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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
LBP, INC.
Delaware 0-24094 13-3764375
(State or other jurisdiction of (Commission file No.) (I.R.S. Employer
incorporation or organization) Identification Number)
200 Mamaroneck Avenue, White Plains, NY 10601
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number including Area Code: (914) 421-2545
LESLIE BUILDING PRODUCTS, INC.
(Former name or former address, if changed since last report)
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ITEM 2. Acquisition or Disposition of Assets.
Pursuant to an Asset Purchase Agreement, dated May 26, 1998 (the
"Agreement"), Registrant's wholly-owned subsidiary, Leslie-Locke, Inc.
("Leslie-Locke"), a Delaware corporation, sold substantially all its net assets
to LL Building Products, Inc., a newly-formed Delaware subsidiary of Building
Materials Corporation of America, d/b/a GAF Materials Corporation. Leslie-Locke
was the sole operating subsidiary of Registrant. The consideration was
approximately $44 million in cash. The transaction was consummated on June 18,
1998 (the "Closing Date"), as of 11:59 p.m. May 31, 1998. Pursuant to the
Agreement, certain adjustments may be made to the consideration within 120 days
from the Closing Date, based upon an audit of the closing date Balance Sheet of
Leslie- Locke by the Registrants' independent auditors. Immediately after the
closing of the transaction, the name of Leslie- Locke was changed to Prime
Acquisition Corp., and the name of Registrant was changed to LBP, Inc.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(b) Pro Forma financial information.
After payment of its outstanding debt, closing costs, and taxes,
Registrant and its subsidiary will have cash in excess of $26 million and
stockholders' equity in excess of $22 million. A substantial portion of the net
proceeds from the sale will be held in escrow for two years. In excess of $22
million of such funds may be released from escrow and used by Registrant at any
time to acquire other businesses, for investments, and for certain other
permitted payments.
As a result of the sale of substantially all the net assets of
Leslie-Locke, Registrant does not currently have any operating businesses.
Registrant will continue to incur expenses associated with the management of its
assets, its financial reporting obligations and other administrative functions.
The sale did not include the assets and liabilities of White Metal
Rolling and Stamping Corp., Leslie-Locke's discontinued ladder manufacturing
subsidiary. See Item 3. "Legal Proceedings" and Note 5 of Notes to Consolidated
Financial Statements in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997.
(2)
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(c) Exhibits.
(1) Asset Purchase Agreement, dated May 26, 1998, by and
between Leslie-Locke, Inc. ("Seller") and BMCA Key Acquisition Corp., now known
as LL Building Products, Inc. ("Buyer").
(i) List of Schedules to Revised Asset Purchase
Agreement. Registrant will furnish supplementally a copy of any Schedule upon
request of the Commission.
(2) First Escrow Agreement, dated June 18, 1998, by and among
Seller, Buyer and The Chase Manhattan Bank ("Escrow Agent").
(3) Second Escrow Agreement, dated June 18, 1998, by and among
Seller, Buyer and the Escrow Agent.
(4) Net Proceeds Escrow agreement, dated June 18, 1998, by and
among Seller, Buyer and the Escrow Agent.
(5) Parent Guarantee Agreement, dated June 18, 1998, by and
between Registrant and Buyer.
Pursuant to the requirements of the Securities and Exchange Act of
1934, as amended, Registrant has duly caused this Report to be signed on its
behalf by the undersigned hereunto duly authorized.
LBP, INC.
(Registrant)
By:______________________________________
Leigh J. Abrams
President and Chief Executive Officer
Dated: July 1, 1998
(3)
ASSET PURCHASE AGREEMENT
---------------------------------
Between
BMCA KEY ACQUISITION CORP.
and
LESLIE-LOCKE, INC.
---------------------------------
Dated May 26, 1998
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TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS
1.1 Certain Defined Terms........................................... 1
ARTICLE II - PURCHASE AND SALE OF ASSETS
2.1 Purchased Assets................................................ 12
2.2 Excluded Assets................................................. 14
2.3 Title Transfer.................................................. 15
2.4 Consent of Third Parties........................................ 15
ARTICLE III - ASSUMED LIABILITIES AND EXCLUDED LIABILITIES
3.1 Assumption of Liabilities....................................... 16
3.2 Excluded Liabilities............................................ 16
3.3 ................................................................ 18
ARTICLE IV - PURCHASE PRICE, CLOSING AND POST-CLOSING ADJUSTMENT
4.1 Purchase Price.................................................. 18
4.2 Post-Closing Adjustment of Purchase Price....................... 20
4.3 Allocation...................................................... 22
4.4 Closing Date.................................................... 22
ARTICLE V - REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SELLER
5.1 Authorization................................................... 22
5.2 Corporate Status................................................ 23
5.3 Records......................................................... 23
5.4 No Conflicts.................................................... 23
5.5 Consents........................................................ 24
5.6 Financial Statements............................................ 24
5.7 Parent SEC Reports and Financial Statements..................... 25
5.8 Absence of Undisclosed Liabilities.............................. 25
5.9 Absence of Changes or Events.................................... 25
5.10 Tax Matters..................................................... 27
5.11 Purchased Assets................................................ 28
5.12 Real Property................................................... 28
5.13 Accounts Receivable............................................. 30
5.14 Inventories..................................................... 30
5.15 Machinery and Equipment......................................... 30
5.16 Contracts....................................................... 31
5.17 Litigation...................................................... 33
5.18 Compliance with Laws............................................ 33
5.19 Licenses; Permits............................................... 33
5.20 Employees and Labor Relations................................... 34
5.21 Employee Benefit Plans; ERISA................................... 35
5.22 Environmental Matters........................................... 38
5.23 Intellectual Property........................................... 40
5.24 Insurance....................................................... 41
5.25 Products........................................................ 42
5.26 Product Warranties.............................................. 42
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5.27 Customers and Suppliers, Etc.................................... 42
5.28 Affiliated Transactions......................................... 43
5.29 Corrupt Acts.................................................... 43
5.30 No Brokers...................................................... 43
ARTICLE VI - REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF BUYER
6.1 Corporate Status; Authorization................................. 44
6.2 ................................................................ 44
6.3 No Conflicts.................................................... 44
6.4 Litigation...................................................... 45
6.5 No Brokers...................................................... 45
6.6 Financing....................................................... 45
6.7 Buyer SEC Reports............................................... 45
6.8 Buyer's Capitalization.......................................... 45
ARTICLE VII - COVENANTS
7.1 Covenants of Seller............................................. 45
7.1.1 Conduct of Business..................................... 45
7.1.2 Access.................................................. 47
7.1.3 Insurance............................................... 48
7.1.4 Supplemental Disclosure................................. 48
7.1.5 Compliance.............................................. 49
7.1.6 Non-Solicitation........................................ 49
7.1.7 Further Actions......................................... 49
7.1.8 Interim Financial Statements............................ 50
7.1.9 Public Announcements.................................... 50
7.1.10 Post-Closing Activities of Seller....................... 50
7.1.11 Further Assurances...................................... 51
7.1.12 SERP Obligations........................................ 51
7.1.13 Investment Company Act Compliance....................... 51
7.2 Covenants of Buyer.............................................. 52
7.2.1 Public Announcements.................................... 52
7.2.2 Further Actions......................................... 52
7.2.3 Litigation and Other Support; Access;
Required Capitalization................................. 53
7.2.4 ........................................................ 54
7.2.5 ........................................................ 54
7.2.6 Further Assurances...................................... 54
ARTICLE VIII - EMPLOYEES
8.1 Employees....................................................... 55
ARTICLE IX - INDEMNIFICATION
9.1 Indemnification by Seller....................................... 57
9.2 Indemnification by Buyer........................................ 58
9.3 Third-Party Claims.............................................. 59
9.4 Limitations on Indemnification.................................. 60
9.5 Survival........................................................ 62
9.6 Suspension of Indemnification................................... 62
ARTICLE X - CONDITIONS TO CONSUMMATION OF TRANSACTION
10.1 Conditions to Obligations of Buyer.............................. 62
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10.1.1 Representations and Warranties,
Covenants .............................................. 63
10.1.2 Title Insurance......................................... 63
10.1.3 Consents and Approvals.................................. 63
10.1.4 Seller's Documents...................................... 64
10.1.5 No Adverse Proceedings.................................. 65
10.1.6 Intentionally Omitted................................... 65
10.1.7 HSR Act................................................. 65
10.1.8 Records................................................. 65
10.1.9 Closing Statements...................................... 65
10.1.10 FIRPTA Certification.................................... 65
10.1.11 Employment Agreement.................................... 65
10.1.12 Parent Agreements....................................... 65
10.1.13 Other Documentation..................................... 65
10.2 Conditions to Obligations of Seller............................. 66
10.2.1 Representations and Warranties;
Covenants............................................... 66
10.2.2 Payment of Purchase Price............................... 66
10.2.3 Buyer's Documents....................................... 66
10.2.4 No Adverse Proceedings.................................. 67
10.2.5 Intentionally Omitted................................... 67
10.2.6 HSR Act................................................. 67
10.2.7 Other Documentation..................................... 67
ARTICLE XI - TERMINATION
11.1 Termination..................................................... 67
11.2 Effect of Termination........................................... 68
ARTICLE XII - NON-COMPETITION
12. ................................................................ 68
ARTICLE XIII - ADDITIONAL COVENANTS
13.1 Bulk Sales Laws................................................. 69
13.2 Certain Tax and Regulatory Matters.............................. 70
13.3 Confidentiality................................................. 70
13.4 Fees and Expenses............................................... 71
13.5 Storage......................................................... 71
13.6 Break-up Fee.................................................... 71
13.7 Disclosure and Schedules........................................ 72
ARTICLE XIV - MISCELLANEOUS
14.1 Notices......................................................... 72
14.2 Successors and Assigns.......................................... 73
14.3 No Third Party Beneficiaries.................................... 73
14.4 Governing Law................................................... 73
14.5 Consent to Jurisdiction......................................... 73
14.6 Entire Agreement................................................ 73
14.7 Severability.................................................... 73
14.8 Counterparts.................................................... 74
14.9 Headings........................................................ 74
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ASSET PURCHASE AGREEMENT
AGREEMENT made this 26th day of May, 1998, by and between BMCA KEY
ACQUISITION CORP., a Delaware corporation ("Buyer") and Leslie-Locke, Inc., a
Delaware corporation ("Seller").
WITNESSETH:
WHEREAS, Buyer desires to purchase from Seller the Purchased Assets
(as such term is defined herein) and has agreed to assume the Assumed
Liabilities (as such term is defined herein) and Seller desires to sell the
Purchased Assets and to transfer the Assumed Liabilities to Buyer for the
consideration and upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements, representations and warranties herein contained, and
subject to the conditions hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.1 or in other
provisions of the Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"Accountants" shall have the meaning ascribed to such term in
Section 4.2(c).
"Accounts Receivable" shall have the meaning ascribed to such term
in Section 2.1(d).
"Acquisition Documents" shall mean this Agreement, the Escrow
Agreements, the Deeds, the Bills of Sale and the Parent Agreements.
"Acquisition Transaction" shall have the meaning ascribed to such
term in Section 7.1.6.
"Adjusted Working Capital" shall mean, at any date of determination,
the excess of (i) the total amount of Purchased Assets which may properly be
classified as current assets in accordance with GAAP (other than receivables
related to insurance claims for damaged or destroyed non-current assets unless
Seller
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has replaced or repaired such non-current assets consistent with Seller's past
practices), applied on a basis consistent with the procedures and methods
employed in preparing the Consolidated Financial Statements over (ii) the total
amount of Assumed Liabilities which may properly be classified as current
liabilities in accordance with GAAP, applied on a basis consistent with Seller's
past practices and the procedures and methods employed in preparing the
Consolidated Financial Statements (including all accruals made or required to be
made in the ordinary course of business and in accordance with GAAP consistent
with past practice in respect of customer rebate programs).
"Affiliate" of a Person, means a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person. "Control" (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of voting securities, by
contract or credit arrangement, as trustee or executor, or otherwise. Without
limiting the generality of the previous sentence, any Person owning fifty
percent (50%) or more of the voting securities of another person shall be deemed
to control that Person. With respect to Seller, the term "Affiliate" (i) shall
include, without limitation, any trade or business, whether or not incorporated,
that together with Seller would be deemed a "single employer" within the meaning
of Section 4001 of ERISA, (ii) unless otherwise expressly provided in this
Agreement, shall not include Drew Industries Incorporated, a Delaware
corporation, or its officers and directors in their capacities as such (the
"Non-Affiliates"), and (iii) shall not include non-management employees of
Seller who individually own beneficially less than 10% of the outstanding shares
of Parent.
"Antitrust Division" shall have the meaning ascribed to such term in
Section 7.1.7(c).
"Assumed Liabilities" shall have the meaning ascribed to such term
in Section 3.1.
"Balance Sheet Date" shall mean December 31, 1997.
"Base Amount" shall have the meaning ascribed to such term in
Section 4.1(a).
"Benefit Arrangements" shall mean any life and health insurance,
hospitalization, savings, bonus, deferred compensation, stock option plan, stock
incentive plan, incentive compensation, holiday, vacation, severance pay, sick
pay, sick leave, disability, tuition refund, service award, company car,
scholarship, relocation, patent award, fringe benefit, contracts, collective
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bargaining agreements, individual employment, consulting or severance contracts
and other policies or practices of Seller providing employee or executive
compensation or benefits to employees or former employees of Seller, other than
Employee Benefit Plans.
"Bills of Sale" shall mean the Bill of Sale and Assignment, dated as
of the Closing Date, relating to the transfer of the Purchased Assets (other
than the Owned Real Property) from Seller to Buyer, in the form attached hereto
as Exhibit A.
"Business" shall mean the business heretofore conducted by Seller
using the Purchased Assets, but not including the Excluded Assets, and relating
generally to the manufacture and sale of (i) security products, (ii) "specialty
products" including flexible duct, metal duct and accessories used in ductable
products, ornamental iron railings and porch columns, and door louvres and
vision-lites and (iii) ventilation products.
"Business Day" shall mean a day other than a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
to close.
"Buyer" shall have the meaning ascribed to such term in the first
paragraph of this Agreement.
"Buyer Related Parties" shall have the meaning ascribed to such term
in Section 9.1.
"Cash Purchase Price" shall have the meaning ascribed to such term
in Section 4.1(a).
"Claim of Environmental Liability" shall mean any actual or
threatened claims, liabilities, obligations, charges, losses, lost profits,
business interruption costs, fines, judgments, costs, penalties, expenses
(including reasonable attorneys' fees), settlements or damages, relating to,
resulting from or arising from, directly or indirectly, in whole or in part, (i)
any suit, action, administrative proceeding, notice, investigation or demand
asserted or threatened by any Person, including any Governmental Authority,
arising under or relating, directly or indirectly, to any Environmental Law,
(ii) requirements imposed by any Governmental Authority under any Environmental
Law, including costs of remediation or restoration or costs incurred in
complying with Environmental Laws, (iii) the presence, Release or threat of
Release into the Environment of any Hazardous Substances, or (iv) personal
injury, bodily injury or property damage arising out of or allegedly arising out
of the presence, Release or threat of Release of Hazardous Substances, if, and
to the extent that, such actual or threatened claims, liabilities, obligations,
charges, losses, lost profits, business interruption costs, fines, judgments,
costs,
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penalties, expenses or damages relate to a site currently owned, occupied,
operated, utilized or leased by Seller or its Affiliates (including the Non-
Affiliates for purposes of this provision), to which any Hazardous Substance was
transported or released by or on behalf of Seller, whether or not arising or
becoming known before or after the Closing.
"Claims or Other Commitments" shall mean any lien, mortgage,
encumbrance, security interest, claim, license, easement, right of way, use
restriction, or other restriction on any of the Purchased Assets.
"Closing" shall have the meaning ascribed to such term in Section
4.4.
"Closing Date" shall have the meaning ascribed to such term in
Section 4.4.
"Closing Date Adjusted Working Capital" shall have the meaning
ascribed to such term in Section 4.2(a).
"Closing Date Balance Sheet" shall have the meaning ascribed to such
term in Section 4.2(a).
"Closing Date IRB Obligations" shall mean the sum, as of the Closing
Date, of (i) the aggregate outstanding principal amount of the IRBs, (ii) the
aggregate amount of accrued and unpaid interest on the IRBs and all other
obligations due and owing with respect to the IRBs (including, without
limitation, prepayment penalties and other amounts due and owing as a result of
any repayment of the IRBs pursuant to Section 4.1(b)(v)), and (iii) the
aggregate amount of Seller's reimbursement and other obligations due and owing
with respect to the IRB Letters of Credit, in each case in the amounts set forth
for such obligations in the Officer's Certificate and IRB payoff letters to be
delivered to Buyer pursuant to Section 10.1.9.
"Closing Statement" shall have the meaning ascribed to such term in
Section 4.2(a).
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consent" shall mean any consent, approval, authorization, waiver,
permit, grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice to,
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any Person, including but not limited to any Governmental Authority.
"Consolidated Financial Statements" shall have the meaning ascribed
to such term in Section 5.6.
"Contracts" shall have the meaning ascribed to such term in Section
5.16.
"Deeds" shall mean the general warranty deeds, dated as of the
Closing Date, relating to the transfer of the Owned Real Property from Seller to
Buyer, in the form attached hereto as Exhibit B.
"Employee Benefit Plans" shall mean each and all "employee benefit
plans" as defined in Section 3(3) of ERISA maintained or contributed to by the
party in question or in which such party participates or participated and which
in any such case provide benefits to current or former employees of such party,
including (i) any such plans that are "employee welfare benefit plans" as
defined in Section 3(l) of ERISA, including retiree medical and life insurance
plans and (ii) any such plans that are Pension Plans.
"Environment" shall mean the air, water, groundwater, surface water,
wetlands, land, soil, subsurface strata, sediment, wildlife, woodlands,
ecosystem, flora or fauna, including, without limitation, the interior and
exterior of buildings or structures, and shall also include, without limitation,
any location or media included in the definition of "Environment" under any and
all Environmental Laws.
"Environmental Law" shall mean any and all statutes, regulations,
ordinances, rules, orders, directives, requirements, common law claims or
adjudications of any Governmental Authority, without limitation in time or
scope, which regulate or govern or are related in any way to the protection of
the Environment, or worker, public, consumer or human health or safety, or are
related in any way to Hazardous Substances, including, without limitation, the
following: the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 4,2 U.S.C. ss.9601 et seq. (CERCLA), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. ss.6901 et seq. (RCRA), the Clean Air
Act, as amended, 42 U.S.C. ss.7401 et seq. (CAA), the Emergency Planning and
Community Right to Know Act, as amended, 42 U.S.C. ss.11001 et seq. (EPCRKA),
the Safe Drinking Water Act, as amended, 42 U.S.C. ss.300 et seq. (SDWA), the
Pollution Prevention Act of 1990, as amended, 42 U.S.C. ss.13101 et seq. (PPA),
the Clean Water Act, as amended, 33 U.S.C. ss.1251 et seq. (CWA), the Federal
Insecticide, Fungicide and Rodenticide Act, as amended, 7 U.S.C. ss.136 et seq.
(FIFRA), the Toxic Substances Control Act, as amended, 15 U.S.C. ss.2601 et seq.
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(TSCA), and OSHA and any and all state and local statutes, laws, or ordinances
corresponding to the foregoing federal statutes.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" shall mean The Chase Manhattan Bank, in its separate
capacities as escrow agent under the First Escrow Agreement and the Second
Escrow Agreement.
"Escrow Agreements" shall mean the First Escrow Agreement and the
Second Escrow Agreement, both dated as of the Closing Date, among Buyer, Seller
and the Escrow Agent, relating to the escrow of (i) $4,000,000 and (ii)
$2,000,000 of the Cash Purchase Price pursuant to Section 4.1(b)(ii), in the
forms attached hereto as Exhibit C and Exhibit D, respectively.
"Excluded Assets" shall have the meaning ascribed to such term in
Section 2.2.
"Excluded Liabilities" shall have the meaning ascribed to such term
in Section 3.2.
"Existing Products" shall have the meaning ascribed to such term in
Section 5.25.
"Former Site" shall mean the sites formerly owned, occupied,
operated, utilized or leased by Seller or its Affiliates (including the
Non-Affiliates for purposes of this provision) but not owned, occupied,
operated, utilized or leased by Seller on the date hereof.
"Former Site Claim of Environmental Liability" shall mean, to the
extent it involves a Former Site, any actual or threatened claims, liabilities,
obligations, charges, losses, lost profits, business interruption costs, fines,
judgments, costs, penalties, expenses (including reasonable attorneys' fees),
settlements or damages, relating to, resulting from or arising from, directly or
indirectly, in whole or in part, (i) any suit, action, administrative
proceeding, notice, investigation or demand asserted or threatened by any
Person, including any Governmental Authority, arising under or relating,
directly or indirectly, to any Environmental Law, (ii) requirements imposed by
any Governmental Authority under any Environmental Law, including costs of
remediation or restoration or costs incurred in complying with Environmental
Laws, (iii) the presence, Release or threat of Release into the Environment of
any Hazardous Substances, or (iv) personal injury, bodily injury or property
damage arising out of or allegedly arising out of the presence, Release or
threat of Release of Hazardous Substances.
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"FTC" shall have the meaning ascribed to such term in Section
7.1.7(c).
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States.
"Governmental Approval" shall mean any Consent of, with or to any
Governmental Authority.
"Governmental Authority" means any federal, state, regional, county,
city, municipal or local government, whether foreign or domestic, or any
department, agency, bureau or other administrative or regulatory body obtaining
authority from any of the foregoing, including, without limitation, courts,
public utilities and sewer authorities.
"Hazardous Substance" shall mean and include, without limitation,
any element, material, compound, mixture, chemical, substance, toxic substance,
hazardous substance, toxic waste, hazardous waste, pollutant or contaminant,
including, without limitation, asbestos, defined as a hazardous substance,
pollutant or contaminant (or words of similar connotation, import or meaning) or
otherwise regulated under or pursuant to any Environmental Law. Any material or
substance containing a Hazardous Substance shall also be considered a Hazardous
Substance.
"HSR Act" shall mean the Hart-Scott-Rodino AntiTrust Improvements
Act of 1976, as amended.
"Income Taxes" shall mean all Federal, state, local and foreign
taxes, charges, levies, imports and assessments imposed solely upon the income
of Seller, including all interest, penalties and additions imposed with respect
to such amounts.
"Indebtedness" of any Person shall mean all obligations of such
Person (whether for principal, interest, premiums, prepayment fees, penalties or
otherwise) (i) for or in respect of borrowed money, (ii) evidenced by notes,
bonds, debentures or similar instruments, (iii) for or in respect of the
deferred purchase price of goods or services (other than trade payables or
accruals incurred in the ordinary course of business), (iv) under or arising
from leases which are required to be capitalized in accordance with GAAP or
letters of credit, or (v) in the nature of guarantees of any of the obligations
described in clauses (i) through (iv) above of any other Person.
"Intellectual Property" shall mean (i) any and all patents
(including design patents, industrial designs and utility models) and patent
applications (including docketed patent disclosures awaiting filing, reissues,
divisions, continuations, continuations-in-part and extensions), patent
disclosures awaiting
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filing determination, inventions and improvements thereto, (ii) trademarks,
service marks, certification marks, trade names, brand names, trade dress,
logos, business and product names, slogans, and registrations and applications
for registration thereof, (iii) copyrights (including software) and
registrations thereof, (iv) inventions, processes, designs, formulae, trade
secrets, know-how, industrial models, confidential and technical information,
manufacturing, engineering and technical drawings, product specifications and
confidential business information, (v) mask work and other semiconductor chip
rights and registrations thereof, (vi) intellectual property rights similar to
any of the foregoing, (vii) computer software, and (viii) copies and tangible
embodiments thereof (in whatever form or medium, including electronic media).
"Inventory" shall have the meaning ascribed to such term in Section
2.1(c).
"IRBs" shall mean the Industrial Development Revenue Bonds issued by
The Pender County Industrial Facilities and Pollution Control Financing
Authority in the initial aggregate principal amount of $7,000,000 pursuant to a
Bond Purchase Agreement by and among The Pender County Industrial Facilities and
Pollution Control Financing Authority, Blount Parrish & Roton, Inc. and Seller,
dated June 13, 1997.
"IRB Creditors" shall mean the issuers of the IRBs and, to the
extent Seller has any outstanding reimbursement or other obligations under the
IRB Letters of Credit, the Persons to whom Seller owes such obligations.
"IRB Letters of Credit" shall mean the letters of credit issued in
connection with the IRBS, and the related letter of credit reimbursement
obligations.
"Leased Real Property" shall mean all interests leased pursuant to
the Leases.
"Leases" shall mean the real property leases, subleases, licenses
and occupancy agreements pursuant to which Seller is the lessee, subleases,
licensee or occupant as set forth on Schedule 5.12(b).
"Liens" shall mean any mortgage, pledge, hypothecation, claim,
assessment, security interest, lease, sublease, license, lien, conditional sale
contract, title retention contract, adverse claim or interest, easement,
encroachment, title defect, voting trust agreement, option, charge, right of
first refusal or other encumbrance or restriction of any kind, or rights of
others or other contract to give any of the foregoing.
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"Machinery and Equipment" shall have the meaning ascribed to such
term in Section 2.1(b).
"Material Adverse Effect" shall mean any event, occurrence, fact,
condition or effect that is materially adverse to (i) the business, operations,
condition (financial or physical), properties (including the Purchased Assets),
net assets or liabilities of Seller or the Business, or (ii) the transactions
contemplated by this Agreement and the rights and obligations of Buyer in
respect thereof.
"Net Proceeds Escrow Agreement" shall mean the agreement, dated as
of the Closing Date, among Seller, Buyer, and either The Chase Manhattan Bank,
NationsBank Corporation or KeyBank, National Association (as selected by Buyer),
as Agent, in the form attached hereto as Exhibit E.
"Off-Site Claim of Environmental Liability" shall mean, as to the
extent it involves an Off-Site Location, any actual or threatened claims,
liabilities, obligations, charges, losses, lost profits, business interruption
costs, fines, judgments, costs, penalties, expenses (including reasonable
attorneys' fees), settlements or damages, relating to, resulting from or arising
from, directly or indirectly, in whole or in part, (i) any suit, action,
administrative proceeding, notice, investigation or demand asserted or
threatened by any Person, including any Governmental Authority, arising under or
relating, directly or indirectly, to any Environmental Law, (ii) requirements
imposed by any Governmental Authority under any Environmental Law, including
costs or remediation or restoration or costs incurred in complying with
Environmental Laws, (iii) the presence, Release or threat of Release into the
Environment of any Hazardous Substances, or (iv) personal injury, bodily injury
or property damage arising out of or allegedly arising out of the presence,
Release or threat of Release of Hazardous Substances.
"Off-Site Location" shall mean a location other than (i) a Former
Site and (ii) the locations listed on Schedule 9.
"OSHA" shall mean the Occupational Safety and Health Act of 1970, as
amended.
"Owned Real Property" shall mean the real property owned by Seller
listed on Schedule 5.12(a) together with all structures, facilities,
improvements and fixtures located thereon as of the date hereof and all
easements, licenses, rights and appurtenances relating to the foregoing other
than owned real property, if any, included in the Excluded Assets.
"Parent" shall mean Leslie Building Products, Inc., a Delaware
corporation, the sole stockholder of Seller.
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"Parent Agreements" shall mean (i) the Parent Guaranty and (ii) the
Parent Voting Agreement.
"Parent Guaranty" means the Guaranty Agreement between Parent and
Buyer, dated as of the Closing Date, in the form attached hereto as Exhibit F.
"Parent SEC Reports" shall have the meaning ascribed to such term in
Section 5.7.
"Parent Voting Agreement" shall mean the Parent Voting Agreement and
related irrevocable proxy, each dated the date hereof, between Parent and Buyer,
in the form attached hereto as Exhibit G.
"Pension Plan" shall mean each Employee Benefit Plan that is an
"employee pension benefit plan" as defined in Section 3(2) of ERISA.
"Personal Property" shall mean the Purchased Assets other than the
Real Property.
"Personal Property Permitted Exceptions" shall mean (i) in respect
of which reserves are recorded as a current liability on the Closing Date
Balance Sheet, liens for taxes and assessments, governmental charges or levies
not yet due or payable; (ii) materialmen's, mechanics', carriers',
warehousemen's, landlords', workmen's, repairmen's, employees' or other like
liens which are not recorded arising in the ordinary course of business, which
in each case are not yet delinquent, and which individually and in the aggregate
(when taken together with other Personal Property Permitted Exceptions) are not
material; (iii) liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance,
social security and other like laws, or to secure the performance of leases, and
which individually and in the aggregate (when taken together with other Personal
Property Permitted Exceptions) are not material; (iv) unrecorded liens arising
from equipment lessors' retention of title to equipment leased by Seller; (v)
Liens (in addition to the Liens listed in clauses (i), (ii), (iii), (iv), and
(vi) of this definition) the existence of which individually or in the aggregate
do not have a Material Adverse Effect on the Business or the Purchased Assets or
materially interfere with the use thereof as currently used by Seller; and (vi)
any Liens disclosed on Schedule 5.11 hereto.
"Person" shall mean any natural person, corporation, general
partnership, limited partnership, limited liability company, other business
organization, trust, union, association or Governmental Authority or other
entity.
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"Process Documentation" shall mean written records that describe the
process by which Past Products and Existing Products have been, are or will be
manufactured by Seller.
"Product Claims" shall mean any and all obligations, liabilities,
costs and expenses (including, without limitation, attorneys' fees) relating to,
resulting from or arising from, directly or indirectly, claims or threatened
claims pertaining to or in respect of any product sold or marketed at any time
by, in connection with, or relating, directly or indirectly, to the Business,
whether based on theories of tort, contract, strict liability, express or
implied warranty or otherwise, and including, without limitation, (i) demands
for refunds, returns or allowances, shipment or sale of the product or design of
the product in question, and (ii) claims asserted in accordance with any
warranty or guarantee which are or have been offered by Seller.
"Pro Forma Financial Statements" shall have the meaning ascribed to
such term in Section 5.6.
"Purchase Price" shall have the meaning ascribed to such term in
Section 4.1(a).
"Purchased Assets" shall have the meaning ascribed to such term in
Section 2.1.
"Real Property" shall mean the Owned Real Property and the Leased
Real Property.
"Real Property Permitted Exceptions" shall mean the Liens and other
items set forth on Schedule 11.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, placement,
distribution, production, sale, generation, transpiration or migration into or
through the Environment.
"Seller Liabilities" shall have the meaning ascribed to such term in
Section 9.1.
"Subsidiary" shall mean, as to any Person, a corporation, company,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors (or persons performing similar
functions) of such corporation, partnership or other entity are at the time
owned, directly or indirectly, through one or more intermediaries,
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"Tax" or "Taxes" shall mean all Federal, state, local and foreign
taxes (including, without limitation, franchise, property, transfer, sales and
use, value added, withholding, payroll and excise taxes, but excluding Income
Taxes), charges, levies, imposts and assessments, including all interest,
penalties and additions imposed with respect to such amounts.
"Third-Party Claim" shall have the meaning ascribed to such term in
Section 9.3.
