DWC, any person
engaged in a trade or business (whether or not incorporated) that is part of the
same control group, or in under common control with, or part of an affiliate
service group that includes Danvid and DWC within the meaning of Code Section
414 and/or Code Section 4001(a)(14).
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"Escrow Agreement" has the meaning set forth in Section 8(f) herein.
"Excluded Assets" are those assets owned by Sellers or in which
Stockholders assert an interest relating to the business of Danvid or DWC which
are not being transferred pursuant to this Agreement, which assets are described
on Schedule of Excluded Assets.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statement" has the meaning set forth in Section 4(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 8(d) below.
"Indemnifying Party" has the meaning set forth in Section 8(d) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium); including in each
case, by way of example, those items of Danvid and DWC described on Schedule of
I.P.
"Inventory Schedule" means the schedule of all of the inventory of the
Sellers to be assigned and conveyed to the Buyer hereunder, which schedule shall
set forth in very general terms and by category substantially all of the items
of inventory of the Sellers to be transferred to the Buyer hereunder, the value
thereof on a first-in first-out basis, and which Inventory Schedule shall be
prepared by Sellers and be delivered in form, content and substance acceptable
to the Buyer at the Closing.
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"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability or other obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section
4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA Sections
3(37)(A) and 4001.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Real Property Schedule" means the Schedule of all real property
interests to be assigned and conveyed to the Buyer by the Sellers at the Closing
pursuant to this Agreement, including all leaseholds, easements, rights of way,
and other real estate interests to be assigned at the Closing as part of the
Acquired Assets, and which Real Property Schedule shall be prepared by the
Seller, in form, content and substance acceptable to the Buyer, and delivered at
the Closing.
"Receivable Schedule" means schedule of all accounts receivable and
other obligations for the payment of money owing to the Sellers and which
receivables are to be assigned to the Buyer at the Closing pursuant to the terms
and conditions of this Agreement, and which Receivable Schedule shall be
prepared by the Sellers, in form, content and substance acceptable to the Buyer,
and delivered to the Buyer at the Closing.
"Reconciliation" shall have the meaning set forth in Section 2(b)
below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
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"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable [or for Taxes
that the taxpayer is contesting in good faith through appropriate proceedings],
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Schedule of Excluded Assets" means that schedule to be prepared by the
Buyer and acknowledged by the Sellers and to be delivered at the Closing setting
forth in reasonable detail those assets belonging to the Sellers or either of
them that are not to be acquired by the Buyer under this Agreement.
"Schedule of IP" means the schedule of intellectual property to be
assigned at the Closing by Sellers, which Schedule shall be prepared by Sellers
and be in form, content and substance acceptable to Buyer and delivered by
Sellers at the Closing.
"Schedule of Material Contracts" means that schedule of all contracts
with third parties binding on or inuring a benefit to the Sellers that are
intended to be assigned as part of the Acquired Assets hereunder, which Schedule
of Material Contracts shall be prepared by the Sellers, in form, content and
substance acceptable to the Buyer, and delivered to the Buyer by the Sellers at
the Closing.
"Sellers" means Danvid and DWC.
"Stockholder" or "Stockholders" means the Stockholders of Sellers,
Daniel P. Crawford, Karen J. Crawford, David A. Crawford and Paul G. Comer; and
such reference shall in each instance include the respective spouses of the
Stockholders.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
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"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d) below.
2. Purchase and Sale of Danvid and DWC Assets.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from each of the Sellers, and each
of the Sellers agrees to sell to the Buyer, all of the Acquired Assets, free and
clear of all liens and encumbrances, for the consideration specified below in
this Section 2; in the aggregate the Sellers shall at the Closing sell under
this Agreement and for the consideration set forth in Section 2(b) hereof any
and all of the assets, both tangible and intangible, of Danvid and DWC except
only the Excluded Assets. The consideration set forth in Section 2(b) below
shall include all consideration payable for the Assets of Danvid and DWC and
whether belonging to either Danvid or DWC, and such consideration shall be
allocated among the Assets and to the respective Sellers in the manner
designated by Buyer, subject to Sellers' approval, which approval will not be
unreasonably withheld, which allocations shall be set forth in a Schedule 2(a)
to be completed by Buyer and approved by Sellers not less than three business
days prior to Closing.
(b) Purchase Price. At the Closing, in full and complete
consideration for the Acquired Assets, the Buyer shall pay, deposit or deliver
the items described in (i) through (iv) below:
(i) an amount of cash shall be payable by wire transfer to accounts
designated by Sellers on Schedule 2(b)(i) -- which Schedule 2(b)(i)
shall be delivered by Sellers to Buyer not less than three days prior
to Closing and will be consistent with Schedule 2(a) -- less the amount
to be paid into escrow with the Escrow Agent as set forth in Section
2(b)(ii), computed as follows:
The cash portion of the Purchase Price shall be comprised of two
separate components, referred to as the "Primary Cash Amount" and
the "Additional Cash Payment," respectively.
First, an amount of cash will be paid to the Sellers (the "Primary
Cash Amount") that is an amount equal to $14 million, minus the
amount of cash reflected on the Closing Balance Sheet, and minus the
amount of all expenditures incurred by Sellers (either paid by
Seller or required to be assumed by Buyer) for any expense other
than ordinary and necessary expenses from and after September 30,
1997 (including, by way of example, any bonuses, capital
expenditures, estimated tax payments or other extraordinary
expenses). At the Closing, a certificate acknowledging the
computation of the Primary Cash Amount shall be executed and
delivered by Buyer and Sellers.
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The second component of the cash portion of the Purchase Price shall
be referred to as the "Additional Cash Payment" which Additional
Cash Payment shall be a function of a factor of the "Tentative Gain"
and shall be an amount determined as follows:
The Tentative Gain is an amount equal to the Primary Cash Amount,
plus the dollar amount of the Assumed Liabilities, plus the amount
reflected on the Closing Balance Sheet as the accrued liability for
federal corporate income tax and Texas Franchise taxes for the
period commencing August 1, 1997 for Danvid and commencing January
1, 1997 for DWC (provided that such amount shall in no event exceed
an aggregate of $500,000), plus the "Buyer Securities Value," minus
the value of the Acquired Assets, adjusted to reflect the federal
income tax basis of the Sellers in such Acquired Assets.
The Additional Cash Payment will equal an amount determined by
multiplying the Tentative Gain times .38, and then dividing that sum
by .62.
For purposes of the foregoing, the "Buyer Securities Value" shall be
determined by multiplying the 384,615 shares of Common Stock comprising the
Buyer Securities (described below) by two-thirds of the average closing sale
price of such stock in the over the counter market during the twenty (20)
consecutive trading days preceding the Closing Date.
(ii) From the amount of cash determined to be payable as part of the
Purchase Price pursuant to the computations set forth in Section 2(b)(i) above
(i.e., out of the Primary Cash Amount and the Additional Cash Payment), an
amount of $10 million shall be deposited into escrow, pursuant to an Escrow
Agreement to be executed at Closing with an escrow agent to be selected by the
Buyer and reasonably acceptable to the Sellers (the "Escrow Agent"). The funds
on deposit in the escrow shall, as to $8,500,000 be retained by the Escrow Agent
for a period commencing on the Closing Date and continuing until the date 45
days following the Closing, with the balance of the funds deposited in escrow to
be retained by the Escrow Agent for 150 days following the Closing Date.
The escrow is intended to secure the obligations for indemnity set
forth in this Agreement and particularly the obligation to indemnify for any
Taxes, tax liability, lien or claim associated with the transfer of the Assets
or encumbering any of the Assets and also to provide a ready source for the
payment of the indemnification obligations of Sellers for the breach of any
representation, warranty or covenant set forth herein in the manner contemplated
by Section 8 of this Agreement.
