Exhibit 2.5
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 10TH day of MAY, 1999 by and among CHAMPAGNE INDUSTRIES,
INC., a Colorado corporation (the "Company"), DONALD SLOANE and DAVID
HILLIARD (the "Selling Stockholders"), and ATRIUM COMPANIES, INC., a Delaware
corporation ("Buyer").
RECITALS:
WHEREAS, the total authorized capital stock of the Company
consists of 50,000 shares of common stock, no par value (the "Common Stock"),
of which 6,000 shares are issued and outstanding; and
WHEREAS, the Selling Stockholders own all of the issued and
outstanding shares of Common Stock; and
WHEREAS, as of the Closing Date (defined below), 6,000
shares of Common Stock will be issued and outstanding; and
WHEREAS, the Selling Stockholders desire to sell all of the
shares of Common Stock owned by them to Buyer, upon the terms and subject to
the conditions hereinafter set forth, which aggregate shares of Common Stock
to be sold are sometimes referred to herein as the "Company Stock."
NOW, THEREFORE, in consideration of the mutual promises,
agreements and covenants set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending legally to be bound, hereby agree as follows:
1. DEFINITIONS.
For purposes of this Agreement and the Schedules attached
hereto, the following terms shall have the meaning specified or referred to
below unless the context requires otherwise:
(a) BREACH. A BREACH of a representation, warranty,
covenant, obligation or other provision of this Agreement or any Related
Agreement will be deemed to have occurred if there is, or has been, any
inaccuracy in or misrepresentation of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation or other provision.
(b) BUYER. Has the meaning assigned to such term in the
first paragraph hereof.
(c) BUYER LOSS OR BUYER LOSSES. Have the meanings assigned
to such terms in Section 14(a) hereof.
(d) CASH ADJUSTMENT. Has the meaning assigned to such term
in Section 3.2(a)(i) hereof.
(e) CLAIM. Has the meaning assigned to such term in Section
14(c)(i) hereof.
(f) CLOSING. The consummation of the Contemplated
Transactions.
(g) CLOSING BALANCE SHEET. Has the meaning assigned to such
term in Section 3.2(a)(i) hereof.
(h) CLOSING DATE. The close of business on the date the
Closing actually takes place.
(i) CODE. Has the meaning assigned to such term in Section
6.15(b) hereof.
(j) COMMON STOCK. Has the meaning assigned to such term in
the first recital hereof.
(k) COMPANY. Has the meaning assigned to such term in the
first paragraph hereof.
(l) COMPANY STOCK. Has the meaning assigned to such term in
the fourth recital hereof.
(m) CONFIDENTIAL INFORMATION. Has the meaning assigned to
such term in Section 26 hereof.
(n) CONTEMPLATED TRANSACTIONS. Collectively, all of the
transactions contemplated by this Agreement and each of the Related
Agreements.
(o) CONTRACT. Any agreement or contract, whether written or
oral, that is legally binding, including any commitment to purchase.
(p) DISCLOSER. Has the meaning assigned to such term in
Section 26 hereof.
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(q) ENCUMBRANCE. Any mortgage, deed of trust, assessment,
judgment, government or municipal restriction, charge, claim, equitable
interest, lien, option, pledge, security interest, right of first refusal or
other encumbrance.
(r) ENVIRONMENTAL CLAIM. Has the meaning assigned to such
term in Section 6.20(g) hereof.
(s) ENVIRONMENTAL CONSULTANT. Has the meaning assigned to
such term in Section 16 hereof.
(t) ENVIRONMENTAL LAWS. Has the meaning assigned to such
term in Section 6.20(g) hereof.
(u) ENVIRONMENTAL REVIEW. Has the meaning assigned to such
term in Section 16 hereof.
(v) ERISA. The Employee Retirement Income Security Act of
1974, as amended, or any successor law, and the regulations and rules issued
pursuant to that act or to any successor law.
(w) ERISA AFFILIATE. Has the meaning assigned to such term
in Section 6.15(a) hereof.
(x) ESCROW AGENT. Has the meaning assigned to such term in
Section 2(a) hereof.
(y) ESCROW AGREEMENT. Has the meaning assigned to such term
in Section 2(a) hereof.
(z) ESTIMATED TAX AMOUNT. Has the meaning assigned to such
term in Section 15(c)(i) hereof.
(aa) EXCHANGE ACT. Has the meaning assigned to such term in
Section 5.2 hereof.
(bb) FINANCIAL STATEMENTS. Collectively, the Company's
consolidated balance sheets and related reviewed statements of operations,
changes in stockholders' equity and statements of cash flows as of and for
the fiscal years ended December 31, 1996, 1997 and 1998, including the notes
thereto and the reports prepared in connection therewith by independent
certified public accountants, and the Company's consolidated internally
prepared unaudited interim balance sheets and related unaudited interim
statements of operations and changes in stockholders' equity for the three
months ended March 31, 1999. The term "Financial Statements" shall include
the financial statements delivered to Buyer pursuant to Section 6.3(b) hereof.
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(cc) GAAP. At any particular time, United States generally
accepted accounting principles as in effect at such time; provided, however,
that, if it were permissible to use more than one principle at such time in
respect of a particular accounting matter, GAAP shall refer to the principle
which was then employed by the Company.
(dd) HAZARDOUS MATERIAL. Has the meaning assigned to such
term in Section 6.20(g) hereof.
(ee) HSR ACT. Has the meaning assigned to such term in
Section 28 hereof.
(ff) INSIDER or INSIDERS. Has the meaning assigned to such
term in Section 5.2 hereof.
(gg) INTELLECTUAL PROPERTY RIGHTS. Has the meaning assigned
to such term in Section 6.8(a) hereof.
(hh) IRS. Has the meaning assigned to such term in Section
6.5 hereof.
(ii) LEASED REAL PROPERTY. Collectively, the real estate
leased by the Company, together with the Company's leasehold interests in and
to all buildings and improvements erected thereon, and all fixtures and
appliances installed in, attached to, or situated in or upon such real estate
and any and all appurtenances relating to such real estate.
(jj) LIABILITIES. Collectively, any debt, obligation, or
liability.
(kk) LOSSES. Buyer Losses or Seller Losses, as applicable.
(ll) NET WORKING CAPITAL. (i) the sum of accounts
receivable, inventories, prepaids and other current assets (excluding cash,
cash equivalents and the current portion of any notes receivable) less (ii)
the sum of all outstanding checks, accounts payable, accrued wages and all
other current Liabilities, excluding those relating to Taxes, debt,
capitalized leases and interest, in each case in (i) and (ii) above, as
recorded on the Closing Balance Sheet in accordance with GAAP.
(mm) OBSOLETE INVENTORY. All inventory that (i) is damaged
or modified beyond use, (ii) was purchased in connection with a discontinued
product, (iii) cannot be sold in the ordinary
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course of business consistent with past practices of the Company, (iv) did
not turn over during the previous six (6) month period, or (v) will not turn
over in the next six (6) month period.
(nn) PERSON. Any individual, corporation, general or
limited partnership, limited liability company, limited liability
partnership, joint venture, estate, trust, association, organization,
governmental body or other entity or body.
(oo) PLANS. Has the meaning assigned to such term in
Section 6.15(a) hereof.
(pp) PROCEEDING. Any action, arbitration, audit, claim,
charge, complaint, investigation, petition, litigation or suit (whether
civil, criminal, administrative, investigative or informal) commenced,
brought, conducted, or heard by or before, or otherwise involving, any court,
or federal, state, municipal or governmental department or any commission,
board, bureau, agency, instrumentality, administrator or arbitrator.
(qq) PROPERTIES. Has the meaning assigned to such term in
Section 16 hereof.
(rr) PURCHASE PRICE. Subject to adjustment as set forth
herein the aggregate amount of consideration payable by Buyer upon the
delivery by the Selling Stockholders of the Company Stock owned by them.
(ss) REAL PROPERTY. Collectively, the real estate owned by
the Company, together with all of the Company's rights, title and interests
in and to all buildings and improvements erected thereon, and all fixtures
and appliances installed in, attached to, or situated in or upon such real
estate and any and all appurtenances relating to such real estate.
(tt) RECIPIENT. Has the meaning assigned to such term in
Section 26 hereof.
(uu) RELATED AGREEMENTS. Collectively, all agreements,
documents, certificates and instruments to be delivered pursuant to or in
connection with this Agreement or the Contemplated Transactions, including
the Exhibits hereto.
(vv) SELLER LOSS OR SELLER LOSSES. Have the meanings
assigned to such terms in Section 14(b) hereof.
(ww) SELLING STOCKHOLDERS. Has the meaning assigned to such
term in the first paragraph hereof.
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(xx) STRADDLE PERIOD. Has the meaning assigned to such term
in Section 15(a) hereof.
(yy) SYSTEMS. Has the meaning assigned to such term in
Section 6.25 hereof.
(zz) TAX OR TAXES. All Federal, state, local or foreign
taxes of any kind, charges, fees, customs, duties, imposts, levies, required
deposits or other assessments, including, without limitation, all net or
gross income, gross receipts, ad valorem, value added, transfer, gains,
franchise, profits, inventory, worth, capital stock, asset, sales, use,
license, estimated, withholding, payroll, transaction, capital, employment
(including required deposits), social security, workers compensation,
unemployment, excise, severance, stamp, occupation, real estate and real and
personal property taxes, together with any interest and any penalties, fines,
additions to tax or additional amounts imposed by any taxing authority
(domestic or foreign) including any obligations under Treasury Regulations
Section 1.1502-6 or any agreements or arrangements with any person with
respect to the liability for or sharing of Taxes and including any liability
as a successor or transferee in respect of Taxes.
(aaa) TAX LIABILITIES. Any Liabilities for Taxes.
(bbb) TAX RETURN. Any return, report, declaration, form or
other documents or information filed with or submitted to, or required to be
filed with or submitted to, any governmental body in connection with the
determination, assessment, collection or payment of any Tax (including all
filings with respect to employment-related Taxes).
(ccc) TERMINATING LIABILITIES. Has the meaning assigned to
such term in Section 2 hereof.
(ddd) THIRD PARTY ACCOUNTING FIRM. Has the meaning assigned
to such term in Section 3.2(a)(ii) hereof.
(eee) THREATENED. A Proceeding, claim, dispute or other
matter will be deemed to have been THREATENED with respect to a Person, if
such Person has received any demand, statement or other notice with respect
to such Proceeding, claim, dispute or other matter.
(fff) TRADE SECRET. Has the meaning assigned to such term
in Section 6.8(b) hereof.
(ggg) UNPAID TAXES. Has the meaning assigned to such
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term in Section 15(c)(i) hereof.
(hhh) WELFARE PLAN. Has the meaning assigned to such term
in Section 6.15(l)
2. PURCHASE AND SALE OF COMPANY STOCK. At the Closing, (i) the
Selling Stockholders, in reliance on the representations, warranties and
covenants of Buyer contained herein and subject to the terms and conditions
of this Agreement, shall sell to Buyer all of the shares of the Company
Stock; and (ii) Buyer, in reliance on the representations, warranties and
covenants of the Company and the Selling Stockholders contained herein and
subject to the terms and conditions of this Agreement, shall purchase such
shares of Company Stock from the Selling Stockholders for the aggregate
Purchase Price of $3,632,780 in cash, which includes an amount sufficient for
the Selling Stockholders to repay the Liabilities of the Company set forth in
Sections 9.9, 9.12, 9.19 and 15(c) hereof (the "Terminating Liabilities").
The Purchase Price will be paid by Buyer at the Closing as follows:
(a) In order to secure the Selling Stockholders'
obligations to indemnify Buyer, Buyer shall deliver or cause to be delivered
to Bank One Texas, N.A. (the "Escrow Agent") $250,000 in cash by wire
transfer of immediately available funds, and such amounts shall be held by
the Escrow Agent, subject to the terms and conditions of, and for the period
set forth in, an Escrow Agreement substantially in the form of Exhibit A
hereto (the "Escrow Agreement"); and
(b) Buyer shall deliver or cause to be delivered to the
Escrow Agent the $3,382,780 in cash by wire transfer of immediately available
funds, with funds in the amounts set forth in Schedule B to the Escrow
Agreement being paid to the parties set forth opposite such amounts.
3. CLOSING. The Closing of such purchase and sale of Company Stock
shall take place at the offices of Paul, Hastings, Janofsky & Walker LLP, New
York, New York on or about the 17th day of May, 1999, at 10:00 A.M., or at
such other time and place as shall be mutually agreed upon by Buyer, the
Company and the Selling Stockholders.
3.1 DELIVERY OF COMPANY STOCK. At the Closing, each Selling
Stockholder shall deliver or cause to be delivered to Buyer, free and clear
of all Encumbrances thereon of every kind, the certificates for the shares of
the Company Stock owned by him in negotiable form for valid transfer, duly
endorsed in blank or with separate executed stock transfer powers attached.