"WARN" shall mean the Worker Adjustment and Retraining Notification
Act of 1988, as amended.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchased Assets. Subject to and upon the terms and conditions
set forth in this Agreement, Seller shall sell, assign, transfer and deliver to
Buyer on and as of the Closing Date, and Buyer shall purchase and acquire on and
as of the Closing Date, all of the properties and assets of Seller (real,
personal and mixed, tangible and intangible) of every kind, nature, character
and description, absolute, contingent or otherwise, wherever located or
situated, and whether or not reflected upon the books, records or financial
statements of Seller, that are owned by Seller on the Closing Date, or in which
Seller has any right, title or interest on the Closing Date, to the extent of
such right, title and interest, other than the Excluded Assets (collectively,
the "Purchased Assets"), including without limitation, the following:
(a) all assets reflected on the Pro Forma Balance Sheet other than
those disposed of since the Balance Sheet Date in accordance with Section 7.1.1;
(b) all machinery, equipment (both fixed and mobile, including,
without limitation, computer equipment), trucks and other vehicles, tools, dies,
molds, spare parts, replacement parts, maintenance stores, office equipment
furniture, furnishings, and fixtures (collectively, the "Machinery and
Equipment");
(c) all inventories of supplies, consigned inventory, finished
goods, work in process, spare parts, stores, raw materials and goods in transit
(collectively, the "Inventory");
(d) all accounts receivable, contract rights and notes receivable
held by Seller, and all notes, bonds and other evidences of indebtedness of, and
rights to receive payments from, any Person held by Seller (the "Accounts
Receivable");
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(e) all credits, prepaid expenses, deferred charges, advance
payments, security deposits and prepaid items;
(f) all books, records, (other than records or portions thereof
relating exclusively to Excluded Assets and Excluded Liabilities) manuals and
other materials (in any form or medium), including, without limitation, all
records and materials maintained at the headquarters of Seller, stationery,
advertising matter, product descriptions, catalogues, price lists,
correspondence, mailing lists, subscriber lists, lists of customers, purchase
orders, distribution lists, credit, collection and sales records, photographs,
production data, sales and promotional materials and records, purchasing
materials and records, personnel records, Process Documentation, if any,
manufacturing and quality control records and procedures, blueprints, research
and development files, records, data and laboratory books, technical
information, research records, records of inventory, test information, market
surveys, business procedures, Intellectual Property disclosures, media materials
and plates, accounting records, sales order files and litigation files (other
than files or portions thereof relating exclusively to Excluded Assets and
Excluded Liabilities);
(g) all right, title and interest of Seller, as lessee or sublessee,
with respect to leased personal property, to the extent the lessors thereof
consent to the assignment of such leases to Buyer, and all licenses, permits,
approvals and qualifications relating to any Leased Real Property issued to
Seller by any Governmental Authority, except as set forth on Schedule 2.1(g)
with respect to any of the foregoing that are not legally transferrable;
(h) all Intellectual Property and all rights thereunder or in
respect thereof including, without limitation, rights to sue for and remedies
against past, present and future infringements thereof, and rights of priority
and protection of interests therein under the laws of any jurisdiction and all
tangible embodiments thereof;
(i) all rights (including, without limitation, any and all
Intellectual Property rights) in and to (i) products sold or leased (including,
but not limited to, products hereafter returned or repossessed and unpaid
sellers' rights of rescission, replevin, reclamation and rights to stoppage in
transit) and (ii) products or other Intellectual Property rights under research
or development prior to or on the Closing Date;
(j) all of Seller's right, title and interest under all contracts,
arrangements, licenses, leases and other agreements, arrangements, commitments
(including, without limitation, forward orders and purchase orders) and
understandings, written or oral, including, without limitation, any right to
receive payment for products sold or services rendered, and to receive goods and
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services, pursuant to such agreements and to assert claims and take other
rightful actions in respect of breaches, defaults and other violations of such
contracts, arrangements, licenses, leases and other agreements and otherwise;
(k) Owned Real Property and Leased Real Property and all legally
transferrable licenses, permits, approvals and qualifications relating to any
Owned Real Property and Leased Real Property issued to Seller by any
Governmental Authority;
(l) all claims under insurance policies and insurance proceeds,
including, without limitation, proceeds received by Seller during the
Pre-Closing Period applicable to non-current assets which have not been replaced
or repaired by Seller consistent with Seller's past practices, except to the
extent such claims and proceeds relate to Excluded Assets; and the cash
surrender value of life insurance policies, if any, owned by Seller other than
included in Excluded Assets;
(m) except to the extent relating exclusively to Excluded
Liabilities, all rights to causes of action, lawsuits, judgments, claims and
demands of any nature available to or being pursued by Seller with respect to
the ownership, use, function or value of any Purchased Asset, whether arising by
way of counterclaim or otherwise;
(n) all guarantees, warranties, indemnities and similar rights in
favor of Seller with respect to any Purchased Asset; provided, however, that to
the extent any of the foregoing may be enforced only by Seller, Buyer may
enforce same in the name, place and stead of Seller and Seller shall execute any
lawful documents reasonably necessary to effectuate the foregoing, all of which
shall be effectuated at the sole expense and liability of Buyer.
(o) all of the goodwill relating directly or indirectly to the
Purchased Assets or to the conduct of the Business; and all right, title and
interest in the names "Leslie-Locke" and the names set forth on Schedule 2.1(o)
and all other names relating, directly or indirectly, to the Purchased Assets or
to the conduct of the Business, and any and all variants and deviations thereof;
and
(p) to the extent legally transferrable, all Governmental Approvals,
including all applications therefor; and unemployment tax reserve deposits,
claims for refund and credit balances of, or inuring to, the benefit of Seller
under any state unemployment compensation plan or workers' compensation plan or
fund.
2.2 Excluded Assets. Notwithstanding anything to the contrary
contained in this Agreement, the Purchased Assets shall
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not include, and Buyer shall not purchase, the following assets of Seller
(collectively, the "Excluded Assets"):
(a) cash of Seller whether or not relating to the Business (other
than cash proceeds of the type referred to in Section 2.1(l));
(b) the notes receivable and other assets set forth on Schedule
2.2(b); and
(c) all capital stock of White Metal Rolling and Stamping Corp, and
any assets relating to the business or operations of White Metal Rolling and
Stamping Corp.
2.3 Title Transfer. Title to the Purchased Assets to be sold,
assigned and transferred to Buyer shall be delivered at the Closing as follows:
(a) in the case of Owned Real Property, Seller shall deliver the
Deeds to Buyer pursuant to which Buyer shall receive insurable fee simple title
in the Owned Real Property, free and clear of all Liens other than Real Property
Permitted Exceptions;
(b) in the case of all other Purchased Assets, Seller shall deliver
the Bills of Sale to Buyer pursuant to which Buyer shall receive title in such
Purchased Assets, free and clear of all Liens other than Personal Property
Permitted Exceptions; and
(c) Assignments of Leases in the form attached hereto as Exhibit H.
(d) Assignment of Right of First Refusal Agreement in respect of
real property in Burgaw, North Carolina without recourse to Seller, in the form
annexed hereto as Exhibit I.
2.4 Consent of Third Parties. This Agreement shall not constitute an
agreement to assign or transfer any interest in any instrument, contract, lease,
permit or other agreement or arrangement or any claim, right or benefit arising
or resulting thereunder if an assignment or transfer or an attempt to make such
assignment or transfer without the consent of a third party would constitute a
breach or violation thereof, and, in the case of a lease, would result in the
applicability of any right of the landlord to recapture the leased premises, or
affect adversely the rights of Buyer or Seller thereunder, and any transfer or
assignment to Buyer by Seller of any interest under any such instrument,
contract, lease, permit or other agreement or arrangement that requires the
consent of a third party (or a waiver of any such right of recapture) shall be
made subject to such consent, waiver or approval being obtained. In the event
any such consent, waiver or approval is not obtained on or prior to the
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Closing Date, Seller shall continue to use all reasonable efforts to obtain any
such approval, waiver or consent for a reasonable time after the Closing Date
until such consent or approval has been obtained, and Seller will cooperate with
Buyer in any lawful and economically feasible arrangement to provide that Buyer
shall receive the interest of Seller, in the benefits under any such instrument,
contract, lease or permit or other agreement or arrangement, including
performance by Seller, as agent, if reasonably and economically feasible;
provided that Buyer shall undertake to pay or satisfy the corresponding
liabilities for the enjoyment of such benefit to the extent Buyer would have
been responsible therefor hereunder if such consent, waiver or approval had been
obtained. Seller shall pay and discharge, and shall indemnify and hold Buyer
harmless from and against, all reasonable out-of-pocket costs of seeking to
obtain or obtaining any such consent or approval whether before or after the
Closing Date.
ARTICLE III
ASSUMED LIABILITIES AND EXCLUDED LIABILITIES
3.1 Assumption of Liabilities. Subject to and upon the terms and
conditions set forth in this Agreement, and simultaneously with the sale,
assignment and transfer to Buyer of the Purchased Assets, Buyer shall assume,
and agrees to pay, perform and discharge pursuant to the terms thereof all
liabilities, obligations, and commitments of Seller incurred in the ordinary
course of business of Seller relating to the Business and the Purchased Assets
including, but not limited to, the liabilities, obligations, and commitments of
Seller more particularly set forth in Schedule 3.1, except to the extent that
any such liability, obligation or commitment expressly constitutes an Excluded
Liability (the "Assumed Liabilities").
3.2 Excluded Liabilities. Buyer shall not assume any of the
following liabilities, obligations, or commitments of Seller whether or not
relating to the Purchased Assets or the Business (collectively, the "Excluded
Liabilities").
(a) any liability or obligation with respect to Indebtedness (other
than the IRBs and the IRB Letters of Credit) and any liability or obligation
relating to, resulting from or arising from, directly or indirectly,
Indebtedness (other than the IRBs and the IRB Letters of Credit);
(b) any liability or obligation relating to, resulting from or
arising from, directly or indirectly, the Excluded Assets;
(c) any liability, obligation or agreement with respect to Income
Taxes (including, without limitation, any such liability
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or obligation arising under any tax sharing agreement to which Seller is a
party);
(d) any liability or obligation, including, without limitation,
legal, accounting and finders' or brokers' fees, incurred in connection with (i)
the negotiation, preparation, execution or performance of this Agreement, the
other Acquisition Documents and all other agreements and documents to be
executed in connection with this Agreement and the consummation of the
transactions contemplated hereby and thereby, or (ii) any efforts to sell a
substantial portion of the assets or securities of Seller or the Business to, or
otherwise engage in any business combination or sale of a substantial portion of
the assets of Seller or the Business with, a third party;
(e) any Former Site Claim of Environmental Liability;
(f) unless incurred in the ordinary course of business, any
liability or obligation, accrued, contingent or otherwise, known or unknown, of
any kind which, if known as of the Closing Date, would have been required to be
recorded on the Closing Date Balance Sheet in accordance with Section 4.4, which
is not recorded thereon;
(g) any liability or obligation (including, without limitation, the
obligation to pay or satisfy any deductible under directors' and officers'
liability insurance) relating to, resulting from or arising from, directly or
indirectly, (i) any claim or action by any shareholder of Seller or an Affiliate
(including the Non-Affiliates for purposes of this provision) of Seller
challenging this Agreement, the other Acquisition Documents or the other
transactions contemplated hereby, the terms or fairness of this Agreement or
such other agreements or transactions or any prior, pending or future
transactions or matters involving Seller or the shareholders of Seller or an
Affiliate (including the Non-Affiliates for purposes of this provision) of
Seller, (ii) any shareholder action by a shareholder of Parent, derivative or
otherwise, or other claim or action, in each case whether instituted prior to or
after the date of this Agreement or the Closing Date alleging failure to obtain
approval of the shareholders of Parent for consummations of the transactions
contemplated by this Agreement or the other Acquisition Documents;
(h) any liability or obligation of Seller to any of its Affiliates
(including the Non- Affiliates for purposes of this provision) for compensation,
benefits or otherwise, other than as set forth on Schedule 3.2(h);
(i) the items listed on Schedule 3.2(i);
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(j) any liability or obligation the existence of which constitutes a
breach of the representations and warranties made by Seller in the first
sentence of Section 5.11 and in the last sentence of 5.12(a);
(k) any other liability or obligation, known or unknown, accrued,
contingent or otherwise which does not relate primarily to the Business or the
Purchased Assets but only to the extent that it does not relate to the Business
or the Purchased Assets;
(l) any Off-Site Claim of Environmental Liability; and
(m) any liabilities or obligations arising prior to the third
anniversary of the Closing Date which would be covered by the employee practices
insurance policy referred to in Section 7.1.3(b), regardless of whether Seller
actually procures or maintains such policy.
3.3 A liability, obligation or commitment of Seller not listed in
Schedule 3.1 shall not be deemed, by virtue of such exclusion, not to have been
incurred in the ordinary course of business, and a liability, obligation or
commitment of Seller not listed in paragraphs (a) through (m) of Section 3.2
shall not be deemed, by virtue of such exclusion, to have been incurred in the
ordinary course of business.
ARTICLE IV
PURCHASE PRICE, CLOSING AND POST-CLOSING ADJUSTMENT
4.1 Purchase Price.
(a) In consideration for the Purchased Assets to be sold and
transferred to Buyer pursuant to Section 2.1, Buyer shall (i) pay to Seller the
sum of (herein referred to as the "Cash Purchase Price") (A) $40,000,000, minus
(B) the Closing Date IRB Obligations, and (C) either (x) plus the excess, if
any, of the Closing Date Adjusted Working Capital (as defined in Section 4.4(a))
over $5,730,000 representing the Adjusted Working Capital as of December 31,
1997 (the "Base Amount"), or (y) minus the excess, if any, of the Base Amount
over the Closing Date Adjusted Working Capital, and (ii) assume the Assumed
Liabilities (the Cash Purchase Price, together with the Assumed Liabilities, is
herein referred to as the "Purchase Price").
(b) Payment of the Cash Purchase Price shall be made, subject to the
post closing adjustment set forth in Section 4.2, as follows:
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(i) five days prior to the Closing Date, Seller shall deliver
to Buyer (A) a schedule of the estimated pro forma working capital of Seller as
of the Closing Date showing the excess (such excess is herein referred to as the
"Estimated Pro Forma Working Capital") of (x) the Purchased Assets which may
properly be classified as current assets in accordance with GAAP, applied on a
basis consistent with the procedures and methods employed in preparing the
Consolidated Financial Statements, over (y) the Assumed Liabilities which may
properly be classified as current liabilities in accordance with GAAP, applied
on a basis consistent with the procedures and methods employed in preparing the
Consolidated Financial Statements (the Estimated Pro Forma Working Capital up to
the sum of the Base Amount plus $7,500,000, as revised pursuant to Section
4.1(b)(iv) is herein referred to as the "Estimated Working Capital"), (B) a
reconciliation of the Estimated Pro Forma Working Capital to the Base Amount,
and (C) a schedule showing the estimated net cash flow of Seller consisting of
the cash receipts and cash disbursements of Seller for the five-day period from
the date of the schedule to the Closing Date (the "Pre-Closing Period") used by
Seller to prepare the Estimated Pro Forma Working Capital (the estimated net
cash flow reflected on said schedule is herein referred to as the "Estimated Net
Cash Flow");
(ii) on the Closing Date, (x) $4,000,000 (the "First Escrow
Fund") and (y) $2,000,000 (the "Second Escrow Fund") shall be delivered to the
Escrow Agent by wire transfer of immediately available funds to the escrow
accounts specified in the First Escrow Agreement and the Second Escrow
Agreement, respectively, which amounts shall be held and distributed, together
with interest earned thereon, by the Escrow Agent in accordance with the terms
of the First Escrow Agreement and the Second Escrow Agreement, respectively;
(iii) the balance of the Cash Purchase Price shall be paid to
Seller on the Closing Date by wire transfer of immediately available funds to
the account specified by Seller in writing prior to the Closing Date, in an
amount equal to (A) $40,000,000, minus (B) $4,000,000 (representing the First
Escrow Fund), minus (C) $2,000,000 (representing the Second Escrow Fund), minus
(D) the Closing Date IRB Obligation, minus (E) the excess, if any, of Unfunded
Pension Plan Obligations (as defined in Section 8.1(f)) over $380,000 as of the
Closing Date, and (F) either (x) minus the excess, if any, of the Base Amount
over the Estimated Working Capital, or (y) plus the excess, if any, of the
Estimated Working Capital over the Base Amount; and
(iv) During the Pre-Closing Period, Seller shall monitor its
actual cash receipts and cash disbursements. If, during the Pre-Closing Period,
the actual net cash flow (the "Actual Net Cash Flow") differs from the Estimated
Net Cash Flow by more than $100,000, Seller shall, on or prior to the Closing
Date,
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deliver to Buyer a schedule reflecting (x) the change in the Estimated Working
Capital resulting from and utilizing the amount by which the Actual Net Cash
Flow differs from the Estimated Net Cash Flow and (y) a statement of Revised
Estimated Working Capital, which shall be the Estimated Working Capital for
purposes of Article IV. On the Closing Date, Seller shall deliver to Buyer a
certificate of Seller's Chief Financial Officer to the effect that the Estimated
Pro Forma Working Capital reflects, to the best knowledge of such Chief
Financial Officer, reasonable best estimates of the amounts reflected thereon.
(v) By notice provided to Seller within ten (10) business days
prior to the Closing Date, Buyer shall, at its option, either (i) agree to
assume Seller's obligations under the IRBs and the IRB Letters of Credit as of
the Closing Date or (ii) if such assumption is not permitted, or at Buyer's
election, satisfy in full as of the Closing Date, Seller's obligations under the
Closing Date IRB Obligations by transferring funds to the IRB Creditors in an
amount equal to the Closing Date IRB Obligations.
4.2 Post-Closing Adjustment of Purchase Price.
(a) As soon as practicable, but in no event more than ninety (90)
days after the Closing Date, Seller shall prepare and furnish to Buyer (i) a
balance sheet of Seller as of the Closing Date prepared in accordance with GAAP,
applied on a basis consistent with the procedures and methods employed in
preparing the Consolidated Financial Statements (the "Closing Date Balance
Sheet"), (ii) a schedule of financial position reflecting the Purchased Assets
and the Assumed Liabilities (the "Purchased Balance Sheet"), (iii) a
reconciliation of the Closing Date Balance Sheet to the Purchased Balance Sheet,
and (iv) a statement (the "Closing Statement") setting forth the Adjusted
Working Capital as of the Closing Date (the "Closing Date Adjusted Working
Capital"), which statement shall be based on, and reconciled to, the Closing
Date Balance Sheet. Seller shall also furnish to Buyer the opinion of KPMG Peat
Marwick LLP, Seller's independent certified public accountants, that (i) the
Closing Date Balance Sheet presents fairly, in all material respects, the
financial position of Seller, in conformity with GAAP, (ii) the Purchased
Balance Sheet presents fairly in all material respects, the net assets sold
pursuant to this Agreement in conformity with GAAP, and (iii) the Closing
Statement and the Closing Date Adjusted Working Capital were prepared in
accordance with this Agreement. The reserve for obsolete Inventory on the
Closing Date Balance Sheet will be not less than $500,000.
(b) The Closing Date Balance Sheet, the Purchased Balance Sheet, and
the Closing Statement shall be examined by a representative of Buyer to
determine the accuracy thereof. Not later than thirty (30) days following
receipt of the Closing Date
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Balance Sheet, the Purchased Balance Sheet, and the Closing Statement or one
hundred twenty (120) days from the Closing Date whichever shall occur later,
such representative shall issue a report accepting the accuracy of the Closing
Date Balance Sheet, the Purchased Balance Sheet, and the Closing Statement, or
identifying which adjustments such representative deems are required to make the
Closing Date Balance Sheet, the Purchased Balance Sheet, and the Closing
Statement accurate in accordance with Section 4.2(a). Such report shall be
delivered to Seller.
(c) If the Closing Date Balance Sheet, the Purchased Balance Sheet,
and the Closing Statement are deemed accurate by Buyer's representative, they
shall become the final Closing Date Balance Sheet, the Purchased Balance Sheet,
and the Closing Statement, and payment shall be made by Buyer or Seller, as the
case may be, in accordance with Sections 4.2(d) or (e). If Buyer's
representative deems that adjustments are necessary, Buyer and Seller, within
fifteen (15) days after the issuance of Buyer's representatives report, shall
attempt in good faith to resolve any disagreements. If any disagreement cannot
be resolved within such fifteen (15) day period, such disagreement shall be
referred to a single partner at an independent public accounting firm (the
"Accountants") jointly designated by Buyer's and by Seller's independent public
accountants for resolution in accordance with this Agreement based upon the
written submissions of the parties. As soon as practicable, but in any event no
later than twenty (20) days after referral of the disagreement, the Accountants
shall deliver a written report to Buyer and Seller determining in detail each
disputed item and setting forth a final determination of the Closing Date
Adjusted Working Capital based upon its resolution of the disputed items. The
fees and expenses of the Accountants in acting pursuant to this Section 4.2(c)
shall be borne one-half by Buyer and one-half by Seller, unless the Accountants
finds one party's position to be so unfounded as to justify a different
allocation of fees and expenses of the Accountants between the parties. Any
determination of the Accountants pursuant to this Section 4.4 shall be
conclusive and binding upon Buyer and Seller and shall constitute an absolute
resolution of any disputed item.
(d) If the Closing Date Adjusted Working Capital is greater than the
Estimated Working Capital, (A) Seller shall be paid $2,000,000 from the Second
Escrow Fund, together with interest earned thereon, and (B) Buyer shall pay to
Seller the amount by which the Closing Date Adjusted Working Capital exceeds the
Estimated Working Capital.
(e) If the Closing Date Adjusted Working Capital is less than the
Estimated Working Capital, then:
(i) if the excess of the Estimated Working Capital over the
Closing Date Adjusted Working Capital is less than
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$2,000,000, Seller shall be paid from the Second Escrow Fund an amount equal to
$2,000,000 minus the amount by which the Estimated Working Capital exceeds the
Closing Date Adjusted Working Capital together with interest earned on the
amount payable, and the balance, if any, of the Second Escrow Fund shall be paid
to Buyer together with interest thereon, or
(ii) if the excess of the Estimated Working Capital over the
Closing Date Working Capital is greater than $2,000,000, Seller shall pay to
Buyer an amount equal to (A) the Estimated Working Capital, minus (B) the
Closing Date Adjusted Working Capital, minus (C) $2,000,000, together with
interest on such amount payable at the same rate applicable to the Second Escrow
Fund, and the entire Second Escrow Fund shall be paid to Buyer together with
interest earned thereon.
4.3 Allocation. The parties agree that the Purchase Price will be
allocated among the Purchased Assets in accordance with Schedule 4.3. Buyer and
Seller agree to complete IRS Form 8594 consistent with such allocation and to
furnish each other with a copy of such Form prepared in draft form no less than
45 days prior to the filing due date of such Form. None of Buyer, Seller or
Seller's Affiliates shall file any return or take a position with any taxing
authority or in connection with any tax related litigation that is inconsistent
with Schedule 4.3.
4.4 Closing Date. The closing (the "Closing") of the sale and
purchase of the Purchased Assets shall take place at 10:00 A.M. local time on
the 15th day of June, 1998 at the offices of Gilbert, Segall and Young LLP, 430
Park Avenue, New York, New York, or such other time and place upon which the
parties may agree. The day on which the Closing actually occurs is herein
sometimes referred to as the "Closing Date". The Closing shall be effective as
of 12:01 A.M. on the Closing Date.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SELLER
Seller represents and warrants to and agrees with Buyer as of the
date hereof and as of the Closing Date as follows:
5.1 Authorization. Seller has the corporate power and authority to
execute and deliver this Agreement, the other Acquisition Documents and all
other agreements and documents to be executed and delivered by it in connection
herewith, to perform fully its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by Seller of this Agreement, the other Acquisition Documents and all
other agreements and documents to be executed and
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delivered by it in connection herewith, the performance by Seller of its
obligations hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
requisite corporate acts and other proceedings of Seller and Parent. This
Agreement, the other Acquisition Documents and all other agreements and
documents to be executed and delivered by Seller in connection herewith have
been duly and validly executed and delivered by Seller and constitute legal,
valid and binding obligations of Seller, enforceable against it in accordance
with their respective terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, rearrangement, fraudulent
transfers, fraudulent conveyance, conservatorship or other laws (including court
decisions) affecting the enforcement of creditors' rights generally.
5.2 Corporate Status.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with full corporate power
and authority to carry on its business (including the Business) and to own or
lease and to operate its properties as and in the places where such business is
conducted and such properties are owned, leased or operated. Schedule 5.2(a)
contains a true and complete list of all states in which Seller is duly licensed
and qualified to do business and the names under which Seller conducts business.
(b) The Certificate of Incorporation and By-Laws of Seller attached
as Schedule 5.2(b) hereto, are true, correct and complete copies of such
documents as amended and in effect as of the date hereof. Seller is not in
violation of any of the provisions of its Certificate of Incorporation or
By-Laws.
(c) Seller has no Subsidiaries and does not own any capital stock
of, or other ownership interest in, any Person, except as disclosed on Schedule
5.2(c).
5.3 Records. The books and records of Seller are substantially
complete and correct in all material respects. The books of account of Seller
are sufficient to prepare the Consolidated and Consolidating Financial
Statements in accordance with GAAP and there have been no transactions involving
Seller which properly should have been set forth therein and which have not been
so set forth.
5.4 No Conflicts. Neither the execution and delivery of this
Agreement, any other Acquisition Document or any other agreement or document to
be executed and delivered in connection herewith or therewith, nor the
consummation of the transactions contemplated hereby or thereby will (a) violate
any law, statute,
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regulation, rule, judgment, order, decree, stipulation, injunction, writ,
charge, or other restriction of any Governmental Authority to which Seller is
bound or subject or by which any of its properties or assets is subject or bound
or any provision of the Certificate of Incorporation or By-Laws of Seller or (b)
conflict with, result in a material breach of, constitute a material default
under, result in an acceleration of, create in any Person the right to
accelerate, terminate, modify or cancel, or require any notice (except such
notices as have been given by Seller) under, any material contract, instrument,
agreement or other arrangement to which Seller is a party or by which Seller or
any of its properties or assets are bound or subject.
5.5 Consents. Except as set forth on Schedule 5.5 and for certain
filings required be made pursuant to the HSR Act, no Governmental Approval or
other Consent is required to be obtained or made by Seller in connection with
the execution, delivery and performance of this Agreement, the other Acquisition
Documents and any other agreement or document executed and delivered in
connection herewith or therewith or the consummation by Seller of the
transactions contemplated hereby or thereby.
5.6 Financial Statements. Schedule 5.6 includes (i) the Consolidated
Balance Sheet as of December 31, 1997 and the related Consolidated Statements of
Operations, Stockholders' Equity and Cash Flows (and related footnotes) for the
year then ended of Parent (together, the "Consolidated Financial Statements"),
the consolidating schedule of financial position of Parent as of December 31,
1997 ("Consolidating Balance Sheet") and the consolidating schedule of results
of operations of Parent for the year then ended ("Consolidating Statement of
Operations") (together, the "Consolidating Financial Statements"), audited by
KPMG Peat Marwick LLP, Parent's regularly retained independent certified public
accountants, and (ii) the unaudited pro forma schedule of financial position of
Seller as of December 31, 1997, the unaudited pro forma schedule of results of
operations of Seller for the year then ended, reflecting the Purchased Assets
and Business of Seller to be sold pursuant to this Agreement, and a
reconciliation of such unaudited pro forma schedule of financial position and
unaudited pro forma schedule of results of operations to the Consolidating
Financial Statements, (together, the "Pro Forma Financial Statements"). The
Consolidated Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis and present fairly in all material respects the
financial position of Parent and the results of its operations and changes in
financial position as of the Balance Sheet Date. The financial position and
results of operations of Seller, as separately reflected in the Consolidating
Financial Statements, are fairly presented in all material respects. The Pro
Forma Financial Statements fairly reflect in all material respects the Purchased
Assets and Business of Seller to be sold pursuant to this
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Agreement, subject to changes occurring in the ordinary course of business from
December 31, 1997 to the Closing Date. The current assets and current
liabilities reflected in the Pro Forma Financial Statements are fairly presented
in all material respects. The Pro Forma Financial Statements have been prepared
on a basis consistent with the procedures and methods employed in preparing the
Consolidated Financial Statements. As of the Balance Sheet Date, the Adjusted
Working Capital, as calculated in accordance with the definition thereof, was
$5,730,000.
5.7 Parent SEC Reports and Financial Statements. Parent has filed
all reports (including without limitation proxy statements) required to be filed
with the SEC since May 10, 1994 (collectively, the "SEC Reports"), and has
previously furnished or made available to Buyer true and complete copies of all
such SEC Reports.
5.8 Absence of Undisclosed Liabilities. To the best knowledge of
Seller, Seller does not have any material liabilities or obligations of any
nature, whether absolute, accrued, contingent or otherwise and whether due or to
become due, arising out of or relating to the Business or any of the Purchased
Assets or the Assumed Liabilities, except (a) to the extent disclosed or
reserved against in the Consolidated Financial Statements (including the notes
thereto) or (b) current liabilities to be disclosed on the Closing Date Balance
Sheet, provided that such liabilities were incurred after the Balance Sheet Date
consistent with the terms of this Agreement and Seller's past practices or (c)
liabilities and obligations set forth on Schedule 3.1.
5.9 Absence of Changes or Events. Except as disclosed on Schedule
5.9, since the Balance Sheet Date, there has not been any (a) a Material Adverse
Effect; (b) damage, destruction or loss (whether or not covered by insurance)
which, individually or in the aggregate, would reasonably be likely to have a
Material Adverse Effect; (c) statute, order, judgment, writ, injunction, decree,
permit, rule or regulation of any Governmental Authority adopted, enacted, or
imposed which, individually or in the aggregate, has had or would reasonably be
likely to have a Material Adverse Effect; (d) extraordinary loss or losses
suffered by Seller or waiver or forgiveness by Seller of any material right or
debt owed to Seller; (e) declaration or payment by Seller of any dividend or any
other distribution to its shareholder whether or not upon or in respect of any
shares of its capital stock; (f) redemption, issuance or acquisition by Seller
of any shares of Seller's capital stock or any interest therein or sale or
transfer by any Person of any such shares or interest; (g) adoption, amendment
or termination of any Employee Benefit Plan, Benefit Arrangement or collective
bargaining agreement of the Seller; (h) material change in compensation paid or
payable by Seller to any of its officers or employees or payment by Seller of
any bonus or like payment to any
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such officer or employee, except as set forth on Schedule 5.9(h); (i) except in
the ordinary course of business consistent with past practice, none of which is,
or would reasonably be likely to have, a Material Adverse Effect, incurrence or
assumption by Seller of any liabilities, obligations or Indebtedness (absolute
or contingent), guarantee by Seller of any liabilities, obligations or
Indebtedness (absolute or contingent) of any Person or execution by Seller of
any other guarantee (other than endorsements for the purpose of collection in
the ordinary course of business); (j) discharge or satisfaction by Seller of any
Lien or payment or cancellation by Seller of any obligation or liability
(absolute or contingent), other than current liabilities shown on the
Consolidated Financial Statements and current liabilities incurred since the
Balance Sheet Date in the ordinary course of business consistent with past
practice in nature and amount; (k) mortgage, pledge or subject to a Lien, other
than Real Property Permitted Exceptions and Personal Property Permitted
Exceptions, of any property, business or assets of Seller, tangible or
intangible; (l) waiver by Seller of any material claims or rights relating,
directly or indirectly, to the Business; (m) entry into any agreement or
arrangement by Seller with any of its Affiliates, including a shareholder or an
Affiliate (including the Non-Affiliates for purpose of this provision) thereof;
(n) any change by Seller in any method of accounting or accounting practice or
policy; (o) acquisition or agreement to acquire, by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or corporation, partnership, limited liability company,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets (other than Inventory in the ordinary
course of business consistent with past practice) which are material,
individually or in the aggregate, to the Business; (p) capital expenditure or
expenditures by Seller relating, directly or indirectly, to the Business in
excess of $25,000 in the aggregate; (q) sale, lease or other disposition by
Seller of, or agreement by Seller to sell, lease or otherwise dispose of any of
its assets or properties, except current assets in the ordinary course of
business consistent with past practice and the non-current assets set forth on
Schedule 5.9(q); (r) lease or purchase of real property; (s) modification,
amendment, termination or lapse of any lease of, or reciprocal easement
agreement, operating agreement or other material agreement relating to, the
Owned Real Property or the Leased Real Property; (t) sale, assignment, transfer,
purchase or license of any Intellectual Property; (u) material change in the
sales programs, customer rebate programs or warranty programs of the Business;
(v) any labor union organizing, any actual or, to the best knowledge of Seller,
threatened employee strikes, work stoppages, slowdowns or lockouts, or any
material change in its relations with its employees or agents; (w) other
transaction by Seller relating, directly or indirectly, to the Business outside
of the ordinary course of business; or (x) agreement, whether in
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writing or otherwise, by Seller to do any of the foregoing. Except as disclosed
on Schedule 5.9, since the Balance Sheet Date, Seller (i) has conducted the
Business in the ordinary course and in substantially the same manner as
conducted prior to such date and in a manner which would not reasonably be
expected to result in a working capital position inconsistent with its working
capital position as of such date and (ii) has preserved, in the ordinary course
of business, Seller's relationships with customers, suppliers and others with
whom Seller deals, and Seller has not taken any action that, if taken after the
date hereof, would constitute a breach of the covenants set forth in Section
7.1.1.
5.10 Tax Matters.
(a) (i) Seller has correctly prepared and properly filed, or will
correctly prepare and file, or caused to be filed in a timely manner (within any
applicable extension periods) all material Tax returns, reports and forms
required to be filed by the Code or by applicable state, local or foreign Tax
laws, (ii) all Taxes due and payable prior to the Closing Date, have been timely
paid in full or will be timely paid in full by Seller by the Closing Date except
to the extent such amount is accrued on the Closing Date Balance Sheet, and
(iii) no Tax Liens have been filed with respect to any property, business or
asset of Seller in respect of any amount claimed to be due in excess of the
amount paid by Seller to remove such lien, and (iv) except as set forth on
Schedule 5.10(f) no claims are being asserted with respect to any Taxes.
(b) Except as set forth on Schedule 5.10(b), Seller has not
previously been a member of an affiliated group of corporations within the
meaning of Section 1504 of the Code.
(c) (i) Neither Seller nor any of its Affiliates has made with
respect to Seller any consent under Section 341 of the Code, no property of
Seller is "tax exempt use property" within the meaning of Section 168(h) of the
Code, and Seller is not a party to any lease made pursuant to Section 168(f)(8)
of the Code.
(ii) Except as set forth on Schedule 5.10(f), there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Tax returns required to be filed with respect to Seller or the
Business, and Seller has not requested any extension of time within which to
file any Tax return, which return has not yet been filed.