The transactions contemplated by this Agreement involve the preparation
of a Closing Balance Sheet intended to set forth, as of the Closing, all of the
assets and liabilities of the Sellers at that time. The parties acknowledge
that, as a practical matter, the Closing Balance Sheet (although subject to the
Seller's Warranty as to its reasonable accuracy as of the Closing
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Date) may omit certain assets or misstate their value, or may omit or
underestimate the amount of liabilities (including contingent claims or
liabilities) that will have to be discharged in order to effect the transfer of
the Acquired Assets free and clear of all liens and encumbrances and to provide
the net value upon which Buyer is relying as presented in the Closing Balance
Sheet. In this regard, the Buyer shall, with the good faith, diligent assistance
of the Sellers following the Closing, attempt to complete a true, complete and
accurate pro-forma balance sheet for each of Danvid and DWC to reconcile and
correct the Closing Balance Sheet prepared and submitted by the Sellers at the
Closing. This reconciliation process (the "Reconciliation") shall be completed
within 120 days of the date of the Closing and Buyer shall have the authority
and right to draw upon amounts deposited with the Escrow Agent to fund the
credits owing by reason of the Reconciliation as determined in the following
manner. In this regard, to the extent that the assets reflected on the Closing
Balance Sheet delivered at the Closing do not have a value equal or exceeding
those actually transferred to the Buyer, or to the extent that any such assets
are subject to any lien or encumbrance not disclosed on the Closing Balance
Sheet required to be discharged in order to render the Acquired Assets free and
clear of any and all liens, or to the extent there is any liability or
obligation not disclosed on the Closing Balance Sheet, upon completion of the
Reconciliation, Buyer shall be entitled to a dollar for dollar credit from the
Purchase Price (which may be drawn from escrow) for the asset deficiency and the
excessive liabilities, as applicable.
(iii) 384,615 shares of the common stock of American Architectural
Products Corp. ("AAPC"), subject to adjustment in the manner described
below.
As to the AAPC Common Stock to be issued as part of the Purchase Price,
the Buyer has agreed if, either (i) as of the expiration of the period ending 18
months following the date of Closing (the "18th Month Date") the asking price
for shares of the Common Stock of AAPC does not meet or exceed the price of
$6.50 per share, or (ii) if the average closing share price for the 20 days
prior to and including the 18th Month Date does not equal or exceed $6.50 per
share, then additional shares of AAPC Common Stock shall be issued according to
the following formula, or, at Seller's option (to be exercised within 10 days of
the expiration of the 18th Month Date) an amount of cash equal to 384,615 times
the deficiency in value from a price of $6.50 per share to the highest price of
either (x) the closing sale price on the 18th Month Date or (y) the average
closing sale price for the 20 trading days prior to and including the 18th Month
Date shall be paid to Sellers. The numerical formula for determining the number
of additional shares of the Common Stock of the Buyer to be issued in accordance
with the foregoing, if applicable, shall be as follows:
($6.50 - P) 384,615 = S
-------------------
R
WHERE:
P = The greater of (i) the average closing sale price
for AAPC's Common Stock during the 20 trading days
prior to and including the expiration of the
applicable 18-month
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period (i.e., the 18th Month Date) or (ii) the
closing sale price on the date of expiration of the
18th Month Date.
R = The average closing sale price of AAPC's Common
Stock on the immediately preceding 20 consecutive
trading days prior to the expiration of the
applicable 12 month period.
S = The number of additional shares of AAPC's Common
Stock to be issued.
The Common Stock of AAPC to be issued in connection with this Agreement
shall from time to time be referred to herein as the "Buyer Securities." The
Buyer Securities shall be subject to a "Lock-Up Agreement" to be executed and
delivered at the Closing restricting any sale, pledge or hypothecation of the
Buyer Securities for a period of 18 months following the Closing and otherwise
including standard provisions - for a lock-up arrangement of this character.
Notwithstanding the foregoing, the Buyer may at any time during the
18-month period following Closing, purchase from Sellers all of the Buyer
Securities at a price of $6.50 per share and upon payment of such amount all
other claims and rights of Sellers under this Section 2(b)(iii) shall be
terminated. This option to Buyer shall be set forth in the Lock-up Agreement.
(iv) Buyer shall at Closing assume the liabilities described
on Schedule 2(b)(iv), which Schedule 2(b)(iv) shall be conformed and
adjusted as of the Closing and initialed by the Parties to set forth
the specific obligations to be assumed by Buyer (the liabilities set
forth on Schedule 2(b)(iv) as conformed for the Closing shall be
referred to herein as the "Assumed Liabilities") which Assumed
Liabilities shall be paid by Buyer or provision for satisfaction made,
in Buyer's reasonable discretion, as the same become due.
Buyer does not assume or agree to be bound by any obligations or liabilities of
Sellers of any kind or nature, known, unknown, contingent or otherwise, except
the Assumed Liabilities. In furtherance, and not in limitation, of the
foregoing, it is understood that Buyer does not assume, undertake or accept any
obligations, duties, responsibilities or liabilities of Sellers (a) to or under
any Employee Benefit Plan, (b) to employees or former employees of Sellers or
any of their beneficiaries, heirs or assignees, including, without limitation,
any liability with respect to accrued pension or welfare benefits under any such
Employee Benefit Plan for such employees' or former employees' service with
Sellers, whether or not any such employees or former employees are offered
employment by, or become employees of, Buyer, or to PBGC, any Union or any
similar organization, arising out of such employees' or former employees'
employment by Sellers or out of the transactions contemplated by this Agreement
or arising by virtue of any collective bargaining relationship or agreement or
pursuant to the National Labor Relations Act or any other labor relations law,
or any obligation to arbitrate any disputes arising under any collective
bargaining relationship or agreement between Sellers and any labor organization
and/or Sellers' employees or former employees; (c) for any income, profits,
excise, ad valorem, or
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other Taxes of any kind or character; (d) any claims for personal injuries,
property damages or consequential damages relating to products sold by Sellers;
or (e) liabilities under any statute, rule or regulation, including, but not
limited to, those related to civil rights, health, safety, labor, discrimination
and the environment.
The consideration described in the foregoing parts (i) through (iv) of
this Section 2(b), which is subject to adjustments, holdbacks and indemnity
claims set forth herein, shall be referred to from time to time as the "Purchase
Price."
Buyer reserves the right to make payment or delivery of the Purchase
Price directly into a single account for the benefit of Sellers or to deliver
the Purchase Price to Sellers in a manner consistent with the allocation
Schedule 2(a).
(c) The Closing, Pre-Closing. The execution and delivery of all
documents and instruments necessary to effect the transfer of the Assets, and
the other transactions contemplated by this Agreement (the "Closing") shall take
place at the offices of Shafer, Ramsey and Mueller, 4514 Cole Avenue, 2nd Floor,
Dallas, Texas, commencing at 9:00 a.m. local time on the second business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Buyer and the Sellers may mutually
determine (the "Closing Date"); provided, however, that the Closing Date shall
be no later than December 15, 1997.
Notwithstanding the foregoing, the Parties shall meet at 11:00 a.m. on
November 17, 1997 or, if not at such date, at Buyer's election another date on
or before November 19, 1997 at a place within the Continental U.S. designated by
Buyer and reasonably acceptable to Sellers to review all reasonably anticipated
documents necessary to effect the transactions and to "pre-close" the
transactions, subject to the continuing effect of each condition to Closing set
forth herein (the "Pre-closing"). At the Pre-closing, preliminary copies of all
documents necessary to effect the Closing on the Closing Date shall be prepared
by the party responsible therefor and reviewed and approved by the Parties with
the right to approve the form and substance of the document or instrument to be
delivered as though the Closing were then occurring. Among the documents to be
prepared in substantially final form at the Pre-closing shall be all Schedules
and Exhibits hereto that are required to be delivered at or prior to the
Closing, the Escrow Agreement, Lock-Up Agreement, a Non-Competition Agreement
for Daniel Crawford, UCC-1's, all necessary releases and estoppels, all bills of
sale, title documents and other forms of assignment, legal opinions, and all
other documents necessary to effect the transactions at the Closing.
(d) Deliveries at the Closing. At the Closing, (i) the Sellers
will deliver to the Buyer the various transfer documents, bills of sale,
assignments, certificates, instruments, and documents referred to in Section
7(a) below and all Schedules to be completed and delivered at or prior to the
Closing by Sellers, and all other documents necessary to effect the transactions
contemplated hereby; (ii) the Buyer will deliver to the Sellers the various
certificates, instruments, and documents referred to in Section 7(b) below and
other documents necessary to effect the transaction, (iii) each of the Sellers
will deliver to the Buyer possession and title to
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the Assets, and (iv) the Buyer will deliver to the Sellers the consideration
specified in Section 2(b) above.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the
Sellers represents and warrants to the Buyer that the statements contained in
this Section 3(a) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)), except as set forth in Schedule 3(a) attached
hereto.
