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FORM 10-Q/A-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9843
MORGAN PRODUCTS LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1095650
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
469 McLaws Circle, Williamsburg, Virginia 23185
(Address of principal executive offices, including zip code)
(804) 564-1700
(Registrant's telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
The number of shares outstanding of registrant's Common Stock, par value $.10
per share, at July 27, 1996 was 8,648,988; 2,386 shares are held in treasury.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
10.3 Asset Purchase Agreement dated as of July 22, 1996 by and
among Morgan Products Ltd., Tennessee Building Products,
Inc., Titan Building Products, Inc., James Fishel, James
Schulman and Tennessee Building Products, Inc.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MORGAN PRODUCTS LTD.
Date: August 22, 1996 By /s/ Douglas H. MacMillan
Douglas H. MacMillan
Vice President, Secretary and
Chief Financial Officer
(For the Registrant and as
Principal Finance Officer)
EXHIBIT INDEX
Exhibit No. Page No.
10.3 Asset Purchase Agreement dated as of July 22, 1996 by and
among Morgan Products Ltd., Tennessee Building Products,
Inc., Titan Building Products, Inc., James Fishel, James
Schulman and Tennessee Building Products, Inc.
Exhibit 10.3
ASSET PURCHASE AGREEMENT
dated as of July 22, 1996
by and among
MORGAN PRODUCTS LTD.,
TENNESSEE BUILDING PRODUCTS, INC.,
TITAN BUILDING PRODUCTS, INC.,
JAMES FISHEL,
JAMES SCHULMAN
and
TENNESSEE BUILDING PRODUCTS, INC.
(as Shareholder of Titan)
TABLE OF CONTENTS
Page
ARTICLE 1
PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES . . . . . . . . . . .
1.1 Agreement of Purchase and Sale . . . . . . . . . . . . . . . . .
1.2 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . .
1.3 Purchase Price; Adjustment; Allocation . . . . . . . . . . . . .
1.4 Instruments of Conveyance and Transfer; Further Assurances;
Access . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 2
CLOSING . . . . . . . . . . . . . . . .
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . .
3.1 Organization; Good Standing; Qualifications . . . . . . . . . . .
3.2 Authority; Consents; Enforceability . . . . . . . . . . . . . . .
3.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . .
3.4 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . .
3.6 Absence of Certain Changes . . . . . . . . . . . . . . . . . . .
3.7 Material Contracts . . . . . . . . . . . . . . . . . . . . . . .
3.8 Title to Purchased Assets and Related Matters . . . . . . . . . .
3.9 Real Property of the Sellers . . . . . . . . . . . . . . . . . .
3.10 Machinery, Equipment, Etc. . . . . . . . . . . . . . . . . . . .
3.11 Inventories of the Sellers . . . . . . . . . . . . . . . . . . .
3.12 Accounts Receivable of the Sellers . . . . . . . . . . . . . . .
3.13 Approvals, Permits and Authorizations . . . . . . . . . . . . .
3.14 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . .
3.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.16 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
3.17 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.18 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . .
3.19 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . . .
3.20 Employee Relations . . . . . . . . . . . . . . . . . . . . . . .
3.21 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . .
3.22 Patents; Trademarks; Trade Names; Copyrights; Licenses, Etc. . .
3.23 Certain Liabilities . . . . . . . . . . . . . . . . . . . . . .
3.24 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . .
3.25 Certain Transactions . . . . . . . . . . . . . . . . . . . . . .
3.26 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . .
3.27 Sellers and Shareholders Not Foreign Persons . . . . . . . . . .
3.28 Suppliers and Customers . . . . . . . . . . . . . . . . . . . .
3.29 Environmental Matters . . . . . . . . . . . . . . . . . . . . .
3.30 Bank Accounts, Credit Cards, Etc. . . . . . . . . . . . . . . .
3.31 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.32 Interest in Competitors and Related Entities . . . . . . . . . .
3.33 Directors and Officers . . . . . . . . . . . . . . . . . . . . .
3.34 Availability of Seller's Employees . . . . . . . . . . . . . . .
3.35 Projected Financials . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER . . . . . . .
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . .
4.2 Authority; Consents; Enforceability . . . . . . . . . . . . . . .
4.3 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . . .
4.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 5
CERTAIN COVENANTS OF THE SELLERS . . . . . . . . . .
5.1 Provide Access to Information . . . . . . . . . . . . . . . . . .
5.2 Operation of Business of the Seller . . . . . . . . . . . . . . .
5.3 Books of Account . . . . . . . . . . . . . . . . . . . . . . . .
5.4 Retention of Employees . . . . . . . . . . . . . . . . . . . . .
5.5 Issuance of Securities . . . . . . . . . . . . . . . . . . . . .
5.6 Other Changes . . . . . . . . . . . . . . . . . . . . . . . . . .
5.7 Additional Information . . . . . . . . . . . . . . . . . . . . .
5.8 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.9 Other Negotiations . . . . . . . . . . . . . . . . . . . . . . .
5.10 Closing Conditions . . . . . . . . . . . . . . . . . . . . . . .
5.11 Environmental Audit . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 6
CERTAIN COVENANTS OF THE BUYER . . . . . . . . . .
6.1 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2 Closing Conditions . . . . . . . . . . . . . . . . . . . . . . .
6.3 Employment of Sellers' Employees and Employee Benefits. . . . . .
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER . . . . . .
7.1 Representations and Warranties . . . . . . . . . . . . . . . . .
7.2 Performance of Obligations of the Sellers . . . . . . . . . . . .
7.3 Closing Certificate . . . . . . . . . . . . . . . . . . . . . . .
7.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . .
7.5 Supporting Documents . . . . . . . . . . . . . . . . . . . . . .
7.6 Bills of Sale, Etc. . . . . . . . . . . . . . . . . . . . . . . .
7.7 Books and Records . . . . . . . . . . . . . . . . . . . . . . . .
7.8 Change of Names of Sellers; Use of Sellers' Names by Buyer . . .
7.9 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.10 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . .
7.11 Authorizations . . . . . . . . . . . . . . . . . . . . . . . . .
7.12 No Material Adverse Change or Undisclosed Liability . . . . . .
7.13 Environmental Matters and Other Inspections . . . . . . . . . .
7.14 Approval of Legal Matters . . . . . . . . . . . . . . . . . . .
7.15 Satisfactory Investigation . . . . . . . . . . . . . . . . . . .
7.16 Adverse Laws . . . . . . . . . . . . . . . . . . . . . . . . . .
7.17 Appointment Letter . . . . . . . . . . . . . . . . . . . . . . .
7.18 Non-Competition Agreement . . . . . . . . . . . . . . . . . . .
7.19 Assignment and Assumption of Leases . . . . . . . . . . . . . .
7.20 Facility Leases . . . . . . . . . . . . . . . . . . . . . . . .
7.21 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . .
7.22 Employee Waivers . . . . . . . . . . . . . . . . . . . . . . . .
7.23 Management Contract . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS . . . . .
8.1 Representations and Warranties . . . . . . . . . . . . . . . . .
8.2 Performance of Obligations of the Buyer . . . . . . . . . . . . .
8.3 Closing Certificate . . . . . . . . . . . . . . . . . . . . . . .
8.4 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . .
8.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . .
8.6 Supporting Documents . . . . . . . . . . . . . . . . . . . . . .
8.7 Approval of Legal Matters . . . . . . . . . . . . . . . . . . . .
8.8 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . .
8.9 Appointment Letter . . . . . . . . . . . . . . . . . . . . . . .
8.10 Agreements of Assignment and Assumption . . . . . . . . . . . .
8.11 Facility Leases . . . . . . . . . . . . . . . . . . . . . . . .
8.12 Employment of Sellers' Employees . . . . . . . . . . . . . . . .
ARTICLE 9
TRANSFER TAXES; PRORATION OF CHARGES . . . . . . . . .
9.1 Certain Taxes and Fees . . . . . . . . . . . . . . . . . . . . .
9.2 Proration of Certain Charges . . . . . . . . . . . . . . . . . .
ARTICLE 10
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION . . . . . . . . . .
10.1 Survival of Representations and Warranties . . . . . . . . . . .
10.2 Agreement to Indemnify by the Sellers . . . . . . . . . . . . .
10.3 Agreement to Indemnify by the Buyer . . . . . . . . . . . . . .
10.4 Procedures Regarding Third Party Claims . . . . . . . . . . . .
10.5 Period of Indemnity . . . . . . . . . . . . . . . . . . . . . .
10.6 Limitation of Liability . . . . . . . . . . . . . . . . . . . .
ARTICLE 11
TERMINATION . . . . . . . . . . . . . . .
ARTICLE 12
GUARANTY OF SHAREHOLDERS . . . . . . . . . . . .
12.1 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.2 Notice to the Shareholders . . . . . . . . . . . . . . . . . . .
12.3 Absoluteness of Guaranty . . . . . . . . . . . . . . . . . . . .
12.4 Guaranty Not Affected . . . . . . . . . . . . . . . . . . . . .
12.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.6 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . .
12.7 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 13
MISCELLANEOUS PROVISIONS . . . . . . . . . . . .
13.1 Access to Books and Records . . . . . . . . . . . . . . . . . .
13.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . .
13.3 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.5 Parties in Interest; No Third Party Beneficiaries . . . . . . .
13.6 Assignability . . . . . . . . . . . . . . . . . . . . . . . . .
13.7 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . .
13.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .
13.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .
13.11 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.12 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . .
13.13 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . .
13.15 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit 10.3
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of this 22nd day of July, 1996, by and among MORGAN PRODUCTS
LTD. a Delaware corporation (the "Buyer"), TENNESSEE BUILDING PRODUCTS, INC.,
a Tennessee corporation ("TBP"), TITAN BUILDING PRODUCTS, INC., a North
Carolina corporation ("TITAN;" and together with TBP, the "Sellers") JAMES
FISHEL and JAMES SCHULMAN, the sole shareholders of TBP, and TBP as the
majority shareholder of TITAN (together with the sole shareholders of TBP,
the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Buyer desires to purchase from each of the Sellers
substantially all of the assets and properties of such Seller relating to its
businesses and operations, subject to certain exceptions as hereinafter
specified, and to assume certain liabilities of each of the Sellers, all upon
the terms and conditions hereinafter set forth; and
WHEREAS, each Seller is willing to sell, transfer, convey, assign
and deliver the same to the Buyer upon the terms and conditions hereinafter
set forth; and
WHEREAS, the Shareholders desire that the foregoing transactions
be effected.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual representations, warranties, covenants and agreements hereinafter
set forth, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS;
ASSUMPTION OF LIABILITIES
1.1 Agreement of Purchase and Sale. On the terms and subject to
the conditions of this Agreement and in reliance upon the representations and
warranties contained herein, at the Closing (as such term is defined in
Article 2 hereof), each Seller shall sell, transfer, convey, assign and
deliver (or cause to be sold, transferred, conveyed, assigned and delivered)
to the Buyer (or a wholly-owned subsidiary of Buyer) and the Buyer (or a
wholly-owned subsidiary of Buyer) shall purchase and accept delivery of, all
of such Seller's right, title and interest in and to all the assets of such
Seller of every kind, character and description, tangible or intangible,
real, personal or mixed, and wherever located, including, without limitation,
all of the assets of each Seller described on Schedule 1.1(a) hereto, but
excluding, however, the assets of each Seller described on Schedule 1.1(b)
hereto (the "Excluded Assets") (said assets of each of the Sellers, other
than the Excluded Assets, constituting the "Purchased Assets"). The
Purchased Assets will be sold free and clear of all mortgages, deeds of
trust, liens, pledges, charges, security interests, contractual restrictions,
claims or encumbrances of any kind or character (collectively,
"Encumbrances").
1.2 Assumed Liabilities. On the terms and subject to the
conditions of this Agreement and in reliance upon the representations and
warranties contained herein, at the Closing the Buyer (or a wholly-owned
subsidiary of Buyer) shall assume and undertake to perform the liabilities
and obligations of each of the Sellers specifically described on Schedule 1.2
hereto (such liabilities and obligations being hereinafter referred to as the
"Assumed Liabilities"). Other than the Assumed Liabilities, the Buyer shall
not assume or be responsible for, and each Seller shall retain and remain
responsible for, any and all of its obligations and liabilities of any nature
whatsoever, whether past, current or future, whether accrued, contingent,
known or unknown.
1.3 Purchase Price; Adjustment; Allocation.
(a) Purchase Price. In addition to the assumption by the
Buyer of the Assumed Liabilities, as the full consideration to be paid by the
Buyer for the Purchased Assets, the Buyer shall pay to the Sellers (to be
allocated between themselves as the Sellers shall determine) an aggregate
purchase price (the "Purchase Price") equal to Fifteen Million Three Hundred
Thousand Dollars ($15,300,000), subject to post-closing adjustment as
provided in subsection (b) below. At the Closing, the Buyer shall pay to the
account or accounts of the Sellers in cash Thirteen Million Seven Hundred
Seventy Thousand Dollars ($13,770,000) and shall pay into escrow the amount
of One Million Five Hundred Thirty Thousand Dollars ($1,530,000) which amount
shall be held pursuant to the terms of an escrow agreement (the "Escrow
Agreement") substantially in the form of Exhibit 1.3(a) attached hereto,
pending determination of any adjustment to the Purchase Price.
The Buyer shall make such payments by wire transfer to an account
or accounts of the Sellers and the Escrow Agent which shall be designated by
the Sellers and the Escrow Agent, as the case may be, in writing at least one
(1) full Business Day prior to the date of the Closing. For purposes of this
Agreement, a Business Day is a day other than a Saturday, a Sunday or a day
on which banks are required or authorized to be closed in the States of New
York, Virginia or Tennessee.
(b) Adjustment.
(i) Attached hereto as Schedule 1.3(b)(i) is a
schedule setting forth the book value of Sellers' accounts receivable -
trade; inventories (at the lowest of FIFO cost or market); property and
equipment; and prepaid expenses, less Sellers' accounts payable - trade;
accrued taxes and expenses; long-term debt (current) and long-term debt
(less current) as of December 31, 1995 ("Historical Net Asset Value").