(iii) current and deferred Taxes, all Taxes owed but not due
on or before the Closing Date and all other Tax liabilities or obligations
relating to any period ending on or before the Closing Date, have been or will
be accrued for in the Closing Date Balance Sheet and such accruals are
sufficient for the
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payment of all accrued and unpaid Taxes, whenever payable, due by or assessed on
Seller.
(d) Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
(e) All Taxes required to be withheld by or on behalf of Seller in
connection with amounts paid or owing to any employee, independent contractor,
creditor or other party have been withheld and such withheld taxes have either
been duly and timely paid to the proper Governmental Authorities or shown as
payables on the Closing Date Balance Sheets.
(f) Except as set forth in Schedule 5.10(f), there is no Tax
litigation, administrative appeal, investigation or audit pending or, to the
best knowledge of Seller, threatened against or relating to Seller.
5.11 Purchased Assets. Except as set forth in Schedule 5.11, Seller
is the owner of, and has valid and marketable title to, all of the Purchased
Assets, free and clear of Liens, other than Real Property Permitted Exceptions
and Personal Property Permitted Exceptions. The Purchased Assets (other than
Machinery and Equipment, the condition of which is covered in Section 5.15), are
in all material respects adequate for the purposes for which such assets are
currently used or are held for use, and, subject to repairs not in excess of
$100,000 in the aggregate in respect of such Purchased Assets are in reasonably
good repair and operating condition (subject to normal wear and tear) and, there
are no facts or conditions in respect of the Purchased Assets which would be
reasonably likely to have a Material Adverse Effect. Except as set forth in
Schedule 5.11, the Purchased Assets constitute all of the assets which are
necessary to enable Buyer to conduct the Business in a manner comparable to the
Business conducted by Seller prior to the Closing Date.
5.12 Real Property.
(a) Schedule 5.12(a) contains a complete and correct list of all
Owned Real Property setting forth the address and owner of each parcel of Owned
Real Property and describing all improvements thereon including, without
limitation, the properties reflected as being so owned on the Balance Sheet.
Seller has good, valid and insurable fee simple title to the Owned Real Property
listed on Schedule 5.12(a), free and clear of all Liens, other than Real
Property Permitted Exceptions.
(b) Schedule 5.12(b) contains a complete and correct list of all
Leases setting forth the address, landlord and tenant for each Lease. Seller has
delivered to Buyer correct and complete copies of the Leases. Each Lease is
legal, valid, binding,
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enforceable, and in full force and effect. Neither Seller nor, to the best
knowledge of Seller, any other party is in material default, violation or breach
in any respect under any Lease, and no event has occurred and is continuing that
constitutes or, with notice or the passage of time or both, would constitute a
material default, violation or breach in any respect under any Lease. All rental
payments required by the Leases are current. Except as set forth on Schedule
5.12(b), none of the buildings or structures are located in a flood zone; each
Lease grants the tenant under the Lease the exclusive right to use and occupy
the demised premises thereunder. Seller has good and valid title to the
leasehold estate under each Lease free and clear of all Liens other than the
Real Estate Permitted Exceptions and the Personal Property Permitted Exceptions.
Seller enjoys peaceful and undisturbed possession under its respective Leases
for the Leased Real Property.
(c) The Real Property constitutes all the fee and leasehold
interests in real property used or held for use in connection with the Business.
To the best knowledge of Seller, there are no roll back taxes or added
assessments affecting the Real Property. Seller is not in default in the payment
of payments in lieu of taxes pursuant to a letter agreement between Seller and
the Town of Burgaw, North Carolina, dated January 23, 1995. Seller has received
no notices from the City of Burgaw, North Carolina (or other Governmental
Authority) with respect to the annexation of the Owned Real Property or the
modification or discontinuance of utility services.
(d) There are no eminent domain or other similar proceedings pending
or, to the best knowledge of Seller, threatened affecting any material portion
of the Real Property. There is no writ, injunction, decree, order or judgment
outstanding (other than an item that would be omitted or insured against by
Buyer's title insurer), nor any action, claim, suit or proceeding, pending or,
to the best knowledge of Seller, threatened, relating to the ownership, lease,
use, occupancy or operation by Seller of any Real Property.
(e) The use and operation of the Real Property by Seller does not
violate in any material respect any material instrument of record or agreement
affecting the Real Property. There is no material violation by Seller of any
covenant, condition, restriction, easement or order of any Governmental
Authority having jurisdiction over such property. No damage or destruction has
occurred with respect to any of the Real Property since the Balance Sheet Date
that would be reasonably likely to result in a Material Adverse Effect.
(f) The Real Property is in material compliance with all applicable
building, zoning, subdivision and other land use and
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similar laws affecting the Real Property (collectively, the "Real Property
Laws"), and Seller has not received any notice of violation or claimed violation
of any Real Property Law. No current use by Seller of the Real Property is
dependent on a nonconforming use or other Governmental Approval the absence of
which would be reasonably likely to have a Material Adverse Effect.
(g) Each parcel included in the Real Property is assessed for real
property tax purposes as a wholly independent tax lot, separate from adjoining
land or improvements not constituting a part of that parcel.
(h) Seller is not a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code.
5.13 Accounts Receivable. All accounts receivable of Seller, whether
reflected on the Balance Sheet or subsequently created, have arisen from bona
fide transactions in the ordinary course of business and are not subject to any
defense, counterclaim or setoff, except as may be asserted in the ordinary
course of business or as set forth on Schedule 5.13. The reserve for doubtful
accounts reflected on the Consolidated Financial Statements and to be reflected
on the Closing Date Balance Sheet has been and will be made in accordance with
GAAP, is reasonable in the context of the business and past experience of Seller
and the present status of the Accounts Receivable, and has been calculated in
the manner set forth on Schedule 5.13A.
5.14 Inventories. The Inventory of Seller owned by Seller on the
Closing Date, taken as a whole, has been, and will have been, acquired in the
usual manner and in ordinary and customary amounts and quantities and at then
prevailing market prices; the Inventory taken as a whole is merchantable and of
a quality and quantity usable and saleable in the ordinary course of the
Business except to the extent reserved against on the Consolidated Financial
Statements and to be reserved against on the Closing Date Balance Sheet, both in
accordance with GAAP, all Inventories are recorded on the books of Seller at the
lower of cost or market value determined in accordance with GAAP and Seller's
past practice. Schedule 5.14 lists the locations of all Inventory.
5.15 Machinery and Equipment. Schedule 5.15 sets forth a list of
each item of Machinery and Equipment to be transferred and conveyed to Buyer
hereunder. Subject to repairs not in excess of $100,000 in the aggregate in
respect of the Machinery and Equipment, the Machinery and Equipment currently
utilized in connection with the Business is in reasonably good repair and
operating condition (subject to ordinary wear and tear), and has been maintained
in accordance with Seller's past practice. Except as set forth herein and in
Schedule 5.15, to the best knowledge of
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Seller, there are no repairs necessary with respect thereto other than routine
maintenance in the ordinary course.
5.16 Contracts. Schedule 5.16, together with other Schedules annexed
hereto or delivered to Buyer in connection with this Agreement, comprise a
complete and correct description of all agreements, contracts and other
instruments, and arrangements (whether written or oral) of the types described
below (x) by which any of the Purchased Assets are bound or affected or (y) to
which Seller is party or by which it is bound in connection with the Business or
the Purchased Assets (collectively, the "Contracts"):
(a) employment, management, service, consulting, agency, collective
bargaining or other similar types of contracts or agreements and other
agreements, contracts, instruments and arrangements relating to or for the
benefit of current, or former (during the past two years) employees, officers,
directors, agents, independent contractors or consultants and contracts or
agreements with any shareholder or Affiliate of Seller;
(b) leases or similar agreements under which (i) Seller is a lessor
or sublessor of, or makes available for use by any third party, any real
property or tangible personal property owned or leased by Seller and (ii) Seller
is lessee of, or holds or uses, any real estate or any machinery, equipment,
vehicle or other tangible personal property owned by a third party;
(c) licenses (whether Seller is a licensor or a licensee) and other
agreements relating in whole or in part to any Intellectual Property (including
any license or other agreement under which Seller has the right to use any of
the same owned or held by a third party);
(d) (i) contracts for the future purchase of any type of materials,
supplies or Machinery and Equipment, (ii) computer hardware and software
contracts, (iii) agreements with any sales representatives, sales agents or
distributor, or (iv) advertising agreements and arrangements, except for those
contracts or agreements which individually do not have an aggregate future
liability in excess of $25,000, or which, in the aggregate, do not have an
aggregate future liability in excess of $100,000 and (v) agreements,
arrangements or understandings with customers for the supply of products, except
for those agreements, arrangements or understandings entered into in the
ordinary course of business and which individually do not have an aggregate
future liability in excess of $25,000 or which, in the aggregate, do not have an
aggregate future liability in excess of $100,000;
(e) agreements, contracts, instruments or indentures under which
Seller has borrowed or loaned any money, agreed to indemnify, defend or hold
harmless any third party or issued any
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note, bond, debenture or other evidence of Indebtedness or, directly or
indirectly, guaranteed (including, without limitation, through so-called
take-or-pay or keepwell agreements) Indebtedness, liabilities or obligations of
others (other than endorsements for the purpose of collection in the ordinary
course of business) or any other note, bond, indemnity, debenture, letter of
credit reimbursement obligations or other evidence of Indebtedness
(collectively, "Seller Indebtedness");
(f) agreements or contracts under which any other Person has,
directly or indirectly, guaranteed Indebtedness, liabilities or obligations of
Seller (other than endorsements for the purpose of collection in the ordinary
course of business) or has issued letters of credit to a third party with
respect to any Indebtedness, liabilities or obligations of Seller;
(g) mortgages, pledges, security agreements, deeds of trust or other
agreements granting a Lien on any property or asset of Seller (including,
without limitation, Liens upon any real or personal property owned or leased by
Seller or any real or personal property acquired under conditional sales,
capital leases or other title retention or security devices);
(h) any other agreement, contract, lease, license, commitment or
instrument which has an aggregate future liability in excess of $25,000 or is
not terminable by notice of not more than 60 days for a cost of less than
$25,000;
(i) any other contract, agreement or commitment that is material to
Seller or the Business, including, without limitation, covenants not to compete,
joint venture and partnership agreements, tax allocation and tax-sharing
agreements and confidentiality and secrecy agreements; or
(j) commitments to enter into any of the foregoing agreements or
arrangements.
Buyer shall purchase and assume, and agrees to pay, perform and discharge
pursuant to the terms thereof the Contracts listed on Schedule 5.16, except to
the extent any liability or obligation pursuant to any such Contract expressly
constitutes an Excluded Liability.
Except as disclosed on Schedule 5.16, each Contract is valid, binding and in
full force and effect and is enforceable by Seller in accordance with its terms,
except to the extent that laws and decisions may affect the enforcement of
creditors' rights generally and general principles of equity. Seller and, to the
best knowledge of Seller, its Affiliates have performed all material obligations
required to be performed by them under the Contracts and Seller, and to the best
knowledge of Seller, its Affiliates,
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are not (with or without the lapse of time or the giving of notice, or both) in
material breach or material default under any material contract and, to the best
knowledge of Seller, no other party to any of the Contracts is (with or without
the lapse of time or the giving of notice, or both) in material breach or
default thereunder. Except as disclosed on Schedule 5.16, no Consent is required
under any of the Contracts in order for the Contracts to be assigned by Seller
to Buyer or for Buyer to enjoy the full benefits of the Contracts upon
consummation of the transactions contemplated hereby. A true and complete copy
of each written Contract and a true and complete description of each oral
Contract have been furnished to Buyer.
5.17 Litigation. Schedule 5.17 sets forth a list of all material
lawsuits and all material, legal, administrative, arbitration and other claims,
proceedings and investigations, which, are pending or, to the best knowledge of
Seller, threatened, by or against or affecting, directly or indirectly, Seller,
the Business or any of the Purchased Assets, including, without limitation, any
which (i) seek injunctive relief, (ii) claim any damages in excess of $5,000
individually or $50,000 in the aggregate, or (iii) relate to the transactions
contemplated by this Agreement or the other Acquisition Documents. Except as
disclosed on Schedule 5.17, Seller is not subject to or in default under any
judgment, order or decree of any court or Governmental Authority applicable to
it or any of its properties, assets, operations or business. Seller has not
received any inquiry from any agency of the federal or any other Governmental
Authority regarding the transactions contemplated hereby.
5.18 Compliance with Laws. Except as set forth on Schedule 5.18,
Seller is in material compliance with the terms of all laws, statutes, orders,
permits, ordinances, rules or regulations (including, without limitation,
Environmental Laws, other than as set forth on Schedule 5.22) of the United
States, any foreign country and any state, political subdivision or any agency
thereof or any Governmental Authority, and all writs, judgments, decrees,
injunctions or similar orders of any Governmental Authority (in each case
whether preliminary or final). Seller has received no notice of any formal or
informal complaint or order filed against Seller alleging any material
non-compliance by Seller with respect to any such laws, statutes, orders,
permits, ordinances, rules, regulations, writs, judgments, decrees, injunctions
or orders.
5.19 Licenses; Permits. Schedule 5.19 sets forth a true and complete
list of all material licenses, permits and authorizations issued or granted to
Seller by local, state or federal Governmental Authorities, in respect of the
Business, which licenses, permits and authorizations represent, all material
licenses, permits and authorizations required in order to operate
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the Business as currently operated by Seller. Except as disclosed on Schedule
5.19, all such licenses, permits or authorizations of Seller are validly held by
Seller, and, to the best knowledge of Seller, Seller has complied in all
material respects with all requirements in connection therewith, and such
licenses, permits or authorizations will not be subject to suspension,
modification or revocation as a result of this Agreement or the consummation of
the transactions contemplated hereby. All licenses, permits and authorizations
issued or granted by local, state or federal Governmental Authorities which are
necessary for the conduct of the Business and which are held in the name of any
employee, officer, director, shareholder, agent, Affiliate or other
representative of Seller or any Affiliate of Seller shall be deemed included
under this warranty, and Seller warrants that such licenses, permits or
authorizations shall be duly and validly transferred to Buyer, to the extent
legally transferrable (unless listed in Schedule 5.19), at or prior to the
Closing and that the warranties, representations, covenants and conditions
contained in this Agreement shall apply to the same extent as if held by Seller
as of the date hereof. Schedule 5.19 sets forth a true and complete list of all
(i) material licenses, permits, approvals and qualifications relating to any
Owned Real Property issued to Seller or any other Person by any Governmental
Authority, (ii) tax reserves, claims for refund and credit balances under state
unemployment compensation plans or workers' compensation plans or funds, that
are not, to the best knowledge of Seller, legally transferrable to Buyer.
5.20 Employees and Labor Relations.
(a) Schedule 5.20(a) references Seller's 1997 payroll register and
1998 current weekly payroll register, previously delivered or made available to
Buyer, reflecting the employees, of Seller, and a summary of (i) Seller's bonus
plans, (ii) additional compensation and other benefits payable, and (iii)
accruals for vacations. Schedule 5.20(a) contains a list of any handbooks
furnished to employees of Seller within the last three years as well as any
written or oral employment policies and job descriptions promulgated or in
effect within the three-year period prior to the date hereof. True and complete
copies of each such handbook, written employment policy and job description, and
a complete description of each such oral employment policy and job description,
have been delivered or made available to Buyer.
(b) Except as set forth on Schedule 5.20(b), (i) neither Seller nor
any of its Affiliates is a party to any collective bargaining or other agreement
with labor unions, labor representatives or any other employee groups relating,
directly or indirectly, to the Business; (ii) there is no labor strike, work
stoppage or slowdown, picketing, boycott, lockout or other labor dispute either
pending or, to the best knowledge of Seller, threatened, against Seller or
affecting the Business or which would
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in any way interfere with or impair the operation or the conduct of the
Business, and since December 31, 1995 there have not been any such actual or
threatened disputes; (iii) no union organizational campaign presently exists
with respect to any employees of the Business and, to the best knowledge of
Seller, no question concerning representation exists respecting such employees;
(iv) Seller is in compliance in all material respects with all applicable
federal, state, and local laws respecting employment, fair employment practices
and fair labor standards, including, without limitation, race, age, sex,
religion, color, national origin, disability and sexual orientation; Seller is
in compliance in all material respects with the requirements of the National
Labor Relations Act, and no unfair labor practice charges or complaints against
Seller are pending, or, to the best knowledge of Seller, threatened, before the
National Labor Relations Board; (v) there are no pending, or to the best
knowledge of Seller, threatened grievances under any collective bargaining
agreement relating, directly or indirectly, to the Business to which Seller is a
party; (vi)(A) no charges with respect to or relating, directly or indirectly,
to the Business are pending before the Equal Employment Opportunity Commission
or any comparable state or local agency responsible for the enforcement of fair
employment practices, and (B) Seller has not received notice of the intent of
any federal, state or local agency responsible for the enforcement of labor or
employment laws to conduct an investigation and no such investigation is in
progress; and (vii) Seller has no written or oral agreements with any employee
leasing companies or employment agencies.
(c) There are no liabilities, known or unknown, contingent or
otherwise, to any present or former employee of Seller alleging or involving
wrongful discharge, discrimination, violation of the rights of disabled persons,
sexual harassment, or benefits under workers' compensation insurance or law
which, to the extent not covered by insurance currently in effect or as
continued after the Closing Date, would exceed the accruals therefor reflected
on Seller's Consolidated Financial Statements or to be reflected on the Adjusted
Closing Date Balance Sheet.
5.21 Employee Benefit Plans; ERISA.
(a) Schedule 5.21(a) sets forth a list and brief description of all
Employee Benefit Plans and Benefit Arrangements, whether written or unwritten,
currently maintained by Seller or its Affiliates with respect to the Business.
Seller has delivered to Buyer true and complete copies of (i) all such Employee
Benefit Plans and Benefit Arrangements which are in writing, including any
amendments thereto, and a complete description of any such Employee Benefit
Plans and Benefit Arrangements which are not in writing, (ii) the annual report
(Form 5500) and all exhibits thereto, if required under ERISA or the Code, with
respect to each Employee
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Benefit Plan and Benefit Arrangement for the last three years, (iii) the
actuarial report if required under ERISA, with respect to each Employee Benefit
Plan and Benefit Arrangement for the last three years, and (iv) all material
documents and correspondence relating to each Employee Benefit Plan and Benefit
Arrangement received from or provided to the Department of Labor, the Internal
Revenue Service or the Pension Benefit Guaranty Corporation ("PBGC") during the
past three years.
(b) Except as set forth in Schedule 5.21(b):
(i) no event has occurred for which, and to the best knowledge
of Seller, no condition or set of circumstances exist under which, Seller or any
Pension Plan could be subject to any material liability under Section 409, 501
or 502 of ERISA or Section 4975 or 4976 of the Code;
(ii) each Employee Benefit Plan and Benefit Arrangement,
together with any related trust, and each trustee or administrator of any
Employee Benefit Plan or Benefit Arrangement, is in material compliance with,
and has been operated and administered in material compliance with, the
requirements prescribed by all applicable statutes, orders or governmental rules
or regulations including, without limitation, ERISA and the Code and with the
terms and conditions of the applicable plan;
(iii) each Pension Plan which is intended to be qualified
under Section 401(a) of the Code is qualified under Section 401(a) of the Code
and a favorable determination letter from the Internal Revenue Service with
respect to each such qualification has been issued with respect thereto, copies
of which have been delivered to Buyer;
(iv) except as set forth on Schedule 5.21(b)(iv), there are no
material actions or proceedings (other than routine claims for benefits) pending
or threatened, with respect to any Employee Benefit Plan or Benefit Arrangement;
(v) to the best knowledge of Seller, no event has occurred
under Section 4041, 4043, 4062, 4063, 4064, 4068 or 4069 of ERISA that could
subject Seller or any officer or director of Seller or any Employee Benefit Plan
to any liability;
(vi) except as set forth on Schedule 5.21(b)(vi), Seller is
not obligated to contribute to, and has never been obligated to contribute to,
any Employee Benefit Plan or Benefit Arrangement which constitutes a
"multi-employer plan" as defined in Section 3(37) of ERISA or a plan described
in Section 4063(a) of ERISA. Except as set forth on Schedule 5.21(b)(vi), Seller
has made or accrued all contributions and payments to the Employee Benefit Plans
which it is required under the terms of such Employee
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Benefit Plans to have paid or accrued for all plan years ending on or prior to
the Balance Sheet Date and no accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any Employee Benefit Plan;
(vii) all required premiums have been paid to the PBGC with
respect to all Pension Plans maintained by Seller or any of its Affiliates with
respect to the Business;
(viii) except as set forth on Schedule 5.21(b)(viii), the
present value of all vested accrued benefits under each Pension Plan, determined
as of the Balance Sheet Date, did not exceed the current value of the assets of
the applicable Pension Plan allocable to such vested accrued benefits. The terms
"present value," current value," and "accrued benefit" have the meanings
specified in Section 3 of ERISA. Schedule 5.21(b)(viii) sets forth in reasonable
detail the assumptions used with respect to each Pension Plan to determine the
present value of such vested accrued benefits and the current value of such
assets, which assumptions shall include an assumption that such Pension Plan
will not be terminated;
(ix) except as set forth on Schedule 5.21(b)(ix) , no Employee
Benefit Plan maintained by any entity (whether or not incorporated) under common
control with Seller within the meaning of Section 414(b), (c), (m) or (o) of the
Code has incurred any material "accumulated funding deficiency" (whether or not
waived) as that term is defined in Section 412 of the Code or Section 302 of
ERISA;
(x) no liability under Title IV of ERISA has been incurred by
Seller or any Affiliate of Seller since the effective date of ERISA that has not
been satisfied in full, and no condition exists that presents a material risk to
Seller or any Affiliate of Seller incurring any liability under such Title,
other than liability for premiums due to the PBGC, which payments have been made
or will be made when due;
(xi) no Employee Benefit Plan or benefit arrangement provides
benefits, including, without limitation, death or medical benefits (whether or
not insured), with respect to current or former employees of Seller or any
Affiliate of Seller beyond their retirement or other termination of service
(other than (A) coverage mandated by applicable law or (B) death benefits or
retirement benefits under any Pension Plan);
(xii) except as provided in Section 7.1.1(i), the consummation
of the transactions contemplated by this Agreement and the other Acquisition
Documents will not (A) entitle any current or former employee or officer of
Seller or any Affiliate of Seller to
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severance pay, unemployment compensation or any other payment, or (B) accelerate
the time of payment or vesting, or increase the amount of compensation due any
such employee or officer; and
(xiii) all Employee Benefit Plans or Benefit Arrangements that
are group health plans have been operated in compliance with the group health
plan continuation coverage requirements of Section 4980B of the Code and Section
601 of ERISA to the extent such requirements are applicable, and no such group
health plan is a self-insured plan.
5.22 Environmental Matters.
(a) Except as disclosed on Schedule 5.22(a), Seller has obtained all
material environmental, health and safety permits, licenses and other
authorizations which, to the best knowledge of Seller, are required under the
Environmental Laws relating, directly or indirectly, to the Purchased Assets or
to the conduct of the Business by Seller; each of such permits, licenses and
other authorizations is valid and enforceable and in full force and effect, and
Seller is in material compliance with the terms and conditions of all such
permits, licenses and other authorizations and with each Environmental Law.
Except as disclosed on Schedule 5.22(a), there are no pending applications for
any permits, licenses or other authorizations under any Environmental Law in
connection with the conduct of the Business by Seller or the operation or
ownership of the Purchased Assets by Seller.
(b) Except as disclosed on Schedule 5.22(b), (i) no Hazardous
Substances generated by, used by, or originating from activities on the Owned
Real Property or Leased Real Property have been Released or threatened to be
Released into the environment, whether by Seller, or, to the best knowledge of
Seller, third parties, at any site, facility or location now owned, operated,
occupied, utilized or leased by Seller, (ii) no oral or written notification of
a Release or threatened Release of a Hazardous Substance has been filed by or on
behalf of Seller with any Governmental Authority and, to the best knowledge of
Seller, no site or facility now owned, operated, occupied, utilized or leased by
Seller is subject to investigation or clean-up under any Environmental Law.
Seller has provided Buyer with copies of all environmental investigations,
studies, audits, tests, reviews and other analyses conducted by or on behalf of,
or that are in the possession of, Seller or any Affiliate of Seller in relation
to any site or facility now owned, operated, occupied, utilized or leased by
Seller, (iii) neither Seller nor any of its Affiliates (including, to the best
knowledge of Seller, the Non-Affiliates for purposes of this provision) has
received any notice of intention to commence suit under any Environmental Law
with respect to the Business or the Purchased Assets and, to the best knowledge
of Seller, there is no basis for any such suit and (iv) neither Seller
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nor any of its Affiliates (including, to the best knowledge of Seller, the
Non-Affiliates for purposes of this provision) have received any request for
information from any Governmental Authority under any Environmental Law with
respect to the Business or the Purchased Assets.
(c) Seller and its Affiliates (including the Non-Affiliates for
purposes of this provision in respect of any site now or formerly owned,
occupied, operated, utilized or leased by Seller) have complied and are in
compliance, in all material respects, with all Environmental Permits and all
applicable Environmental Laws pertaining to the Owned Real Property, the Leased
Real Property and all Purchased Assets (and the use, ownership or
transferability thereof) and the Business and Seller has no material liability,
contingent or otherwise, under any Environmental Law except as disclosed on
Schedule 5.22(c). No Person has alleged any material violation by Seller or its
Affiliates (including the Non-Affiliates for purposes of this provision) of any
applicable Environmental Law relating to the conduct of the Business or the use,
ownership or transferability of the Owned Real Property, the Leased Real
Property and all Purchased Assets. Except as disclosed on Schedule 5.22(c),
Seller has not caused or permitted the use, generation, manufacture, refining,
transportation, treatment, storage, handling, disposal, production or processing
of any Hazardous Substances on any of the Owned Real Property or Leased Real
Property or in connection with the conduct of the Business except in material
compliance with every applicable Environmental Law and all applicable federal,
state and local laws and regulations, and Seller has not caused or permitted,
and Seller has no knowledge of, the Release or threatened Release of any
Hazardous Substances generated, used or originating from any of the Owned Real
Property or Leased Real Property or the operations of the Business, which has
had, has, or would be reasonably likely to have a Material Adverse Effect.
(d) Except as set forth in Schedule 5.22(d), neither Seller nor any
of its Affiliates (including the Non-Affiliates for purposes of this provision)
have caused or taken any action (or omitted to take any action) that has
resulted or may result in, or has been or is subject to, any liability or
obligation relating to (i) the environmental conditions on, under, or about any
Owned Real Property, the Leased Real Property, the Purchased Assets or other
properties or assets owned, leased or used by Seller held for use in connection
with, necessary for the conduct of, or otherwise material to, the Business, or
(ii) the past or present use, management, handling, transport, treatment,
generation, storage or Release of any Hazardous Substances on, under, or about
any Owned Real Property, the Leased Real Property, the Purchased Assets or other
properties or assets owned, leased or used by Seller held for use in connection
with, necessary for the conduct of, or otherwise material to, the Business,
except for any such liabilities and
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obligations that, individually and in the aggregate, are not material to Seller
or the Business and have not had or resulted in, and would not be reasonably
likely to have or result in, a Material Adverse Effect.
(e) The Owned Real Property, to the best knowledge of Seller the
Leased Real Property, and the Purchased Assets owned, operated, occupied,
utilized or leased by Seller with respect to the Business are not subject to any
Liens under any Environmental Law. Seller, in respect of the Owned Real
Property, the Leased Real Property and the other Purchased Assets is in material
compliance with any statutory land use regulation or prohibition under any
Environmental Law or any law of any Governmental Authority relating to the
protection of wetlands, woodlands and the like.
(f) Seller's operations are in material compliance with the
requirements of OSHA and any state and local occupational safety and health
laws, and all regulations promulgated thereunder and, except as set forth in
Schedule 5.22(f), there are no pending or, to the best knowledge of Seller,
threatened safety and/or health citations, complaints, lawsuits or orders issued
with respect to any of the foregoing laws. Except as set forth on Schedule
5.22(f), since January 1, 1995, there have been no citations, notices,
inspections, lawsuits or complaints issued to Seller or any of its Affiliates
with respect to the Business or the Purchased Assets by the Occupational Safety
and Health Administration or any state occupational safety and health
administration, nor are there any agreements between Seller and/or its
Affiliates and any such administrative agency.
5.23 Intellectual Property.
(a) Schedule 5.23(a) contains a complete and correct list of all
Intellectual Property used by Seller (the "Intellectual Property") other than
(i) inventions, trade secrets, processes, formulas, compositions, designs and
confidential business and technical information and (ii) Intellectual Property
that is both not registered or subject to application for registration and not
material to the Business. Seller owns or has the exclusive right to use pursuant
to license, sublicense, agreement or permission all Intellectual Property
Purchased Assets, free from any Liens, other than Permitted Exceptions, and free
from any requirement of any past, present or future royalty payments, license
fees, charges or other payments, or conditions or restrictions whatsoever. The
Intellectual Property Purchased Assets comprise all of the Intellectual Property
necessary for Buyer to conduct the Business in the manner conducted by Seller
prior to the Closing Date.
(b) Immediately after the Closing, Buyer will own all of the
Intellectual Property Purchased Assets owned by Seller and will
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have the right to use all other Intellectual Property Purchased Assets, free
from any Liens, other than Personal Property Permitted Exceptions, and on the
same terms and conditions as in effect prior to the Closing.
(c) To the best knowledge of Seller, the conduct of the Business
does not infringe or otherwise conflict with any rights of any Person in respect
of any material Intellectual Property. To the best knowledge of Seller, none of
the material Intellectual Property is being infringed or otherwise used or
available for use, by any other Person.
(d) No material claim or demand of any Person has been made nor is
there any proceeding that is pending or, to the best knowledge of Seller,
threatened which (i) challenges the rights of Seller in respect of any material
Intellectual Property Purchased Assets, (ii) asserts that Seller is infringing
or otherwise in conflict with, or is required to pay any royalty, license fee,
charge or other amount with regard to, any material Intellectual Property,
except as set forth in Schedule 5.23(d), or (iii) claims that any material
default exists under any agreement or arrangement listed on Schedule 5.23(d).
None of the Intellectual Property Purchased Assets is subject to any outstanding
order, ruling, decree, judgment or stipulation by or with any Governmental
Authority or has been the subject of any litigation within the last five years,
whether or not resolved in favor of Seller.
(e) All material Intellectual Property has been duly registered
with, filed in or issued by, as the case may be, the United States Patent and
Trademark Office or the United States Copyright Office to the extent material to
the Business.
(f) Except as set forth in Schedule 5.23(f), there are, and
immediately after the Closing will be, no contractual restriction or limitations
pursuant to any orders, decisions, injunctions, judgments, awards or decrees of
any Governmental Authority on the Buyer's right to use any name and mark
material to the conduct of the Business as currently conducted by Seller.
5.24 Insurance. Schedule 5.24 contains a true and complete list and
brief description of all policies of insurance maintained by Seller. All
premiums due to the date hereof on such insurance policies have been paid in
full, and all such policies are currently valid and binding and in full force
and effect. Seller has not received any notice of cancellation or termination in
respect of any such policy and Seller is not in material default under any such
policy and no insurance company has ever denied, or to the best knowledge of
Seller, attempted to deny, coverage based upon any allegation that Seller has
violated or breached the terms of coverage, or violated any law or regulation.
Except as set forth on Schedule 5.24, all such policies are occurrence policies
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and, to the best knowledge of Seller, to the extent the Assumed Liabilities are
insured thereby, Buyer shall, following the Closing Date, be entitled to the
benefits under such policies as provided in Section 2.1(l). Seller maintains
policies of fire and casualty, liability and other forms of insurance in such
amounts, with such deductibles and against such risks and losses, as are
reasonable for the Business and Purchased Assets and will continue such
insurance in effect through the Closing. Seller is not in default under any
contractual obligation to maintain a specified level or type of insurance.
5.25 Products. Schedule 5.25 references a list, previously delivered
to Buyer, reflecting each category of products currently sold or marketed by
Seller ("Existing Products") in connection with the Business. Schedule 5.25 also
sets forth the revenues attributable to each category of Existing Products for
the years ended December 31, 1996 and December 31, 1997 (other than Existing
Products with revenues of less than $100,000 in each such year).
5.26 Product Warranties.
(a) The standard forms of product warranties and guarantees used by
Seller or relating, directly or indirectly, to the Business are attached as
Schedule 5.26(a) or described therein.
(b) Other than as set forth on Schedule 5.26(b) or relating to any
matter that has been resolved, Seller has not received notice of any product
warranty claim or similar claim with an actual or alleged liability to the
Business in excess of $10,000.
5.27 Customers and Suppliers, Etc.
(a) Schedule 5.27 identifies all customers with whom Seller has done
more than $50,000 of business in the current or any of the last two fiscal
years, all suppliers with whom Seller has done more than $50,000 of business in
the current or any of the last two fiscal years, the total value of business
transacted with such customers and suppliers during each such fiscal year or
portion thereof, and, if applicable, the reasons any such contract was
terminated.