3.2 ADJUSTMENTS TO THE PURCHASE PRICE.
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(a) (i) Within sixty (60) days subsequent to the Closing
Date, the Company shall prepare in accordance with GAAP a consolidated
balance sheet of the Company as of the close of business on the Closing Date,
including all normal year-end adjustments based on methodologies consistent
with those used in connection with preparing the reviewed balance sheet of
the Company dated as of December 31, 1998 (the "Closing Balance Sheet"). Upon
completion of the Closing Balance Sheet, the Company shall determine the
post-closing cash adjustment (the "Cash Adjustment"). The Company shall
promptly deliver to Buyer and the Selling Stockholders (i) a copy of the
Closing Balance Sheet and (ii) a reasonably detailed calculation of the Cash
Adjustment along with the basis for such calculations. The Cash Adjustment
shall be equal to the Company's cash and cash equivalents as set forth on the
Closing Balance Sheet. In the event that the Company shall have failed to
make the payments required by Section 4 hereof, the Cash Adjustment shall be
decreased by an amount equal to any such payments. If the Selling
Stockholders do not object to the amount of the Cash Adjustment within twenty
(20) business days of receipt thereof, the Selling Stockholders shall pay to
Buyer, or Buyer shall pay to the Selling Stockholders, as the case may be, no
later than the fifth business day after the twentieth business day following
receipt of the calculation of the Cash Adjustment an amount in cash equal to
the Cash Adjustment, if any.
(ii) If the Selling Stockholders object to the Cash
Adjustment, if any, they shall notify Buyer within twenty (20) business days
following receipt thereof, setting forth in specific detail the basis for
their objection and their proposal for any adjustments to the Cash
Adjustment. Buyer and the Selling Stockholders shall seek in good faith to
reach agreement as to any such proposed adjustment or that no such adjustment
is necessary within thirty (30) days following receipt of notice of the
Selling Stockholders' objection. If agreement is reached in writing within
such period as to all proposed further adjustments, or that no adjustments
are necessary, the parties shall make such adjustments, if any, and the Cash
Adjustment shall be based thereon. If Buyer and the Selling Stockholders are
unable to reach agreement within thirty (30) days following receipt of notice
of the Selling Stockholders' objection, then a "Big-5" accounting firm as
agreed upon by Buyer and the Selling Stockholders (the "Third Party
Accounting Firm") shall be engaged to review the proposed Cash Adjustment
and, to the extent necessary, the Closing Balance Sheet, and shall make a
determination as to the resolution of any adjustments necessary to cause the
Cash Adjustment to have been properly prepared in accordance with this
Agreement. All such resolutions shall relate only to such matters as are
still in dispute and shall represent either agreement with the position taken
by Buyer or
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the Selling Stockholders or a compromise between such positions. The
determination of the Third Party Accounting Firm shall be delivered as soon
as practicable following selection of the Third Party Accounting Firm and
shall be final, conclusive and binding upon Buyer. Thereafter, the Selling
Stockholders shall pay to Buyer, or Buyer shall pay to the Selling
Stockholders, as the case may be, not later than five days following the
determination of adjustments by the Third Party Accounting Firm, an amount in
cash equal to the Cash Adjustment, as the case may be, if any, as determined
by the Third Party Accounting Firm. All fees and expenses of the Third Party
Accounting Firm shall be borne pro rata by the Company and the Selling
Stockholders in proportion to the allocation of the dollar amount of changes
made by the Third Party Accounting Firm such that the prevailing party pays a
lesser portion of such fees and expenses.
(iii) The Selling Stockholders and accountants and
representatives designated by them (which shall not, in any event, be
employees of the Company) shall be permitted full access to examine the books
and records of the Company upon their reasonable request in connection with
their review of the Closing Balance Sheet and the Cash Adjustment at such
reasonable times and in a reasonable manner mutually acceptable to Buyer and
the Selling Stockholders during the twenty (20) business day period following
delivery to the Selling Stockholders of the calculation of the Cash
Adjustment, if any.
(iv) At least two (2) business days prior to the Closing
Date, the Selling Stockholders shall provide Buyer with a list of all checks
written by the Company during the sixty (60) day period prior to the Closing
Date. The list shall indicate which checks have been cashed.
(b) The Purchase Price shall be reduced on the Closing Date
by the amount of any obligation described in Section 9.9 hereof which Buyer
agrees will not be repaid at or prior to the Closing and will remain with the
Company after the Closing.
4. PAYMENTS TO BE MADE. The Selling Stockholders and the Company
agree to cause all providers of services relating to the Contemplated
Transactions to deliver to the Company their invoices in respect of such
services prior to Closing. The Company shall, immediately prior to the
Closing, pay (i) all fees and expenses incurred by the Company and the
Selling Stockholders relating to the Contemplated Transactions, and (ii) the
Terminating Liabilities, in each case, out of the Company's cash and cash
equivalents. In the event the payments made pursuant to this Section 4, prior
to giving effect thereto, exceed the Company's cash and cash equivalents as
set forth on the Closing Balance Sheet, such excess shall be paid directly by
the Selling Stockholders to Buyer.
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5. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
of the Selling Stockholders represents and warrants to Buyer as follows:
5.1 STOCK OWNERSHIP AND OTHER MATTERS.
(a) Such Selling Stockholder is the lawful owner of record
and beneficially of the number of shares of Common Stock set forth opposite
his name on Schedule 5.1 hereto, free and clear of all Encumbrances of every
kind, and such Selling Stockholder has full legal power and capacity and all
authorization required by law to transfer and deliver such shares of Common
Stock owned by him in accordance with this Agreement. At the Closing, such
Selling Stockholder will be the lawful owner of record and beneficially of
the number of shares of Common Stock set forth opposite his name on Schedule
5.1 hereto and shall validly convey and transfer to Buyer such shares of
Common Stock owned by him, free and clear of all Encumbrances. Such Selling
Stockholder does not and, at the Closing, will not, own any capital stock of
the Company except as set forth above. None of the Common Stock owned by such
Selling Stockholder is, or at the Closing, will be, subject to restrictions
on the transfer thereof, except for restrictions imposed by applicable
Federal and state securities laws. Such Selling Stockholder is not, and, at
the Closing, will not be, a party to or bound by any Contract which grants to
any Person an option or right of first refusal or other right of any
character to acquire at any time, or upon the happening of any stated events,
shares of capital stock or other securities of the Company whether or not
presently issued and outstanding.
(b) Such Selling Stockholder is not a "foreign person"
within the meaning of Internal Revenue Code Section 1445(f)(3) and Treasury
Regulation Section 1.1445-2(b)(2)(i). There is no pending action or
Proceeding that has been commenced against such Selling Stockholder that may
have the effect of preventing, delaying or making illegal the Contemplated
Transactions and, to the best knowledge of such Selling Stockholder, no such
action or Proceeding has been Threatened. Except as set forth on Schedule 5.1
hereto, neither the execution and delivery of this Agreement or the Related
Agreements by such Selling Stockholder nor the consummation by such Selling
Stockholder of the transactions provided for herein or therein will conflict
with, violate, or result in a breach of, default under or the creation of any
Encumbrance pursuant to, any agreement to which such Selling Stockholder is a
party or by which it is bound or any law, order, judgment or decree or any
provision of the Articles of Incorporation or By-Laws of the Company or such
Selling Stockholder or any Contract to which the
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Company or such Selling Stockholder is a party. Such Selling Stockholder has
full power and legal authority and full legal capacity to execute and deliver
this Agreement and the Related Agreements and to consummate and perform the
transactions contemplated hereby and thereby to be performed by him. The
execution and delivery of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby are within
the power of such Selling Stockholder and have been duly executed and
delivered by such Selling Stockholder and constitute the legal, valid and
binding obligations of such Selling Stockholder, enforceable against him in
accordance with their respective terms. Except as set forth on Schedule 5.1
hereto, no permit, authorization, consent or approval of, or filing with or
notification to, any governmental, regulatory or administrative body or any
other third party is required in connection with the execution and delivery
of this Agreement and the Related Agreements by such Selling Stockholder. No
representation or warranty by such Selling Stockholder in this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make any statement herein
not misleading.
5.2 TRANSACTIONS WITH AFFILIATES. Schedule 5.2 hereto sets forth,
for (i) such Selling Stockholder, or (ii) any corporation, partnership,
limited liability company, trust or other entity in which such Selling
Stockholder owns any beneficial interest (other than any publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than five percent (5%) of the stock of which
is beneficially owned by such Selling Stockholder), or is a trustee, partner
or holder of more than five percent (5%) of the outstanding capital stock
thereof or is otherwise an "affiliate" (as such term is defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) thereof (collectively "Insiders" and, each individually, an
"Insider"), every agreement, undertaking, understanding or compensation
arrangement of any Insider with the Company (other than normal employment
arrangements) and any interest of any Insider in any property, real, personal
or mixed, tangible or intangible, used in or pertaining to the business of
the Company (other than ownership of capital stock of the Company). Except as
set forth on Schedule 5.2 hereto, none of the Insiders has any direct or
indirect interest exceeding five percent (5%) in any competitor or supplier
of the Company or in any Person from whom or to whom the Company leases any
property, or in any other Person with whom the Company transacts business of
any nature.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
STOCKHOLDERS. The Company and the Selling Stockholders represent and warrant to
Buyer as follows:
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6.1 ORGANIZATION, STANDING, QUALIFICATION AND CAPITALIZATION. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado, and has all requisite
corporate power and authority to conduct its business as presently conducted
and to own and lease the properties and assets used in connection therewith.
A complete and accurate copy of (i) the Articles of Incorporation of the
Company, and all amendments thereto certified by the Secretary of State of
the State of Colorado, and (ii) the By-Laws of the Company, and all
amendments thereto certified by the Company's Secretary will be delivered to
Buyer at least ten (10) days prior to the Closing Date. The Company is in
good standing in the jurisdictions listed in Schedule 6.1 hereto and there
are no jurisdiction in which the Company is required to be qualified to do
business as a foreign corporation where failure to so qualify would,
individually or in the aggregate, have a material adverse effect on the
business, operations, properties, assets, Liabilities or financial condition
of the Company (a "Material Adverse Effect").
The total authorized capital stock of the Company consists
of 50,000 shares of Common Stock, no par value, of which 6,000 shares are
issued and outstanding. All of such shares were duly authorized and validly
issued and are fully paid and nonassessable. There are no shares of capital
stock of the Company issued and outstanding except for such shares. None of
such shares was issued in violation of any preemptive or preferential right.
There are currently no outstanding conversion or exchange rights,
subscriptions, options, warrants or other arrangements or commitments
obligating the Company to issue or transfer any shares of capital stock or
other securities. The Company is not and, at the Closing, will not be, nor
does the Company or any of the Selling Stockholders have any knowledge that
any holder of Common Stock is, a party to or bound by any Contract which
grants to any Person an option or right of first refusal or other right of
any character to acquire at any time, or upon the happening of any stated
events, shares of capital stock or other securities of the Company whether or
not presently issued or outstanding. A total of 6,000 shares of Common Stock
will be issued and outstanding as of the Closing Date. As of the Closing
Date, all of such shares will be duly authorized and validly issued, fully
paid and nonassessable and will not have been issued in violation of any
preemptive or preferential right.
6.2 EQUITY OWNED BY THE COMPANY. Except as set forth on Schedule 6.2
hereto, the Company, directly or indirectly, owns no shares of any
corporation and has no interest in any partnership, limited liability
company, joint venture or other legal entity.
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6.3 FINANCIAL STATEMENTS. Schedule 6.3 hereto includes complete and
accurate copies of the Financial Statements, all of which have been prepared
in accordance with GAAP applied on a basis consistent with that of the
preceding fiscal year subject, in the case of interim financial statements,
to (i) the absence of footnote disclosures and notes, and (ii) changes
resulting from year-end adjustments consistent with year-end adjustments made
in connection with the year-end periods referred to in the Financial
Statements.
(a) The Financial Statements heretofore furnished to Buyer
do, and the financial statements furnished to Buyer after the date hereof
pursuant to Section 6.3(b) will, fairly present the financial condition and
results of operations, equity and cash flow of the Company as of the
respective dates of and for the respective periods referred to in the
Financial Statements, all in accordance with GAAP consistently applied
subject, in the case of interim financial statements to (i) the absence of
footnote disclosures and notes, and (ii) changes resulting from year-end
adjustments consistent with year-end adjustments made in connection with the
year-end periods referred to in the Financial Statements.
(b) Within 15 days following the end of each month, the
Company will deliver to Buyer complete and accurate copies of unaudited
balance sheet of the Company as of the end of each month ending subsequent to
the date hereof and prior to the Closing Date and the related statements of
operations and changes in stockholders' equity and statements of cash flows
for each month then ended.
(c) All inventory of the Company as set forth in the
Financial Statements consisted of, and all inventory as of the Closing Date
will consist of, raw materials, work-in-process and finished goods of a
quality and quantity usable or salable in the ordinary course of business of
the Company. The value at which inventories were reflected in the Financial
Statements was the lower of cost or market value adjusted to conform to FIFO
inventory valuation principles, with adequate provision for obsolete
material, all in accordance with GAAP applied on a basis consistent with that
of the preceding fiscal year.
(d) All accounts receivable of the Company as set forth in
the Financial Statements are, and all accounts receivable which arise between
the date hereof and the Closing Date will be, genuine, valid, binding and
subsisting, having arisen or arising out of bona fide sales and deliveries of
products or the performance of services in the ordinary course of business
consistent with past practice and are collectible in the ordinary course of
business consistent with the Company's historical collection practices,
subject to no defenses,
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counterclaims or set-offs (other than in the ordinary course), but subject to
allowances and accruals as reflected in the Financial Statements. Such
allowances and accruals are reasonable and appropriate on the basis of the
Company's prior experience and are in accordance with GAAP applied on a basis
consistent with that of the preceding fiscal year.
(e) The Company's Net Working Capital is greater than $1.1
million.