(ii) As soon as practicable after the Closing, but not
later than ninety (90) days after the Closing, Buyer shall prepare and
cause to be audited by Price Waterhouse LLP and delivered to the Sellers
a schedule setting forth the net book value of such assets and
liabilities as of the Closing Date (the "Closing Date Net Asset Value,"
and such schedule, the "Closing Date Schedule") and comparing the
Closing Date Net Asset Value to Historical Net Asset Value.
(iii) The Closing Date Schedule shall be prepared in a
manner consistent with Schedule 1.3(b)(i) (including, without
limitation, any changes footnoted thereon) using the accounting
practices and policies of the Sellers historically applied and in
accordance with generally accepted accounting principles ("GAAP")
consistently applied. Price Waterhouse LLP shall assist in preparing
the Closing Date Schedule and shall audit such schedule in accordance
with generally accepted auditing standards. Buyer shall have the right,
but not the obligation, to conduct a physical inventory as of the
Closing for purposes of preparing the Closing Date Schedule. The
Sellers or their representatives shall have the right to be present at
and take part in any such physical counting of inventories.
(iv) To the extent that Closing Date Net Asset Value
exceeds Historical Net Asset Value as shown on the Closing Date
Schedule, the Purchase Price will be increased by the amount of such
difference and to the extent that Historical Net Asset Value exceeds
Closing Date Net Asset Value the Purchase Price will be so decreased.
(v) The Sellers shall have the right, no later than
thirty (30) days following receipt of the Closing Date Schedule, to
deliver a notice in writing to Buyer, objecting to the Closing Date
Schedule and identifying each of its exceptions thereto. For purposes
of Sellers' exercising such right to object, the Buyer shall give, and
shall cause to be given, to the Sellers full access, during normal
business hours and on reasonable prior notice, to the books and records
used in connection with the preparation of the Closing Date Schedule,
including, without limitation, the general ledger, work papers and
historical financial information reasonably requested by the Sellers.
In the event that, by the expiration of such thirty (30) day period, the
Sellers shall not have notified the Buyer of any objection to the
Closing Date Schedule, the Closing Date Schedule shall be deemed agreed
to by the Sellers and shall be final, conclusive and binding on all of
the parties hereto. If such a notice of objection is timely given by
the Sellers identifying each of its exceptions thereto, then, the Buyer
and the Sellers shall, together with Price Waterhouse LLP, confer for
the purpose of resolving such exceptions. Each party shall make
available to the other parties, upon reasonable request, all work papers
prepared by such party in the performance of the responsibilities
assigned to it under this Section 1.3(b)(ii). If the parties are unable
to resolve all exceptions to the Closing Date Schedule within thirty
(30) days after delivery of the notice of written objections to Buyer,
either the Sellers or the Buyer may, at any time after such thirty (30)
day period and before such exceptions are resolved, by written notice to
the other party, submit all such exceptions which remain unresolved at
the time of such notice to binding arbitration in Nashville, Tennessee,
before a panel of three arbitrators (the "Panel"), in accordance with
the rules of the American Arbitration Association. All of the
arbitrators on the Panel must be independent certified public
accountants engaged in auditing and having had personal responsibility
for audits of corporations engaged in businesses similar to the
businesses of the Sellers and the Buyer. Of the three arbitrators, one
shall be selected by the Sellers, one shall be selected by the Buyer and
the third, who shall act as Chairman of the Panel, shall be selected by
the other two arbitrators. The arbitrators shall determine the manner
in which the costs of any such arbitration shall be borne by the Sellers
and the Buyer. The parties shall instruct the Panel to issue its
determination regarding the dispute and the Closing Date Schedule within
thirty (30) days of its engagement or, otherwise, as soon as
practicable. The determination by the Panel shall be conclusive and
binding on all the parties hereto.
(vi) Promptly upon the later of the expiration of the 30
day period following delivery to Sellers of the Closing Date Schedule or
the determination of the Panel, any amounts required to be paid shall be
disbursed as provided in the Escrow Agreement, and, in the event that
the amount required to be paid exceeds the amount held in escrow, then
the Sellers or Buyer, as the case may be, shall promptly pay to the
other by wire transfer to an account specified in writing by the other
the amount equal to such excess.
(c) Allocation. Schedule 1.3(c) hereto sets forth the
allocation of the Purchase Price and the Assumed Liabilities among the
Purchased Assets being sold by each Seller, as mutually agreed between the
Sellers and the Buyer. Sellers and Buyer represent, warrant and agree that
such allocation has been determined through arms-length negotiations.
Sellers and Buyer agree that, to the extent permitted by applicable law, they
will adopt and utilize the amounts allocated to each of the Purchased Assets
or class of assets for purposes of all federal, state and other income tax
returns or reports of any nature filed by them and that they will not
voluntarily take any position inconsistent therewith upon examination of any
such tax returns or reports, in any claim for refund, in any litigation or
otherwise with respect to such tax returns or reports. Notwithstanding any
other provision of this Agreement, the foregoing shall survive the Closing
Date without limitation.
1.4 Instruments of Conveyance and Transfer; Further Assurances;
Access.
(a) Instruments of Conveyance and Transfer. At the Closing,
each Seller shall deliver to the Buyer a Bill of Sale and Assignment,
substantially in the form of Exhibit 1.4 hereto (the "Bills of Sale"), and
such other endorsements, certificates of title, assignments and other good
and sufficient instruments of conveyance and transfer, as shall be necessary
to vest in the Buyer good, valid and marketable title to the Purchased Assets
being sold by such Seller in accordance herewith. Simultaneously therewith,
the Sellers shall take all steps as may be required to transfer to the Buyer
actual possession and exclusive operating control of the Purchased Assets.
(b) Further Assurances. Each Seller further agrees that,
from and after the Closing, it will execute and deliver to the Buyer such
additional instruments and documents and take such further action as the
Buyer may reasonably require in order to more fully vest, record and/or
perfect the Buyer's title to, or interest in, the Purchased Assets.
ARTICLE 2
CLOSING
The Closing shall take place at the offices of Boult, Cummings,
Conners & Berry located at 414 Union Street, Suite 1600, Nashville,
Tennessee, at 10:00 a.m., local time on the later to occur of (i) August 1,
1996, or (ii) no later than the fifth Business Day after all conditions set
forth in Articles 7 and 8 have been satisfied or waived by the party entitled
to waive them. Subject to the foregoing, the parties shall use their
reasonable best efforts to cause the Closing to occur on or before September
30, 1996. The date upon which the closing shall take place is herein called
the "Closing Date."
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers and the Shareholders hereby represent and warrant,
jointly and severally, to the Buyer as follows (except that Titan's
representations and warranties are limited to Titan):
3.1 Organization; Good Standing; Qualifications. Each of TBP
and Titan is a corporation duly organized, validly existing and in good
standing under the laws of the State of Tennessee and North Carolina,
respectively. Each Seller is qualified as a foreign corporation and in good
standing in the jurisdictions listed on Schedule 3.1 annexed hereto, which
jurisdictions are the only jurisdictions where the nature of the Sellers'
businesses and the Purchased Assets require such qualification.
3.2 Authority; Consents; Enforceability.
(a) Authority. Each Seller has full power and authority to
carry on its business as now conducted. Each Seller and each Shareholder has
full power, authority and capacity to execute and deliver this Agreement and
the other agreements, documents and instruments contemplated hereby, to
consummate the transactions contemplated hereby and thereby and to perform
its or his respective obligations hereunder and thereunder. The execution
and delivery by each of the Sellers and the Shareholders of this Agreement
and the other agreements, documents and instruments contemplated hereby, the
consummation by each of the Sellers and the Shareholders of the transactions
contemplated hereby and thereby and the performance by each of the Sellers
and the Shareholders of its or his respective obligations hereunder and
thereunder have been duly and validly authorized by all necessary action on
behalf of each such party. The execution and delivery by each of the Sellers
and the Shareholders of this Agreement and the other agreements, documents
and instruments contemplated hereby, the consummation of the transactions
contemplated hereby and thereby and the performance by each of the Sellers
and the Shareholders of its or his respective obligations hereunder and
thereunder do not and will not, except as set forth on Schedule 3.2(a)
hereto, (i) conflict with or violate any of the provisions of the Charter or
Articles of Incorporation (as the case may be) or By-laws of either Seller,
(ii) violate any law, ordinance, rule or regulation or any judgment, order,
writ, injunction or decree or similar command of any court, administrative or
governmental agency or other body applicable to any of the Sellers, the
Shareholders, the Purchased Assets or the Assumed Liabilities, (iii) violate
or conflict with the terms of, or result in the acceleration of, any
indebtedness or obligation of either Seller under, or violate or conflict
with or result in a breach of, or constitute a default under, any material
instrument, agreement or indenture or any mortgage, deed of trust or similar
contract to which either Seller or any Shareholder is a party or by which
either of the Sellers or any of the Purchased Assets or Assumed Liabilities
are bound or affected, or (iv) result in the creation or imposition of any
Encumbrance upon any of the Purchased Assets.
(b) Consents. Except as set forth in Schedule 3.2(b) hereto,
no consent, authorization or approval of, or notice to, or filing or
registration with, any governmental body or authority, or any other third
party (collectively, "Consents"), is required in connection with the
execution and delivery by each of the Sellers and the Shareholders of this
Agreement and the other agreements, documents and instruments to be executed
and delivered in connection herewith, the consummation of the transactions
contemplated hereby and thereby and the performance by each of the Sellers
and the Shareholders of its or his respective obligations hereunder or
thereunder.
(c) Enforceability. This Agreement constitutes, and all
instruments of conveyance and other agreements, documents and instruments to
be executed and delivered by the Sellers and the Shareholders in connection
herewith shall, when so executed and delivered, constitute the legal, valid
and binding obligations of each of the Sellers and the Shareholders,
enforceable against each of the Sellers and the Shareholders in accordance
with their respective terms.
3.3 Financial Statements. (a) The Sellers have delivered to
the Buyer prior to the date hereof:
(i) the audited consolidated balance sheets for TBP as
of December 31, 1995 and 1994 and the audited balance sheets for Titan
as of December 31, 1995 and 1994, and, in each case, the consolidated
statements of income and shareholders' equity and cash flows related
thereto for the fiscal years then ended (including the notes thereto and
any other information included therein), in each case accompanied by the
report of Kraft Bros., Esstman, Patton and Harrell, the Sellers'
independent certified public accountants (collectively, the "Annual
Financial Statements"); and
(ii) the unaudited consolidated balance sheet of TBP
as of May 31, 1996 and the unaudited balance sheet of Titan as of May
31, 1996 and, in each case, the related unaudited consolidated statement
of income and cash flows for the five (5) month period then ended
(collectively, the "Interim Financial Statements"; the Annual Financial
Statements and the Interim Financial Statements are hereinafter
collectively referred to as the "Financial Statements").
(b) Except as set forth on Schedule 3.3(b), the Financial
Statements (i) are in accordance with the books and records of each of TBP
and Titan, as the case may be, (ii) fully and fairly present the financial
condition and results of each of the operations of each of the Sellers as of
and for the periods indicated, and (iii) have been prepared in accordance
with GAAP consistently applied.
3.4 Investments. Except for the ownership interest of TBP in
Titan, neither Seller owns, directly or indirectly, any shares of capital
stock or other equity ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity, and has no
commitment to contribute to the capital of, make loans to, or share in the
losses of, any enterprise.
3.5 Capitalization. The issued and outstanding shares of
capital stock of the Sellers are held of record and beneficially by the
Shareholders in the amounts set forth opposite their names on Schedule 3.5
hereto, free and clear of any Encumbrances. Neither Seller has any
outstanding subscriptions, options, warrants, calls, contracts, commitments,
convertible securities or other instruments, agreements or arrangements of
any character or nature whatsoever under which either Seller is or may be
obligated to issue any shares of its capital stock.
3.6 Absence of Certain Changes. Since December 31, 1995, each
Seller has operated its business in the ordinary course and, except as set
forth on Schedule 3.6 hereto, there has not been incurred, nor has there
occurred:
(a) Any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting the Purchased Assets or the
businesses of either of the Sellers;
(b) Any sale, transfer, pledge or other disposition of any
tangible or intangible assets of either Seller (except sales of inventory in
the ordinary course of business) having an aggregate book value of $10,000 or
more;
(c) Any termination, amendment, cancellation or waiver of any
Material Contract (as defined in Section 3.7 hereof) or any termination,
amendment, cancellation or waiver of any rights or claims of any Seller under
any Material Contract (except in each case in the ordinary course of business
and consistent with past practices);
(d) Any change in the accounting methods, procedures or
practices followed by either Seller or any change in depreciation or
amortization policies or rates theretofore adopted by either Seller;
(e) Any obligation, liability or indebtedness (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
incurred by either Seller to any person or entity other than in the ordinary
course of business and consistent with past practices;
(f) Any material change in policies, operations or practices
with respect to business operations followed by either of the Sellers,
including, without limitation, with respect to selling methods, returns,
discounts or other terms of sale, or with respect to the policies, operations
or practices of either of the Sellers concerning its employees;
(g) To the best knowledge of each of the Sellers and the
Shareholders, any statute, rule, regulation or order adopted or promulgated
which adversely affects the Purchased Assets or the business of either of the
Sellers or the ability of either Seller to enter into valid, binding and
enforceable agreements;
(h) Any issuance, declaration, setting aside or payment of
any dividend or other distribution of cash or property on any of the capital
stock of either Seller, or any direct or indirect redemption, purchase or
other acquisition of any shares of capital stock of either Seller, or any
agreement or commitment by either Seller to do any of the foregoing;
(i) Any strikes, work stoppages or other labor disputes
involving the employees of either Seller;
(j) Any capital appropriation or expenditure or commitment
therefor on behalf of either Seller in excess of $20,000 individually, or
$50,000 in the aggregate;
(k) Any material write-down or write-up of the value of any
inventory or equipment of either Seller;
(l) Any general uniform increase in the compensation of
employees of either Seller (including, without limitation, any increase
pursuant to any bonus, pension, profit-sharing, defined compensation or other
plan or commitment) not in the ordinary course of business, or any increase
in any such compensation payable to any individual officer, director,
consultant or agent thereof, or any loans or commitments therefor made by
either Seller to any persons, including any officers, directors,
shareholders, employees, consultants or agents of either Seller or any of its
affiliates;
(m) Any purchase or sales contracts or commitments of either
Seller entered into outside the ordinary course of business;
(n) Any liabilities of either Seller incurred for any
severance or termination pay or similar payment;
(o) Any material increase in inventory levels of either Seller
in excess of historical levels for comparable periods;
(p) Any sales contracts or commitments which will be in
excess of the capacity of either Seller as of the date of the Closing;
(q) Any purchase contracts or commitments in excess of the
requirements of either of the Sellers in the ordinary course or at prices
higher than current market prices;
(r) Any pledge or agreement by or on behalf of either Seller
to make any charitable contribution or to incur any non-business expense that
is either (i) outside of the ordinary course of business and not consistent
with past practice or (ii) in excess of $1,000 individually or $2,500 in the
aggregate;
(s) Any account receivable in excess of $5,000 individually
or $20,000 in the aggregate or note receivable in excess of $5,000
individually or $20,000 in the aggregate owing to either Seller which (i) has
been written off as uncollectible, in whole or in part, (ii) has had asserted
against it any claim, refusal or right of setoff, or (iii) with respect to
which the account or note debtor has refused to, or threatened in writing not
to, pay for any reason, or such account or note debtor has become insolvent
or bankrupt;
(t) Any other change in the condition (financial or
otherwise), business operations, assets, earnings or business of, or any
material change in the prospects (other than such changes which are
attributable to or result from general or regional economic conditions,
conditions generally affecting the Sellers' industry or circumstances of a
cyclical nature) of, either Seller which, in the judgment of such Seller and
the Shareholders, has, or could reasonably be expected to have, a material
adverse effect on the Purchased Assets or the business or operations of
either Seller; or
(u) Any agreement, whether in writing or otherwise, by either
Seller to take or do any of the actions enumerated in this Section 3.6.