(b) Except as set forth on Schedule 5.27(b), no employee, client,
supplier or customer or other Person having a material business relationship
with Seller has informed Seller that such Person (and Seller has no reason to
believe that any such Person) intends to change such relationship because of the
transactions contemplated hereby or in any agreement or document to be executed
and delivered in connection herewith.
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5.28 Affiliated Transactions. Except as set forth in Schedule 5.28
in connection with or relating, directly or indirectly, to the Business: (i)
there is no Indebtedness or other obligations or liabilities (other than Assumed
Liabilities) between Seller, any Affiliate (including the Non- Affiliates for
purpose of this provision) of Seller or any officer, director or shareholder of
Seller, on the one hand, and any employee of the Business, on the other, (ii) no
such officer, director, shareholder or Affiliate (including the Non-Affiliates
for purpose of this provision) provides or causes to be provided (or has
provided since January 1, 1995) any assets, services (except as an employee) or
facilities to the Business, (iii) the Business does not provide or cause to be
provided (and has not provided since January 1, 1995) any assets, services or
facilities to any such officer, director, shareholder or Affiliate (including
the Non-Affiliates for purpose of this provision) (other than, in the case of
Seller's employees, compensation and benefits in the ordinary course of
business), (iv) Seller does not beneficially own, directly or indirectly, any
investment assets issued by any such employee and (v) none of Seller, any
Affiliate (including the Non-Affiliates for purpose of this provision) of Seller
or any officer, director or shareholder of Seller has, or since January 1, 1995
has had, any contract, agreement or other arrangement with any such employee.
5.29 Corrupt Acts. No funds or assets of Seller have been used for
illegal purposes; no unrecorded funds or assets of Seller have been established
or set aside for any purpose; no accumulation or use of Seller's corporate funds
has been made without being properly accounted for in the books and records of
Seller; all payments by or on behalf of Seller have been duly and properly
recorded and accounted for in its books and records; no false or artificial
entry has been made in the books and records of Seller for any reason; no
payment has been made by or on behalf of Seller with the understanding that any
part of such payment is to be used for any purpose other than that described in
the documents supporting such payment; and Seller has not made, directly or
indirectly, any illegal contributions to any political party or candidate,
either domestic or foreign, or any contribution, gift, bribe, payoff, influence
payment or kickback, whether in cash, property or services, to any individual,
corporation, partnership or other entity, to secure business or to pay for
business secured.
5.30 No Brokers. Seller has not entered into nor will enter into any
agreement, arrangement or understanding with any Person which will result in the
obligation of Buyer to pay any finders fee, brokerage commission or similar
payment in connection with the transactions contemplated hereby.
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ARTICLE VI
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF BUYER
Buyer represents and warrants to and agrees with Seller as of the
date hereof and as of the Closing Date as follows:
6.1 Corporate Status; Authorization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has the corporate power and authority to execute and deliver
this Agreement, the other Acquisition Documents and all other agreements and
documents to be executed and delivered by it in connection herewith, to perform
fully its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Buyer of this Agreement, the other Acquisition Documents and all other
agreements and documents to be executed and delivered by it in connection
herewith or therewith, the performance by Buyer of obligations hereunder and
thereunder, and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all requisite corporate acts
and other proceedings of Buyer. This Agreement, the other Acquisition Documents
and all other agreements and documents to be executed and delivered by Buyer in
connection herewith or therewith have been duly and validly executed and
delivered by Buyer and constitute legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, rearrangement, fraudulent transfers, fraudulent conveyance,
conservatorship or other laws (including court decisions) affecting the
enforcement of creditors' rights generally.
6.2 The Certificate of Incorporation and By-Laws of Buyer attached
as Schedule 6.2 hereto, are true, correct and complete copies of such documents
as amended and in effect as of the date hereof. Buyer is not in violation of any
of the provisions of its Certificate of Incorporation or By-Laws.
6.3 No Conflicts. Neither the execution and delivery of this
Agreement, any other Acquisition Document or any other agreement or document to
be executed and delivered in connection herewith or therewith, nor the
consummation of the transactions contemplated hereby or thereby will (a) violate
any law, statute, regulation, rule, judgment, order, decree, stipulation,
injunction, writ, charge, or other restriction of any Governmental Authority to
which Buyer is bound or subject or by which any of its properties or assets is
subject or bound or any provision of the Certificate of Incorporation or By-Laws
or other organizational documents of Buyer or (b) conflict with, result in a
breach of, constitute a default under, result in an acceleration of, create in
any Person
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the right to accelerate, terminate, modify or cancel, or require any notice
under, any material contract, instrument, agreement or other arrangement to
which Buyer is a party or by which Buyer or any of its properties or assets are
bound or subject. Except as set forth in Schedule 6.3, no Governmental Approval
or other Consent is required to be obtained or made by Buyer in connection with
the execution and delivery of the Acquisition Agreements, any other Acquisition
Document or any other agreement or document to be executed and delivered in
connection herewith or therewith or the consummation of the transactions
contemplated hereby or thereby.
6.4 Litigation. As of the date of this Agreement, there are no
claims, demands, suits, proceedings or litigations of any kind pending or, to
the knowledge of Buyer, threatened to which Buyer is a party and which relate to
this Agreement, the other Acquisition Documents or the performance by Buyer of
its obligations hereunder and thereunder.
6.5 No Brokers. Buyer has not entered into, and will not enter into,
any agreement, arrangement or understanding with any Person which will result in
the obligation of Seller to pay a finder's brokerage commission or similar
payment in connection with the transactions contemplated hereby.
6.6 Financing. On the date hereof, Buyer has, or has unconditional
access to, sufficient funds to pay the Cash Purchase Price and pay, perform and
discharge the Assumed Liabilities in accordance with Section 4.1, or has a
binding commitment from a third party with adequate capital to furnish such
funds on terms and conditions which have been accepted by Buyer.
6.7 Buyer SEC Reports. Buyer has previously furnished or made
available to Seller true and complete copies of all SEC Reports filed by Buyer
during the past three years.
6.8 Buyer's Capitalization. On the Closing Date, the ratio of
Buyer's Indebtedness to Buyer's net worth (such ratio herein referred to as
"Buyer's Capitalization") will not exceed 3:1 (the "Required Capitalization").
ARTICLE VII
COVENANTS
7.1 Covenants of Seller.
7.1.1 Conduct of Business. Except as otherwise expressly permitted
or required by in this Agreement, during the period from the date hereof to the
Closing Date, Seller shall:
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(a) conduct its operations in the ordinary course of business, in
substantially the same manner as heretofore conducted, and in material
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use all reasonable efforts (i) to preserve intact its
current business organization, (ii) keep its physical assets in working
condition, (iii) keep available the services of its current officers and
employees, and (iv) preserve its relationships with customers, suppliers and
others having business dealings with it to the end that its goodwill and ongoing
business shall not be impaired in any material respect;
(b) pay accounts payable and other obligations and liabilities when
they become due and payable in the ordinary course of business consistent with
past practice;
(c) perform in all material respects all of its obligations under
all Contracts and other agreements and instruments relating to or affecting the
Business or the Purchased Assets, and comply in all material respects with all
applicable laws applicable to it, the Purchased Assets or the Business;
(d) not acquire, sell, lease, encumber or dispose of any Purchased
Assets, other than current assets in the ordinary course of business consistent
with past practice, and will not acquire, sell, lease, encumber or dispose of
any long-term assets having an aggregate net book value in excess of $25,000
without Buyer's prior written consent;
(e) not amend its Certificate of Incorporation or By-Laws;
(f) not mortgage or pledge any of the Purchased Assets or otherwise
subject any of the Purchased Assets to any Lien, other than Real Estate
Permitted Exceptions and Personal Property Permitted Exceptions;
(g) not take any action, or fail to take any action permitted by
this Agreement, which action or omission would result in a breach of any of the
representations and warranties of Seller set forth in Section 5;
(h) without the prior consent of Buyer, which shall not be
unreasonably withheld or delayed, not enter into or assume any material
agreement, contract or instrument relating to the Business, or enter into or
permit any material amendment, supplement, waiver or other modification in
respect thereof, unless any of the foregoing is in the ordinary course of
business, consistent with Seller's past practice, and can be fully performed
within one year;
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(i) not grant (or commit to grant) any increase in the compensation
(including incentive or bonus compensation) of any employee employed by Seller,
except the stay-bonuses reflected on the Closing Date Balance Sheet as a current
liability, or paid prior to the Closing Date, in connection with the
transactions contemplated by this Agreement or in the ordinary course of
business as disclosed in Schedule 7.1.1(i), or institute, adopt or amend (or
commit to institute, adopt or amend) any compensation or benefit plan, policy,
program or arrangement or collective bargaining agreement applicable to any such
employee;
(j) not make any material adverse change in the selling,
distribution, pricing, advertising or collection practices of the Seller,
including, but not limited to, any special effort or program to sell or consign
products to customers or to discount, factor or collect sooner than normal any
accounts receivable;
(k) except in the ordinary course of business and consistent with
past practices, not purchase, order or otherwise acquire inventory for the
Business in excess of the reasonably forecast requirements of the Business for
the year following the Closing Date; and
(l) not agree in writing or otherwise take any of the foregoing
actions.
7.1.2 Access.
(a) Prior to the Closing, Seller will give Buyer and its employees,
counsel and accountants and other representatives reasonable access, during
normal business hours and upon reasonable notice, to the personnel, suppliers
and customers, properties, books and records of Seller. Prior to Closing, Buyer
and Buyer's agents and representatives shall have the right to enter upon the
Owned Real Property and Leased Real Property for the purpose of performing
testing to determine whether there has been a Release of Hazardous Substances
and whether said property is in compliance with each applicable Environmental
Law, and for the purpose of obtaining a survey, and Seller shall permit Buyer
and Buyer's agents and representatives entry upon such property and shall
reasonably cooperate with any testing performed by Buyer or Buyer's agents and
representatives, and for obtaining such survey. Prior to Closing, Buyer and
Buyer's agents and representatives shall have the right to review all records
and documents of Seller to determine whether Seller is and has been in
compliance with each applicable law, including, without limitation, applicable
Environmental Law, and Seller shall cooperate and reasonably assist Buyer and
Buyer's agents and representatives with such document review.
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(b) Seller covenants and agrees that for a period of five (5) years
from the Closing Date it will maintain in a reasonably accessible place any
books and records relating to the Business which this Agreement expressly
contemplates will be retained by Seller and will provide copies of such books
and records to Buyer or its representatives at Buyer's expense.
7.1.3 Insurance.
(a) Seller shall use its reasonable best efforts to keep, or cause
to be kept, all insurance policies set forth on Schedule 7.1.3, or suitable
replacements therefor, in full force and effect through the close of business on
the Closing Date.
(b) Seller agrees to procure and maintain for a term of three years
at the sole expense of Seller continuation employee practices insurance of the
type, and on terms and conditions, substantially similar to the employee
practices insurance presently maintained by Seller; provided, however, that any
liabilities or obligations arising after the third anniversary of the Closing
Date which would have been covered by such insurance if such insurance had
thereafter continued to be in effect shall be Assumed Liabilities.
7.1.4 Supplemental Disclosure.
(a) Seller shall have the continuing obligation until the Closing
promptly to notify Buyer in writing with respect to any matter hereafter arising
or discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described in this Agreement or the
Schedules or other attachments annexed hereto. Subsequent to the date of this
Agreement, supplemental or amended disclosures will be made in respect of
Schedules if appropriate to reflect changes occurring since the date of this
Agreement (or, in the case of Schedules 2.2(b), 3.1, 3.2(i), 5.9, 5.9(h),
5.9(q), 5.13, 5.15, 5.16 (items 63 to 72), 5.21(b)(viii), 5.27 (for year-to-date
1998 totals), and 5.28 (item 1), the account balances listed in such Schedules
may be updated from the date thereof through the Closing Date), which
disclosures, as supplemented or amended, shall be deemed to have been made as of
the date of this Agreement only if (A) such supplemental or amended disclosures
shall be the result of events occurring or conditions arising in the ordinary
course of the Business subsequent to the date of this Agreement (or, without
limiting the foregoing, in the case of Schedules 2.2(b), 3.1, 3.2(i), 5.9,
5.9(h), 5.9(q), 5.13, 5.15, 5.16 (items 63 to 72), 5.21(b)(viii), 5.27 (for
year-to-date 1998 totals), and 5.28 (item 1), subsequent to the account balance
dates provided therein), and consistent with Seller's past practices, and which
are permitted by Section 7.1.1, and (B) the inclusion or existence of such
events or
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conditions would not reasonably be likely to result in a net adverse effect to
Buyer in excess of $250,000 in the aggregate.
(b) If Seller shall furnish supplemental or amended disclosures
subsequent to the date of this Agreement which are not in accordance with
clauses (A) and (B) of the last provision of Section 7.1.4(a), Buyer may elect
either (i) to terminate this Agreement, or (ii) to consummate the transactions
contemplated by this Agreement without any obligation or liability of Seller to
Buyer in respect of such supplemental or amended disclosures; provided, however,
if Buyer elects to terminate this Agreement as a result of Seller furnishing
supplemental or amended disclosures which are not in compliance with Section
7.1.4(a)(A), Seller's sole liability and obligation to Buyer shall be to pay to
Buyer the Break-up Fee provided in Section 13.6.
7.1.5 Compliance. Except as set forth on Schedules 5.22(c) and 5.18,
prior to the Closing, Seller will comply in all respects with all applicable
laws, statutes, rules, regulations, ordinances or other pronouncements having
the effect of law in the United States, any foreign country or any domestic or
foreign state, any city or other political subdivision, or of any Governmental
Authority (including, without limitation, every Environmental Law) and any writ,
judgment, decree, injunction or similar order of any Governmental Authority (in
each case whether preliminary or final) applicable to Seller, the Business or
the Purchased Assets if the failure to comply therewith would reasonably be
likely to result in a Material Adverse Effect.
7.1.6 Non-Solicitation. Until the Closing Date or the date on which
this Agreement is terminated pursuant to Section 11.1 whichever occurs first,
Seller, its Affiliates and each Person acting on behalf of Seller or such
Affiliate shall not: (a) solicit or encourage any inquiries or proposals for, or
enter into any discussions with respect to, the acquisition of Seller or any
properties and assets held for use in connection with, necessary for the conduct
of, or otherwise material to, the Business (an "Acquisition Transaction"); or
(b) furnish or cause to be furnished any non-public information concerning the
Business to any Person (other than the Buyer and its prospective lenders and
investors and their respective representatives), other than in the ordinary
course of business or pursuant to applicable law and after prior written notice
to the Buyer, except as previously furnished to prospective buyers other than
Buyer. Seller shall promptly notify Buyer of any inquiry or proposal received by
Seller with respect to any such Acquisition Transaction. Seller shall not sell,
transfer or otherwise dispose of, grant any option or proxy to any Person with
respect to, create any Lien (except Permitted Exceptions) upon, or transfer any
interest in, any Purchased Asset, other than in the ordinary course of business
and consistent with this Agreement.
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7.1.7 Further Actions.
(a) Seller agrees to use all reasonable good faith efforts to take
all actions and do all things necessary, proper or advisable to consummate the
transactions contemplated hereby by the Closing Date.
(b) Seller shall use its reasonable best efforts to obtain prior to
the Closing Date all material approvals, authorizations and consents of all
third Persons identified on Schedule 5.5 and all permits which are necessary for
(i) the consummation of the transactions contemplated hereby and (ii) the
ownership or leasing and operation by Buyer of all Purchased Assets. Seller
shall promptly (and at least five business days prior to the Closing) furnish
Buyer with written notice of Seller's inability to obtain any such approval,
authorization or consent, and unless Buyer shall furnish Seller with written
notice to the contrary at least three business days prior to the Closing Date,
Seller shall have no liability or obligation to Buyer subsequent to the Closing
Date in respect of any such approval, authorization or consent.
(c) Seller will (i) take promptly all actions necessary to make any
filings required of Seller under the HSR Act with respect to the transactions
contemplated by this Agreement, (ii) use its best efforts to respond as promptly
as practicable to all inquiries received from the Federal Trade Commission
("FTC") or the Antitrust Division (the "Antitrust Division") of the United
States Department of Justice for additional information or documentation in
connection with all notices, reports or other documentation filed by Buyer and
Seller under the HSR Act and (iii) cooperate with Buyer in connection with the
filing by or on behalf of Buyer under the HSR Act with respect to the
transactions contemplated by this Agreement and in connection with resolving any
investigation or other inquiry concerning the transaction as contemplated by
this Agreement commenced by the FTC or the Antitrust Division or state attorneys
general.
7.1.8 Interim Financial Statements. Seller shall provide Buyer, as
soon as practicable, with copies of all interim financial statements that are
prepared by Seller in the ordinary course of business prior to the Closing,
which shall be prepared consistent with past accounting practices and in
accordance with GAAP.
7.1.9 Public Announcements. Except as required by applicable law,
Seller shall not, and it shall not permit any Affiliate to, make any public
announcement in respect of this Agreement, the other Acquisition Documents, or
the transactions contemplated hereby or thereby without the prior written
consent of Buyer which shall not be unreasonably withheld or delayed.
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7.1.10 Post-Closing Activities of Seller.
(a) From the Closing Date through and including the second
anniversary thereof, Seller shall not, directly or indirectly, liquidate or
distribute by way of dividend or otherwise, or use to make any investment in any
Affiliate (including the Non-Affiliates for purposes of this provision) or
shareholder, or use to pay amounts due to Parent in excess of $100,000 in the
aggregate, an amount equal to the Net Proceeds realized by Seller from the
Purchase Price. For purposes hereof "Net Proceeds" shall mean the Cash Purchase
Price paid to Seller pursuant to Section 4, minus the sum of (i) income taxes
directly resulting from the transactions contemplated by this Agreement
(calculated as of the due date thereof), (ii) all professional fees directly
relating to the transactions contemplated by this Agreement, (iii) fees to
Harris Williams & Co. directly relating to the transactions contemplated by this
Agreement, (iv) the cost of insurance to be obtained by Seller pursuant to
Section 7.1.3(b), (v) expenses of Seller and Parent directly relating to the
transactions contemplated by this Agreement not in excess of $500,000 in the
aggregate, (vi) transfer taxes paid by Seller in accordance with Section
13.4(i), (vii) the First Escrow Fund, (viii) Seller's Indebtedness as set forth
on Schedule 7.1.10(a)(viii), and (ix) in addition to the foregoing, other
expenses directly related to the preparation and consummation of this Agreement.
Notwithstanding anything to the contrary contained herein, Seller may at any
time use all or any portion of the Net Proceeds in the manner provided, and
subject to the requirements set forth, in Section 3 of the Net Proceeds Escrow
Agreement.
(b) Following the Closing Date, Seller will not, directly or
indirectly, use or do business, or allow any Affiliate to use or do business, or
assist any third party in using or doing business, under the names and marks
"Leslie-Locke" (or any other name confusingly similar to such names and marks).
As of the Closing Date, Seller shall have taken all actions necessary to change
its name to comply with the foregoing.
7.1.11 Further Assurances. Following the Closing Date, Seller shall,
and shall cause each of its Affiliates to, from time to time, execute and
deliver such additional instruments, documents, conveyances or assurances and
take such other actions as shall be necessary, or otherwise requested by Buyer,
to confirm and assure the rights and obligations provided for in this Agreement
and the other Acquisition Document and render effective the consummation of the
transactions contemplated hereby and thereby.
7.1.12 SERP Obligations. Seller shall not permit any employee who is
not a participant in the Seller's Supplemental Executive Retirement Trust (the
"SERP") as of the date hereof to become a participant in the SERP or otherwise
become eligible to
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receive benefits thereunder. Immediately prior to the Closing Date, Seller shall
terminate the SERP.
7.1.13 Investment Company Act Compliance.
(a) Subsequent to the Closing Date, Seller shall, in good faith,
determine if it is required to register as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). If Seller shall
determine that such registration is required, Seller shall either (i) register
pursuant to, and in accordance with the requirements of, the 1940 Act or (ii)
use its reasonable best efforts to obtain an exemption from such registration
requirement and if such exemption is not available, Seller shall comply with
clause (i) of this Section 7.1.13(a).
(b) If Seller becomes a registered investment company and, for any
reason, Seller determines that it is constrained under the 1940 Act from
fulfilling its obligations under this Agreement and the other Acquisition
Documents, Seller shall use its reasonable best efforts to obtain exemptive
relief from such constraint; provided, however, that the failure of Seller to
obtain exemptive relief shall not result in a breach or default of this
Agreement or any other Acquisition Document, and Seller shall perform its
obligations to the extent reasonably practicable subject to such constraint.
7.2 Covenants of Buyer.
7.2.1 Public Announcements. Except as required by applicable law,
Buyer shall not, and it shall not permit any Affiliate to, make any public
announcement in respect of this Agreement or the transactions contemplated
hereby without the prior written consent of Seller which shall not be
unreasonably withheld or delayed.
7.2.2 Further Actions.
(a) Buyer agrees to use all reasonable good faith efforts to take
all actions and do all things necessary, proper or advisable to consummate the
transactions contemplated hereby by the Closing Date.
(b) Buyer will (i) take promptly all actions necessary to make any
filings required of Buyer under the HSR Act with respect to the transactions
contemplated by this Agreement, (ii) use its best efforts to respond as promptly
as practicable to all inquiries received from the FTC or the Antitrust Division
for additional information or documentation in connection with all notices,
reports or other documentation filed by Buyer and Seller under the HSR Act and
(iii) cooperate with Seller in connection
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with the filing by or on behalf of Seller under the HSR Act with respect to the
transactions contemplated by this Agreement and in connection with resolving any
investigation or other inquiry concerning the transaction as contemplated by
this Agreement commenced by the FTC or the Antitrust Division or state attorneys
general.
7.2.3 Litigation and Other Support; Access; Required Capitalization.
(a) Following the Closing Date, upon the request of Seller, Buyer
shall make available to Seller former employees of Seller who are employed by
Buyer subsequent to the Closing Date and all pertinent information, books and
records of Seller relating to Seller and the Business (i) to render assistance
to Seller in connection with litigation pending in the United States Bankruptcy
Court, Southern District of New York, known as In re White Metal Rolling and
Stamping Corp. and related litigation known as Alan Nisselson, Chapter 7 Trustee
of White Metal Rolling and Stamping Corp. vs. Drew Industries Incorporated,
Leslie-Locke, Inc., Leslie Building Products Inc. and Kinro, Inc. (collectively,
the "Litigation"); and (ii) to render assistance to Seller in promptly preparing
(A) the Closing Date Balance Sheet and Purchased Balance Sheet, (B) financial
statements of Seller for periods ending on or prior to the Closing Date, and (C)
tax returns, tax reports and other reports and documents required to be timely
filed by Seller pursuant to law or regulation for periods ending on or prior to
the Closing Date; provided that Buyer shall have no liability in respect of the
contents of any such statement, return, report or document or in respect of the
preparation or filing thereof, and provided further that, (A) the maximum number
of days during each fiscal year that Buyer's employees shall be required to be
made available pursuant to clause (i) shall not exceed five (5) days for any
single Buyer employee and twenty (20) days for all Buyer employees; and (B) that
in the event that Seller reasonably believes it needs assistance beyond the
limits set forth in the previous proviso, Buyer agrees to discuss in good faith
with Seller the terms and conditions of any such additional assistance. Seller
shall give Buyer reasonable notice of the necessity for such assistance. To the
extent reasonably possible, such assistance may be rendered by telephone, mail
or facsimile transmission; provided, however, that Buyer will not prohibit or
interfere with personal appearances by such employees if Seller shall deem such
personal appearances to be reasonably necessary. Such employees shall be made
available by Buyer without compensation from Seller, and all expenses incurred
by such employees in connection with personal appearances shall be paid by
Seller.
(b) Following the Closing Date, Buyer shall permit representatives
of Seller to have full access (at all reasonable times, and in a manner so as
not to interfere with the normal
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operations of Buyer) to all financial and accounting records, contracts, other
records and documents (and the right to make and retain copies of the foregoing)
pertaining to Seller prior to the Closing Date as Seller shall deem reasonably
necessary for, or in connection with, (i) the filing of tax returns and other
reports and documents required to be filed by Seller pursuant to law or
regulation and (ii) the conduct of the Litigation.
(c) Buyer covenants and agrees that for a period of five (5) years
from the Closing Date and for such additional period as may be specifically
required by law it will maintain in a reasonably accessible place any books and
records relating to the Business which this Agreement expressly contemplates
will be delivered to Buyer and, upon Seller's request, will provide copies of
such books and records to Seller or its representatives at Seller's expense.
(d) During the two-year period following the Closing Date, (the
"Applicable Period"), Buyer shall furnish to Seller quarterly balance sheets,
prepared in accordance with GAAP, setting forth, among other things, Buyer's
Indebtedness and net worth as of the date of such balance sheet and a schedule
setting forth Buyer's Capitalization as of the date of such balance sheet. Such
balance sheets and schedules shall be delivered within forty-five (45) days of
each fiscal quarter-end or, in the case of the balance sheets to be delivered
with respect to fiscal quarters ending on December 31, within ninety (90) days
of such fiscal quarter end. Buyer shall deliver to Seller a certificate of
Buyer's Chief Financial Officer to the effect that Buyer's Capitalization
reflected on such schedules is fairly presented in all material respects and in
accordance with this Agreement.
(e) Buyer covenants and agrees that Buyer will maintain the Required
Capitalization at all times during the Applicable Period, provided that (i)
Buyer's Capitalization shall be determined solely by reference to the balance
sheets to be delivered to Seller pursuant to Section 7.2.3(d), and (ii) for
purposes of calculating the net worth component of the Required Capitalization,
Seller Liabilities and receivables representing indemnification of Seller
Liabilities shall be excluded.
7.2.4 Buyer shall pay, perform and discharge, pursuant to the terms
thereof, all the Assumed Liabilities.
7.2.5 Buyer shall continue in effect Seller's existing medical,
hospitalization and disability insurance for a period in Buyer's sole
discretion. Subsequent to replacement of Seller's insurance by other insurance
maintained or procured by Buyer, any liability arising or resulting from a claim
based upon an occurrence or condition which occurred or existed prior to the
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Closing Date shall be an Assumed Liability to the extent not covered by such
replacement insurance.
7.2.6 Further Assurances. Following the Closing Date, Buyer shall,
and shall cause each of its Affiliates to, from time to time, execute and
deliver such additional instruments, documents, conveyances or assurances and
take such other actions as shall be necessary, or otherwise reasonably requested
by Seller, to confirm and assure the rights and obligations provided for in this
Agreement and the other Acquisition Documents and render effective the
consummation of the transactions contemplated hereby and thereby.
ARTICLE VIII
EMPLOYEES
8.1 Employees.
(a) Effective on the Closing Date, Buyer will offer to hire all of
the employees listed on the current payroll register referred to on Schedule
5(a) (the "Employees") at a compensation level equivalent to such employee's
base salary immediately prior to the Closing Date. Any Employee which accepts
Buyer's offer of employment hereunder is herein referred to as a "Transferred
Employee." Subject to Sections 5(c) and 7.1.3(b), Buyer assumes, and shall pay,
perform and discharge, pursuant to the terms thereof, all employment related
obligations (as defined below) with respect to Transferred Employees and former
employees arising after the Closing or to be reflected as a dollar amount in the
Closing Date Balance Sheet in respect of any period prior to the Closing or as
otherwise provided in this Agreement. For purposes of this Section 8.1,
"employment-related obligations" shall mean compensation for services performed
for Seller prior to the Closing Date and for Buyer after the Closing Date (and
related employment and withholding taxes), benefits accrued under any Seller or
Buyer sponsored Pension Plan, Employee Benefit Plan or Benefit Arrangement
(excluding stock option and stock purchase plans), and Workers Compensation
benefits with respect to occupational injuries or illness occurring or arising
before or after the Closing Date.
(b) Seller shall retain sole responsibility for any obligations or
liabilities with regard to the Employees under WARN, and agrees to indemnify
Buyer and hold it harmless for same and for any obligations or liabilities
relating to or arising from the termination of employment of any employee of
Seller on or prior to the Closing Date. Buyer shall be solely responsible for
such liability and agrees to indemnify Seller and hold it harmless for
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same to the extent such liability arises solely as a result of actions taken by
Buyer after the Closing Date, and agrees to indemnify Seller and hold Seller
harmless for same. The indemnification obligations pursuant to this Section
8.1(b) shall include, without limitation, any claim by an employee for back pay,
front pay, benefits, or compensatory or punitive damages, any claim by any
governmental unit for penalties regarding any issue of prior notification (or
any lack thereof) of any plant closing or mass lay-off, as well as the costs and
expenses, including reasonable attorneys' fees, in defending any such claims.
(c) Buyer shall be responsible for all medical or related health
insurance claims, including, without limitation, dental, prescription drug and
vision claims of any Transferred Employees and any employees of Seller who do
not constitute Transferred Employees, in either case, who, as of the Closing
Date, are receiving continuation of such medical or related health insurance to
the extent required by COBRA under affected Employee Benefit Plans or Benefit
Arrangements of Seller. Buyer shall be responsible for providing health care
continuation coverage as required by COBRA to any Transferred Employees
terminated by Buyer at any time.
(d) Seller will encourage each of the Employees to accept Buyer's
offer of employment as of the Closing Date, and shall take no action, including,
without limitation, the offering of employment with Seller to induce Employees
not to accept employment with Buyer.
(e) Transferred Employees will receive credit for Past Service in
determining entitlement under Buyer's Pension Plans, Employee Benefit Plans and
Benefit Arrangements. For purpose hereof, "Past Service" means service with
regard to the Business as an employee of Seller.
(f) Seller shall transfer to Buyer and Buyer shall assume, and
agrees to pay, perform and discharge, pursuant to the terms thereof, all
Seller's obligations under, Pension Plans, Employee Benefit Plans and Benefit
Arrangements (excluding stock option and stock purchase plans) of Seller listed
on Schedule 5.21(a), or Buyer shall include the employees covered by such
Pension Plans, Employee Benefit Plans and Benefit Arrangements in comparable
plans to be maintained by Buyer (collectively, the "Buyer Plans"), in either
case in such manner as Seller shall have no obligation or liability with respect
thereto after the Closing Date except to the extent provided herein; provided
that with respect to Seller's Pension Plans obligations, Buyer shall assume up
to (but not exceeding) $380,000 in Unfunded Pension Plan Obligations (as of the
Closing Date Balance Sheet). For purposes of this Section 8.1(f), "Unfunded
Pension Plan Obligations" means, the present value of all vested accrued
benefits under all of
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Seller's Pension Plans over the current value of the assets of such Pension
Plans allocable to such accrued benefits, calculated in accordance with the
assumptions set forth in Schedule 5.21(b)(viii).
(g) On the Closing Date, Seller shall transfer (or shall cause the
trustees under Seller's Pension Plans to transfer)to the applicable Buyer
qualified trusts all assets of Seller's Pension Plans subject to the liabilities
of Seller's Pension Plans.
(h) Seller's employees shall continue to be covered by Seller
through the Closing Date under those Employee Benefit Plans and Benefit
Arrangements in which they participated prior to the Closing Date. Buyer shall
be liable for the payment of all benefits accrued by Seller's employees prior to
the Closing Date under any Pension Plan (regardless of the extent to which such
benefits are funded as of such date, subject to the provisions contained in
Sections 8.1(f) and (i)) and expenses incurred by such employees or their
covered dependents on or prior to the Closing Date under any Employee Benefit
Plan which is an employee welfare benefit plan as defined in Section 3(l) of
ERISA, regardless of when demand for payment of such benefits is asserted.
(i) All medical claims of Transferred Employees and his/her
dependents relating to claims incurred for services rendered or treatments
provided prior to Closing shall be administered through, and satisfied by
payments made under, Seller's current medical plan (to the extent of the
coverage provided). All medical claims of Transferred Employees relating to
claims incurred for services rendered or treatments provided after the Closing
or in excess of Seller's medical plan coverage shall be assumed by Buyer.
(j) In addition to the foregoing, (i) Buyer shall assume, and shall
pay, perform, and discharge pursuant to the terms thereof, the existing
severance payment agreement with Seller's President as described on Schedule
8.1(j), or provide to such Person, a severance payment agreement in the form
provided in Exhibit L-1 attached hereto, and (ii) Buyer shall assume, and shall
pay, perform and discharge pursuant to the terms thereof, the existing severance
payment arrangement with the management employees of Seller listed on Schedule
3.2(h) or provide to such employees a severance payment arrangement in the form
provided in Exhibit L-2 attached hereto.