6.4 PROPERTIES AND PERMITS. The Company has good and marketable
title to all its properties and assets reflected in the December 31, 1998
reviewed balance sheet, (except, in each case, properties and assets sold or
otherwise disposed of in the ordinary course of business, consistent with
past practice) in each case free and clear of all Encumbrances of any nature
whatsoever, except (i) any Encumbrances disclosed in the Financial
Statements, (ii) liens for current Taxes not yet due and payable, or (iii)
those Encumbrances set forth on Schedule 6.4 hereto. All plants, facilities,
structures and equipment owned or used by the Company are, subject to
ordinary wear and tear, in good operating condition and repair. Schedule 6.4
hereto sets forth a true, correct and complete list of all Real Property and
all Leased Real Property owned or used by the Company, together with a list
of each lease, sublease, license or any other instrument under which the
Company claims or holds such leasehold or other interest or right to the use
thereof, and with respect to the leases, subleases, licenses and other
instruments on Schedule 6.4, identifying which of those leases, subleases,
licenses or other instruments, if any, require that a consent be obtained
(from any lessors, guarantors or any other third parties) before a valid
transfer of the Company Stock may be obtained and identifying in each
instance the party which is required to grant consent thereto, the location
of the premises, the date and term of the agreement and the amount of the
monthly rent. Such leases, subleases, licenses and other agreements are
valid, subsisting, in full force and effect and binding upon the parties
thereto in accordance with their terms. Prior to the date hereof, the Company
has delivered to Buyer true, correct and complete copies of all of the
leases, subleases, licenses and other instruments set forth on Schedule 6.4
and any related agreements. The Company has paid in full all amounts due, and
have each satisfied in full all Liabilities due and payable, under such
leases, subleases, licenses and other agreements. Neither the Company nor any
Subsidiary is, or as of the Closing Date will be, in default under any of
such leases, subleases, licenses or other agreements, nor, to the best
knowledge of the Company or the Selling Stockholders, is any other party in
default thereunder, and, to the best knowledge of the Company and the Selling
Stockholders, no facts or circumstances have occurred which, with the giving
of notice or the passage of time or both,
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would constitute a default under any of such leases, subleases, licenses or
other agreements.
6.5 TAXES. The amounts recorded as provisions for Taxes in the
Financial Statements are sufficient for the payment of all Taxes, whether
disputed or not, owed or to be owed by the Company with respect to the time
up to the date of the latest Financial Statements, including with respect to
income earned up to the date of the latest Financial Statements. The Company
has duly and timely filed all Tax Returns with the appropriate governmental
authorities which were required to be filed by them, due on or prior to the
date hereof (without regard to any extensions), and such Tax Returns were
true and correct in all respects. Except as set forth on Schedule 6.5, no
extension of time within which to file any Tax Return which has not been
filed has been requested or granted. The Company has paid in full, or
recorded adequate reserves in accordance with GAAP on the Financial
Statements for the payment of, all Taxes shown on all Tax Returns. Any such
reserves are reflected in the Financial Statements. The Estimated Tax Amount
(as defined in Section 15(c)(i) hereof) will be, as of the Closing Date, true
and accurate to the best knowledge of the Selling Stockholders. Except as set
forth on Schedule 6.5 hereto, no Tax Return of the Company has been examined
or audited by the Internal Revenue Service (the "IRS") or any state, local,
foreign or other Taxing authority and there are no open, pending or
Threatened tax-related Proceedings, audits, examinations, assessments,
asserted deficiencies or claims for additional Taxes with respect to the
Company. Except as set forth on Schedule 6.5, there are no past or current
revenue agents' reports or any other assertions of deficiencies or other
Liabilities for Taxes (including any reports, statements, summaries and other
communications or assertions or claims of deficiencies or other Liabilities)
with respect to the Company. There are no waivers or extensions of any
applicable statutes of limitation for the assessment and collection of Taxes
for which the Company may be liable that are in effect and no requests for
such waivers are pending. The Company has not received any Tax rulings, made
any request for rulings, or entered into any closing agreements with any
Taxing authority. The Company is not required to make any adjustments with
respect to a change in accounting method and no such adjustments have been
proposed by the IRS or requested by the Company. The Company is not party to
any Tax sharing or allocation agreement, nor is potentially required to
indemnify any person with respect to Taxes. The Company is not party to any
arrangement that is treated as a partnership for Tax purposes. Schedule 6.5
lists all states, territories and jurisdictions (whether foreign or domestic)
in which the Company is required to file Tax Returns. No claim or inquiry has
been made by any Taxing authority in a jurisdiction where the Company does
not file Tax Returns that either is or may be subject to Tax
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in such jurisdiction. There are no liens for Taxes upon the assets of the
Company, or with respect to the capital stock of the Company, except for
liens for current Taxes not yet due and payable. No power of attorney related
to Taxes has been granted by, or with respect to, the Company that will
remain in force after the Closing Date. The Company is not and never has been
a member of an "affiliated group" within the meaning of Section 1504(a)(1) of
the Code, nor has it been required or elected to join in any consolidated,
combined, unitary or Federal, state or local Tax filings.
The Company is not a "collapsible corporation" under
Section 341 of the Code, nor has it filed a consent with the IRS pursuant to
Section 341(f) of the Code concerning collapsible corporations. The Company
has not made any payment, is not obligated to make any payment, and is not a
party to any agreement that under certain circumstances could obligate it to
make any payments that will be limited as to deductibility under Section 280G
of the Code. The Company has disclosed on its Federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement
of Federal income Tax within the meaning of Section 6662 of the Code. The
Company has no deferred income reportable for a period beginning after the
Closing Date but that is attributable to a transaction (e.g., an installment
sale) occurring in a period ending on or prior to the Closing Date. None of
the presently outstanding debt of the Company is "corporate acquisition
indebtedness" within the meaning of Section 279(b) of the Code. The Company
has delivered to the Buyer true, correct and complete copies of all federal
income Tax returns, audit and examination reports, if any, and statements of
deficiencies, if any, filed by, assessed against or agreed to by the Company
for any period ending in 1994, 1995, 1996, 1997 and 1998.
6.6 LITIGATION AND LABOR MATTERS. Except as set forth on
Schedule 6.6 hereto:
(a) there is no litigation, Proceeding or governmental
investigation pending or Threatened, against or related to the Company or its
properties or businesses;
(b) there is no litigation, Proceeding or governmental
investigation pending or Threatened, against or related to any Selling
Stockholder or any of such Selling Stockholder's properties or businesses
that could reasonably be expected to have an adverse impact on the Company;
(c) the Company is not in default with respect to any
order, writ, injunction or decree of any court or Federal, state, municipal
or governmental department, commission, board,
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bureau, agency or instrumentality;
(d) the Company has not committed, and neither any Selling
Stockholder nor the Company has received any notice of or claim that the
Company has committed any unfair labor practice under applicable Federal or
state law;
(e) there are no collective bargaining agreements between
the Company and any persons employed by the Company, and the Company does not
have a duty to bargain with any labor organization with respect to any
employee. There is not pending any demand for recognition or any other
request or demand from a labor organization for representative status with
respect to any persons employed by the Company.
(f) there is no pending action or Proceeding that has been
commenced against the Company that may have the effect of preventing,
delaying or making illegal the Contemplated Transactions and, to the best
knowledge of the Company and the Selling Stockholders, no such action or
Proceeding has been Threatened.
6.7 INSURANCE. The Company is insured under various policies of
fire, liability and other forms of insurance, as set forth on Schedule 6.7
hereto, which policies are valid and enforceable in accordance with their
terms. At no time was there a period in which the Company lacked insurance
coverage. The Company shall continue to carry all such policies or similar
policies during the pendency of this Agreement, and all outstanding claims
under such policies are described in Schedule 6.7 hereto. There is no
recorded liability for retrospective insurance premium adjustments for any
period prior to the date hereof. Schedule 6.7 hereto sets forth a complete
and accurate list of the following, each of which have been made available to
Buyer for its review:
(a) All comprehensive general liability and other policies
of insurance under which the Company is or has been insured at any time
within the five (5) year period immediately preceding the date of this
Agreement.
(b) All property and casualty policies of insurance under
which the Company is presently insured.
(c) The expiration date of each insurance policy under
which the Company is currently insured.
6.8 INTELLECTUAL PROPERTY RIGHTS.
(a) Schedule 6.8 hereto sets forth all patents and patent
applications; all trademarks, service marks, trade names
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(whether registered or unregistered) and applications for registration and
registrations therefor; all copyrights (whether registered or unregistered)
and applications for registration and registrations therefor; all Internet
domain names, 1-800 and 1-888 telephone numbers; all inventions and other
intellectual property rights and all licenses with respect to any of the
foregoing, used or developed by the Company, or in which the Company has an
interest (collectively, the "Intellectual Property Rights"). No other patent,
trademark, service mark, trade name or copyright, or license under any
thereof, is necessary to permit the business of the Company to be conducted
as now conducted or as heretofore or proposed to be conducted. Except as set
forth on Schedule 6.8, the Company owns exclusively and/or has the exclusive
and unrestricted right to use, free and clear of all Encumbrances, all
Intellectual Property Rights, and all renewals therefor and claims for
infringement thereof, without to the best knowledge of the Company and the
Selling Stockholders infringing upon or otherwise acting adversely to the
right or claimed right of any third party. The Company is not obligated or
under any liability whatsoever to make any payments by way of royalties, fees
or otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, trade name, copyright or other intangible asset,
with respect to the use of any of the Intellectual Property Rights, in
connection with the conduct of the Company's respective business or otherwise.
(b) Except as set forth on Schedule 6.8, the Company owns
exclusively and has the exclusive and unrestricted right to use all "trade
secrets" required for or incident to the development, manufacture,
distribution and sale of all products, and the offering and rendering of all
services, proposed to be sold or offered by the Company free and clear of any
Encumbrances, including, without limitation, of any former employer of its
employees. "Trade secrets" shall mean all trade secrets, "know-how,"
inventions, discoveries, designs, customer lists, supplier lists, marketing
strategies, processes, computer programs (including source code), technical
data, confidential data and other information which is of value.
(c) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all of its "trade secrets."
(d) The Company and the Selling Stockholders have no
knowledge, and have not received any communication alleging, that the Company
has violated or, by conducting its business as now conducted, would violate
any of the patents, licenses, trademarks, service marks, trade names,
copyrights, trade secrets or other proprietary rights of any person or
entity. Except as
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set forth on Schedule 6.8 hereto, neither the Company nor the Selling
Stockholders are aware of any third party that is infringing upon or
violating any of the Company's Intellectual Property Rights, "trade secrets"
or other proprietary rights.
6.9 CONTRACTS AND COMMITMENTS. Schedule 6.9 hereto sets forth a
complete and accurate list of, and the Company has made available to Buyer
for its review complete and correct copies of or, in the case of an oral
Contract, a complete and correct description of:
(a) Each Contract (other than open purchase orders) that
involves the performance of services or the delivery of goods or materials to
the Company of an amount or value in excess of $20,000;
(b) Each Contract (other than open sales orders) that
involves the performance of services for or the delivery of goods or
materials by the Company of amount or value in excess of $20,000;
(c) Each Contract that was not entered into in the ordinary
course of business that involves expenditures or receipts in excess of $5,000
to which the Company is a party;
(d) Each license or other Contract with respect to
intellectual property, including without limitation the Intellectual Property
Rights and franchise agreements, to which the Company is a party;
(e) Each Contract to which any employee of the Company is a
party relating to wages, hours and other conditions of employment;
(f) Each Contract for capital expenditures in excess of
$20,000 to which the Company is a party;
(g) Each Contract or commitment relating to the borrowing
of money or a line of credit to which Company is a party or by which it or
any of its assets are bound;
(h) Each Contract or commitment with any present or former
officer, director, stockholder, employee or consultant of the Company,
pursuant to which any payment is or may become due to any such person;
(i) Each lease agreement pertaining to any personal
property leased by or from the Company, and each lease agreement pertaining
to any Real Property or Leased Real Property involving the Company as a
landlord;
(j) Each representative or sales agency Contract or
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commitment to which the Company is a party;
(k) Each Contract restricting a Person from competing with
the Company;
(l) Each Contract with respect to environmental Remediation
at any facility or property now or formerly owned by the Company, and each
Contract relating to bringing any current facility or property of the Company
into compliance with applicable requirements relating to underground storage
tank systems.
(m) Each Contract relating to the purchase by the Company
of raw materials from any vendor or supplier.
Except for delays, minor failures to meet specifications or
other minor defaults which are normal in the conduct of business between the
Company, as the case may be, and other parties to the above Contracts, all
parties to the above Contracts have complied with the provisions thereof, no
party is in default thereunder, and, to the best knowledge of the Company and
the Selling Stockholders, no event has occurred which but for the passage of
time or the giving of notice would constitute a default thereunder. The
Company has not received any written notice of any default with respect to
any of the above Contracts.
6.10 ABSENCE OF UNDISCLOSED LIABILITIES. There are no Liabilities or
obligations of the Company either accrued, absolute, contingent or otherwise,
including, but not limited to, any Liabilities for Taxes due or to become
due, except:
(1) to the extent reflected in the December 31, 1998
audited balance sheets and not heretofore paid or discharged, and
(2) those incurred, consistently with past business
practice, in or as a result of the normal and ordinary course of business
since December 31, 1998, and
(3) those set forth on Schedule 6.10 hereto.
6.11 ABSENCE OF DEFAULT. The Company is not in default in the
performance, observance or fulfillment of any obligation, covenant or
condition contained in any debenture or note, or contained in any conditional
sale or equipment trust agreement, or loan or other borrowing agreement to
which the Company is a party.