3.7 Material Contracts.
(a) List of Material Contracts. Set forth on Schedule 3.7(a)
hereto is a list of all of the following contracts, agreements, documents,
instruments, understandings or arrangements, written or oral, relating to the
Purchased Assets or the Assumed Liabilities of each of the Sellers
(collectively, the "Material Contracts"):
(i) purchase or sales orders and other contracts for
the sale of goods or services in excess of $75,000 individually;
(ii) purchase orders or contracts involving the
expenditure of more than $50,000 in any instance for the purchase of
materials, supplies, equipment or services and which are not cancelable
within thirty (30) days without penalty;
(iii) except for contracts which are listed on Schedule
3.7(a) pursuant to other subsections of this Section 3.7, contracts
which have a term in excess of one (1) year and involve the expenditure
of more than $20,000;
(iv) contracts and agreements relating to the leasing
(as lessor or lessee) or to the conditional purchase or sale by either
Seller of any property, real, personal or mixed;
(v) contracts, commitments and arrangements with any
governmental body, agency or authority;
(vi) indentures, mortgages, deeds of trust, promissory
notes, loan agreements, capital leases, security agreements or other
agreements or commitments for the borrowing of money, or the deferred
purchase price of assets, or which otherwise evidence indebtedness of
either Seller or which create an Encumbrance on any of the Purchased
Assets;
(vii) guarantees of the obligations of a third party or
agreements to indemnify third parties;
(viii) agreements which restrict the Seller from doing
business with any other person or entity in any geographic area or from
producing or selling any product;
(ix) contracts or agreements between the Seller and any
of the Shareholders or any affiliate of any of the Shareholders;
(x) license agreements (as licensee or licensor) with
third parties;
(xi) employment, severance or consulting agreements or
arrangements and collective bargaining agreements and other related
agreements;
(xii) distributor, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar agreements or any
other contract relating to the payment of a commission;
(xiii) profit-sharing, bonus, incentive, stock option,
pension, retirement, stock purchase, hospitalization, insurance or
similar plan, agreement or policy, formal or informal, providing
benefits to any current or former director, officer, shareholder or
employee;
(xiv) any agreement, arrangement, commitment or
understanding for the sale of any of the Purchased Assets, outside the
ordinary course of business; and
(xv) any other agreement, understanding or arrangement,
written or oral, which, in the judgment of the Sellers or the
Shareholders, is material to the businesses of the Sellers, the
Purchased Assets or the Assumed Liabilities and not otherwise described
in this Section 3.7.
True copies of all written Material Contracts and written
summaries of all oral Material Contracts described or required to be
described on Schedule 3.7(a) have been furnished to the Buyer.
(b) Performance, Defaults, Enforceability. Each Seller has
in all material respects performed all of its obligations required to be
performed by it to the date hereof, and is not in default or, to the best of
the Sellers' and the Shareholders' knowledge, alleged to be in default in any
material respect, under any Material Contract, and, to the best of the
Sellers' and the Shareholders' knowledge, there exists no event, condition or
occurrence which, after notice or lapse of time or both, would constitute
such a default. To the knowledge of the Sellers and the Shareholders, no
other party to any Material Contract is in default in any respect of any of
its obligations thereunder. Each of the Material Contracts is valid and in
full force and effect and enforceable against the parties thereto in
accordance with their respective terms, and, except as set forth in Schedule
3.7(b) hereto, the transfer and assignment to the Buyer of all of the
Material Contracts, will not (i) require the consent of any party thereto or
(ii) constitute an event permitting termination thereof.
3.8 Title to Purchased Assets and Related Matters. The Sellers
have good and marketable title to all of the Purchased Assets, free and clear
of all Encumbrances, except those described on Schedule 3.8 or another
schedule hereto and liens for taxes not yet due and payable. Except as set
forth in Schedule 3.8 or another schedule hereto, the Purchased Assets: (i)
include all properties and assets (real, personal and mixed, tangible and
intangible, and all leases, licenses and other agreements) utilized by the
Sellers in carrying on their businesses in the ordinary course; (ii) are in
the exclusive possession and control of the Sellers and no person or entity
other than the Sellers is entitled to possession of any portion of the
Purchased Assets; and (iii) do not include any contracts for future services,
prepaid items or deferred charges the full value or benefit of which will not
be usable by or transferable to the Buyer, or any goodwill, organizational
expense or other similar intangible asset.
3.9 Real Property of the Sellers.
(a) Owned Real Property. Titan owns no real property. TBP
owns one parcel of real property located at Lot 287, Block 2, Brown Creek
Farms, Crossville, Cumberland County, Tennessee (the "Owned Real Property");
however, the Owned Real Property is not used in the conduct of the business
of either of the Sellers and is not included in the Purchased Assets.
(b) Leased Premises. Schedule 3.9(b) hereto contains a
complete list and description (including buildings and other structures
thereon) of all real property of which either Seller is a tenant (herein
collectively the "Leased Premises" and, together with the Owned Real
Property, the "Real Property") or which is used in the conduct of the
Sellers' businesses. True, correct and complete copies of all leases of all
Leased Premises (the "Leases") have been delivered to the Buyer. The Leased
Premises are in good physical condition and, with respect to each Lease, no
event or condition currently exists which would give rise to a material
repair or restoration obligation if such Lease were to terminate. Neither
Seller nor the Shareholders have knowledge of any event or condition which
currently exists which would create a legal or other impediment to the use of
the Leased Premises as currently used, or would increase the additional
charges or other sums payable by the tenant under any of the Leases
(including, without limitation, any pending tax reassessment or other special
assessment affecting the Leased Premises). The improvements and building
systems which comprise a part of the Leased Premises as to which the Sellers
are responsible for the maintenance and repair thereof are in good condition,
maintenance and repair.
(c) Claims. There is no person or entity other than the
Sellers in or entitled to possession of the Leased Premises.
(d) Easements, Etc. Each Seller has all easements and
rights, including, but not limited to, easements for power lines, water
lines, sewers, roadways and other means of ingress and egress, necessary to
conduct its business as now conducted, all such easements and rights are
unconditional appurtenant rights to the Leased Premises, which are for the
applicable lease terms and none of such easements or rights are subject to
any forfeiture or divestiture rights.
(e) Condemnation. Neither the whole nor any portion of any
of the Leased Premises has been condemned, expropriated, ordered to be sold
or otherwise taken by any public authority, with or without payment or
compensation therefor, and neither Seller knows of any such condemnation,
expropriation, sale or taking, or has any grounds to anticipate that any such
condemnation, expropriation, sale or taking is threatened or contemplated.
Neither Seller has any knowledge of any pending assessments which would
affect the Leased Premises.
(f) Zoning, Etc. To the best of each of the Sellers' and
Shareholders' knowledge, none of the Leased Premises is in violation of any
public or private restriction or any law or any building, zoning, health,
safety, fire or other law, ordinance, code or regulation, and no notice from
any governmental body has been served upon either Seller or, to the best of
each of the Sellers' and Shareholders' knowledge, upon any of the Real
Property claiming any violation of any such law, ordinance, code or
regulation or requiring or calling to the attention of either Seller or any
Shareholder the need for any work, repair, construction, alterations or
installation on or in connection with said properties which has not been
complied with.
3.10 Machinery, Equipment, Etc.
(a) Owned Equipment. Schedule 3.10(a) sets forth a list of
all material machinery, equipment (including computer equipment), motor
vehicles, furniture and fixtures owned by the Sellers and included in the
Purchased Assets (collectively, the "Owned Equipment").
(b) Leased Equipment. Schedule 3.10(b) contains a list of
all leases or other agreements, whether written or oral, under which either
Seller is lessee of or holds or operates any items of machinery, equipment
(including computer equipment), motor vehicles, furniture and fixtures or
other property owned by any third party (collectively the "Leased
Equipment").
(c) Maintenance of Equipment. To the best knowledge of each
of the Sellers and the Shareholders, the Owned Equipment and the Leased
Equipment of each Seller is in good operating condition, maintenance and
repair taking into account the age thereof.
3.11 Inventories of the Sellers. The inventories of each of the
Sellers included in the Purchased Assets consist of items of a quality and
quantity usable and salable in the normal course of its business, are
generally sufficient to do business in the ordinary course, and the levels of
inventories are consistent with the levels maintained by each of the Sellers
in the ordinary course consistent with past practices. Except as set forth
in Schedule 3.11 hereto, the values at which such inventories are carried are
based on the LIFO method and are stated in accordance with GAAP consistently
applied by the Sellers at the lower of historic cost or market.
3.12 Accounts Receivable of the Sellers. Each Seller has
delivered to the Buyer a true and correct aged list of all unpaid accounts
receivable of each such Seller as of June 30, 1996. All accounts receivable
of each of the Sellers included in the Purchased Assets will constitute
legal, valid and binding and enforceable claims with respect to which the
rendition of services or the sale of goods has been completed in bona fide
transactions in the ordinary course of business, are collectible at the
aggregate recorded amounts thereof, subject to the reserve for doubtful
accounts, in the ordinary course of each of the Sellers' business, and are
not subject to any known offsets or counterclaims. An adequate reserve for
doubtful accounts has been established and such reserve is consistent with
both the operations of the Seller's business in the ordinary course and its
past practices.
3.13 Approvals, Permits and Authorizations. Set forth on
Schedule 3.13 hereto is a list of all governmental licenses, permits,
certificates of inspection, other authorizations, filings and registrations
which are necessary for each of the Sellers to own the Purchased Assets and
to operate their businesses as presently conducted (collectively, the
"Authorizations"). All Authorizations have been duly and lawfully secured or
made by the Sellers and are in full force and effect. There is no proceeding
pending or, to each of the Sellers' and the Shareholders' knowledge,
threatened to revoke or limit any Authorization. Except as set forth on
Schedule 3.13 hereto, all Authorizations may be lawfully transferred to the
Buyer as contemplated by this Agreement and, as of the Closing, all
Authorizations will be transferred pursuant to this Agreement to the Buyer
and all consents and approvals required to effect such transfer will have
been obtained by each of the Sellers. None of the transactions contemplated
by this Agreement will terminate, violate or limit the effectiveness, either
by virtue of the terms thereof or because of the non-assignability thereof,
of any Authorization. With respect to renewal of Authorizations, each Seller
has made, in a timely manner, all filings, reports, notices and other
communications with the appropriate governmental body, and has otherwise
taken, in a timely manner, all other action, known or anticipated to be
required to be taken by each such Seller, reasonably necessary to secure the
renewal of the respective Authorizations prior to the date of their
respective expirations.
3.14 Compliance with Laws. Except to the extent that
noncompliance would not, individually or in the aggregate, result in any
change, loss, failure, effect or other occurrence which is materially adverse
to the business operations, properties, condition or assets of either Seller,
taken as a whole ("Material Adverse Effect") each Seller has conducted its
operations and business in compliance with, and all of the Purchased Assets
comply with, (i) all applicable laws, rules and regulations (including,
without limitation, any laws, rules and regulations relating to
anticompetitive practices, contracts, discrimination, employment, health,
safety, and zoning, but excluding Environmental Laws which are the subject of
Section 3.29 hereof) and (ii) all applicable orders, rules, writs, judgments,
injunctions, decrees and ordinances. Neither Seller has received any
notification of any asserted present or past failure by it to comply with
such laws, rules or regulations, or such orders, rules, writs, judgments,
injunctions, decrees or ordinances. Set forth on Schedule 3.14 are all
orders, writs, judgments, injunctions, decrees and other awards of any court
or any governmental instrumentality applicable to the Purchased Assets or
either of the Sellers or to their respective businesses and operations. Each
Seller has, or will have prior to the Closing, delivered to the Buyer copies
of all reports, if any, of such Seller required under the Federal
Occupational Safety and Health Act of 1970, as amended, and under all other
applicable health and safety laws and regulations. The deficiencies, if any,
noted on such reports or any deficiencies noted by inspection through the
Closing Date have been corrected by such Seller.
3.15 Insurance.
(a) Schedule 3.15(a) of this Agreement sets forth a list of
all policies of liability, theft, fidelity, life, fire, product liability,
workmen's compensation, health and any other insurance and bonds maintained
by, or on behalf of, each Seller on its properties, operations, assets,
business or personnel (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims in excess of $5,000
thereunder). Each such insurance policy identified therein is and shall
remain in full force and effect on and as of the Closing Date, neither Seller
is in default with respect to any provision relating to the payment of
premiums contained in any such insurance policy, and each Seller, to the best
of such Seller's and the Shareholders' knowledge, is not in default with
respect to any other provision contained in any such insurance policy and has
not failed to give any notice or present any claim under any such insurance
policy in a due and timely fashion. No notice of cancellation or termination
has been received with respect to any such policy. Neither Seller has,
during the last three (3) fiscal years, been denied or had revoked or
rescinded any policy of insurance.