(i) Authority, Binding Effect. Each of Danvid and DWC has the power
under the laws of the State of Texas and their respective jurisdictions
of incorporation, and the corporate authority to execute and deliver
this Agreement and the other instruments and documents required or
contemplated herein ("Related Agreements"), to perform its obligations
hereunder and thereunder and to consummate the transactions provided
for herein and therein. The execution, performance and consummation of
this Agreement and Related Agreements by each of Danvid and DWC have
been duly authorized by all necessary action on the part of each of
Danvid and DWC and will not contravene the articles of incorporation or
bylaws of either Danvid or DWC or conflict with, result in a breach of,
or entitle any party to terminate, or call a default with respect to,
any agreement or instrument to which either Danvid or DWC is a party or
by which any of their respective properties or assets are bound in any
manner which would have a material adverse affect on the transactions
contemplated herein. The execution, performance and consummation by
each of Danvid and DWC of this Agreement and the Related Agreements
will not result in any violation by either Danvid or DWC of any law,
rule or regulation applicable to them or the Assets in any manner.
Danvid and DWC are not a party to, nor subject to or bound by, any
judgment, injunction or decree of any court or governmental authority
which may restrict or interfere with the performance of this Agreement
or the Related Agreements. This Agreement and the Related Agreements
executed and delivered by each of Danvid and DWC constitute the valid
and binding obligations of them enforceable in accordance with their
respective terms.
(ii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
the Sellers are subject or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which either of the Sellers or any
of their affiliates is a party or by which any of them are bound or to
which any of their respective assets are subject.
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(iii) Brokers' Fees. The Sellers have no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
(iv) Investment. The Sellers (A) understand that the Buyer
Securities have not been, and will not be, registered under the
Securities Act, or under any state securities laws, and are being
offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, and will be "restricted
securities" and will not be capable of being freely resold under either
applicable law or the lock-up Agreements, (B) are acquiring the Buyer
Securities solely for his or its own respective account for investment
purposes, and not with a view to the distribution thereof, (C) are each
a sophisticated investor with knowledge and experience in business and
financial matters, (D) have each received certain information
concerning the Buyer and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks
inherent in holding the Buyer Securities, and (E) are each able to bear
the economic risk and lack of liquidity inherent in holding the Buyer
Securities.
(b) Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers that the statements contained in this
Section 3(b) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)), except as set forth in Schedule 3(b) attached
hereto.
(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions. The
Buyer need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement, except as provided.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
the Buyer is subject or any provision of its charter or bylaws or (B)
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to
which any of its assets is subject.
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(iv) Brokers' Fees. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller
could become liable or obligated.
(v) Buyer Securities. When issued at the Closing, the Buyer
Securities will be fully paid, validly issued and non-assessable. The Buyer
Securities are being offered and sold pursuant to exemptions from the
registration requirements of the Securities Act of 1933 and similar state
securities laws. Although not registered, based on the representations of the
Sellers and the manner of sale, Buyer believes the securities are not required
to be registered to be issued to the Sellers, although the Buyer Securities may
not be freely resold in the absence of such registration or another exemption
from applicable securities laws and in compliance with the Lock-up Agreement.
4. Representations and Warranties Concerning Danvid and DWC. The
Sellers represent and warrant to the Buyer that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 4), except as set forth in the Disclosure Schedule delivered by the
Sellers to the Buyer on the date hereof (the "Disclosure Schedule").
Nothing in the Disclosure Schedule shall be deemed adequate to disclose
an exception to a representation or warranty made herein, however, unless the
Disclosure Schedule identifies the exception with particularity and describes
the relevant facts in detail. Without limiting the generality of the foregoing,
the mere listing (or inclusion of a copy) of a document or other item shall not
be deemed adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the existence of
the document or other item itself).
The Disclosure Schedule will be arranged in paragraphs corresponding to
the lettered and numbered paragraphs contained in this Section 4.
(a) Organization, Qualification, and Corporate Power. Each of Danvid
and DWC is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Texas. Each of Danvid and DWC is duly authorized
to conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required (provided Danvid is not qualified in
Florida, and directs sales in that state through one employee). Each of Danvid
and DWC has full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which they are
respectively engaged and in which Danvid or DWC presently proposes to engage and
to own and use the properties owned and used by them. Section 4(a) of the
Disclosure Schedule lists the directors and officers of Danvid and DWC. The
Sellers have delivered to the Buyer correct and complete copies of the charter
and bylaws Danvid and DWC (each as amended to date). The minute books
(containing the records of meetings of the stockholders, the board of directors,
and any committees of the board of directors), the stock certificate books, and
the stock record books of Danvid and DWC are correct and complete. Neither
Danvid nor DWC is in default under or in violation of any provision of their
respective charter or bylaws.
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(b) Capitalization. The entire authorized capital stock of Danvid
consists of 4,500 shares of Common Stock, no par value. The power to vote all
issued and outstanding shares of Sellers is in the aggregate vested in the
Stockholders. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to Danvid. There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of Danvid, except those empowering the
Stockholders.
Mr. Comer is the owner of all of the issued and outstanding capital
stock of DWC, and all of such issued and outstanding capital stock is duly
authorized and validly issued, fully paid and nonassessable. The Sellers
represent and warrant that DWC performs customer-related functions for Danvid,
owns no substantial assets other than contractual rights and relationships with
certain of the customers of Danvid and other relationships with persons for whom
Danvid provides products and services, and has no liabilities of any character,
save and except liabilities owing to Mr. Comer and ordinary and necessary
business expenses incurred in the regular conduct of business.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Danvid or DWC is subject or any provision
of the charter or bylaws of Danvid or DWC or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Danvid or DWC is a party or by which either is bound or to
which any of their respective assets are subject (or result in the imposition of
any Security Interest upon any of their respective assets). Neither Danvid nor
DWC is required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement on the terms hereof; except the notices required under
Hart-Scott-Rodino.
(d) Brokers' Fees. Danvid does not have any Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(e) Title to Assets. Each of Danvid and DWC has good and marketable
title to, or a valid leasehold interest in, the properties and assets used by
them, located on their premises, or shown on the Most Recent Balance Sheet,
acquired after the date thereof or shown on the Closing Balance Sheet, free and
clear of all Security Interests, except for properties and assets disposed of in
the Ordinary Course of Business since the date of the Most Recent Balance Sheet.
At the Closing, Danvid and DWC will convey to Buyer good, valid, and
marketable title to all the Assets, subject to no mortgage, Security Interest,
pledge, valid or enforceable lien, conditional sales agreement, claim,
restriction, reservation, covenant, encumbrance or charge, or restraint on
transfer, except for the obligations described on the Disclosure Schedule, which
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obligations will be discharged and liens released as of the Closing and except
obligations relating to the Assumed Liabilities.
Neither Danvid nor DWC has signed, or authorized the filing of, any
financing statement under the Uniform Commercial Code or otherwise or granted
any security agreement authorizing any secured party thereunder to file any such
financing statement with respect to any of the Assets, except that in favor of
the persons described in the Disclosure Schedule.
(f) Subsidiaries. Neither Danvid nor DWC own subsidiaries, nor any
interest in any other business entity.
(g) Financial Statements. Attached hereto as Exhibit 4(g) are the
following financial statements (collectively the "Financial Statements"): (i)
audited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended July 31, 1995, July
31, 1996 and July 31, 1997 (the "Most Recent Fiscal Year End") for Danvid; (ii)
unaudited balance sheets and statements of income, changes in stockholders
equity, and cash flow as of and for the fiscal years ended July 31, 1992, July
31, 1993, and July 31, 1994; and (iii) unaudited balance sheets and statements
of income, changes in stockholders' equity, and cash flow (the "Most Recent
Financial Statements") as of and for the two months ended September 30, 1997
(the "Most Recent Fiscal Month End") for Danvid. The Balance Sheet set forth in
the Most Recent Financial Statements shall be referred to herein as the "Most
Recent Balance Sheet."
The Financial Statements (including the notes thereto) present fairly
in all material respects the financial condition of Danvid as of such dates and
the results of operations of Danvid for such periods, are correct and complete,
and are consistent with the books and records of Danvid (which books and records
are correct and complete).
At the Closing, Sellers shall deliver the Closing Balance Sheets from
each of Danvid and DWC which shall each be complete and correct as of the
Closing to show all assets (reflecting their then fully depreciated net book
value), and any liabilities of each of Danvid and DWC, subject only to
immaterial changes necessitated by delivery or billing process ordinary for the
businesses.