6.12 EXISTING CONDITION. Except as disclosed in Schedule 6.12 hereto,
since December 31, 1998 there has not been (i) any material adverse change in
the business, operations, properties, assets, Liabilities or financial
condition, of the Company; (ii) any damage, destruction or loss, whether covered
by insurance or
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not, materially and adversely affecting the business, operations, properties,
assets, Liabilities or financial condition, of the Company; (iii) any
redemption, purchase or other acquisition of any capital stock of the
Company; (iv) any increase in the compensation payable or to become payable
by the Company to any of its respective officers, directors, employees,
partners or agents; (v) any change in the terms of any bonus, insurance,
pension or other benefit plan for or with any of the Company's officers,
directors or employees which increases amounts paid, payable or to become
payable thereunder; or (vi) any complaints or other concerns which relate to
the Company's labor relations.
6.13 VALIDITY OF CONTEMPLATED TRANSACTIONS. Except as set forth on
Schedules 5.1 and 6.13 hereto, neither the execution and delivery of this
Agreement or the Related Agreements by the Company nor the consummation by
the Company of the transactions provided for herein or therein will conflict
with, violate, or result in a breach or default or the creation of any
Encumbrance pursuant to, any Contract to which the Company is a party or by
which the Company, or its assets are bound or any law, order, judgment or
decree or any provision of its Articles of Incorporation or By-Laws. The
Company has full power and legal authority to execute and deliver this
Agreement and the Related Agreements and to consummate and perform the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby are within the corporate power
of the Company and have been duly authorized by all necessary corporate
action on the part of the Company. This Agreement and the Related Agreements
to which the Company is a party have been duly executed and delivered by the
Company and constitute the legal, valid and binding obligations of the
Company, enforceable against it in accordance with their respective terms.
6.14 RESTRICTIONS. The Company is not subject to any charter or
other corporate or partnership restriction, any agreement or any judgment,
order, writ, injunction or decree, which materially and adversely affects the
business, operations, properties, assets, Liabilities or financial condition
of the Company.
6.15 EMPLOYEE BENEFITS.
(a) Except as set forth on Schedule 6.15 hereto, the
Company does not maintain and has not maintained, any bonus, deferred
compensation, incentive compensation, stock purchase, stock option, severance
or termination pay, hospitalization or other medical, life or other
insurance, supplemental unemployment benefits, profit sharing, pension, or
retirement plan, program, agreement or arrangement, or other employee benefit
plan,
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program, agreement or arrangement (other than arrangements involving the
payment of wages) sponsored, maintained or contributed to or required to be
contributed to by the Company or by any trade or business, whether or not
incorporated (an "ERISA Affiliate") that together with the Company would be
deemed a "single employer" within the meaning of Section 4001(a)(14) of
ERISA, for the benefit of any current or former employee, director, partner
or independent contractor of the Company or any ERISA Affiliate, whether
formal or informal (the "Plans") with respect to which the Company or any
ERISA Affiliate has or may in the future have any liability or obligation to
contribute or make payments of any kind. No "leased employee," as that term
is defined in Section 414(n) of the Code, performs services for the Company.
(b) Each Plan is in writing and the Company has furnished
to Buyer a copy of each Plan and any amendments thereto and, if applicable,
with respect to each Plan (i) a copy of each trust or other funding
arrangement and all amendments thereto, (ii) each summary plan description
and summary of material modifications, (iii) the three most recently filed
Forms 5500 under ERISA or the Internal Revenue Code of 1986, as amended (the
"Code"), (iv) all determination letters, rulings, information letters and any
other material document or correspondence relating to a Plan from the IRS,
the United States Department of Labor, or the Pension Benefit Guaranty
Corporation, (v) the three most recently prepared financial statements and
(vi) all Contracts relating to the Plans with respect to which the Company,
or any ERISA Affiliate may have any liability, including, without limitation,
insurance contracts, investment management agreements, subscription and
participation agreements and record keeping agreements. The Company has no
express or implied commitment to create or incur liability with respect to or
cause to exist any other employee benefit plan, program, agreement or
arrangement, or to enter into any Contract or agreement to provide
compensation or benefits to any individual or to modify or change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.
(c) Each Plan is now and has been operated in material
compliance with its terms and the requirements of all applicable laws, orders,
rules and regulations, including, without limitation, ERISA and the Code. The
Company has performed all material obligations required to be performed by it
under, is not in any material respect in default under or in violation of, and
has no knowledge of any default or violation by any party to, any Plan. No
governmental investigation or legal action, suit or claim (other than claims for
benefits under the Plans) is pending or, to the best knowledge of the Company
and
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the Selling Stockholders, Threatened with respect to any Plan and, to the
best knowledge of the Company and the Selling Stockholders, no fact or event
exists that could give rise to any such investigation, action, suit or claim.
(d) None of the Plans is (i) subject to Title IV of ERISA,
(ii) a "multi employer pension plan" as such term is defined in Section 3(37)
of ERISA, (iii) subject to the laws of a country or jurisdiction other than
the United States, or (iv) subject to Section 302 of ERISA or Section 412 of
the Code.
(e) Neither the Company, nor, to the best of the Company's
and the Selling Stockholders' knowledge, any ERISA Affiliate, any of the
Plans, any trust created thereunder, nor any trustee or administrator thereof
has engaged in a transaction in connection with which the Company or any
ERISA Affiliate, any of the Plans, any such trust, or any trustee or
administrator thereof, or any party dealing with the Plans or any such trust
could be subject to either a civil liability or penalty pursuant to Section
409, 502(i) or 502(1) of ERISA or a tax imposed pursuant to Chapter 43 of the
Code.
(f) Full payment has been made, or will be made, in
accordance with the terms of each of the Plans and any applicable collective
bargaining agreement, of all amounts which the Company or any ERISA Affiliate
is required to pay, and all such amounts properly accrued through the Closing
Date with respect to the current plan year thereof will be paid by the
Company on or prior to the Closing Date or will be properly recorded on the
Company's Financial Statements.
(g) Each of the Plans that is intended to be "qualified" in
form within the meaning of Section 401(a) of the Code is so qualified and has
been the subject of a favorable determination letter from the IRS regarding
such qualification, no such determination letter has been revoked and
revocation has not been Threatened, no event has occurred and no
circumstances exist that would adversely affect the tax-qualification of such
Plan and such Plan has not been amended since the effective date of its most
recent determination letter in any respect that might adversely affect its
qualification or materially increase its cost.
(h) No employee of the Company will be entitled to any
additional benefits or any acceleration of the time of payment or vesting of
any benefits under any Plan as a result of the Contemplated Transactions. The
Company has not taken any action that would create any obligation to provide
severance benefits of any kind upon the termination of any employee for any
reason.
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(i) No amounts payable under the Plans will fail to be
deductible for Federal income tax purposes by virtue of Section 280G of the
Code.
(j) No Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured), with respect
to current or former employees upon retirement or other termination of
service (other than (i) coverage mandated by applicable law, (ii) death
benefits or retirement benefits under any "employee pension plan," as that
term is defined in Section 3(2) of ERISA, (iii) deferred compensation
benefits accrued as Liabilities on the books of the Company or an ERISA
Affiliate, or (iv) benefits the full cost of which is borne by the current or
former employee (or his beneficiary)).
(k) Schedule 6.15 discloses whether each Plan that is an
"employee welfare benefit plan" as defined in Section 3(1) of ERISA ("Welfare
Plan") is (i) unfunded, (ii) funded through a "welfare benefit fund," as such
term is defined in Section 419(e) of the Code, or other funding mechanism, or
(iii) insured. Each such Welfare Plan may be amended or terminated without
liability to the Company at any time after the Closing Date. Each of the
Plans that is intended to satisfy the requirements of Section 501(c)(9) of
the Code has satisfied such requirements.
(l) With respect to each Plan that is funded wholly or
partially through an insurance policy, there will be no liability of the
Company or an ERISA Affiliate, as of the Closing Date, under any such
insurance policy or ancillary agreement with respect to such insurance policy
in the nature of a retroactive rate adjustment loss sharing arrangement or
other actual or contingent liability arising wholly or partially out of
events occurring prior to the Closing Date.
(m) Except as otherwise disclosed on the Closing Balance
Sheet, neither the Company nor any ERISA Affiliate has, or will have, any
current or contingent liability with respect to any Plan.
6.16 PERSONAL PROPERTY. Schedule 6.16 hereto contains a correct and
complete list of each item of tangible personal property owned or used by the
Company, other than tools, inventory, office furniture and supplies and
miscellaneous items of personal property with an individual book value of
less than $5,000. Schedule 6.16 indicates which items are owned by the
Company. Except as set forth on Schedule 6.16 hereto, each item of tangible
personal property owned by the Company is owned free and clear of all
Encumbrances.
6.17 BANK ACCOUNTS AND DIRECTORS AND OFFICERS.
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Schedule 6.17 contains a true and complete list of the name and location of
each bank in which the Company has an account, each safety deposit box or
custody agreement and the names of the Persons authorized to draw thereon or
to withdraw therefrom. Schedule 6.17 also sets forth the names of all
directors and officers of the Company.
6.18 COMPLIANCE WITH LAWS AND INSTRUMENTS. The Company, and each of its
facilities, properties and/or operations, has complied in all material respects
with, and is in compliance in all material respects with, and neither the
Company, nor any of its facilities, properties or operations has received any
notice of any violation or delinquency, with respect to, any laws,
ordinances, rules, regulations, orders, permits or authorizations (including,
without limitation, any safety, health, wage, hour, employment and trade
laws, ordinances, rules, regulations, orders, permits or authorizations)
applicable to the business, operations or properties of the Company. All
approvals, authorizations, consents, licenses, permits, tank registrations or
orders with respect to the business, operations and properties of the Company
have been obtained, were validly issued, accurately reflect the currently
existing operations, are in full force and effect as of the date hereof and
are set forth on Schedules 6.4 and 6.20 hereto, and all such approvals,
authorizations, consents, licenses, permits, registrations and orders shall
transfer to Buyer with and as part of the Contemplated Transactions with no
further consent or authorization, except where the failure to obtain such
approvals, authorizations, consents, licenses, permits, registrations or
orders or of such approvals, authorizations, consents, licenses, permits,
registrations or orders, to be so issued, be in full force and effect or
transfer would not, individually or in the aggregate, have a Material Adverse
Effect. Neither the ownership or use of the Company's properties, nor the
conduct of its business, violates, or with or without the giving of notice or
the passage of time, or both, will violate, conflict with or result in a
breach, default, right to accelerate or loss of rights under, or result in
the creation of any Encumbrance pursuant to, any term or provision of the
Articles of Incorporation or By-Laws of the Company as presently in effect,
or any note, mortgage, deed of trust, indenture, lease, permit, license,
consent, approval, agreement, instrument, insurance policy, law, statute,
rule or regulation or any order, judgment, award or decree to which the
Company is a party or by which the Company, its business or its properties
and assets may be bound or affected, except where such violation, conflict,
breach, default, right to accelerate, loss of rights or creation of
Encumbrance would not, individually or in the aggregate, cause a Material
Adverse Effect.
6.19 AUTHORIZATIONS. Except as set forth on Schedules 6.4
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and 6.13 hereto, no permit, authorization, consent or approval of, or filing
with or notification to, any governmental, regulatory or administrative body
or any other third party is required in connection with the execution and
delivery of this Agreement and the Related Agreements by the Company or the
consummation of the transactions contemplated hereby and thereby.
6.20 ENVIRONMENTAL COMPLIANCE
(a) The Company, and each of its facilities, properties and/or
operations, has complied in all material respects and is in compliance with, and
neither the Company, nor any of its facilities, properties or operations has
received any notice of any violation or delinquency, with respect to, any
decree, order or arbitration award or any law, statute, ordinance, rule or
regulation of or agreement with, or any license, permit or authorization from,
any governmental, regulatory or administrative authority to which it or its
properties, assets, personnel or business are subject and which relates to the
environment including, without limitation, Environmental Laws. To the best
knowledge of the Company and the Selling Stockholders, there are no
circumstances or conditions existing that are reasonably likely to prevent or
interfere with such compliance in the future.
(b) The Company has no underground or above ground storage
tanks now or previously located at its facility.
(c) The Company has obtained all approvals, consents, permits,
licenses and other authorizations required under Environmental Laws. Schedule
6.20 hereto sets forth each environmental approval, consent, permit, license and
authorization held by the Company, including, without limitation, the tank
registration for each facility and each permit or other administrative order or
other arrangement under which Remediation is currently being conducted. Each
permit is validly issued and in full force and effect and will transfer to Buyer
as part of the Contemplated Transactions without further authorization or
consent.
(d) There is no Environmental Claim pending or, to the best
knowledge of the Company and the Selling Stockholders, Threatened against the
Company, or its assets (whether owned or leased) or any facility previously
owned or operated by the Company. There are no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the Release, presence or disposal of any pollutant, contaminant,
waste, toxic substance, hazardous substance or petroleum, that could form the
basis of any Environmental Claim against the Company, or its assets.
(e) Schedule 6.20 hereto contains a true and
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complete list of each facility previously owned or operated by the Company.
Each facility previously owned or operated by the Company was operated by the
Company, and, to the best knowledge of the Company and the Selling
Stockholders, by others, in compliance in all material respects with
applicable Environmental Laws, and during the Company's ownership or
operation of each such facility there was no storage, disposal or Release of
any Hazardous Materials at such facility.
