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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): October 11, 1994
TJ INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-7469 82-0250992
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
380 E. ParkCenter Boulevard, Suite 300, Boise, Idaho 83706
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (208) 345-8500
EXHIBIT INDEX, Page 6
PAGE 1 OF 6
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On October 11, 1994, TJ International, Inc. (the"Company") formed a
Delaware general partnership (the "Partnership"),combining the
Company's wholly-owned subsidiary, Norco Windows, Inc.,a Wisconsin
corporation ("Norco"), with SealRite Windows, Inc., a Nebraska
corporation ("SealRite") and Oldach Window Corp., a Delaware
corporation ("Oldach"). The Partnership, which was initially formed
as the N-S&O Partnership, will operate under the name "Outlook Window
Partnership."
Under the terms of a Partnership Formation and Contribution Agreement
(the "Contribution Agreement"), the Company contributed to the
Partnership all of the assets and liabilities of Norco and all of the
issued and outstanding capital stock of its wholly-owned subsidiaries,
Dashwood Industries Limited, a corporation organized under the laws of
the Province of Ontario, Canada ("Dashwood"), and R. LaFlamme & Frere,
Inc., a corporation organized under the laws of the Province of
Quebec, ("LaFlamme"), in exchange for a 73.5% interest in the
Partnership.
The Contribution Agreement also provided that each of SealRite and
Oldach contributed all of their respective assets and liabilities
in exchange for an aggregate 26.5% interest in the Partnership.
The Partnership Agreement of the Partnership (the "Partnership
Agreement") provides that the Company shall make an additional cash
contribution to the Partnership equal to the amount of any operating
losses for Norco, Dashwood and LaFlamme, from the period October 3,
1994 to December 31, 1995.
The day-to-day business of the Partnership is under the control and
direction of a chief executive officer. However, the Partnership may
not take certain significant actions concerning the business of the
Partnership, such as incurring indebtedness, selling assets or
changing the nature of the Partnership's business without majority
approval of the management board of the Partnership, consisting of
three members appointed by the Company, two members appointed by
SealRite and Oldach, and the chief executive officer.
The Partnership Agreement provides that if either Norco or SealRite
and Oldach experiences a change of control, the other party or parties
will have the right to buy the Partnership interest of the party
experiencing the change of control (the "Change Party") at a value
that does not include any takeover premium attributable to the change
of control. The interest of either party in the Partnership will be
valued by a qualified investment banker mutually approved by the
parties. The foregoing provisions may have the effect of discouraging
certain transactions which involve an actual or threatened change of
control of the Company.
PAGE 2 OF 6
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Under the terms of a Liquidity Transaction Agreement, the Company has
agreed to use its best efforts to cause a planned corporate successor
to the Partnership to undertake a firm commitment underwritten public
offering of common stock, pursuant to which the shareholders of
SealRite and Oldach would be given piggy-back registration rights. The
timing of such initial public offering is anticipated during calendar
year 1995; however, the Company may delay such offering up to an
additional 12 months. Once the corporate successor to the Partnership
has completed a public offering, the SealRite and Oldach shareholders
are granted two demand registration rights. If at least 80% of the
SealRite and Oldach shareholdings have not been publicly registered by
October 3, 1997, SealRite and Oldach may unilaterally market the
Partnership (or its corporate successor), subject to the Company's
right of first refusal.
(b) The assets contributed by Norco, SealRite and Oldach to the
Partnership will continue to be used in the manufacturing,
distribution and sale of windows and doors and related products.
PAGE 3 OF 6
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of businesses acquired.
(b) Pro forma financial information.
It is impracticable for the Company to provide financial statements or
pro forma financial information at this time regarding the transaction
described in Item 2. Therefore, the Company will file the required
financial statements and pro forma financial information under cover
of Form 8 as soon as practicable, but not later than November 26,
1994.
(c) Exhibits
Exhibit
Number
2 Conformed copy of the Partnership Formation and Contribution
Agreement among TJ International, Inc., SealRite Windows,
Inc. and Oldach Window Corp., dated as of October 11, 1994.
Schedules and Exhibits to the Partnership Formation and
Contribution Agreement are listed in the Agreement.
TJ International will furnish supplementally a copy of any
Schedule or Exhibit to the Commission on request.
2 Conformed copy of the Partnership Agreement of the N-S&O
Partnership by and among Norco Windows, Inc., SealRite
Windows, Inc. and Oldach Window Corp., dated as of
October 11, 1994.
Schedules and Exhibits to the Partnership Agreement are
listed in the Agreement.
TJ International will furnish supplementally a copy of any
Schedule or Exhibit to the Commission on request.
4 Conformed copy of the Liquidity Transaction Agreement by
and among T.J International the N-S&O Partnership and the
individual shareholders of SealRite Windows, Inc., and
Oldach Window Corp., dated as of October 11, 1994.
PAGE 4 OF 6
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TJ INTERNATIONAL, INC.
---------------------------------------
(Registrant)
By: /s/ Valerie A. Heusinkveld
-----------------------------------
Valerie A. Heusinkveld
Vice President, Finance and
Chief Financial Officer
Date: October 25, 1994
PAGE 5 OF 6
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EXHIBIT INDEX
Exhibit No. Description Document No.
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2 Partnership Formation and Contribution 2
Agreement among TJ International, Inc.
SealRite Windows, Inc., and Oldbach
Window Corp., dated as of October 11,
1994.
2 Partnership Agreement of the N-S&O 3
Partnership among Norco Windows, Inc.,
SealRite Windows, Inc. and Oldach
Window Corp., dated as of October 11,
1994.
4 Liquidity Transaction Agreement among 4
TJ International, Inc., the N-S&O
Partnership, and the individual
shareholders of SealRite Windows, Inc.
and Oldach Window Corp., dated of October 11,
1994.
PAGE 6 OF 6
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PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT
by and among
TJ INTERNATIONAL, INC.
and
SEALRITE WINDOWS, INC.
and
OLDACH WINDOW CORP.
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October 11, 1994
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TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 General. . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Additional Definitions . . . . . . . . . . . . . . . . . 4
ARTICLE II CONTRIBUTIONS TO THE PARTNERSHIP. . . . . . . . . . . . . . . 5
Section 2.1 Contribution of TJI. . . . . . . . . . . . . . . . . . . 5
Section 2.2 Contribution of S&O. . . . . . . . . . . . . . . . . . . 6
Section 2.3 Assumed Liabilities. . . . . . . . . . . . . . . . . . . 7
Section 2.4 Additional TJI Contribution. . . . . . . . . . . . . . . 8
Section 2.5 Waiver of Bulk Transfer Statutes . . . . . . . . . . . . 10
ARTICLE III EXCLUDED LIABILITIES; SURVIVAL AND INDEMNIFICATION. . . . . . 10
Section 3.1 Excluded Liabilities . . . . . . . . . . . . . . . . . . 10
Section 3.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.3 Indemnification. . . . . . . . . . . . . . . . . . . . . 12
Section 3.4 Control of Litigation. . . . . . . . . . . . . . . . . . 12
ARTICLE IV CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.2 Conveyance Instruments . . . . . . . . . . . . . . . . . 14
Section 4.3 Further Assurances . . . . . . . . . . . . . . . . . . . 14
ARTICLE V RELATED AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.1 Related Agreements . . . . . . . . . . . . . . . . . . . 15
Section 5.2 Credit Facility. . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF TJI . . . . . . . . . . . . 16
Section 6.1 Capitalization and Ownership . . . . . . . . . . . . . . 16
Section 6.2 Title to TJI Subsidiary Stock. . . . . . . . . . . . . . 17
Section 6.3 Organization . . . . . . . . . . . . . . . . . . . . . . 17
Section 6.4 Qualification. . . . . . . . . . . . . . . . . . . . . . 17
Section 6.5 Authority. . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.6 No Violations. . . . . . . . . . . . . . . . . . . . . . 18
Section 6.7 Financial Statements . . . . . . . . . . . . . . . . . . 19
Section 6.8 Absence of Certain Changes or Events . . . . . . . . . . 20
Section 6.9 Certain Tax Matters. . . . . . . . . . . . . . . . . . . 22
Section 6.10 Inventory; Receivables . . . . . . . . . . . . . . . . . 23
Section 6.11 Title to Properties; Encumbrances. . . . . . . . . . . . 24
Section 6.12 Leases . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.13 Intellectual Property. . . . . . . . . . . . . . . . . . 25
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Section 6.14 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.15 Pension and Employee Benefits of Dashwood and LaFlamme . 29
Section 6.16 Documents; Commitments . . . . . . . . . . . . . . . . . 31
Section 6.17 Labor Matters. . . . . . . . . . . . . . . . . . . . . . 31
Section 6.18 No Breach. . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.19 Required Consents. . . . . . . . . . . . . . . . . . . . 32
Section 6.20 Litigation . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.21 Compliance With Applicable Law; Adverse Restrictions . . 33
Section 6.22 Environmental Matters. . . . . . . . . . . . . . . . . . 34
Section 6.23 Assets Necessary to Business . . . . . . . . . . . . . . 35
Section 6.24 Customers, Distributors, and Suppliers . . . . . . . . . 36
Section 6.25 Insider Transactions . . . . . . . . . . . . . . . . . . 36
Section 6.26 Accuracy of Information Furnished. . . . . . . . . . . . 36
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF SEALRITE AND OLDACH . . . . 37
Section 7.1 No Dissenters Rights . . . . . . . . . . . . . . . . . . 37
Section 7.2 Organization . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.3 Qualification. . . . . . . . . . . . . . . . . . . . . . 37
Section 7.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.5 No Violations. . . . . . . . . . . . . . . . . . . . . . 38
Section 7.6 Financial Statements . . . . . . . . . . . . . . . . . . 39
Section 7.7 Absence of Certain Changes or Events . . . . . . . . . . 40
Section 7.8 Certain Tax Matters. . . . . . . . . . . . . . . . . . . 41
Section 7.9 Inventory; Receivables . . . . . . . . . . . . . . . . . 43
Section 7.10 Title to Properties; Encumbrances. . . . . . . . . . . . 43
Section 7.11 Leases . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.12 Intellectual Property. . . . . . . . . . . . . . . . . . 45
Section 7.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.14 Documents; Commitments . . . . . . . . . . . . . . . . . 48
Section 7.15 Labor Matters. . . . . . . . . . . . . . . . . . . . . . 49
Section 7.16 No Breach. . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.17 Required Consents. . . . . . . . . . . . . . . . . . . . 50
Section 7.18 Litigation . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.19 Compliance With Applicable Law; Adverse Restrictions . . 51
Section 7.20 Environmental Matters. . . . . . . . . . . . . . . . . . 51
Section 7.21 Assets Necessary to Business of S&O. . . . . . . . . . . 52
Section 7.22 Customers, Distributors, and Suppliers . . . . . . . . . 53
Section 7.23 Insider Transactions . . . . . . . . . . . . . . . . . . 53
Section 7.24 Accuracy of Information Furnished. . . . . . . . . . . . 53
ARTICLE VIII ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES. . . . . . 54
Section 8.1 Cash Distribution to S&O . . . . . . . . . . . . . . . . 54
Section 8.2 Tax Distributions by S&O . . . . . . . . . . . . . . . . 54
Section 8.3 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . 54
Section 8.4 Consents, Permits, Etc.. . . . . . . . . . . . . . . . . 55
ARTICLE IX NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
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ARTICLE X CONSULTANT FEES; EXPENSES OF THE PARTIES . . . . . . . . . . . . . 57
Section 10.1 Consultants. . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.1 Binding Effect; Assignment . . . . . . . . . . . . . . . 57
Section 11.2 Exhibits and Schedules . . . . . . . . . . . . . . . . . 58
Section 11.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.4 Amendment and Modification . . . . . . . . . . . . . . . 58
Section 11.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.7 Severability . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . 59
Section 11.9 No Third Party Beneficiaries. . . . . . . . . . . . . . 59
Section 11.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . 59
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LIST OF SCHEDULES
Schedule No. Item
------------ ----
2.1(a) Permitted TJI Encumbrances
2.2 Permitted S&O Encumbrances
3.1(b) Norco Excluded Liabilities
3.1(c) S&O Excluded Liabilities
6.3 Unanimous Shareholder Agreements for
Dashwood and LaFlamme
6.4 Material TJI Jurisdictions
6.6 TJI Violations
6.7(a) TJI Financial Statements
6.7(b) Amount of Canadian NOLs
6.9 TJI Tax Matters
6.11(a) TJI Owned and Leased Real Property
6.11(b) TJI Encumbrances
6.11(d) TJI Mortgages
6.13 TJI Intellectual Property
6.14 TJI ERISA Matters
6.15 D&L Canadian Employee Benefit Plans
6.17 TJI Labor Matters
6.18 TJI Breach re Material Agreements
6.19 TJI Required Consents
6.20 TJI Litigation
6.21 TJI Compliance With Applicable Law
6.22 TJI Environmental Matters
6.25 TJI Insider Transactions
7.1 Unanimous S&O Shareholder
Resolutions
7.3 Material S&O Jurisdictions
7.5 S&O Violations
7.6 S&O Financial Statements
7.8 S&O Tax Matters
7.10(a) S&O Owned and Leased Real Property
7.10(b) S&O Encumbrances
7.10(d) S&O Mortgages
7.12 S&O Intellectual Property
7.13 S&O ERISA Matters
7.15 S&O Labor Matters
7.16 S&O Breach re Material Agreements
7.17 S&O Required Consents
7.18 S&O Litigation
7.19 S&O Compliance With Applicable Law
7.20 S&O Environmental Matters
7.23 S&O Insider Transactions
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LIST OF EXHIBITS
Exhibit Document Name
------- -------------
EXHIBIT A Partnership Agreement
EXHIBIT B Partnership Support Services Agreement
EXHIBIT C Liquidity Transaction Agreement
EXHIBIT D Employee Leasing Agreement
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PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT
THIS PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT ("AGREEMENT") is made
and entered into as of October 11, 1994, effective as of October 3, 1994. The
parties ("PARTIES") to this Agreement are TJ INTERNATIONAL, INC., a Delaware
corporation ("TJI"), SEALRITE WINDOWS, INC., a Nebraska corporation ("SEALRITE")
and OLDACH WINDOW CORP., a Delaware corporation ("OLDACH") (SealRite and Oldach
are referred to herein from time to time collectively, as "S&O").
RECITALS
A. TJI is the sole shareholder and the legal and beneficial owner of all
of the issued and outstanding capital stock of (i) Norco Windows, Inc., a
Wisconsin corporation ("NORCO") and (ii) Dashwood Industries Limited, a
corporation organized under the laws of the Province of Ontario, Canada
("DASHWOOD"). Dashwood is the sole shareholder and the legal and beneficial
owner of all of the issued and outstanding capital stock of R. LaFlamme & Frere,
Inc., a corporation organized under the laws of the Province of Quebec, Canada
("LAFLAMME"). Norco, Dashwood and LaFlamme are referred to herein from time to
time collectively, as the "TJI SUBSIDIARIES."
B. Each of the TJI Subsidiaries and S&O is in the business of
manufacturing, marketing, selling and distributing windows and doors and related
products for the residential and light commercial markets (individually and
collectively, the "BUSINESS").
C. The respective Boards of Directors of the Parties have determined that
the interests of their stockholders would best be served by forming a general
partnership under the laws of the State of Delaware under the name "N-S&O
PARTNERSHIP" (the "PARTNERSHIP") to carry on the Business of the TJI
Subsidiaries and of S&O on a consolidated basis.
D. In furtherance of the foregoing, (a) TJI, as its initial contribution
to the Partnership, (i) will cause Norco to assign, convey and deliver to the
Partnership substantially all of the assets and liabilities relating to, arising
out of or resulting from the conduct of the Business by Norco and (ii) will
assign, convey and deliver to the Partnership all of the issued and outstanding
capital stock of Dashwood, and (b) SealRite and Oldach, as their initial
contributions to the Partnership, will assign,
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 1
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convey and deliver to the Partnership substantially all of their respective
assets and liabilities relating to, arising out of or resulting from their
conduct of the Business.
NOW, THEREFORE, in consideration of the premises (which are incorporated
into this Agreement by this reference), and the mutual covenants and conditions
contained herein, the Parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 GENERAL.
As used in this Agreement, capitalized terms defined immediately after
their use shall have the respective meanings thereby provided, and the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
ACTION: any action, claim, suit, arbitration, inquiry, subpoena, discovery
request, proceeding or investigation by or before any court or grand jury, any
governmental or other regulatory or administrative agency or commission or any
arbitration tribunal.
AFFILIATE: with respect to any specified person, a person that, directly
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, such specified person.
BALANCE SHEET DATE: June 30, 1994.
ENCUMBRANCES: any title defects, objections, liens, pledges, claims,
rights of first refusal, demands, options, security interests, mortgages or
other encumbrances of any nature whatsoever (including any "adverse claim" as
defined in the Uniform Commercial Code).
ENVIRONMENT: any indoor or outdoor ambient air, surface water,
groundwater, drinking water, building surface, material surface, land surface or
subsurface stratum, including, without limitation, any organic or non-organic
material therein, thereon or thereunder.
ENVIRONMENTAL LAW: any federal, foreign, state, provincial, local, or
municipal law (including common law), statute, ordinance, rule, code,
regulation, order, decree, judgment, decision, ruling,
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 2
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permit or authorization (each as may be in effect from time to time) relating or
applicable to pollution or protection of human health, safety or the
environment, including, without limitation, any of the foregoing relating or
applicable to emissions, discharges, spills, releases or threatened releases of
any Materials of Environmental Concern upon or into the Environment, or human or
natural resource exposure to any Material of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of any Material of Environmental Concern.
ENVIRONMENTAL LIABILITY: any and all Liabilities, relating or applicable
to the Environment, or to any violation of or liability under, or allegation of
violation of or liability under, any Environmental Law, including, without
limitation, liability for investigatory costs, oversight costs, remediation and
cleanup costs, governmental or private response costs and cost recovery actions,
natural resource damages, property damages, personal injuries, consequential
economic damages, administrative, civil or criminal penalties, fines or
forfeitures, and attorneys' fees or other costs of defending an Action or a
claim relating to same.
GAAP: generally accepted accounting principles as in effect as of the date
of this Agreement.
INVENTORY: items of raw materials, finished goods, work-in-progress and
inventories.
LAWS: any federal, foreign, state, provincial, local or municipal law
(including common law), statute, ordinance, rule, code, regulation, order,
decree, judgment, decision, ruling, permit or authorization (each as may be in
effect from time to time).
LIABILITIES: any and all Actions, debts, liabilities, warranties and
obligations (of any nature or type whatsoever regardless of when arising),
whether accrued, contingent or reflected on a balance sheet, including, without
limitation, those relating to, arising out of or resulting from (i) any Law
(including, without limitation, any Environmental Law), Action, order or consent
decree of any governmental entity, (ii) any judgment or award of any court,
arbitrator or other governmental or other tribunal or (iii) any lease, contract,
commitment or undertaking, including, without limitation, any such debts,
liabilities, warranties and obligations constituting Environmental Liabilities.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 3
<PAGE>
LOSS: any loss, liability, claim, damage, obligation, payment, cost or
expense (including, without limitation, the costs and expenses of any Action,
any demand, assessment, judgment, settlement or compromise related thereto and
reasonable attorneys' fees, disbursements and other charges in connection
therewith).
MATERIAL OF ENVIRONMENTAL CONCERN: (a) any chemical, material, substance,
waste or compound defined or regulated under any Environmental Law, and (b) any
hazardous, toxic, industrial or dangerous chemical, material, substance, waste
or compound, any pollutant, contaminant or deleterious agent, asbestos and
asbestos-containing materials, petroleum, petroleum products, or any derivatives
of the foregoing.
S&O ACCOUNTANTS: Price Waterhouse.
TJI ACCOUNTANTS: Arthur Andersen & Co.
SECTION 1.2 ADDITIONAL DEFINITIONS.
The following terms shall have the meanings defined for such terms in the
sections set forth below:
Term Section
---- -------
Assumed Liabilities 2.3
Business Recital B
Closing 4.1
Closing Date 4.1
Conveyance Instruments 4.2
Dashwood Recital A
Dashwood Stock 2.1(a)(ii)
Effective Date 4.1
Employee Fringe Benefit
Arrangements 6.14(a), 7.13(a)
Environmental Permits 6.22(a), 7.20(a)
Excluded Liabilities 3.1
Indemnitee 3.3
Indemnitor 3.3
LaFlamme Recital A
Material S&O Jurisdictions 7.3
Material TJI Jurisdictions 6.4
Non-Assigned Agreements 8.4(b)
Norco Recital A
Norco Assets 2.1(a)(i)
Norco Balance Sheet 6.7(a)
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 4
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Term Section
---- -------
Norco Excluded Liabilities 3.1(b)
Norco Liability Threshold 3.1(b)
Partnership Recital C
Partnership Agreement 5.1(a)
Permitted S&O Encumbrances 2.2
Permitted TJI Encumbrances 2.1(a)(i)
Related Agreements 5.1
Returns 6.9(a)(i), 7.8(a)(i)
S&O Assets 2.2
S&O Balance Sheets 7.6
S&O Common Stock 7.1(a)
S&O Excluded Liabilities 3.1(c)
S&O Financial Statements 7.6
S&O Intellectual Property 7.12
S&O Leases 7.11
S&O Liability Threshold 3.1(c)
S&O Mortgages 7.10(d)
Tax Assets 6.9(a)(v), 7.8(a)(v)
TJI Balance Sheets 6.7(a)
TJI Effective Date
Balance Sheet 2.4(a)
TJI Effective Date
Net Worth 2.4(a)
TJI Financial Statements 6.7
TJI Intellectual Property 6.13
TJI Leases 6.12
TJI Mortgages 6.11(d)
TJI Subsidiaries Recital A
TJI Subsidiary Stock 6.1
ARTICLE II
CONTRIBUTIONS TO THE PARTNERSHIP
SECTION 2.1 CONTRIBUTION OF TJI.