Prior to the date hereof, Sellers have delivered stand-alone financial
statements for DWC for the last three fiscal years and for the most recent
quarterly period ended (September 30, 1997). These DWC financial statements are
true and complete in all material respects, were prepared in accordance with
GAAP, and present fairly the financial condition and results of operations of
DWC for the periods indicated.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any adverse change in the business,
financial condition, operations, results of operations, or future prospects of
Danvid or DWC and the Closing Balance Sheet of Danvid and DWC will not vary
materially from the balance sheet presented as of the Most Recent Fiscal Month
End. Without limiting the generality of the foregoing, since the Most Recent
Fiscal Year End, Danvid or DWC have:
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(i) not sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for fair consideration in the
Ordinary Course of Business;
(ii) not entered into any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) either
involving more than $25,000 or otherwise outside the Ordinary Course of
Business;
(iii) not allowed any circumstance to exist under which any party
has and no party (including Danvid or DWC) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses)
involving more than $10,000 to which Danvid or DWC is a party or by
which either is bound;
(iv) not imposed any Security Interest upon any of their assets,
tangible or intangible;
(v) not made any capital expenditure (or series of related capital
expenditures) either involving more than $25,000 or outside the
Ordinary Course of Business;
(vi) not made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person;
(vii) not issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation;
(viii) not delayed or postponed the payment of accounts payable and
other Liabilities outside the Ordinary Course of Business;
(ix) not canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) outside the ordinary
course of business;
(x) not issued, sold, or otherwise disposed of any capital stock, or
granted any options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any of its capital
stock;
(xi) not declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital
stock;
(xii) not experienced any damage, destruction, or loss (whether or
not covered by insurance) to its property outside the ordinary course
of business;
(xiii) not made any loan to, or entered into any other transaction
with, any of their respective directors, officers, and employees
outside the Ordinary Course of Business;
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(xiv) not granted any increase in the base compensation of any of
their respective directors, officers, and employees outside the
Ordinary Course of Business;
(xv) not adopted, amended, modified, or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of their respective directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xvi) not made or pledged to make any charitable or other capital
contribution outside the Ordinary Course of Business; and
(xvii) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving Danvid or DWC.
(i) Undisclosed Liabilities. Except as set forth on Section 4(i) of
the Disclosure Schedule, (a) Danvid does not have any Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability), except for (i) Liabilities set forth on the face of the
Most Recent Balance Sheet and, as of the Closing, set forth in the Danvid
Closing Balance Sheet (rather than in any notes thereto) and (ii) Liabilities
which have arisen after the Most Recent Fiscal Month End in the Ordinary Course
of Business and as of the Closing set forth in the Closing Balance Sheet (none
of which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law) and (b) DWC does not have any Liabilities, except as set forth
on the Closing Balance Sheet. A complete listing of all payables (in form
acceptable to Buyer) has been provided to Buyer and a then current payable
listing (in such form as is acceptable to Buyer) will be provided at the Closing
(the "Closing Liability Schedule").
(j) Legal Compliance. Danvid, DWC and their respective predecessors
and Affiliates have complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
(k) Tax Matters.
(i) Danvid, DWC and each of their respective Affiliates have filed
all Tax Returns that it or they were required to file. All such Tax
Returns were correct and complete in all respects. All Taxes owed by
Danvid, DWC and each of their respective Affiliates (whether or not
shown on any Tax Return) have been paid. Except an extension for
federal income taxes for the 1996 fiscal year, neither Danvid nor DWC
is currently the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where Danvid or DWC does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction and none of the
Sellers
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or Stockholders is aware of any Basis for any such claim. There are no
Security Interests on any of the assets of Danvid or DWC that arose in
connection with any failure (or alleged failure) to pay any Taxes.
(ii) Danvid and DWC, in each case, has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) No Seller or director or officer (or employee responsible for
Tax matters) of Danvid or DWC expects any authority to assess any
additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax Liability of Danvid or
DWC either (A) claimed or raised by any authority in writing or (B) as
to which any of the Sellers and the directors and officers (and
employees responsible for Tax matters) of Danvid or DWC has Knowledge
based upon personal contact with any agent of such authority. Section
4(k)(iii) of the Disclosure Schedule lists all federal, state, local,
and foreign income Tax Returns filed with respect to Danvid and DWC for
taxable periods ended on or after September 30, 1990, indicates those
Tax Returns that have been audited, and indicates those Tax Returns
that currently are the subject of audit. The Sellers have delivered to
the Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed
against or agreed to by Danvid or DWC since September 30, 1990.
(iv) Neither Danvid nor DWC has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency.
(v) Neither Danvid nor DWC has made or is obligated to make any
payments that are not deductible under Code Section 280G, or is a party
to any agreement that under any circumstances could obligate it to make
any payments that will be not deductible under Code Section 280G and
none of the Assumed Liabilities is an obligation to make a payment that
is not deductible under such Code Section 280G. Danvid and DWC each has
disclosed on their respective federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662. Neither
Danvid nor DWC is a party to any Tax allocation or sharing agreement or
any other agreement or undertaking under which it has or may have
Liability for the Taxes of any Person other than itself. Danvid has not
been a member of an Affiliated Group filing a consolidated federal
income Tax Return nor has any Liability for the Taxes of any Person
(other than itself) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) Section 4(k)(vi) of the Disclosure Schedule sets forth the
following information as of the most recent practicable date (as well
as on an estimated pro forma basis as of the Closing giving effect to
the consummation of the transactions contemplated hereby): (A) the
basis of Danvid and DWC in their respective assets; and (B) the amount
of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable
to Danvid or DWC.
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(vii) The unpaid Taxes of Danvid or DWC, in each case, (A) did not,
as of the Most Recent Fiscal Month End, exceed the reserve for Tax
Liability (other than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on
the face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (B) do not exceed that reserve as adjusted for the passage
of time through the Closing Date in accordance with the past custom and
practice of Danvid or DWC, in each case, in filing their Tax Returns.
(l) Real Property.
(i) Section 4(l)(i) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to Danvid or DWC. The
Sellers have delivered to the Buyer correct and complete copies of the
leases and subleases listed in Section 4(l)(i) of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease
listed in Section 4(l)(i) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated
hereby;
(C) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification,
or acceleration thereunder;
(D) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(E) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (D) above are true
and correct with respect to the underlying lease;
(F) Danvid or DWC, in each applicable case, has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(G) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation
thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations; and
(H) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of
said facilities.
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(m) Intellectual Property.
(i) Danvid and DWC, respectively, own or has the right to use
pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary or desirable for the operation of the
businesses of Danvid and DWC as presently conducted. Each item of
Intellectual Property owned or used by Danvid and DWC, respectively,
immediately prior to the Closing hereunder will be owned or available
for use by Buyer on identical terms and conditions immediately
subsequent to the Closing hereunder. Danvid and DWC has each taken all
necessary action to maintain and protect each item of Intellectual
Property that they own or use.
(ii) Neither Danvid nor DWC has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Sellers and the
directors and officers (and employees with responsibility for
Intellectual Property matters) of Danvid or DWC has ever received any
charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation.
(iii) Section 4(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to Danvid or DWC with
respect to any of its Intellectual Property, identifies each pending
patent application or application for registration Danvid or DWC has
made with respect to any of its Intellectual Property, and identifies
each license, agreement, or other permission which Danvid or DWC has
granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Sellers have delivered to
the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date). Section 4(m)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark used by Danvid or
DWC in connection with any of their respective businesses. With respect
to each item of Intellectual Property required to be identified in
Section 4(m)(iii) of the Disclosure Schedule:
(A) Danvid and DWC in each case possesses all right, title,
and interest in and to the item, free and clear of any Security
Interest, license, or other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge; and
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge
of any of the Sellers or Stockholders, is threatened which
challenges the legality, validity, enforceability, use, or ownership
of the item.
(iv) Section 4(m)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that Danvid
or DWC uses pursuant to license, sublicense, agreement, or permission.
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(n) Tangible Assets. Danvid and DWC, in each case, owns or leases
all buildings, machinery, equipment, and other tangible assets, including those
described on the Equipment Schedule and all others to be assigned under this
Agreement, necessary for the conduct of its business as presently conducted.
Each such tangible asset (exclusive of inventory which is subject to other
representations and warranties hereunder) is free from defects (patent and
latent), has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used. The Equipment Schedule to be delivered at the Closing will
set forth substantially all items of equipment, furniture, computers, and other
tangible assets (except inventory work in process and supplies to be held for
resale) owned by Sellers and to be assigned at the Closing as part of the
Assets.