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ARTICLE IX
INDEMNIFICATION
The parties hereto agree to indemnify, defend and hold each other
harmless as follows:
9.1 Indemnification by Seller. Subject to the provisions of Section
9.4, Seller shall defend, indemnify and hold Buyer and its Affiliates and the
directors, officers and employees of Buyer and its Affiliates (collectively, the
"Buyer Related Parties") harmless from and against all claims and charges paid,
and the cost of defending any claims and charges, losses and damages incurred or
realized, lost profits, business interruption costs, fines and penalties paid,
expenses paid (including reasonable attorneys' fees), other costs paid, amounts
paid in settlement, judgments and other liabilities paid (collectively, the
"Seller Liabilities") that they may suffer, sustain or incur or become subject
to, arising out of, based upon, or in connection with any of the following:
(a) any misrepresentation or breach or violation of the
representations and warranties of Seller, or any failure to perform the
covenants or agreements of Seller, as such representations, warranties,
covenants and agreements are set forth in this Agreement, the Schedules annexed
hereto or any other agreement, document or certificate delivered to Buyer by or
on behalf of Seller pursuant to this Agreement;
(b) any Excluded Liability other than an Off-Site Claim of
Environmental Liability;
(c) any liability or obligation relating to, resulting from or
arising from, directly or indirectly, any Claim of Environmental Liability and
any Off-Site Claim of Environmental Liability;
(d) the failure of Seller to comply with WARN to the extent provided
in Section 8.1; and
(e) any actions, suits, proceedings or demands in connection with
the foregoing or the enforcement of Buyer's rights thereunder.
9.2 Indemnification by Buyer. Buyer shall defend, indemnify and hold
Seller and its Affiliates and the directors, officers and employees of Seller
and its Affiliates harmless from and against all claims and charges paid, and
the cost of defending any claims and charges, losses and damages realized, lost
profits, business interruption costs, fines and penalties paid, expenses
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paid (including reasonable attorneys' fees), other costs paid, amounts paid in
settlement, judgments and other liabilities paid (collectively, the "Buyer
Liabilities") that they may suffer, sustain or incur or become subject to,
arising out of, based upon, or in connection with any of the following:
(a) any misrepresentation or breach or violation of the
representations and warranties of Buyer, or any failure to perform the covenants
and agreements of Buyer, as such representations, warranties, covenants and
agreements are set forth in this Agreement, the Schedules annexed hereto and in
any other agreement, document or certificate delivered to Seller by or on behalf
of Buyer pursuant to this Agreement;
(b) any Assumed Liability; and
(c) any actions, suits, proceedings, or demands in connection with
the foregoing or the enforcement of Seller's rights under this Agreement.
9.3 Third-Party Claims.
(a) If any claim or demand is asserted against an indemnified party
by a third party with respect to any matter under the indemnities set forth in
Sections 9.1 or 9.2 (a "Third Party Claim"), the indemnified party shall
promptly give written notice and details thereof, including copies of all
pleadings and the pertinent documents, to the indemnifying party, but the
indemnifying party's obligations shall not be affected by the failure to give
such notice except to the extent that it can demonstrate that it was materially
prejudiced thereby. Within twenty (20) days of receipt of such notice, the
indemnifying party shall (i) pay the Third Party Claim either in full or upon
compromise agreed to by the indemnifying party or (ii) notify the indemnified
party that the indemnifying party disputes the Third Party Claim and intends to
defend against it, and thereafter so defend and pay any adverse final judgment
or award or settlement amount in regard thereto. Such defense shall be
controlled by the indemnifying party, and the cost of such defense shall be
borne by it, except that the indemnified party shall have the right to
participate in such defense at its own expense. The indemnifying party shall
have the right to settle or compromise any Third Party Claim of which it has
assumed the defense only upon the receipt of written consent to such settlement
or compromise from the indemnified party, which consent shall not be
unreasonably withheld or delayed; provided, however, that the indemnified party
shall not be obligated to consent to any settlement unless it involves claims
for money damages only or other relief not involving or affecting the
indemnified party, which are being paid or performed in full by other than the
indemnified party, and any such failure to consent shall not be deemed
unreasonable.
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(b) If the indemnifying party fails to take action within twenty
(20) days as set forth above, then, upon twenty (20) days notice to the
indemnifying party setting forth the details thereof, the indemnified party
shall have the right to pay, compromise or defend any Third Party Claim and to
assert the amount of any payment on the Third Party Claim plus the expense of
defense or settlement as an indemnity claim. The indemnified party shall also
have the right, exercisable in good faith and upon reasonable prior notice to
the indemnifying party, to take such action as may be reasonably necessary to
avoid a default prior to the assumption of the defense of the Third Party Claim
by the indemnifying party and any expenses incurred by so acting shall be paid
by the indemnifying party.
(c) Payment of Third Party Claims shall be made in accordance with
Section 9.3(a) or (b) above. Subject to Section 9.4, with respect to all claims
other than Third Party Claims, the indemnifying party shall promptly pay or
reimburse the indemnified party in respect of any claim or liability to which
the foregoing indemnities relate after receipt of a notice of claim (as defined
in Section 9.4(c)) from the indemnified party. In the event the indemnifying
party fails or refuses to make payment for such claims within a period of twenty
(20) days from the date of notice of claim, the indemnified party shall be
entitled to exercise all rights available pursuant to this Agreement and also
shall be entitled to receive from the indemnifying party interest on the full
amount of such claims, such interest to accrue at the maximum rate allowable by
law from and after such twentieth day until such claims are paid in full.
(d) With respect to any claim for indemnification hereunder, the
indemnified party will give to the indemnifying party and its counsel,
accountants and other representatives reasonable access, during normal business
hours and upon the giving of reasonable prior notice, to its books and records
relating to such claims, and to its employees, accountants, counsel and other
representatives, all without charge to the indemnifying party, except for
reimbursement of reasonable out-of-pocket expenses. In this regard, after the
assertion of a claim for indemnity, the indemnified party agrees to maintain any
of its books and records which may relate to the claim for indemnification
hereunder for such period of time as may be necessary to enable the indemnifying
party to resolve such claim.
9.4 Limitations on Indemnification.
(a) Except as provided in Section 9.5, no claim or claims for
indemnity pursuant to Sections 9.1(a) and (d) (and (e) to the extent applicable
thereto) shall be made unless (i) notice of such claim or claims for indemnity
is given prior to the second anniversary of the Closing Date, (ii) the aggregate
amount of
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indemnification sought for all claims under Sections 9.1(a), (d) and (e) since
the Closing Date shall exceed $100,000 (the "Threshold"), and (iii) then, only
to the extent that such aggregate amount exceeds the Threshold, but in no event
more than $4,000,000 in the aggregate for all such claims.
(b) Except as provided in Section 9.5, no claim or claims for
indemnity pursuant to Section 9.1(c) (and (e) to the extent applicable thereto)
shall be made unless (i) notice of such claim or claims for indemnity is given
prior to the fourth anniversary of the Closing Date, (ii) the aggregate amount
of indemnification sought for all claims under Sections 9.1(c) and (e) since the
Closing Date, shall exceed $250,000 (the "Environmental Threshold"), and (iii)
then, only to the extent that such aggregate amount exceeds the Environmental
Threshold, but in no event more than $4,000,000 in the aggregate for all such
claims.
(c) For purposes of this Section 9.4, "notice of claim" shall mean a
notice prepared and delivered in good faith (i) stating that the Person
furnishing the notice has determined that at the date thereof such person is, or
is more likely than not to be, entitled to indemnification under Section 9.1,
and (ii) including a detailed description of, the basis for, and the method of
calculating the amount of, the claim.
(d) Notwithstanding anything to the contrary contained in Article
IX, if the Buyer Related Parties seek any indemnification payment pursuant to
Section 9.1(a), Seller shall be entitled to an offsetting credit or payment (the
"Offset") equal to the sum of (i) the aggregate amount by which the current
liabilities accrued for on the Closing Date Balance Sheet exceeds or exceeded
the actual aggregate amount of such liabilities incurred by Buyer, plus (ii) to
the extent not reflected as a current asset on the Closing Date Balance Sheet,
the sum of (A) refunds of insurance premiums received by Buyer after the Closing
Date applicable to any period prior to the Closing Date, and (B) payments
received by Buyer after the Closing Date in respect of insurance claims made in
connection with events occurring prior to the date of this Agreement in excess
of expenses related thereto paid after the Closing Date, provided that any
insurance proceeds received by Buyer in respect of the matter described on
Schedule 9.4(d) may only be used to offset indemnification claims asserted by
Buyer in respect of the damage described therein. The Offset amount shall be
applied (i) to reduce the amount of any unpaid indemnification payment to which
the Buyer Related Parties are entitled, and (ii) the balance, if any, to the
extent of the aggregate indemnification payments previously made by Seller,
shall be paid by Buyer to Seller. To the extent the Offset exceeds the sum of
the amounts provided in the foregoing clauses (i) and (ii), such excess shall be
retained by Buyer, provided that such excess shall be applied to reduce any
indemnification payment to which the
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Buyer Related Parties are entitled pursuant to Section 9.1(c). Seller shall have
the right to determine the Offset one time as promptly as practicable following
the second anniversary of the Closing Date. In furtherance of the foregoing, if
the Buyer Related Parties seek indemnification payment against Seller pursuant
to Section 9.1(a), Seller shall have the right, following the second anniversary
of the Closing Date and during normal business hours, to review the books and
records of Buyer to determine the amount, if any, of the Offset, and Buyer shall
cooperate with Seller in connection therewith. Any disagreement between Buyer
and Seller regarding Seller's calculation of the Offset shall be resolved in the
manner provided in Section 4.2(c).
(e) The rights and obligations set forth in this Article IX will be
the exclusive rights and obligations with respect to claims under this Agreement
by or among the parties hereto.
9.5 Survival. All statements contained in this Agreement or the
Schedules annexed hereto or any document or certificate delivered pursuant to
this Agreement or in connection with the transactions contemplated hereby, shall
be deemed representations and warranties hereunder. Except as expressly set
forth in this Section 9.5, all representations, warranties of Seller hereunder
shall survive until the second anniversary of the Closing Date. Representations
and warranties, the breach of which give rise to (i) Claims of Environmental
Liability and Off-Site Claims of Environmental Liability shall survive until the
fourth anniversary of the Closing Date and (ii) Former Site Claims for
Environmental Liabilities shall survive indefinitely. The obligations of defense
and indemnity contained in this Article IX shall survive the Closing.
9.6 Suspension of Indemnification. In addition to any other remedies
Seller may have pursuant to this Agreement, upon breach by Buyer of the
covenants set forth in Sections 7.2.3(d) or (e), (A) Seller may deliver written
notice to Buyer that Buyer is in default of its obligations thereunder (provided
that any such notice is delivered prior to the second anniversary of the Closing
Date, and (B) if such default has not been cured within fifteen (15) days
following Buyer's receipt of such notice, all obligations and liabilities of
Seller to indemnify Buyer pursuant to any provision of Article IX shall be
automatically suspended. In the event that, within such 15-day period, Buyer
cures a default giving rise to the suspension hereunder and furnishes to Seller
a certificate of Buyer's Chief Financial Officer that the default has been
cured, Seller's indemnification obligations shall be reinstated automatically
(and retroactively to the first date of the suspension) and Seller shall be
liable for all indemnification claims arising during the period of suspension;
provided that the period during which such suspension shall be effective shall
not be
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deemed to extend the limitation periods provided in Sections 9.4(a) or (b).
ARTICLE X
CONDITIONS TO CONSUMMATION OF TRANSACTION
10.1 Conditions to Obligations of Buyer.
The obligations of Buyer hereunder to consummate the transactions
provided for herein on the Closing Date are subject to the fulfillment, at or
prior to the Closing, of the following conditions (all or any of which may be
waived in writing in whole or in part by Buyer in its sole discretion):
10.1.1 Representations and Warranties, Covenants.
(a) The representations and warranties of Seller herein contained
shall be true and correct in all material respects as of the date hereof and as
of the Closing Date as though made on and as of such date, (b) Seller shall have
performed and complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Seller
at or prior to Closing, and (c) Seller shall have executed and delivered to
Buyer a certificate of an authorized officer of Seller, dated the Closing Date,
substantially in the form of Exhibit J attached hereto, to the effect that the
conditions set forth in Sections 10.1.1 (a) and (b) have been satisfied.
10.1.2 Title Insurance. Buyer shall have been issued at Buyer's sole
expense, in form and substance reasonably satisfactory to Buyer, title insurance
policies in respect of the Owned Real Property (with the standard exceptions
omitted and subject only to the Real Property Permitted Exceptions and to the
standard "exclusions" to coverage in the standard printed form ALTA Owner's
policy), including such endorsements as Buyer shall reasonably require
including, without limitation, endorsements eliminating the general survey
exception and mechanics lien exception and contiguity endorsements, where
appropriate, to the extent the Owned Real Property is comprised of more than one
parcel (the "Satisfactory Title Insurance"). If Buyer cannot obtain the
Satisfactory Title Insurance at standard rates, then Buyer's sole right with
respect thereto shall be to terminate this Agreement, without any liability of
Seller to Buyer, or to accept such insurance as may be issued. Buyer shall not,
however, terminate this Agreement if the inability to obtain the Satisfactory
Title Insurance results from the inclusion therein of exceptions in addition to
the Real Property Permitted Exceptions to the extent said additional exceptions
are minor in nature and would not
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materially adversely affect the operation of the business located on the Real
Property.
10.1.3 Consents and Approvals. Notwithstanding anything to the
contrary contained in this Agreement, including, without limitation, the
provisions of Sections 2.4 and 7.1.7(b), all Consents required for the
assignment of Seller's Leases, all Certificates of Occupancy, all material
Consents to or from any Governmental Authority or any other Person necessary to
permit Seller to perform Seller's obligations under this Agreement, and all
documents and agreements to be executed and delivered by Buyer in connection
herewith and to consummate the transactions contemplated hereby and thereby and
necessary to enable Buyer to conduct the Business in the manner in which it is
presently conducted by Seller, shall have been duly obtained, made or given and
shall be in full force and effect for the benefit of Buyer, including, without
limitation, those listed on Schedules 5.5 and 6.3, unless such Consents are
listed on Schedule 10.1.3. No Consents shall impose any material adverse
conditions or restrictions on Buyer which exceed those currently in effect;
provided, however, that if any such Consent or Consents impose materially
adverse conditions or restrictions on Buyer which exceed those currently in
effect, Buyer may terminate this Agreement, and Seller shall have no obligation
or liability to Buyer pursuant to this Agreement or any other Acquisition
Document. At or before the Closing, the Liens (other than Real Property
Permitted Exceptions and Personal Property Permitted Exceptions) listed on
Schedule 5.11 shall have been released, and the Indebtedness described on such
Schedule shall have been discharged, on terms reasonably satisfactory to Buyer.
10.1.4 Seller's Documents. Seller shall have caused to be delivered
to Buyer, at or before the Closing, the following: (a) good standing
certificates issued by the appropriate official of the state of incorporation of
Seller and in the State of North Carolina, (b) a copy of the Certificate of
Incorporation and By-Laws of Seller, together with a certificate of the
secretary of Seller, dated as of the Closing Date, certifying as to the accuracy
and completeness of such corporate documents, (c) certified copies of
resolutions duly adopted by the board of directors and stockholder of Seller
authorizing the execution, delivery and performance of this Agreement and of all
other documents and agreements to be executed and delivered in connection
herewith and the consummation of the transactions contemplated hereby and
thereby, (d) such incumbency certificates relating to the officers of Seller as
Buyer shall reasonably request, (e) executed copies of this Agreement, the other
Acquisition Documents and the other agreements and documents required to be
delivered in connection herewith or therewith, (f) Estoppel Certificates, in the
form of Exhibit K or such other form as the Lessor is required to deliver,
executed by the Lessor under the West Manville Street, Compton,
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California lease (Seller hereby agreeing to use good faith efforts to obtain
estoppel certificates from the Lessors under the Artesia Boulevard, Compton,
California Lease and the Atlanta Lease referenced in Schedule 5.12(b), (g) the
original Leases and originals of all amendments, modifications and guarantees
relating thereto or, if not available, then certified copies thereof, (h) the
original certificates of occupancy for the Owned and, to the extent available to
Seller, the Leased Real Property, (i) the documents referred in Section 2.3(a)
and (c), and (j) the assignment of Right of First Refusal Agreement in the form
attached hereto as Exhibit I.
10.1.5 No Adverse Proceedings. No action, suit, proceeding or
investigation by or before any Governmental Authority shall have been commenced
or threatened seeking to restrain, prevent, enjoin or change the transactions
contemplated hereby or questioning the validity or legality of any of such
transactions or seeking damages in connection with any of such transactions.
10.1.6 Intentionally Omitted
10.1.7 HSR Act. The requirements of the HSR Act and any similar
antitrust law that is applicable to the transactions contemplated hereby shall
have been satisfied and the waiting period thereunder shall have expired or been
terminated.
10.1.8 Records. Seller shall have delivered to Buyer all original
agreements, documents, plans, reports, books, records and files (collectively,
"Records") in their possession relating, directly or indirectly, to the
Purchased Assets or to the conduct of the Business (excluding those related to
Excluded Assets and Excluded Liabilities) not then in the possession of Buyer,
provided that Seller may retain any Tax returns, reports or forms, and Buyer
shall be provided with copies of such returns, reports or forms only to the
extent that they relate to the Business.
10.1.9 Closing Statements. Seller shall have delivered to Buyer an
officer's certificate setting forth the amount of the Closing Date IRB
Obligations, together with a copy of the IRB payoff letters.
10.1.10 FIRPTA Certification. Seller shall have delivered to Buyer
the appropriate certification that discharges Buyer from the withholding
obligation set forth in Section 1445 of the Code.
10.1.11 Employment Agreement. Each of the parties listed on Schedule
10.1.11 shall have delivered an executed employment agreement to Buyer in the
Forms of Exhibits L-1 and L-2 hereto.
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10.1.12 Parent Agreements. Parent shall have delivered the executed
Parent Agreements to Buyer.
10.1.13 Other Documentation. Seller shall have executed and
delivered such other documents and instruments as Buyer shall have reasonably
requested as to (i) the accuracy and validity of or compliance with all
representations, warranties and covenants made by Seller in this Agreement and
the other documents and agreements contemplated hereby, (ii) the satisfaction of
all conditions contained herein or therein and (iii) all other matters
pertaining hereto and thereto.
10.2 Conditions to Obligations of Seller.
The obligations of Seller to consummate the transactions provided
for herein on the Closing Date are subject to the fulfillment, at or prior to
the Closing, of each of the following conditions (all or any of which may be
waived in writing in whole or in part by Seller in its sole discretion):
10.2.1 Representations and Warranties; Covenants.
(a) The representations and warranties of Buyer herein contained
shall be true and correct in all material respects as of the date hereof and as
of the Closing Date as though made on and as of such date, (b) Buyer shall have
performed and complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by Buyer
at or prior to Closing, and (c) Buyer shall have delivered to Seller a
certificate of an authorized officer of Buyer, dated the Closing Date, in the
form of Exhibit M attached hereto, to the effect that the conditions set forth
in Sections 10.2.1 (a) and (b) have been satisfied.
10.2.2 Payment of Purchase Price. Buyer shall have paid to Seller
the Cash Purchase Price due at the Closing in the manner described in Section
4.1(b) hereof, and shall have assumed the Assumed Liabilities by virtue of its
execution of this Agreement.
10.2.3 Buyer's Documents. Buyer shall have caused to be delivered to
Seller, at or before the Closing, the following: (a) good standing certificate
issued by the appropriate officials of the State of Delaware with respect to
Buyer, (b) Buyer's certificate of incorporation and by-laws, together with a
certificate of the Secretary or Assistant Secretary of Buyer, dated as of the
Closing Date, certifying as to the accuracy and completeness of such corporate
documents, (c) certified copies of resolutions duly adopted by the board of
directors of Buyer authorizing the execution, delivery and performance of this
Agreement and of all other documents and agreements to be executed
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and delivered by Buyer in connection herewith and the consummation of the
transactions contemplated hereby and thereby, (d) such incumbency certificates
relating to the officers of Buyer as Seller shall reasonably request, (e)
executed copies of this Agreement, the other Acquisition Documents and the other
agreements and documents required to be delivered in connection herewith or
therewith, and (f) a guaranty by Building Materials Corporation of America of
Seller's obligations and liabilities under the lease for premises located at
4501 Circle 75 Parkway, Atlanta, Georgia, as amended, in the form attached to
the Fifth Amendment to Lease between the landlord and Seller dated May 13, 1998.
10.2.4 No Adverse Proceedings. No action, suit or proceeding or
investigation by or before any Governmental Authority shall have been commenced
or threatened seeking to restrain, prevent, enjoin or change the transactions
contemplated hereunder or questioning the validity or legality of any of such
transactions or seeking damages in connection with any of such transactions.
10.2.5 Intentionally Omitted
10.2.6 HSR Act. The requirements of the HSR Act and any similar
antitrust law that is applicable to the transactions contemplated hereby shall
have been satisfied and the waiting period thereunder shall have expired or been
terminated.
10.2.7 Other Documentation. Buyer shall have executed and delivered
such other documents and instruments as Seller shall have reasonably requested
as to (i) the accuracy and validity of or compliance with all representations,
warranties and covenants made by Buyer in this Agreement and the other documents
and agreements contemplated hereby, (ii) the satisfaction of all conditions
contained herein or therein and (iii) all other matters pertaining hereto and
thereto.
ARTICLE XI
TERMINATION
11.1 Termination. The Parties hereto may terminate this Agreement
prior to the Closing Date, as provided below:
(a) Seller and Buyer may terminate this Agreement by mutual written
consent;
(b) Buyer may terminate this Agreement by giving written notice to
Seller in the event Seller is in material breach, and Seller may terminate this
Agreement by giving written notice to Buyer in the event Buyer is in material
breach, of any
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representation, warranty or covenant contained in this Agreement (unless in
either case such breach is remedied within ten (10) days after delivery of
written notice thereof by the non-breaching party to the breaching party);
(c) Buyer may terminate this Agreement pursuant to Section 7.1.4(b)
if Seller furnishes supplemental or amended disclosures which are not in
compliance with (i) Section 7.1.4(a)(A) or Section 7.1.4(a)(B);
(d) Buyer may terminate this Agreement by giving written notice to
Seller if the Closing shall not have occurred on or before July 31, 1998 by
reason of the failure of any condition precedent under Section 10.1 hereof
(unless the failure results primarily from a breach by Buyer of any
representation, warranty or covenant contained in this Agreement or any
unreasonable delay, act or omission of Buyer);
(e) Seller may terminate this Agreement by giving written notice to
Buyer if the Closing shall not have occurred on or before July 31, 1998 by
reason of the failure of any condition precedent under Section 10.2 hereof
(unless the failure results primarily from a breach by Seller of any
representation, warranty or covenant contained in this Agreement or any
unreasonable delay, act or omission of Seller).
(f) Seller may terminate this Agreement without obligation or
liability to Buyer, other than pursuant to Section 13.6, if Parent or Seller
shall determine, in its good faith judgment, that it or its respective Board of
Directors is required to pursue an Acquisition Transaction in order to discharge
its respective fiduciary duties under applicable law. Seller shall promptly
furnish Buyer with notice of such determination.
11.2 Effect of Termination. If either party terminates this
Agreement pursuant to Section 11.1, all obligations of Seller and Buyer
hereunder shall terminate without any liability of either to the other (except
for any liability of either for breaches of this Agreement); provided that
Section 13.6 (to the extent applicable to termination pursuant to Sections
11.1(b), (c), (d) or (f)) and the confidentiality provisions of Section 13.3
shall survive such termination.
ARTICLE XII
NON-COMPETITION
12. (a) For a period of five (5) years after the Closing Date,
Seller and its Affiliates (excluding Transferred Employees)
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will not by himself or itself or through any other person, firm or corporation,
directly solicit, raid, entice or induce any person who, to the best knowledge
of Seller or such Affiliate, is at the time of such solicitation or was within
twenty-four (24) months prior thereto, an employee or consultant of Seller to
become employed in any capacity by such person, firm, or corporation, and
neither Seller nor any Affiliate of Seller shall approach any such employee or
consultant for such purpose or authorize or knowingly approve the taking of such
actions by any other person;
(b) For a period of ten (10) years after the Closing Date, Seller,
Parent, and Parent's Chief Executive Officer, by ownership of securities or
otherwise (other than as a shareholder of not more than five percent (5%) of any
class of securities of any other corporation, which class of securities shall
have been registered under Section 12 of the Securities Exchange Act of 1934, as
amended), will not, directly or indirectly, engage in any business in North
America consisting of the business conducted by Buyer on the date hereof and the
Business conducted by Seller on the date hereof.
Seller acknowledges that a violation or threatened violation of any of the
provisions of this Section 12 will result in Buyer sustaining irreparable harm,
which result could not be fully redressed by the payment of damages to Buyer,
and, therefore, in addition to any other remedies which Buyer may have under
this Agreement or otherwise, Buyer shall be entitled to apply to any court of
competent jurisdiction, at law or in equity, for an injunction without the
posting of any bond or other security, enjoining or restraining Seller or any of
its Affiliates from committing or continuing any such violation, and the Seller
and any such Affiliate shall not object to any application or issuance of such
injunction. If for any reason any court of competent jurisdiction shall find any
of the provisions of this Section 12 unreasonable in duration or in geographic
scope or otherwise, the prohibitions contained herein shall be restricted to
such time and geographic areas as such court determines to be reasonable. Such
restriction shall apply only with respect to the operation of such provisions in
the particular jurisdiction in which such adjudication is made.
ARTICLE XIII
ADDITIONAL COVENANTS
13.1 Bulk Sales Laws. Seller and Buyer agree to waive compliance in
all respects with the requirements of the bulk sales or bulk transfer laws of
any jurisdiction which may be applicable to the transactions contemplated by
this Agreement. Seller hereby agrees to indemnify and hold Buyer harmless from
and against any
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and all claims, losses, damages, costs, expenses or liabilities which Buyer may
incur or be subjected to or which may be asserted against Buyer resulting from
the failure to comply in any respect with the requirements of applicable bulk
sales or bulk transfer laws, but only arising out of Seller's failure to pay or
perform the Excluded Liabilities. Buyer hereby agrees to indemnify and hold
Seller harmless from and against any and all claims, losses, damages, costs,
expenses or liabilities which Seller may incur or be subjected to or which may
be asserted against Seller resulting from the failure to comply in any respect
with the requirements of applicable bulk sales or bulk transfer laws, but only
arising out of Buyer's failure to pay or perform the Assumed Liabilities.
13.2 Certain Tax and Regulatory Matters.
(a) Seller shall correctly prepare or cause to be correctly prepared
and timely file or cause to be timely filed all tax returns that are required to
be filed respecting the Business for all taxable periods ending on or before the
Closing Date in respect of Income Taxes, and Buyer shall prepare or cause to be
prepared and shall furnish to Seller for timely filing all tax returns in
respect of all other Taxes that are required to be filed respecting the Business
for all periods ending on or before the Closing Date.
(b) Seller shall pay or cause to be paid and shall be liable for all
Income Taxes due and payable, and shall be entitled to receive all refunds
thereof, with respect to the Business for all periods ending on or before the
Closing Date. Buyer shall pay and cause to be paid and shall be liable for all
other Taxes due and payable, and shall be entitled to receive all refunds
thereof, with respect to the Business for the period prior to and after the
Closing Date, and Buyer shall pay and cause to be paid and shall be liable for
all taxes in respect of income with respect to the Business for the period
beginning with the Closing Date.
(c) At Buyer's option, Buyer may elect treatment as a successor
employer, as defined in Section 3121(a)(1) of the Internal Revenue Code of 1986,
and if it makes this election, it shall comply with the alternative procedures
set forth in Section 5 of Rev. Proc. 96-60, 1996-2 CB 399. Seller agrees to
provide the required approval and assistance to enable Buyer to comply with this
procedure were Buyer to make such election. Buyer shall notify Seller within
thirty (30) days after the Closing Date as to whether it will make this
election.
(d) After the Closing Date and until the expiration of all relevant
statutes of limitation (including extensions thereof), upon reasonable written
notice, Seller and Buyer agree to furnish or cause to be furnished to the other
and the other's representatives, employees, counsel and accountants, such access
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(during normal business hours), information (including records pertinent to
Seller in possession of either Seller or Buyer) and assistance relating to the
Business and Seller as are reasonably necessary for financial reporting,
regulatory compliance and accounting matters, the preparation and filing of any
Tax returns, reports or forms or the defense of any Tax claim or assessment;
provided, however, that such access does not unreasonably disrupt the normal
business operations of the party giving such access and information.
13.3 Confidentiality. Except as required by law, prior to and
following the Closing, Seller shall not (and shall cause its Affiliates not to)
disclose or use any information concerning the Business ("Business
Information"), whether or not such information is confidential, except that
Seller and any such Affiliate may include such information concerning the
transactions contemplated hereby, and their effects upon Seller or any such
Affiliates as may be required in Tax returns and regulatory and administrative
filings required of Seller and Affiliates, or by law, or under legal compulsion,
or in connection with the Litigation, and provide such notification as may be
required concerning this Agreement and the transaction contemplated hereby to
any insurance carrier or persons having contracts with, or doing business with,
Seller. Except to the extent permitted by this Section 13.3, if Seller becomes
legally compelled to disclose all or any part of the Business Information,
whether by deposition, interrogatory, request for documents, subpoena, civil
investigative demand or similar process, or otherwise, Seller shall use its
reasonable best efforts to notify Buyer in advance of such required disclosure
so that Buyer may seek a protective order or other similar remedy. If such
protective order or other similar remedy is not obtained, Seller shall use its
reasonable best efforts to disclose only that portion of the Business
Information that it is legally required to disclose, based upon advice of
counsel, and shall use its reasonable best efforts to obtain confidential
treatment of the Business Information disclosed.
13.4 Fees and Expenses. Whether or not the transactions contemplated
herein are consummated, each of parties hereto shall be solely liable for the
fees and expenses incurred by such party's attorneys, accountants and other
representatives in connection with the preparation of this Agreement, the
documents deliverable hereunder, any investigation or examination authorized
herein. Buyer shall be responsible to pay all Taxes imposed on the transfers
contemplated by this Agreement; provided that, Seller shall reimburse Buyer,
upon demand, for up to $60,000 of such Taxes paid by Buyer.
13.5 Storage. Within sixty (60) days after the Closing Date, Seller
shall remove from the Burgaw, North Carolina manufacturing facility of Seller
all records of Seller pertaining
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to White Metal Rolling and Stamping Corp. as are stored thereat on the date
hereof.
13.6 Break-up Fee. Except as otherwise provided in this Agreement,
if the transactions contemplated by this Agreement are not consummated and on or
before May 31, 1999 an Acquisition Transaction occurs (or there is a binding
agreement to consummate an Acquisition Transaction) for consideration in excess
of the Purchase Price, Seller shall, upon receipt from Buyer of an invoice,
become immediately liable to Buyer for and shall pay to Buyer $1,250,000 (the
"Breakup Fee"). The Break-up Fee shall be paid to Buyer in immediately available
funds as a condition to, and upon, the closing of such Acquisition Transaction
or at any time thereafter upon Buyer's giving written notice to Seller that the
Break-up Fee is due. Payment of the Break-up Fee shall be Buyer's sole and
exclusive remedy in the event an Acquisition Transaction occurs. No Break-Up Fee
shall be payable if (i) this Agreement is terminated pursuant to Article XI
(other than pursuant to Sections 11.1(b), (c)(i), (d) or (f)) or (ii) Section
10.1.3 or (iii) the FTC or the Antitrust Division shall determine that the
transaction contemplated by this Agreement may violate the antitrust laws.
13.7 Disclosure and Schedules. Buyer and Seller acknowledge and
agree that the Schedules annexed to this Agreement or otherwise delivered to
Buyer (the "Disclosure Information") constitute exceptions, modifications,
limitations or other qualifications to the representations, warranties,
covenants and agreements of Seller contained in this Agreement or the other
Acquisition Documents, to which the Schedules relate and are incorporated
herein.
ARTICLE XIV
MISCELLANEOUS
14.1 Notices. All notices and other communications hereunder shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, telegram, telex, facsimile or other
standard form of telecommunication, or by registered or certified post-paid
mail, return receipt requested, and addressed as follows, or to such other
address as any party may notify the other in accordance with provision hereof:
To Buyer: BMCA Key Acquisition Corp.
1361 Alps Road
Wayne, NJ 07470
Attention: President
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with a copy to:
To Seller: Leslie-Locke, Inc.
c/o Leslie Building Products, Inc.
200 Mamaroneck Avenue
White Plains, NY 10601
Attention: President
with a copy to: Harvey F. Milman, Esq.
Gilbert, Segall and Young LLP
430 Park Avenue
New York, NY 10022
14.2 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of Seller and Buyer and their respective successors and
assigns. This Agreement shall not be assignable by either party without the
prior written consent of the other party.
14.3 No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns, and the persons entitled to
indemnification as provided in Article IX.
14.4 Governing Law. This Agreement shall be governed by the internal
laws of the State of New York without giving effect to principles of conflicts
of law.