(a) Subject to the terms and conditions of this Agreement, on the
Closing Date (as defined in Section 4.1 hereof), TJI shall:
(i) Assign, transfer and deliver, or cause to be assigned,
transferred and delivered to the Partnership, as a contribution,
effective as of the Effective Date, free and clear of all Encumbrances
other than those set forth on SCHEDULE 2.1(A) attached hereto (the
"PERMITTED TJI ENCUMBRANCES"), all of the assets, properties, rights
and
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 5
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business of every kind and description; wherever located; real,
personal or mixed; tangible or intangible; owned or held by Norco; or
used primarily in the conduct of the Business by Norco as the same
shall exist on the Closing Date, including, without limitation, all
assets and property of Norco shown on the "NORCO BALANCE SHEET" (as
defined in Section 6.7 of this Agreement) and not disposed of in the
ordinary course of business, and all assets and property thereafter
acquired by Norco (collectively, the "NORCO ASSETS"); AND
(ii) Assign, transfer and deliver, or cause to be assigned,
transferred and delivered to the Partnership, as a contribution,
effective as of the Effective Date, 25,000 common shares (no par
value), 25,100 Class D preferred shares (no par value), and 21,061,013
Class B shares (no par value) (the "DASHWOOD STOCK"), representing all
of the issued and outstanding capital stock of Dashwood, free and
clear of all Encumbrances, including, without limitation, all
Encumbrances on the underlying assets of Dashwood and LaFlamme, other
than Permitted TJI Encumbrances.
(b) The Parties hereby agree that the consideration to be paid by the
Partnership for the Dashwood Stock is an amount equal to $18,000,000, which
the Parties have agreed is the fair market value of the Dashwood Stock as
of the Closing Date (including the fair market value of $3,000,000 of
LaFlamme, which is a wholly-owned subsidiary of Dashwood), subject to
adjustment pursuant to Section 2.4 hereof. Such consideration shall be
fully satisfied by the issuance of a partnership interest in the
Partnership to TJI (or as TJI may direct, to Norco) with a fair market
value equal to such amount as of the Closing Date, and by the making of the
adjustments described in Section 2.4.
SECTION 2.2 CONTRIBUTION OF S&O.
Subject to the terms and conditions of this Agreement, on the Closing Date,
each of SealRite and Oldach shall assign, transfer and deliver to the
Partnership, as a contribution, effective as of the Effective Date, free and
clear of all Encumbrances other than those set forth on SCHEDULE 2.2 attached
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 6
<PAGE>
hereto (the "PERMITTED S&O ENCUMBRANCES"), all of the assets, properties, rights
and business of every kind and description; wherever located; real, personal or
mixed; tangible or intangible; owned or held by SealRite and/or Oldach; or used
primarily in the conduct of the Business by SealRite and/or Oldach, as
applicable, as the same shall exist on the Closing Date, including, without
limitation, all assets and property shown on the "S&O BALANCE SHEETS" (as
defined in Section 7.6 of this Agreement) and not disposed of in the ordinary
course of business, and all assets and property thereafter acquired by S&O
(collectively, the "S&O ASSETS").
SECTION 2.3 ASSUMED LIABILITIES.
Except as provided in Article III hereof, in consideration of the transfers
set forth in Sections 2.1 and 2.2 above, the Partnership shall, effective as of
the Effective Date, without any further responsibility or liability of or
recourse to the Parties or any of the Parties' directors, shareholders,
officers, employees, agents, consultants, representatives, successors,
transferees or assigns, absolutely and irrevocably assume and be solely liable
and responsible for, and shall agree to pay, discharge or fulfill (i) all of the
Liabilities of Norco relating to, arising out of or resulting from its conduct
of the Business or the use, ownership or operation of the Norco Assets, whether
known or unknown, or arising or accruing before or after the Effective Date, and
(ii) all of the Liabilities of SealRite and Oldach relating to, arising out of
or resulting from their respective conduct of the Business or the use, ownership
or operation of the S&O Assets, whether known or unknown, or arising or accruing
before or after the Effective Date, including, without limitation, the following
(collectively, the "ASSUMED LIABILITIES"):
(a) all Liabilities which are set forth, reflected, disclosed or
reserved for on the Norco Balance Sheet and the S&O Balance Sheets;
(b) all Liabilities of Norco and S&O, as applicable, relating to,
arising out of or resulting from any and all contracts, leases, mortgages,
debt instruments and other agreements to which either Norco or S&O is a
party;
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 7
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(c) all warranty, performance and similar obligations whether arising
under contract, implied by law or otherwise, entered into or made in the
ordinary course of the Business of Norco and S&O, as the case may be, with
respect to their products or services;
(d) all Environmental Liabilities relating to any real property
owned, leased or held for use by the TJI Subsidiaries or S&O; and
(e) all Liabilities relating to all Actions relating to, arising out
of or resulting from the operation of the Business of Norco and S&O, as the
case may be, including, without limitation, the litigation described in
SCHEDULES 6.19 and 7.18 attached hereto.
SECTION 2.4 ADDITIONAL TJI CONTRIBUTION.
(a) Within one hundred twenty (120) days after the Closing Date, TJI
shall deliver to S&O and the Partnership an audited combined balance sheet
of the TJI Subsidiaries dated as of the Effective Date (the "TJI EFFECTIVE
DATE BALANCE SHEET"), together with a report thereon of the TJI Accountants
to the effect that the TJI Effective Date Balance Sheet fairly presents the
combined net worth of the TJI Subsidiaries on a stand-alone basis as of the
Effective Date (the "TJI EFFECTIVE DATE NET WORTH") in accordance with GAAP
applied on a basis consistent with the TJI Balance Sheets (to the extent
the TJI Balance Sheets were prepared on a stand-alone basis in accordance
with GAAP). The cost of preparing the TJI Effective Date Balance Sheet and
the report thereon, which shall be part of an overall audit of the
Partnership as of the Effective Date, shall be paid by the Partnership.
S&O and the S&O Accountants, shall have the opportunity to observe physical
inventories and to examine the work papers, schedules and other documents
prepared by the TJI Accountants in connection with their preparation of the
TJI Effective Date Balance Sheet, and all books and records of the TJI
Subsidiaries used in the preparation thereof.
(b) S&O, with the advice and counsel of the S&O Accountants, shall
have a period of thirty (30) days after delivery of the TJI Effective Date
Balance Sheet to present to TJI and the TJI Accountants any objections that
S&O or the S&O Accountants may have to any of the
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 8
<PAGE>
matters set forth therein, which objections shall be set forth in
reasonable detail. SealRite and Oldach expressly covenant and agree to
cause the S&O Accountants to review the TJI Effective Date Balance Sheet
using an accounting methodology which is consistent with the accounting
methodology used in preparation of the TJI Balance Sheets (to the extent
the methodology conforms to GAAP), and that there shall be no changes in
methodology or major judgments by the S&O Accountants in such review (to
the extent such methodology and major judgments conform to GAAP) without a
corresponding change in a factual event. If no objections are raised
within such 30-day period, the TJI Effective Date Balance Sheet shall be
deemed accepted and approved by S&O.
(c) If S&O shall raise any objections within the 30-day period, TJI
and S&O shall attempt to resolve the matter or matters in dispute.
(d) If such dispute cannot be resolved by TJI and S&O within thirty
(30) days after the delivery of the TJI Effective Date Balance Sheet, then
the specific matters in dispute shall be submitted to a nationally-
recognized "Big Six" accounting firm mutually agreed to by TJI and S&O,
which firm shall make a final and binding determination as to such matter
or matters. Such accounting firm shall send its written determination to
the Parties and the Partnership as soon as possible (but in no event more
than forty-five (45) days after submission of such matters to such
accounting firm). The fees and expenses of the accounting firm referred to
in this Section 2.4(d) shall be paid by the Partnership.
(e) Upon the acceptance and approval of the TJI Effective Date
Balance Sheet in accordance with Sections 2.4(b)-2.4(d) of this Agreement,
if the TJI Effective Date Net Worth shall EXCEED $50,000,000, the Parties
shall cause the Partnership to make a cash payment to TJI in an amount
equal to the amount by which the TJI Effective Net Worth exceeds
$50,000,000. If the TJI Effective Date Net Worth shall be LESS than
$50,000,000, TJI shall make or shall cause Norco to make, an additional
cash contribution to the Partnership equal to the amount by which the TJI
Effective Date Net Worth is less than $50,000,000.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 9
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The "Units" (as defined in Section 4.1 of the "Partnership Agreement" (as
defined in Section 5.1 of this Agreement)) allocated to Norco and S&O pursuant
to the Partnership Agreement, have been so allocated after giving effect to any
cash adjustment which may be required pursuant to this Section 2.4(e). Such
Units shall not be adjusted in any way as a result of any such cash adjustment
under this Section 2.4(e).
SECTION 2.5 WAIVER OF BULK TRANSFER STATUTES.
The Parties expressly acknowledge and agree to waive compliance with the
requirements of any bulk transfer acts or similar laws of any application
jurisdiction in connection with the transfer of the Norco Assets and the S&O
Assets to the Partnership. Any and all Loss resulting from a failure by the
Parties to comply properly with any bulk transfer act shall be an Assumed
Liability, and shall be borne by the Partnership.
ARTICLE III
EXCLUDED LIABILITIES; SURVIVAL AND INDEMNIFICATION
SECTION 3.1 EXCLUDED LIABILITIES.
The Parties expressly acknowledge and agree that the Assumed Liabilities
shall not include the following Liabilities (the "EXCLUDED LIABILITIES"):
(a) Any Liability of the Parties resulting from, arising out of, or
relating to this Agreement, the Partnership Agreement and the other Related
Agreements;
(b) Those specific Liabilities of Norco set forth and described on
SCHEDULE 3.1(b) attached hereto (the "NORCO EXCLUDED LIABILITIES");
PROVIDED, HOWEVER, that the Partnership shall assume, and pay and discharge
when due, any and all of such Norco Excluded Liabilities in an aggregate
amount up to but not greater than $2,000,000 IN EXCESS OF the amount set
forth as specific reserves for such Norco Excluded Liabilities on the Norco
Balance Sheet (the "NORCO LIABILITY THRESHOLD");
(c) Those specific Liabilities of SealRite and/or Oldach set forth on
SCHEDULE 3.1(c) attached hereto (the "S&O EXCLUDED LIABILITIES"); PROVIDED,
HOWEVER, that the Partnership shall
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 10
<PAGE>
assume, and pay and discharge when due, any and all of such S&O Excluded
Liabilities in an aggregate amount up to but not greater than $2,000,000 IN
EXCESS OF the amount set forth as specific reserves for such S&O Excluded
Liabilities on the S&O Balance Sheets (the "S&O LIABILITY THRESHOLD");
(d) Any Liability relating to any broker's, finder's, consultant's,
investment banking or similar fee incurred by any party for its own account
in connection with the transactions contemplated by this Agreement, except
as may be provided in the Partnership Agreement;
(e) Any Liabilities that are accrued for, applicable to or arising
from any period ending on or prior to the Effective Date for all federal,
state or local income taxes, and all deficiencies, assessments, charges,
interest and penalties associated therewith; and
(f) Any Liabilities of TJI or the TJI Subsidiaries, or S&O, as the
case may be, to the extent that their existence or magnitude constitutes or
results in a material breach of a representation or warranty made herein by
TJI or S&O, as the case may be, which survives the Closing.
SECTION 3.2 SURVIVAL.
(a) The covenants and agreements of the parties contained in this
Agreement, the Partnership Agreement and the other Related Agreements shall
survive the Closing.
(b) None of the representations and warranties of the Parties
contained herein or in any certificate or other writing delivered pursuant
hereto or in connection herewith shall survive the Effective Date, EXCEPT
that the following representations and warranties shall extend until the
first to occur of (i) the date on which the Partnership converts into a
corporation pursuant to the Liquidity Transaction Agreement (as defined in
Section 5.1(c) hereof), or (ii) December 31, 1995:
(i) with respect to the representations and warranties of TJI:
(A) Section 6.1 hereof with respect to capitalization and ownership,
(B) Section 6.2 hereof with respect to the capital stock of the TJI
Subsidiaries, (C) Section 6.3 hereof with respect
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 11
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organization of the TJI Subsidiaries (excluding Norco), (D) Section
6.5 hereof with respect to the authority of TJI and the TJI
Subsidiaries to enter into this Agreement, the Partnership Agreement
and the other Related Agreements and the consummation of the
transactions contemplated hereby and thereby, and (E) Section 6.11
hereof with respect to the TJI Subsidiaries' title to their respective
properties; and
(ii) with respect to the representations and warranties of
SealRite and Oldach: (A) Section 7.4 hereof with respect to the
authority of each of S&O to enter into this Agreement, the Partnership
Agreement and the other Related Agreements and to consummate the
transactions contemplated hereby and thereby, and (B) Section 7.10
hereof with respect to S&O's title to their respective properties.
SECTION 3.3 INDEMNIFICATION.
TJI and its successors and assigns, and SealRite and Oldach, jointly and
severally, and their successors and assigns, jointly and severally (each of TJI
and S&O, as applicable an "INDEMNITOR"), hereby agree to indemnify the
Partnership, TJI, SealRite and Oldach, as applicable, and their respective
Affiliates, directors, shareholders, officers, employees, agents, consultants
and representatives, as applicable (each, an "INDEMNITEE"), from and against and
agree to hold it or them harmless from and against any and all Losses relating
to, arising out of or resulting from:
(a) any inaccuracy in or any breach of any representation, warranty,
covenant or agreement of the parties which survives the Closing;
(b) Norco Excluded Liabilities IN EXCESS OF the Norco Liability
Threshold; and
(c) S&O Excluded Liabilities IN EXCESS OF the S&O Liability
Threshold.
SECTION 3.4 CONTROL OF LITIGATION.
(a) The Indemnitees agree to give prompt notice to the Indemnitors of
any pending, threatened, imminent or material Loss which any such
Indemnitee deems to be within the ambit of Section 3.3 of this Agreement
(specifying with reasonable particularity the basis therefor) and will give
the Indemnitors such information with respect thereto as the Indemnitors
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 12
<PAGE>
may reasonably request. The Indemnitors may, at their own expense,
participate in and, upon notice to such Indemnitee, assume the defense
of any such Action, PROVIDED, that the Indemnitors' counsel is
reasonably satisfactory to such Indemnitee. If the Indemnitors assume
such defense, the Indemnitors shall thereafter consult with such
Indemnitee upon such Indemnitee's reasonable request for such
consultation from time to time with respect to such Action, and the
Indemnitors shall not, without such Indemnitee's consent, which
consent shall not be unreasonably withheld, settle or compromise any
such Action. Such Indemnitees shall have the right (but not the duty)
to participate in the defense thereof and to employ counsel, at their
own expense, separate from the counsel employed by the Indemnitors.
For any period during which the Indemnitors have not assumed the
defense thereof, the Indemnitors shall be liable for the reasonable
fees and expenses of counsel employed by any Indemnitee; PROVIDED,
HOWEVER, that the Indemnitors shall not be liable for the fees or
expenses of more than one counsel employed by any Indemnitee in any
jurisdiction for all Indemnitees. If the Indemnitees assume the
defense thereof, the Indemnitees shall thereafter consult with the
Indemnitors upon the Indemnitors' reasonable request for such
consultation from time to time with respect to such Action and the
Indemnitees shall not, without the Indemnitors' consent (which consent
shall not be unreasonably withheld), settle or compromise any such
Action. Whether or not the Indemnitors choose to defend or prosecute
any claim, all of the parties hereto shall cooperate in the defense or
prosecution thereof.
(b) The Indemnitors shall not be liable under Section 3.3 hereof with
respect to any Loss resulting from a claim or demand the defense of which
the Indemnitors were not offered the opportunity to assume as provided
under Section 3.4(a) hereof, with respect to which the Indemnitors did not
receive appropriate notice on or before any applicable notice period, to
the extent the Indemnitors' liability under Section 3.3 hereof is
prejudiced as a result thereof. No investigation by any Indemnitee prior
to the Closing Date shall relieve any Indemnitor of any liability
hereunder.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 13
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ARTICLE IV
CLOSING
SECTION 4.1 CLOSING.
The closing of the transactions contemplated hereby (the "CLOSING") shall
take place at 10:00 A.M. (Boise time) at the offices of TJI on October 11, 1994,
or at such other time and place as the Parties may mutually agree in writing
(the date on which the Closing occurs in accordance with the foregoing is
referred to in this Agreement as the "CLOSING DATE"), simultaneously with the
execution and delivery of this Agreement, the Partnership Agreement, and each of
the other Related Agreements described in Article V hereof, and shall be deemed
effective as of 12:01 A.M. (Boise time) on October 3, 1994 (the "EFFECTIVE
DATE").
SECTION 4.2 CONVEYANCE INSTRUMENTS.
In order to effectuate the contribution to the Partnership of the Norco
Assets, the Dashwood Stock and the S&O Assets as contemplated by Article II
hereof, the Parties have, or will on or before the Closing Date, execute and
deliver, or cause to be executed and delivered at the Closing, all such
documents or instruments of assignment, transfer, or conveyance, in each case
dated the Closing Date, but effective as of the Effective Date (collectively,
the "CONVEYANCE INSTRUMENTS"), as the Parties and their respective counsel shall
reasonably deem necessary or appropriate to vest or confirm title in, to and
under the Norco Assets, the Dashwood Stock and the S&O Assets in and to the
Partnership.
SECTION 4.3 FURTHER ASSURANCES.
From time to time, at the request of the Parties or the Partnership and
without further consideration, each Party, at the Partnership's expense, will
execute and deliver and TJI will cause the TJI Subsidiaries to execute and
deliver, such other documents, and take such other action, as a Party or the
Partnership may reasonably request in order to consummate more effectively the
transactions contemplated hereby and to vest in the Partnership good and
marketable title to the Norco Assets, the Dashwood Stock and the S&O Assets, as
applicable, free and clear of all Encumbrances other
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 14
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than TJI Permitted Encumbrances or S&O Permitted Encumbrances, as the case may
be, including, without limitation, consents of third parties and any necessary
governmental filings, notices or approvals, and to cause any Encumbrances on the
underlying assets of Dashwood and LaFlamme (other than Permitted TJI
Encumbrances) to be removed. Each of TJI and S&O hereby constitutes and
appoints, effective as of the Closing Date, the Partnership and its successors
and permitted assigns as the true and lawful attorney of such Party with full
power of substitution in the name of the Partnership or in the name of such
Party, but for the benefit of the Partnership, to collect for the account of the
Partnership any items of the Norco Assets or the S&O Assets and to institute and
prosecute all proceedings which the Partnership may in its reasonable discretion
deem proper in order to assert or enforce any right, title or interest in, to,
or under the Norco Assets or the S&O Assets, and to defend or compromise any and
all action, suits, or proceedings in respect of the Norco Assets, the Dashwood
Stock and/or the S&O Assets. The Partnership shall be entitled for its own
account to any amounts collected pursuant to the foregoing powers, including any
amounts payable as interest in respect thereof.
ARTICLE V
RELATED AGREEMENTS
SECTION 5.1 RELATED AGREEMENTS.
Contemporaneously with the execution and delivery of this Agreement, the
Parties shall enter into the following other agreements (collectively, the
"RELATED AGREEMENTS"):
(a) the Partnership Agreement of the Partnership ("PARTNERSHIP
AGREEMENT"), substantially in the form attached hereto as EXHIBIT A;
(b) the Partnership Support Services Agreement substantially in the
form attached hereto as EXHIBIT B, pursuant to which TJI shall provide
certain partnership accounting, risk management and other support services
to the Partnership;
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 15
<PAGE>
(c) the Liquidity Transaction Agreement substantially in the form
attached hereto as EXHIBIT C, relating to the future public offering of
securities of the planned corporate successor to the Partnership; and
(d) the Employee Leasing Agreement substantially in the form attached
hereto as EXHIBIT D, pursuant to which the Parties shall provide interim
leasing of the respective employees of Norco and S&O to the Partnership.
SECTION 5.2 CREDIT FACILITY.
TJI shall use its best efforts to fulfill Norco's obligations under Section
3.7.2 of the Partnership Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF TJI
In addition to the representations and warranties set forth elsewhere in
this Agreement, TJI represents and warrants to S&O and to the Partnership for
itself and for each of the TJI Subsidiaries, as appropriate, as follows:
SECTION 6.1 CAPITALIZATION AND OWNERSHIP.
There are issued and outstanding: (i) 43,350 shares of Norco common stock,
$1.00 par value; (ii) 25,000 Dashwood common shares, no par value, 25,100
Dashwood Class D Preferred shares, no par value, and 21,061,013 Dashwood Class B
shares, no par value; and (iii) 515,272 LaFlamme ACTION ORDINAIRES shares, no
par value (such shares are hereinafter referred to collectively, as the "TJI
SUBSIDIARY STOCK"). The TJI Subsidiary Stock represents all of the issued and
outstanding capital stock and other securities of the TJI Subsidiaries. All of
the Dashwood Stock is owned legally and beneficially by TJI, and has been duly
authorized and validly issued and is fully paid and nonassessable. All of the
shares of common stock of LaFlamme are owned legally and beneficially by
Dashwood, and have been duly authorized and validly issued and are fully paid
and nonassessable. There are no outstanding rights, options, warrants,
conversion rights, preemptive
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 16
<PAGE>
rights, or agreements for the purchase or acquisition from TJI or the TJI
Subsidiaries with respect to any shares or other securities of the TJI
Subsidiaries.
SECTION 6.2 TITLE TO TJI SUBSIDIARY STOCK.
TJI has good and marketable title to the Dashwood Stock, free and clear of
all Encumbrances (other than Permitted TJI Encumbrances and restrictions on
transfers of the stock of the TJI Subsidiaries under applicable securities
laws). Dashwood has good and marketable title to the common stock of LaFlamme,
free and clear of all Encumbrances (other than Permitted TJI Encumbrances and
restrictions on transfers of the stock of the TJI Subsidiaries under applicable
securities laws).