(o) Inventory. The inventory of Danvid and DWC consists of raw
materials and supplies, manufactured and purchased parts, goods in process, and
finished goods, all of which is merchantable and fit for the purpose for which
it was procured or manufactured, and none of which is slow-moving, obsolete,
damaged, or defective, subject only to the reserve for inventory writedown set
forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date. The
Inventory Schedule to be delivered at the Closing will set forth a categorical
description, including numbers of units and location of substantially all items
of inventory, material, and supplies, work in process, parts, and other goods
held for resale and owned by the Sellers as of the Closing Date. The Inventory
Schedule to be delivered at the Closing will be full, fair and complete and will
reflect accurate values based on a "first in, first out" basis for the inventory
reflected thereon, all of which shall be assigned to the Buyer by the Sellers,
together with any and all other inventory, raw materials, supplies and other
goods in process and finished goods owned by the Sellers, as of the Closing
Date. The Sellers' mix of inventory and goods and the dollar value of inventory
shall be substantially similar to that disclosed to the Buyer as of the Most
Recent Balance Sheet Date, subject to ordinary course adjustments, and, in all
events, the inventory shall consist of items with a value (on a first in, first
out basis) of not less than 90 percent of that on the Most Recent Balance Sheet
as of the Closing.
(p) Contracts. Section 4(p) of the Disclosure Schedule (which
incorporates by reference the Schedule of Material Contracts) lists the
following contracts and other agreements to which Danvid or DWC is a party:
(i) any agreement for the lease of personal property to or from any
Person;
(ii) any agreement for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which will extend
over a period of more than three months, result in a loss to Danvid or
DWC or involve consideration in excess of $10,000;
(iii) any agreement creating or concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any
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capitalized lease obligation, or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the Sellers, Stockholders and their
Affiliates;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis;
(x) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of Danvid; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $20,000.
The Sellers have delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 4(p) of the Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 4(p) of the Disclosure Schedule. With
respect to each such agreement, except as set forth in the Disclosure Schedule:
(A) the agreement is legal, valid, binding, enforceable, and in full force and
effect; (B) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (C) no party is in breach
or default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) no party has repudiated any provision
of the agreement.
(q) Notes and Accounts Receivable. A complete list of substantially
all accounts receivable of Danvid and DWC and the aging thereof has been
furnished to Buyer, and a then current and complete aging report will be
furnished at the Closing (as defined hereunder, the "Receivable Schedule"). As
of the Closing the fully collectible receivables of Sellers will not be less
than 90 percent of the amount of receivables reflected on the Most Recent
Balance Sheet. All notes and accounts receivable of Danvid and DWC are reflected
properly on its books and records, are valid receivables subject to no setoffs
or counterclaims (except ordinary course customer credits for minor product
failures or defects), are current and collectible, and will be fully collected
in accordance with their terms at their recorded amounts, subject only to
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the reserve for bad debts set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto).
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of Danvid or DWC.
(s) Insurance. Section 4(s) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which Danvid or DWC has been a
party, a named insured, or otherwise the beneficiary of coverage at any time
within the past five years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate)
of coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither Danvid nor any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; (D) no party to the policy has repudiated any
provision thereof; and (E) none of such policies involve any retroactive premium
adjustments. Danvid has been covered during the past 10 years by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. Section 4(s) of the Disclosure
Schedule describes any self-insurance arrangements, including Danvid's
self-insurance of workers' compensation.
(t) Litigation. Section 4(t) of the Disclosure Schedule sets forth
each instance in which Danvid, DWC or any of their Affiliates, (i) is subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or (ii)
is a party or, to the Knowledge of any of the Sellers, Stockholders and the
directors and officers (and employees with responsibility for litigation
matters) of Danvid or any of its Affiliates, is threatened to be made a party to
any action, suit, proceeding, hearing, or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any
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arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 4(t) of the Disclosure Schedule could result
in any material adverse change in the business, financial condition, operations,
results of operations, or future prospects of Danvid or DWC. None of the
Sellers, Stockholders and the directors and officers (and employees with
responsibility for litigation matters) of Danvid has any reason to believe that
any such action, suit, proceeding, hearing, or investigation may be brought or
threatened against Danvid or DWC.
(u) Product Warranty. Each product manufactured, sold, leased, or
delivered by Danvid or DWC has been in conformity with all applicable
contractual commitments and all express and implied warranties, and Danvid and
DWC have no Liability (and there is no Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability) for replacement or repair
thereof or other damages in connection therewith (except minor claims arising in
the ordinary course of business). Section 4(u) of the Disclosure Schedule
includes copies of the standard terms and conditions of sale or service for
Danvid (containing applicable guaranty, warranty, and indemnity provisions).
(v) Product Liability. Danvid and DWC have no Liability (and there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by Danvid or DWC.
(w) Employees. Danvid is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes. Danvid has not
committed any unfair labor practice. None of the Sellers and the directors and
officers (and employees with responsibility for employment matters) of Danvid
has any Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of
Danvid.
(x) Employee Benefits. Danvid and DWC have neither maintained nor
contributed to any Employee Benefit Plan, except a profit sharing plan for which
Danvid and DWC shall remain wholly responsible.
(y) Guaranties. Neither Danvid nor DWC is a guarantor or otherwise
is liable for any Liability or obligation (including indebtedness) of any other
Person.
(z) Environment, Health, and Safety.
(i) Each of Danvid, DWC and their respective predecessors and
Affiliates has complied with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply. Without limiting the
generality of the preceding sentence, each such person has obtained and
been in compliance with all of the terms and conditions of all permits,
licenses, and other
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authorizations which are required under, and has complied with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws.
(ii) None of Danvid, DWC and their respective predecessors and
Affiliates has handled or disposed of any substance, arranged for the
disposal of any substance, exposed any employee or other individual to
any substance or condition, or owned or operated any property or
facility in any manner that could form the Basis for any present or
future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against Danvid or DWC for damage to any
site, location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other individual, or
for any reason under any Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the business of Danvid
and DWC have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances.
(aa) Certain Business Relationships with Danvid. None of the
Stockholders and their Affiliates has been involved in any business arrangement
or relationship with Danvid within the past 12 months, and none of the
Stockholders or their Affiliates owns any asset, tangible or intangible, which
is used in the business of Danvid or DWC.
(ab) Disclosure. The representations and warranties contained in
this Section 4 do not contain any untrue statement of fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 4 not misleading.
(ac) Schedules. Each and every Schedule (except those to be prepared
solely by Buyer) attached to this Agreement or to be provided at or prior to
Closing is, or shall be when provided, true, correct and complete in all
respects. This Agreement contemplates the provision of certain Schedules
following the execution and delivery of the Agreement, certain of which are to
be provided at the Closing. As to any Schedule to be provided following the date
of this Agreement, including those to be provided at the Closing, each such
Schedule shall be deemed incorporated by reference herein and each such
Schedule, when prepared and delivered by the Sellers shall be true, complete and
correct in all respects and shall not omit to set forth any information that
would render the description of the items reflected by the applicable Schedule
misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its best efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the Closing conditions set forth in
Section 7 below) and the preparation of accurate and completed Schedules and
other documents.
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(b) Notices and Consents. Danvid and DWC will give any notices to
third parties, and the Stockholders will cause Danvid and DWC to use their
respective best efforts to obtain any third party consents, that are necessary
to effect the transactions contemplated by this Agreement or that the Buyer may
request. Each of the Parties will (and the Sellers will cause Danvid and DWC to)
give any notices to, make any filings with, and use its best efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies necessary to effect these transactions or the terms of this Agreement.
Without limiting the generality of the foregoing, each of the Parties will file
any Notification and Report Forms and related material that he or it may be
required to file with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice under the Hart-Scott-Rodino Act, will
use its best efforts to obtain an early termination of the applicable waiting
period, and will make any further filings pursuant thereto that may be
necessary, proper, or advisable in connection therewith.
(c) Operation of Business. Danvid and DWC will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business; except the payment of bonuses to certain principals and
employees, the payment of estimated taxes, and contributions to the Danvid
Profit Sharing Plan (all of which shall be deducted from the Primary Cash Amount
in accordance with the formula set forth in Section 2(b)(i) of this Agreement).
By way of example and not of limitation, Danvid and DWC will only expend funds
in a manner typical and ordinary for the regular conduct of their businesses and
will forego the expenditure of any funds or other capital for any extraordinary
item. Specifically, other than ordinary payroll, no payments of cash or other
distributions will be made to any of the Stockholders or to any other insider or
affiliate and no transaction involving the expenditure of funds for capital
improvements, or other extraordinary expenditures shall be undertaken by the
Sellers without the prior written approval of the Buyer and an adjustment to the
Purchase Price calculation to reflect the diminishing value in the equity of the
Sellers and the reduction in cash.
(d) Preservation of Business. Danvid and DWC will and the
Stockholders will cause Danvid and DWC to keep their business and properties
substantially intact, including their respective present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
(e) Full Access. Each of the Sellers will permit representatives of
the Buyer to have full access to all premises, properties, personnel, books,
records (including Tax records), contracts, and documents of or pertaining to
Danvid or DWC.