14.5 Consent to Jurisdiction. Each party hereto hereby irrevocably
submits to the exclusive personal and subject matter jurisdiction of the United
States District Court for the Southern District of New York and any court of the
State of New York located in New York City over any suit, action or proceeding
arising out of or relating to this Agreement. Each party hereby irrevocably
waives to the fullest extent permitted by law, (a) the right to trial by jury;
(b) any objection that they may now or hereafter have to the venue of any such
suit, action or proceeding brought in any such court; and (c) any claim that any
such suit, action or proceeding has been brought in an inconvenient forum. Final
judgement in any suit, action or proceeding brought in any such court shall be
conclusive and binding upon each party duly served with process therein and may
be enforced in the courts of the jurisdiction of which either party or any of
their property is subject, by a suit upon such judgement.
14.6 Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject
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matter hereof and there are no terms other than contained herein; this Agreement
cannot be changed or terminated orally; no waiver of any breach of any provision
of this Agreement shall be deemed a waiver of a breach of a similar or
dissimilar provision at the same time or any prior or subsequent time or of the
provision itself.
14.7 Severability. In the event that any one or more of the
provisions of this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement and this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had not been
contained herein.
14.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which shall be
deemed to be one and the same instrument.
14.9 Headings. The headings of this Agreement are for convenience of
reference only and shall not affect in any manner any of the terms and
conditions hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
BMCA KEY ACQUISITION CORP.
By:______________________________________
Title:___________________________________
LESLIE-LOCKE, INC.
By:______________________________________
Title: President
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SCHEDULES TO REVISED ASSET PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
SCHEDULE 2.1(g) - NON-TRANSFERRABLE LEASES and NON-TRANSFERRABLE
GOVERNMENTAL PERMITS
SCHEDULE 2.1(o) - TRADEMARK AND TRADENAMES
SCHEDULE 2.2(b) - NOTES RECEIVABLE RETAINED BY SELLER
SCHEDULE 3.1 - ASSUMED LIABILITIES
SCHEDULE 3.2(h) - OBLIGATIONS TO AFFILIATES
SCHEDULE 3.2(i) - OTHER EXCLUDED LIABILITIES
SCHEDULE 4.3 - ALLOCATION OF PURCHASE PRICE
SCHEDULE 5.2(a) - STATES WHERE QUALIFIED and NAMES USED
SCHEDULE 5.2(b) - CERTIFICATE OF INCORPORATION and BY-LAWS
SCHEDULE 5.2(c) - SUBSIDIARIES
SCHEDULE 5.5 - CONSENTS
SCHEDULE 5.6 - FINANCIAL STATEMENTS
SCHEDULE 5.9 - MATERIAL CHANGES OR EVENTS
SCHEDULE 5.9(h) - MATERIAL CHANGES IN COMPENSATION
SCHEDULE 5.9(q) - LONG TERM ASSETS DISPOSED OF SINCE BALANCE SHEET
DATE
SCHEDULE 5.10(b)- AFFILIATED GROUP
SCHEDULE 5.10(f) - TAX LITIGATION
<PAGE>
SCHEDULE 5.11 - LIENS
SCHEDULE 5.12(a) - OWNED REAL PROPERTY
SCHEDULE 5.12(b) - LEASES
SCHEDULE 5.13 - OFFSETS TO ACCOUNTS RECEIVABLE
SCHEDULE 5.14 - LOCATIONS OF INVENTORY
SCHEDULE 5.15 - MACHINERY and EQUIPMENT
SCHEDULE 5.16 - CONTRACTS
SCHEDULE 5.17 - LITIGATION
SCHEDULE 5.18 - MATERIAL NON-COMPLIANCE WITH LAWS
SCHEDULE 5.19 - LICENSES, PERMITS, and NON-TRANSFERRABLE APPROVALS,
REFUNDS and RESERVES
SCHEDULE 5.20(a) - SELLER'S 1997 and 1998 PAYROLL REGISTERS
SCHEDULE 5.20(b) - LABOR AGREEMENTS, GRIEVANCES
SCHEDULE 5.21(a) - EMPLOYEE BENEFIT PLANS and BENEFIT ARRANGEMENTS
SCHEDULE 5.21(b) - ERISA EVENTS
SCHEDULE 5.21(b)(iv) - CLAIMS REGARDING EMPLOYEE BENEFIT PLANS
SCHEDULE 5.21(b)(vi) - MULTI-EMPLOYER PLANS, and FUNDING DEFICIENCIES
SCHEDULE 5.21(b)(ix) - FUNDING DEFICIENCY
SCHEDULE 5.22 - ENVIRONMENTAL MATTERS
SCHEDULE 5.22(a) - REQUIRED ENVIRONMENTAL PERMITS NOT OBTAINED BY
SELLER
- 2 -
<PAGE>
SCHEDULE 5.22(b) - RELEASES OF HAZARDOUS SUBSTANCES and NOTIFICATIONS
OF RELEASES
SCHEDULE 5.22(c) - NON-COMPLIANCE WITH ENVIRONMENTAL LAWS OR PERMITS
and LOCAL CODES and REGULATIONS
SCHEDULE 5.22(d) - ENVIRONMENTAL CONDITIONS, MISUSE OF HAZARDOUS
SUBSTANCES
SCHEDULE 5.22(f) - OSHA CLAIMS
SCHEDULE 5.23(a) - OWNED INTELLECTUAL PROPERTY
SCHEDULE 5.23(d) - ROYALTIES
SCHEDULE 5.23(f) - CONTRACTUAL RESTRICTIONS OR LEGAL LIMITATIONS
RELATING TO USE OF NAMES
SCHEDULE 5.24 - ALL INSURANCE POLICIES and POLICIES WHICH ARE NON-
OCCURRENCE
SCHEDULE 5.25 - CATEGORIES OF EXISTING PRODUCTS
SCHEDULE 5.26(a) - PRODUCT WARRANTIES and GUARANTEES
SCHEDULE 5.26(b) - PRODUCT WARRANTY CLAIMS
SCHEDULE 5.27 - CUSTOMERS and SUPPLIERS, ETC. OVER $50,000
SCHEDULE 5.27(b) - CHANGES OF CUSTOMERS and SUPPLIERS
SCHEDULE 5.28 - ALL AFFILIATED TRANSACTIONS
SCHEDULE 6.2 - BUYER'S CHARTER DOCUMENTS
SCHEDULE 6.3 - BUYER'S GOVERNMENTAL APPROVALS
SCHEDULE 7.1.1(d) - LONG TERM ASSETS BOUGHT OR SOLD DURING INTERIM
PERIOD
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<PAGE>
SCHEDULE 7.1.1(i) - COMPENSATION INCREASES
SCHEDULE 7.1.3 - INSURANCE TO BE KEPT IN EFFECT
SCHEDULE 8.1(h) - SEVERANCE AGREEMENT
SCHEDULE 9 - CURRENT and FORMER LOCATIONS
SCHEDULE 10.1.3 - CONSENTS NECESSARY FOR CLOSING
SCHEDULE 10.1.12 - PERSONS ENTERING INTO EMPLOYMENT AGREEMENTS
SCHEDULE 11 - REAL PROPERTY PERMITTED EXCEPTIONS
- 4 -
FIRST ESCROW AGREEMENT
FIRST ESCROW AGREEMENT (this"Agreement"), dated this 18th day of
June, 1998, by and among BMCA Key Acquisition Corp., a Delaware corporation (the
"Buyer"), on its own behalf and on behalf of the other Buyer Related Parties (as
defined in the Asset Purchase Agreement referred to below) and Leslie-Locke,
Inc., a Delaware corporation (the "Seller") and The Chase Manhattan Bank (the
"Escrow Agent" and together with the Buyer and the Seller, the "Parties").
W I T N E S S E T H:
WHEREAS, the Buyer and the Seller have entered into an Asset
Purchase Agreement, dated May 26, 1998 (the "Asset Purchase Agreement";
capitalized terms used herein without definition having the respective meanings
ascribed to them in the Asset Purchase Agreement), providing for the sale by the
Seller to the Buyer of substantially all of the assets of the Seller;
WHEREAS, pursuant to the terms of the Asset Purchase Agreement, the
Seller is obligated to deposit an aggregate of $4,000,000 of the Cash Purchase
Price (less withdrawals or charges under sections 2 and 4 hereof, and plus any
earnings from investment of the Escrow Deposit remaining in the escrow account
in accordance with section 3, the "Escrow Deposit") with the Escrow Agent;
WHEREAS, the Seller is willing to deposit the $4,000,000 and the
Escrow Agent is willing to hold the Escrow Deposit upon the terms and conditions
specified herein; and
WHEREAS, it is a condition precedent to the closing of the Asset
Purchase Agreement that the Buyer and the Seller enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived herefrom and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Deposit into Escrow. On the date hereof, the Seller shall deposit $4,000,000
with the Escrow Agent by transferring funds to: The Chase Manhattan Bank, Escrow
Exigency Account No. 967006242, Attention: Escrow Administration, ABA No.
021000021, Reference: Leslie-Locke.
<PAGE>
2. Release of Escrow Deposit.
2.1 Release in Absence of Notification. On the date that is two
years from the date of this Escrow Agreement (the "Escrow Release Date"), the
Escrow Agent shall release the Escrow Deposit and deliver to the Seller such
funds as remain of the Escrow Deposit unless the Buyer shall have delivered to
the Escrow Agent a Notice of Claim under section 2.2 which has not been resolved
as of the Escrow Release Date pursuant to this section 2.
2.2 Release Upon Undisputed Claim. If the Buyer, in good faith,
prepares and delivers to the Escrow Agent and to the Seller prior to the Escrow
Release Date one or more notices (each a "Notice of Claim") (i) stating that the
Buyer has determined that at the date thereof, it or another Buyer Related Party
is, or is more likely than not to be, entitled to indemnification under Section
9.1 of the Asset Purchase Agreement in accordance with the terms and conditions
of Article IX of the Asset Purchase Agreement (collectively, the
"Indemnification Provisions") and (ii) including a detailed description of the
basis for, and the method of calculating, either (x) the amount to which the
Buyer is entitled in respect thereof (the "Claim Amount"), or (y) the amount to
which the Buyer in good faith determines it is more likely than not thereafter
to be entitled, which amount cannot in good faith be definitively determined at
the time of the notice (the "Contingent Claim Amount"), in either case under the
Indemnification Provisions, the Escrow Agent shall in any such case retain the
Claim Amount or Contingent Claim Amount, and shall pay such amount as provided
in this section 2. If the Seller shall not, within 20 days after its receipt of
a Notice of Claim specifying a Claim Amount (the expiration of such 20 day
period being herein called the "Return Date"), have notified the Escrow Agent
and the Buyer of Seller's intent to contest the merits or amount of such Notice
of Claim (a "Notice of Objection"), the Escrow Agent shall, within five days
after the Return Date, deliver to the Buyer from the Escrow Deposit the lesser
of the Escrow Deposit and the Claim Amount. Any failure of the Seller to
dispute, object or otherwise respond to any Notice of Claim specifying a
Contingent Claim Amount shall not limit or affect the Seller's right to dispute
or object to any Determination Notice (as defined in Section 2.4) with respect
thereto. Notices of Claim specifying a Contingent Claim Amount shall be subject
to Section 2.4 hereof.
2.3 Distribution; Undetermined Claim. If, on the later of the Escrow
Release Date and any Return Date, there is outstanding (a) a Notice of Claim
(which was delivered prior to the Escrow Release Date) and a Notice of Objection
responding to such Notice of Claim, or (b) a Notice of Claim (which was
delivered prior to the Escrow Release Date) specifying a Contingent Claim
Amount, the Escrow Agent shall retain that portion of the Escrow Deposit equal
to the Claim Amount or the Contingent Claim Amount or both, as the case may be,
subject (in each case to the extent applicable) to Sections 2.4 and 2.5 hereof,
and shall distribute to the Seller the remaining portion, if any, of the Escrow
Deposit. In the case of a Notice of Claim specifying a Claim Amount, any amount
retained in accordance with the preceding sentence shall be distributed when the
Notice of Claim has been resolved as provided in Section 2.5 hereof, unless the
Buyer and the Seller acting jointly shall otherwise direct the Escrow Agent to
distribute such amount. Any termination will not affect the Buyer's right to
receive any amount from the Escrow Deposit to which the Buyer has become
entitled on or prior to the Escrow Release Date.
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2.4 Subsequent Determination. If the Buyer shall have submitted a
Notice of Claim specifying a Contingent Claim Amount prior to the Escrow Release
Date, the Buyer shall promptly determine the actual amount of the
indemnification payment to which it claims to be entitled in respect of such
claim (the "Deferred Claim Amount") and deliver to the Escrow Agent and the
Seller a notice setting forth the Deferred Claim Amount, including a detailed
description of the method of calculating such Deferred Claim Amount (the
"Determination Notice"). Unless, within 15 days after the receipt of such
Determination Notice (the expiration of such 15 day period being herein referred
to as the "Deferred Return Date"), the Seller shall have delivered to the Escrow
Agent and the Buyer a Notice of Objection contesting the merits or amount of
such Determination Notice, the Escrow Agent shall, within 10 days after the
Deferred Return Date, deliver to the Buyer from the Escrow Deposit the lesser of
the Escrow Deposit and the Deferred Claim Amount. If the Buyer shall not deliver
a Determination Notice with respect to any Contingent Claim Amount by the later
of the Escrow Release Date and 180 days after the date Buyer delivers a Payment
Notice with respect to such Contingent Claim Amount, the Buyer and the Seller
shall promptly thereafter refer such matter to the AAA pursuant to Section 2.5
for a determination of, and the Seller and the Buyer shall expressly instruct
the arbitrator or arbitrators to determine, the appropriate portion of the
Escrow Deposit to be retained in escrow, including, where applicable, on and
after the Escrow Release Date, with respect to such Contingent Claim Amount (the
"Estimate", it being understood that the determination of such Estimate shall be
without prejudice to the Buyer's right to assert a claim under the Asset
Purchase Agreement or the Guaranty for the actual amount of the Seller's
liability under the Indemnification Provisions in respect of such Contingent
Claim Amount in excess of such Estimate, or to the Seller's right to the
distribution in accordance herewith of the amount by which such Estimate exceeds
the actual amount of the Seller's liability under the Indemnification Provisions
in respect of such Contingent Claim Amount, and that in making such
determination, the arbitrator or arbitrators shall not be bound or limited by,
or precluded from applying, the "more likely than not" standard set forth in
Section 2.2 hereof, but shall instead apply whatever standard such arbitrator or
arbitrators deem appropriate in determining the appropriate portion of the
Escrow Deposit to be retained).
2.5 Release Upon Resolution of Claim. If a Notice of Objection shall
have been filed in respect of a Notice of Claim or Determination Notice, the
Buyer and the Seller shall have 20 days from the date of receipt by the Buyer of
such Notice of Objection, or such longer period as the Buyer and the Seller may
agree upon, within which to resolve privately such Notice of Claim or
Determination Notice. If the Parties are unable to reach a resolution within
such time period, the Notice of Claim or Determination Notice shall, at the
request of the Seller or the Buyer, be referred to three arbitrators selected
from the panel of arbitrators of the American Arbitration Association ("AAA"),
one of whom shall be chosen by the Buyer, one of whom shall be chosen by the
Seller and the third of whom shall be chosen by the two arbitrators so chosen.
If either the Buyer or the Seller shall not have designated such an arbitrator
within 20 days after submission by the AAA of the list of names of arbitrators
selected from its panel, the resolution of the contested Notice shall be made by
the arbitrator chosen by the other Party. Any such arbitration shall take place
in the State, City and County of New York. Such arbitrator or arbitrators shall
determine the amount of indemnification, if any, to which the Buyer is entitled
in accordance with the Commercial Arbitration Rules of the AAA. Upon a "Final"
(as hereinafter
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defined) resolution of a Notice of Claim or Determination Notice pursuant to
this section 2.5, the Buyer and the Seller shall promptly (and in any case
within five Business Days) notify the Escrow Agent in writing of such award and,
if any amount is awarded to Buyer, the Escrow Agent shall deliver to the Buyer
the lesser of the Escrow Deposit and the amount so awarded. If the Buyer or the
Seller shall fail or refuse promptly so to notify the Escrow Agent, the Seller
or the Buyer, as the case may be, may so notify the Escrow Agent. All costs and
expenses of arbitration under this section 2.5 shall be borne (a) if the final
resolution is in favor of the Buyer, by the Seller or (b) if the final
resolution is in favor of the Seller, by the Buyer or (c) if otherwise, as
determined by the arbitrator. For purposes hereof, an arbitor's award shall be
"Final" upon the expiration of the 90-day period following the delivery of such
award provided under New York Civil Practice Law and Rules Section 7511 (or the
time period under any applicable successor provision) for the making of an
application to vacate or modify the award.
2.6 Exclusivity. The Escrow Deposit shall constitute the sole and
exclusive source for the satisfaction of claims of the Buyer Related Parties in
respect of the Indemnification Provisions, other than in respect of (a) Excluded
Liabilities, (b) Claims of Environmental Liability, (c) Off-Site Claims of
Environmental Liability and (d) Former Site Claims of Environmental Liability,
in each case as and to the extent provided in Article IX of the Asset Purchase
Agreement. The Buyer Related Parties shall in no event be entitled to
duplicative payments for any claim under any of this Agreement, the Parent
Guaranty and the Asset Purchase Agreement. Buyer, on behalf of itself and the
other Buyer Related Parties, acknowledges and agrees that the Escrow Deposit
shall only be available to satisfy claims of the Buyer Related Parties in
respect of the Indemnification Provisions, and shall not be available to
satisfy, any other obligation now or hereafter owed by the Seller or any other
person or entity to the Buyer or any other Buyer Related Party, and the Buyer,
on behalf of itself and the other Buyer Related Parties, hereby waives and
agrees not to assert any other right with respect to, the Escrow Deposit except
as expressly provided herein.
2.7 Notices to Escrow Agent. Any notice or other communication given
by the Buyer, on the one hand, and the Seller, on the other, to the Escrow Agent
shall be concurrently given to the Seller, on the one hand, and the Buyer, on
the other. Any notice to the Escrow Agent shall indicate by what means such
notice has been sent to the Buyer or the Seller, as the case may be. If
applicable, such notice shall also indicate the Return Date.
3. Investment of the Escrow Deposit.
(a) The Escrow Agent shall invest the Escrow Deposit and
reinvest any interest thereon or proceeds therefrom in any of the following, as
directed by the Seller: (i) any evidence of indebtedness with a maturity of 180
days or less issued directly or fully guaranteed or insured by the United States
of America or any agency or instrumentality thereof, provided that the full
faith and credit of the United States is pledged in support thereof, (ii)
certificates of deposit and bankers' acceptances with a maturity of 180 days or
less of any commercial bank organized under the laws of the United States of
America or any State thereof which has combined capital and surplus and
undivided profits of not less than $100,000,000; (iii) commercial paper and loan
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participations with a maturity of 180 days or less issued by a corporation that
is not an Affiliate (including, for the purpose of this provision, the
Non-Affiliates) of Seller organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by Standard & Poors
Corporation or at least P-1 by Moody's Investors Services, Inc. or at least an
equivalent rating category of another nationally recognized securities rating
agency; and (iv) fully collateralized repurchase agreements, having terms of 180
days or less, for government obligations of the type specified in (i) above with
a commercial bank or trust company meeting the requirements of (ii) above; (v)
Chase Vista U.S. Government Money Market Fund or (vi) in the absence of
investment instructions, Chase Vista U.S. Government Money Market Fund.
(b) The Escrow Agent shall have the right to liquidate any
investments held, in order to provide funds necessary to make required payments
under this Escrow Agreement. The Escrow Agent in its capacity as escrow agent
hereunder shall not have any liability for any loss sustained as a result of any
investment made pursuant to the instructions of the parties hereto or as a
result of any liquidation of any investment prior to its maturity or for the
failure of the parties to give the Escrow Agent instructions to invest or
reinvest the Escrow Fund or any earnings thereon.
4. General Instructions. To induce the Escrow Agent to act
hereunder, it is further agreed by the undersigned that:
(a) The Escrow Agent shall not be under any duty to give the
Escrow Deposit (which term for purposes of this section 4 includes any earnings
on and investments of the initial amount deposited pursuant to section 1 hereof)
held by it hereunder any greater degree of care than it gives its own similar
property and shall not be required to invest any funds held hereunder except as
directed in this Agreement. Funds held hereunder shall be invested in accordance
with section 3.
(b) This Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall not be bound by the provisions of any agreement
among the other Parties hereto except this Agreement.
(c) The Escrow Agent shall not be liable, except for its own
bad faith, gross negligence or willful misconduct, as determined by a court of
competent jurisdiction, and, except with respect to claims based upon such bad
faith, gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the other Parties hereto shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any successor to the Escrow
Agent) from and against any and all losses, liabilities, claims, actions,
damages and expenses, including reasonable attorneys' fees and disbursements,
arising out of and in connection with this Agreement. Anything in this agreement
to the contrary notwithstanding, in no event shall the Escrow Agent be liable
for special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action. Without limiting
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the foregoing, the Escrow Agent shall in no event be liable in connection with
its investment or reinvestment of any cash held by it hereunder in good faith,
in accordance with the terms hereof, including without limitation any liability
for any delays (not resulting from its own bad faith, gross negligence or
willful misconduct) in the investment or reinvestment of the Escrow Deposit, or
any loss of interest incident to any such delays. In the event that the Buyer or
the Seller is required to indemnify and hold harmless the Escrow Agent pursuant
to this section 5(c) or section 5(f), the Buyer or the Seller, as the case may
be, shall have the right to seek contribution from the other Parties hereto
(other than the Escrow Agent) for amounts paid or payable in respect of such
indemnity to the extent permitted by law.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, award, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity of
the service thereof. The Escrow Agent may act or refrain from acting in reliance
upon any instrument or signature believed by it to be genuine and may assume
that any person purporting to give notice or receipt or advice or make any
statement or execute any document in connection with the provisions hereof has
been duly authorized to do so. The Escrow Agent shall have no duty to verify the
propriety of any conditions imposed by this Agreement upon the Buyer, the Seller
or the Buyer Related Parties.
(e) The Escrow Agent may act pursuant to the advice of counsel
with respect to any matter relating to this Agreement and shall not be liable
for any action taken or omitted in good faith in accordance with such advice.
(f) The Escrow Agent does not have any interest in the Escrow
Deposit but is serving as escrow holder only and having only possession thereof.
The Buyer and the Seller shall, jointly and severally, pay or reimburse the
Escrow Agent upon request for any transfer taxes or other taxes (other than
income taxes) relating to the Escrow Deposit incurred in connection herewith and
shall, jointly and severally, indemnify and hold harmless the Escrow Agent from
any amounts that it is obligated to pay in the way of such taxes. As between the
Buyer and the Seller, the Buyer, on the one hand, and the Seller, on the other
hand, shall be responsible for any transfer taxes or other taxes (other than
income taxes) incurred in connection herewith in proportion to the amount of
earnings received by such Party. The Escrow Agent shall be entitled to charge
against the Escrow Deposit any transfer taxes incurred in connection herewith.
(g) The Escrow Agent shall make periodic distributions of
earnings from the Escrow Deposit to the Seller upon written request of the
Seller in such amounts certified by the Seller as being necessary for the Seller
to pay all applicable income taxes, at the maximum applicable rate imposed on
such earnings. The Escrow Agent shall file annually or otherwise as required by
applicable law all required tax information reports or forms (or other tax
returns that may be required by applicable law) reporting such earnings as being
for the Seller's tax account. Any payments of income from the Escrow Deposit
shall be subject to withholding regulations then in force with respect to United
States taxes. The Parties hereto will provide the Escrow Agent with appropriate
W-9 forms for tax identification number certification. Each party hereto, except
6
<PAGE>
the Escrow Agent shall, in the notice section of this agreement provide the
Escrow Agent with their Tax Identification Number (TIN) as assigned by the
Internal Revenue Service. All interest or other income earned under the Escrow
Agreement shall be allocated and paid as provided herein and reported by the
recipient to the Internal Revenue Service as having been so allocated and paid.
It is understood that the Escrow Agent shall be responsible for income reporting
only with respect to income earned on investment of funds which are a part of
the Escrow Deposit and is not responsible for any other reporting. This
paragraph and paragraphs (c) and (f) of this section 4 shall survive
notwithstanding termination of this Agreement or the resignation of the Escrow
Agent. Notwithstanding anything in this Agreement to the contrary, it is the
intention of the Buyer and the Seller hereto that this First Escrow Agreement
shall be treated as a "true escrow" for purposes of applicable state and federal
law and the case law thereunder.
(h) The Escrow Agent makes no representation as to the
validity, value, genuineness or the collectibility of any security or other
documents or instrument held by or delivered to it.
(i) The Escrow Agent shall not be called upon to advise any
Party as to the wisdom of selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
(j) The Escrow Agent (and any successor to the Escrow Agent)
may at any time resign as such by delivering the Escrow Deposit and all earnings
thereon to any successor to the Escrow Agent jointly designated by the other
Parties hereto in writing, or to any court of competent jurisdiction, whereupon
the Escrow Agent shall be discharged of and from any and all further obligations
arising in connection with this Agreement. The Escrow Agent shall promptly
deliver written notice of its resignation to the other Parties hereto. The
resignation of the Escrow Agent will take effect on the earlier of (i) the
appointment of a successor (including a court of competent jurisdiction) or (ii)
the day which is 30 days after the date of delivery of its written notice of
resignation to the other Parties hereto. If at that time the Escrow Agent has
not received a designation of a successor to the Escrow Agent, the Escrow
Agent's sole responsibility after that time shall be to safe-keep the Escrow
Deposit until receipt of a designation of successor to the Escrow Agent or a
joint written disposition instruction by the other parties hereto or a final
order of a court of competent jurisdiction.
(k) The Escrow Agent shall have no responsibility for the
contents of any writing of any arbitrator or third party contemplated herein as
a means to resolve disputes and may rely without any liability upon the contents
thereof.
(l) In the event of any disagreement between the Buyer and the
Seller resulting in adverse claims or demands being made in connection with the
Escrow Deposit, or in the event that the Escrow Agent in good faith is in doubt
as to what action it should take hereunder, the Escrow Agent shall be entitled
to retain the Escrow Deposit (or such part thereof as is the subject of such
disagreement) until the Escrow Agent shall have received (i) a written, Final
decision of the arbitrator or arbitrators appointed pursuant to section 2.5 (the
"Arbitrator")
7
<PAGE>
directing the delivery of all or such part of the Escrow Deposit; or (ii) a
written agreement executed by the Buyer and the Seller acting jointly directing
delivery of the Escrow Deposit or such part thereof. Any written decision
referred to in (i) above shall be accompanied by a certificate of a duly
authorized representative of the presenting Party reasonably satisfactory to the
Escrow Agent to the effect that said written decision is the decision of the
Arbitrator and is Final. The Escrow Agent shall act on such written decision of
the Arbitrator without further question.
(m) The Buyer and the Seller hereby agree to (i) pay the
Escrow Agent reasonable compensation (as payment in full) for the services to be
rendered hereunder, as described in Schedule 2 attached hereto, and (ii) pay or
reimburse the Escrow Agent upon request for all expenses, disbursements and
advances, including reasonable attorney's fees, incurred or made by it in
connection with the preparation, execution, performance, delivery modification
and termination of this Agreement. The fees, costs and expenses of the Escrow
Agent and its counsel shall be borne equally by the Buyer and the Seller. Any
fees or expenses of the Escrow Agent or its counsel which are not paid as
provided for herein may be taken from any property held by the Escrow Agent
hereunder.
(n) In the event funds transfer instructions are given (other
than in writing at the time of execution of the Agreement), whether in writing,
by telecopier or otherwise, the Escrow Agent is authorized to seek confirmation
of such instructions by telephone call-back to the person or persons designated
on Schedule 2 hereto, and the Escrow Agent may rely upon the confirmations of
anyone purporting to be the person or person so designated. The persons and
telephone numbers for call-backs may be changed only in a writing actually
received and acknowledged by the Escrow Agent. The parties to this Agreement
acknowledge that such security procedure is commercially reasonable.
(o) It is understood that the Escrow Agent and the
beneficiary's bank in any funds transfer may rely solely upon any account number
or similar identifying number provided by either of Seller or Buyer with respect
to funds to be delivered pursuant to this Agreement to the party providing such
information to identify (i) the beneficiary, (ii) the beneficiary's bank, or
(iii) an intermediary bank. The Escrow Agent may apply any of the escrowed funds
for any payment order it executes using any such identifying number, even where
its use may result in a person other than the beneficiary being paid, or the
transfer of funds to a bank other than the beneficiary's bank, or an
intermediary bank designated.
5. Choice of Law; Consent to Jurisdiction; Compliance with Law. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York without regard to the conflicts of law rules of such
state. The Buyer and the Seller hereby irrevocably submit to the jurisdiction of
any New York State or Federal court sitting in the State, City and County of New
York in any action or proceeding arising out of or relating to this Agreement,
and the Parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such a New York State or
Federal court. The Buyer, the Seller and the Escrow Agent hereby consent to and
grant any such court jurisdiction over the persons of such Parties and over the
subject matter of any such dispute and agree that delivery or
8
<PAGE>
mailing of process or other papers in connection with any such action or
proceeding in the manner provided herein below shall be valid and sufficient
service thereof, provided service so made shall be deemed completed only upon
actual receipt. Nothing contained in this Section 5 shall be deemed to affect
the right of any party to serve process in any other manner that may be
permitted under applicable law.
6. Successors and Assigns.
(a) This Agreement shall be binding upon and inure solely to
the benefit of the Parties hereto and their respective successors and permitted
assigns, and shall not be enforceable by or inure to the benefit of any third
party. No Party may assign any of its rights or obligations under this Agreement
without the written consent of the other Parties; provided, however, that the
Seller and Parent shall be free to merge with or into one another at any time,
provided that the surviving corporation of such merger shall thereafter succeed
to and be responsible for all obligations and rights of the Seller hereunder.
(b) Any corporation into which the Escrow Agent in its
individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Escrow Agreement without further act.
7. Amendments; Entire Agreement. This Agreement may only be modified
by a writing signed by all of the Parties hereto, and no waiver hereunder shall
be effective unless in a writing signed by the party to be charged. This
Agreement constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties
related to the subject matter hereof.
8. Notices. All notices, deliveries or other communications required
or permitted hereunder shall be in writing and shall be deemed received (a) upon
delivery when sent by courier, (b) one Business Day after being sent by
facsimile transmission if such transmission is concurrently confirmed by
first-class registered or certified mail, return receipt requested, postage
prepaid, and (c) three days after being mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, and in any case,
addressed as follows:
9
<PAGE>
if to the Buyer, to:
BMCA Key Acquisition Corp.
1361 Alps Road
Wayne, NJ 07570
Telecopy:
Attention: President
and to:
BMCA Key Acquisition Corp.
1361 Alps Road
Wayne, NJ 07570
Telecopy:
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Friedman, Kaplan & Seiler LLP
875 Third Avenue
New York, NY 10022
Telecopy: (212) 355-6401
Attention: Timothy J. Clark, Esq.
if to the Seller to:
Leslie-Locke, Inc.
c/o Leslie Building Products, Inc.
200 Mamaroneck Avenue
White Plains, NY 10601
Telecopy:
Attention: President
with a copy (which shall not constitute notice) to:
Gilbert, Segall and Young LLP
430 Park Avenue
New York, NY 10022
Telecopy: (212) 644-4051
Attention: Harvey F. Milman, Esq.
and, if to the Escrow Agent, to:
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<PAGE>
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Telecopy: (212) 946-8156
Attention: Escrow Administration, 15th Floor
provided, however, notice to the Escrow Agent shall not be deemed given until
such notice is actually received by the Escrow Agent at the Escrow Agent's
address given above.
9. Authorization to use a Central Securities Depository. The other
Parties hereto authorize the Escrow Agent, for any securities held hereunder, to
use the services of any United States central securities depository it deems
appropriate, including but not limited to the Depository Trust Company and the
Federal Reserve Bank Entry System. 10. Execution. Execution of this Agreement by
the Escrow Agent will constitute its acceptance of the terms hereof and will
acknowledge its receipt of the Escrow Deposit.
10. Execution. Execution of this Agreement by the Escrow Agent will
constitute its acceptance of the terms hereof and will acknowledge its receipt
of the Escrow Deposit.
11. Counterparts. This Agreement may be in one or more counterparts,
each of which shall be an original, and all of which, when taken together,
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
BMCA KEY ACQUISITION CORP., on its Own
Behalf and on Behalf of the Other Buyer Related
Parties
By:
---------------------------------------------
Name:
Title:
LESLIE-LOCKE, INC.
By:
---------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By:
---------------------------------------------
Name:
Title:
12
<PAGE>
SCHEDULE 1
Six and one-quarter (6.25) basis points of the highest value of collateral held
on deposit per annum or any part thereof subject to a minimum of $5,000 per
annum or any part thereof without proration for partial years, (includes
investment in a Chase Manhattan Bank Money Market Account or The Chase Manhattan
Bank Mutual Fund known as the Chase Vista Fund).