(b) Set forth on Schedule 3.15(b) hereto is a summary of
information pertaining to property damage and personal injury claims in
excess of $10,000 against each Seller during the past five (5) years, all of
which are fully satisfied or are being defended by the insurance carrier and
involve no exposure to either Seller.
3.16 Tax Matters.
(a) All federal, state and local tax returns and reports
required as of the date hereof to be filed by either of the Sellers for
taxable periods ending prior to the date hereof have been duly and timely
filed by such Seller with the appropriate governmental agencies, and all such
returns and reports are true, correct and complete in all material respects.
(b) All federal, state and local income, profits, franchise,
sales, use, occupation, property, excise, payroll, withholding, employment,
estimated, intangibles and other taxes of any nature, including interest,
penalties and other additions to such taxes ("Taxes"), payable by, or due
from, either of the Sellers for all periods prior to the date hereof have
been fully paid or adequately reserved for by such Seller or, with respect to
Taxes required to be accrued, such Seller has properly accrued or will
properly accrue such Taxes in the ordinary course of business consistent with
past practice of each such Seller.
3.17 Litigation. Except as set forth in Schedule 3.17, there
are no actions, suits, claims, investigations or legal or administrative or
arbitration proceedings pending, or to the best knowledge of each Seller and
the Shareholders, threatened against either Seller or the Shareholders with
respect to the Purchased Assets or the Assumed Liabilities or the business of
either Seller. Neither Seller nor any Shareholder knows of any basis for the
institution of any such suit or proceeding. Neither Seller is now under any
judgment, order, writ, injunction, decree, award or other similar command of
any court, administrative agency or other governmental authority applicable
to the business of either Seller or any of the Purchased Assets or Assumed
Liabilities.
3.18 Powers of Attorney. There are no persons, firms,
associates, corporations, business organizations or other entities holding
general or special powers of attorney from either Seller.
3.19 Brokers' and Finders' Fees. Except as set forth on
Schedule 3.19 hereto, neither of the Sellers nor any Shareholders has
incurred any liability to any broker, finder, agent, employee or any other
person or entity for any fees, bonuses, commissions or other payments with
respect to the transactions contemplated by this Agreement, and the Sellers
and the Shareholders hereby agree to assume all liability to any such broker,
finder, agent, employee or any other person or entity claiming any such fee,
bonus or commission.
3.20 Employee Relations. As of May 31, 1996, TBP employs a
total of two hundred sixty-five (265) employees and Titan employs a total of
one hundred four (104) employees. Except as set forth in Schedule 3.20
hereto, as of the date hereof: (a) neither Seller is delinquent in the
payment (i) to or on behalf of any past or present employees of any wages,
salaries, commissions, bonuses, benefit plan contributions or other
compensation for all periods prior to the date hereof or the date of the
Closing, as the case may be, (ii) of any amount which is due and payable to
any state or state fund pursuant to any workers' compensation statute, rule
or regulation or any amount which is due and payable to any workers'
compensation claimant or any other party arising under or with respect to a
claim that has been filed under state statutes and approved in the ordinary
course in accordance with each Seller's respective policies regarding
workers' compensation and/or any applicable state statute or administrative
procedure; (b) there is no unfair labor practice charge or complaint against
either Seller pending before the National Labor Relations Board, and, to the
knowledge of either of the Sellers and the Shareholders, none is threatened;
(c) there is no labor strike, dispute, slowdown or stoppage actually in
progress or, to the knowledge of either of the Sellers and the Shareholders,
threatened against either Seller; (d) there are no collective bargaining
agreements currently in effect between either Seller and labor unions or
organizations representing any employees of either Seller; (e) no collective
bargaining agreement is currently being negotiated by either Seller; (f) to
the best of each of the Sellers' and the Shareholders' knowledge, there are
no union organizational drives in progress and there has been no formal or
informal request to either Seller for collective bargaining or for an
employee election from any union or from the National Labor Relations Board;
(g) no union representation or jurisdictional dispute or question exists
respecting the employees of either Seller; (h) no grievance or arbitration
proceedings are pending and, to the best of the Sellers' knowledge, no claim
therefor has been asserted against either Seller; and (i) no dispute exists
between either Seller and any of their respective sales representatives or,
to the knowledge of the Sellers, between any such sales representatives with
respect to territory, commissions, products or any other terms of their
representation.
3.21 Compensation. Schedule 3.21 hereto contains each of the
following lists: (a) a list of all employees (including sales
representatives) of each Seller for the year ended December 31, 1995,
together with the amount of total compensation paid to each such person for
the twelve month period ended December 31, 1995 and the current aggregate
base salary or hourly rate (including any bonus or commission) for each such
person; (b) a list of all employees (including sales representatives) of the
Sellers as of the date of this Agreement, together with the current rate of
compensation for each such person and the total compensation paid to each
such person for the month ended May 31, 1996; (c) a list of all consultants
of each Seller from January 1, 1994 to the date hereof, together with the
amount of total compensation paid to each such person by each such Seller for
the calendar year ended December 31, 1995 and the current rate of
compensation for each such person; and (d) a list of all family members of
the Shareholders who were employees of or consultants to either Seller as of
May 31, 1996, together with the date of hire of each such person, the
positions held by each such person in the applicable Seller, the amount of
total compensation paid to each such person by the applicable Seller for the
calendar year ended December 31, 1995 and the current rate of compensation
(including any bonus or commission) for each such person.
3.22 Patents; Trademarks; Trade Names; Copyrights; Licenses,
Etc.
(a) Except as set forth on Schedule 3.22 hereto, there are no
patents, trademarks, trade names, service marks, service names and
copyrights, and there are no applications therefor or licenses thereof,
inventions, trade secrets, computer software, logos, slogans, proprietary
processes and formulae and all other proprietary information, know-how and
intellectual property rights, whether patentable or unpatentable, which are
owned or leased by either Seller or used in the conduct of either Sellers'
business. Neither Seller is a party to, and neither Seller pays a royalty to
anyone under, any license or similar agreement. There is no existing claim,
or, to the knowledge of each of the Sellers and the Shareholders, any basis
for any claim, against either Seller that any of its operations, activities
or products infringe the patents, trademarks, trade names, copyrights or
other property rights of others or that either Seller is wrongfully or
otherwise using the property rights of others.
(b) TBP is the owner of the name "Tennessee Building
Products, Inc." in the State of Alabama and is the owner of the names
"Tennessee Building Products, Inc.," "Tennessee Glass Company," "Tennessee
Kitchen Center, Inc.," "Windows, Doors & More, Inc." and "Tennessee Kitchen
and Bath" in the State of Tennessee, and; Titan is the owner of the name
"Titan Building Products, Inc." in the State of North Carolina. To the
knowledge of the Sellers, no person uses, or has the right to use, such names
or any derivation thereof in connection with the manufacture, assembly, sale
and distribution of window and door units and other millwork and insulated
glass.
3.23 Certain Liabilities.
(a) Parts (a)(i) and (ii) of Schedule 3.23 hereto set forth a
true and complete aged listing of all accounts payable owing by each Seller
as of May 31, 1996. All accounts payable by each Seller to third parties as
of the date hereof arose in the ordinary course of business and none are
delinquent or past due.
(b) Part (b)(i) and (ii) of Schedule 3.23 hereto set forth a
list of all indebtedness of each Seller as of the close of business on the
day preceding the date hereof (other than accounts payable) including,
without limitation, money borrowed, the deferred purchase price of assets,
letters of credit and capitalized leases, indicating, in each case, the name
or names of the lender, the date of maturity, the rate of interest, any
prepayment penalties or premiums and the unpaid principal amount of such
indebtedness as of such date.
3.24 No Undisclosed Liabilities. Neither Seller has any
material liabilities or obligations of any nature, known or unknown, fixed or
contingent, matured or unmatured, other than those (a) reflected in the
Interim Financial Statements, (b) incurred in the ordinary course of business
since the date of the Interim Financial Statements, or (c) disclosed
specifically on Schedule 3.24 hereto.
3.25 Certain Transactions. Except as set forth in Schedule
3.25, there are no transactions between either Seller and any of the
Shareholders (including the Shareholders' affiliates), or any of the
directors, officers or salaried employees, or the family members or
affiliates (other than for services as employees, officers and directors) of
any of either of the Sellers or any of the Shareholders (including the
Shareholders' affiliates), including, without limitation, any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from, any of the Shareholders, or any such
officer, director or salaried employee, family member, or affiliate or any
corporation, partnership, trust or other entity in which such family member,
affiliate, officer, director or employee has a substantial interest or is a
shareholder, officer, director, trustee or partner.
3.26 Employee Benefits.
(a) Part (a) of Schedule 3.26 lists each "employee welfare
benefit plan" (as defined in Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), maintained by each Seller or to
which each Seller contributes or is required to contribute (each such plan
being hereinafter called a "Welfare Benefit Plan").
(b) Part (b) of Schedule 3.26 lists each "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) presently maintained by
each Seller or to which each Seller contributes or is required to contribute
(each such plan being hereinafter called a "Pension Benefit Plan"). No such
Pension Benefit Plan is subject to Title IV of ERISA or Section 412 of the
Code and no such Pension Benefit Plan is a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA). No other entity which is a member of the
same controlled group of organizations (within the meaning of Sections
414(b), (c) or (m) of the Code) as each Seller, maintains, contributes to or
is obligated to contribute to any plan that is subject to Title IV of ERISA
or Section 412 of the Code or that is a "multiemployer plan."
(c) Part (c) of Schedule 3.26 lists each deferred
compensation plan, bonus plan, stock option plan, "phantom" stock plan,
employee stock purchase plan and each other employee benefit plan, agreement,
arrangement or commitment of each Seller not otherwise listed in Parts (a) or
(b) of Schedule 3.26.
(d) All of the Pension Benefit Plans and any related trust
agreements or annuity contracts (or any other funding instruments) have been
administered and maintained to date in substantial compliance with the
provisions of ERISA and the Code, where required, and all other applicable
laws, rules and regulations; and, except as set forth in Part (d) of Schedule
3.26, a favorable determination as to the qualification under the Code of
each of the Pension Benefit Plans intended to be so qualified, and each
amendment thereto, has been made by the IRS or application for such
determination has been made with respect thereto within the applicable
remedial amendment period. No act or omission has occurred that would cause
the loss of qualified status for any Pension Benefit Plan intended to be
qualified.
(e) Each Welfare Benefit Plan has been administered and
maintained to date in substantial compliance with the requirements of ERISA
and the Code, where required, and all other applicable laws, rules and
regulations. No Welfare Benefit Plan is funded by means of a voluntary
employees' beneficiary association ("VEBA") within the meaning of Section
501(c)(9) of the Code or is otherwise subject to the funding rules of
Sections 419 and 419A of the Code. Each Welfare Benefit Plan complies and
has complied with the continuation coverage (COBRA) requirements of Section
4980B of the Code to the extent such Section is applicable to such Welfare
Benefit Plans. No Welfare Benefit Plan provides medical or other welfare
benefits to retired or former employees of either Seller (other than COBRA
continuation coverage, where applicable).
(f) To the knowledge of each Seller, no plan fiduciary of any
Welfare Benefit Plan or Pension Benefit Plan has engaged in any transaction
in violation of Section 406(a) or (b) of ERISA or any "prohibited
transaction" (as defined in Section 4975(c)(1) of the Code) for which no
exemption exists under Sections 407 or 408 of ERISA or Section 4975(d) of the
Code. No litigation concerning any such plan is pending or, to each of the
Sellers' and the Shareholders' knowledge, threatened, nor, to the knowledge
of each of the Sellers and the Shareholders, is there outstanding any
complaint to the Department of Labor concerning any such plan.
(g) True and complete copies of each Welfare Benefit Plan,
each Pension Benefit Plan and each plan, agreement and arrangement listed in
Part (c) of Schedule 3.26, and the related trust agreements or annuity
contracts (or any other funding instruments), the most recent Summary Plan
Descriptions thereof, all records concerning any IRS or Department of Labor
audit, if any, of the same or of deductions for contributions thereto, the
three most recent Annual Reports on Form 5500 required to be filed with any
governmental agency for each Welfare Benefit Plan and each Pension Benefit
Plan and annual financial statements for the last three (3) plan years of any
Pension Benefit Plan, together with test results demonstrating compliance
with coverage and either contributions or benefits non-discrimination, as
required by the Code, have heretofore been, or will be prior to the Closing,
delivered by each of the Sellers to the Buyer.
(h) Each Welfare Benefit Plan, Pension Benefit Plan, related
trust agreement or annuity contract (or any other funding instruments) of
each of the Sellers is legally valid and binding and in full force and
effect, and there are no material defaults thereunder. None of the rights of
either of the Sellers thereunder will be impaired by the consummation of the
transactions contemplated by this Agreement, and all of the rights of each of
the Sellers thereunder will be enforceable by such Seller after the Closing
without the consent or agreement of any other party.
(i) All contributions and premium payments required with
respect to the Welfare Benefit Plans, Pension Benefit Plans and other plans,
arrangements and agreements listed on Schedule 3.26 have been made when due.
(j) The execution and delivery of this Agreement by the
Sellers and the consummation of the transactions contemplated hereunder,
either alone or together with subsequent events, will not result in any
obligation or liability (with respect to accrued benefits or otherwise) to
any Welfare Benefit Plan, Pension Benefit Plan or other plan, arrangement or
agreement listed in Schedule 3.26, or to any employee or former employee of
the Sellers, except for such obligations and liabilities which are being
expressly assumed by the Buyer pursuant to this Agreement.
3.27 Sellers and Shareholders Not Foreign Persons. None of the
Sellers or the Shareholders is a "foreign person" as that term is defined in
the Code and the regulations promulgated pursuant thereto, and the Buyer has
no obligation under Section 1445 of the Code to withhold or pay over to the
IRS any part of the "amount realized" (as such term is defined in the
regulations issued under Section 1445 of the Code) by the Sellers and/or the
Shareholders in the transactions contemplated hereby.