(f) Notice of Developments. The Sellers will give prompt written
notice to the Buyer of any material adverse development causing a breach of any
of the representations and warranties in Section 4 above.
(g) Exclusivity. This Agreement is binding on the Parties and may be
considered an option in favor of Buyer for which consideration has been given
and is, therefore, specifically enforceable. None of the Sellers or Stockholders
will (i) solicit, initiate, or encourage the submission of any proposal or offer
from any Person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets of, Danvid
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or DWC (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. None of the Stockholders will vote their shares of stock
of Danvid or DWC in favor of any such acquisition structured as a merger,
consolidation, asset sale, or share exchange. The Sellers will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing. In addition to specific performance, a
violation of this covenant shall entitle Buyer to all actual and consequential
damages suffered by Buyer, and Sellers and the Stockholders shall be jointly and
securely liable therefor.
6. Incidental Transactions and Post-Closing Covenants. The Parties
agree as follows with respect to certain matters incident to these transactions
and the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary or in Buyer's discretion desirable to carry out the purposes
of this Agreement, each of the Parties will take such further action (including
the execution and delivery of such further instruments and documents) as any
other Party may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Section 8 below). From and after the Closing the Sellers will be entitled to
possession of all documents, books, records (including Tax records), agreements,
and financial data of any sort relating to Danvid or DWC. Notwithstanding the
foregoing, Sellers shall retain and preserve all documents, books, records
(including tax records), and financial data of any sort relating to Danvid or
DWC for a period of not less than eight years following the date of this
Agreement. Additionally, Buyer, at Buyer's discretion and upon request, shall be
afforded reasonable access to all such books and records. Sellers shall not
destroy any such books and records without providing at least thirty days'
written notice of their intent to do so to Buyer, and prior to such destruction,
Buyer may take possession of such books and records proposed to be destroyed by
the Sellers.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Danvid or DWC, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 8 below).
(c) Transition. None of the Sellers will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business relation of Danvid or DWC from maintaining
the same business relationships with Buyer after the Closing as it maintained
with Danvid or DWC prior to the Closing. Each of the
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Sellers will refer all customer inquiries relating to the business of Danvid or
DWC to the Buyer from and after the Closing. Promptly upon the Closing, each of
the Sellers will undertake such acts, including the filing of appropriate
documents with the Secretary of State of the State of Texas, to change their
business names to new names that do not include reference to "Danvid" or any
other name that would be confusing or similar to the names Danvid Company,
Danvid Window Company or any of the names reflected in the Schedule of IP
delivered pursuant to this Agreement. Each of the Sellers and Stockholders will
cooperate in all manner requested by the Buyer to assist the Buyer in changing
its corporate name and business trade name to "Danvid Company" or such other
similar name as Buyer may select, including the execution, delivery and filing
of all documents necessary to enable Buyer to begin to conduct business under a
name employing the word "Danvid" as of the Closing.
(d) Confidentiality. Each of the Sellers and Stockholders will treat
and hold as such all of the Confidential Information, refrain from using any of
the Confidential Information except in connection with this Agreement, and
deliver promptly to the Buyer or destroy, at the request and option of the
Buyer, all tangible embodiments (and all copies) of the Confidential information
which are in his or its possession. In the event that any of the Sellers or
Stockholders is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that person will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, any of the Sellers or
Stockholders is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, that
person may disclose the Confidential Information to the tribunal; provided,
however, that the disclosing person shall use his or its best efforts to obtain,
at the request of the Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the Buyer shall designate. The foregoing provisions
shall not apply to any Confidential Information which is generally available to
the public immediately prior to the time of disclosure.
(e) Covenant Not to Compete. Other than for AAPC or Buyer, for a
period of ten years from and after the Closing Date, none of the Sellers or
Stockholders will engage directly or indirectly in any business that Danvid or
DWC conducts as of the Closing Date in the continental United States or any
geographic area in which Danvid or DWC conducts that business as of the Closing
Date; provided, however, that no owner of less than 1% of the outstanding stock
of any publicly traded corporation shall be deemed to engage solely by reason
thereof in any of its businesses. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 6(e) is invalid
or unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
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In consideration for the foregoing covenant, Mr. Daniel Crawford,
subject to the full and complete enforceability of the covenant not to compete
described hereinabove and subject to Mr. Crawford's forbearance from undertaking
any act in contravention of the foregoing covenant, regardless of its
enforceability, shall be paid within thirty days of the end of each calendar
year following the first anniversary of the date of this Agreement, an amount
equal to $350,000 per year. Mr. Crawford shall, at the Closing, execute and
deliver a separate Non-Competition Agreement restricting competition with Buyer,
in form and substance acceptable to Buyer.
The foregoing covenants not to compete are reasonable and necessary in
order to protect the legitimate and valid business interests of the Buyer and
are reasonable and necessary for that purpose. The consideration contemplated by
the Purchase Price and the additional payment to Mr. Crawford set forth herein
are full, complete and adequate consideration for the foregoing covenant and the
Sellers and Stockholders acknowledge and agree that they are not by reason of
such conditions and compliance therewith precluded from undertaking activity
necessary for making a living.
(f) Sellers' Cessation of Business. As of the close of business on
the Closing Date, each Seller shall cease active business operations.
Particularly, each Seller shall as of such date (i) stop all marketing, sale,
and other activity ordinarily conducted by Seller in connection with the
operation of its business; (ii) each Seller shall, effective at the close of
business on the Friday preceding the Closing Date, cease and terminate as
employees each and every of Sellers' employees, notifying each of Seller's
employees that they shall have the opportunity to apply for employment with
Buyer in accordance with Buyer's ordinary business practices; and (iii) notify
each employee of any severance obligation owing, and that provision for payment
of such severance obligation shall be made by the applicable Seller at or upon
the Closing, Sellers acknowledging that such severance obligations shall not be
Assumed Liabilities. Notwithstanding the foregoing, Buyer shall retain complete
freedom in the selection of employees for its own business operations and shall
not be obligated to employ any of the Sellers' employees. Any such employee
proposed to be employed by Buyer shall be employed only in accordance with
Buyer's ordinary practices for hiring and subject to the limitations on hiring
imposed upon Buyer's employees generally. Buyer shall not assume or in any way
be liable or responsible for existing liabilities or obligations of either
Seller of any nature whatsoever to any employee. Sellers shall provide all
required "COBRA" notices to Seller's employees on the Closing Date or such
earlier date as may be required by law.
(g) Nature of Transactions, Payments to Creditors. The parties
acknowledge that the transactions contemplated hereby have been negotiated in
good faith and at arm's length and that the price for the Assets represents
reasonably equivalent value for the Assets in the context in which they are
being sold. Sellers acknowledge that in connection with the cessation of their
respective businesses they will effect an orderly distribution of its assets
among their creditors and agree that they shall pay when due each and every
obligation reflected by the financial statements or that is otherwise owing to
any third party prior to the distribution of any funds to any insider or
affiliate of the Seller or to any stockholder of either Seller.