SECTION 6.3 ORGANIZATION.
(a) Each of TJI and the TJI Subsidiaries is a corporation which is
duly organized, validly existing, and in good standing under the laws of
its state (or jurisdiction) of incorporation, with the corporate power and
authority to own, lease, and operate its properties and to carry on its
business as now being conducted.
(b) The copies of the Certificate or Articles of Incorporation
(however denominated) and all amendments thereto of each of the TJI
Subsidiaries, as certified by the Secretary of State (or equivalent
official) of the state (or jurisdiction) of its incorporation, and the
Bylaws, as amended to date, of each of the TJI Subsidiaries, as certified
by the Corporate Secretary of the relevant TJI Subsidiary and delivered to
S&O, are true, complete, and correct copies of the respective
Certificate/Articles of Incorporation and Bylaws, as amended and presently
in effect, of the TJI Subsidiaries.
(c) Copies of unanimous shareholder agreements presently in effect
for Dashwood and LaFlamme are attached hereto as SCHEDULE 6.3.
SECTION 6.4 QUALIFICATION.
Each of the TJI Subsidiaries is licensed or qualified to do business,
including, as a foreign corporation and is in good standing in the jurisdictions
in which it conducts its business (except
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 17
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where the failure to so qualify would not have a material adverse effect on the
Business or financial condition such TJI Subsidiary (the "MATERIAL TJI
JURISDICTIONS"). SCHEDULE 6.4 contains a complete list of all Material TJI
Jurisdictions.
SECTION 6.5 AUTHORITY.
TJI and each of the TJI Subsidiaries has the corporate power and authority
to execute and deliver this Agreement, the Partnership Agreement, and the other
Related Agreements and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by TJI and the TJI Subsidiaries of this
Agreement, the Partnership Agreement, and the other Related Agreements, as the
case may be, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action of TJI and
the TJI Subsidiaries; no other corporate proceedings on the part of TJI or the
TJI Subsidiaries or any other person or entity, whether pursuant to the
Certificates or Articles of Incorporation (however denominated) or Bylaws of TJI
or the TJI Subsidiaries or by law or otherwise, are necessary to authorize TJI
and the TJI Subsidiaries to enter into this Agreement, the Partnership
Agreement, and the other Related Agreements, as the case may be, or to
consummate the transactions contemplated hereby and thereby; all requisite
approvals from boards of directors and/or shareholders have been obtained by TJI
in connection with the transfer of the Dashwood Stock; and each of this
Agreement, the Partnership Agreement and the other Related Agreements is the
legal, valid, and binding obligation of TJI and of the TJI Subsidiaries, as the
case may be.
SECTION 6.6 NO VIOLATIONS.
Except as set forth on SCHEDULE 6.6 attached hereto, neither the execution
or delivery of this Agreement, the Partnership Agreement, or the other Related
Agreements, nor the consummation of the transactions contemplated hereby or
thereby:
(a) Violates or will violate (i) any order, writ, injunction,
judgment, decree, or award of any court or governmental or regulatory
authority or (ii) to the knowledge of TJI or the TJI Subsidiaries, violates
or will violate any Laws to which TJI or the TJI Subsidiaries or any of
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 18
<PAGE>
their respective properties or assets are subject, or requires anyfiling or
registration with, or consent, authorization, approval or permit of, any
governmental or regulatory authority on the part of TJI or the TJI
Subsidiaries;
(b) Violates or will violate, or conflicts with or will conflict
with, any provision of, or constitutes a default under, the Certificates or
Articles of Incorporation (however denominated) or Bylaws of TJI or the TJI
Subsidiaries or any unanimous shareholder agreement relating to any TJI
Subsidiary; or
(c) (i) violates or breaches or constitutes a default (or an event
which, with notice or lapse of time or both, would constitute a default)
under, or give rise to a right to terminate, any mortgage, contract,
agreement, deed of trust, license, lease, or other instrument, arrangement,
commitment, obligation, understanding, or restriction of any kind to which
TJI (with respect to the Business only) or any TJI Subsidiary is a party or
by which its properties may be bound, or (ii) will cause, or give any
person grounds to cause, to be accelerated (with notice or lapse of time or
both) the maturity of, or will increase, any liability or obligation of TJI
(with respect to the Business only) or any TJI Subsidiary which violation,
breach, default, liability, or obligation, individually or in the
aggregate, is or would be material to the Business or financial condition
of any TJI Subsidiary.
SECTION 6.7 FINANCIAL STATEMENTS.
(a) SCHEDULE 6.7(a) attached hereto contains true and correct copies
of (i) a separate balance sheet for each of the TJI Subsidiaries, and (ii)
a combined balance sheet relating to the Business of the TJI Subsidiaries
individually and taken as a whole, in each case as of June 30, 1994 (the
"TJI BALANCE SHEETS"), and the related statements of operations for the
Business of the TJI Subsidiaries taken as a whole for the six month period
ended June 30, 1994 and the years ended December 31, 1993, 1992 and 1991.
The TJI Balance Sheet relating to Norco dated as of June 30, 1994 is
referred to herein as the "NORCO BALANCE SHEET", and all of the financial
statements referred to in the preceding sentence are hereinafter
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 19
<PAGE>
collectively referred to as the "TJI FINANCIAL STATEMENTS." Each of the
TJI Financial Statements was prepared from the books and records of TJI
and the TJI Subsidiaries, as the case may be, on a stand-alone basis in
conformity with GAAP consistently applied, and fairly present the
financial condition and results of operations of the TJI Subsidiaries
for the periods and as of the dates stated therein.
(b) SCHEDULE 6.7(b) attached hereto sets forth the amount of the
"Canadian NOLs" (as defined in Section 5.7.1 of the Partnership Agreement),
and such Canadian NOLs are in an amount not less than is set forth in
SCHEDULE 6.7(b).
SECTION 6.8 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since the Balance Sheet Date, each of the TJI Subsidiaries has operated its
Business in the ordinary course consistent with past practice, and neither any
TJI Subsidiary nor the Business of the TJI Subsidiaries taken as a whole has:
(a) Suffered or been overtly threatened with any material adverse
change in its business or any event or condition of any character, which,
individually or in the aggregate, has had or might reasonably be expected
to have a material adverse effect on the business or financial condition of
the Business of any of the TJI Subsidiaries;
(b) Incurred any obligations or liabilities (absolute, accrued,
contingent, or otherwise) or entered into any transactions, other than in
the ordinary course of business;
(c) Paid, discharged, or satisfied any claims, obligations, or
liabilities (absolute, accrued, contingent, or otherwise), except the
payment, discharge, or satisfaction in the ordinary course of business and
consistent with past practice of any claims, obligations, and liabilities
(i) which are reflected or reserved against in the TJI Financial Statements
or (ii) which were incurred in the ordinary course of business and
consistent with past practice since the Balance Sheet Date;
(d) Permitted or allowed any of its properties or assets to be
subjected to any Encumbrances or other liabilities and obligations, except
Permitted TJI Encumbrances;
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(e) Written off as uncollectible, or canceled or waived, any accounts
receivable or any portion thereof, or any debts or claims, except in the
ordinary course of business and consistent with past practice;
(f) Sold, conveyed, or otherwise disposed of any properties or
assets, except for fair consideration in the ordinary course of business
and consistent with past practice;
(g) Disposed of or permitted to lapse any TJI Intellectual Property
(as defined in Section 6.13 hereof), or any license, permit, or other form
of authorization to use any TJI Intellectual Property;
(h) Except for normal increases which are not material and are
consistent with past practice, granted or agreed to grant any increase in
the compensation of any employee of the TJI Subsidiaries (including any
such increase pursuant to any bonus, pension, profit sharing or other plan
or commitment), or become a party to or instituted any new benefit programs
for any employees of the TJI Subsidiaries;
(i) Made any capital expenditure, or commitment for a capital
expenditure, for additions to property, plant, equipment or TJI
Intellectual Property, other than in the ordinary course of business;
(j) Made any change in any method of accounting or accounting
practice or in any tax procedures or elections;
(k) Terminated or suffered a termination of (excluding a termination
in accordance with its terms) or amended, any material contract, agreement,
license, or lease;
(l) Declared, paid, or made, or set aside for payment or making, any
dividend or other distribution in respect of the capital stock of any TJI
Subsidiary or, directly or indirectly, redeemed, purchased, or otherwise
acquired any of the capital stock of any TJI Subsidiary; or
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 21
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(m) Agreed, whether in writing or otherwise, or made any arrangement,
whether or not legally binding, to take any action which, if taken prior to
the date hereof, should have been disclosed on a Schedule to clauses
(a)-(l) of this Section 6.8.
SECTION 6.9 CERTAIN TAX MATTERS.
(a) Except as set forth in SCHEDULE 6.9, each TJI Subsidiary:
(i) Has filed or will file or furnish when due in
accordance with all applicable laws all federal, state, provincial,
local and other tax returns, reports and declarations of every nature
(including, without limitation, income, employment, payroll, excise,
property, sales and use, capital, goods and services taxes and
unemployment contributions and Canadian Pension Plan and Quebec
Pension Plan contributions) required to be filed by, on behalf of, or
with respect to such TJI Subsidiary or its assets (collectively, the
"RETURNS") prior to the Closing Date;
(ii) Has correctly reflected in all material respects on the
Returns (and, as to any Returns not filed as of the date hereof, will
correctly reflect) the facts regarding its income, business, assets,
operations, activities, and status of any other information required
to be shown therein;
(iii) Has timely paid, withheld, or made adequate provision
for all taxes shown as due and payable on the Returns that have been
filed, and has otherwise withheld from each payment all taxes and
other amounts required to be withheld, and has paid all such amounts
and all installments of taxes due and payable within the required
time;
(iv) Is not subject to any liens for taxes on its assets;
(v) Has not participated in any tax sharing or other
arrangement whereby such TJI Subsidiary, in determining its income,
revenues, receipts, gain, loss, or any net operating loss or other tax
loss, net capital loss, investment tax credit, foreign tax credit,
charitable deduction or any other credit or tax attribute which could
reduce
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 22
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taxes (including, without limitation, deductions and credits relating
to alternative minimum taxes) (collectively, "TAX ASSETS"), has taken
into account or included any income, revenues, receipts, gain, loss,
asset, liability, or Tax Assets of any other person (or vice versa);
(vi) Is not currently under any contractual obligation to
pay the tax obligations of, or with respect to transactions relating
to, any other person or to indemnify any other person with respect to
any tax;
(viii) Is not subject to any (A) claims, audits, actions,
suits, proceedings, or investigations with respect to any tax or
assessment for which any TJI Subsidiary could be liable, which would
be material, to the knowledge of the directors or officers of TJI or
any TJI Subsidiary, and (B) requests for rulings in respect of any tax
or any proposed transaction pending before any governmental authority
responsible for the imposition of any tax.
(b) SCHEDULE 6.9 hereto contains a list of states, countries,
provinces and other jurisdictions to which any tax is currently being paid
by the TJI Subsidiaries.
SECTION 6.10 INVENTORY; RECEIVABLES.
(a) Substantially all the Inventory of the TJI Subsidiaries is of a
good and merchantable quality, usable and saleable in the ordinary course
of business. The Inventory set forth on the TJI Balance Sheets is stated
properly therein at the lower of cost or realizable market value,
determined in accordance with generally accepted accounting principles
consistently applied. The quantities of all items of TJI Inventory are
reasonable and warranted in the present circumstances of the Business of
the TJI Subsidiaries.
(b) All accounts and notes receivable relating to the Business of the
TJI Subsidiaries at the Balance Sheet Date have been included in the TJI
Balance Sheets in accordance with generally accepted accounting principles
consistently applied. Since the Balance Sheet Date, no accounts or notes
receivable have been sold, transferred, or otherwise
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 23
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disposed of by TJI or by any TJI Subsidiary, nor have any of such accounts
or notes receivable become uncollectible or subject to any material
defense, claim or offset.
SECTION 6.11 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) SCHEDULE 6.11(a) attached hereto sets forth a list of all owned
and leased real property of the TJI Subsidiaries, including the address of
such property, the nature of the particular TJI Subsidiary's interest in
such property, and the function and use of such property.
(b) Except as set forth in the TJI Financial Statements or in
SCHEDULE 6.11(b), each of the TJI Subsidiaries, as applicable, (i) has
leasehold title or good and marketable fee simple title to each piece of
real property owned, leased, rented or used by the TJI Subsidiaries, in
each case free and clear of all Encumbrances in the case of real property
owned by the TJI Subsidiaries, except for Permitted TJI Encumbrances, and
(ii) leases or owns all tangible personal property free and clear of all
Encumbrances, except for Permitted TJI Encumbrances.
(c) Except as set forth in the TJI Financial Statements or in
SCHEDULE 6.11(b), to the knowledge of TJI or the TJI Subsidiaries, there
are no Liabilities of the TJI Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable, or otherwise, and
there is no existing condition, situation, or set of circumstances which
could reasonably be expected to result in such a liability, other than:
(i) liabilities disclosed or provided for in the TJI Balance Sheets; and
(ii) liabilities incurred in the ordinary course of business consistent
with past practice since the Balance Sheet Date, which in the aggregate are
not material to the Business of such TJI Subsidiary.
(d) Complete and accurate copies of all mortgages relating to any
real property owned by the TJI Subsidiaries (the "TJI MORTGAGES") have
heretofore been furnished to S&O. None of the TJI Mortgages has been
amended or modified except as indicated in SCHEDULE 6.11(d) and the
aggregate amount of all principal, interest, and other sums that is secured
by each of the TJI Mortgages as of the Closing Date does not exceed the
amount reflected in SCHEDULE 6.11(d).
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 24
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SECTION 6.12 LEASES.
TJI heretofore has delivered to S&O a true and complete copy of each lease
pursuant to which TJI or any TJI Subsidiary leases real or personal property
used in connection with the Business (collectively, the "TJI LEASES"). Each of
the TJI Leases is in full force and effect in accordance with its terms, no TJI
Lease has been modified or amended, and neither TJI nor any TJI Subsidiary has
received any written notice of any breach or default with respect to a TJI
Lease, the consequences of which would result in such TJI Lease being terminated
by the lessor thereof.
SECTION 6.13 INTELLECTUAL PROPERTY.
SCHEDULE 6.13 attached hereto lists all trademarks, trade names, business
names, service marks, copyrights, patents, patented and unpatented inventions,
trade secrets, registered and unregistered designs, and all applications and
registrations therefor and licenses thereof, and all other intellectual property
and proprietary information relating to or connected with the Norco Assets, the
TJI Subsidiaries or the operation of the Business of the TJI Subsidiaries,
indicating for each item whether owned, leased or licensed by the particular TJI
Subsidiary (collectively, the "TJI INTELLECTUAL PROPERTY"). The TJI
Subsidiaries own, have the exclusive right to use, or possess adequate licenses
or other rights to use all such TJI Intellectual Property, and no rights thereto
have been granted to others by TJI or by the TJI Subsidiaries. Except as
described in SCHEDULE 6.13, no patents, patented and unpatented inventions,
trademarks, trade secrets, registered and unregistered designs, service marks,
trade names or copyrights are necessary to conduct or continue the Business of
the TJI Subsidiaries as it is presently conducted and no consent is required for
the assignment of any license for the TJI Intellectual Property. The TJI
Intellectual Property is free and clear of all assignments, licenses,
restrictions, or other Encumbrances, and none is subject to any outstanding
order, decree, judgment, stipulation or charge. To the knowledge of TJI or the
TJI Subsidiaries, the TJI Subsidiaries' use of the TJI Intellectual Property
does not infringe upon or otherwise violate the rights of others, and to the
knowledge of TJI or the TJI Subsidiaries, none of the TJI Intellectual Property
is being infringed upon or otherwise violated by others. No one has asserted in
writing to TJI or to the TJI Subsidiaries
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 25
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that the TJI Subsidiaries' use of the TJI Intellectual Property infringes or
violates any patent, patented or unpatented invention, trade secret, registered
and unregistered designs, trade name, trademark, service mark, copyright or
other intellectual property right of any other person or entity or that the TJI
Subsidiaries are not the owners of the sole and exclusive right to use the TJI
Intellectual Property (except licensed property).
SECTION 6.14 ERISA.
(a) Except as set forth on SCHEDULE 6.14 attached hereto, neither TJI
(with respect to the Business only) nor any TJI Subsidiary (except Dashwood
and LaFlamme) is a party to or participates in or has any liability with
respect to:
(i) Any "employee welfare benefit plan" or "employee
pension benefit plan" (as those terms are respectively defined in
Sections 3(1) and 3(2) of the Employee Retirement Income Security Act
of 1974, as amended (ERISA)), including a "multiemployer plan" (as
defined in Section 3(37) of ERISA);
(ii) Any retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation plan,
vacation pay, severance pay, bonus or benefit arrangement, insurance
or hospitalization program, or any other material fringe benefit
arrangements (herein referred to collectively as "EMPLOYEE FRINGE
BENEFIT ARRANGEMENTS") for any employee, which does not constitute an
"employee benefit plan" (as defined in Section 3(3) of ERISA); or
(iii) Any employment agreement.
Neither Dashwood nor LaFlamme is a party to or participates in any plan,
program, policy or arrangement which provides any employee benefits to any
United States employee performing services within the United States.
(b) All plans, arrangements, and agreements listed in Schedule 6.14
and any related trust agreements or annuity contracts materially comply
with and are and have been materially operated in accordance with each
applicable provision of ERISA, the Code, other
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 26
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Federal statues, state law (including, without limitation, state insurance
law) and the regulations and rules promulgated pursuant thereto or in
connection therewith and the terms of each such respective plan,
arrangement and agreement. Neither TJI nor any TJI Subsidiary has any
notice or knowledge of any material violation of any of the foregoing by
any such plan, arrangement or agreement.
(c) All employee pension benefit plans listed in SCHEDULE 6.14 which
are subject to ERISA materially comply in form and in operation with the
applicable requirements of Section 401(a) and 501(a) of the Code. To the
knowledge of TJI and the TJI Subsidiaries, no event has occurred which will
or could give rise to disqualification under the Code of any such employee
pension benefit plan listed in SCHEDULE 6.14 that is subject to ERISA or to
a tax under Section 511 of the Code; and no such plan which is subject to
Part 3 of Subtitle B of Title 1 of ERISA has incurred any "accumulated
funding deficiency." Neither TJI nor the TJI Subsidiaries (excluding
Dashwood and LaFlamme) has otherwise engaged in any transaction with
respect to any employee benefit plan listed in SCHEDULE 6.14 which could
result in a tax under Section 4975 of the Code. There are no Actions
(other than routine claims for benefits) pending or, to the knowledge of
TJI, threatened against such plans or the assets of such plans, and, to the
knowledge of TJI or the TJI Subsidiaries, no facts exist which are
reasonably likely to give rise to any such Actions (other than routine
claims for benefits). As to any employee pension benefit plan which is
listed in SCHEDULE 6.14 and which is subject to Title IV of ERISA, there
have been no "reportable events" (as described in Section 4043 of ERISA),
and no steps have been taken to terminate any such plan. All group health
plans (within the meaning of Section 5000(b)(1) of the Code in which any
employees of the TJI Subsidiaries (excluding Dashwood and LaFlamme)
participate (including any plans of current and former affiliates of TJI or
the TJI Subsidiaries which must be taken into account under Section 162(i)
or Section 162(k) of the Code) have been operated in material compliance
with the group health plan continuation coverage requirements of
Section 162(k) of the Code as
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 27
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in effect for years beginning prior to January 1, 1989, Section 4980B for
years beginning after December 31, 1988 and Part 6 of Subtitle B of Title I
of ERISA, to the extent such requirements are applicable.
(d) No employee or former employee of the TJI Subsidiaries (excluding
Dashwood and LaFlamme) or any of their affiliates will become entitled to
any bonus, retirement, severance, job security, or similar benefit or
enhancement of such benefit solely as a result of the transactions
contemplated hereby.
(e) Except as set forth on SCHEDULE 6.14, neither TJI nor any TJI
Subsidiary or any affiliate of same (as determined under Internal Revenue
Code Section 414(b), (c), (m) or (o) ("ERISA Affiliate") is a party to or
participates in or has any liability with respect to any "employee pension
benefit plan", as defined in Section 3(2) of ERISA, which is a
"multiemployer plan", as defined in Section 3(37) of ERISA.
(f) Except as set forth on SCHEDULE 6.14, or except as required by
section 4980B of the Code, neither TJI nor any ERISA Affiliate has promised
any former employee or other individual whether or not employed by TJI or
any ERISA Affiliate, medical or other benefit coverage, and neither TJI nor
any ERISA Affiliate maintains or contributes to any plan or arrangement
providing medical benefits, life insurance, or other welfare benefits to
former employees, their spouses or dependents or any other individual
whether or not employed by TJI or any ERISA Affiliate.
(g) Except as set forth on SCHEDULE 6.14, neither TJI nor any ERISA
Affiliate is a party to or participates in or has any liability with
respect to any employee pension benefit plan which is subject to Title IV
of ERISA.
(h) Neither TJI nor any ERISA Affiliate has failed to make any
contributions to or to pay any amounts due and owing as required by the
terms of any of the plans, arrangements, and agreements listed in SCHEDULE
6.14, or by any collective bargaining agreement, or by ERISA or any other
applicable law.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 28
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SECTION 6.15 PENSION AND EMPLOYEE BENEFITS OF DASHWOOD AND LAFLAMME.
(a) Except as set forth on SCHEDULE 6.15 attached hereto, neither
Dashwood nor LaFlamme is party to or has any liability with respect to any
employee benefit, welfare, bonus, pension, profit sharing, deferred
compensation, stock option, retirement, hospitalization insurance, medical
and dental insurance, disability insurance, vacation pay, severance pay or
any other material employee benefit arrangements or practice related to the
employees or former employees which are currently maintained or were
maintained, at any time in the last five calendar years (herein referred to
collectively as "CANADIAN PLANS").