<PAGE>
SCHEDULE 2
Telephone Number(s) for Call-Backs and
Person(s) Designated to Confirm Funds Transfer Instructions
If to the Seller:
Name Telephone Number
---- ----------------
1. Fredric M. Zinn, CFO (914) 421-2545
------------------------- ------------------------------
2.
------------------------- ------------------------------
3.
------------------------- ------------------------------
If to the Buyer:
1. Stephen R. Olsen, V.P. (973) 628-3714
------------------------- ------------------------------
2.
------------------------- ------------------------------
3.
------------------------- ------------------------------
Telephone call-backs shall be made to each of the Seller and the Buyer if joint
instructions are required pursuant to the Agreement.
SECOND ESCROW AGREEMENT
SECOND ESCROW AGREEMENT (this"Agreement"), dated this 18th day of
June, 1998, by and among BMCA Key Acquisition Corp., a Delaware corporation (the
"Buyer"), on its own behalf and on behalf of the other Buyer Related Parties (as
defined in the Asset Purchase Agreement referred to below) and Leslie-Locke,
Inc., a Delaware corporation (the "Seller") and The Chase Manhattan Bank (the
"Escrow Agent" and together with the Buyer and the Seller, the "Parties").
W I T N E S S E T H:
WHEREAS, the Buyer and the Seller have entered into an Asset
Purchase Agreement, dated May 26, 1998 (the "Asset Purchase Agreement";
capitalized terms used herein without definition having the respective meanings
ascribed to them in the Asset Purchase Agreement), providing for the sale by the
Seller to the Buyer of substantially all of the assets of the Seller;
WHEREAS, pursuant to the terms of the Asset Purchase Agreement, the
Seller is obligated to deposit an aggregate of $2,000,000 of the Cash Purchase
Price (plus any earnings from investment of the Escrow Deposit remaining in the
escrow account in accordance with section 3, the "Escrow Deposit") with the
Escrow Agent;
WHEREAS, the Seller is willing to deposit the $2,000,000 and the
Escrow Agent is willing to hold the Escrow Deposit upon the terms and conditions
specified herein; and
WHEREAS, it is a condition precedent to the closing of the Asset
Purchase Agreement that the Buyer and the Seller enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived herefrom and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Deposit into Escrow. On the date hereof, the Seller shall deposit $2,000,000
with the Escrow Agent by transferring funds to: The Chase Manhattan Bank, Escrow
Exigency Account No. 967006242, Attention: Escrow Administration, ABA No.
021000021, Reference: Leslie-Locke.
<PAGE>
2. Release; Notices.
2.1 Procedure. The Seller and the Buyer shall deliver to the Escrow
Agent a joint written notice setting forth (i) the amount of the Escrow Deposit
and the interest earnings thereon through the date of such notice to be
distributed to the Buyer and/or the Seller in accordance with the terms of
Section 4.2 of the Asset Purchase Agreement (it being understood that interest
earnings shall be distributed to the Buyer and/or the Seller in proportion to
the amounts of the Escrow Deposit payable to the Buyer and/or the Seller under
Section 4.2), and (ii) the Buyer and/or the Seller accounts or addresses to
which such amounts should be distributed. Such notice shall be delivered by the
Seller and the Buyer promptly following the final determination of the Purchase
Price to be made pursuant to Section 4.2. The Escrow Agent shall (promptly after
its receipt of such notice) distribute the Escrow Deposit and the interest
earnings thereon through the date of such notice to the Buyer and/or the Seller
in accordance with such notice.
2.2 Exclusivity. Each of the Buyer, on behalf of itself and the
other Buyer Related Parties, on the one hand ("Buyer Group"), and the Seller, on
behalf of itself and its Affiliates and the directors, officers and employees of
Seller and its Affiliates, on the other hand ("Seller Group"), acknowledges and
agrees that the Escrow Deposit shall only be available to satisfy claims of the
Buyer and/or the Seller in respect of the Closing Date Adjusted Working Capital
in accordance with the terms and conditions of Section 4.2 of the Asset Purchase
Agreement, and shall not be available to satisfy, any other obligation now or
hereafter owed by the Seller or any other person or entity to the Buyer Group or
by the Buyer or any other person or entity to the Seller Group, and each of the
Buyer, on behalf of the Buyer Group, and the Seller, on behalf of the Seller
Group, hereby waives and agrees not to assert any other right with respect to,
the Escrow Deposit except as expressly provided herein.
2.3 Notices to Escrow Agent. Any notice or other communication given
by the Buyer, on the one hand, and the Seller, on the other, to the Escrow Agent
shall be concurrently given to the Seller, on the one hand, and the Buyer, on
the other. Any notice to the Escrow Agent shall indicate by what means such
notice has been sent to the Buyer or the Seller, as the case may be. If
applicable, such notice shall also indicate the Return Date.
3. Investment of the Escrow Deposit.
(a) The Escrow Agent shall invest the Escrow Deposit and
reinvest any interest thereon or proceeds therefrom in any of the following, as
directed by the Seller: (i) any evidence of indebtedness with a maturity of 30
days or less issued directly or fully guaranteed or insured by the United States
of America or any agency or instrumentality thereof, provided that the full
faith and credit of the United States is pledged in support thereof, (ii)
certificates of deposit and bankers' acceptances with a maturity of 30 days or
less of any commercial bank organized under the laws of the United States of
America or any State thereof which has combined capital and surplus and
undivided profits of not less than $100,000,000; (iii) commercial paper and loan
participations with a maturity of 30 days or less issued by a corporation that
is not an Affiliate
2
<PAGE>
(including, for the purpose of this provision, the Non- Affiliates) of Seller
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by Standard & Poors Corporation or at least P-1
by Moody's Investors Services, Inc. or at least an equivalent rating category of
another nationally recognized securities rating agency; and (iv) fully
collateralized repurchase agreements, having terms of 30 days or less, for
government obligations of the type specified in (i) above with a commercial bank
or trust company meeting the requirements of (ii) above; (v) Chase Vista U.S.
Government Money Market Fund or (vi) in the absence of investment instructions,
Chase Vista U.S. Government Money Market Fund.
(b) The Escrow Agent shall have the right to liquidate any
investments held, in order to provide funds necessary to make required payments
under this Escrow Agreement. The Escrow Agent in its capacity as escrow agent
hereunder shall not have any liability for any loss sustained as a result of any
investment made pursuant to the instructions of the parties hereto or as a
result of any liquidation of any investment prior to its maturity or for the
failure of the parties to give the Escrow Agent instructions to invest or
reinvest the Escrow Fund or any earnings thereon.
4. General Instructions. To induce the Escrow Agent to act
hereunder, it is further agreed by the undersigned that:
(a) The Escrow Agent shall not be under any duty to give the
Escrow Deposit (which term for purposes of this section 4 includes any earnings
on and investments of the initial amount deposited pursuant to section 1 hereof)
held by it hereunder any greater degree of care than it gives its own similar
property and shall not be required to invest any funds held hereunder except as
directed in this Agreement. Funds held hereunder shall be invested in accordance
with section 3.
(b) This Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall not be bound by the provisions of any agreement
among the other Parties hereto except this Agreement.
(c) The Escrow Agent shall not be liable, except for its own
bad faith, gross negligence or willful misconduct, as determined by a court of
competent jurisdiction, and, except with respect to claims based upon such bad
faith, gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the other Parties hereto shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any successor to the Escrow
Agent) from and against any and all losses, liabilities, claims, actions,
damages and expenses, including reasonable attorneys' fees and disbursements,
arising out of and in connection with this Agreement. Anything in this agreement
to the contrary notwithstanding, in no event shall the Escrow Agent be liable
for special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action. Without limiting the foregoing, the Escrow Agent shall in no event be
liable in connection with its investment or
3
<PAGE>
reinvestment of any cash held by it hereunder in good faith, in accordance with
the terms hereof, including without limitation any liability for any delays (not
resulting from its own bad faith, gross negligence or willful misconduct) in the
investment or reinvestment of the Escrow Deposit, or any loss of interest
incident to any such delays. In the event that the Buyer or the Seller is
required to indemnify and hold harmless the Escrow Agent pursuant to this
section 5(c) or section 5(f), the Buyer or the Seller, as the case may be, shall
have the right to seek contribution from the other Parties hereto (other than
the Escrow Agent) for amounts paid or payable in respect of such indemnity to
the extent permitted by law.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, award, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity of
the service thereof. The Escrow Agent may act or refrain from acting in reliance
upon any instrument or signature believed by it to be genuine and may assume
that any person purporting to give notice or receipt or advice or make any
statement or execute any document in connection with the provisions hereof has
been duly authorized to do so. The Escrow Agent shall have no duty to verify the
propriety of any conditions imposed by this Agreement upon the Buyer, the Seller
or the Buyer Related Parties.
(e) The Escrow Agent may act pursuant to the advice of counsel
with respect to any matter relating to this Agreement and shall not be liable
for any action taken or omitted in good faith in accordance with such advice.
(f) The Escrow Agent does not have any interest in the Escrow
Deposit but is serving as escrow holder only and having only possession thereof.
The Buyer and the Seller shall, jointly and severally, pay or reimburse the
Escrow Agent upon request for any transfer taxes or other taxes (other than
income taxes) relating to the Escrow Deposit incurred in connection herewith and
shall, jointly and severally, indemnify and hold harmless the Escrow Agent from
any amounts that it is obligated to pay in the way of such taxes. As between the
Buyer and the Seller, the Buyer, on the one hand, and the Seller, on the other
hand, shall be responsible for any transfer taxes or other taxes (other than
income taxes) incurred in connection herewith in proportion to the amount of
earnings received by such Party. The Escrow Agent shall be entitled to charge
against the Escrow Deposit any transfer taxes incurred in connection herewith.
(g) The Escrow Agent makes no representation as to the
validity, value, genuineness or the collectibility of any security or other
documents or instrument held by or delivered to it.
(h) The Escrow Agent shall not be called upon to advise any
Party as to the wisdom of selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
(i) The Escrow Agent (and any successor to the Escrow Agent)
may at any time resign as such by delivering the Escrow Deposit and all earnings
thereon to any successor
4
<PAGE>
to the Escrow Agent jointly designated by the other Parties hereto in writing,
or to any court of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Agreement. The Escrow Agent shall promptly deliver written notice of
its resignation to the other Parties hereto. The resignation of the Escrow Agent
will take effect on the earlier of (i) the appointment of a successor (including
a court of competent jurisdiction) or (ii) the day which is 30 days after the
date of delivery of its written notice of resignation to the other Parties
hereto. If at that time the Escrow Agent has not received a designation of a
successor to the Escrow Agent, the Escrow Agent's sole responsibility after that
time shall be to safe-keep the Escrow Deposit until receipt of a designation of
successor to the Escrow Agent or a joint written disposition instruction by the
other parties hereto or a final order of a court of competent jurisdiction.
(j) The Escrow Agent shall have no responsibility for the
contents of any writing of any arbitrator or third party contemplated herein as
a means to resolve disputes and may rely without any liability upon the contents
thereof.
(k) In the event of any disagreement between the Buyer and the
Seller resulting in adverse claims or demands being made in connection with the
Escrow Deposit, or in the event that the Escrow Agent in good faith is in doubt
as to what action it should take hereunder, the Escrow Agent shall retain the
Escrow Deposit (or such part thereof as is the subject of such disagreement)
until the Escrow Agent shall have received (i) a written agreement executed by
the Buyer and the Seller acting jointly directing delivery of the Escrow Deposit
or such part thereof, or (ii) an order of a court of competent jurisdiction
directing delivery of the Escrow Deposit or such part thereof.
(l) The Buyer and the Seller hereby agree to (i) pay the
Escrow Agent upon execution of this Agreement reasonable compensation (as
payment in full) for the services to be rendered hereunder, as described in
Schedule 2 attached hereto, and (ii) pay or reimburse the Escrow Agent upon
request for all expenses, disbursements and advances, including reasonable
attorney's fees, incurred or made by it in connection with the preparation,
execution, performance, delivery modification and termination of this Agreement.
The fees, costs and expenses of the Escrow Agent and its counsel shall be borne
equally by the Buyer and the Seller. Any fees or expenses of the Escrow Agent or
its counsel which are not paid as provided for herein may be taken from any
property held by the Escrow Agent hereunder.
(m) In the event funds transfer instructions are given (other
than in writing at the time of execution of the Agreement), whether in writing,
by telecopier or otherwise, the Escrow Agent is authorized to seek confirmation
of such instructions by telephone call-back to the person or persons designated
on Schedule 2 hereto, and the Escrow Agent may rely upon the confirmations of
anyone purporting to be the person or person so designated. The persons and
telephone numbers for call-backs may be changed only in a writing actually
received and acknowledged by the Escrow Agent. The parties to this Agreement
acknowledge that such security procedure is commercially reasonable.
5
<PAGE>
(n) Each party hereto, except the Escrow Agent shall, in the
notice section of this agreement provide the Escrow Agent with their Tax
Identification Number (TIN) as assigned by the Internal Revenue Service. All
interest or other income earned under the Escrow Agreement shall be allocated
and paid as provided herein and reported by the recipient to the Internal
Revenue Service as having been so allocated and paid.
(o) It is understood that the Escrow Agent and the
beneficiary's bank in any funds transfer may rely solely upon any account number
or similar identifying number provided by either of Seller or Buyer with respect
to funds to be delivered pursuant to this Agreement to the party providing such
information to identify (i) the beneficiary, (ii) the beneficiary's bank, or
(iii) an intermediary bank. The Escrow Agent may apply any of the escrowed funds
for any payment order it executes using any such identifying number, even where
its use may result in a person other than the beneficiary being paid, or the
transfer of funds to a bank other than the beneficiary's bank, or an
intermediary bank designated.
5. Choice of Law; Consent to Jurisdiction; Compliance with Law. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York without regard to the conflicts of law rules of such
state. The Buyer and the Seller hereby irrevocably submit to the jurisdiction of
any New York State or Federal court sitting in the State, City and County of New
York in any action or proceeding arising out of or relating to this Agreement,
and the Parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such a New York State or
Federal court. The Buyer, the Seller and the Escrow Agent hereby consent to and
grant any such court jurisdiction over the persons of such Parties and over the
subject matter of any such dispute and agree that delivery or mailing of process
or other papers in connection with any such action or proceeding in the manner
provided herein below shall be valid and sufficient service thereof, provided
service so made shall be deemed completed only upon actual receipt. Nothing
contained in this Section 5 shall be deemed to affect the right of any party to
serve process in any other manner that may be permitted under applicable law.
6. Successors and Assigns.
(a) This Agreement shall be binding upon and inure solely to
the benefit of the Parties hereto and their respective successors and permitted
assigns, and shall not be enforceable by or inure to the benefit of any third
party. No Party may assign any of its rights or obligations under this Agreement
without the written consent of the other Parties; provided, however, that the
Seller and Parent shall be free to merge with or into one another at any time,
provided that the surviving corporation of such merger shall thereafter succeed
to and be responsible for all obligations and rights of the Seller hereunder.
(b) Any corporation into which the Escrow Agent in its
individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate
6
<PAGE>
trust business of the Escrow Agent in its individual capacity may be
transferred, shall be the Escrow Agent under this Escrow Agreement without
further act.
7. Amendments; Entire Agreement. This Agreement may only be modified
by a writing signed by all of the Parties hereto, and no waiver hereunder shall
be effective unless in a writing signed by the party to be charged. This
Agreement constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties
related to the subject matter hereof.
8. Notices. All notices, deliveries or other communications required
or permitted hereunder shall be in writing and shall be deemed received (a) upon
delivery when sent by courier, (b) one Business Day after being sent by
facsimile transmission if such transmission is concurrently confirmed by
first-class registered or certified mail, return receipt requested, postage
prepaid, and (c) three days after being mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, and in any case,
addressed as follows:
if to the Buyer, to:
BMCA Key Acquisition Corp.
1361 Alps Road
Wayne, NJ 07470
Telecopy:
Attention: President
and to:
BMCA Key Acquisition Corp.
1361 Alps Road
Wayne, NJ 07470
Telecopy:
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Friedman, Kaplan & Seiler LLP
875 Third Avenue
New York, NY 10022
Telecopy: (212) 355-6401
Attention: Timothy J. Clark, Esq.
if to the Seller to:
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Leslie-Locke, Inc.
c/o Leslie Building Products, Inc.
200 Mamaroneck Avenue
White Plains, NY 10601
Telecopy:
Attention: President
with a copy (which shall not constitute notice) to:
Gilbert, Segall and Young LLP
430 Park Avenue
New York, NY 10022
Telecopy: (212) 644-4051
Attention: Harvey F. Milman, Esq.
and, if to the Escrow Agent, to:
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Telecopy: (212) 946-8156
Attention: Escrow Administration, 15th Floor
provided, however, notice to the Escrow Agent shall not be deemed given until
such notice is actually received by the Escrow Agent at the Escrow Agent's
address given above.
9. Authorization to use a Central Securities Depository. The other
Parties hereto authorize the Escrow Agent, for any securities held hereunder, to
use the services of any United States central securities depository it deems
appropriate, including but not limited to the Depository Trust Company and the
Federal Reserve Bank Entry System.
10. Execution. Execution of this Agreement by the Escrow Agent will
constitute its acceptance of the terms hereof and will acknowledge its receipt
of the Escrow Deposit.
11. Counterparts. This Agreement may be in one or more counterparts,
each of which shall be an original, and all of which, when taken together,
constitute one and the same instrument.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
BMCA KEY ACQUISITION CORP., on its Own
Behalf and on Behalf of the Other Buyer Related
Parties
By:
--------------------------------------------
Name:
Title:
LESLIE-LOCKE, INC.
By:
--------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By:
--------------------------------------------
Name:
Title:
9
<PAGE>
SCHEDULE 1
Six and one-quarter (6.25) basis points of the highest value of collateral held
on deposit per annum or any part thereof subject to a minimum of $5,000 per
annum or any part thereof without proration for partial years, (includes
investment in a Chase Manhattan Bank Money Market Account or The Chase Manhattan
Bank Mutual Fund known as the Chase Vista Fund).
<PAGE>
SCHEDULE 2
Telephone Number(s) for Call-Backs and
Person(s) Designated to Confirm Funds Transfer Instructions
If to the Seller:
Name Telephone Number
---- ----------------
1. Fredric M. Zinn, CFO (914) 421-2545
----------------------------------- ------------------------------
2.
----------------------------------- ------------------------------
3.
----------------------------------- ------------------------------
If to the Buyer:
1. Stephen R. Olsen, V.P. (973) 628-3714
----------------------------------- ------------------------------
2.
----------------------------------- ------------------------------
3.
----------------------------------- ------------------------------
Telephone call-backs shall be made to each of the Seller and the Buyer if joint
instructions are required pursuant to the Agreement.
NET PROCEEDS ESCROW AGREEMENT
NET PROCEEDS ESCROW AGREEMENT (this"Agreement"), dated this 18th day
of June, 1998, by and among BMCA KEY ACQUISITION CORP., a Delaware corporation
(the "Buyer"), on its own behalf and on behalf of the other Buyer Related
Parties (as defined in the Asset Purchase Agreement referred to below) and
LESLIE-LOCKE, INC., a Delaware corporation (the "Seller") and The Chase
Manhattan Bank (the "Escrow Agent" and together with the Buyer and the Seller,
the "Parties").
W I T N E S S E T H:
WHEREAS, the Buyer and the Seller have entered into an Asset
Purchase Agreement, dated May 26, 1998 (the "Asset Purchase Agreement";
capitalized terms used herein without definition having the respective meanings
ascribed to them in the Asset Purchase Agreement), providing for the sale by the
Seller to the Buyer of substantially all of the assets of the Seller;
WHEREAS, pursuant to Sections 9.1(b) and (c) of the Asset Purchase
Agreement, the Seller is obligated to indemnify the Buyer Related parties for
certain losses incurred by the Buyer Related Parties;
WHEREAS, pursuant to the terms of the Asset Purchase Agreement, the
Seller is obligated to deposit the Net Proceeds with the Escrow Agent;
WHEREAS, the Seller is willing to deposit the Net Proceeds and the
Escrow Agent is willing to hold the Net Proceeds upon the terms and conditions
specified herein; and
WHEREAS, it is a condition precedent to the closing of the Asset
Purchase Agreement that the Buyer and the Seller enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived herefrom and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Deposit into Escrow. On the date hereof, the Seller shall deposit
$18,875,020, representing Seller's good faith estimate of the Net Proceeds (the
"Initial Deposit") with the Escrow Agent by transferring funds to: The Chase
Manhattan Bank, Escrow Exigency Account No. 967006242, Attention: Escrow
Administration, ABA No. 021000021, Reference: Leslie-Locke (the "Account").
Within 5 Business Days after the release to the Seller of the balance, if
<PAGE>
any, held under the Second Escrow Agreement, the Seller shall calculate the
amount of the Net Proceeds and furnish to the Buyer, with a copy to the Escrow
Agent, its final calculation thereof (which calculation shall be in reasonable
detail). The Seller shall calculate its good faith estimate of the Net Proceeds
and the final amount of the Net Proceeds in accordance with the terms of the
Asset Purchase Agreement. If the Net Proceeds as finally calculated is greater
than the Initial Deposit, the Seller shall, simultaneously with the furnishing
of its final calculation of the Net Proceeds, deposit in the Account an amount
equal to the deficiency; if the Net Proceeds so calculated is less than the
Initial Deposit, the Escrow Agent shall, within three (3) Business Days after
its receipt of the Seller's calculation, pay to the Seller from the Initial
Deposit the amount of the excess. The Initial Deposit, increased or reduced in
accordance with the preceding sentence, and less any withdrawals or charges
under Sections 2, 3 and 5 hereof, is referred to herein as the "Escrow Deposit."
Notwithstanding anything herein to the contrary, in no event shall earnings on,
or appreciation of, amounts from time to time held in the Account ("Earnings")
or Excess Funds (as hereinafter defined) be deemed to be part of the Escrow
Deposit. For the purpose of this Agreement, the term "Excess Funds" shall mean
the amount, if any, by which (i) the balance of the Escrow Deposit, determined
without regard to any Earnings held therein, exceeds (ii)(w) the Net Proceeds as
finally determined in accordance with Section 1 hereof, reduced by (x) amounts
distributed from the Escrow Fund pursuant to Section 3 hereof, (y) amounts
distributed from the Escrow Fund to the Buyer Related Parties pursuant to
Section 2 hereof, and (z) amounts paid other than from the Escrow Deposit to the
Buyer Related Parties by or on behalf of the Seller or the Parent in
satisfaction of any obligation of the Seller or the Parent in respect of the
Indemnification Provisions (as defined in Section 2.2 hereof). The amount
referred to in clause (ii) of the preceding sentence is sometimes referred to
herein as the "Deposit Balance".
2. Release of Escrow Deposit.
2.1 Release. (a) The Escrow Agent shall release the Escrow Deposit
and deliver to the Seller such funds as remain of the Escrow Deposit on the
earliest to occur of (i) the second anniversary of the date hereof; (ii) the
date which is five (5) days after the date on which the Escrow Agent receives
notice that the Deposit Balance equals zero (0); and (iii) without prejudice to
the Seller's obligations under Section 7.1.13 of the Asset Purchase Agreement,
the date which is five (5) days after the date on which the Escrow Agent
receives notice that the Seller (or the Parent, if a merger of the Seller and
the Parent shall occur) has become an entity registered pursuant to the
Investment Company Act of 1940, as amended (the "Escrow Release Date").
Notwithstanding the foregoing, if the Escrow Release Date occurs by virtue of
clause (i) or (ii) of the preceding sentence, and if the Buyer shall theretofore
have delivered to the Escrow Agent a Notice of Claim under Section 2.2 which has
not been resolved as of the Escrow Release Date pursuant to this Section 2, the
Escrow Agent shall retain such portion of the Escrow Fund as is required by
Section 2.3 hereof, and shall distribute the balance to the Seller. If any
amount is so retained by the Escrow Agent after the Escrow Release Date, and
thereafter the events described in clause (iii) of the first sentence of this
Section 2.1 occur, then the Escrow Agent shall distribute to the Seller the
balance of the Escrow Deposit held by the Escrow Agent on, or as soon as
practicable after, the date such events occur.
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<PAGE>
(b) Notwithstanding any provision hereof to the contrary, any
portion of the Escrow Fund required to be retained by the Escrow Agent pursuant
to the terms hereof shall nevertheless at all times remain subject to
distribution pursuant to Section 3 hereof, provided that after the Escrow
Release Date, no such amount shall be subject to distribution pursuant to
Section 3(d) hereof.
2.2 Release Upon Undisputed Claim. If the Buyer, in good faith,
prepares and delivers to the Escrow Agent and to the Seller prior to the Escrow
Release Date one or more notices (each a "Notice of Claim") (i) stating that the
Buyer has determined that at the date thereof, it or another Buyer Related Party
is, or is more likely than not to be, entitled to indemnification under Section
9.1(b) or (c) (and (e) to the extent applicable) of the Asset Purchase Agreement
in accordance with the terms and conditions of Article IX of the Asset Purchase
Agreement (collectively, the "Indemnification Provisions") and (ii) including a
detailed description of the basis for, and the method of calculating, either (x)
the amount to which the Buyer is entitled in respect thereof (the "Claim
Amount"), or (y) the amount to which the Buyer in good faith determines it is
more likely than not thereafter to be entitled, which amount cannot in good
faith be determined definitively at the time of the notice (the "Contingent
Claim Amount"), in either case under the Indemnification Provisions, the Escrow
Agent shall in any such case retain the Claim Amount or Contingent Claim Amount,
and shall pay such amount as provided in this section 2. If the Seller shall
not, within 20 days after its receipt of a Notice of Claim specifying a Claim
Amount (the expiration of such 20 day period being herein called the "Return
Date"), have notified the Escrow Agent and the Buyer of Seller's intent to
contest the merits or amount of such Notice of Claim (a "Notice of Objection"),
the Escrow Agent shall, within five days after the Return Date, deliver to the
Buyer from the Escrow Deposit the lesser of the Escrow Deposit and the Claim
Amount. Any failure of the Seller to dispute, object or otherwise respond to any
Notice of Claim specifying a Contingent Claim Amount shall not limit or affect
the Seller's right to dispute or object to any Determination Notice (as defined
in Section 2.4) with respect thereto. Notices of Claim specifying a Contingent
Claim Amount shall be subject to Section 2.4 hereof.
2.3 Distribution; Undetermined Claim. If, on the later of the Escrow
Release Date and any Return Date, there is outstanding (a) a Notice of Claim
(which was delivered prior to the Escrow Release Date) and a Notice of Objection
responding to such Notice of Claim, or (b) a Notice of Claim (which was
delivered prior to the Escrow Release Date) specifying a Contingent Claim
Amount, the Escrow Agent shall retain that portion of the Escrow Deposit equal
to the Claim Amount or the Contingent Claim Amount or both, as the case may be,
subject (in each case to the extent applicable) to Sections 2.1(b), 2.4, 2.5 and
2.6 hereof, and shall distribute to the Seller the remaining portion, if any, of
the Escrow Deposit. Any termination will not affect the Buyer's right to receive
any amount from the Escrow Deposit to which the Buyer has become entitled on or
prior to the Escrow Release Date.
2.4 Subsequent Determination. Insofar as any Notice of Claim
specifying a Contingent Claim Amount arises out of, is based upon or relates to
a claim by any third party that the Buyer is liable for any Excluded Liability
as successor to the Seller, such retention of the Contingent Claim Amount
pursuant to Section 2.3 hereof shall, without limitation on the
3
<PAGE>
provisions of the Asset Purchase Agreement, be subject to the Buyer taking such
action as the Seller may reasonably request in response to such claim, at the
Seller's sole expense, including filing and diligently pursuing a motion to
dismiss such claim. The Buyer shall promptly determine the actual amount of the
indemnification payment to which it claims to be entitled in respect of any
Notice of Claim specifying a Contingent Claim Amount (the "Deferred Claim
Amount") and deliver to the Escrow Agent and the Seller a notice setting forth
the Deferred Claim Amount, including a detailed description of the method of
calculating such Deferred Claim Amount (the "Determination Notice"). Unless,
within 15 days after the receipt of such Determination Notice (the expiration of
such 15 day period being herein referred to as the "Deferred Return Date"), the
Seller shall have delivered to the Escrow Agent and the Buyer a Notice of
Objection contesting the merits or amount of such Determination Notice, the
Escrow Agent shall, within 10 days after the Deferred Return Date, deliver to
the Buyer from the Escrow Deposit the lesser of the Escrow Deposit and the
Deferred Claim Amount. If the Buyer shall not deliver a Determination Notice
with respect to any Contingent Claim Amount by the later of the Escrow Release
Date and 180 days after the date the Buyer delivers a Payment Notice with
respect to such Contingent Claim Amount, the parties shall promptly thereafter
refer such matter to arbitration pursuant to Section 2.5 for a determination as
to the appropriate portion of the Escrow Deposit to be retained in escrow,
including, where applicable, after the Escrow Release Date, with respect to such
Contingent Claim Amount (the "Estimate", it being understood that the
determination of such Estimate shall be without prejudice to the Buyer's right
to assert a claim under the Asset Purchase Agreement or the Guaranty for the
actual amount of the Seller's liability under the Indemnification Provisions in
respect of such Contingent Claim Amount in excess of such Estimate or to the
Seller's right to the distribution in accordance herewith of the amount by which
such Estimate exceeds the actual amount of the Seller's liability under the
Indemnification Provisions in respect of such Contingent Claim Amount, and that
in making such determination, the arbitrator or arbitrators shall not be bound
or limited by, or precluded from applying, the "more likely than not" standard
set forth in Section 2.2 hereof, but shall instead apply whatever standard such
arbitrator or arbitrators deem is appropriate in determining the appropriate
portion of the Escrow Deposit to be retained).
2.5 Arbitration Regarding Contingent Claim Amounts. Arbitrations
referred to in the last sentence of Section 2.4 hereof shall be referred to
three arbitrators selected from the panel of arbitrators of the American
Arbitration Association ("AAA"), one of whom shall be chosen by the Buyer, one
of whom shall be chosen by the Seller and the third of whom shall be chosen by
the two arbitrators so chosen. If either the Buyer or the Seller shall not have
designated such an arbitrator within 20 days after submission by the AAA of the
list of names of arbitrators selected from its panel, the arbitration shall be
conducted by the arbitrator chosen by the other Party. Any such arbitration
shall take place in the State, City and County of New York. The Seller and the
Buyer shall expressly instruct the arbitrator or arbitrators to determine the
appropriate amount of the Estimate, if any, referred to in Section 2.4 hereof in
accordance with the Commercial Arbitration Rules of the AAA. Upon a "Final" (as
hereinafter defined) determination of the Estimate pursuant to this section 2.5,
the Buyer and the Seller shall promptly (and in any case within five Business
Days) notify the Escrow Agent in writing of such determination and the Escrow
Agent shall retain such portion of the Contingent Claim Amount as
4
<PAGE>
does not exceed the Estimate so determined, and shall retain or distribute any
balance of such Contingent Claim Amount in accordance with the terms of this
Agreement. If the Buyer or the Seller shall fail or refuse promptly so to notify
the Escrow Agent, the Seller or the Buyer, as the case may be, may so notify the
Escrow Agent. All costs and expenses of arbitration under this section 2.5 shall
be borne as determined by the arbitrator. For purposes hereof, an arbitor's
award shall be "Final" upon the expiration of the 90-day period following the
delivery of such award provided under New York Civil Practice Law and Rules
Section 7511 (or the time period under any applicable successor provision) for
the making of an application to vacate or modify the award.
2.6 Release Upon Resolution of Claim. If a Notice of Objection shall
have been filed in respect of a Notice of Claim or Determination Notice, the
Buyer and the Seller shall have 20 days from the date of receipt by the Buyer of
such Notice of Objection, or such longer period as the Buyer and the Seller may
agree upon, within which to resolve privately such Notice of Claim or
Determination Notice. If the Buyer and the Seller are unable to reach a
resolution within such time period, the Escrow Agent shall retain the Claim
Amount or Contingent Claim Amount, as the case may be, and shall, unless
otherwise provided in this Section 2 or in Section 3, distribute such amount
only if directed to do so (i) by a written direction signed by the Buyer and the
Seller or (ii) by a court of competent jurisdiction.
2.7 Escrow Deposit Property of Seller; Exclusivity. The Escrow
Deposit shall at all times be and remain the property of the Seller, unless and
until the Buyer or any other Buyer Related Party shall become entitled to a
distribution of any portion thereof in accordance with the Indemnification
Provisions and the provisions of this Agreement. The Escrow Deposit shall
constitute the sole and exclusive source for the satisfaction of claims of the
Buyer Related Parties in respect of the Indemnification Provisions, other than
in respect of (a) Excluded Liabilities, (b) Claims of Environmental Liability,
(c) Off-Site Claims of Environmental Liability and (d) Former Site Claims of
Environmental Liability, in each case as and to the extent provided in Article
IX of the Asset Purchase Agreement. The Buyer Related Parties shall in no event
be entitled to duplicative payments for any claim under any of this Agreement,
the Parent Guaranty and the Asset Purchase Agreement. Buyer, on behalf of itself
and the other Buyer Related Parties, acknowledges and agrees that the Escrow
Deposit shall only be available to satisfy claims of the Buyer Related Parties
in respect of the Indemnification Provisions, and shall not be available to
satisfy, any other obligation now or hereafter owed by the Seller or any other
person or entity to the Buyer or any other Buyer Related Party, and the Buyer,
on behalf of itself and the other Buyer Related Parties, hereby waives and
agrees not to assert any other right with respect to, the Escrow Deposit except
as expressly provided herein. Without limiting the generality of the foregoing,
the Escrow Deposit shall not be available to satisfy any obligation or liability
of the Seller or the Parent, however arising, including in respect of any
indemnification obligation pursuant to the Asset Purchase Agreement other than
the Indemnification Provisions.