Sellers and Stockholders represent and warrant that the net proceeds of
the sale of the Assets available after payment to the creditors identified in
Schedule 6(g) each of whom shall
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be paid in full at the time of Closing (the "Discharged Liabilities"), will be
adequate to discharge each and every of the Sellers' obligations, except those
owing to insiders and shareholders and except the Assumed Liabilities. In this
regard, Sellers and Stockholders acknowledge that they do not foresee the need
to seek any form of protection under Bankruptcy laws or any other law affecting
creditors' rights generally, and Sellers covenant and agree that neither Danvid
nor DWC shall undertake any bankruptcy filing for a period of 91 days following
the date of this Agreement. To the extent Sellers undertake any bankruptcy
filing during the 91-day period following the Closing Date, the Stockholders and
Sellers shall indemnify the Buyer for each and every loss, liability, or
obligation associated with the bankruptcy filing, including reimbursement of all
payments or the loss of any of the Assets or the proceeds thereof by Buyer and
shall indemnify Buyer for any and all costs associated with the defense of any
action or proceeding brought by any debtor-in-possession, trustee, or other
party representing the Seller or any creditor of Seller arising out of any
insolvency proceeding. Further, in light of the foregoing representations,
Sellers and Stockholders stipulate and agree that any such filing would operate
as a fraud upon Buyer and shall be conclusively stipulated to be undertaken in
bad faith.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions at the Closing is subject to satisfaction
of the following conditions:
(i) the representations and warranties set forth in Section 3(a) and
Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Sellers and Stockholders shall have performed and complied
with all of their covenants hereunder in all material respects through
the Closing;
(iii) Danvid and DWC shall have procured in form acceptable to
Buyer, all of the third party consents necessary to effect these
transactions, as are required hereunder or as Buyer reasonably
requests;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation,
or (C) affect adversely the right of the Buyer to own the Assets;
(v) each liability set forth on Schedule 6(g) (the Discharged
Liabilities) shall have been fully paid or discharged or provision
acceptable to Buyer shall have been made;
(vi) the Sellers shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in Section
7(a)(i)-(v) is satisfied in all respects;
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(vii) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Parties shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies necessary to effect the transactions;
(viii) the relevant parties shall have entered into agreements in
form and substance acceptable to Buyer to effect all incidental
transactions contemplated by this Agreement, including by way of
example, the execution and delivery of an Escrow Agreement consistent
with Section 8(f), and an acceptable form of non-competition agreement
for Mr. Daniel Crawford, and the same shall be in full force and
effect;
(ix) the Buyer shall have received from counsel to the Sellers an
opinion in form set forth in Exhibit 7(a)(ix) attached hereto,
addressed to the Buyer, and dated as of the Closing Date;
(x) the Buyer shall have received all title documents, assignments
and other documents necessary to effect the transfer of the Assets free
and clear of all liens and encumbrances, except those relating to the
Assumed Liabilities, in form acceptable to Buyer;
(xi) the Buyer shall have been fully satisfied with the results of
its due diligence investigation, in the Buyer's sole, complete and
absolute discretion;
(xii) there shall be no material variance in the dollar amount or
concentration or makeup of the receivables and payables owing by or to
Danvid or DWC, from the presentation of the receivables and payables
provided to the Buyer for the period ended as of the Most Recent
Balance Sheet date;
(xiii) Danvid shall have conducted its business only in the ordinary
course of business and shall not have undertaken any capital
expenditure in excess of $50,000 without the prior approval of the
Buyer. Danvid shall not have suffered any material adverse change in
the financial condition of the property or business; and there shall
have been no increase in wages, salaries or benefits, except for
regularly scheduled increases previously described to the Buyer;
(xiv) The Sellers shall deliver at the Closing:
(A) Certified copies of the resolutions which have been duly
adopted by the Boards of Directors and shareholders of each Seller, and
are in full force and effect and which authorize the execution and
delivery of this Agreement and the Related Agreements to be executed by
each Seller and the consummation of the transactions provided for
herein and therein;
(B) Sellers shall each deliver a certificate duly executed by
the president of each Seller and each of the Stockholders indicating
that the representations, and warranties, including the Exhibits
hereto, are, as of the
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Closing, complete and accurate in all material respects and that all
agreements and covenants to be performed prior to or at the Closing
have been performed;
(C) Seller shall execute and deliver such UCC-1 Financing
Statement forms and related documents necessary to effect as a public
record the transfer of the Sellers' Receivables and shall endorse such
other documents necessary to effect the assignment of the Receivables
that are included every the Assets;
(D) Sellers shall deliver a full and complete release from
each and every obligation owing by the Sellers to any third party and
such other documents and instruments necessary to release, as a public
record, each and every lien, claim, or encumbrance against the Assets
by any creditor asserting a lien, claim or encumbrance (including, as
examples, UCC-3 forms to release any UCC lien placed on the Assets),
except liens securing the Assumed Liabilities;
(E) Each of the schedules to be delivered at the Closing in
accordance herewith, including the Inventory Schedule, Equipment
Schedule, Receivable Schedule, Schedule of Material Contracts, Real
Property Schedule and all other schedules to be incorporated in this
Agreement shall be delivered in accordance with the requirements of
this Agreement;
(F) Possession and title of all of the Assets purchased by
Purchaser hereunder, in the manner designated by Buyer and at Seller's
cost and expense.
(xv) Buyer's Board of Directors shall have, after being informed of
the terms and conditions of the transactions, approved the acquisition
on the terms set forth in this Agreement;
(xvi) The Pre-Closing shall have occurred and the documents required
to be delivered in preliminary form thereat shall be in a form
acceptable to Buyer or Sellers shall have, prior to Closing, conformed
such documents so as to satisfy Sellers' delivery obligations on the
terms hereof;
(xvii) the Buyer shall have obtained on terms and conditions
satisfactory to it, in its sole and absolute discretion, all of the
financing it needs in order to consummate the transactions contemplated
hereby and fund the working capital requirements of a business to be
conducted with the Assets after the Closing; and
(xviii) all actions to be taken by the Sellers or Stockholders in
connection with consummation of the transactions contemplated hereby
will have been taken or capable of being taken at the Closing, and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby, including, by way of
example, those described in Section 6 hereof, will be satisfactory in
form and substance to the Buyer.
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The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions is subject to satisfaction of the
following conditions:
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation
(and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a certificate to
the effect that each of the conditions specified above in Section
7(b)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated; and
(vi) the Sellers shall have received from counsel to the Buyer an
opinion to the effect that Buyer is duly organized and existing and has
requisite corporate authority to enter into this Agreement.
The Sellers may waive any condition specified in this Section 7(b) if they
execute a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty at the time of Closing) and
continue in full force and effect forever thereafter (subject to any applicable
statutes of limitations).
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event any of the Sellers breaches (or in the event any
third party alleges facts that, if true, would mean any of the Sellers
or Stockholders has breached) any of their representations, warranties,
and covenants contained herein, then each of the Sellers
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agrees to jointly and severally indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may suffer through
and after the date of the claim for indemnification resulting from,
arising out of, relating to, in the nature of, or caused by the breach
(or the alleged breach). Notwithstanding the foregoing, Sellers shall
not have any obligation to indemnify the Buyer from and against any
Adverse Consequences resulting from, arising out of, relating to, in
the nature of, or caused by the breach (or alleged breach) of any
representation or warranty of the Sellers and Stockholders (except
those in Section 4(d)(i)(k) and (aa), in which case such indemnity
shall be unlimited) until the Buyer has suffered Adverse Consequences
by reason of all such breaches (or alleged breaches) in excess of a
$50,000 aggregate threshold (at which point the Sellers and
Stockholders will be obligated to indemnify the Buyer from and against
all such Adverse Consequences relating back to the first dollar).
(ii) Each of the Sellers agrees to, jointly and severally, indemnify
the Buyer from and against the entirety of any Adverse Consequences the
Buyer may suffer resulting from, arising out of, relating to, in the
nature of, or caused by any Liability of Buyer or Danvid for the unpaid
Taxes of any Person, including, by way of example, under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(c) Indemnification Provisions for Benefit of the Sellers. In the
event the Buyer breaches (or in the event any third party alleges facts that, if
true, would mean the Buyer has breached) any of its representations, warranties,
and covenants contained herein, then the Buyer agrees to indemnify each of the
Sellers from and against the entirety of any Adverse Consequences the Seller may
suffer through and after the date of the claim for indemnification resulting
from, arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party
in notifying any indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 10
days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
acceptable to the
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Indemnified Party that the indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third Party Claim
involves only money damages and does not seek an injunction or other
equitable relief, (D) settlement of, or an adverse judgment with
respect to, the Third Party Claim is not, in the good faith judgment of
the Indemnified Party, likely to establish a precedential custom or
practice materially adverse to the continuing business interests of the
Indemnified Party, and (E) the Indemnifying Party conducts the defense
of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 8(d)(ii) above, (A)
the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim,
(B) the Indemnified Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party (not to be
withheld unreasonably but which may be conditioned on satisfactory
assurances respecting the financial capacity to discharge all of the
applicable Adverse Consequences), and (C) the Indemnifying Party will
not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent
of the Indemnified Party (not to be withheld unreasonably but which may
be conditioned on satisfactory assurances respecting the financial
capacity to discharge all of the applicable Adverse Consequences).
(iv) In the event any of the conditions in Section 8(d)(ii) above is
or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith), (B) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of defending
against the Third Party Claim (including fees and expenses), and (C)
the Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Section 8.
(e) Determination of Adverse Consequences. The Parties shall take
into account the time cost of money (using the Applicable Rate as the discount
rate) in determining Adverse Consequences for purposes of this Section 8. All
indemnification payments under this Section 8 shall be deemed adjustments to the
Purchase Price.