(b) TJI has furnished to S&O a true and correct copy of all Canadian
Plans as listed in SCHEDULE 6.15 as amended to the date hereof together
with all related documentation including, without limitation, funding
agreements, actuarial reports, funding and financial information and plan
summaries, booklets and personnel manuals, and there have been no material
changes in the financial condition of any such plan from that stated in the
documentation supplied. All employee data provided is substantially true
and correct. No amendments have been made to the Canadian Plans and no
improvements to the Canadian Plans have been promised and the amendments or
improvements to the Canadian Plans will be made or promised prior to the
date hereof. No insurance policy requires or any other contract or
agreement affecting the Canadian Plans requires or permits a retroactive
increase in premiums or payments due thereunder.
(c) All of the Canadian Plans have been established, registered,
qualified, invested and administered, in all respects, in accordance with
all applicable laws, regulations, orders or other legislative,
administrative or judicial promulgations (herein referred to as "APPLICABLE
LAWS"). None of the Canadian Plans enjoy any special tax status under the
Income Tax Act (Canada) or under other applicable legislation, nor have any
advance tax rulings been sought or received in respect of the Canadian
Plans. All obligations regarding the Canadian Plans have been satisfied
and there are no outstanding defaults or violations by any party thereto,
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 29
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or any taxes owing under any Canadian Plans. All contributions or premiums
required to be made by Dashwood and/or LaFlamme under the terms of the
Canadian Plans or by Applicable Laws have been made in a timely fashion in
accordance with Applicable Laws and the terms of the Canadian Plans and
neither of Dashwood or LaFlamme have any liability (other than liabilities
accruing after the date hereof with respect to any of the Canadian Plans).
Contributions and premiums are to be paid on an accrual basis for the
period up to the Effective Date even though not otherwise required to be
made until a later date in respect of the period that includes the
Effective Date. All of the Canadian Plans which are subject to
actuarially-based funding requirements are fully funded or fully insured on
both an ongoing and solvency basis pursuant to the actuarial assumptions
and methodology contained in the going concern actuarial valuation report
most recently filed with the provincial pension authorities as of the date
hereof. The level of insurance reserves under each of the Canadian Plans
which is an insured plan is reasonable and sufficient to provide for all
incurred but unreported claims. There have been no improper withdrawals or
transfer of assets from the Canadian Plans or the funds relating thereto,
and neither Dashwood nor LaFlamme has been in breach of any fiduciary
obligation with respect to the administration of the Canadian Plans or the
funding media relating thereto.
(d) None of the Canadian Plans, nor any related funding medium
thereunder, is subject to any pending investigation, examination or other
proceeding, action or claim initiated by any governmental agency or
instrumentality, or by any other party, and there exists no state of facts
which after notice or lapse of time or both could reasonably be expected to
give rise to any such investigation, examination or other proceeding,
action or claim or to affect the registration of any of the Canadian Plans.
Further, should any matter arise which could affect the registration of any
of the Canadian Plans, Dashwood and/or LaFlamme, as the case may be, will,
in a timely fashion, take all steps required to ensure the registration is
not affected.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 30
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(e) Dashwood and LaFlamme have reserved the right to amend, modify or
terminate each of the Canadian Plans, subject to approval required by
Applicable Laws.
(f) Except for registered pension plans or group registered
retirement savings plans, none of the Canadian Plans provides benefits to
retired employees.
(g) No employee or former employee of Dashwood or LaFlamme will
become entitled to any bonus, retirement, severance, job security or
similar benefit enhancements of such benefits solely as a result of the
transactions contemplated hereby.
SECTION 6.16 DOCUMENTS; COMMITMENTS.
(a) TJI has delivered to S&O copies of every material contract,
agreement, or other commitment, written or oral, to which the TJI
Subsidiaries or TJI (with respect to the Business only) is a party or has
succeeded to a party by assumption or assignment or in which it has a
beneficial interest (any contract or agreement shall, for the purposes of
this Agreement, be deemed material (A) if the Business of any of the TJI
Subsidiaries is substantially dependent upon it, (B) if it involves a
financial obligation of or benefit to the Business of the TJI Subsidiaries
in excess of $100,000, (C) if the contract is not made in the ordinary
course, or (D) if it constitutes a management contract or employment
contract (excluding oral agreements that arise by operation of law).
(b) Neither TJI (with respect to the Business only) nor any TJI
Subsidiary is restricted by agreement from carrying on the Business
anywhere in the world.
SECTION 6.17 LABOR MATTERS.
(a) Except as set forth on SCHEDULE 6.17 attached hereto, neither any
TJI Subsidiary nor any employees of the TJI Subsidiaries is a party to or
is covered by any labor agreement with any collective bargaining
representative.
(b) To the knowledge of TJI or the TJI Subsidiaries, there are no
unfair labor practice complaints, labor disputes, work stoppages, or union
organization efforts, or threats of the foregoing, or pending or threatened
proceedings under the Ontario Human Rights
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 31
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Code, Employment Standards Act, Workers Compensation Act, or any other
employment-related legislation applicable in Ontario or Quebec, directed
against any of the operations of the Business of the TJI Subsidiaries.
SECTION 6.18 NO BREACH.
(a) Except as may be set forth in SCHEDULE 6.18, each permit,
contract, agreement, deed of trust, lease, policy, license, plan,
commitment, arrangement, and understanding (whether evidenced by a written
document or otherwise) referred to in this Agreement or in any Schedule
hereto, under which TJI or any TJI Subsidiary has any right, interest, or
obligation (i) is in full force and effect, and (ii), to the knowledge of
TJI or the TJI Subsidiaries, is not subject to any threatened amendment,
cancellation, or outstanding dispute.
(b) TJI or the TJI Subsidiaries, as the case may be, are not in
breach of, and there does not exist any default or event (including the
execution and delivery of this Agreement, the Partnership Agreement, and
the other Related Agreements and the consummation of the transactions
contemplated hereby or thereby) which, with the giving of notice or the
lapse of time or both, would become a breach or default, and there is no
basis for any valid claim of a default in any respect, under any such
permits, contracts, agreements or other documents.
SECTION 6.19 REQUIRED CONSENTS.
Except as set forth in SCHEDULE 6.19, no material consent, approval,
governmental filing, authorization, or permit from any court, governmental or
regulatory authority or administrative agency, or any other person or entity is
necessary to the consummation of the transactions contemplated by this
Agreement, the Partnership Agreement, or the other Related Agreements.
Moreover, except as set forth in SCHEDULE 6.19, no other material consent,
approval, permit, clearance, or audit is required under any federal, foreign or
provincial Law or the Laws of the countries, provinces or states in which TJI or
any TJI Subsidiary has real property or leasehold interests in order to
accomplish and complete the conveyance of real or personal property and
leasehold interests contemplated hereunder. TJI has
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 32
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used (or TJI has caused each TJI Subsidiary to use) its best efforts to secure
the consents (where such consents are necessary) of the other parties thereto or
any other person to the consummation of the transactions contemplated by this
Agreement, the Partnership Agreement, and the Related Agreements.
SECTION 6.20 LITIGATION.
Except as set forth in SCHEDULE 6.20, (a) there are no Actions or legal,
administrative, arbitration or other method of settling disputes or agreements
or litigation pending or, to the knowledge of TJI or the TJI Subsidiaries,
threatened by or against, or involving TJI (with respect to the Business only)
or any TJI Subsidiary, or any directors, officers, or employees thereof in their
capacity as such, or (b) which question or challenge the validity of this
Agreement, the Partnership Agreement, or the other Related Agreements or any
action taken or to be taken by TJI or any TJI Subsidiary pursuant to this
Agreement, the Partnership Agreement, or the other Related Agreements or in
connection with the transactions contemplated hereby or thereby. To the
knowledge of TJI or the TJI Subsidiaries, there is no valid basis for any such
Action or other litigation. No Action or other litigation set forth in SCHEDULE
6.20 would, if adversely decided, have a material adverse effect on the Business
of the TJI Subsidiaries taken as a whole or, after the Closing Date, on the
ability of the Partnership to conduct the Business of the TJI Subsidiaries.
SECTION 6.21 COMPLIANCE WITH APPLICABLE LAW; ADVERSE RESTRICTIONS.
(a) Except as and to the extent set forth in SCHEDULES 6.21 and 6.20,
the operations of TJI (with respect to the Business only) and the TJI
Subsidiaries have at all times been conducted in material compliance with
(a) all applicable permits, orders, writs, injunctions, judgments, decrees,
or awards of all courts and governmental and regulatory authorities, and
(b) all Laws, which are applicable to the assets or the Business of the TJI
Subsidiaries (including, without limitation, Environmental Laws, and those
relating to employment and employment practices, terms and conditions of
employment, and wages and hours laws). Except as and to the extent set
forth in SCHEDULE 6.21 or 6.20, neither TJI (with respect to the
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 33
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Business only) nor any TJI Subsidiary has received any written notification
of any failure or alleged failure to comply with any Laws, except for
failures which in the aggregate are not and were not material to the
conduct of the Business with respect to TJI and to the TJI Subsidiaries.
(b) No event or circumstance has occurred which, with the giving of
notice, the passage of time or otherwise, would result in a "Determination
of Taxability" (as defined in the Trust Indenture securing the bonds
described herein) under the $8,000,000 Industrial Revenue Bonds, Series
1989, issued by the Industrial Development Corporation of Twin Falls,
Idaho.
SECTION 6.22 ENVIRONMENTAL MATTERS.
Except as set forth in SCHEDULE 6.22,
(a) To the knowledge of TJI or the TJI Subsidiaries, TJI (with
respect to the Business only) and the TJI Subsidiaries have obtained all
permits and authorizations relating to pollution or protection of health,
safety, or the environment which are required by any Environmental Law
("ENVIRONMENTAL PERMITS"), including, without limitation, those regulating
air emissions, water effluent discharges, or the treatment, storage,
disposal, transportation or release of any Material of Environmental
Concern. SCHEDULE 6.22 contains a complete and accurate list of all such
Environmental Permits;
(b) TJI and the TJI Subsidiaries have taken all actions necessary to
register any products or materials relating to the Business of the TJI
Subsidiaries, required to be registered under any applicable Environmental
Laws;
(c) Neither TJI nor any TJI Subsidiary is aware of or has received
notice of, any occurrence, event, condition, circumstance, activity,
practice, incident, action, or plan which TJI reasonably expects would
result in an Action or claim, or allegation of Environmental Liability,
based on, arising out of or related to alleged on-site or off-site
contamination associated in any manner with or affecting the Business of
the TJI Subsidiaries and properties related thereto; and
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(d) To the knowledge of TJI and the TJI Subsidiaries, there are and
have been no underground storage tanks or surface impoundments on any real
property now or heretofore owned, leased or rented by or otherwise under
the control of TJI (with respect to the Business only) or any of the TJI
Subsidiaries, which tanks or impoundments, if determined by any court,
governmental, or regulatory authority having jurisdiction thereof, to be in
violation of or subject to liability under any Environmental Law, would
have a material adverse effect on the Business of the TJI Subsidiaries
taken as a whole.
(e) SCHEDULE 6.22 sets forth an accurate and complete list of all
currently pending Actions and claims or allegations of any person relating
to Environmental Laws or otherwise relating to environmental, health, and
safety matters, including pollution of the Environment or Materials of
Environmental Concern related to the Business of the TJI Subsidiaries. All
such Actions, claims or allegations arising in the past three (3) years
which are not currently pending are also set forth on SCHEDULE 6.22.
(f) TJI and the TJI Subsidiaries are in material compliance with all
Environmental Permits and are also in material compliance with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables contained in any
Environmental Laws;
(g) SCHEDULE 6.22 contains an accurate and complete list of all
remedial, response or corrective actions required by governmental
authorities or otherwise undertaken since January 1, 1992, under all
Environmental Permits or Environmental Laws relating to the Business of the
TJI Subsidiaries.
SECTION 6.23 ASSETS NECESSARY TO BUSINESS.
As a result of the transactions effected hereby, the Partnership, with
respect to Norco Assets owned prior to the Closing Date by Norco, and Dashwood
and LaFlamme (a) will have title to, or a valid leasehold interest in, all
tangible and intangible assets and properties relating to the Business of the
TJI Subsidiaries; (b) will possess valid consents, authorizations, approvals,
and permits relating
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to the Business of the TJI Subsidiaries, except for certain consents identified
on SCHEDULES 6.6 and 6.19; and (c) will be party to all agreements, in each case
necessary to permit the Partnership, directly and through the TJI Subsidiaries,
to continue to carry on the Business of the TJI Subsidiaries substantially as
presently conducted. The assets of the TJI Subsidiaries constitute all assets
necessary to conduct the Business of the TJI Subsidiaries.
SECTION 6.24 CUSTOMERS, DISTRIBUTORS, AND SUPPLIERS.
Since January 1, 1994, there has not been any adverse change in the
business relationship of TJI or any TJI Subsidiary with any customer,
distributor, or supplier which is material to the business or financial
condition of the Business of the TJI Subsidiaries taken as a whole.
SECTION 6.25 INSIDER TRANSACTIONS.
SCHEDULE 6.25 sets forth: (a) the amounts and other essential terms of
indebtedness or other obligations, liabilities or commitments (contingent or
otherwise) of TJI (with respect to the Business only) or the TJI Subsidiaries to
or from any past or present officer, director or, to the knowledge of TJI, any
TJI stockholder or any person related to, controlling, controlled by or under
common control with any of the foregoing (other than for usual services
performed within the past month the payment for which is not yet due); and (b)
all transactions between such persons and TJI (with respect to the Business
only) and the TJI Subsidiaries since the Balance Sheet Date and all proposed
transactions with such persons together with the essential terms thereof.
SECTION 6.26 ACCURACY OF INFORMATION FURNISHED.
No representation, statement or information made or furnished by TJI or by
any TJI Subsidiary to S&O, including those contained in this Agreement, in the
various Schedules and Exhibits hereto, or in other information and statements
furnished by TJI and the TJ Subsidiaries to S&O, contains or shall contain any
untrue statement of a material fact or omits or shall omit any material fact
necessary to make the information contained therein not misleading.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 36
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SEALRITE AND OLDACH
In addition to the representations and warranties set forth elsewhere in
this Agreement, SealRite and Oldach, jointly and severally, represent and
warrant to TJI and to the Partnership as follows:
SECTION 7.1 NO DISSENTERS RIGHTS.
No shareholder of either SealRite or Oldach has exercised any dissenters'
rights or other appraisal rights in connection with the approval by such
shareholders of the transactions contemplated by this Agreement, the Partnership
Agreement and the other Related Agreements. Attached as SCHEDULE 7.1 hereto are
true and correct copies of the unanimous consent resolutions signed by the
shareholders of S&O, authorizing this Agreement, the Partnership Agreement and
the other Related Agreements, and the transactions contemplated hereby and
thereby.
SECTION 7.2 ORGANIZATION.
(a) Each of SealRite and Oldach is a corporation which is duly
organized, validly existing, and in good standing under the laws of its
state (or jurisdiction) of incorporation, with the corporate power and
authority to own, lease, and operate its properties and to carry on its
business as now being conducted.
(b) The copies of the Certificate of Incorporation and all amendments
thereto of each of SealRite and Oldach, as certified by the Secretary of
State (or equivalent official) of the state (or jurisdiction) of its
incorporation, and the Bylaws, as amended to date, of each of SealRite and
Oldach, as certified by its Corporate Secretary and delivered to TJI, are
true, complete, and correct copies of the respective Certificates of
Incorporation and Bylaws, as amended and presently in effect, of SealRite
and Oldach.
SECTION 7.3 QUALIFICATION.
Each of SealRite and Oldach is licensed or qualified to do business,
including as a foreign corporation and is in good standing in the jurisdictions
in which it conducts its business (except
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where the failure to so qualify would not have a material adverse effect on the
Business or financial condition of either SealRite or Oldach (the "MATERIAL S&O
JURISDICTIONS"). SCHEDULE 7.3 contains a complete list of all S&O Material
Jurisdictions.
SECTION 7.4 AUTHORITY.
Each of SealRite and Oldach has the corporate power and authority to
execute and deliver this Agreement, the Partnership Agreement, and the other
Related Agreements and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by S&O of this Agreement, the Partnership
Agreement, and the other Related Agreements, as the case may be, and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action of SealRite and Oldach, including,
without limitation, approval by the S&O Shareholders in accordance with the
provisions of the Delaware General Business Corporation Act; no other corporate
proceedings on the part of S&O or any other person or entity, whether pursuant
to their Certificates of Incorporation or Bylaws or by law or otherwise, are
necessary to authorize S&O to enter into this Agreement, the Partnership
Agreement, and the other Related Agreements, as the case may be, or to
consummate the transactions contemplated hereby and thereby; and each of this
Agreement, the Partnership Agreement and the other Related Agreements is the
legal, valid, and binding obligation of SealRite and Oldach.
SECTION 7.5 NO VIOLATIONS.
Except as set forth on SCHEDULE 7.5, neither the execution or delivery of
this Agreement, the Partnership Agreement, or the other Related Agreements, nor
the consummation of the transactions contemplated hereby or thereby:
(a) Violates or will violate (i) any order, writ, injunction,
judgment, decree, or award of any court or governmental or regulatory
authority or (ii) to the knowledge of either SealRite or Oldach, violates
or will violate any Laws to which either SealRite or Oldach or any of their
respective properties or assets are subject, or requires any filing or
registration with, or
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consent, authorization, approval or permit of, any governmental or
regulatory authority on the part of either SealRite or Oldach;
(b) Violates or will violate, or conflicts with or will conflict
with, any provision of, or constitutes a default under, the Certificate of
Incorporation or Bylaws of either SealRite or Oldach; or
(c) (i) violates or breaches or constitutes a default (or an event
which, with notice or lapse of time or both, would constitute a default)
under, or gives rise to a right to terminate, any mortgage, contract,
agreement, deed of trust, license, lease, or other instrument, arrangement,
commitment, obligation, understanding, or restriction of any kind to which
either SealRite or Oldach is a party or by which their properties may be
bound, or (ii) will cause, or give any person grounds to cause, to be
accelerated (with notice or lapse of time or both) the maturity of, or will
increase, any liability or obligation of SealRite or Oldach which
violation, breach, default, liability, or obligation, individually or in
the aggregate, is or would be material to the Business or financial
condition of either SealRite or Oldach.
SECTION 7.6 FINANCIAL STATEMENTS.
SCHEDULE 7.6 attached hereto contains true and correct copies of a separate
balance sheet for each of SealRite and Oldach dated as of June 30, 1994
(collectively, the "S&O BALANCE SHEETS"), and the related statements of
operations for the Business of each of S&O for the six month period ended June
30, 1994 and 1993 and for the years ended December 31,1993 and 1992. The
financial statements referred to in the preceding sentence are hereinafter
collectively referred to as the "S&O FINANCIAL STATEMENTS." Each of the S&O
Financial Statements was prepared from the books and records of SealRite and
Oldach, as applicable, in conformity with GAAP consistently applied and fairly
present the financial condition and results of operations of the Business of S&O
for the periods and as of the dates stated therein.
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SECTION 7.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since the Balance Sheet Date, each of SealRite and Oldach has operated its
Business in the ordinary course consistent with past practice, and neither
SealRite, Oldach nor the Business of S&O taken as a whole has:
(a) Suffered or been overtly threatened with any material adverse
change in its business or any event or condition of any character, which,
individually or in the aggregate, has had or might reasonably be expected
to have a material adverse effect on the business or financial condition of
the Business of either SealRite or Oldach;
(b) Except as provided and allowed in Sections 8.1 and 8.2 hereof,
incurred any obligations or liabilities (absolute, accrued, contingent, or
otherwise) or entered into any transactions, other than in the ordinary
course of business;
(c) Paid, discharged, or satisfied any claims, obligations, or
liabilities (absolute, accrued, contingent, or otherwise), except the
payment, discharge, or satisfaction in the ordinary course of business and
consistent with past practice of any claims, obligations, and liabilities
(i) which are reflected or reserved against in the S&O Financial Statements
or (ii) which were incurred in the ordinary course of business and
consistent with past practice since the Balance Sheet Date;
(d) Permitted or allowed any of its properties or assets to be
subjected to any Encumbrances or other liabilities and obligations, except
Permitted S&O Encumbrances;
(e) Written off as uncollectible, or canceled or waived, any accounts
receivable or any portion thereof, or any debts or claims, except in the
ordinary course of business and consistent with past practice;
(f) Sold, conveyed, or otherwise disposed of any properties or
assets, except for fair consideration in the ordinary course of business
and consistent with past practice;
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 40
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(g) Disposed of or permitted to lapse any S&O Intellectual Property
(as defined in Section 7.12 hereof), or any license, permit, or other form
of authorization to use any S&O Intellectual Property;
(h) Except for normal increases which are not material and are
consistent with past practice, granted or agreed to grant any increase in
the compensation of any employee of either SealRite or Oldach (including
any such increase pursuant to any bonus, pension, profit sharing or other
plan or commitment), or become a party to or instituted any new benefit
programs for any employees of either SealRite or Oldach;
(i) Made any capital expenditure, or commitment for a capital
expenditure, for additions to property, plant, equipment or S&O
Intellectual Property, other than in the ordinary course of business;
(j) Made any change in any method of accounting or accounting
practice or in any tax procedures or elections;
(k) Terminated or suffered a termination of (excluding a termination
in accordance with its terms) or amended, any material contract, agreement,
license, or lease;
(l) Except as provided and permitted in Section 8.1 hereof, declared,
paid, or made, or set aside for payment or making, any dividend or other
distribution in respect of the capital stock of either SealRite or Oldach
or, directly or indirectly, redeemed, purchased, or otherwise acquired any
of the capital stock of either SealRite or Oldach; or
(m) Agreed, whether in writing or otherwise, or made any arrangement,
whether or not legally binding, to take any action which, if taken prior to
the date hereof, should have been disclosed on a Schedule to clauses (a)-
(l) of this Section 7.7.
SECTION 7.8 CERTAIN TAX MATTERS.