3.28 Suppliers and Customers. Schedule 3.28 contains, with
respect to the years ended December 31, 1994 and December 31, 1995, a true
and complete list of (i) the fifty (50) largest customers (in dollar volume)
of each Seller, (ii) the twenty-five (25) largest suppliers (in dollar
volume) to each Seller and (iii) those customers of each Seller who are
dealing with such Seller on the basis that such Seller is a minority-owned
business or is a "small business" pursuant to regulations promulgated by the
Small Business Administration. To the knowledge of each Seller and the
Shareholders, no such supplier, customer or creditor intends or has
threatened to terminate or modify any of their respective relationships with
the Sellers. Except as set forth on Schedule 3.28, neither Seller is
required to provide bonding or any other security arrangements in connection
with any transactions with any of its respective customers or suppliers.
3.29 Environmental Matters.
(a) Each Seller has obtained all permits, licenses and other
authorizations which are required to be maintained by such Seller under all
federal, state and local laws, regulations, rules and ordinances relating to
pollution or protection of the environment, and all provisions contained in
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved under such laws,
regulations, rules and ordinances (all of the foregoing being, collectively,
the "Environmental Laws") for the use and operation of the Real Property and
the operation of its business as it is presently being conducted, except
where the failure to obtain any such permit, license or other authorization
would not result in any Material Adverse Effect. All such permits, licenses
and authorizations are in effect, to the best knowledge of each of the
Sellers and the Shareholders, no appeal nor any other action is pending to
revoke any such permit, license or authorization, and each Seller is in
compliance with all terms and conditions of all such permits, licenses and
authorizations except where noncompliance would not result in any Material
Adverse Effect.
(b) Each Seller is in compliance with all Environmental Laws
except where the failure to comply with any such law would not result in any
Material Adverse Effect.
(c) There are no environmental studies or reports made by or
on behalf of either Seller relating to the Real Property which have not been
delivered to Buyer and are listed on Schedule 3.29(c).
(d) Neither Seller has, during the period of its ownership
and/or use of the Real Property, and to each of the Sellers' and the
Shareholders' best knowledge, no other person has at any time prior to or
during the period of the Sellers' ownership and/or use of the Real Property,
released, placed, stored, buried or dumped any hazardous substances, oils,
pollutants or contaminants, as those terms are defined under any
Environmental Law (collectively, "Hazardous Substances"), or any other wastes
produced by, or resulting from, any business, commercial, or industrial
activities, operations or processes, on or beneath, or adjacent to, the Real
Property, except for inventories of such substances to be used, and wastes
generated therefrom, in the ordinary course of businesses of the Sellers
(which inventories and wastes, if any, were, to the best of each of the
Sellers' and the Shareholders' knowledge, and are stored and disposed of by
each Seller in accordance with applicable laws and regulations and in a
manner such that there has been no release of any such substances into the
environment).
(e) To the knowledge of each of the Sellers and the
Shareholders, no employee of either Seller in the course of his or her
employment with such Seller has been exposed to any Hazardous Substances or
other substance, generated, produced or used by such Seller which could give
rise to any claim against either Seller.
(f) Neither Seller has received any notice or order from any
governmental agency or private or public entity advising it that it is
responsible for or potentially responsible for the cleanup or paying for the
cost of cleanup of any Hazardous Substances or any other waste or substance
and neither Seller has entered into any agreements concerning such cleanup,
nor does either Seller have knowledge of any facts which might reasonably
give rise to such notice, order or agreement.
(g) Except as described in Schedule 3.29(g), the Real
Property does not contain any: (i) underground storage tanks; (ii) asbestos;
(iii) equipment using PCBs; (iv) underground injection wells; or (v) septic
tanks in which process wastewater or any Hazardous Substances have been
disposed.
(h) To the knowledge of each of the Sellers and the
Shareholders, neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will require any
notice, environmental audit or other action of either Seller or of any of the
other parties hereto pursuant to any Environmental Law applicable to either
Seller or any of their facilities.
(i) Except as set forth on Schedule 3.29(i) hereto, neither
Seller has entered into any agreement that may require it to pay to,
reimburse, guarantee, pledge, defend, indemnify or hold harmless any person
for or against any Environmental Liabilities and Costs. For purposes of this
Agreement, "Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to monitor or conduct cleanup or
remediation, losses, damages, deficiencies, punitive damages, consequential
damages, treble damages, costs and expenses (including, without limitation,
all reasonable fees, disbursements and expenses of counsel, expert and
consulting fees and costs of investigations and feasibility studies and
responding to government requests for information or documents), fines,
penalties, restitution and monetary sanctions, interest, direct or indirect,
known or unknown, absolute or contingent, past, present or future, resulting
from any claim or demand, by any person or entity, whether based in contract,
tort, implied or express warranty, strict liability, joint and several
liability, criminal or civil statute, including any Environmental Law, or
arising from environmental, health or safety conditions, or the release or
threatened release of Hazardous Substances into the environment, as a result
of past or present ownership, leasing or operation of any properties owned,
leased or operated by either Seller.
3.30 Bank Accounts, Credit Cards, Etc. Schedule 3.30 hereto
lists all bank accounts, credit cards and safe deposit boxes in the name of,
or controlled by, either Seller, and cellular telephones and paging devices
provided and/or paid for by either Seller, and details about the persons
having access to or authority over such accounts, credit cards, safe deposit
boxes and cellular telephones and paging devices.
3.31 Warranties. Set forth on Schedule 3.31 hereto are
descriptions or copies of the forms of all express warranties and disclaimers
of warranty made by each Seller (separate and distinct from any applicable
manufacturers' or suppliers' warranties or disclaimers of warranties) during
the past five (5) years to customers or users of the products or services of
the Sellers. There have been no breach of warranty or breach of
representation claims against either Seller during the past five (5) years
which have resulted in any material cost, expenditure or exposure to either
Seller.
3.32 Interest in Competitors and Related Entities. Except as
set forth on Schedule 3.32 hereto, no Shareholder and no affiliate of any
Shareholder (meaning any person directly or indirectly controlling,
controlled by or under common control with any Shareholder, whether by stock
ownership, agreement or otherwise, or any parent, child or sibling of any
Shareholder) (i) has any direct or indirect interest in any person or entity
engaged or involved in any business which is competitive with the business of
either Seller, (ii) has any direct or indirect interest in any person or
entity which is a lessor of assets or properties to, material supplier of, or
provider of services to, either Seller, or (iii) has a beneficial interest in
any contract or agreement to which either Seller is a party; provided,
however, the foregoing representation and warranty shall not apply to any
person or entity, or any interest or agreement with any person or entity,
which is a publicly held corporation in which the Shareholders individually
and collectively own less than 3% of the issued and outstanding voting stock.
3.33 Directors and Officers. Set forth on Schedule 3.33 hereto
is a true and correct list of the names and titles of each director and
officer of each Seller.
3.34 Availability of Seller's Employees. There have been no
actions taken by either Seller, their respective affiliates, or any of their
respective shareholders, officers, directors or employees, to discourage, or
in any way prevent, any of the employees of either Seller from being hired by
the Buyer after the Closing, and neither Seller will take any such actions.
3.35 Projected Financials. Neither of the Sellers nor any of
the Shareholders has any reason to believe that the projected financials of
each of the Sellers contained in the Information Memorandum prepared by J.C.
Bradford & Co. dated January 1996 (the "Information Memorandum") or the
assumptions upon which such projected financials were based are incorrect or
incomplete; provided, that, the representation of the Sellers and the
Shareholders made in this Section 3.35 shall in no way be construed as a
guarantee of such projected financials of the Sellers.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Sellers as
follows:
4.1 Organization and Good Standing. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
4.2 Authority; Consents; Enforceability.
(a) Authority. The Buyer has full corporate power and
authority to execute and deliver this Agreement and the other agreements and
documents and instruments contemplated hereby, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution and delivery by the Buyer of this Agreement and
the other agreements, documents and instruments contemplated hereby, the
consummation by the Buyer of the transactions contemplated hereby and thereby
and the performance by the Buyer of its obligations hereunder and thereunder
have been duly and validly authorized by all necessary corporate action on
the part of the Buyer. The execution and delivery by the Buyer of this
Agreement and the other agreements, documents and instruments contemplated
hereby, the consummation by the Buyer of the transactions contemplated hereby
and thereby and the performance by the Buyer of its obligations hereunder and
thereunder will not (i) conflict with or violate any of the provisions of the
Certificate of Incorporation or By-laws of the Buyer, (ii) violate any law,
ordinance, rule or regulation or any judgment, order, writ, injunction or
decree or similar command of any court administrative or governmental agency
or other body applicable to the Buyer or any of its assets, or (iii) violate
or conflict with the terms of, or result in the acceleration of, any
indebtedness or obligation of the Buyer under, or violate or conflict with or
result in a breach by the Buyer of, or constitute a default under, any
material instrument, agreement or indenture or any mortgage, deed of trust or
similar contract to which the Buyer is a party or by which the Buyer or any
of its assets may be otherwise bound or affected.
(b) Consents. Except as set forth in Schedule 4.2(b) hereto,
no consent, authorization or approval of, or notice to, or filing or
registration with, any governmental body or authority, or any other third
party, is required in connection with the execution and delivery by the Buyer
of this Agreement and the other agreements, documents and instruments to be
executed and delivered in connection herewith, the consummation by the Buyer
of the transactions contemplated hereby and thereby and the performance by
the Buyer of its obligations hereunder and thereunder.
(c) Enforceability. This Agreement constitutes, and all
other agreements, documents and instruments to be executed and delivered by
the Buyer in connection herewith shall, when so executed and delivered,
constitute, the legal, valid and binding obligations of the Buyer,
enforceable against the Buyer in accordance with their respective terms,
except to the extent that enforceability may be limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors'
rights generally.
4.3 Brokers' and Finders' Fees. The Buyer has not incurred any
liability to any broker, finder, agent, employee or any other person or
entity for any fees, bonuses, commissions or other payments with respect to
the transactions contemplated by this Agreement, and the Buyer hereby agrees
to assume all liability to any such broker, finder, agent, employee or any
other person or entity claiming any such fee, bonus or commission.
4.4 Litigation. There are no actions, suits, claims,
investigations or legal or administrative or arbitration proceedings pending
or, to the Buyer's knowledge, threatened or probable of assertion, against
the Buyer before any court, governmental or administrative agency or other
body relating to this Agreement and/or the transactions contemplated hereby.
The Buyer is not now under any judgment, order, writ, injunction, decree or
other similar command of any court, administrative agency or other
governmental agency which relate to this Agreement and/or the transactions
contemplated hereby.
ARTICLE 5
CERTAIN COVENANTS OF THE SELLERS
The Sellers hereby covenant and agree that from and after the
date hereof until the Closing:
5.1 Provide Access to Information. Each Seller shall afford to
the Buyer, its attorneys, accountants, and such other representatives of the
Buyer as the Buyer shall designate to the Sellers in writing, free and full
access at all reasonable times, and upon reasonable prior notice, to the
Purchased Assets and the properties, books and records of each Seller and to
interview personnel of each Seller and up to a total of twenty-five (25)
suppliers of either Seller, of Buyer's selection, and up to a total of
twenty-five (25) customers of either Seller, of Buyer's selection, in order
that the Buyer may have full opportunity to make such investigation as it
shall reasonably desire of the Purchased Assets (including, without
limitation, any appraisals or inspections thereof), Assumed Liabilities and
the businesses and operations of the Sellers. In addition, each Seller shall
provide to the Buyer and its representatives such additional financial and
operating data and other information in respect of the Purchased Assets,
Assumed Liabilities and the business and properties of each such Seller as
the Buyer shall from time to time reasonably request.
5.2 Operation of Business of the Sellers. Each Seller shall (a)
maintain its corporate existence in good standing, (b) operate its business
substantially as presently operated and only in the ordinary course and
consistent with past operations, (c) use its best efforts to preserve intact
its present business organizations and employees and its relationships with
persons having business dealings with them, (d) comply in all respects with
all applicable laws, rules and regulations, (e) maintain its insurance
coverages, (f) pay all Taxes, charges and assessments when due, subject to
any valid objection or contest of such amounts asserted in good faith and
adequately reserved against, (g) make all debt service payments when
contractually due and payable, (h) pay all accounts payable and other current
liabilities when due, and (i) maintain the Welfare Benefit Plans and Pension
Benefit Plans, and (j) maintain the property, plant and equipment included in
the Purchased Assets in good operating condition taking into account the age
thereof.
5.3 Books of Account. Each Seller shall maintain its books and
records of account in the usual, regular and ordinary manner.
5.4 Retention of Employees. Each Seller shall use its
reasonable best efforts to encourage such personnel of such Seller as the
Buyer may designate in writing to become employees of the Buyer after the
date of the Closing.
5.5 Issuance of Securities. Neither Seller shall (a) issue any
debt or equity security or any options or warrants, (b) enter into any
subscriptions, agreements, plans or other commitments pursuant to which
either Seller is or may become obligated to issue any shares of its capital
stock or any securities convertible into shares of its capital stock, (c)
otherwise change or modify its capital structure, (d) engage in any
reorganization or similar transaction, or (e) agree to take any of the
foregoing actions.
5.6 Other Changes. Neither Seller shall take, cause, agree to
take or cause, or permit to occur any of the actions or events set forth in
Section 3.6 of this Agreement.
5.7 Additional Information. Each Seller shall furnish to the
Buyer such additional information with respect to any matters or events
arising or discovered subsequent to the date hereof which, if existing or
known on the date hereof, would have rendered any representation or warranty
made by either Seller or any information contained in any Schedule hereto or
in other information supplied in connection herewith then inaccurate or
incomplete. The receipt of such additional information by the Buyer shall
not operate as a waiver by the Buyer of the obligation of the Sellers to
satisfy the conditions to Closing set forth in Section 7.1 hereof.
5.8 Publicity. Except as may be required by law or the
applicable rules or regulations of any securities exchange, none of the
Sellers or the Shareholders shall make any press release or other public
announcement relating to this Agreement or the transactions contemplated
hereby, without the prior written approval of the Buyer.
5.9 Other Negotiations. None of the Sellers or the Shareholders
shall pursue, initiate, encourage or engage in any negotiations or
discussions with, or provide any information to, any other person or entity
(other than the Buyer and its representatives and affiliates) regarding the
sale or other disposition of the assets or capital stock of either Seller or
any merger or consolidation or similar transaction involving either Seller.