(f) There are no surveys, reports (including, without
limitation, reports from underground storage tank closures or removals,
Remediation programs or assessments and tank replacements), assessments, audits,
evaluations, sampling results, regulatory agency correspondence or other
documents relating to the presence, migration or disposal of any Hazardous
Material, that were prepared for or at the request of the Company or are or were
in its possession or at or relating to any of its assets (the "Environmental
Reports").
(g) "Environmental Claim" means any claim, complaint, action,
suit, Proceeding, investigation or notice by any Person alleging potential
liability arising out of, based on, or resulting from (i) the Release or
disposal into, or the presence in, the environment, whether surface or
subservice, including, without limitation, the indoor environment, of any
pollutant, contaminant, waste, toxic substance, hazardous substance or petroleum
at any location, whether or not owned by the Company or (ii) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law. "Environmental Laws" means all applicable Federal, state or local laws,
statutes, ordinances, orders, decrees, or other binding obligations related to
the protection of the environment or human health (including worker health and
safety), including but not limited to the Resource Compensation and Recovery
Act, the Comprehensive Environmental Response Conservation and Liability Act,
the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, and
the Occupational Safety and Health Act, and any other laws, statutes,
ordinances, or provisions related to Releases or threatened Releases of any
pollutant, contaminant, Hazardous Material or petroleum, or the use, treatment,
storage, disposal, transport or handling of any Hazardous Material, all
rules, regulations, orders, permits, licenses, or any term or provision
thereof, promulgated pursuant to authority granted therein, and all Federal,
state, county, municipal or local requirements issued or promulgated pursuant
to authority granted therein or delegated thereunder, all as they may have
been amended and exist as of the effective date of this Agreement, unless
otherwise stated. "Hazardous Material" means any pollutant, toxic substance,
contaminant, hazardous waste, hazardous material, hazardous substance,
extremely hazardous
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material, or other substance or compound, including, without limitation,
petroleum or any refined product or fraction thereof, asbestos or
polychlorinated biphenyls regulated under Environmental Laws.
(h) No Remedial Investigation has been commenced at or in
relation to any of the Properties.
6.21 NON-COMPETITION AGREEMENTS. The Company is not a party to any
agreement or other commitment imposing any restriction on the manner or in the
geographic location in which it conducts or may conduct its business or uses or
may use its properties and assets in competition with any third party.
6.22 CHANGE OF CONTROL PROVISIONS. Except as set forth on Schedules 6.4
and 6.13 hereto, neither the execution and delivery of this Agreement or the
Related Agreements nor the consummation of the transactions provided for herein
or therein will trigger any obligation of the Company to any Person, including,
without limitation, the obligation to make payments to any Person pursuant to
any Contract or agreement to which the Company is a party or by which it or its
assets are bound.
6.23 DIVIDENDS AND DISTRIBUTIONS. Since December 31, 1998, the Company
has not declared, paid, set aside or made any dividend or other distribution or
payment in respect of its capital stock or any other securities.
6.24 DISCLOSURE. No representation or warranty by the Company or the
Selling Stockholders in this Agreement or the Related Agreement, contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary to make any statement herein or therein not
misleading. The Company has made available for inspection by Buyer and its
representatives complete and correct copies of the corporate minute books of the
Company. Such minute books contain the minutes of all meetings of stockholders,
the board of directors and any committees thereof of the Company that have been
held prior to the date hereof and all written consents to action executed in
lieu thereof. All documents furnished to Buyer hereunder are true and complete
copies of the originals therefor, and any originals delivered are true and
complete.
6.25 YEAR 2000. All of the equipment, systems, software, data and
databases, including, without limitation, accounting systems, but excluding any
"off-the-shelf" software that any consumer can purchase not altered by the
Company (collectively, the "Systems"), of the Company comply with the following
"Standards for Year 2000" to the extent that other systems, information or
technology used with the Systems properly exchange date/time with it, and to the
extent that events do not occur
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which affect the Systems that are outside the control of the Company: (i) the
occurrence in or use by the Systems of dates before, on or after January 1,
2000 will not adversely affect the performance of the Systems with respect to
date-dependent data, computations, output or other functions, including,
without limitation, calculating, comparing and sequencing; (ii) the Systems
will not abnormally end or provide invalid or incorrect results as a result
of date-dependent data; and (iii) the Systems can accurately recognize,
manage, accommodate and manipulate datedependent data, including, without
limitation, single century formulas and leap years.
6.26 RELATIONSHIP WITH GENERAL ELECTRIC COMPANY. Neither the Company
nor any Selling Stockholders has any equity, creditor or similar relationship,
including, without limitation, any investment in, or any debtor, revolving
credit, leasing or creditor relationship, but excluding any vendor or vendee
relationship or ownership in any mutual fund or similar investment which owns
less than 5% of the stock of General Electric Company or its subsidiaries, with
General Electric Company or any entity known by the Company or the Selling
Stockholders to be a Subsidiary of General Electric Company.
7. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to the Selling Stockholders that:
7.1 ORGANIZATION, GOOD STANDING AND AUTHORITY. Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to conduct
its business as presently conducted and to own and lease the properties and
assets used in connection therewith. The execution and delivery of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereby and thereby are within the corporate power of Buyer and have
been duly authorized by all necessary corporate action on the part of Buyer.
This Agreement and the Related Agreements to which Buyer is a party constitute
the legal, valid and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms.
7.2 VALIDITY OF CONTEMPLATED TRANSACTIONS. Except as set forth on
Schedule 7.2 hereto, neither the execution and delivery of this Agreement or the
Related Agreements by Buyer nor the consummation by Buyer of the transactions
provided for herein or therein will conflict with, violate, or result in a
breach of or default under any Contract to which Buyer is a party or by which it
or its assets are bound or any law, order, judgment or decree or any provision
of the Certificate of Incorporation or By-Laws of Buyer.
7.3. AUTHORIZATIONS. Except as set forth on Schedule 7.2
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hereto, no permit, authorization, consent or approval of, or filing with or
notification to, any governmental, regulatory or administrative body or any
other third party is required in connection with the execution and delivery
of this Agreement and the Related Agreements by Buyer or the consummation of
the transaction contemplated hereby and thereby.
7.4 INVESTMENT REPRESENTATIONS. The Company Stock being delivered
pursuant to the provisions of this Agreement will be held by Buyer for its own
account and not with a view to, or for resale in connection with, the
distribution thereof.
7.5 LITIGATION. There is no pending action or Proceeding that has been
commenced against Buyer and that may have the effect of preventing, delaying, or
making illegal the Contemplated Transactions and, to the best knowledge of
Buyer, no such action or Proceeding has been Threatened.
8. CONDUCT OF BUSINESS PENDING CLOSING. The Company and the Selling
Stockholders represent, warrant and agree with respect to the Company that, from
the date hereof and pending the Closing and except as otherwise approved in
writing by Buyer:
8.1 BUSINESS IN THE ORDINARY COURSE. The Company shall refrain from
engaging in transactions other than in the ordinary course of business
consistent with past practice. The Company shall operate its business in
accordance and in compliance in all material respects with all applicable laws,
ordinances, rules or regulations or orders, including, without limitation
Environmental Laws, and all permits, authorizations, consents and approvals. The
Company shall maintain all permits and licenses in effect and, if necessary,
make all appropriate filings for the renewal of any permits or licenses. The
Company shall also refrain from entering into any transaction involving capital
expenditures or commitments therefor (including any borrowings in connection
with such transaction) of more than $15,000, individually, or $50,000 in the
aggregate, or the disposal of any properties or assets (other than inventory in
the ordinary course) with a value of more than $10,000, individually, or
$25,000, in the aggregate.
8.2 ACCOUNTING AND CREDIT CHANGES. The Company shall not make any
change in its accounting procedures and practices or its credit criteria from
those in existence at December 31, 1998.
8.3 CAPITALIZATION, OPTIONS, DIVIDENDS AND PAYMENTS. No change shall be
made in the Articles of Incorporation or By-laws of the Company; the Company
shall not issue or reclassify or alter any shares of its outstanding or unissued
capital stock or other securities; and the Company shall not grant options,
warrants or other rights of any kind to purchase any of its
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securities, or agree to issue any shares of its capital stock or any other
securities, or purchase, redeem or otherwise acquire for consideration any
shares of its capital stock or any other securities or, except as set forth
on Schedules 6.23 hereto, declare, pay, set aside or make any dividends or
other distributions or payments in respect of its capital stock or any other
securities, or make any payments to officers of the Company. The Selling
Stockholders shall not sell or transfer any of the Company Stock.
8.4 ENCUMBRANCE OF ASSETS. No Encumbrance on any of the properties or
assets of the Company shall be made other than in the ordinary course of
business consistent with past practice.
8.5 REAL PROPERTY ACQUISITIONS, DISPOSITIONS AND LEASES. The Company
shall refrain from acquiring or agreeing to acquire, or disposing or agreeing to
dispose of, real estate and from entering into or agreeing to enter into
leases of real estate or equipment, and from creating any modification,
amendment or termination of the leases for the leased Real Property.
8.6 LITIGATION DURING INTERIM PERIOD. The Company shall promptly advise
Buyer in writing of the commencement or threat against the Company of (i) any
Tax audit, and (ii) any claim, litigation or Proceeding not covered by insurance
when the amount claimed is in any individual claim, litigation or Proceeding in
excess of $5,000 or, in the aggregate, $25,000.
8.7 ACCESS. Buyer, Buyer's potential financing sources and their
respective officers, directors, attorneys, accountants and representatives shall
be permitted to inspect and examine the property, books and records of the
Company, and its title to any real estate, and such officers, directors,
attorneys, accountants and representatives shall be afforded access to such
property, books, records and titles, and the Company and the Selling
Stockholders will upon request furnish Buyer with any information reasonably
required with respect to the Company's properties, assets and business and will
provide Buyer with copies of any Contract, document or instrument listed in any
Schedule hereto.
8.8 GOOD WILL. The Company shall use its best efforts to preserve the
Company's business, organization and relationships with its respective vendors,
customers and suppliers and others having business relations with it.
8.9 LOANS. The Company shall not (a) make any loans or advances to, or
assume, guarantee or otherwise become liable for any indebtedness, except that
the Company may continue to borrow against its existing line of credit in the
ordinary course of its business, or other obligations of any stockholder,
director, officer, partner or employee of the Company; or (b) incur any
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indebtedness other than in the ordinary course of business consistent with past
practice.
8.10 EMPLOYEE MATTERS. The Company shall not make, amend or enter into
any employment Contract other than hiring hourly at will employees in the
ordinary course of business.
8.11 PRESERVATION OF BUSINESS AND ASSETS. The Company shall preserve
intact, for the ongoing benefit of Buyer after the Closing, the Company's
business and assets, including without limitation, all permits, licenses and
authorizations, and the Intellectual Property Rights and trade secrets of the
Company. The Company shall protect and maintain all patents, copyrights,
trademarks and trade secrets of the Company, and all registrations and
applications for registration therefor. The Company shall maintain its equipment
in proper condition in accordance with all applicable laws, permits and
warranties, and shall maintain all records required by law, including, without
limitation, tank monitoring permits.
8.12 AFFILIATE TRANSACTIONS. The Company shall not enter into any
transaction with any of the Persons described in Section 5.2.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. All obligations of
Buyer under this Agreement are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES. The Company's and the Selling
Stockholders' representations and warranties contained in this Agreement and the
Related Agreements shall be true and correct at and as of the time of Closing as
though such representations and warranties were made at and as of such time
(except to the extent that they are stated therein to be true as of some other
date). The Selling Stockholders shall have delivered to Buyer a certificate
dated the Closing Date to such effect.
9.2 COMPLIANCE WITH AGREEMENTS. The Company and the Selling
Stockholders shall have performed or complied with all agreements and conditions
required by this Agreement to be performed or complied with by them prior to or
at the Closing. The Selling Stockholders shall have delivered to Buyer a
certificate dated the Closing Date to such effect.
9.3 OPINION OF COUNSEL. The Selling Stockholders and the Company shall
have delivered to Buyer an opinion of their counsel, Minor & Brown P.C. dated
the Closing Date in form and substance satisfactory to Buyer.
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9.4 MATERIAL DAMAGE. The business, properties and assets of the Company
shall not have been and shall not be threatened to be materially adversely
affected in any way as a result of fire, explosion, earthquake, disaster,
accident, labor dispute, flood, drought, embargo, riot, civil disturbance,
uprising, activity of armed forces or act of God or public enemy.
9.5 APPROVAL OF COUNSEL. All steps to be taken and all resolutions,
papers and documents to be executed, and all other legal matters in connection
with the purchase and sale of the Company Stock and related matters, including
compliance with applicable state securities laws, shall be subject to the
reasonable approval of Buyer's counsel.
9.6 RESIGNATIONS. Each director of the Company requested to resign by
Buyer shall have executed and delivered to Buyer resignation letters in form and
substance satisfactory to Buyer.
9.7 CERTIFICATES. The Company shall have furnished to Buyer (a) at
least ten (10) days prior to the Closing Date, copies, certified by the
Secretary of State of the State of Colorado, as of a date not more than thirty
(30) days prior to the Closing Date, of each of the Articles of Incorporation of
the Company and each of the Subsidiaries, and all amendments thereto, (b)
copies, certified by the Secretary of the Company, as of the Closing Date, of
the By-Laws of the Company, (c) certificates of good standing issued with
respect to the Company by the appropriate governmental and taxing officials of
the States of Colorado, as of a date not more than ten (10) days prior to the
Closing Date, accompanied by bring-down certificates dated as of the Closing
Date, and (d) a certificate of the Secretary of the Company relating to the
incumbency and corporate proceedings in connection with the consummation of the
Contemplated Transactions, and the absence of changes in the Company's Articles
of Incorporation and By-Laws.