(a) Except as set forth in SCHEDULE 7.8, each of SealRite and Oldach:
(i) Has filed or will file or furnish when due in
accordance with all applicable laws all federal, state, local and
other tax returns, reports and declarations
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 41
<PAGE>
of every nature (including, without limitation, income, employment,
payroll, excise, property, sales and use, capital, goods and services
taxes and unemployment contributions) required to be filed by, on
behalf of, or with respect to S&O and the S&O Assets (collectively,
the "RETURNS") prior to the Closing Date;
(ii) Has correctly reflected in all material respects on the
Returns (and, as to any Returns not filed as of the date hereof, will
correctly reflect) the facts regarding its income, business, assets,
operations, activities, and status of any other information required
to be shown therein;
(iii) Has timely paid, withheld, or made adequate
provision for all taxes shown as due and payable on the Returns that
have been filed, and has otherwise withheld from each payment all
taxes and other amounts required to be withheld, and has paid all such
amounts and all installments of taxes due and payable within the
required time;
(iv) Is not subject to any liens for taxes on its assets;
(v) Has not participated in any tax sharing or other
arrangement whereby either SealRite or Oldach, in determining its
income, revenues, receipts, gain, loss, or any net operating loss or
other tax loss, net capital loss, investment tax credit, foreign tax
credit, charitable deduction or any other credit or tax attribute
which could reduce taxes (including, without limitation, deductions
and credits relating to alternative minimum taxes) (collectively, "TAX
ASSETS"), has taken into account or included any income, revenues,
receipts, gain, loss, asset, liability, or Tax Assets of any other
person (or vice versa);
(vi) Is not currently under any contractual obligation to
pay the tax obligations of, or with respect to transactions relating
to, any other person or to indemnify any other person with respect to
any tax;
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 42
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(vii) Is not subject to any (A) claims, audits, actions,
suits, proceedings, or investigations with respect to any tax or
assessment for which either SealRite or Oldach could be liable, which
would be material, to the knowledge of the directors or officers of
either SealRite or Oldach, and (B) requests for rulings in respect of
any tax or any proposed transaction pending before any governmental
authority responsible for the imposition of any tax.
(b) SCHEDULE 7.8 hereto contains a list of states and other
jurisdictions to which any tax is currently being paid by the either
SealRite or Oldach.
SECTION 7.9 INVENTORY; RECEIVABLES.
(a) Substantially all Inventory of S&O is of a good and merchantable
quality, usable and saleable in the ordinary course of business. The
Inventory set forth on the S&O Balance Sheets is stated properly therein at
the lower of cost or realizable market value, determined in accordance with
generally accepted accounting principles consistently applied. The
quantities of all items of S&O Inventory are reasonable and warranted in
the present circumstances of the Business of S&O.
(b) All accounts and notes receivable relating to the Business of S&O
at the Balance Sheet Date have been included in the S&O Balance Sheets in
accordance with generally accepted accounting principles consistently
applied. Since the Balance Sheet Date, no accounts or notes receivable
have been sold, transferred, or otherwise disposed of by either SealRite or
Oldach, nor have any of such accounts or notes receivable become
uncollectible or subject to any material defense, claim or offset.
SECTION 7.10 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) SCHEDULE 7.10(A) attached hereto sets forth a list of all owned
and leased real property of each of SealRite and Oldach, including the
address of each such property, the nature of SealRite or Oldach's interest
in such property, and the function and use of such property.
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(b) Except as set forth in the S&O Financial Statements or in
SCHEDULE 7.10(B), to the knowledge of S&O, each of SealRite or Oldach, as
applicable (i) has leasehold title or good and marketable fee simple title
to each piece of real property owned, leased, rented or used by S&O, in
each case free and clear of all Encumbrances in the case of real property
owned by S&O, except for Permitted S&O Encumbrances, and (ii) leases or
owns all tangible personal property free and clear of all Encumbrances,
except for Permitted S&O Encumbrances.
(c) Except as set forth in the S&O Financial Statements or in
SCHEDULE 7.10(B), to the knowledge of either SealRite or Oldach, there are
no liabilities of S&O of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable, or otherwise, and there is no existing
condition, situation, or set of circumstances which could reasonably be
expected to result in such a liability, other than: (i) liabilities
disclosed or provided for in the S&O Balance Sheets; and (ii) liabilities
incurred in the ordinary course of business consistent with past practice
since the Balance Sheet Date, which in the aggregate are not material to
the Business of either SealRite or Oldach.
(d) Complete and accurate copies of all mortgages relating to any
real property owned by either SealRite or Oldach (the "S&O MORTGAGES")
heretofore have been furnished to TJI. None of the S&O Mortgages has been
amended or modified except as indicated in SCHEDULE 7.10(D) and the
aggregate amount of all principal, interest, and other sums that is secured
by each of the S&O Mortgages as of the Closing Date does not exceed the
amount reflected in SCHEDULE 7.10(D).
SECTION 7.11 LEASES.
S&O has heretofore delivered to TJI a copy of each lease pursuant to which
either SealRite or Oldach leases real or personal property (collectively, the
"S&O LEASES"). Each of the S&O Leases is in full force and effect in accordance
with its terms, no S&O Lease has been modified or amended, and neither SealRite
nor Oldach has received any written notice of any breach or default with respect
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to an S&O Lease, the consequences of which would result in such S&O Lease being
terminated by the lessor.
SECTION 7.12 INTELLECTUAL PROPERTY.
SCHEDULE 7.12 attached hereto lists all trademarks, trade names, business
names, service marks, copyrights, patents, patented and unpatented inventions,
trade secrets, registered and unregistered designs, and all applications and
registrations therefor and licenses thereof, and all other intellectual property
and proprietary information relating to or connected with the S&O Assets or the
operation of the Business of S&O, indicating for each item whether owned, leased
or licensed by either SealRite or Oldach (collectively, the "S&O INTELLECTUAL
PROPERTY"). S&O own, have the exclusive right to use, or possess adequate
licenses or other rights to use all such S&O Intellectual Property, and no
rights thereto have been granted to others by either SealRite or Oldach. Except
as described in SCHEDULE 7.12, no patents, patented and unpatented inventions,
trademarks, service marks, trade names, trade secrets, registered and
unregistered designs, or copyrights are necessary to conduct or continue the
Business of S&O as it is presently conducted and no consent is required for the
assignment of any license for the S&O Intellectual Property. The S&O
Intellectual Property is free and clear of all assignments, licenses,
restrictions, or other Encumbrances, and none is subject to any outstanding
order, decree, judgment, stipulation or charge. To the knowledge of S&O, S&O's
use of the S&O Intellectual Property does not infringe upon or otherwise violate
the rights of others, and to the knowledge of S&O, none of the S&O Intellectual
Property is being infringed upon or otherwise violated by others. No one has
asserted in writing to either SealRite or Oldach that S&O's use of the S&O
Intellectual Property infringes or violates any patent, patented or unpatented
invention, trade secret, trade name, trademark, service mark, registered and
unregistered designs, copyright or other intellectual property right of any
other person or entity or that S&O are not the owners of the sole and exclusive
right to use the S&O Intellectual Property (except licensed property).
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 45
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SECTION 7.13 ERISA.
(a) Except as set forth on SCHEDULE 7.13, neither SealRite nor Oldach
is a party to or participates in or has any liability with respect to:
(i) Any "employee welfare benefit plan" or "employee
pension benefit plan" (as those terms are respectively defined in
Sections 3(1) and 3(2) of the Employee Retirement Income Security Act
of 1974, as amended (ERISA)), including a "multiemployer plan" (as
defined in Section 3(37) of ERISA);
(ii) Any retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation plan,
vacation pay, severance pay, bonus or benefit arrangement, insurance
or hospitalization program, or any other material fringe benefit
arrangements (herein referred to collectively as "EMPLOYEE FRINGE
BENEFIT ARRANGEMENTS") for any employee, which does not constitute an
"employee benefit plan" (as defined in Section 3(3) of ERISA); or
(iii) Any employment agreement.
(b) A true and correct copy of each of the plans, arrangements, and
agreements listed in SCHEDULE 7.13 heretofore has been supplied to TJI by
S&O. A true and correct copy of the most recent annual report, actuarial
report (with all attachments), summary plan description, and Internal
Revenue Service determination letter with respect to each such plan or
arrangement, to the extent applicable, heretofore has been supplied to TJI
by S&O, and there have been no material changes in the financial condition
of any such plan from that stated in the annual report and actuarial report
supplied.
(c) All plans, arrangements, and agreements listed in SCHEDULE 7.13
and any related trust agreements or annuity contracts materially comply
with and are and have been materially operated in accordance with each
applicable provision of ERISA, the Code, other Federal statues, state law
(including, without limitation, state insurance law) and the regulations
and rules promulgated pursuant thereto or in connection therewith and the
terms of each such
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respective plan, arrangement and agreement. Neither SealRite nor Oldach
has any notice or knowledge of any material violation of any of the
foregoing by any such plan, arrangement or agreement.
(d) All employee pension benefit plans listed in SCHEDULE 7.13 which
are subject to ERISA materially comply in form and in operation with the
applicable requirements of Section 401(a) and 501(a) of the Code. To the
knowledge of either SealRite or Oldach, no event has occurred which will or
could give rise to disqualification under the Code of any such employee
pension benefit plan listed in SCHEDULE 7.13 that is subject to ERISA or to
a tax under Section 511 of the Code; and no such plan which is subject to
Part 3 of Subtitle B of Title 1 of ERISA has incurred any "accumulated
funding deficiency." Neither SealRite nor Oldach has otherwise engaged in
any transaction with respect to any employee benefit plan listed in
SCHEDULE 7.13 which could result in a tax under Section 4975 of the Code.
There are no Actions (other than routine claims for benefits) pending or,
to the knowledge of either SealRite or Oldach, threatened against such
plans or the assets of such plans, and, to the knowledge of either SealRite
or Oldach, no facts exist which are reasonably likely to give rise to any
such Actions (other than routine claims for benefits). As to any employee
pension benefit plan which is listed in SCHEDULE 7.13 and which is subject
to Title IV of ERISA, there have been no "reportable events" (as described
in Section 4043 of ERISA), and no steps have been taken to terminate any
such plan. All group health plans (within the meaning of Section
5000(b)(1) of the Code) in which any S&O Business Employees participate
(including any plans of current and former affiliates of SealRite or Oldach
which must be taken into account under Section 162(i) or Section 162(k) of
the Code) have been operated in material compliance with the group health
plan continuation coverage requirements of Section 162(k) of the Code as in
effect for years beginning prior to January 1, 1989, Section 4980B for
years beginning after December 31, 1988 and Part 6 of Subtitle B of Title I
of ERISA, to the extent such requirements are applicable.
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(e) No employee or former employee of either SealRite or Oldach or
any of their affiliates will become entitled to any bonus, retirement,
severance, job security, or similar benefit or enhancement of such benefit
solely as a result of the transactions contemplated hereby.
(f) Except as set forth on SCHEDULE 7.13, neither SealRite nor Oldach
is a party to or participates in or has any liability with respect to any
"employee pension benefit plan", as defined in Section 3(2) of ERISA, which
is a "multiemployer plan", as defined in Section 3(37) of ERISA.
(g) Except as set forth on SCHEDULE 7.13, or except as required by
section 4980B of the Code, neither S&O nor any ERISA Affiliate has promised
any former employee or other individual whether or not employed by either
SealRite or Oldach or any ERISA Affiliate, medical or other benefit
coverage, and neither S&O nor any ERISA Affiliate maintains or contributes
to any plan or arrangement providing medical benefits, life insurance, or
other welfare benefits to former employees, their spouses or dependents or
any other individual whether or not employed by S&O or any ERISA Affiliate.
(h) Except as set forth on SCHEDULE 7.13, neither S&O nor any ERISA
Affiliate is a party to or participates in or has any liability with
respect to any employee pension benefit plan which is subject to Title IV
of ERISA.
(i) Neither S&O nor any ERISA Affiliate has failed to make any
contributions to or to pay any amounts due and owing as required by the
terms of any of the plans, arrangements, and agreements listed in SCHEDULE
7.13, or by any collective bargaining agreement, or by ERISA or any other
applicable law.
SECTION 7.14 DOCUMENTS; COMMITMENTS.
(a) S&O has delivered to TJI copies of each material contract,
agreement, or other commitment, written or oral, to which either SealRite
or Oldach is a party or has succeeded to a party by assumption or
assignment or in which it has a beneficial interest (any contract
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or agreement shall, for the purposes of this Agreement, be deemed material
(A) if the Business or either SealRite or Oldach taken as a whole is
substantially dependent upon it, (B) if it involves a financial obligation
of or benefit to the Business of either SealRite or Oldach in excess of
$100,000, (C) if the contract is not made in the ordinary course, or (D) if
it constitutes a management contract or employment contract (excluding oral
agreements that arise by operation of law)).
(b) Neither SealRite nor Oldach is restricted by agreement from
carrying on its Business anywhere in the world.
SECTION 7.15 LABOR MATTERS.
(a) Except as set forth in SCHEDULE 7.15, neither SealRite nor Oldach
nor any employee of either SealRite or Oldach is a party to or is covered
by any labor agreement with any collective bargaining representative.
(b) To the knowledge of either SealRite or Oldach, there are no
unfair labor practice complaints, labor disputes, work stoppages, or union
organization efforts, or threats of the foregoing, directed against any of
the operations of the Business of SealRite or Oldach.
SECTION 7.16 NO BREACH.
(a) Except as may be set forth in SCHEDULE 7.16, each permit,
contract, agreement, deed of trust, lease, policy, license, plan,
commitment, arrangement, and understanding (whether evidenced by a written
document or otherwise) referred to in this Agreement or in any Schedule
hereto, under which SealRite or Oldach has any right, interest, or
obligation (i) is in full force and effect, and (ii) is not subject to any
threatened amendment, cancellation, or outstanding dispute.
(b) SealRite or Oldach, as the case may be, is not in breach of, and
there does not exist any default or event (including the execution and
delivery of this Agreement, the Partnership Agreement, and the other
Related Agreements and the consummation of the transactions contemplated
hereby or thereby) which, with the giving of notice or the lapse of
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 49
<PAGE>
time or both, would become a breach or default, and there is no basis for
any valid claim of a default in any respect, under any such permit,
contract or other agreement.
SECTION 7.17 REQUIRED CONSENTS.
Except as set forth in SCHEDULE 7.17, no consent, approval, governmental
filing, authorization, or permit from any court, governmental or regulatory
authority or administrative agency or any other person or entity is necessary to
the consummation of the transactions contemplated by this Agreement, the
Partnership Agreement, or the other Related Agreements. Moreover, except as set
forth on SCHEDULE 7.17, no other consent, approval, permit, clearance, or audit
is required under any federal law or the laws of the states in which SealRite or
Oldach has real property or leasehold interests in order to accomplish and
complete the conveyance of real or personal property and leasehold interests
contemplated hereunder. Each of SealRite and Oldach has used its best efforts
to secure the consents (where such consents are necessary) of the other parties
thereto or any other person to the consummation of the transactions contemplated
by this Agreement, the Partnership Agreement, and the Related Agreements.
SECTION 7.18 LITIGATION.
Except as set forth in SCHEDULE 7.18, (a) there are no Actions, or legal,
administrative, arbitration or other method of settling disputes or
disagreements or litigation pending or, to the knowledge of SealRite or Oldach,
threatened by or against, or involving SealRite or Oldach, or any directors,
officers, or employees thereof in their capacity as such, or (b) which question
or challenge the validity of this Agreement, the Partnership Agreement, or the
other Related Agreements, or any action taken or to be taken by SealRite or
Oldach pursuant to this Agreement, the Partnership Agreement, or the other
Related Agreements or in connection with the transactions contemplated hereby or
thereby. To the knowledge of SealRite or Oldach, there is no valid basis for
any such Action or other litigation. No Action or other litigation set forth in
SCHEDULE 7.18 would, if adversely decided, have a material adverse effect on the
Business of S&O taken as a whole or, after the Closing Date, on the ability of
the Partnership to conduct the Business of S&O.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 50
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SECTION 7.19 COMPLIANCE WITH APPLICABLE LAW; ADVERSE RESTRICTIONS.
Except as and to the extent set forth in SCHEDULES 7.19 and 7.20, the
operations of S&O have at all times been conducted in materials compliance with
(a) all applicable permits, orders, writs, injunctions, judgments, decrees, or
awards of all courts and governmental and regulatory authorities, and (b) to the
knowledge of S&O, all Laws, which are applicable to the assets of S&O
(including, without limitation, Environmental Laws and those related to
employment practices, terms and conditions of employment and wages and hours
laws). Except as and to the extent set forth in SCHEDULE 7.19 or 7.20, neither
SealRite nor Oldach has received any written notification of any failure or
alleged failure to comply with any Laws, except for failures which in the
aggregate are not and were not material to the conduct of the Business of S&O as
a whole.
SECTION 7.20 ENVIRONMENTAL MATTERS.
Except as set forth in SCHEDULE 7.20,
(a) To the knowledge of SealRite or Oldach, S&O have obtained all
permits and authorizations relating to pollution or protection of health,
safety, or the environment which are required by any Environmental Law
("ENVIRONMENTAL PERMITS"), including, without limitation, those regulating
air emissions, water effluent discharges, or the treatment, storage,
disposal, transportation or release of any Material of Environmental
Concern. SCHEDULE 7.20 contains a complete and accurate list of all such
Environmental Permits;
(b) S&O have taken all actions necessary to register any products or
materials relating to the Business of S&O, required to be registered under
any applicable Environmental Laws;
(c) Neither SealRite nor Oldach is aware of or has received notice
of, any occurrence, event, condition, circumstance, activity, practice,
incident, action, or plan which S&O reasonably expects would result in an
Action or claim, or allegation of Environmental Liability, based on,
arising out of or related to alleged on-site or off-site contamination
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 51
<PAGE>
associated in any manner with or affecting the Business of S&O and
properties related thereto; and
(d) To the knowledge of S&O, there are and have been no underground
storage tanks or surface impoundments on any real property now or
heretofore owned, leased or rented by or otherwise under the control of
either SealRite or Oldach, which tanks or impoundments, if determined by
any court, governmental, or regulatory authority having jurisdiction
thereof, to be in violation of or subject to liability under any
Environmental Law, would have a material adverse effect on the Business of
S&O taken as a whole.
(e) SCHEDULE 7.20 sets forth an accurate and complete list of all
currently pending Actions and claims or allegations of any person relating
to Environmental Laws or otherwise relating to environmental, health, and
safety matters, including pollution of the Environment or Materials of
Environmental Concern related to the Business of S&O. All such Actions,
claims or allegations arising in the past three (3) years which are not
currently pending are also set forth on SCHEDULE 7.20.
(f) Each of SealRite and Oldach is in material compliance with all
Environmental Permits and is also in material compliance with all
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables contained in any
Environmental Laws;
(g) SCHEDULE 7.20 contains an accurate and complete list of all
remedial, response or corrective actions required by governmental
authorities or otherwise undertaken since January 1, 1992, under all
Environmental Permits or Environmental Laws relating to the Business of the
S&O.
SECTION 7.21 ASSETS NECESSARY TO BUSINESS OF S&O.
As a result of the transactions effected hereby, the Partnership, with
respect to S&O Assets owned prior to the Closing Date by SealRite or Oldach
(a) will have title to, or a valid leasehold interest in, all tangible and
intangible assets and properties relating to the Business of S&O; (b) will
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 52
<PAGE>
possess valid consents, authorizations, approvals, and permits relating to the
Business of S&O, except for certain consents identified on SCHEDULES 7.5 and
7.18; and (c) will be party to all agreements, in each case necessary to permit
the Partnership, to continue to carry on the Business of S&O substantially as
presently conducted.
SECTION 7.22 CUSTOMERS, DISTRIBUTORS, AND SUPPLIERS.
Since January 1, 1994, there has not been any adverse change in the
business relationship of SealRite or Oldach with any customer, distributor, or
supplier which is material to the business or financial condition of the
Business of S&O taken as a whole.
SECTION 7.23 INSIDER TRANSACTIONS.
SCHEDULE 7.23 sets forth: (a) the amounts and other essential terms of
indebtedness or other obligations, liabilities or commitments (contingent or
otherwise) of SealRite or Oldach to or from any past or present officer,
director or stockholder or any person related to, controlling, controlled by or
under common control with any of the foregoing (other than for usual services
performed within the past month the payment for which is not yet due); and (b)
all transactions between such persons and SealRite or Oldach since the Balance
Sheet Date and all proposed transactions with such persons together with the
essential terms thereof (excluding, for purposes of the foregoing, the cash
distribution to the S&O Shareholders as provided in Section 6.1 hereof).
SECTION 7.24 ACCURACY OF INFORMATION FURNISHED.
No representation, statement or information made or furnished by SealRite
or Oldach to TJI, including those contained in this Agreement, in the various
Schedules and Exhibits hereto, or in other information and statements furnished
by SealRite and Oldach to TJI, contains or shall contain any untrue statement of
a material fact or omits or shall omit any material fact necessary to make the
information contained therein not misleading.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 53
<PAGE>
ARTICLE VIII
ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES
SECTION 8.1 CASH DISTRIBUTION TO S&O.
Notwithstanding any other provision of this Agreement to the contrary, it
is expressly acknowledged and agreed by TJI that at the Closing, TJI shall cause
the Partnership to make a cash distribution to S&O in an amount equal to $16
million (two-thirds to Oldach and one-third SealRite). The "Units" (as defined
in Section 4.1 of the Partnership Agreement) assigned to S&O pursuant to the
Partnership Agreement reflect the foregoing distribution, and therefore shall
not be adjusted in any way as a result thereof.
SECTION 8.2 TAX DISTRIBUTIONS BY S&O.
In addition to the cash distribution provided in Section 6.1 above, TJI
expressly acknowledges and agrees that at the Closing, S&O shall distribute or
shall have distributed to the shareholders of S&O an amount sufficient to enable
them to pay all federal, state and local income taxes payable by them on S&O's
taxable income for the portion of its current fiscal year ending on the Closing
Date (net of any distributions previously made by S&O on account of such taxes).