5.10 Closing Conditions. The Sellers shall use all reasonable
best efforts to satisfy promptly the conditions to Closing set forth in
Article 7 hereof required herein to be satisfied by the Sellers and any other
covenants or agreements of the Sellers to be satisfied prior to the Closing.
5.11 Environmental Audit.
The Sellers shall allow an environmental auditing firm selected
by the Buyer and paid for by the Buyer (the "Environmental Auditor") to have
access to the Real Property in order to conduct an environmental
investigation, satisfactory to the Buyer in scope of, and to prepare a report
with respect to, the Real Property (the "Environmental Audit"). The Sellers
shall provide to the Environmental Auditor: (i) reasonable access to all its
existing records concerning the matters which are the subject of the
Environmental Audit; and (ii) reasonable access to the employees of the
Sellers and the last known addresses of former employees of the Sellers who
is most familiar with the matters which are the subject of the Environmental
Audit (the Sellers agreeing to use reasonable efforts to have such former
employees respond to any reasonable requests or inquiries by the
Environmental Auditor). The Sellers shall otherwise cooperate with the
Environmental Auditor in connection with the Environmental Audit.
ARTICLE 6
CERTAIN COVENANTS OF THE BUYER
The Buyer hereby covenants and agrees that:
6.1 Publicity. From and after the date hereof until the
Closing, except as may be required by law or as necessary in connection with
the transactions contemplated hereby, the Buyer shall not make any press
release or other public announcement relating to this Agreement or the
transactions contemplated hereby, without the prior written approval of the
Sellers.
6.2 Closing Conditions. From and after the date hereof until
the Closing, the Buyer shall use all reasonable best efforts to satisfy
promptly the conditions to Closing set forth in Article 8 hereof required
herein to be satisfied by the Buyer.
6.3 Employment of Sellers' Employees and Employee Benefits.
(a) Employment. On or before the Closing Date, the Buyer
shall make offers of employment to the active employees of the Sellers
("Seller Employees"). Seller Employees who accept such offers of employment
and commence employment with the Buyer shall be employees at will and
referred to herein as "Hired Employees". Any Seller Employee absent from
work due to a leave of absence or disability as of the Closing shall be
offered employment by the Buyer at such time as such Seller Employee is able
to return to work in the capacity in which he or she worked immediately prior
to such absence. Any Seller Employee absent from work due to a leave of
absence or disability as of the Closing who is subsequently offered
employment by the Buyer will become a Hired Employee at such time the
employee accepts the offer of employment and commences work for the Buyer.
(b) Seller's Defined Contribution Plan. Effective as of the
Closing, the Buyer shall assume the sponsorship of the Tennessee Building
Products, Inc. Retirement Savings Plan and Trust Agreement ("Seller 401(k)
Plan"). Notwithstanding anything else to the contrary contained herein,
Sellers shall indemnify and hold harmless the Buyer from and against any
claims and the related costs and expenses of defending such claims (including
attorneys' fees) to the extent such claims arise from the Sellers'
administration of the Seller 401(k) Plan prior to the Closing. Prior to the
assumption of assets and benefit liabilities under the Seller 401(k) Plan,
the Sellers shall deliver to the Buyer evidence reasonably satisfactory to
Buyer that the Seller 401(k) Plan and related trust are qualified under
Sections 401(a) and 501(a) of the Code.
(c) Sellers' Welfare Plans. Effective as of the Closing,
Buyer shall assume the Sellers' Health, Life Insurance (and Dependant Life
Insurance), AD&D, Short-Term Disability and Long-Term Disability Plans (the
"Seller Welfare Plans"). The Sellers shall take all such actions as
necessary to assign the respective insurance policies and preferred provider
contracts to the Buyer and the Sellers shall indemnify and hold harmless
Buyer from and against any claims and the related costs and expenses of
defending such claims (including attorneys' fees) to the extent such claims
arise from the Sellers' administration of the Seller Welfare Plans prior to
the Closing.
(d) Vacation and Sick Days. With respect to the Hired
Employees, the Buyer shall recognize all accrued and unused vacation days and
sick days as of the Closing, and the Buyer shall permit the Hired Employees
to use such accrued vacation days and sick days following the Closing in a
manner similar to that provided under the Sellers' vacation and sick day
policies.
(e) TBP Salary Continuation Agreements. The Buyer shall not
assume any liability for or any obligation of either Seller under any TBP
Salary Continuation Agreement (each, an "SCA")
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement at the Closing
and the consummation by the Buyer of the transactions contemplated hereby are
subject to the satisfaction or fulfillment by the Sellers, prior to or at the
Closing, of each of the following conditions, unless waived by the Buyer:
7.1 Representations and Warranties. The representations and
warranties made by the Sellers and the Shareholders in this Agreement shall
be true and correct in all material respects at and as of the date of this
Agreement and at and as of the date of the Closing as though such
representations and warranties were made at and as of such times.
7.2 Performance of Obligations of the Sellers. The Sellers
shall have performed and complied in all material respects with all their
covenants, agreements, obligations and restrictions pursuant to this
Agreement required to be performed or complied with prior to or at the
Closing.
7.3 Closing Certificate. Each Seller shall have delivered a
certificate, signed by each such Seller's President and dated the date of the
Closing, certifying to the satisfaction of the conditions set forth in
Sections 7.1 and 7.2 hereof.
7.4 Opinion of Counsel. The Buyer shall have received an
opinion of Boult, Cummings, Conners & Berry, counsel to the Sellers and the
Shareholders, dated the date of the Closing, in the form of Exhibit 7.4
annexed hereto.
7.5 Supporting Documents. The Buyer shall have received the
following:
(a) A copy of the Charter of TBP and a copy of the Articles
of Incorporation of Titan, in each case with all amendments thereto and
certified as of a recent date by the Secretary of State of the State of
Tennessee and the Secretary of State of the State of North Carolina,
respectively;
(b) One or more certificates of the Secretary of State of the
State of Tennessee and/or the Secretary of State of the State of North
Carolina, as the case may be, dated as of a recent date as to the due
incorporation and good standing of each Seller, and stating that neither
Seller owes any franchise taxes in such state and listing all documents of
each Seller on file with said official;
(c) One or more certificates of officials from the
jurisdictions listed on Schedule 3.1 hereto as to the good standing of each
Seller in such jurisdictions;
(d) A certificate of the Secretary or an Assistant Secretary
of each Seller dated the date of the Closing and certifying (i) that attached
thereto is a true, complete and correct copy of the By-laws of such Seller as
in effect on the date of such certification, (ii) that the Charter or the
Articles of Incorporation of such Seller have not been amended since the date
of the last amendment referred to in the certificate delivered pursuant to
subsection (a) above, (iii) that attached thereto are true, complete and
correct copies of the resolutions duly adopted by the Board of Directors and
the Shareholders of each such Seller approving the transactions contemplated
hereby and authorizing the execution, delivery and performance by each such
Seller of this Agreement and the sale and transfer of the Purchased Assets as
in effect on the date of such certification, and (iv) as to the incumbency
and signatures of those officers of each such Seller executing any instrument
or other document delivered in connection with such transactions;
(e) Uniform Commercial Code Search Reports on Form UCC-11
with respect to each Seller from the states and local jurisdictions where the
principal places of business of each such Seller and the Purchased Assets are
located and releases on Form UCC-3 of any liens listed on such report; and
(f) Such reasonable additional supporting documents and other
information as the Buyer or its counsel may reasonably request.
7.6 Bills of Sale, Etc. The Buyer shall have received a duly
executed Bill of Sale from each Seller and all necessary deeds, assignments,
documents and instruments to effect the transfers, conveyances and
assignments to the Buyer referred to in Article 1 hereof, free and clear of
all Encumbrances, and each of the Sellers shall have taken such action as
shall be necessary to put the Buyer in actual possession and exclusive
control of each of the Purchased Assets (including, without limitation, the
delivery of keys).
7.7 Books and Records. The Buyer shall have received all books
and records of, or pertaining to, the businesses of the Sellers and the
Purchased Assets and Assumed Liabilities, except the corporate minute books
and stock record books of the Sellers, which are not required to be
transferred to the Buyer pursuant to Section 1.1 hereof.
7.8 Change of Names of Sellers; Use of Sellers' Names by Buyer.
At the Closing, each Seller shall deliver to the Buyer all documents,
including, without limitation resolutions of the Board of Directors and the
shareholders of each such Seller, necessary to effect a change of corporate
names of the Sellers after the Closing to names other than "Tennessee
Building Products, Inc." and "Titan Building Products, Inc." or any variation
thereof which names shall be sufficiently different from the name of the
Buyer and "Tennessee Building Products, Inc." and "Titan Building Products,
Inc." as to distinguish them upon the records in the office of the Secretary
of State of Tennessee and/or the Office of the Secretary of State of North
Carolina, as the case may be, from such names and such names shall be
sufficiently different from the names "Tennessee Kitchen Center, Inc.,"
"Windows, Doors & More, Inc.," "Tennessee Glass Company" and "Tennessee
Kitchen and Bath" as to distinguish them from such names. Each Seller shall
also have delivered to the Buyer at the Closing a written consent to the use
by the Buyer or any parent, subsidiary or affiliate of the Buyer, or any
successor or assignee of any thereof, of the names "Tennessee Building
Products, Inc.," "Titan Building Products, Inc.," "Tennessee Kitchen Center,
Inc.," "Windows, Doors & More, Inc.," "Tennessee Glass Company" and
"Tennessee Kitchen and Bath" or any variant thereof and an agreement
satisfactory to the Buyer that the Sellers will not use the names "Tennessee
Building Products, Inc.," "Titan Building Products, Inc.," "Tennessee Kitchen
Center, Inc.," "Windows, Doors & More, Inc.," "Tennessee Glass Company" or
"Tennessee Kitchen and Bath" or any variant thereof.
7.9 Consents. The Buyer shall have received duly executed
copies of all consents, authorizations, approvals, notices, registrations and
filings referred to in Sections 3.2(b) and 3.7(b) hereof, including without
limitation, the expiration or termination of the waiting period, including
any extensions thereof, under the Hart-Scott Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), if applicable.
7.10 No Litigation. No action, suit or other proceeding shall
be pending or threatened before any court, tribunal or governmental authority
seeking or threatening to restrain or prohibit the consummation of the
transactions contemplated by this Agreement, or seeking to obtain damages in
respect thereof, or involving a claim that consummation thereof would result
in a violation of any law, rule, decree or regulation of any governmental
authority having appropriate jurisdiction and no order, decree or ruling of
any governmental authority or court shall have been entered challenging the
legality, validity or propriety of, or otherwise relating to, this Agreement
or the transactions contemplated hereby or prohibiting, restraining or
otherwise preventing the consummation of the transactions contemplated
hereby.
7.11 Authorizations. The Buyer shall have received evidence of
the transfer to the Buyer of all Authorizations referred to in Section 3.13
of this Agreement or the Sellers shall have effectively obtained or made on
behalf of the Buyer or assisted the Buyer in obtaining or making, all
Authorizations.
7.12 No Material Adverse Change or Undisclosed Liability. There
shall have been no material adverse change or development in the business,
prospects, properties, earnings, results of operations or financial condition
of either Seller or any of the Purchased Assets or Assumed Liabilities, and
no fact or condition shall exist or be contemplated or threatened which will,
or, in the Buyer's reasonable judgment, would be reasonably likely to, cause
such a change or development or result in a liability or obligation of either
Seller not previously disclosed in writing to the Buyer.
7.13 Environmental Matters and Other Inspections. The Buyer and
its representatives shall have been afforded the opportunity to perform
environmental site assessments and building and other property inspections
and appraisals in a manner determined by the Buyer as necessary in order that
the Buyer may properly investigate and evaluate the Real Property and the
Purchased Assets.
7.14 Approval of Legal Matters. The form of all instruments,
certificates and documents to be executed and delivered by the Sellers to the
Buyer pursuant to this Agreement and all legal matters in respect of the
transactions as herein contemplated shall be reasonably satisfactory to the
Buyer and its counsel, none of whose approval shall be unreasonably withheld
or delayed.
7.15 Satisfactory Investigation. The Buyer, its accountants,
attorneys, building inspectors and other representatives shall have been
given a full opportunity to conduct a due diligence review (including,
without limitation, interviews of the Sellers' employees, customers and
suppliers and inspection and measurement of the Real Property) in accordance
with Section 5.1 hereof and the Buyer shall have been satisfied, in its sole
discretion, in all respects with the results of such investigation; provided,
that, after August 5, 1996, unless written notification by the Buyer to the
Sellers to the contrary shall have been given on or before August 5, 1996,
the condition set forth in this Section 7.15 shall be deemed to be satisfied.
7.16 Adverse Laws. No statute, rule, regulation or order shall
have been adopted or promulgated which materially adversely affects the
Purchased Assets, the Assumed Liabilities or the business of either Seller.
7.17 Appointment Letter. The appointment letter between the
Buyer and John Whipple, executed by such parties on July 19, 1996 (the
"Appointment Letter"), shall be in full force and effect at and as of the
Closing Date.
7.18 Non-Competition Agreement. The Sellers, the Shareholders
and John Whipple shall have executed and delivered to the Buyer the Non-
Competition Agreement substantially in the form of Exhibit 7.18 attached
hereto.
7.19 Assignment and Assumption of Leases. The appropriate
Seller shall have executed and delivered to the Buyer agreements of
Assignment and Assumption ("Agreements of Assignment and Assumption") with
respect to the Leases for each of the facilities located at Huntsville,
Alabama; Chattanooga, Tennessee; Charlotte, North Carolina, and; Greenville,
South Carolina, together with the Consent and Estoppel Certificate and a
Landlord Waiver from the landlord under each such Lease, substantially in the
forms of Exhibits 7.19(a), (b) and (c), respectively, attached hereto.
7.20 Facility Leases. The appropriate landlord of each of the
Nashville facility, the Chattanooga facility and the Nashville glass facility
shall have executed and delivered to the Buyer a lease with respect to each
such facility, substantially in the form of Exhibit 7.20 hereto (the
"Facility Leases"). Each such landlord shall have also delivered a Landlord
Waiver with respect to each such Facility Lease, substantially in the form of
Exhibit 7.19(c) attached hereto.