9.8 EARN-OUT AGREEMENT. The Selling Stockholders shall have executed
and delivered to Buyer the Earn-Out Agreement, substantially in the form of
Exhibit B hereto.
9.9 SATISFACTION OF OBLIGATIONS AND RELEASE OF ENCUMBRANCES. Except as
set forth on Schedule 9.9 hereof, the Company shall have satisfied in full (i)
all of its indebtedness and guarantees of indebtedness for money borrowed
outstanding and all prepayment penalties, accrued interest and other obligations
relating thereto, including, without limitation, all real estate debt, contracts
for deed and notes payable to stockholders, (ii) all of its capitalized lease
obligations and all prepayment penalties, accrued interest and other obligations
relating thereto, and (iii) all of its obligations pursuant to mortgages and all
prepayment penalties, accrued interest and other
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obligations relating thereto. Buyer shall have received satisfactory evidence
of the satisfaction of each of the Liabilities set forth in this Section 9.9
and of the release of all Encumbrances on assets of the Company.
9.10 LITIGATION. There shall be no pending action or Proceeding
commenced against the Company or the Selling Stockholders that may have the
effect of preventing, delaying or making illegal the Contemplated Transactions
and no such action or Proceeding shall have been Threatened.
9.11 MATERIAL ADVERSE CHANGE. There shall not be any material adverse
change in the business, operations, prospects, properties, assets, Liabilities
or condition, financial or otherwise, of the Company.
9.12 ACCRUED COMPENSATION. The Company shall have made all bonus or
other extraordinary payments to employees accrued as of the Closing Date in
respect of compensation or otherwise. Buyer shall have received acknowledgments
from such employees of satisfaction and discharge of all such payments.
9.13 LEASES. All leases to which the Company is a party and which
expire prior to the Closing Date shall have been renegotiated to Buyer's
satisfaction. The Company shall, upon the request of Buyer, deliver estoppels in
form and substance reasonably satisfactory to Buyer.
9.14 EMPLOYMENT AGREEMENTS. Donald Sloane, Loren Sloane, David Hilliard
and Steve Dobler shall have executed and delivered to Buyer Employment and
Non-Competition Agreements in form and substance satisfactory to Buyer.
9.15 DUE DILIGENCE. Buyer shall be satisfied in its sole discretion as
to the results of its due diligence investigation of the business, properties,
assets and Liabilities of the Company, including, without limiting the
generality of the foregoing, the results of the Environmental Review.
9.16 ESCROW AGREEMENT. The Selling Stockholders shall have executed and
delivered to Buyer the Escrow Agreement.
9.17 RIGHTS OF FIRST REFUSAL. The Company shall have executed and
delivered to Buyer evidence, satisfactory to Buyer in its sole discretion, of
the elimination of rights of first refusal to purchase its capital stock from
the Selling Stockholders.
9.18 NOTIFICATIONS AND THIRD PARTY CONSENTS. The Company shall have
notified any Person that leases equipment to the Company as to the sale of the
Company Stock if so required by the
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terms of any equipment lease to which the Company is a party. Buyer shall
have received satisfactory evidence of such notifications. Buyer shall have
received satisfactory evidence of the receipt by the Selling Stockholders of
all permits, authorizations, consents, approvals and waivers from third
parties and governmental, regulatory or administrative authorities necessary
to permit the consummation of the Contemplated Transactions and the operation
of the business of the Company, including, without limitation, the consents
set forth on Schedules 6.4 and 6.13 hereto. Buyer shall have received
satisfactory evidence that all notices to, and filings and registrations
with, all governmental agencies required to be made by the Selling
Stockholders shall have been made. Buyer agrees to cooperate with the Selling
Stockholders in connection with procuring any permits or authorizations that
are required to be executed by Buyer.
9.19 FEES AND EXPENSES. Buyer shall have received satisfactory evidence
that all fees and expenses of the Selling Stockholders and the Company relating
to the Contemplated Transactions have been paid in full.
9.20 HART-SCOTT-RODINO ACT FILINGS. Any person required in connection
with the Contemplated Transactions to file a notification and report form in
compliance with the HSR Act shall have filed such form and the applicable
waiting period with respect to each such form (including any extension thereof
by reason of a request for additional information) shall have expired or been
terminated.
9.21 FIRPTA CERTIFICATE. The Selling Stockholders shall have executed
and delivered to Buyer a certificate containing the information, under penalties
of perjury, set forth in Treasury Regulation Section 1.1445-2(b)(2)(i).
9.22 NET WORKING CAPITAL. The Company shall have Net Working Capital in
excess of $1.1 million. The Selling Stockholders shall have delivered to Buyer a
certificate dated the Closing Date to such effect.
10. CONDITIONS PRECEDENT TO THE SELLING STOCKHOLDERS' OBLIGATIONS. All
obligations of the Selling Stockholders under this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES. Buyer's representations and
warranties contained in this Agreement and the Related Agreements shall be true
and correct at and as of the time of Closing as though such representations and
warranties were made at and as of such time. Buyer shall have delivered to the
Selling Stockholders a certificate dated the Closing Date and
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signed by its President or a Vice President to such effect.
10.2 COMPLIANCE WITH AGREEMENT. Buyer shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing. Buyer shall have delivered to
the Selling Stockholders a certificate dated the Closing Date and signed by its
President or a Vice President to such effect.
10.3 OPINION OF COUNSEL. Buyer shall have delivered to the Selling
Stockholders an opinion of Buyer's counsel dated the Closing Date, in form and
substance satisfactory to the Selling Stockholders.
10.4 HART-SCOTT-RODINO ACT FILINGS. Any person required in connection
with the Contemplated Transactions to file a notification and report form in
compliance with the HSR Act shall have filed such form and the applicable
waiting period with respect to each such form (including any extension thereof
by reason of a request for additional information) shall have expired or been
terminated.
10.5 EARN-OUT AGREEMENT. Buyer shall have executed and delivered to the
Selling Stockholders the Earn-Out Agreement, substantially in the form of
Exhibit B hereto.
10.6 EMPLOYMENT AGREEMENTS. Buyer shall have executed and delivered
Employment and Non-Competition Agreements referred to in Section 9.14 hereof.
10.7 THIRD PARTY CONSENTS. The Selling Stockholders shall have received
evidence of the receipt by Buyer of all consents set forth on Schedule 7.2
hereof.
11. BROKER AND FINDER FEES. The Company and the Selling Stockholders
represent and warrant to Buyer that they have not engaged or dealt with any
broker or other Person who may be entitled to any brokerage fee or commission in
respect of the execution of this Agreement or the consummation of the
transactions contemplated hereby. Buyer represents and warrants to the Company
and the Selling Stockholders that neither it nor any of its corporate affiliates
has engaged or dealt with any broker or other Person who may be entitled to any
brokerage fee or commission in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby.
Each of the parties hereto shall indemnify and hold the others harmless
against any and all claims, losses, Liabilities or expenses which may be
asserted against such other parties as a result of such first mentioned party's
dealings, arrangements or agreements with any such broker or Person.
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12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by Buyer, the Company and the Selling Stockholders in this
Agreement or pursuant hereto shall survive the Closing until the date which is
the second anniversary date of the Closing, except for (a) the representations
and warranties (i) contained in Section 6.20 and (ii) relating to Taxes of all
kinds, which shall, in each case, survive the Closing until claims based thereon
shall have been barred by the relevant statutes of limitations, and (b) the
representations and warranties contained in Section 5.1(a) which shall
survive the Closing indefinitely; provided, that in the event that any claim
for a Breach of a representation or warranty has been asserted prior to the
last day such representation or warranty would otherwise survive pursuant to
this Section 12 such representation and warranty shall survive until the
final disposition of such claim.
13. TERMINATION.
13.1 TERMINATION EVENTS. This Agreement may, by written notice given
prior to or at the Closing, be terminated:
(i) By Buyer if a material Breach of any of the
representations, warranties, covenants or obligations of the Selling
Stockholders or the Company set forth in this Agreement has been
committed by the Selling Stockholders or the Company and such Breach
has not been (1) waived by Buyer, or (2) cured by the Company or the
Selling Stockholders, as the case may be, within ten (10) days after
receipt of written notice thereof to the Selling Stockholders from
Buyer;
(ii) By Buyer if the Selling Stockholders fail to acquire at
least one hundred percent (100%) of the issued and outstanding shares
of capital stock of the Company;
(iii) By the Selling Stockholders if a material Breach of any
of the representations, warranties, covenants or obligations of Buyer
set forth in this Agreement has been committed by Buyer and such Breach
has not been (1) waived by the Selling Stockholders, or (2) cured by
Buyer within ten (10) days after receipt of written notice thereof from
the Selling Stockholders;
(iv) By mutual written consent of Buyer and the Selling
Stockholders;
(v) By Buyer on or before May 18, 1999, if it fails to obtain
a commitment on terms satisfactory to Buyer in its sole discretion to
procure the financing required to consummate the Contemplated
Transactions; or
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(vi) By either Buyer or the Selling Stockholders if the
Closing has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before June 15, 1999, or such
later date as the parties may agree upon in writing.
13.2 EFFECT OF TERMINATION. Anything to the contrary set forth in this
Agreement notwithstanding, the sole and exclusive right and remedy of any of the
parties hereto for and with respect to any Breach of a representation, warranty,
covenant, obligation or agreement of any of the other parties hereto under this
Agreement or any of the Related Agreements that occurs before the Closing and
with respect to which any of the parties hereto terminates this Agreement shall
be to terminate this Agreement pursuant to and in accordance with the provisions
of this Section 13; provided, however, that if this Agreement is terminated
because (a) Buyer terminates this Agreement pursuant to Section 13(i) hereof,
(b) Buyer terminates this Agreement pursuant to Section 13.1(ii) hereof, or
(c) the Selling Stockholders terminate this Agreement or otherwise declines
to close the Contemplated Transactions when, in the case of this clause (c),
all conditions set forth in Section 10 hereof shall have been satisfied on or
prior to the last date under this Agreement when such conditions could have
been satisfied, Buyer shall, in any such case, be entitled to receive from
the Company and the Selling Stockholders an amount equal to all reasonable
out-of-pocket fees and expenses (including fees and expenses of its counsel)
incurred by Buyer and its affiliates in connection herewith without prejudice
to the right of Buyer to pursue any equitable remedy; provided, further, that
if this Agreement is terminated because (a) the Selling Stockholders
terminate this Agreement pursuant to Section 13.1(iii) hereof, or (b) Buyer
terminates this Agreement or otherwise declines to close the Contemplated
Transactions when, in the case of this clause (b), all conditions set forth
in Section 9 hereof shall have been satisfied on or prior to the last date
under this Agreement when such conditions could have been satisfied, the
Selling Stockholders shall, in any such case, be entitled to receive from
Buyer an amount equal to all reasonable out-of-pocket fees and expenses
(including fees and expenses of its counsel) incurred by the Selling
Stockholders or the Company in connection herewith.
14. INDEMNIFICATION.
(a) Each Selling Stockholder shall indemnify and hold harmless
Buyer and its officers, directors, employees, stockholders, representatives and
agents, from and against any claims, damages, losses, Liabilities, Taxes, fines,
penalties, costs and expenses (including, without limitation, settlement
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costs, any reasonable legal, accounting or other expenses incurred in
connection with investigating or defending any actions or Threatened actions
and court costs) (a "Buyer Loss" or "Buyer Losses") sustained or required to
be paid by reason of, arising out of or caused by (i) any misrepresentation
or Breach of any representation or warranty made by the Selling Stockholders
or the Company in this Agreement or any Related Agreement, or (ii) any Breach
of or failure to perform any covenant, agreement or obligation of the Selling
Stockholders or the Company contained in this Agreement or any Related
Agreement, (iii) whether or not disclosed on any Schedule hereto, any income
Taxes, imposed by any Taxing authority, with respect to any period ending on
or prior to the Closing Date, or allocated to the Selling Stockholders
pursuant to Section 15(a) hereof, for which Buyer or any affiliate of Buyer,
including the Company, is or becomes liable or which results in a lien on any
assets of the Company, whether or not known to Buyer at the Closing
(including, without limitation, any income Taxes owed for the Tax periods of
the Company ending as of the Closing Date), (iv) whether or not disclosed on
any Schedule hereto, any Taxes of the Company of any kind, imposed by any
Taxing authority, with respect to any period ending on or prior to the
Closing Date for which Buyer or any affiliate of Buyer, including the
Company, is or becomes liable or which results in a lien on any asset of the
Company, whether or not known to Buyer at Closing, to the extent the amount
disclosed to Buyer prior to the Closing Date as the amount properly accrued
or accruable for each such Tax item was not adequate to satisfy the actual
payment of any such Taxes or to the extent any estimated or periodic payments
due on or prior to the Closing Date with respect to any such Taxes is or is
later determined not to be sufficiently paid, (v) whether or not disclosed on
any Schedule hereto, any audits or examinations, including, without
limitation, the reopening of past audits, made in respect of Taxes or Plans
relating to any period ending on or prior to the Closing Date or any
penalties asserted by, or fees under voluntary compliance programs payable
to, the Internal Revenue Service or Department of Labor, including, without
limitation, for failure to file Forms 5500 on any due date for such forms
occurring prior to the Closing Date, (vi) whether or not disclosed on any
Schedule hereto, any off-site disposal of Hazardous Materials, or (vii) the
litigation described on Schedule 6.6.