(f) Escrow Arrangement and Right to Setoff. Simultaneously with the
Closing, a part of the cash portion of the Purchase Price will be deposited in
escrow with the Escrow Agent pursuant to the terms and conditions of an Escrow
Agreement to be satisfactory to the Buyer and the Escrow Agent and to be
approved at the Pre-Closing and executed and delivered at the Closing. The
Escrow Agreement shall be consistent with the provisions hereof and contain
other customary terms for an escrow of this type. The funds deposited with the
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Escrow Agent shall be held in an interest-bearing account with interest accruing
for the benefit of the Sellers (but subject to Buyer's claims for indemnity),
all of which interest shall be held in and retained in the escrow account until
the escrow arrangement is terminated by its term which shall be not less than 18
months and will otherwise be subject to the indemnity claims for which the
escrow arrangement is being established and will be used to compensate Buyer for
any Liability associated with the businesses conducted by the Sellers prior to
the Closing or arising out of any breach of any representation, warranty or
covenant set forth herein, and for the diminution in the value of the assets
described on the Closing Balance Sheet and schedules to be delivered by the
Sellers at the Closing. The Escrow Agreement shall also authorize the Buyer to
draw upon the escrow to satisfy any deficiency in net asset value or
responsibility for any liability upon Reconciliation of the Closing Balance
Sheet in the matter contemplated by Section 2(b) hereof. In the event Buyer
alleges, at any time within the period commencing on the Closing Date and
continuing until 150 days thereafter, any claim for indemnity or other form of
liability or obligation of Sellers or Stockholders under this Agreement or any
of the related Transaction Documents, the Escrow Agent shall withhold such funds
and maintain them in the Escrow Agent's possession pending resolution of the
applicable claim for indemnity.
(g) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of any
representation, warranty, or covenant.
9. Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and Sellers for certain tax matters following
the Closing Date:
(a) Tax Returns. Except taxes paid as an Assumed Liability, Sellers
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns for Danvid and DWC for all periods and shall pay or cause to be paid any
amount shown to be due on such Tax Returns and any amounts that may subsequently
be found to be due with respect to such periods and such Tax Returns. In
addition to the indemnity in Section 8 hereof, Sellers shall indemnify and
reimburse Buyer for any Taxes of Danvid or DWC that Buyer may pay or be assessed
with respect to any period. Seller shall pay such reimbursement to Buyer within
fifteen (15) days after payment by Buyer of such Taxes.
(b) Certain Taxes. Buyer will pay all transfer taxes associated with
the transfer of any vehicles or other assets that require a license or
certificate of title. All other transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by Sellers
when due, and Sellers will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation, but Sellers and
Stockholders agree to indemnify and reimburse Buyer for any liability that it
may incur as a result of joining in the execution of any such Tax Returns or
other documentation and to pay any such reimbursement to Buyer within fifteen
(15) days after payment by Buyer of any such amounts.
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10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) the Buyer and the Sellers may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice
to the Sellers prior to or at the Closing if any condition to the
Buyer's obligation to Close is not satisfied or if Buyer is not
satisfied with the results of its continuing business, legal, and
accounting due diligence regarding Danvid;
(iii) the Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing (A) in the event
any of the Sellers has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, and
the Buyer has notified the Sellers of the breach, or (B) if the Closing
shall not have occurred on or before December 15, 1997, by reason of
the failure of any condition precedent under Section 7(a) hereof
(unless the failure results primarily from the Buyer itself breaching
any representation, warranty, or covenant contained in this Agreement);
and
(iv) the Sellers may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing of the failure of
any of Sellers conditions to Closing or in the event the Buyer has
breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, any of the Sellers has
notified the Buyer of the breach.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach). Buyer will return all
Confidential Information and trade secrets to Danvid upon any such termination
and will forego attempting to exploit any trade secrets of Danvid thereafter.
11. Miscellaneous.
(a) Nature of Certain Obligations. The representations, warranties,
and covenants of the Sellers in this Agreement are joint and several
obligations. This means that each Seller and Stockholder will be responsible to
the extent provided in Section 8 above for the entirety of any Adverse
Consequences the Buyer may suffer as a result of any breach thereof.
(b) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of the
Buyer and the Sellers; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in
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which case the disclosing Party will use its reasonable best efforts to advise
the other Parties prior to making the disclosure). AAPC may refer to Danvid and
DWC and use, in AAPC's reasonable discretion, any and all information provided
to AAPC about Danvid and DWC (including financial statements) in AAPC's offering
circular for the notes to provide the financing for this (among other)
transactions.
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and the Requisite Sellers; provided, however, that
the Buyer may (i) assign any or all of its rights and interests hereunder to one
or more of its Affiliates and (ii) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which taken
together will constitute one and the same instrument. Additionally, signatures
transmitted by facsimile shall be effective and delivery deemed made when
received by facsimile transmission; facsimile signatures shall be followed by
next-day delivery of original counterparts.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers or Stockholders:
c/o Ms. Paulette Mueller
Shafer, Ramsey & Mueller
4514 Cole Avenue, 2nd Floor
Dallas, TX 75205-4159
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If to the Buyer:
American Architectural Products Corp.
755 Boardman-Canfield Road
Southbridge Executive Park
Building G West
Boardman, OH 44512
Attn: Mr. Frank Amedia
with a copy to:
Mr. Jeffrey D. Warren
Squire, Sanders & Dempsey L.L.P. and at
40 North Central Avenue 6250 Texas Commerce Tower
Suite 2700 600 Travis Street
Phoenix, AZ 85004 Houston, Texas 77002
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Texas without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Texas or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of Texas. Jurisdiction and venue in any
action arising hereunder shall be in a court of competent subject matter
jurisdiction in Dallas County, Texas, and each of the Parties consents to
jurisdiction therein.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Requisite Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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(l) Expenses. Each of the Parties will bear his or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. The Sellers agree that
Danvid has not borne and will not bear any of the Sellers' costs and expenses
(including any of their legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter [(subject to the provisions set
forth in Section 10(i) above), in addition to any other remedy to which they may
be entitled, at law or in equity.
(p) Stockholders of Sellers Bound. Simultaneously with the execution
and delivery of this Agreement, the Stockholders are executing and delivering a
separate Agreement in Support of Asset Purchase Agreement (the "Stockholders
Agreement") that provides for the Stockholders to be bound to the agreements,
representations, warranties and covenants of the Seller as though a party
hereto. Under the Stockholders Agreement the Stockholders will be jointly and
severally bound with the Sellers for all obligations under this Agreement and
all Related Agreements, including the indemnity in Section 8 hereof.
(q) Good Faith. Each of the parties hereto shall, in good faith,
undertake their reasonable best efforts to complete the documentation necessary
to be completed prior to the Pre-closing and to be executed and delivered at
the Closing. Further, by way of example, Buyer shall undertake to do all acts
and things reasonably necessary to obtain the financing that is
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necessary for Buyer to effect the transactions contemplated by this Agreement
and to satisfy the condition to Closing set forth in Section 7(a)(xvii).
*****
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
"BUYER"
DCI/DWC ACQUISITION, CORP. [IN FORMATION]
By: /s/ Frank J. Amedia
-------------------------------------
Title: President and CEO
----------------------------------
"SELLERS"
DANVID COMPANY, INC.
By: /s/ Dan Crawford
-------------------------------------
Title: President
----------------------------------
DANVID WINDOW COMPANY
By: /s/ Dan Crawford
-------------------------------------
Title: President
----------------------------------
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The following schedules to the Asset Purchase Agreement have been omitted
from this Exhibit 2.2. The Company agrees to furnish supplementally a copy of
any omitted schedule to the Securities and Exchange Commission upon request.
Disclosure Schedule
Section 4(a) Directors and Officers of Danvid and DWC
Section 4(e) Title to Assets
Exhibit 4(g) Financial Statements
Section 4(i) Undisclosed Liabilities
Section 4(k)(iii) Tax Returns
Section 4(k)(vi) Basis in Assets
Section 4(l)(i) Leased Real Property
Section 4(m)(iii) Intellectual Property Patents, Registrations,
Trademarks and Trade Names
Section 4(m)(iv) Third-Party Intellectual Property Licensed to
Danvid and DWC
Section 4(p) Contracts and other Agreements
Section 4(s) Insurance Policies
Section 4(t) Litigation
Section 4(u) Product Warranty
Real Property Schedule
Inventory Schedule
Equipment Schedule
Material Contracts Schedule
Receivable Schedule
Excluded Assets Schedule
Intellectual Property Schedule
Closing Balance Sheet
Schedule 2(a) Allocation of Consideration
Schedule 2(b)(i) Wire Transfer Instructions
Schedule 2(b)(iv) Assumed Liabilities
Schedule 6(g) Creditors paid at Closing
Exhibit 7(a)(ix) Form of Sellers' counsel's opinion