7.21 Escrow Agreement. The Sellers shall have executed and
delivered to the Buyer the Escrow Agreement.
7.22 Employee Waivers. The Buyer shall have received an
executed Employee Waiver, substantially in the form attached hereto as
Exhibit 7.22, from each employee who is a party to an SCA with either Seller.
7.23 Management Contract. The Management Contract between
Tennessee Building Products, Inc. and F&S Management Company, dated December
30, 1987 (the "Management Contract") shall have been terminated by the
parties thereto, and the Buyer shall have received evidence reasonably
satisfactory to Buyer of such termination;
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers under this Agreement at the
Closing and the consummation by the Sellers of the transactions contemplated
hereby are subject to the satisfaction or fulfillment by the Buyer, prior to
or at the Closing, of each of the following conditions, unless waived by the
Sellers:
8.1 Representations and Warranties. The representations and
warranties made by the Buyer in this Agreement shall be true and correct in
all material respects at and as of the date of this Agreement and at and as
of the date of the Closing as though such representations and warranties were
made at and as of such times.
8.2 Performance of Obligations of the Buyer. The Buyer shall
have performed and complied in all material respects with all its covenants,
agreements, obligations and restrictions pursuant to this Agreement required
to be performed or complied with prior to or at the Closing.
8.3 Closing Certificate. The Buyer shall have delivered a
certificate, signed by the Buyer's Vice President and dated the date of the
Closing, certifying to the satisfaction of the conditions set forth in
Sections 8.1 and 8.2 hereto.
8.4 Payment of Purchase Price. The Buyer shall have tendered to
the Sellers payment of the cash portion of the Purchase Price and deposited
the Escrow Amount in accordance with the Escrow Agreement.
8.5 Opinion of Counsel. The Sellers shall have received an
opinion of Winthrop, Stimson, Putnam & Roberts, counsel to the Buyer, dated
the date of the Closing, in the form of Exhibit 8.5 annexed hereto.
8.6 Supporting Documents. The Sellers shall have received the
following:
(a) A copy of the Certificate of Incorporation of the Buyer,
and all amendments thereto, certified as of a recent date by the Secretary of
State of the State of Delaware;
(b) A certificate of the Secretary of State of the State of
Delaware dated as of a recent date as to the due incorporation and good
standing of the Buyer;
(c) A certificate of the Secretary or an Assistant Secretary
of the Buyer dated the date of the Closing, and certifying (i) that attached
thereto is a true, complete and correct copy of the By-laws of the Buyer as
in effect on the date of such certification, (ii) that the Certificate of
Incorporation of the Buyer has not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to Subsection (a)
above, (iii) that attached thereto are true, complete and correct copies of
the resolutions duly adopted by the Board of Directors of the Buyer approving
the transactions contemplated hereby and authorizing the execution, delivery
and performance by the Buyer of this Agreement as in effect on the date of
such certification, and (iv) as to the incumbency and signatures of certain
officers of the Buyer executing any instrument or other document delivered in
connection with such transactions; and
(d) Copies of all authorizations, consents, approvals,
notices, filings and registrations referred to in Section 4.2(b) hereof,
including without limitation, the expiration or termination of the waiting
period, including any extensions thereof, under the HSR Act, if applicable.
8.7 Approval of Legal Matters. The form of all certificates,
instruments and documents to be executed and/or delivered by the Buyer to the
Sellers pursuant to this Agreement and all legal matters in respect of the
transactions as herein contemplated shall be reasonably satisfactory to the
Sellers and its counsel, none of whose approval shall be unreasonably
withheld or delayed.
8.8 No Litigation. No action, suit or other proceeding shall be
pending or threatened before any court, tribunal or governmental authority
seeking or threatening to restrain or prohibit the consummation of the
transactions contemplated by this Agreement, or seeking to obtain damages in
respect thereof, or involving a claim that consummation thereof would result
in the violation of any law, rule, decree or regulation of any governmental
authority having appropriate jurisdiction, and no order, decree or ruling of
any governmental authority or court shall have been entered challenging the
legality, validity or propriety of, or otherwise relating to, this Agreement
or the transactions contemplated hereby or prohibiting, restraining or
otherwise preventing the consummation of the transactions contemplated
hereby.
8.9 Appointment Letter. The Appointment Letter shall be in full
force and effect at and as of the Closing Date.
8.10 Agreements of Assignment and Assumption. The Buyer shall
have executed and delivered to the appropriate Seller the Agreements of
Assignment and Assumption.
8.11 Facility Leases. The Buyer shall have executed and
delivered the Facility Leases to the appropriate landlords.
8.12 Employment of Sellers' Employees. The Buyer shall have
made offers of employment to all of Sellers' employees in accordance with
Section 6.3 of the Agreement; provided, that, no such offer shall give any
employee the right to continuing employment.
ARTICLE 9
TRANSFER TAXES; PRORATION OF CHARGES
9.1 Certain Taxes and Fees. All sales, transfer, documentary,
stamp, recording and other similar taxes and/or fees which may be due or
payable in connection with the sale of the Purchased Assets pursuant hereto
shall be borne by the Sellers.
9.2 Proration of Certain Charges. The following Taxes, charges
and payments ("Charges") shall be prorated on a per diem basis and
apportioned between the Sellers and the Buyer as of the date of the Closing:
real property, intangibles Taxes, utility charges, rental or lease charges,
license fees, general assessments imposed with respect to the Purchased
Assets, employee payrolls and employee benefit plan contributions and related
premium payments and any other Taxes, charges, fees, assessments and expenses
not measured or measurable in whole or in part by net or gross income or
receipts. The Sellers shall be liable for that portion of the Charges
relating to, or arising in respect of, periods on or prior to the date of the
Closing and the Buyer shall be liable for that portion of the Charges
relating to, or arising in respect of, any period after the date of the
Closing. Attached hereto as Schedule 9.2 is a pro forma schedule of all such
charges anticipated to be accrued as of the date of the Closing, setting
forth the respective categories thereof and the amounts thereof.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
10.1 Survival of Representations and Warranties. All statements
contained in any schedule or certificate delivered hereunder or in connection
herewith by or on behalf of any of the parties pursuant to this Agreement
shall be deemed representations and warranties by the respective parties
hereunder unless otherwise expressly provided herein. The representations
and warranties of the Sellers, the Shareholders and the Buyer contained in
this Agreement, including those contained in any Schedule or certificate
delivered hereunder or in connection herewith, shall survive the Closing
hereunder to the extent provided in Section 10.5.
10.2 Agreement to Indemnify by the Sellers. Subject to the
terms and conditions of Sections 10.4 and 10.5 hereof, the Sellers and the
Shareholders hereby agree, jointly and severally, to indemnify and save the
Buyer, its permitted assigns hereunder, and their respective officers,
directors and employees (each, a "Buyer Indemnitee") harmless from and
against, for and in respect of, any and all demands, judgments, injuries,
penalties, damages, losses, obligations, liabilities, claims, actions or
causes of action, encumbrances, costs, expenses, Environmental Liabilities
and Costs (including, without limitation, reasonable attorneys' fees and
expert witness fees) suffered, sustained, incurred or required to be paid by
any Buyer Indemnitee (collectively, "Buyer's Damages") arising out of or
based upon or resulting from or in connection with or as a result of:
(a) the untruth, inaccuracy or breach of any representation
or warranty of the Sellers or any Shareholder contained in or made pursuant
to this Agreement, including in any Schedule or certificate delivered
hereunder or in connection herewith;
(b) the breach or nonfulfillment of any covenant or agreement
of either Seller contained in this Agreement or in any other agreement,
document or instrument delivered hereunder or pursuant hereto;
(c) the assertion against the Buyer or the Purchased Assets
of any liability or obligation of either Seller (whether absolute, accrued,
contingent or otherwise and whether a contractual, tort or any other type of
liability, obligation or claim) not expressly assumed by the Buyer pursuant
to this Agreement;
(d) any loss of life, injury to persons or property, or
damage to natural resources caused by the actual, alleged, or threatened
release, storage, transportation, treatment or generation, of Hazardous
Substances generated, stored, used, disposed of, treated, handled or shipped
by either Seller on or before the date of the Closing;
(e) any cleanup of Hazardous Substances released, disposed of
or discharged: (i) on, beneath or adjacent to the Real Property prior to or
on the date of the Closing; or (ii) at any other location if such substances
were generated, used, stored, treated, transported or released by either
Seller prior to or on the date of the Closing;
(f) any and all expenses (including brokers' and finders'
fees and taxes) of the Sellers or the Shareholders related to the
consummation of the transactions contemplated by this Agreement; or
(g) any and all liabilities and obligations arising out of or
related to express or implied warranties given by either Seller to its
customers with respect to products manufactured and sold by either Seller
prior to the Closing Date; provided, that, such liabilities and obligations
are not in the ordinary course of business and are in nature or amount
unusual or exceptional.
10.3 Agreement to Indemnify by the Buyer. Subject to the terms
and conditions of Sections 10.4 and 10.5 hereof, the Buyer hereby agrees to
indemnify and save the Sellers and the Shareholders and their respective
shareholders, officers, directors and employees (each, a "Seller Indemnitee")
harmless from and against, for and in respect of, any and all demands,
judgments, injuries, penalties, damages, losses, obligations, liabilities,
claims, actions or causes of action, encumbrances, costs and expenses
(including, without limitation, reasonable attorneys' fees and expert witness
fees) suffered, sustained, incurred or required to be paid by any Seller
Indemnitee (collectively "Seller's Damages") arising out of or based upon or
in connection with or as a result of:
(a) the untruth, inaccuracy or breach of any representation
or warranty of the Buyer contained in or made pursuant to this Agreement,
including in any Schedule or certificate delivered hereunder or in connection
herewith;
(b) the breach or nonfulfillment of any covenant or agreement
of the Buyer contained in this Agreement or in any other agreement, document
or instrument delivered hereunder or pursuant hereto;
(c) the assertion against either Seller of any liability or
obligation included in the Assumed Liabilities;
(d) any and all expenses (including brokers' and finders'
fees and taxes) of the Buyer related to the consummation of the transactions
contemplated by this Agreement; or
(e) the operation of the Purchased Assets by the Buyer after
the Closing.
10.4 Procedures Regarding Third Party Claims. The procedures to
be followed by the Buyer, the Sellers and the Shareholders with respect to
indemnification hereunder regarding claims by third persons which could give
rise to an indemnification obligation hereunder shall be as follows:
(a) Promptly after receipt by any Buyer Indemnitee or Seller
Indemnitee, as the case may be, of notice of the commencement of any action
or proceeding (including, without limitation, any notice relating to a tax
audit) or the assertion of any claim by a third person, which the person
receiving such notice has reason to believe may result in a claim by it for
indemnity pursuant to this Agreement, such person (the "Indemnified Party")
shall give notice of such action, proceeding or claim to the party against
whom indemnification pursuant hereto is sought (the "Indemnifying Party"),
setting forth in reasonable detail the nature of such action, proceeding or
claim, including copies of any written correspondence from such third person
to such Indemnified Party.
(b) The Indemnifying Party shall be entitled, at its own
expense, to participate in the defense of such action, proceeding or claim,
and, if (i) the action, proceeding or claim involved seeks (and continues to
seek) solely monetary damages, (ii) the Indemnifying Party confirms, in
writing, its obligation hereunder to indemnify and hold harmless the
Indemnified Party with respect to such damages in their entirety pursuant to
Sections 10.2 or 10.3 hereof, as the case may be, and (iii) the Indemnifying
Party shall have made provision which, in the reasonable judgment of the
Indemnified Party, is adequate to satisfy any adverse judgment as a result of
its indemnification obligation with respect to such action, proceeding or
claim, then the Indemnifying Party shall be entitled to assume and control
such defense with counsel chosen by the Indemnifying Party and approved by
the Indemnified Party, which approval shall not be unreasonably withheld or
delayed. The Indemnified Party shall be entitled to participate therein
after such assumption, the costs of such participation following such
assumption to be at its own expense. Upon assuming such defense, the
Indemnifying Party shall have full rights to enter into any monetary
compromise or settlement which is dispositive of the matters involved;
provided, that, such settlement is paid in full by the Indemnifying Party and
will not have any direct or indirect continuing material adverse effect upon
the Indemnified Party.
(c) With respect to any action, proceeding or claim as to
which (i) the Indemnifying Party does not have the right to assume the
defense or (ii) the Indemnifying Party shall not have exercised its right to
assume the defense, the Indemnified Party shall assume and control the
defense of and contest such action, proceeding or claim with counsel chosen
by it and approved by the Indemnifying Party, which approval shall not be
unreasonably withheld. The Indemnifying Party shall be entitled to
participate in the defense of such action, proceeding or claim, the cost of
such participation to be at its own expense. The Indemnifying Party shall be
obligated to pay the reasonable attorneys' fees and expenses of the
Indemnified Party to the extent that such fees and expenses relate to claims
as to which indemnification is due under Sections 10.2 or 10.3 hereof, as the
case may be. The Indemnified Party shall have full rights to dispose of such
action, proceeding or claim and enter into any monetary compromise or
settlement; provided, however, in the event that the Indemnified Party shall
settle or compromise any claims involved in such action, proceeding or claim
insofar as they relate to, or arise out of, the same facts as gave rise to
any claim for which indemnification is due under Sections 10.2 or 10.3
hereof, as the case may be, it shall act reasonably and in good faith in
doing so.
(d) Both the Indemnifying Party and the Indemnified Party
shall cooperate fully with one another in connection with the defense,
compromise or settlement of any such action, proceeding or claim including,
without limitation, by making available to the other all pertinent
information and witnesses within its control.
10.5 Period of Indemnity. The indemnities contained in this
Article 10 shall expire fifteen (15) months from the Closing Date, except (i)
with respect to the indemnities for breach of the representations and
warranties of the Sellers and the Shareholders contained in Section 3.16
which shall expire 60 days after the expiration of the applicable Tax statute
of limitation; (ii) with respect to Buyer's Damages or Seller's Damages as to
which notice has been given pursuant to Section 10.4 within such period, in
which case the indemnification period shall be extended until final
resolution of such Damages; and (iii) there shall be no limitation period
with respect to either Buyer's Damages arising under the Sellers'
indemnification obligations under Section 10.2(b), (c), (d), (e) and (f) or
with respect to Seller's Damages arising under Buyer's indemnification
obligations under Section 10.3(b), (c), (d) and (e).