2.8 Notices to Escrow Agent. Any notice or other communication given
by the Buyer, on the one hand, and the Seller, on the other, to the Escrow Agent
shall be concurrently given to the Seller, on the one hand, and the Buyer, on
the other. Any notice to the Escrow Agent
5
<PAGE>
shall indicate by what means such notice has been sent to the Buyer or the
Seller, as the case may be. If applicable, such notice shall also indicate the
Return Date.
3. Permitted Payments. The Seller may at any time during the term of
this Agreement, and in the Seller's sole discretion, direct the Escrow Agent to
distribute from the Escrow Deposit to the Seller or any other designated
recipient all or a portion of the Escrow Deposit for the express purpose of
making a "Permitted Payment" (as hereinafter defined) of such amount (or the
proceeds thereof). Any such direction must (i) be in writing, (ii) be - --
delivered to the Escrow Agent, with a copy to the Buyer, at least five (5)
Business Days in advance of the distribution date stated therein, (iii) certify
that the Seller intends to utilize the --- amount of the distribution to make a
Permitted Payment and that such payment will be made within the time period
stated in the direction (which shall not be more than five (5) Business Days
after the distribution date), and (iv) specify the payee of the distribution (a
"Withdrawal -- Notice"). The Escrow Agent shall distribute the amount specified
in each Withdrawal Notice in accordance with the terms thereof. For the purpose
hereof, a Permitted Payment shall mean any of the following:
(a) a withdrawal by the Seller of Excess Funds;
(b) the Seller's investment in, or purchase of (including by
merger), a twenty-five percent (25%) or greater interest in the
capital stock of or a group of assets constituting a business, or
real estate, other than an interest in an Affiliate (including, for
the purpose of this provision, a Non-Affiliate) of the Seller;
(c) the payment by Seller of any amount due to the Parent,
provided that the aggregate amount of Permitted Payments prior to
the Escrow Release Date pursuant to this clause (c) does not exceed
$100,000 in the aggregate;
(d) the payment or discharge by the Seller of any claim,
liability, expense, debt or other obligation of any nature
whatsoever (each a "Liability") provided that the same arises out
of, or is based upon, or is incurred in connection with, acts,
omissions, events, circumstances, conditions or facts occurring, or
states of facts existing, on or prior to the date hereof, including
any amount in settlement or otherwise payable to a judgment creditor
or claimant in litigation or arbitration, and any liability or
expense of the Seller, the Parent or any Affiliate (including, for
the purpose of this provision, a Non-Affiliate) of the Seller in
connection with the Litigation and other litigation or arbitration
pending or threatened or hereafter threatened or commenced against
the Seller ("Litigation Expenses"), in each case whether or not
presently matured or liquidated, and howsoever arising, including,
without limitation, by contract or in tort or strict liability;
provided, however, that the payment or discharge of a Liability to
or on behalf of a person or entity that is an Affiliate (including,
for the purpose of this provision, a Non-Affiliate) of the Seller or
the Parent on the date hereof shall not constitute a Permitted
Payment unless such payment is in payment or discharge of (A) any
Liability in respect of which the Seller is jointly and severally
liable with
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any Affiliate (including, for the purpose of this provision, a
Non-Affiliate), (B) any Liability to an Affiliate (including, for
the purpose of this provision, a Non-Affiliate) based upon a right
of indemnity, contribution or subrogation against the Seller, (C)
any Liability of an Affiliate (including, for the purpose of this
provision, a Non-Affiliate) to a judgment creditor or claimant in
litigation or arbitration (including a settlement payment) arising
out of or in connection with the operations of the Seller, or (D) a
Litigation Expense; provided further that no payment shall be
permitted to be made pursuant to this clause (d) at any time prior
to the Escrow Release Date to the extent that such payment would
reduce the Escrow Deposit to less than $10,000,000;
(e) the Seller's payment to the Buyer of any payment due to
Buyer pursuant to Section 4.2(e)(ii) of the Asset Purchase
Agreement; or
(f) the payment or discharge by the Seller or the Parent of
any Liability which arises out of or is based upon acts, omissions,
events, circumstances, conditions or facts first occurring, or
states of facts first existing, after the date hereof; provided that
the aggregate amount of Permitted Payments prior to the Escrow
Release Date under this clause (e) does not exceed $500,000 in the
aggregate.
4. Investment of the Escrow Deposit; Distribution of Earnings.
(a) The Escrow Agent shall invest the Escrow Deposit and
reinvest any proceeds thereof arising from the maturity or sale thereof, other
than Earnings, in any of the following, as directed by the Seller: (i) any
evidence of indebtedness with a maturity of 180 days or less issued directly or
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof, provided that the full faith and credit of the United
States is pledged in support thereof, (ii) certificates of deposit and bankers'
acceptances with a maturity of 180 days or less of any commercial bank organized
under the laws of the United States of America or any State thereof which has
combined capital and surplus and undivided profits of not less than
$100,000,000; (iii) commercial paper and loan participations with a maturity of
180 days or less issued by a corporation that is not an Affiliate (including,
for the purpose of this provision, the Non-Affiliates) of Seller organized under
the laws of any state of the United States or the District of Columbia and rated
at least A-1 by Standard & Poors Corporation or at least P-1 by Moody's
Investors Services, Inc. or at least an equivalent rating category of another
nationally recognized securities rating agency; (iv) fully collateralized
repurchase agreements, having terms of 180 days or less, for government
obligations of the type specified in (i) above with a commercial bank or trust
company meeting the requirements of (ii) above; (v) Chase Vista U.S. Government
Money Market Fund or (vi) in the absence of investment instructions, Chase Vista
U.S. Government Money Market Fund. The Escrow Agent will promptly, but not less
frequently than monthly, pay to the Seller, subject to the following sentence,
all Earnings on the Escrow Deposit. The Escrow Agent shall deduct from Earnings
on the Escrow Deposit all commissions or other transaction expenses payable in
connection with the investment of the Escrow Deposit. The Escrow Agent
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shall furnish to the Seller, with a copy to the Buyer, within fourteen (14) days
after the end of each month during which any amount is held hereunder, a
statement detailing the balance of the Escrow Deposit as of such month-end,
investment transactions with respect to the Escrow Deposit during such month and
the amount of Earnings on the Escrow Deposit during such month.
(b) The Escrow Agent shall have the right to liquidate any
investments held, in order to provide funds necessary to make required payments
under this Escrow Agreement. The Escrow Agent in its capacity as escrow agent
hereunder shall not have any liability for any loss sustained as a result of any
investment made pursuant to the instructions of the parties hereto or as a
result of any liquidation of any investment prior to its maturity or for the
failure of the parties to give the Escrow Agent instructions to invest or
reinvest the Escrow Fund or any earnings thereon.
5. General Instructions. To induce the Escrow Agent to act
hereunder, it is further agreed by the undersigned that:
(a) The Escrow Agent shall not be under any duty to give the
Escrow Deposit (which term for purposes of this section 5 includes any Earnings
on and investments of the amount deposited pursuant to section 1 hereof) held by
it hereunder any greater degree of care than it gives its own similar property
and shall not be required to invest any funds held hereunder except as directed
in this Agreement. Funds held hereunder shall be invested in accordance with
section 4.
(b) This Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall not be bound by the provisions of any agreement
among the other Parties hereto except this Agreement.
(c) The Escrow Agent shall not be liable, except for its own
bad faith, gross negligence or willful misconduct, as determined by a court of
competent jurisdiction, and, except with respect to claims based upon such bad
faith, gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the other Parties hereto shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any successor to the Escrow
Agent) from and against any and all losses, liabilities, claims, actions,
damages and expenses, including reasonable attorneys' fees and disbursements,
arising out of and in connection with this Agreement. Anything in this agreement
to the contrary notwithstanding, in no event shall the Escrow Agent be liable
for special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action. Without limiting the foregoing, the Escrow Agent shall in no event be
liable in connection with its investment or reinvestment of any cash held by it
hereunder in good faith, in accordance with the terms hereof, including without
limitation any liability for any delays (not resulting from its own bad faith,
gross negligence or willful misconduct) in the investment or reinvestment of the
Escrow Deposit, or any loss of interest incident to any such delays. In the
event that the Buyer or the Seller is required
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to indemnify and hold harmless the Escrow Agent pursuant to this section 5(c) or
section 5(f), the Buyer or the Seller, as the case may be, shall have the right
to seek contribution from the other Parties hereto (other than the Escrow Agent)
for amounts paid or payable in respect of such indemnity to the extent permitted
by law.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, award, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity of
the service thereof. The Escrow Agent may act or refrain from acting in reliance
upon any instrument or signature believed by it to be genuine and may assume
that any person purporting to give notice or receipt or advice or make any
statement or execute any document in connection with the provisions hereof has
been duly authorized to do so. The Escrow Agent shall have no duty to verify the
propriety of any conditions imposed by this Agreement upon the Buyer, the Seller
or the Buyer Related Parties.
(e) The Escrow Agent may act pursuant to the advice of counsel
with respect to any matter relating to this Agreement and shall not be liable
for any action taken or omitted in good faith in accordance with such advice.
(f) The Escrow Agent does not have any interest in the Escrow
Deposit but is serving as escrow holder only and having only possession thereof.
The Buyer and the Seller shall, jointly and severally, pay or reimburse the
Escrow Agent upon request for any transfer taxes or other taxes (other than
income taxes) relating to the Escrow Deposit incurred in connection herewith and
shall, jointly and severally, indemnify and hold harmless the Escrow Agent from
any amounts that it is obligated to pay in the way of such taxes. As between the
Buyer and the Seller, the Seller shall be responsible for any transfer taxes or
other taxes (other than income taxes) incurred in connection herewith. The
Escrow Agent shall be entitled to charge against the Escrow Deposit any transfer
taxes incurred in connection herewith.
(g) The Seller shall include in its taxable income currently
the earnings on the Escrow Deposit, and the Escrow Agent shall make periodic
distributions of earnings from the Escrow Deposit to the Seller upon written
request of the Seller in such amounts certified by the Seller as being necessary
for the Seller to pay all applicable income taxes, at the maximum applicable
rate imposed on such earnings. The Escrow Agent shall file annually or otherwise
as required by applicable law all required tax information reports or forms (or
other tax returns that may be required by applicable law) reporting such
earnings as being for the Seller's tax account. Any payments of income from the
Escrow Deposit shall be subject to withholding regulations then in force with
respect to United States taxes. The Seller will provide the Escrow Agent with
appropriate W-9 forms for tax identification number certification. Each party
hereto, except the Escrow Agent shall, in the notice section of this agreement
provide the Escrow Agent with their Tax Identification Number (TIN) as assigned
by the Internal Revenue Service. All interest or other income earned under the
Escrow Agreement shall be allocated and paid as provided herein and reported by
the recipient to the Internal Revenue Service as having been so allocated and
paid. It is understood that the Escrow Agent shall be responsible for income
reporting only with respect
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<PAGE>
to income earned on investment of funds which are a part of the Escrow Deposit
and is not responsible for any other reporting. This paragraph and paragraphs
(c) and (f) of this section 5 shall survive notwithstanding termination of this
Agreement or the resignation of the Escrow Agent.
(h) The Escrow Agent makes no representation as to the
validity, value, genuineness or the collectibility of any security or other
documents or instrument held by or delivered to it.
(i) The Escrow Agent shall not be called upon to advise any
Party as to the wisdom of selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
(j) The Escrow Agent (and any successor to the Escrow Agent)
may at any time resign as such by delivering the Escrow Deposit and all
undistributed Earnings to any successor to the Escrow Agent jointly designated
by the other Parties hereto in writing, or to any court of competent
jurisdiction, whereupon the Escrow Agent shall be discharged of and from any and
all further obligations arising in connection with this Agreement. The Escrow
Agent shall promptly deliver written notice of its resignation to the other
Parties hereto. The resignation of the Escrow Agent will take effect on the
earlier of (i) the appointment of a successor (including a court of competent
jurisdiction) or (ii) the day which is 30 days after the date of delivery of its
written notice of resignation to the other Parties hereto. If at that time the
Escrow Agent has not received a designation of a successor to the Escrow Agent,
the Escrow Agent's sole responsibility after that time shall be to safe-keep the
Escrow Deposit and any undistributed Earnings until receipt of a designation of
successor to the Escrow Agent or a joint written disposition instruction by the
other parties hereto or a final order of a court of competent jurisdiction.
(k) In the event of any disagreement between the Buyer and the
Seller resulting in adverse claims or demands being made in connection with the
Escrow Deposit, or in the event that the Escrow Agent in good faith is in doubt
as to what action it should take hereunder, the Escrow Agent shall be entitled
to retain the Escrow Deposit (or such part thereof as is the subject of such
disagreement) until the Escrow Agent shall have received (i) a written agreement
executed by the Buyer and the Seller acting jointly directing delivery of the
Escrow Deposit or such part thereof or (ii) an order of a court of competent
jurisdiction directing delivery of the Escrow Deposit or such part thereof.
(l) The Buyer hereby agrees to (i) pay the Escrow Agent
reasonable compensation (as payment in full) for the services to be rendered
hereunder, as described in Schedule 2 attached hereto, and (ii) pay or reimburse
the Escrow Agent upon request for all expenses, disbursements and advances,
including reasonable attorney's fees, incurred or made by it in connection with
the preparation, execution, performance, delivery modification and termination
of this Agreement.
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<PAGE>
(m) In the event funds transfer instructions are given (other
than in writing at the time of execution of the Agreement), whether in writing,
by telecopier or otherwise, the Escrow Agent is authorized to seek confirmation
of such instructions by telephone call-back to the person or persons designated
on Schedule 2 hereto, and the Escrow Agent may rely upon the confirmations of
anyone purporting to be the person or person so designated. The persons and
telephone numbers for call-backs may be changed only in a writing actually
received and acknowledged by the Escrow Agent. The parties to this Agreement
acknowledge that such security procedure is commercially reasonable.
(n) It is understood that the Escrow Agent and the
beneficiary's bank in any funds transfer may rely solely upon any account number
or similar identifying number provided by either of Seller or Buyer with respect
to funds to be delivered pursuant to this Agreement to the party providing such
information to identify (i) the beneficiary, (ii) the beneficiary's bank, or
(iii) an intermediary bank. The Escrow Agent may apply any of the escrowed funds
for any payment order it executes using any such identifying number, even where
its use may result in a person other than the beneficiary being paid, or the
transfer of funds to a bank other than the beneficiary's bank, or an
intermediary bank designated.
6. Choice of Law; Consent to Jurisdiction; Compliance with Law. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York without regard to the conflicts of law rules of such
state. The Buyer and the Seller hereby irrevocably submit to the jurisdiction of
any New York State or Federal court sitting in the State, City and County of New
York in any action or proceeding arising out of or relating to this Agreement,
and the Parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such a New York State or
Federal court. The Buyer, the Seller and the Escrow Agent hereby consent to and
grant any such court jurisdiction over the persons of such Parties and over the
subject matter of any such dispute and agree that delivery or mailing of process
or other papers in connection with any such action or proceeding in the manner
provided herein below shall be valid and sufficient service thereof, provided
service so made shall be deemed completed only upon actual receipt. Nothing
contained in this Section 6 shall be deemed to affect the right of any party to
serve process in any other manner that may be permitted under applicable law.
7. Successors and Assigns.
(a) This Agreement shall be binding upon and inure solely to
the benefit of the Parties hereto and their respective successors and permitted
assigns, and shall not be enforceable by or inure to the benefit of any third
party. No Party may assign any of its rights or obligations under this Agreement
without the written consent of the other Parties; provided, however, that the
Seller and the Parent shall be free to merge with or into one another at any
time, provided that the surviving corporation of such merger shall thereafter
succeed to and be responsible for all obligations and rights of the Seller
hereunder.
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(b) Any corporation into which the Escrow Agent in its
individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Escrow Agreement without further act.
8. Amendments; Entire Agreement. This Agreement may only be modified
by a writing signed by all of the Parties hereto, and no waiver hereunder shall
be effective unless in a writing signed by the party to be charged. This
Agreement constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties
related to the subject matter hereof.
9. Notices. All notices, deliveries or other communications required
or permitted hereunder shall be in writing and shall be deemed received (a) upon
delivery when sent by courier, (b) one Business Day after being sent by
facsimile transmission if such transmission is concurrently confirmed by
first-class registered or certified mail, return receipt requested, postage
prepaid, and (c) three days after being mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, and in any case,
addressed as follows:
if to the Buyer, to:
BMCA Key Acquisition Corp.
1361 Alps Road
Wayne, NJ 07470
Telecopy:
Attention: President
and to:
BMCA Key Acquisition Corp.
1361 Alps Road
Wayne, NJ 07470
Telecopy:
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Friedman, Kaplan & Seiler LLP
875 Third Avenue
New York, NY 10022
Telecopy: (212) 355-6401
Attention: Timothy J. Clark, Esq.
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<PAGE>
if to the Seller to:
Leslie-Locke, Inc.
c/o Leslie Building Products, Inc.
200 Mamaroneck Avenue
White Plains, NY 10601
Telecopy:
Attention: President
with a copy (which shall not constitute notice) to:
Gilbert, Segall and Young LLP
430 Park Avenue
New York, NY 10022
Telecopy: (212) 644-4051
Attention: Harvey F. Milman, Esq.
and, if to the Escrow Agent, to:
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Telecopy: (212) 946-8156
Attention: Escrow Administration, 15th Floor
provided, however, notice to the Escrow Agent shall not be deemed given until
such notice is actually received by the Escrow Agent at the Escrow Agent's
address given above.
10. Authorization to use a Central Securities Depository. The other
Parties hereto authorize the Escrow Agent, for any securities held hereunder, to
use the services of any United States central securities depository it deems
appropriate, including but not limited to the Depository Trust Company and the
Federal Reserve Bank Entry System.
11. Execution. Execution of this Agreement by the Escrow Agent will
constitute its acceptance of the terms hereof and will acknowledge its receipt
of the Escrow Deposit.
12. Counterparts. This Agreement may be in one or more counterparts,
each of which shall be an original, and all of which, when taken together,
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
BMCA KEY ACQUISITION CORP. on its Own
Behalf and on Behalf of the Other Buyer Related
Parties
By:
--------------------------------------------
Name:
Title:
LESLIE-LOCKE, INC.
By:
--------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By:
--------------------------------------------
Name:
Title:
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<PAGE>
SCHEDULE 1
Six and one-quarter (6.25) basis points of the highest value of collateral held
on deposit per annum or any part thereof subject to a minimum of $5,000 per
annum or any part thereof without proration for partial years, (includes
investment in a Chase Manhattan Bank Money Market Account or The Chase Manhattan
Bank Mutual Fund known as the Chase Vista Fund).
<PAGE>
SCHEDULE 2
Telephone Number(s) for Call-Backs and
Person(s) Designated to Confirm Funds Transfer Instructions
If to the Seller:
Name Telephone Number
---- ----------------
1. Fredric M. Zinn, CFO (914) 421-2545
----------------------------------------- ------------------------------
2.
----------------------------------------- ------------------------------
3.
----------------------------------------- ------------------------------
If to the Buyer:
1. Stephen R. Olsen, V.P. (973) 628-3714
----------------------------------------- ------------------------------
2.
----------------------------------------- ------------------------------
3.
----------------------------------------- ------------------------------
Telephone call-backs shall be made to each of the Seller and the Buyer if joint
instructions are required pursuant to the Agreement.
PARENT GUARANTY AGREEMENT
PARENT GUARANTY AGREEMENT (this "Agreement"), dated this 18th day of
June, 1998, by and between LESLIE BUILDING PRODUCTS, INC., a Delaware
corporation ("Guarantor"), and BMCA KEY ACQUISITION CORP., a Delaware
corporation ("Buyer"), on its own behalf and on behalf of the other Buyer
Related Parties (as defined in the Asset Purchase Agreement referred to below).
W I T N E S S E T H:
WHEREAS, Buyer and Leslie-Locke, Inc., a Delaware corporation
("Seller") have entered into an Asset Purchase Agreement, dated May 26, 1998
(the "Asset Purchase Agreement"), providing for the sale by Seller to Buyer of
substantially all of the assets of Seller;
WHEREAS, Guarantor is the owner of 100% of the issued and
outstanding stock of Seller;
WHEREAS, pursuant to Sections 9.1(b) and (c) of the Asset Purchase
Agreement, Seller is obligated to indemnify the Buyer Related Parties for
certain losses incurred by the Buyer Related Parties (as defined in the Asset
Purchase Agreement);
WHEREAS, Guarantor has agreed to guaranty Seller's indemnification
obligations under Sections 9.1(b) and (c) of the Asset Purchase Agreement;
WHEREAS, it is a condition precedent to the closing of the Asset
Purchase Agreement that Buyer, Guarantor, Seller and Agent enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
agreements, provisions and covenants contained herein, the parties hereby agree
as follows:
1. Definitions. (a) Capitalized terms used herein without definition have the
respective meanings ascribed to them in the Asset Purchase Agreement.
(b) The following terms used in this Agreement shall have the
following meanings:
"Escrow Deposit" shall have the meaning set forth in the Net
Proceeds Escrow Agreement (as hereinafter defined).
"Net Proceeds Escrow Agreement" shall mean the Net Proceeds Escrow
Agreement dated the date hereof among Buyer, Seller and The Chase Manhattan Bank
as escrow agent.
<PAGE>
"Net Proceeds Escrow Agreement" shall mean the Net Proceeds Escrow
Agreement dated the date hereof among Buyer, Seller and The Chase Manhattan Bank
as escrow agent.
"Obligations" shall mean the due, prompt and complete payment by
Seller of all amounts due to the Buyer Related Parties solely under Sections
9.1(b) and (c) (and (e) to the extent applicable) of the Asset Purchase
Agreement in respect of Excluded Liabilities, Claims of Environmental Liability
and Off-Site Claims of Environmental Liability, when and as the same shall
become due and payable, subject to and in accordance with the limitations and
other provisions (including provisions regarding defense of third-party claims)
of Article IX of the Asset Purchase Agreement. Without limiting the provisions
of Section 9.4 of the Asset Purchase Agreement, Obligations shall not include
any amounts referred to in the preceding sentence unless a notice of claim
(within the meaning of Section 9.4(c) of the Asset Purchase Agreement) with
respect to the matter to which such amount relates has been delivered to Seller
on or prior to the fourth anniversary of the Closing Date.
"Permitted Payment" shall have the meaning set forth in the Net
Proceeds Escrow Agreement.
"Termination Date" shall have the meaning set forth in the Net
Proceeds Escrow Agreement.
2. Guaranty. Guarantor unconditionally and irrevocably guarantees to
the Buyer Related Parties the due, prompt and complete payment and performance
by Seller of all of the Obligations.
This guaranty is a guaranty of payment, performance and compliance
and not of collectibility and is in no way conditioned or contingent upon any
attempt to collect from or enforce performance or compliance by Seller or upon
any other event or condition whatsoever. If for any reason whatsoever Seller
shall fail or be unable duly, punctually and fully to pay any Obligations as and
when the same shall become due and payable or to perform or comply with any
Obligation, Guarantor will forthwith, upon Buyer's written demand, pay or cause
to be paid the Obligation to Buyer (on behalf of itself and the other Buyer
Related Parties), in lawful money of the United States, or perform or comply
with such Obligation or cause such Obligation to be performed or complied with.
Notwithstanding anything herein to the contrary, prior to the
Termination Date, Guarantor's liability hereunder shall not exceed, and the
Buyer Related Parties' recourse against Guarantor shall be limited to, the
aggregate amount of dividends, distributions and other payments made by Seller
to Guarantor after the Closing Date only out of the Escrow Deposit (as defined
in the Net Proceeds Escrow Agreement) held under the Net Proceeds
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<PAGE>
Escrow Agreement (excluding any dividends, distributions or other payments to
Guarantor which would qualify as Permitted Payments under paragraphs (c), (d)
and (f) of Section 3 of the Net Proceeds Escrow Agreement). On and after the
Termination Date, Guarantor's liability hereunder in respect of the Obligations
shall be unlimited.
3. Guarantor's Representations and Warranties. Guarantor hereby
represents and warrants to Buyer (for its own benefit and the benefit of the
other Buyer Related Parties) as follows:
(a) Organization, Good Standing, Etc. Guarantor is a corporation
duly organized and validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and as
proposed to be conducted, and to enter into and to carry out the terms of this
Agreement.
(b) Authorization and Enforceability. The execution and delivery by
Guarantor of this Agreement and all other agreements and documents to be
executed and delivered by it in connection herewith, the performance by
Guarantor of its obligations hereunder and thereunder, and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate acts and other proceedings of Guarantor.
This Agreement and all other agreements and documents to be executed and
delivered by Guarantor in connection herewith have been duly and validly
executed and delivered by Guarantor and, subject to claims or rights of
creditors and other third parties against Guarantor which may now or hereafter
be determined to exist, including, without limitation, in respect of Excluded
Liabilities ("Creditor Claims"), constitute legal, valid and binding obligations
of Guarantor, enforceable against it in accordance with their respective terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, rearrangement, fraudulent transfers or conveyance,
conservatorship or other laws (including court decisions) affecting the
enforcement of creditors' rights generally.
(c) Relationship to Seller. Guarantor owns 100% of the issued and
outstanding shares of capital stock of Seller.
(d) Compliance with Other Instruments, Etc. The execution and
delivery by Guarantor of, and performance of the obligations of Guarantor under,
this Agreement will not result in any violation of or be in conflict with or
constitute a default under any term of any agreement or instrument to which it
is a party or by which it is bound or, except with respect to Creditor Claims,
any term of any applicable law, ordinance, rule or
3
<PAGE>
regulation of any governmental authority or, except with respect to Creditor
Claims, any term of any applicable order, judgment or decree of any court,
arbitrator or governmental authority or result in the creation of (or impose any
obligation on Guarantor to create) any lien upon any of the properties or assets
of Guarantor pursuant to any such term, which violation, conflict, default or
lien might have a material adverse effect on the business, operations, condition
(financial or physical), properties, net assets or liabilities of Guarantor or
upon the ability of Guarantor to perform its obligations under this Agreement.
(e) Governmental Consent. No Governmental Approval or Consent on the
part of Guarantor is required for the valid execution and delivery of this
Agreement and the due performance of the obligations of Guarantor under this
Agreement.
4. Guarantor's Obligations Unconditional. The obligations of
Guarantor under this Agreement shall remain in full force and effect without
regard to, and shall not be released, discharged or in any way affected by:
(a) any amendment of or change in, or termination or waiver of, any
of the Acquisition Documents;
(b) any furnishing, acceptance or release of, or any defect in any
security for, any of the Obligations;
(c) any failure, omission or delay on the part of Seller to conform
or comply with any term of any of the Acquisition Documents;
(d) any waiver of the payment, performance or observance of any of
the obligations, conditions, covenants or agreements contained in any
Acquisition Document, or any other waiver, consent, extension, indulgence,
compromise, settlement, release or other action or inaction under or in respect
of any of the Acquisition Documents;
(e) any failure, omission or delay on the part of Buyer or other
Buyer Related Party to enforce, assert or exercise any right, power or remedy
conferred on it in this Agreement;
(f) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, conservatorship, custodianship,
liquidation, marshalling of assets and liabilities or similar proceedings with
respect to Seller or Guarantor or any action taken by any trustee or receiver or
by any court in any such proceeding;
(g) any merger or consolidation of Seller or Guarantor into or with
any other corporation, or any sale, lease or
4
<PAGE>
transfer of any of the assets of Seller or Guarantor to any other person; or
(h) any change in the ownership of any shares of capital stock of
Seller, or any change in the corporate relationship between Seller and
Guarantor, or any termination of such relationship.
5. Waiver. Guarantor unconditionally waives, to the extent permitted
by applicable law,(a) notice of any of the matters referred to in Section 4, (b)
notice to Guarantor of the incurrence of any of the Obligations, notice to
Guarantor or Seller of any breach or default by Seller with respect to any of
the Obligations or any other notice that may be required, by statute, rule of
law or otherwise, to preserve any rights of Buyer or any other Buyer Related
Party against Guarantor, (c) any right to the enforcement, assertion, exercise
or exhaustion by Buyer or any other Buyer Related Party of any right, power,
privilege or remedy conferred in the Asset Purchase Agreement or any other
Acquisition Document, in each case except as provided for therein, (d) any
requirement to mitigate the damages resulting from any default under any
Acquisition Document, (e) any notice of any sale, transfer or other disposition
of any right, title to or interest in any Acquisition Document, (f) any release
of Guarantor from its obligations hereunder resulting from any loss by it of its
rights of subrogation hereunder and (g) any other circumstance whatsoever which
might otherwise constitute a legal or equitable discharge or release of a
guarantor or surety; provided, however, that the foregoing waivers shall not
affect or limit (x) Guarantor's right to written demand pursuant to Section 2
hereof, (y) Guarantor's right to any other notice or demand provided for herein,
or (z) the obligation of Buyer or any other Buyer Related party to give any
other notice required by the Acquisition Documents; and provided, further that
neither the foregoing waivers nor any other provision hereof shall affect or
limit the right of Guarantor to assert against any Buyer Related Party any other
defense, counterclaim, setoff or other right, to the extent that Seller would
not be prohibited from asserting such defense, counterclaim, setoff or other
right under the Asset Purchase Agreement.
6. Subrogation. Until the earlier of (a) termination of this
Agreement or (b) the payment and performance in full of all Obligations,
Guarantor shall not seek to exercise any rights of subrogation, reimbursement or
indemnity arising from payments made by Guarantor pursuant to the provisions of
this Agreement.
7. Amendments, Etc. No amendment, modification, termination or
waiver or any provision of this Agreement, or consent to any departure by
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Guarantor and Buyer (on its own behalf and on behalf of
the
5
<PAGE>
other Buyer Related Parties), and then such amendment, modification, termination
or waiver shall be effective only in the specific instance and for the specific
purpose for which given.
8. Notices. All notices under the terms and provisions hereof shall
be in writing, and shall be delivered or sent by telex or telecopy or mailed by
first class mail, postage prepaid, addressed, (a) if to Buyer, at the address
set forth in Section 14.1 of the Asset Purchase Agreement, or at such other
address as Buyer shall from time to time designate in writing to Guarantor, and
(b) if to Guarantor, at 200 Mamaroneck Avenue, White Plains, NY 10601, or at
such other address as Guarantor shall from time to time designate in writing to
Buyer. Any notice so addressed shall be deemed to be given when so delivered or
sent or, if mailed, on the third Business Day after being so mailed.
9. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted assigns. This
Agreement shall not be assignable either party without the prior written consent
of the other. Guarantor shall be free to merge with or into Seller at any time,
subject to and in accordance with the terms of the other Acquisition Documents.
10. Submission to Jurisdiction. Each of the parties hereto, for
itself and its successors and assigns, hereby irrevocably (a) agrees that any
legal or equitable action, suit or proceeding against it arising out of or
relating to this Agreement or any transaction contemplated hereby or the subject
matter of any of the foregoing may be instituted in any state or federal court
in the State, City and County of New York, (b) waives any objection which it may
now or hereafter have to the venue of any action, suit or proceeding, (c)
irrevocably submits itself to the nonexclusive jurisdiction of any state or
federal court of competent jurisdiction in the State of New York for purposes of
any such action, suit or proceeding. Each such party waives personal service of
process and consents that service of process upon it may be made by certified or
registered mail, return receipt requested, at its address specified or
determined in accordance with the provisions of Section 8, provided service so
made shall be deemed completed only upon actual receipt. Nothing contained in
this Section 10 shall be deemed to affect the right of any party to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any jurisdiction.
11. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LEGAL OR EQUITABLE
ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE OTHER ACQUISITION
6
<PAGE>
DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT
MATTER OF ANY OF THE FOREGOING.
12. Miscellaneous. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. The section and
paragraph headings in this Agreement and the table of contents are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof, and all references herein to numbered
sections, unless otherwise indicated, are to sections in this Agreement. This
Agreement shall in all respects be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to applicable
principles of conflicts of law.
IN WITNESS WHEREOF, the Parties and the Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
LESLIE BUILDING PRODUCTS, INC.
By:
----------------------------------------------
Name:
Title:
BMCA KEY ACQUISITION CORP., on its Own Behalf and on
Behalf of the Other Buyer Related Parties
By:
----------------------------------------------
Name:
Title:
7