The Parties acknowledge and agree that the amount of the foregoing tax
distribution shall be subject to adjustment on or prior to December 31, 1994.
Such adjustment shall be made by the payment of cash by the Partnership or S&O,
as the case may be, to S&O or the Partnership, as the case may be, on or before
January 13, 1994, and shall not be deemed to be an adjustment to the capital
accounts of S&O (or any other partner) for financial reporting purposes or for
purposes of Section 12.7 of the Partnership Agreement.
SECTION 8.3 TRANSFER TAXES.
The Partnership shall pay, or cause to be paid, all sales, use and other
(excluding income) taxes and recording, registration and filing fees imposed on
any transfers by any Party of real property and tangible and intangible personal
property, including without limitation intellectual property, applicable to the
transfers of the Norco Assets, the Dashwood Stock and the S&O Assets.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 54
<PAGE>
SECTION 8.4 CONSENTS, PERMITS, ETC.
Each of TJI and S&O covenants and agrees with the other Party as follows:
(a) Each Party (i) has maintained in full force and effect and
renewed, when required, all consents, approvals, governmental filings,
authorizations, and permits, and (ii) has obtained (or will use its best
efforts to obtain at the earliest practicable date hereafter) all consents,
approvals, governmental filings, authorizations, and permits necessary to
(A) the consummation of the transactions contemplated by this Agreement,
the Partnership Agreement, and the other Related Agreements and (B) the
continued conduct of the Business by the Partnership after the Effective
Date as it is presently conducted by TJI, the TJI Subsidiaries and each of
S&O, and each Party delivers herewith (or will deliver when obtained
hereafter) to the Partnership copies of each such consent, approval,
governmental filing, authorization, and permit.
(b) To the extent that any of the contracts, leases, agreements,
Permits, plans, commitments, purchase orders, or other binding arrangements
relating to the TJI Assets, the S&O Assets or the Business (in this
Section 8.4(b) called "NON-ASSIGNED AGREEMENTS") cannot be assumed by or
assigned to the Partnership without the consent of another party, and such
consent has not been obtained as of the Closing Date, each of the Parties
hereto agrees to continue to use its best efforts to obtain such consent
and to cooperate with the other in any reasonable arrangement designed to
enable TJI, the TJI Subsidiaries or SealRite and/or Oldach, as applicable,
to perform its obligations under, and to provide for the Partnership the
benefits of, any such Non-Assigned Agreements, including enforcement at any
reasonable cost, and for the account for the Partnership, of any and all
rights of TJI, the TJI Subsidiaries or S&O, as applicable, against the
other party thereto arising out of the breach or cancellation thereof by
such other party or otherwise. TJI and S&O will promptly pay to the
Partnership when received all monies received by such Party under any such
Non-Assigned Agreements.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 55
<PAGE>
ARTICLE IX
NOTICES
Any notices or communications permitted or required hereunder shall be
deemed sufficiently given if hand-delivered, or sent (i) by postage prepaid,
registered or certified mail return receipt requested or (ii) by nationally-
recognized private carrier or facsimile to the Parties at their respective
addresses set forth below, or to such other address of which any Party may
notify the other Parties in writing. Notices delivered by mail shall be deemed
given two (2) business days after being deposited in the United States mail,
return receipt requested. Notices delivered by hand, by facsimile, or by a
nationally recognized private carrier shall be deemed given on the first
business day following receipt; PROVIDED, HOWEVER, that a notice delivered by
facsimile shall only be effective if such notice is also delivered by hand, or
deposited in the United States mail, postage prepaid, registered or certified
mail, on or before two (2) business days after it is delivered by facsimile.
If to TJI and/or the TJI Subsidiaries:
TJ International, Inc.
380 E. ParkCenter Blvd., Suite 300
P.O. Box 65
Boise, Idaho 83707
Facsimile: (208) 345-3431
Attention: Walter C. Minnick
With a copy to:
Hawley Troxell Ennis & Hawley
877 Main Street, Suite 1000
Boise, Idaho 83706
Facsimile: (208) 342-3829
Attention: Paul M. Boyd, Esq.
If to S&O:
LaSalle Capital Group, Inc.
Three First National Plaza, Suite 5710
Chicago, Illinois 60602
Facsimile: (312) 236-0720
Attention: Charles S. Meyer
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 56
<PAGE>
With a copy to:
Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606
Facsimile: (312) 715-4150
Attention: Robert L. Schlossberg, Esq.
ARTICLE X
CONSULTANT FEES; EXPENSES OF THE PARTIES
SECTION 10.1 CONSULTANTS.
Each of the Parties represents and warrants to the other that, except for
the retention by TJI of Lehman Brothers and Bushkin Associates for its own
account, and the retention by S&O of Bowles Hollowell Conner & Co. for its own
account, no broker or finder has acted on its behalf in connection with the
transactions contemplated by this Agreement. Each of the Parties agree to
indemnify, defend and hold the other Party harmless from any claim or demand for
any commission, compensation or other payment by the foregoing broker retained
by it and by any other broker, finder or similar agent claiming to have been or
that was in fact employed by or on behalf of the indemnifying party.
SECTION 10.2 EXPENSES.
Other than the expenses and fees of any brokers or advisers specifically
mentioned in Section 10.1 above, all of the fees and expenses incurred by the
Parties in connection with the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated hereby, and due
diligence related thereto, including, without limitation, the fees,
disbursements and expenses of their respective attorneys and accountants, shall
be borne and paid by the Partnership.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 BINDING EFFECT; ASSIGNMENT.
This Agreement shall be binding upon, and inure to the benefit of, all the
Parties and their respective successors, legal representatives and assigns
permitted in accordance with this Article XI.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 57
<PAGE>
No assignment of this Agreement or of any rights or obligations hereunder may be
made by any Party (by operation of law or otherwise) without the prior written
consent of the other Parties, and any attempted assignment without the required
consents shall be void; PROVIDED, HOWEVER, that no such consent shall be
required (i) for TJI to assign part or all of its rights under this Agreement to
one or more corporations owned or controlled by TJI (ii) for either SealRite or
Oldach to assign part or all of their respective rights under this Agreement to
their respective shareholders, but no such assignment by a Party of its rights
hereunder shall relieve such Party of its respective obligations under this
Agreement, the Partnership Agreement or any Related Agreement.
SECTION 11.2 EXHIBITS AND SCHEDULES.
All Exhibits and Schedules attached hereto and the documents and agreements
referred to herein to be delivered and the acts to be performed at or subsequent
to the Closing are incorporated herein and expressly made a part of this
Agreement as fully as though completely set forth herein.
SECTION 11.3 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the Parties. In
pleading or proving any provision of this Agreement, it shall not be necessary
to produce more than one such counterpart.
SECTION 11.4 AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented only by written
agreement of the Parties hereto.
SECTION 11.5 HEADINGS.
The headings contained in this Agreement are inserted for convenience of
reference only and shall not otherwise affect the meaning or interpretation or
be deemed a substantive part of this Agreement.
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 58
<PAGE>
SECTION 11.6 WAIVER.
The failure of any Party at any time or times to enforce or require
performance of any provision hereof shall in no way operate as a waiver or
affect the right of such Party at a later time to enforce the same. No waiver
by any Party of any condition or the breach of any term, covenant,
representation or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach, or a waiver of any
other condition or of any term, covenant, representation or warranty contained
in this Agreement.
SECTION 11.7 SEVERABILITY.
If any provision of this Agreement shall hereafter be held to be invalid or
unenforceable for any reason, that provision shall be reformed to the maximum
extent permitted to preserve the Parties' original intent, failing which, it
shall be severed from this Agreement with the balance of this Agreement
continuing in full force and effect. Such occurrence shall not have the effect
of rendering the provision in question invalid in any other jurisdiction or in
any other case or circumstances, or of rendering invalid any other provisions
contained herein to the extent that such other provisions are not themselves
actually in conflict with any applicable law.
SECTION 11.8 GOVERNING LAW.
This Agreement and all agreements ancillary hereto shall be governed by and
construed in all respects under the laws of the State of Delaware, without
reference to its conflicts of laws, rules or principles.
SECTION 11.9 NO THIRD PARTY BENEFICIARIES.
This Agreement is solely for the benefit of the Parties hereto and shall
not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, action or other right.
SECTION 11.10 ENTIRE AGREEMENT.
This Agreement, all agreements ancillary hereto or executed in connection
herewith, all of the Exhibits and Schedules attached hereto and thereto, and all
documents and certificates referred to
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 59
<PAGE>
herein or therein and delivered hereunder or thereunder, constitute the entire
understanding of the parties concerning the transactions contemplated hereby and
thereby, cancel and supersede all previous agreements and understandings, oral
or written, between the Parties with respect to the subject matter hereof
(including, without limitation, that certain letter agreement dated August 29,
1994 between TJI, S&O and the shareholders of S&O). No modification of this
Agreement or waiver of the terms, conditions, warranties, representations and
rights hereunder will be binding upon any Party unless signed in writing by an
authorized representative of such Party.
* * *
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 60
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Partnership Formation and
Contribution Agreement to be executed by their duly authorized representatives
as of the day and year first above written.
TJ INTERNATIONAL, INC.
By: /s/ Jody B. Olson
---------------------------------
Name: Jody B. Olson
-------------------------------
Its: VP
--------------------------------
SEALRITE WINDOWS, INC.
By: /s/ Robert L. Schlossberg
---------------------------------
Name:
-------------------------------
Its: VP
--------------------------------
OLDACH WINDOW CORP.
By: /s/ Robert L. Schlossberg
---------------------------------
Name:
-------------------------------
Its: VP
-------------------------------
PARTNERSHIP FORMATION AND CONTRIBUTION AGREEMENT - 61
<PAGE>
- - -------------------------------------------------------------------------------
PARTNERSHIP AGREEMENT
OF
N-S&O PARTNERSHIP
by and between
NORCO WINDOWS, INC.,
SEALRITE WINDOWS, INC.
and
OLDACH WINDOWS CORP.
- - -------------------------------------------------------------------------------
Dated October 11, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS AND INTERPRETATION........................... 1
Section 1.1 Definitions.................................. 1
Section 1.2 Other Definitions............................ 8
ARTICLE 2 FORMATION OF THE PARTNERSHIP............................. 8
Section 2.1 Formation.................................... 8
Section 2.2 Related Agreements........................... 8
Section 2.3 Name......................................... 9
Section 2.4 Partnership Filings........................... 9
Section 2.5 Office of the Partnership..................... 9
Section 2.6 Term.......................................... 9
Section 2.7 Scope of Partners' Authority.................. 9
ARTICLE 3 CONTRIBUTIONS TO THE PARTNERSHIP.......................... 9
Section 3.1 Initial Contributions by TJI.................. 9
Section 3.2 Initial Contributions by S&O................. 10
Section 3.3 Special Distribution to S&O.................. 11
Section 3.4 Additional Contributions..................... 11
Section 3.5 Return of Contributions; Interest............ 11
Section 3.6 ND&L Operating Loss Payment.................. 11
3.6.1 Calculation.................................. 11
3.6.2 Objection to Statement....................... 11
3.6.3 Payment...................................... 12
3.6.4 Allocation to Norco.......................... 12
3.6.5 Dispute Resolution........................... 12
Section 3.7 Additional Financing......................... 12
3.7.1 Source of Financing.......................... 12
3.7.2 Access to TJI Credit Facility................ 12
Section 3.8 Non-Assignable Contracts..................... 13
Section 3.9 Warranties................................... 13
ARTICLE 4 INTERESTS IN THE PARTNERSHIP............................. 14
Section 4.1 Units........................................ 14
4.1.1 Authorized Units............................. 14
4.1.2 Outstanding Units............................ 14
Section 4.2 Transfers of Partnership Interests........... 14
4.2.1 General Prohibition.......................... 14
4.2.2 Permitted Transfers.......................... 14
Section 4.3 Agreements with Transferees.................. 15
Section 4.4 Restraining Order............................ 15
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ARTICLE 5 CAPITAL ACCOUNTS, DISTRIBUTIONS AND
ALLOCATIONS.............................................. 16
Section 5.1 Capital Accounts............................. 16
Section 5.2 Distribution Rights of Partnership Interests. 16
5.2.1 Distribution Rights.......................... 16
5.2.2 Limitation on Distribution Rights............ 16
Section 5.3 Distributions with Respect to Units.......... 16
5.3.1 In General................................... 16
5.3.2 Limitations on Distributions................. 17
5.3.3 Time and Nature of Distributions............. 17
(a) Current Distributions........................ 17
(b) Liquidating Distributions.................... 17
(c) Property Distributions....................... 17
Section 5.4 Distributions with Respect to Canadian Net
Operating Loss Tax Benefits.................. 17
5.4.1 In General................................... 17
5.4.2 Determination of Amount...................... 17
5.4.3 Distributions to Norco....................... 18
5.4.4 Tax Allocation............................... 18
5.4.5 Canadian NOLs Not Fully Realized Prior to
Liquidation.................................. 18
5.4.6 Independent Provision........................ 18
5.4.7 Sale of Canadian Subsidiaries................ 18
Section 5.5 Tax Distributions............................ 19
5.5.1 In General................................... 19
5.5.2 Good Faith Determination..................... 19
5.5.3 Determination of Highest Pro Rata Allocation. 19
5.5.4 Mandatory Tax Distributions.................. 19
5.5.5 Changes in Interests or Holdings............. 19
5.5.6 Authority of Management Board................ 20
Section 5.6 Tax Allocations.............................. 20
5.6.1 In General................................... 20
5.6.2 Changes in Interests and Holdings............ 20
5.6.3 Nonrecourse Liabilities...................... 20
5.6.4 Effect on Taxes Only......................... 21
Section 5.7 Definition of Canadian NOLs.................. 21
Section 5.8 Miscellaneous Tax Matters.................... 21
5.8.1 Authority of Management Board................ 21
5.8.2 Partnership Elections........................ 22
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5.8.3 Tax Matters Partner.......................... 22
5.8.4 Certain Partnership-Level Taxes.............. 22
ARTICLE 6 CONDUCT OF THE BUSINESS.................................. 22
Section 6.1 Business of the Partnership.................. 22
Section 6.2 Chief Executive Officer...................... 23
Section 6.3 Appointment of CEO........................... 23
Section 6.4 Duties of CEO................................ 23
Section 6.5 Budget....................................... 24
Section 6.6 Expenses of the Partnership.................. 24
6.6.1 Pre-Closing Expenses......................... 24
6.6.2 Post-Closing Expenses........................ 24
Section 6.7 Other Business Activities; Disclosure, Waiver 25
Section 6.8 Scope of Authority; Indemnification.......... 26
6.8.1 Scope of Authority........................... 26
6.8.2 Indemnification.............................. 26
ARTICLE 7 MANAGEMENT BOARD......................................... 26
Section 7.1 Management Board............................. 26
Section 7.2 Composition of Management Board.............. 27
7.2.1 Management Board without CEO................. 27
7.2.2 Management Board with CEO.................... 27
7.2.3 Chairman and Vice Chairman................... 27
Section 7.3 Approval of Management Board................. 27
7.3.1 Definition................................... 27
7.3.2 Quorum....................................... 28
7.3.3 Nonapplication............................... 28
Section 7.4 Major Decisions.............................. 28
7.4.1 Definition................................... 28
7.4.2 Nonapplication............................... 30
Section 7.5 Deadlock..................................... 30
Section 7.6 Sale of Canadian Subsidiaries................ 31
7.6.1 Sale of Canadian Subsidiaries................ 31
7.6.2 Payment of Sale Proceeds; Reduction in
Ownership Percentages........................ 31
7.6.3 Effect of Sale............................... 32
7.6.4 Termination if No Sale....................... 32
Section 7.7 Alternates and Change in Appointees.......... 33
7.7.1 Alternates................................... 33
7.7.2 Change in Appointees......................... 33
Section 7.8 Remuneration................................. 33
Section 7.9 Committees................................... 33
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Section 7.10 Meetings of the Management Board............. 33
Section 7.11 Records and Minutes.......................... 34
7.11.1 Records...................................... 34
7.11.2 Minutes...................................... 34
Section 7.12 Written Decisions............................ 34
ARTICLE 8 LIABILITIES OF PARTNERS;
INDEMNIFICATION.......................................... 34
Section 8.1 Liabilities of Partners...................... 34
Section 8.2 Indemnification.............................. 35
ARTICLE 9 DEALINGS BETWEEN THE PARTNERSHIP AND
A PARTNER................................................ 35
Section 9.1 Dealings with Partners....................... 35
Section 9.2 Rates for Services........................... 35
Section 9.3 Loans........................................ 36
ARTICLE 10 BOOKS, RECORDS AND FINANCIAL
INFORMATION.............................................. 36
Section 10.1 Books of Account............................. 36
Section 10.2 Appointment of Auditor....................... 36
Section 10.3 Bank Accounts................................ 36
Section 10.4 Other Accounting Decisions................... 36
Section 10.5 Tax Returns.................................. 37
Section 10.6 Notice of Tax Audit.......................... 37
Section 10.7 Delivery of Financial Statements............. 37
Section 10.8 Confidentiality.............................. 38
ARTICLE 11 DEFAULT.................................................. 38
Section 11.1 Event of Default............................. 38
Section 11.2 Remedies..................................... 39
Section 11.3 Buy Procedure................................ 39
Section 11.4 Valuation.................................... 40
11.4.1 Appointment of Investment Banker............. 40
11.4.2 Establishment of Value....................... 41
11.4.3 Decision Binding............................. 41
11.4.4 Expenses..................................... 41
Section 11.5 Limitation on Rights......................... 41
ARTICLE 12 TERMINATION OF THE PARTNERSHIP........................... 41
Section 12.1 No Abandonment............................... 41
Section 12.2 Dissolution.................................. 41
12.2.1 Dissolution Events........................... 41
iv
<PAGE>
12.2.2 Waiver of Dissolution and Partition Rights... 42
Section 12.3 Termination Election......................... 42
Section 12.4 Appointment of Receiver...................... 42
Section 12.5 Dissolution Upon Termination Election or Event of
Default...................................... 43
Section 12.6 Other Dissolution............................ 43
12.6.1 Winding Up................................... 43
12.6.2 Management Rights During Winding Up.......... 43
Section 12.7 Distributions on Liquidation................. 44
Section 12.8 Disposition of Documents an4 Records......... 44
Section 12.9 Contribution Obligation of Partners.......... 45
ARTICLE 13 NOTICES.................................................. 45
ARTICLE 14 MEDIATION/ARBITRATION.................................... 46
Section 14.1 Mediation.................................... 46
Section 14.2 Binding Arbitration.......................... 47
ARTICLE 15 MISCELLANEOUS............................................ 47
Section 15.1 Governing Law................................ 47
Section 15.2 Interpretation............................... 47
Section 15.3 Binding Effect............................... 48
Section 15.4 Exhibits..................................... 48
Section 15.5 Counterparts................................. 48
Section 15.6 Amendment and Modification................... 48
Section 15.7 Waiver....................................... 49
Section 15.8 Severability................................. 49
Section 15.9 Entire Agreement............................. 49
Section 15.10 Further Assurances........................... 49
Section 15.11 Time......................................... 50
v
<PAGE>
PARTNERSHIP AGREEMENT
OF
N-S&O PARTNERSHIP
THIS PARTNERSHIP AGREEMENT ("AGREEMENT") is made and entered into
as of the 11th day of October, 1994, effective as of October 3, 1994, by and
between NORCO WINDOWS, INC., a Wisconsin corporation ("NORCO"), SEALRITE
WINDOWS, INC., a Nebraska corporation ("SEALRITE") and OLDACH WINDOWS CORP., a
Delaware corporation ("OLDACH").
RECITALS
A. Norco, either directly or through an Affiliate, is the owner
of (i) the Norco Assets and (ii) the Dashwood Stock.
B. SealRite and Oldach are the owners of the S&O Assets.
C. The parties have agreed to form a general partnership under
the laws of the State of Delaware under the name "N-S&O PARTNERSHIP," pursuant
to the provisions of the Delaware Uniform Partnership Act.
AGREEMENT
In consideration of the mutual covenants and conditions contained
hereto, the parties, intending to be legally bound hereby, agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS.
As used in this Agreement, capitalized terms defined immediately
after their use shall have the respective meanings thereby provided, and the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ACT" means the Delaware Uniform Partnership Act, Delaware Code.
PARTNERSHIP AGREEMENT - 1
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"AFFILIATE" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person in question. For the purposes of this definition, "CONTROL"
(including, with correlative meanings, the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH"), as used with respect to any Person, means the
possession, directly or indirectly, of the power, alone or as part of an
organized group, to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by contract
or otherwise.
"AGREEMENT" means this Agreement of Partnership of N-S&O
Partnership, including the Exhibits and Schedules hereto.
"ASSUMED LIABILITIES" means the liabilities of Norco and of S&O
which are assumed by the Partnership pursuant to the provisions of the
Contribution Agreement.
"AUDITOR" means a firm of which one or more of the partners are
members in good standing of the American Institute of Certified Public
Accountants, has a recognized national reputation, and which is appointed by the
Management Board as an auditor for the Partnership, pursuant to Section 10.2 of
this Agreement.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a
statutory or civic holiday in Boise, Idaho.
"CANADIAN SUBSIDIARIES" means Dashwood and LaFlamme, and
"CANADIAN SUBSIDIARY" means either one of them.
"CEO" means the Chief Executive Officer of the Partnership,
selected in accordance with the provisions of Section 6.3 of this Agreement.
"CHAIRMAN" means the person appointed, from time to time, by the
Partners as the chairman of the Management Board.
"CLOSING DATE" means 10:00 A.M. (Boise time) on October 11, 1994.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor legislation thereto.
"DASHWOOD" means Dashwood Industries Inc., a corporation organized
under the laws of the Province of Ontario, Canada and, following consummation of
the transactions contemplated herein and in the Contribution Agreement, a
wholly-owned subsidiary of the Partnership.