(b) Buyer shall indemnify and hold harmless each Selling
Stockholder from and against any claims, damages, losses, Liabilities,
Regulatory Actions, Remediation costs, injuries to Persons, property or natural
resources, fines, penalties, costs and expenses (including, without limitation,
settlement costs, any reasonable legal, accounting or other expenses incurred in
connection with investigating or defending any actions or Threatened actions and
court costs) (a "Seller Loss" or "Seller
-39-
Losses") sustained or required to be paid by reason of, arising out of or
caused by (i) any misrepresentation or Breach of any representation or
warranty made by Buyer in this Agreement or any Related Agreement, or (ii)
any Breach of any covenant, agreement or obligation of Buyer contained in
this Agreement or any Related Agreement.
(c) (i) In the event that any indemnified party is made a
defendant in or party to any claim, action, suit or Proceeding, judicial or
administrative, instituted by any third party for Losses, or otherwise receives
any demand from any third party for Losses (any such third party claim, action,
suit or Proceeding being referred to as a "Claim"), the indemnified party
(referred to in this clause (c)(i) as the "notifying party") shall give the
indemnifying party prompt notice thereof. The failure to give such notice shall
not affect whether an indemnifying party is liable for reimbursement unless such
failure has resulted in the loss of substantive rights with respect to the
indemnifying party's ability to defend such Claim, and then only to the extent
of such Loss. The indemnifying party shall be entitled to contest and defend
such Claim; provided, that the indemnifying party (A) diligently contests and
defends such Claim, and (B) acknowledges in writing that it is obligated to
provide indemnification with respect to such Claim. Notice of the intention so
to contest and defend shall be given by the indemnifying party to the notifying
party within twenty (20) business days after the notifying party's notice of
such Claim (but, in all events, at least five (5) business days prior to the
date that an answer to such Claim is due to be filed). Such contest and defense
shall be conducted by reputable attorneys employed by the indemnifying party.
The notifying party shall be entitled at any time, at its own cost and expense
(which expense shall not constitute a Loss unless the notifying party reasonably
determines that the indemnifying party is not adequately representing or,
because of a conflict of interest, may not adequately represent, the interests
of the indemnified parties, and only to the extent that such expenses are
reasonable), to participate in such contest and defense and to be represented by
attorneys of its or their own choosing. If the notifying party elects to
participate in such defense, the notifying party will cooperate with the
indemnifying party in the conduct of such defense. Neither the notifying party
nor the indemnifying party may concede, settle or compromise any Claim without
the consent of the other party, which consent will not be unreasonably withheld.
Notwithstanding the foregoing, if the indemnifying party fails to acknowledge in
writing its obligation to provide indemnification in respect of such Claim, then
the notifying party alone shall be entitled to contest, defend and settle such
Claim in the first instance (in which case, expenses incurred in connection
therewith shall constitute a Loss) and, only if the
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notifying party chooses not to contest, defend or settle such Claim, the
indemnifying party shall then have the right to contest and defend (but not
settle) such Claim.
(ii) In the event any indemnified party should have a
claim against any indemnifying party that does not involve a Claim, the
indemnified party shall deliver a notice of such claim with reasonable
promptness to the indemnifying party. Such notice shall state that the
indemnifying party has thirty (30) days to dispute the claim or such claim
shall be conclusively deemed a liability of such party. The failure to give
such notice shall not affect whether an indemnifying party is liable for
reimbursement unless such failure has resulted in the loss of substantive
rights with respect to the indemnifying party's ability to defend such Claim,
and then only to the extent of such Loss. If the indemnifying party notifies
the indemnified party that it does not dispute the claim described in such
notice or fails to notify the indemnified party within thirty (30) days after
delivery of such notice by the indemnified party whether the indemnifying
party disputes the claim described in such notice, the Loss in the amount
specified in the indemnified party's notice will be conclusively deemed a
liability of the indemnifying party and the indemnifying party shall pay the
amount of such Loss to the indemnified party on demand.
(iii) After the Closing, the rights set forth in this
Section 14 shall be the indemnified parties' sole and exclusive remedies
against the other for misrepresentations or Breaches of covenants contained
in this Agreement. Notwithstanding the foregoing, nothing herein shall
prevent any of the indemnified parties from bringing an action based upon
allegations of fraud, bad faith or willful misconduct in connection with this
Agreement. In the event action is brought in accordance with the preceding
sentence of this clause (iii), the prevailing party's attorneys' fees and
costs shall be paid by the nonprevailing party.
(d) In connection with any indemnification claim by Buyer
under this Agreement, Buyer (except as set forth in the next sentence) shall be
required to seek recovery for Losses out of the funds held in the Escrow Fund
(as defined in the Escrow Agreement) pursuant to the Escrow Agreement until such
funds are exhausted and is entitled to seek such recovery regardless of whether
such Losses are attributable to the actions or Breaches of the Company or any
Selling Stockholders. Upon exhaustion of the funds held in the Escrow Fund,
Buyer may then seek additional recovery from the Selling Stockholders; provided,
however, that with respect to any such additional recovery, each of the Selling
Stockholders shall not be liable in an amount which, if added to all other
amounts paid as indemnification payments, would exceed
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the net proceeds received by such Selling Stockholders from the sale of their
shares of Company Stock, including proceeds used to pay the Terminating
Liabilities plus payments made pursuant to the Earn-Out Agreement, except as
set forth in the next sentence. Buyer shall not be entitled to pursue any
indemnification claim or recovery against the Selling Stockholders beyond the
foregoing limit, except to the extent any such claim or recovery is based
upon the Selling Stockholders (i) Breach of a representation and warranty
made in Section 5.1(a), or (ii) fraud, bad faith or willful misconduct in
connection with this Agreement.
(e) The obligations set forth in this Section 14 shall be
unconditional and absolute. In the event of a conflict between the provisions of
this Section 14 and any other provisions of this Agreement, the provisions of
Section 14 shall control. The Selling Stockholders shall not have any
indemnification obligations under this Section 14 for Losses until such time
as total Losses for which Buyer is otherwise entitled to indemnification
hereunder equal $50,000 in the aggregate, whereafter the Selling Stockholders
shall be liable for all such Losses in excess thereof, subject to the
limitations set forth in Section 14(d) hereof. Buyer shall not have any
indemnification obligations under this Section 14 for Losses until such time
as total Losses for which the Selling Stockholders are otherwise entitled to
indemnification hereunder equal $50,000 in the aggregate, whereafter Buyer
shall be liable for all such Losses in excess thereof.
(f) The indemnification obligations set forth in this Section
14 shall survive any assignment or other transfer by Buyer or any of the Selling
Stockholders and, except as otherwise set forth in Section 14(a) or (b) hereof,
shall remain in full force and effect regardless of whether Losses are incurred
before or after the Time of Possession.
(g) The amount of any Loss subject to indemnification
hereunder shall be calculated net of any insurance proceeds received or
receivable by Buyer or Company on account of such loss. Buyer and the Company
shall seek full recovery under any insurance policies covering any Loss to the
same extent as they would if such Loss were not subject to indemnification
hereunder; provided, that such Loss is covered by an insurance carrier that is
not an insurance carrier of Buyer. The recipient of an indemnification payment
hereunder shall refund to the Selling Stockholders the amount of any Tax Benefit
directly attributable to such payment within fifteen (15) days of the receipt or
realization of such Tax Benefit. "Tax Benefit" shall mean the present value of
any refund of Taxes paid or reduction in the amount of Tax which otherwise would
have been paid currently using the actual average tax rate for the then
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current tax year applicable to the recipient of such payment. In the case of
a reduction in the amount of Tax which otherwise would have been paid, the
Tax Benefit for purposes of this section shall be deemed to be realized on
the date the recipient of such payment files its tax return for the applicable
taxable year, including valid and proper extensions of such filing date.
(h) All indemnification payments made hereunder shall be
treated by all parties as an adjustment to the Purchase Price for tax reporting
purposes, subject to current and future applicable Tax laws.
15. TAX MATTERS.
(a) The Selling Stockholders shall be responsible for paying
all income Tax Liabilities of the Company in respect of the Company or arising
from operations of the Company prior to and including the Closing Date. The
Selling Stockholders shall be responsible for paying all other outstanding Tax
Liabilities of the Company as of the Closing Date to the extent any of such Tax
Liabilities are not (i) adequately accrued on the Financial Statements of the
Company as of March 31, 1999 and (ii) with respect to later periods prior to
Closing Date, accrued on the Financial Statements of the Company in a manner
consistent with GAAP and prior practice of the Company, and disclosed to Buyer
four (4) days prior to the Closing Date.
(b) After the Closing Date, the Company, Buyer and the Selling
Stockholders shall make available to the others, as reasonably requested, all
information, records or documents relating to Tax Liabilities or potential Tax
Liabilities of the Company for all periods prior to or including the Closing
Date and shall preserve all such information, records and documents until the
expiration of any applicable statute of limitations or extensions thereof.
Notwithstanding any other provisions hereof, each party shall bear its own
expenses in complying with the foregoing provisions.
(c) (i) The Selling Stockholders shall estimate, in good faith
and based on the most recently available financial information, the amount
necessary to satisfy the Tax Liabilities of the Company that are owed or will be
owing to any Taxing authority for any taxable periods of the Company ending on
or before the Closing Date that are allocated to the Selling Stockholders
pursuant to Section 15(a) hereof (the "Unpaid Taxes"), excluding Tax Liabilities
that are included in the calculation of the adjustment described in Section 3.2
hereof (the amount so allocated to the Selling Stockholder defined as the
"Estimated Tax Amount"). Buyer shall be notified of the Estimated Tax Amount on
the Closing Date.
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(ii) The Escrow Agent shall pay the Company an amount
equal to the Estimated Tax Amount out of the Payment Fund (as defined in the
Escrow Agreement) as set forth in Schedule B to the Escrow Agreement.
(iii) If the Estimated Tax Amount actually paid by
the Selling Stockholder is insufficient to satisfy all of the Company's Tax
Liabilities for the Unpaid Taxes, the amount necessary to so satisfy such Tax
Liabilities shall be paid by the Selling Stockholders to Buyer pursuant to
Section 14(a)(ii), (iii) and (iv) hereof. If the amount necessary to satisfy
all of the Company's Tax Liabilities for the Unpaid Taxes as adjusted pursuant
to Section 15(c)(i) is less than the Estimated Tax Amount actually paid by the
Selling Stockholder, the Company shall pay the Selling Stockholders such excess
upon the filing, including extensions, of the last of the returns for such Tax
periods. The Company shall promptly notify the Selling Stockholders of such
filing.
(iv) The Company shall bear the cost and shall
control the preparation and filing of all Tax Returns due on or after the
Closing Date, with reasonable rights of review granted to the Selling
Stockholders, subject to the cooperation provisions of Section 15(b) hereof.
16. ENVIRONMENTAL MATTERS.
The Company and the Selling Stockholders shall provide full
access to the Real Property, the Leased Real Property and the equipment and
operations located thereon (the "Properties"), and shall provide the reasonable
cooperation of the Company's personnel in connection with the performance of an
environmental review of the Properties (the "Environmental Review"). Buyer
shall, at Buyer's sole cost, expense and option, retain an environmental
engineering consultant (the "Environmental Consultant") to perform the
Environmental Review. The Environmental Review, if performed at Buyer's option,
shall include, but not be limited to, (i) a review of relevant environmental
agency files, correspondence between environmental agencies and the Company,
as the case may be, in connection with the Properties, environmental permits
and notifications, previous environmental audits and inspection reports
concerning the Properties, and (ii) a physical inspection of the Properties.
The Environmental Review may also include sampling of soil, surface or ground
water and concrete or wall material at the Properties and integrity tests on
each underground storage tank system (including lines, pumps, valves and
other equipment), if deemed necessary or appropriate by Buyer, in
consultation with the Environmental Consultant. On or before ten days prior
to the Closing Date, the Environmental Consultant shall deliver to the
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Selling Stockholders and Buyer a report setting forth any environmental
conditions discovered during the Environmental Review.
17. EXPENSES. The Selling Stockholders shall bear their expenses
incurred in connection with this Agreement and the Related Agreements and the
transactions contemplated hereby and thereby. The Selling Stockholders agree to
pay all stamps and/or transfer taxes that become due and payable as a result of
the transactions contemplated by this Agreement.
18. ANNOUNCEMENTS. No announcements of the transactions contemplated
hereby shall be made to the general public by any of the parties hereto or their
respective officers, directors, employees, advisors, agents or representatives.
Buyer and the Company will cooperate with each other as to the timing and
content of any announcement of the transactions contemplated hereby to any
employees, customers or suppliers of the Company.
19. FURTHER ACTIONS AND ASSURANCES. Buyer, the Selling Stockholders and
the Company will execute and deliver any and all documents, and will cause any
and all other action to be taken, either before or after Closing, which may be
necessary or proper to effect or evidence the provisions of this Agreement and
the transactions contemplated hereby.
20. COUNTERPARTS. This Agreement may be executed in several
counterparts each of which is an original and all of which taken together shall
constitute a single instrument.