10.6 Limitation of Liability. The obligations and liabilities
of the Buyer and the Sellers and the Shareholders for indemnification and
breaches of representations and warranties hereunder shall be subject to the
following limitations:
(a) Provided that the Closing shall have taken place, the
rights to indemnification of the Buyer, on the one hand, and the Sellers and
the Shareholders, on the other hand, shall be limited to a maximum aggregate
recovery from the other party or parties of an amount equal to ten percent
(10%) of the Purchase Price, as adjusted pursuant to Section 1.3(b) hereof;
and
(b) No indemnification shall be required to be made by the
Buyer, on the one hand, or the Sellers and the Shareholders, on the other
hand, unless the cumulative aggregate total amount of Buyer's Damages or
Seller's Damages, as the case may be, exceeds an amount equal to $200,000,
and then only to the extent of such excess;
provided, that, the foregoing limitations on liability set forth in
subsections (a) and (b) above shall not apply to (or count towards) any
indemnification obligations arising out of (i) fraud, willful misconduct or
knowing misstatement of the Buyer, on the one hand, or either Seller or any
Shareholder, on the other hand; (ii) indemnification obligations under
Sections 10.2(d), (e) or (f); and/or (iii) any amounts paid by any party
hereto to another party pursuant to Section 1.3(b) of this Agreement.
ARTICLE 11
TERMINATION
This Agreement may be terminated prior to the Closing (a) at any
time by the written mutual consent of the Buyer and the Sellers, (b) by the
Buyer, if the conditions set forth in Article 7 hereof shall not have been
met by the close of business on September 30, 1996, (c) by the Sellers if the
conditions set forth in Article 8 hereof shall not have been met by the close
of business on September 30, 1996, (d) by the Buyer at any time on or before
August 5, 1996 for any reason other than as set forth in (b) above, and
thereafter for any such reason other than as set forth in (b) above, in
either case upon the payment by the Buyer to the Sellers of $1,000,000 (which
payment shall be in lieu of payment for any and all other liabilities of or
payments by the Buyer, notwithstanding anything else to the contrary
contained herein), or (e) by the Buyer in the event that the Sellers have not
obtained, on or before August 5, 1996, the consents necessary under that
certain Distributorship Agreement by and between TBP and Merillat Industries,
Inc. or have not obtained a Consent and Estoppel Certificate and Landlord
Waiver from the landlord under, and any other consent necessary pursuant to,
that certain Lease Agreement by and between Titan and SCI NC Limited
Partnership dated February 15, 1995. In the event that this Agreement is
terminated as aforesaid, this Agreement shall be of no further force or
effect and no party shall have any liability to any other party hereto except
as provided above; provided, however, that (except as set forth in (d) above)
the termination of this Agreement will not relieve either party of any
liability for breach of any agreement hereunder occurring prior to such
termination and, provided, further, that, notwithstanding such termination,
the provisions of Sections 5.8, 6.1 and 13.2 hereto shall survive any
termination of this Agreement.
ARTICLE 12
GUARANTY OF SHAREHOLDERS
12.1 Guaranty. The Shareholders of each Seller, jointly and
severally, hereby guarantee, with respect to such Seller as to which such
Shareholder is an owner, the due and punctual payment, observance and
performance by each such Seller of each and all of the obligations and
liabilities of each such Seller under this Agreement and all other
agreements, documents and instruments to be executed and delivered by the
Sellers pursuant to, or in connection with, this Agreement (collectively, the
"Other Agreements"), including, without limitation, the Sellers' obligations
to indemnify and save the Buyer harmless, in accordance with the provisions
of Article 10 of this Agreement. All of the foregoing liabilities and
obligations of the Sellers under this Agreement and the Other Agreements,
together with any and all reasonable fees, costs and expenses (including,
without limitation, attorneys' fees) which may be paid or incurred by the
Buyer in enforcing or collecting liabilities and obligations of the
Shareholders under this Guaranty, are hereinafter called, collectively, the
"Guaranteed Obligations" and, individually, a "Guaranteed Obligation."
12.2 Notice to the Shareholders. The Shareholders hereby agree
that if any Guaranteed Obligation is not paid, observed or performed, as the
case may be, when and as due, the Buyer may notify the Shareholders of such
non-performance, whereupon the Shareholders shall cause the applicable Seller
to promptly pay, observe or perform or the Shareholders, jointly and
severally, will promptly pay, observe or perform, as the case may be, such
Guaranteed Obligation.
12.3 Absoluteness of Guaranty. The obligations of the
Shareholders under this Guaranty shall be absolute and unconditional, present
and continuing, irrespective of any bankruptcy proceeding involving the
Sellers or any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of or termination of the existence of any Seller, or any
circumstance which might constitute a legal or equitable discharge of a
guarantor.
12.4 Guaranty Not Affected. Each of the Shareholders hereby
consents and agrees that, at any time and from time to time:
(a) the time, manner, place and/or terms and conditions of
payment, observance or performance of all or any of the Guaranteed
Obligations may be extended, amended, modified or changed pursuant to
agreement between the Buyer and the Sellers;
(b) any action may be taken under or in respect of this
Agreement or any of the Other Agreements, and the exercise of any remedy,
power or privilege thereunder may be waived, omitted or not enforced;
(c) the time for performance of or compliance with any term,
obligation, covenant or agreement on the part of the Sellers to be performed
or observed by the Sellers under this Agreement or any of the Other
Agreements may be extended, or such performance or compliance waived, or
failure in or departure from such performance or compliance consented to; and
(d) this Agreement and/or any of the Other Agreements may be
amended or modified in any respect by the parties thereto,
all in such manner and upon such terms as the parties thereto may deem
proper, and without notice to or further assent from the Shareholders, and
all without affecting this Guaranty or the obligations of the Shareholders
hereunder, which shall continue in full force and effect until all of the
Guaranteed Obligations and all obligations of the Shareholders hereunder
shall have been fully paid, observed and performed.
12.5 Waiver. Each of the Shareholders hereby waives notice of
acceptance of this Guaranty, presentment, demand, protest, or (except as set
forth in Section 12.2 hereof) any notice of any kind whatsoever, with respect
to any or all of the Guaranteed Obligations, and promptness in making any
claim or demand hereunder; and no act or omission of any kind shall in any
way affect or impair this Guaranty. Each of the Shareholders, except as set
forth in Section 12.2 hereof, also waives any requirement, and any right to
require, that any right or power be exercised or any action be taken against
either Seller or any other person or entity or any assets for any of the
Guaranteed Obligations.
12.6 No Subrogation. Notwithstanding any payment, observance or
performance made by the Shareholders pursuant to this Article 12, the
Shareholders hereby irrevocably waive any and all rights of subrogation to
all of the Buyer's rights against the Sellers and any and all rights of
reimbursement, assignment, indemnification or implied contract or any similar
rights against the Sellers or against any endorser or other guarantor of all
or any part of any obligations of the Sellers to the Buyer with respect to
any liabilities of the Shareholders under this Article 12. If,
notwithstanding the foregoing, any amount shall be paid to the Shareholders
on account of any subrogation rights at any time when all of the obligations
of the Sellers to the Buyer shall not have been paid in full, such amount
shall be held by the Shareholders in trust for the Buyer, segregated from
other funds of the Shareholders, and shall, forthwith upon receipt by the
Shareholders, be turned over to the Buyer in the exact form received by the
Shareholders (duly endorsed by the Shareholders to the Buyer, if required),
to be applied against the obligations of the Sellers to the Buyer, whether
matured or unmatured, in such order as the Buyer may determine.
12.7 Reinstatement. This Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time payment,
observance or performance, or any part thereof, of any of the Guaranteed
Obligations is rescinded or must otherwise be restored or returned by the
Buyer upon the insolvency, bankruptcy or reorganization of the Sellers, all
as though such payment, observance or performance had not been made.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 Access to Books and Records. The Buyer shall, for a
period of six years following the Closing, give, and shall cause to be given,
to each of the Sellers and their authorized representatives such access,
during normal business hours and upon prior notice, to such books and records
constituting part of the Purchased Assets as shall be reasonably necessary
for the Sellers in connection with the preparation and filing of the Sellers'
tax returns for periods prior to the Closing, and to make extracts and copies
of such books and records at the expense of the Sellers; provided, that, the
Sellers shall keep the Buyer informed as to the expiration of the statutes of
limitations with respect to the Sellers for taxable periods prior to the
Closing for which the Buyer is in possession of books and records
constituting part of the Purchased Assets.
13.2 Confidentiality.
Notwithstanding anything herein to the contrary, each party
shall hold in strict confidence documents and information concerning the
other, the other's affiliates and their respective businesses and properties
(including that of the Sellers) and the transactions contemplated hereby,
except that either party may disclose such documents and information to (i)
any governmental authority reviewing the transactions contemplated hereby or
as required in either party's judgment pursuant to federal or state laws; or
(ii) such persons as are required to have such information in either party's
good faith judgment in order to assist either party in consummating the
transactions contemplated hereby, and except that upon consummation of the
transactions contemplated by this Agreement, the Buyer may disclose such
documents and information to such persons as it may desire in order to carry
on the businesses heretofore conducted by the Sellers. The Buyer agrees that
upon termination of this Agreement for any reason, the Buyer shall return to
the Sellers, upon the Sellers' request, all copies of all documents and other
information provided to the Buyer by the Sellers hereunder.
13.3 Remedies. Each of the parties to this Agreement is
entitled to all remedies in the event of breach provided at law or in equity,
specifically including, but not limited to, specific performance.
13.4 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be given in writing and
shall be delivered personally or sent by a nationally recognized overnight
courier, postage prepaid, and shall be deemed to have been duly given when so
delivered personally or one (1) Business Day after the date of deposit with
such nationally recognized overnight courier. All such notices, claims,
certificates, requests, demands and other communications shall be addressed
to the respective parties at the addresses set forth below or to such other
address as the person to whom notice is to be given may have furnished to the
others in writing in accordance herewith.
If to the Buyer, to:
Morgan Products Ltd.
469 McLaws Circle
Williamsburg, VA 23185
Telecopier No.: (757) 564-1714
Attention: Douglas H. MacMillan
with a copy to:
Winthrop, Stimson, Putnam & Roberts
Financial Centre
695 East Main Street
Post Office Box 6760
Stamford, CT 06904-6760
Telecopier No.: (203) 965-8226
Attention: Frode Jensen, III, Esq.
If to either Seller or either Shareholder, to:
Tennessee Building Products, Inc.
Titan Building Products, Inc.
c/o Mr. James Fishel
6420 East Valley Court
Nashville, TN 37205
and
c/o Mr. James Schulman
588 Harpeth Trace Drive
Nashville, TN 37221
Attention: James Schulman
in either case, with a copy to:
Boult, Cummings, Conners & Berry
414 Union Street
Suite 1600
Nashville, TN 37219
Telecopier No.: (615) 252-2380
Attention: Davis H. Carr, Esq.
The Buyer, the Sellers or the Shareholders may change the address
or telecopier number to which such communications are to be directed by
giving written notice to the others in the manner provided in this Agreement.
13.5 Parties in Interest; No Third Party Beneficiaries.
(a) Subject to Section 13.6 hereof, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto.
(b) Nothing in this Agreement, expressed or implied, is
intended or shall be construed to confer upon or give to any employee of the
Sellers or the Buyer, or any other person, firm, corporation or legal entity,
other than the parties hereto and their successors and permitted assigns, any
rights, remedies or other benefits under or by reason of this Agreement.
13.6 Assignability. This Agreement shall not be assignable by
any party hereto without the prior written consent of the other parties;
provided, that, Buyer may assign its rights and obligations under this
Agreement to any affiliate of Buyer presently existing or hereafter formed
and to any person or entity that shall acquire all or substantially all of
the assets of the Buyer; provided, further, however, that no such assignment
shall relieve the Buyer of its obligations hereunder.
13.7 Entire Agreement; Amendment. This Agreement and the other
writings referred to herein or delivered pursuant hereto contain the entire
understanding of the parties hereto with respect to its subject matter.
There are no representations, promises, warranties, covenants or undertakings
other than as expressly set forth herein or therein. This Agreement
supersedes all prior agreements and understandings between the parties hereto
with respect to its subject matter. This Agreement may be amended or
modified only by a written instrument duly executed by the parties hereto,
and any condition to a party's obligations hereunder may only be waived in
writing by such party.
13.8 Headings. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
13.9 Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, and all such counterparts together shall constitute but
one agreement.
13.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee, without
giving effect to its principles of conflicts of law.
13.11 Knowledge. Whenever any representation or warranty of the
Sellers contained herein or in any other document executed and delivered in
connection herewith is based upon the knowledge of the Sellers, such
knowledge shall be deemed to include the knowledge of any of the
Shareholders.
13.12 Waiver of Jury Trial. THE PARTIES HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE BOTH PARTIES INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO OR
CONNECTED WITH THIS AGREEMENT.
13.13 Waivers. Any party to this Agreement may, by written
notice to the other parties hereto, waive any provision of this Agreement
from which such party is entitled to receive a benefit. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach of such provision or any
other provision of this Agreement.
13.14 Severability. In the event that any provision, or part
thereof, of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions, or parts thereof, shall not in any way be affected or impaired
thereby.
13.15 Expenses. Except as otherwise set forth herein, each
party shall be responsible for its own legal fees and other costs and
expenses incurred in connection with this Agreement and the negotiation and
consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed all as of the day, month and year first above written.
MORGAN PRODUCTS LTD.
By: /s/ Larry R. Robinette
Name: Larry R. Robinette
Title: President & Chief
Executive Officer
TENNESSEE BUILDING PRODUCTS, INC.
By: /s/ James F. Fishel, President
Name: James Fishel
Title: President
TITAN BUILDING PRODUCTS, INC.
By: /s/ James F. Fishel, President
Name: James Fishel
Title: President
/s/ James F. Fishel
James Fishel
/s/ James Schulman
James Schulman
TENNESSEE BUILDING PRODUCTS, INC.
(as Shareholder of Titan)
By: /s/ James F. Fishel, President
Name: James Fishel
Title: President