PARTNERSHIP AGREEMENT - 2
<PAGE>
"DASHWOOD STOCK" means all of the issued and outstanding capital
stock of Dashwood, including, without limitation, the issued and outstanding
common and Class "D" shares of Dashwood, which is being contributed to the
Partnership by TJI under the terms of the Contribution Agreement.
"DISTRIBUTABLE CASH" of the Partnership, at any time, means
amounts determined by the Management Board, on a quarterly basis, as being
available out of excess cash flow of the Partnership for distribution to the
Partners, after payment of all current debts and liabilities of the Partnership
as the same became due from time to time (including in respect of any financing
pursuant to Section 3.7 hereof) as provided in Article V of this Agreement.
"EFFECTIVE DATE" is 12:01 A.M. (Boise time) on October 3, 1994.
"EVENT OF DEFAULT" has the meaning ascribed thereto in
Section 11.1 of this Agreement.
"EVENT OF INSOLVENCY" means any one or more of the following:
(a) If a Person files a petition in bankruptcy or for
re-organization or for an arrangement pursuant to any applicable
bankruptcy law or under any similar laws, now or hereafter in
effect, or is adjudged by a court of competent jurisdiction bankrupt
or becomes insolvent or makes an assignment for the benefit of its
creditors or admits in writing its inability to pay its debts
generally as they become due or is dissolved or suspends payment
generally of its obligations;
(b) If a petition is filed proposing the adjudication of a
Person as a bankrupt or its re-organization pursuant to any
applicable bankruptcy law or any similar law, now or hereafter in
effect, and
(i) the Person consents to the filing thereof,
(ii) the petition is not discharged or denied within 60
days after the filing thereof, or
(iii) the petition is not diligently defended against;
and
(c) if a receiver, nominee or liquidator (or other similar
official) is appointed to take charge of a part
PARTNERSHIP AGREEMENT - 3
<PAGE>
or of all or substantially all of the business or assets of a
Person; and
(i) that Person consents to such appointment, or
(ii) the appointment is not discharged or withdrawn
official within sixty (60) days after the appointment.
"FISCAL YEAR" means the 52/53 week period which ends on the
Saturday closest to December 31 of each year, except that the first Fiscal Year
shall be the period commencing on October 3, 1994 and ending on December 31,
1994.
"INTEREST RATE" means the rate of interest charged by the lead
banker of the Partnership from time to time on unsecured commercial loans made
to the Partnership, or if the Partnership does not have a lead banker or any
unsecured commercial loans outstanding at such time, the variable nominal rate
of interest per annum being the prime interest rate of Bank of America, N.A. (or
its successor) for commercial loans as publicly declared by such bank from time
to time as its "PRIME RATE."
"LAFLAMME" means R. LaFlamme & Frere, Inc., a corporation
organized under the laws of the Province of Quebec, Canada, and a wholly-owned
subsidiary of Dashwood.
"LIQUIDITY TRANSACTION" a transaction contemplated by the
Liquidity Transaction Agreement pursuant to which the business of the
Partnership is transferred to a successor corporate form, and its securities are
issued to the public in an offering registered under the securities acts, or as
otherwise provided in the Liquidity Transaction Agreement.
"MANAGEMENT BOARD" means the management board of the Partnership
established pursuant to Article VII of this Agreement.
"ND&L" means, collectively, Norco, Dashwood and LaFlamme.
"ND&L EXPENSES" means all amounts paid or payable by the
Partnership or the Canadian Subsidiaries in respect of the costs and expenses
attributable to the Norco Assets, the Norco liabilities or the Canadian
Subsidiaries during the Start-Up Period, calculated in accordance with generally
accepted accounting principles, and shall INCLUDE, without limitation:
(a) direct and indirect window and patio door manufacturing
costs (net of by-product revenue, if any) adjusted for changes in
inventory values;
PARTNERSHIP AGREEMENT - 4
<PAGE>
(b) an allowance for depreciation and amortization;
(c) expenses attributable to the marketing of the window,
patio door and other products produced by ND&L;
(d) net interest expense attributable to ND&L, which will
include (i) interest on the term debt assumed by the Partnership (as
provided in the Contribution Agreement) or owed by the Canadian
Subsidiaries, (ii) interest on the intercompany debt owed by the
Canadian Subsidiaries to TJI, plus (iii) the interest on seasonal
working capital needs or monthly negative cash flows, with interest
charged at the rate provided in Section 3.7.2 hereof (the foregoing
interest expense to be offset by the amount of imputed interest at
the rate charged to the Partnership by TJI on reductions in seasonal
working capital and monthly positive cash flows);
(e) allocations of payments made by the Partnership under
the Partnership Support Services Agreement which are a consequence
of, or attributable to, the Norco Assets, the Norco liabilities or
the Canadian Subsidiaries (excluding, however, any salary or
expenses associated with the CEO and his staff and their office
facilities); and
(f) any year-end operating adjustments;
but shall EXCLUDE:
(a) special one-time write-downs or reserves taken by the
Canadian Subsidiaries or relating to the Norco Assets and severance
payments that arise from events such as a significant downsizing of
operations or a significant change in the business strategy or
product offering, or area of geographic operations (the foregoing
amount which shall be excluded, shall be offset by the benefit or
cost savings associated with any such one-time write-downs or
reserves, the amount of which to be determined by Chairman and Vice
Chairman in mutual consultation);
(b) allocations of overhead and administration from any of
the Partners or the Partnership to the extent not reimbursed or
reimbursable by Norco or the Canadian Subsidiaries; and
(c) all development costs for future manufacturing
facilities.
PARTNERSHIP AGREEMENT - 5
<PAGE>
It is expressly agreed by the Partners that ND&L Expenses shall be
computed with reference to the business of ND&L as in operation on the Effective
Date. Accordingly, there shall be EXCLUDED from the calculation of ND&L
Expenses during the Start-Up Period any costs or expenses associated with any
material change (as opposed to a mere reduction in sales) in the business of any
of Norco, Dashwood or LaFlamme, including, without limitation, any start-up
costs incurred with the implementation of new product lines, any major capital
expenditures, any material shut-downs of plants and/or equipment, and any other
material strategic or operational changes.
An example of calculating ND&L Expenses is set forth in SCHEDULE 1
attached hereto. In addition to the foregoing, it is expressly agreed by the
Partners that notwithstanding the definition of ND&L Expenses set forth above,
in the event Dashwood or LaFlamme are sold pursuant to the terms of Section 7.6
of this Agreement, ND&L Expenses with respect to such sold Canadian Subsidiary
or Subsidiaries, as the case may be, shall be computed on a cash basis only
(E.G., amortization and depreciation shall not be considered an ND&L Expense
with respect to such sold Canadian Subsidiary because they are non-cash items).
"ND&L OPERATING LOSSES" means an amount calculated for the
purposes of this Agreement equal to the amount, if any, by which the ND&L
Expenses exceed the ND&L Revenues during the Start-Up Period. In computing ND&L
Operating Losses, that portion of ND&L Expenses and ND&L Revenues expressed in
Canadian currency shall be translated to U.S. currency using an exchange factor
methodology consistent with TJI's practice immediately prior to the Closing
(which shall be the average of the exchange rates computed every two weeks
during the Start-Up Period).
"ND&L REVENUES" means all amounts received or receivable by the
Partnership in respect of the revenues generated by the Norco Assets and the
Canadian Subsidiaries during the Start-Up Period, calculated in accordance with
generally accepted accounting principles.
"NET INCOME" or "NET LOSS" for any period, means, respectively,
the net income or net loss of the Partnership (or of specified assets of the
Partnership) for such period determined in accordance with generally accepted
accounting principles.
"NORCO ASSETS" means the facilities, assets, properties and rights
relating to, arising out of or resulting from Norco's operation and ownership of
its window and patio door business, which are contributed to the Partnership
under the terms of the Contribution Agreement.
PARTNERSHIP AGREEMENT - 6
<PAGE>
"OLDACH ASSETS" means the facilities, assets, properties and
rights relating to, arising out of or resulting from Oldach's operation and
ownership of its window and patio door business, which are contributed to the
Partnership under the terms of the Contribution Agreement.
"PARTNERSHIP" means the N-S&O Partnership, a general partnership
formed under the laws of the State of Delaware.
"PARTNERS" means Norco, SealRite and Oldach, and "PARTNER" means
any one of them.
"PERSON" means an individual, corporation, body corporate,
partnership, syndicate, joint venture, limited liability company, association,
trust or unincorporated organization or any trustee, executor, administrator or
other legal representative.
"SEALRITE ASSETS" means the facilities, assets, properties and
rights relating to, arising out of, or resulting from SealRite's operation and
ownership of its window and patio door business which is contributed to the
Partnership under the terms of the Contribution Agreement.
"SECRETARY" means the person appointed from time to time by the
Chairman as the secretary of the Management Board (which such person may or may
not be a member of the Management Board).
"S&O" means, collectively, SealRite and Oldach.
"S&O ASSETS" means, collectively, the SealRite Assets and the
Oldach Assets.
"S&O SHAREHOLDERS" means, collectively, the shareholders of
SealRite and Oldach, as they may exist from time to time.
"START-UP PERIOD" means the period of time from October 3, 1994 to
December 31, 1995.
"TJI" means TJ International, Inc., the parent corporation of
Norco.
"UNITS" means the units of partnership interest which the Partners
receive in exchange for their contributions to the Partnership, as set forth in
Section 4.1.2 hereof.
"VICE CHAIRMAN" means the person appointed, from time to time, as
the vice chairman of the Management Board.
"VALUATION DATE" means the date of receipt by the Secretary of the
notice under Section 11.2.(d) of this Agreement.
PARTNERSHIP AGREEMENT - 7
<PAGE>
SECTION 1.2 OTHER DEFINITIONS.
Capitalized terms not specifically defined herein shall have the
meanings ascribed thereto in the Contribution Agreement (as defined in Section
2.2(a) below).
ARTICLE 2
FORMATION OF THE PARTNERSHIP
SECTION 2.1 FORMATION.
Norco, SealRite and Oldach do hereby enter into and form a general
partnership (the "PARTNERSHIP") for the purposes set forth herein and upon the
terms, provisions and conditions set forth in this Agreement. The Partnership
shall be governed by the Uniform Partnership Act of the State of Delaware, as
from time to time amended or revised, except as expressly provided herein to the
contrary.
SECTION 2.2 RELATED AGREEMENTS.
Concurrently with the execution and delivery of this Agreement, the
Partnership, the Partners and certain of their Affiliates are entering into the
following related agreements (collectively, the "RELATED AGREEMENTS"):
(a) A Partnership Formation and Contribution Agreement
("CONTRIBUTION AGREEMENT"), as more particularly described in
Section 3.1 below;
(b) A Partnership Support Services Agreement between TJI and
the Partnership (the "SUPPORT SERVICES AGREEMENT"), pursuant to
which TJI has agreed to perform certain support services for the
Partnership;
(c) An Employee Leasing Agreement between the Partnership
and the Partners (the "EMPLOYEE LEASING AGREEMENT"), which shall
govern the interim leasing of employees of the Partners to the
Partnership; and
(d) A Liquidity Transaction Agreement between TJI and S&O
Shareholders (the "LIQUIDITY TRANSACTION AGREEMENT"), regarding
the presently contemplated public offering of securities of a
planned corporate successor to the Partnership.
In the event of a conflict between the terms and conditions of any
Related Agreement and the terms of this Agreement, the terms of this Agreement
shall govern and control.
PARTNERSHIP AGREEMENT - 8
<PAGE>
SECTION 2.3 NAME.
The name of the Partnership shall be "N-S&O PARTNERSHIP." Any
change in the name of the Partnership shall be Approved by the Management Board
in accordance with this Agreement.
SECTION 2.4 PARTNERSHIP FILINGS.
The parties hereto shall promptly execute, acknowledge and file or
cause to be filed a certificate of assumed name and/or such other instruments as
shall be required to comply with the Act or as required for the conduct of its
business under the laws of any state or other jurisdiction.
SECTION 2.5 OFFICE OF THE PARTNERSHIP.
The principal office of the Partnership shall be in such location as
determined by the Management Board from time to time. The Partnership may have
such additional places of business as shall from time to time be determined by
the Management Board.
SECTION 2.6 TERM.
The term of the Partnership is from the Effective Date until
dissolution of the Partnership in accordance with the terms of this Agreement or
the Act. None of the Partners shall have the right and each Partner hereby
agrees not to withdraw from the Partnership, nor to dissolve, terminate or
liquidate, or to petition a court for dissolution, termination or liquidation of
the Partnership, except as provided in this Agreement.
SECTION 2.7 SCOPE OF PARTNERS' AUTHORITY.
Except as otherwise expressly and specifically provided in this
Agreement, none of the Partners shall have any authority to bind or act for, or
assume any obligations or responsibility on behalf of, the other Partners or the
Partnership.
ARTICLE 3
CONTRIBUTIONS TO THE PARTNERSHIP
SECTION 3.1 INITIAL CONTRIBUTIONS BY TJI.
As of the Effective Date, TJI shall be deemed to have transferred to
the Partnership or shall have caused Norco to transfer to the Partnership, as a
contribution in accordance with the provisions of the Contribution Agreement,
the Norco Assets and the Dashwood Stock, in exchange for:
PARTNERSHIP AGREEMENT - 9
<PAGE>
(a) the assumption by the Partnership of all of the Assumed
Liabilities (as defined in the Contribution Agreement) with respect
to the Norco Assets and Norco Business as of the Effective Date; and
(b) an interest in the Partnership entitling Norco to (i) an
initial capital account balance equal to $50,000,000 (being the
agreed fair market values of the Norco Assets (net of liabilities)
and the Canadian Subsidiaries) and (ii) 73.5% of the Units of the
Partners, both such value and number of Units determined immediately
AFTER taking into account all of the transfers and distributions
contemplated by this Article III.
The Partners expressly agree that for purposes of the calculation of
the $50,000,000 value set forth above, $32 million shall be allocated to Norco,
$15 million shall be allocated to Dashwood, and $3 million shall be allocated to
LaFlamme.
Furthermore, the Partners expressly agree that at such time as TJI
makes its contribution to the Partnership pursuant to Section 2.4(e) of the
Contribution Agreement, the Partnership shall (i) promptly loan to Dashwood an
amount equal to any intercompany debt owed by Dashwood to TJI, and (ii) promptly
cause Dashwood to pay to TJI an amount equal to such intercompany debt.
SECTION 3.2 INITIAL CONTRIBUTIONS BY S&O.
As of the Effective Date, S&O shall be deemed to have transferred to
the Partnership, as a contribution in accordance with the provisions of the
Contribution Agreement, the S&O Assets, in exchange for:
(a) the assumption by the Partnership of all of the Assumed
Liabilities (as defined in the Contribution Agreement) with respect
to the S&O Assets and the S&O Business as of the Effective Date; and
(b) an interest in the Partnership entitling S&O to (i) an
initial aggregate capital account balance equal to $18,000,000
(being the agreed fair market values of the S&O Assets after taking
into account the special distribution provided in Section 3.3 below)
and (ii) 26.5% of the Units of the Partners, both such value and
number of Units determined immediately AFTER taking into account
all of the transfers and distributions contemplated by this
Article III.
PARTNERSHIP AGREEMENT - 10
<PAGE>
SECTION 3.3 SPECIAL DISTRIBUTION TO S&O.
Notwithstanding any other provision of this Agreement, the Partners
agree that concurrently with the execution and delivery of this Agreement, the
Partnership shall make a special distribution to S&O in the aggregate amount of
$16,000,000 (apportioned one-third to SealRite and two-thirds to Oldach). Such
special distribution shall be financed by the Partnership through the TJI credit
facility, as provided in Section 3.5.2 hereof.
SECTION 3.4 ADDITIONAL CONTRIBUTIONS.
Except as otherwise expressly provided in this Agreement, in the
Contribution Agreement, or as or required by law, the Partners are not required
to make any additional contributions to the Partnership.
SECTION 3.5 RETURN OF CONTRIBUTIONS; INTEREST.
A Partner shall not have a separate right to receive a return of
such Partner's contributions to the Partnership or receive interest thereon but
shall have distribution rights as are provided in Article V of this Agreement.
SECTION 3.6 ND&L OPERATING LOSS PAYMENT.
3.6.1 CALCULATION. As soon as practicable after the end of
the Start-Up Period, the Management Board will cause the Partnership to
calculate the ND&L Operating Losses, if any, for such Period. Such calculation
shall take the form of a statement (the "OPERATING LOSS STATEMENT"), which
will set forth ND&L Revenues and ND&L Expenses during the Start-Up Period. The
Management Board shall have the Auditor audit the Operating Loss Statement.
3.6.2 OBJECTION TO STATEMENT. The Partners shall have the
right at their own expense to review the Operating Loss Statement. If any
Partner, within thirty (30) days after delivery of the Operating Loss Statement,
notifies the Partnership in writing that it objects to any items on such
Operating Loss Statement, specifying with particularity any such item and
stating the specific factual or legal basis for any such objection, the
Partnership and such disputing Partner shall resolve in good faith and use their
best efforts to resolve such items. If the dispute is not resolved within
twenty (20) days after receipt by the Partnership of such notice, the disputed
items shall be resolved pursuant to Section 3.6.5 below. All Partners (and
their authorized representatives) will have access to the books and records of
the Partnership, including the work papers, schedules and other documents
prepared or used by the Partnership in
PARTNERSHIP AGREEMENT - 11
<PAGE>
preparing the Operating Loss Statement or by the Auditor in auditing the same.
3.6.3 PAYMENT. Not later than the later of five (5) days
after the acceptance of the Operating Loss Statement by all of the Partners or,
in the event of a dispute, five (5) days after resolution of any such dispute
under Section 3.6.5 below, Norco shall contribute or cause to be contributed to
the Partnership, an amount in cash equal to 100% of the ND&L Operating Losses
for the Start-Up Period. Any payment made pursuant to this Section 3.6 will be
disregarded as either an expense or income of the Partnership for the purposes
of determining any allocation or distributions under this Agreement; PROVIDED,
however, such payment shall be a credit to Norco's capital account.
3.6.4 ALLOCATION TO NORCO. One Hundred Percent (100%) of
the ND&L Operating Losses for the Start-Up Period shall be allocated to Norco
and be a debit to Norco's capital account.
3.6.5 DISPUTE RESOLUTION. Disputes arising under this
Section 3.6 and not solved by mutual agreement as stated therein shall be
resolved by a nationally recognized accounting firm with no affiliation or
relationship whatsoever with the Partnership, the Partners, or their respective
Affiliates (the "ACCOUNTING REFEREE"), chosen and mutually acceptable to both
disputing Partner(s) and the non-disputing Partner(s), within five (5) days of
the date on which the need to choose the Accounting Referee arises. The
Accounting Referee shall resolve any disputed items within thirty (30) days of
having the item referred to it pursuant to such procedures as it may require.
The costs, fees and expenses of the Accounting Referee shall be borne by the
Partnership.
SECTION 3.7 ADDITIONAL FINANCING.
3.7.1 SOURCE OF FINANCING. Any funds which are required by
the Partnership to finance its operations shall, to the extent reasonably
possible, be obtained through borrowings from institutional lenders, banks and
other like sources, solely upon the credit of the Partnership and without
recourse to or guaranty of TJI. During the period the Partnership is
consolidated into TJI (by either the consolidation or equity method), the
Partnership shall obtain TJI's prior consent to any financing sources (which
consent shall not be unreasonably withheld), and such financing shall not
violate any of TJI's debt agreement covenants.
3.7.2 ACCESS TO TJI CREDIT FACILITY. Notwithstanding the
provisions of Section 3.7.1 above, Norco agrees that it will use its best
efforts to make available or cause to be made available access to credit and
financing
PARTNERSHIP AGREEMENT - 12
<PAGE>
represented by and under TJI's current revolving credit facility; PROVIDED,
however, that the foregoing shall (a) apply only to the extent that such credit
is available and not otherwise committed, and (b) be restricted or limited if
the syndicate of TJI lenders involved in such credit facility determines not to
provide such credit to the Partnership on the same terms and conditions set
forth in the credit facility agreement as applicable to TJI. As consideration
for providing the Partnership access to the TJI revolving credit facility, and
as a condition thereof, the Partnership shall execute and deliver a guaranty
agreement as provided by the TJI lenders and a contribution agreement among S&O,
TJI and the other TJI Affiliates which have signed a similar guaranty agreement,
substantially in the forms attached as EXHIBIT A and EXHIBIT B hereto,
respectively, with such changes as may be mutually agreed upon. In addition,
the Partners expressly acknowledge and agree that the Partnership shall repay to
TJI all indebtedness borrowed or assumed by the Partnership under the facility
at an interest rate per annum equal to 1.25% above the deemed borrowing cost to
TJI under its credit facility; PROVIDED, however, that in no event shall such
deemed borrowing cost to TJI be in excess of 0.05% over the base rate of
interest to TJI thereunder. Norco shall cause TJI and such Affiliates to sign
the contribution agreement. The guaranty agreement shall provide that it shall
terminate if the Partnership no longer uses the TJI credit facility.
SECTION 3.8 NON-ASSIGNABLE CONTRACTS.
Each of Norco, SealRite and Oldach confirm that each property, right
contract, permit, license, permission and authority included in the assets
transferred by the Partners to the Partnership under the Contribution Agreement
and not assignable without the required consent of a third party will be held by
Norco, SealRite or Oldach, as the case may be, as bare trustee for and on behalf
of the Partnership, for the benefit of and subject to the control and direction
of the Partnership. Norco, SealRite or Oldach, as the case may be, will take
all reasonable actions that may be necessary to obtain the requisite consents
and on each consent being obtained, the property, right, contract, permit,
license, permission or authority to which the consent relates will be
transferred to the Partnership without further act or deed of the Partnership.
SECTION 3.9 WARRANTIES.