21. CONTENTS OF AGREEMENT; PARTIES IN INTEREST, ETC. This Agreement
sets forth the entire understanding of the parties. Any previous agreements or
understandings between the parties regarding the subject matter hereof,
including, without limitation, the letter of intent dated as of March 18, 1999
and the Confidentiality Agreement dated as of April 8, 1999 and any amendments
thereto, are merged into and superseded by this Agreement. All representations,
warranties, covenants, terms, conditions, obligations and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and permitted assigns of the Selling Stockholders,
the Company and Buyer. Neither this Agreement nor any rights, interests, or
obligations hereunder may be assigned by any party without the prior written
consent of all other parties hereto.
22. NEW YORK LAW TO GOVERN; VENUE. THIS AGREEMENT SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES AGREE TO SUBMIT TO THE
PERSONAL AND EXCLUSIVE
-45-
JURISDICTION OF THE STATE AND FEDERAL COURTS SERVING DENVER, COLORADO WITH
RESPECT TO THE ENFORCEMENT OR INTERPRETATION OF THIS AGREEMENT OR THE
PARTIES' OBLIGATIONS HEREUNDER. EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE
SERVICE OF ANY AND ALL PROCESS IN ANY ACTION OR PROCEEDING BY THE MAILING OF
COPIES OF SUCH PROCESS BY REGISTERED OR CERTIFIED MAIL TO SUCH PARTY AT THE
ADDRESS SPECIFIED IN SECTION 25 HEREOF. NOTHING IN THIS SECTION SHALL AFFECT
THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULL EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
23. SECTION HEADINGS AND GENDER. The section headings herein have been
inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof. The use of the masculine pronoun
herein when referring to any party has been for convenience only and shall be
deemed to refer to the particular party intended regardless of the actual gender
of such party.
24. SCHEDULES AND EXHIBITS. All Schedules and Exhibits referred to in
this Agreement are intended to be and are hereby specifically made a part of
this Agreement.
25. NOTICES. All notices, requests and other communications which are
required or permitted hereunder shall be sufficient if given in writing and
delivered personally or by registered or certified mail, postage prepaid, or by
facsimile transmission (with a copy simultaneously sent by registered or
certified mail, postage prepaid), as follows (or to such other address as shall
be set forth in a notice given in the same manner):
If to Buyer to: Atrium Companies, Inc.
1341 W. Mockingbird Lane
Suite 1200W
Dallas, Texas 75247
Facsimile: (214) 630-5058
Attn: Jeff L. Hull
and
Atrium Companies, Inc.
c/o Ardshiel, Inc.
-46-
230 Park Avenue - Suite 2527
New York, New York 10169
Facsimile: (212) 972-1809
Attn: Daniel T. Morley
James G. Turner
Copies to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Facsimile: (212) 319-4090
Attn: Joel M. Simon, Esq.
Marie Censoplano, Esq.
If to the Selling Stockholders:
Donald Sloane
5380 E. Sanford Circle
Englewood, Colorado 80110
David Hilliard
17555 E. Prentice Circle
Aurora, Colorado 80015-2460
Copies to: Minor & Brown PC
650 South Cherry Street, Suite 1100
Denver, Colorado 80246-1813
Facsimile: (303) 320-6330
Attn: Laura Breaker
If to the Company:
Champagne Industries, Inc.
12775 E. 38th Avenue
Denver, Colorado 80239
Facsimile: (303) 375-1212
Attn: Donald Sloane
Copies to: Minor & Brown PC
650 South Cherry Street, Suite 1100
Denver, Colorado 80246-1813
Facsimile: (303) 320-6330
Attn: Laura Breaker
26. CONFIDENTIAL INFORMATION. Notwithstanding any termination of this
Agreement, all information disclosed by one party ("Discloser") to the other
party ("Recipient") or learned
-47-
by the Recipient from the Discloser will be considered "Confidential
Information" of the Discloser. Notwithstanding the foregoing, Confidential
Information shall not include information that (i) is now or subsequently
becomes generally known or available to the public through no breach on the
part of Recipient, (ii) Recipient can demonstrate was in its possession prior
to disclosure to Recipient by Discloser, (iii) is independently developed by
Recipient without the use of any Confidential Information, (iv) Recipient
obtains from a third party who has the right to transfer or disclose it, or
(v) is required to be disclosed by any judicial or governmental request,
requirement or order. Except to the extent contemplated under Section 18
hereof, the existence of this Agreement and its contents shall be considered
"Confidential Information," but disclosure may be made on a need to know
basis to the officers, directors, advisors, agents, and representatives of
the parties in connection with facilitating the consummation of the
Contemplated Transactions, including any financing thereof. Subsequent to the
Closing, the parties may disclose the existence of this Agreement and its
contents for any legitimate business purpose. For a period of three years
from the date of this Agreement, Recipient, its corporate affiliates and
representatives, will hold all Confidential Information of Discloser in
confidence; provided that nothing shall prohibit the Company from disclosing
any information about itself or its business subsequent to the Closing or the
termination of this Agreement, regardless of the source of such information.
27. CONSTRUCTION AND INTERPRETATION. This Agreement has been negotiated
by the undersigned and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement, or any
provision of this Agreement, against the party drafting this Agreement will not
apply in any construction or interpretation of this Agreement.
28. ANTI-TRUST MATTERS. Buyer, the Company and the Selling Stockholders
will cause to be filed, and will cooperate with each other in connection with,
all filings required to be made by the parties under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), or any successor law,
regulations and rules promulgated pursuant to the HSR Act or any successor law,
and shall observe the applicable waiting period (including any extensions
thereof by reason of a request for additional information). Buyer, the Company
and the Selling Stockholders will coordinate all filings made pursuant to the
HSR Act so as to present the filings to the Federal Trade Commission and the
Department of Justice at the time selected by the mutual agreement of the
Selling Stockholders and Buyer and to avoid substantial errors or inconsistences
between the two in the description of the transaction. Buyer shall pay all fees
payable
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to the Federal Trade Commission in connection with the filings required to be
made pursuant to the HSR Act.
29. ASSIGNMENT OF CERTAIN RIGHTS. The Selling Stockholders hereby
transfer, convey and assign to Buyer and the Company all of their rights to
receive any endorsements necessary in order for the Selling Stockholders to
become bona fide purchasers with respect to Company Stock purchased by the
Selling Stockholders prior to the date of this Agreement, which rights shall be
specifically enforceable by Buyer and/or the Company.
30. MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended at any time
by Buyer, the Company and the Selling Stockholders in writing signed by all of
the parties. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by all of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof nor shall such waiver constitute a
continuing waiver.
31. INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
32. THIRD PARTY BENEFICIARIES. Except as otherwise expressly set forth
herein, no individual or entity shall be a third-party beneficiary of the
representations, warranties, covenants and agreements made by any party hereto.
33. KNOWLEDGE. All references to the "best knowledge of the Company and
the Selling Stockholders" shall refer to the actual knowledge after due inquiry.
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IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
ATRIUM COMPANIES, INC.
By: /s/ JEFF L. HULL
-----------------------------
Name: Jeff L. Hull
Title: Executive Vice President
Chief Financial Officer
Treasurer and Secretary
CHAMPAGNE INDUSTRIES, INC.
By: /s/ DONALD SLOANE
-----------------------------
Name: Donald Sloane
Title: President
DONALD SLOANE /s/ DONALD SLOANE
-----------------------------
DAVID HILLIARD /s/ DAVID HILLIARD
-----------------------------
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TABLE OF CONTENTS
PAGE
1. Definitions.............................................................................1
2. Purchase and Sale of Company Stock......................................................6
3. Closing.................................................................................6
3.1 Delivery of Company Stock......................................................7
3.2 Adjustments to the Purchase Price..............................................7
4. Payments to be Made.....................................................................8
5. Representations and Warranties of the Selling Stockholders..............................8
5.1 Stock Ownership and Other Matters..............................................8
5.2 Transactions With Affiliates...................................................9
6. Representations and Warranties of the Company and the Selling Stockholders.............10
6.1 Organization, Standing, Qualification and Capitalization......................10
6.2 Subsidiaries of the Company...................................................11
6.3 Financial Statements..........................................................11
6.4 Properties and Permits........................................................12
6.5 Taxes.........................................................................12
6.6 Litigation and Labor Matters..................................................14
6.7 Insurance.....................................................................14
6.8 Intellectual Property Rights..................................................15
6.9 Contracts and Commitments.....................................................16
6.10 Absence of Undisclosed Liabilities............................................17
6.11 Absence of Default............................................................17
6.12 Existing Condition............................................................17
6.13 Validity of Contemplated Transactions.........................................18
6.14 Restrictions..................................................................18
6.15 Employee Benefits.............................................................18
6.16 Personal Property.............................................................21
6.17 Bank Accounts and Directors and Officers......................................21
6.18 Compliance with Laws and Instruments..........................................21
6.19 Authorizations................................................................21
6.20 Environmental Compliance......................................................22
6.21 Non-Competition Agreements....................................................23
6.22 Change of Control Provisions..................................................23
6.23 Dividends and Distributions...................................................24
6.24 Disclosure....................................................................24
6.25 Year 2000.....................................................................24
6.26 Relationship with General Electric Company....................................24
7. Representations and Warranties of Buyer................................................24
7.1 Organization, Good Standing and Authority.....................................24
7.2 Validity of Contemplated Transactions.........................................25
7.3. Authorizations................................................................25
7.4 Investment Representations....................................................25
7.5 Litigation....................................................................25
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8. Conduct of Business Pending Closing....................................................25
8.1 Business in the Ordinary Course...............................................25
8.2 Accounting and Credit Changes.................................................26
8.3 Capitalization, Options, Dividends and Payments...............................26
8.4 Encumbrance of Assets.........................................................26
8.5 Real Property Acquisitions, Dispositions and Leases...........................26
8.6 Litigation During Interim Period..............................................26
8.7 Access........................................................................26
8.8 Good Will.....................................................................26
8.9 Loans.........................................................................26
8.10 Employee Matters..............................................................27
8.11 Preservation of Business and Assets...........................................27
8.12 Affiliate Transactions........................................................27
9. Conditions Precedent to Buyer's Obligations............................................27
9.1 Representations and Warranties................................................27
9.2 Compliance with Agreements....................................................27
9.3 Opinion of Counsel............................................................27
9.4 Material Damage...............................................................27
9.5 Approval of Counsel...........................................................28
9.6 Resignations..................................................................28
9.7 Certificates..................................................................28
9.8 Earn-Out Agreement............................................................28
9.9 Satisfaction of Obligations and Release of Encumbrances.......................28
9.10 Litigation....................................................................28
9.11 Material Adverse Change.......................................................28
9.12 Accrued Compensation..........................................................28
9.13 Leases........................................................................29
9.14 Employment Agreements.........................................................29
9.15 Due Diligence.................................................................29
9.16 Escrow Agreement..............................................................29
9.17 Rights of First Refusal.......................................................29
9.18 Notifications and Third Party Consents........................................29
9.19 Fees and Expenses.............................................................29
9.20 Hart-Scott-Rodino Act Filings.................................................29
9.21 FIRPTA Certificate............................................................30
9.22 Net Working Capital...........................................................30
10. Conditions Precedent to the Selling Stockholders' Obligations..........................30
10.1 Representations and Warranties................................................30
10.2 Compliance with Agreement.....................................................30
10.3 Opinion of Counsel............................................................30
10.4 Hart-Scott-Rodino Act Filings.................................................30
10.5 Earn-Out Agreement............................................................30
10.6 Employment Agreements.........................................................30
10.7 Third Party Consents..........................................................30
11. Broker and Finder Fees.................................................................31
12. Survival of Representations and Warranties.............................................31
13. Termination............................................................................31
13.1 Termination Events............................................................31
13.2 Effect of Termination.........................................................32
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14. Indemnification........................................................................32
15. Tax Matters............................................................................36
16. Environmental Matters..................................................................37
17. Expenses...............................................................................37
18. Announcements..........................................................................37
19. Further Actions and Assurances.........................................................37
20. Counterparts...........................................................................37
21. Contents of Agreement; Parties In Interest, Etc........................................38
22. New York Law to Govern; Venue..........................................................38
23. Section Headings and Gender............................................................38
24. Schedules and Exhibits.................................................................38
25. Notices................................................................................38
26. Confidential Information...............................................................40
27. Construction and Interpretation........................................................40
28. Anti-Trust Matters.....................................................................40
29. Assignment of Certain Rights...........................................................41
30. Modification and Waiver................................................................41
31. Invalid Provisions.....................................................................41
32. Third Party Beneficiaries..............................................................41
33. Knowledge..............................................................................41
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LIST OF SCHEDULES
Schedule 5.1 - Stock Ownership and Other Matters
Schedule 5.2 - Transactions With Affiliates
Schedule 6.1 - Qualification
Schedule 6.2 - Subsidiaries of the Company
Schedule 6.3 - Financial Statements
Schedule 6.4 - Properties and Permits
Schedule 6.5 - Taxes
Schedule 6.6 - Litigation
Schedule 6.7 - Insurance
Schedule 6.8 - Intellectual Property Rights
Schedule 6.9 - Contracts and Commitments
Schedule 6.10 - Absence of Undisclosed Liabilities
Schedule 6.12 - Existing Condition
Schedule 6.13 - Validity of Contemplated Transactions
Schedule 6.15 - Employee Benefits
Schedule 6.16 - Personal Property
Schedule 6.17 - Bank Accounts and Directors and Officers
Schedule 6.20 - Environmental Compliance
Schedule 7.2 - Validity of Contemplated Transactions
Schedule 9.9 - Excluded Indebtedness
LIST OF EXHIBITS
Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Earn-Out Agreement
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