Each of Norco, SealRite and Oldach confirm the assignment to the
Partnership of the benefit of any and all warranties in respect of any of the
assets transferred to the Partnership by it under the Contribution Agreement
unless the benefit of such warranties may not be assigned, in which case Norco,
SealRite or Oldach, as the case may be, at the request of
PARTNERSHIP AGREEMENT - 13
<PAGE>
the Partnership, will enforce all rights for the benefit of and at the cost of
the Partnership which it may have pursuant to any warranty which may not be
assigned.
ARTICLE 4
INTERESTS IN THE PARTNERSHIP
SECTION 4.1 UNITS.
4.1.1 AUTHORIZED UNITS. There are authorized for issuance
100,000 units of partnership interest ("UNITS").
4.1.2 OUTSTANDING UNITS. Set forth below is the ownership
of all issued and outstanding Units, determined after taking into account all of
the transfers and distributions contemplated by Article III hereof and Sections
8.1 and 8.2 of the Contribution Agreement:
PARTNER NUMBER OF UNITS
--------- ----------------
Norco 73,500
SealRite 8,333 and 1/3
Oldach 17,666 and 2/3
TOTAL: 100,000
-------
-------
Any change in the number of Units held by any Partner or in the
identity of any holder thereof, including, without limitation, any change in the
ownership of Units contemplated by Section 7.6 hereof, shall be set forth on an
addendum attached to this Agreement and signed by all of the Partners.
SECTION 4.2 TRANSFERS OF PARTNERSHIP INTERESTS.
4.2.1 GENERAL PROHIBITION. Except as expressly permitted
herein, none of the Partners shall sell, assign, transfer, mortgage, charge or
otherwise encumber or permit any of the foregoing, whether voluntarily or by
operation of law (herein sometimes collectively referred to as a "TRANSFER"),
any part of or all of its Units or interest in the Partnership without the
written consent of the other Partners, and any attempt to do so shall be void.
The giving of such consent in any one or more instances shall not limit or waive
the need for such consent in any other or subsequent instances.
4.2.2 PERMITTED TRANSFERS. Notwithstanding the provisions
of Section 4.2.1 above, a Partner may from time to time transfer all or any part
of its Units or interest in the Partnership under the following circumstances:
PARTNERSHIP AGREEMENT - 14
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(a) where such Partner transfers its Units or interest in
the Partnership to an Affiliate or Affiliates which, as a condition
of such transfer, executes a counterpart of this Agreement as
amended and thereby becomes a Partner in the place and stead of the
assignor; or
(b) where a Partner exercises its rights under Section 11.3
below; or
(c) where the transfer is to an existing Partner;
unless such transfer will result in a termination of the Partnership under Code
section 708(b)(1)(B), in which case Section 4.2.1 hereof shall apply.
SECTION 4.3 AGREEMENTS WITH TRANSFEREES.
In the event that pursuant to the provisions of this Article IV, any
Partner (the "TRANSFEROR") shall transfer its entire Units/interest in the
Partnership to any person or entity other than a then-existing Partner (the
"TRANSFEREE"), no such transfer shall be made or shall be effective to make
such Transferee a Partner or entitle such Transferee to any benefits or rights
hereunder until the proposed Transferee agrees in writing to assume and be bound
by all the obligations of the Transferor and be subject to all the restrictions
to which the Transferor is subject under the terms of this Agreement. In the
event a Partner's Units/interest is transferred by operation by law and the
Partner's Transferee fails to sign such a writing within ninety (90) days of the
date it is determined that such a transfer has been made, such failure shall
entitle the other Partners to treat such failure as a default under this
Agreement, and to elect any of the remedies afforded Non-Defaulting Partner(s)
under Section 11.2 hereof.
SECTION 4.4 RESTRAINING ORDER.
In the event that any Partner shall at any time transfer or attempt
to transfer its Units/interest in the Partnership in violation of the provisions
of this Agreement and any rights hereby granted, the other Partners shall, in
addition to all rights and remedies at law and in equity, be entitled to a
decree or order restraining and enjoining such transfer and the offending
Partner shall not plead in defense thereto that there would be an adequate
remedy at law; it being hereby expressly acknowledged and agreed that damages at
law will be an inadequate remedy for a breach or threatened breach of the
violations of the provisions concerning transfer set forth in this Agreement.
PARTNERSHIP AGREEMENT - 15
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ARTICLE 5
CAPITAL ACCOUNTS, DISTRIBUTIONS AND ALLOCATIONS
SECTION 5.1 CAPITAL ACCOUNTS.
A separate capital account shall be established for financial
reporting purposes on the books and records of the Partnership for each Partner.
The capital account of each Partner shall mean the fair market value of the
initial capital contribution of such Partner made pursuant to the terms of this
Agreement, increased by the fair market value of any additional capital
contributions made by such Partner after the Effective Date of this Agreement,
increased by the amount of Net Income credited to such Partner, and reduced by
any Net Loss charged to or distributions of cash or the fair market value of
other property made to such Partner pursuant to the terms of this Agreement. It
is expressly acknowledged and agreed by the Partners that any cash payments to
the Partnership as a result of any indemnification obligations contained herein,
in the Contribution Agreement or in any other Related Agreement shall not be
deemed a capital contribution by the contributing Partner and shall not increase
its capital account hereunder.
SECTION 5.2 DISTRIBUTION RIGHTS OF PARTNERSHIP INTERESTS.
5.2.1 DISTRIBUTION RIGHTS. Excluding the special
distribution to S&O as provided in Section 3.3 hereof and the rights of Norco
under Section 7.6 hereof, the distribution rights of the Partners in the
Partnership shall consist of the distribution rights associated with:
(a) Units (as described in Section 5.3 hereof);
(b) Canadian NOLs (as defined in Section 5.4 hereof); and
(c) Mandatory Tax Distributions (as defined in Section 5.5
hereof).
5.2.2 LIMITATION ON DISTRIBUTION RIGHTS. No distribution
shall be made if after such distribution the fair market value of the assets of
the Partnership would be less than its liabilities.
SECTION 5.3 DISTRIBUTIONS WITH RESPECT TO UNITS.
5.3.1 IN GENERAL. Except as otherwise provided herein,
distributions with respect to Units shall be made pro rata among the holders of
Units. Except as provided in Sections 5.4 and 12.7, it is intended that the
total distributions with respect
PARTNERSHIP AGREEMENT - 16
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to any Unit be the same as the total distributions with respect to any other
Unit.
5.3.2 LIMITATIONS ON DISTRIBUTIONS. The Partnership may not
make distributions pursuant to this Section 5.3 or Sections 5.4 or 5.5 or
otherwise under this Agreement to the extent the Partnership is not permitted to
do so under any agreements with its lenders.
5.3.3 TIME AND NATURE OF DISTRIBUTIONS.
(a) CURRENT DISTRIBUTIONS. The Management Board shall
determine whether, when, and to what extent non-liquidating
distributions of Distributable Cash with respect to Units shall be
made. Any distributions of Distributable Cash shall be a Major
Decision in accordance with the provisions of Section 7.4 hereof.
(b) LIQUIDATING DISTRIBUTIONS. Liquidating distributions
shall be made expeditiously in pursuance of an orderly liquidation
and winding up after dissolution of the Partnership.
(c) PROPERTY DISTRIBUTIONS. It is not contemplated that
distributions of property other than cash will be made, but such
distributions, including distributions of property subject to
liabilities, may be made under this Agreement in the discretion of
the Management Board except as otherwise provided herein.
Distributions of property shall be valued at the fair market value
of the net equity therein as determined in the reasonable judgment
of the Management Board. Whether a distribution of cash and/or
other property is pro rata shall be determined by reference to
value. No Partner shall be entitled to distributions of property
other than cash.
SECTION 5.4 DISTRIBUTIONS WITH RESPECT TO CANADIAN NET OPERATING LOSS TAX
BENEFITS.
5.4.1 IN GENERAL. Dashwood and LaFlamme have significant
Canadian NOLs (as defined in Section 5.7 hereof). The Partners agree that Norco
should receive additional distributions hereunder for the value of such Canadian
NOLs.
5.4.2 DETERMINATION OF AMOUNT. The additional distribution
to Norco under this Section 5.4 shall be computed at an amount equal to the
income tax that would have been paid (but was not paid) to the Canadian taxing
authorities (after the date hereof with respect to taxable income arising after
the date hereof resulting from the operations of the Canadian Subsidiaries,
PARTNERSHIP AGREEMENT - 17
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as opposed to resulting from any transaction contemplated by this Agreement or
the Related Agreements), had there been no Canadian NOLs.
5.4.3 DISTRIBUTIONS TO NORCO. At such time as all or any
part of the Canadian NOLs are actually realized by the Partnership on a
consolidated basis (determined in accordance with the provisions of Section
5.4.2 above), the tax benefit of such amount shall be credited to the capital
account of Norco, and the Partnership shall make an immediate cash distribution
to Norco equal to the amount of such tax benefit (which distribution shall be a
debit to Norco's capital account).
5.4.4 TAX ALLOCATION. The treatment of the Canadian NOLs
may or may not have any income tax impact on the federal, state or local taxable
income of the Partnership. If there is any such tax impact, then such impact
shall be allocated to Norco, which shall, notwithstanding anything in this
Agreement to the contrary, reduce the amount of distributions which would
otherwise be payable to Norco.
5.4.5 CANADIAN NOLS NOT FULLY REALIZED PRIOR TO LIQUIDATION.
The Partnership may liquidate or have a Liquidity Transaction prior to the
Canadian NOLs being fully realized. If the Partnership's assets are transferred
to a successor corporation, the successor corporation shall, pursuant to an
instrument reasonably satisfactory to Norco, assume the Partnership's obligation
to pay Norco the amount of such tax benefits of such Canadian NOLs which remain
unrealized pursuant to the terms of this Agreement. Such agreement shall
provide that it shall be a condition precedent of any payments thereunder that
the corporate successor shall realize the tax benefit of such Canadian NOLs.
5.4.6 INDEPENDENT PROVISION. Section 5.4 is intended to
operate separate and apart from the other provisions of this Agreement. For
example, the distributions under Sections 5.3 and 5.5 shall not take into
account any distributions under this Section 5.4.
5.4.7 SALE OF CANADIAN SUBSIDIARIES. If either or both of
the Canadian Subsidiaries are sold pursuant to Section 7.6, this Section 5.4 and
Section 5.2.1(b) shall terminate AB INITIO with respect to the Canadian
Subsidiary which has been sold and shall have no force and effect, and Norco
shall pay the Partnership a refund of any distributions made pursuant to this
Section 5.4 prior to such sale with respect to such Canadian Subsidiary.
PARTNERSHIP AGREEMENT - 18
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SECTION 5.5 TAX DISTRIBUTIONS.
5.5.1 IN GENERAL. If the Partnership has federal taxable
income for a particular tax year, such federal taxable income will flow through
to the Partners (including the owners of Partners that are flow through
entities) and such Partners (including the owners of Partners that are flow
through entities) are responsible for the payment of federal, state and local
tax on such Partnership taxable income.
5.5.2 GOOD FAITH DETERMINATION. The Management Board shall
assume a 46.6% federal, state and local income tax rate, as shall be amended
from time to time to take into account changes in applicable income tax rates.
Such rate may be assumed to be lower in the event taxable income includes
special items, such as capital gains. The Management Board may also consider
other factors as it deems relevant, including the known or anticipated taxable
income for the Partnership for other quarters in the same taxable year.
5.5.3 DETERMINATION OF HIGHEST PRO RATA ALLOCATION. The
Management Board shall then determine the highest per Unit allocation of taxable
income to a particular Partner. For example, Partner A may have 10 Units and be
allocated $100 of taxable income and Partner B may have 20 Units and be
allocated $180 of taxable income. Thus, Partner A would have the highest per
Unit allocation of taxable income.
5.5.4 MANDATORY TAX DISTRIBUTIONS. The Management Board
shall cause the Partnership to distribute to each Unit holder an amount equal to
the estimated income tax per Unit per quarter determined pursuant to Sections
5.5.2 and 5.5.3 above, based on the highest per Unit allocation of taxable
income for such quarter ("MANDATORY TAX DISTRIBUTIONS"). Said amount shall be
distributed by wire transfer on January 14, April 14, June 14 and September 14
of each year, commencing January 14, 1995. The amount of any Mandatory Tax
Distribution shall be reduced by any distributions of Distributable Cash made
within the prior 92 days pursuant to Section 5.3.3. To the extent the aggregate
of the amounts of Mandatory Tax Distributions hereunder is determined to be less
than the income tax per Unit pursuant to Sections 5.5.2 and 5.5.3 for a taxable
year, based upon the Partnership's determination of actual taxable income after
the close of such taxable year, an additional amount equal to such difference
shall be distributed by the Partnership no later than April 14th of the year
following such taxable year.
5.5.5 CHANGES IN INTERESTS OR HOLDINGS. The principles of
Section 5.6.2, relating to changes in interests or holdings, shall apply for
purposes of this Section 5.5, but it is understood that Mandatory Tax
Distributions to be made that relate
PARTNERSHIP AGREEMENT - 19
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to a Partner's predecessors in interest shall be made instead to such Partner.
5.5.6 AUTHORITY OF MANAGEMENT BOARD. Determinations under
this Section 5.5 shall be made reasonably and in good faith by the Management
Board. In making such determinations, the Management Board shall be entitled to
make reasonable assumptions and estimates in reasonable pursuit of convenience
of administration.
SECTION 5.6 TAX ALLOCATIONS.
5.6.1 IN GENERAL. All items of Partnership income, gain,
loss, deduction, credit, basis adjustment, and the like for any taxable year
shall be allocated among the Partners for income tax purposes in accordance with
the Partners' respective holdings of Units and in accordance with law, including
Code section 704(b), in a manner reasonably and in good faith determined by the
Management Board for the intended benefit of the Partners generally. In
accordance with Code Section 704(c) and the Regulations thereunder, income,
gain, loss, and deduction with respect to any property contributed to the
capital of the Partnership shall, solely for tax purposes, be allocated among
the Partners so as to take account of any variation between the adjusted basis
of such property to the Partnership for federal income tax purposes and its fair
market value to the Partnership.
5.6.2 CHANGES IN INTERESTS AND HOLDINGS. Where there is a
change in the holders of partnership interests, in the respective holdings of
partnership interests, or in the respective rights or duties appurtenant to
partnership interests (caused, E.G., by a transfer, issuance, retirement or
modification of a partnership interest), allocations under Section 5.6.1 for a
taxable year among the persons who are or were holders of partnership interests
shall be made in the manner determined by the Management Board to be required by
the Code, including Code section 706, and if the Management Board determines
that more than one method is permitted, then by the method that the Management
Board selects as appropriate, taking into account both principles of substantial
fairness and convenience of administration.
5.6.3 NONRECOURSE LIABILITIES. For purposes of Treas. Reg.
Section 1.752-3(a)(3) relating to allocation of nonrecourse liabilities of the
Partnership among the Partners for purposes of allocating nonrecourse
deductions, each Partner's interest in Partnership profits shall be in
Section accordance with Units. For purposes of Treas. Reg. Section 1.704-2,
income, gain, loss, deduction and expenditure attributable to nonrecourse
liabilities shall also be in accordance with Units.
PARTNERSHIP AGREEMENT - 20
<PAGE>
5.6.4 EFFECT ON TAXES ONLY. Nothing in this Section 5.6
shall be construed to cause, or to permit or require the Partnership, the
Management Board, or any other person to cause, any adjustment to the rights or
duties of the Partners or the Partnership relating to contributions,
distributions, liabilities to third parties, or the like.
SECTION 5.7 DEFINITION OF CANADIAN NOLS.
5.7.1 "CANADIAN NOLS" means an amount calculated for the
purposes of this Agreement equal to the SUM of (A) $9,027,493 Canadian (which
is the unused non-capital losses and unused tax credits for Canadian income tax
purposes of the Canadian Subsidiaries as of December 31, 1993), PLUS (B) the
following:
(a) for the period from January 1, 1994 through and
including June 30, 1994, 100% of the non-capital losses and unused
tax credits for Canadian income tax purposes of the Canadian
Subsidiaries as shown on Form T-25(4) (Continuity of Losses
Carryforward Schedule) (the "REPORTABLE LOSS AMOUNT"); and
(b) for the Start-Up Period, (i) 100% of the Reportable Loss
Amount in the event that Norco is required to make any payments as a
result of ND&L Operating Losses pursuant to Section 3.6 hereof (but
only to the extent of cash contributed as a result of such ND&L
Operating Losses for the Canadian Subsidiaries only).
5.7.2 In computing Canadian NOLs, that portion expressed in
Canadian currency shall be translated into U.S. currency on the date or dates
that they provide a tax benefit to the Canadian Subsidiaries.
5.7.3 For purposes of this Agreement, a tax benefit will be
realized when the Canadian Subsidiaries reduce the Canadian income tax payments
to the Canadian authorities by the tax benefit.
5.7.4 For any period which does constitute a full fiscal year,
the resulting full fiscal year will be prorated and shall be used to calculate
the Reportable Loss Amount for the period.
SECTION 5.8 MISCELLANEOUS TAX MATTERS.
5.8.1 AUTHORITY OF MANAGEMENT BOARD. All tax and accounting
determinations and elections shall be made reasonably and in good faith by the
Management Board for the intended benefit
PARTNERSHIP AGREEMENT - 21
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of the Partners generally and without preference or bias as to any Partner or
Partners.
5.8.2 PARTNERSHIP ELECTIONS. The Management Board may make
or decline to make, or may revoke or seek to revoke, any election which the
Partnership may make under the tax laws, including the election provided by
section 754 of the Code.
5.8.3 TAX MATTERS PARTNER. Unless otherwise required by
law, the tax matters partner within the meaning of section 6231(a)(7) of the
Code shall be Norco.
5.8.4 CERTAIN PARTNERSHIP-LEVEL TAXES. The Management Board
is authorized to file "group" or "composite" state income tax returns on behalf
of nonresident Partners in states where the Partnership conducts business to the
extent applicable state law permits the filing of such returns and the
Management Board determines that the interests of such Partners as a whole would
thereby be served. The Management Board may take any actions on behalf of the
Partnership and such Partners as may be necessary or appropriate to satisfy any
conditions that may be imposed by state law on the right to file such returns.
To the extent the Management Board files a group or composite state income tax
return, the Management Board shall notify each Partner of his share of tax paid
with such return, which share shall be determined pursuant to any reasonable
method chosen by the Management Board that is in accordance with applicable law.
The amount of such Partner's share of tax paid with such return shall be treated
as a distribution of such amount to such Partner. In the event that any state,
local or other income tax imposed on the Partnership as an entity (such as the
Illinois Personal Property Tax Replacement Income Tax) is reduced by reason of
the holding of a partnership interest by any holder, no part of the expense of
the Partnership for such tax shall be allocated to such holder, and an amount
equal to the reduction attributable to such holder shall be distributed to such
holder on March 14 of each year, commencing March 14, 1995. Any payment
hereunder shall be in addition to the Mandatory Tax Distributions provided
above.
ARTICLE 6
CONDUCT OF THE BUSINESS
SECTION 6.1 BUSINESS OF THE PARTNERSHIP.
The business of the Partnership is the manufacturing, marketing,
selling and distribution of windows and doors and related products for the
residential and light commercial markets (individually, and collectively, the
"BUSINESS"). The Partnership shall not carry on any other operations or
business other than the
PARTNERSHIP AGREEMENT - 22
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Business, unless such activity is Approved by the Management Board.
SECTION 6.2 CHIEF EXECUTIVE OFFICER.
The Partnership shall have a Chief Executive Officer ("CEO"), who
shall be selected and appointed pursuant to Section 6.3 hereof. The CEO, who
shall sit as a member on the Management Board, shall be responsible for the
implementation of the decisions of the Management Board and for conducting the
ordinary and usual business and affairs of the Partnership. The CEO shall not
be, be deemed to be or considered a partner of the Partnership and shall not
have any of the liabilities or obligations of a partner. The Management Board
shall require that the CEO shall at all times conform to policies and programs
established by the Management Board and that the scope of the CEO's authority
shall be limited to said policies and programs. The acts of the CEO shall bind
the Partners and the Partnership when within the scope of the CEO's authority.
The CEO shall at all times be subject to the direction of the Management Board,
and the Management Board shall require that the CEO keep the Management Board
informed as to all matters of concern to the Partnership.
SECTION 6.3 APPOINTMENT OF CEO.
The Management Board shall have the sole authority and
responsibility to appoint the CEO of the Partnership, with such authority and
duties as shall be determined from time to time by Approval of the Management
Board. The annual compensation, rights and duties, and tenure of the CEO shall
be determined in the sole discretion of the Management Board. Notwithstanding
any other provision of this Agreement to the contrary, for purposes of the
foregoing, the CEO (in his capacity as a Management Board member) shall be
prohibited from voting on any matter relating to his compensation, duties and
responsibilities, or tenure. Any matter relating to the compensation and tenure
of the CEO shall be determined by a simple MAJORITY of the Board members,
excluding the CEO.
SECTION 6.4 DUTIES OF CEO.
The CEO shall implement or cause to be implemented all decisions
Approved by the Management Board and delegated to the CEO by the Management
Board, and shall conduct or cause to be conducted the ordinary and usual
business and affairs of the Partnership in accordance with and as limited by
this Agreement and the Related Agreements, as applicable.
PARTNERSHIP AGREEMENT - 23
<PAGE>
SECTION 6.5 BUDGET.
Not less often than once each fiscal year (and not less than 30 days
prior to the beginning of each such fiscal year), the CEO shall prepare and
submit to the Management Board for its consideration a budget and a three-year
operating plan ("BUDGET") setting forth the estimated receipts and
expenditures (capital, operating and other) of the Partnership, as well as the
business strategy and goals for the Partnership, for the period covered by the
Budget. In addition, the CEO shall prepare monthly financial statements for
distribution to the Board. The CEO shall review the Partnership's performance
against the Budget on at least a quarterly basis. When Approved by the
Management Board, the CEO shall implement the Budget and shall be authorized,
subject to the provisions of Section 7.4 below, without the need for further
Approval by the Management Board, to make the expenditures and incur the
obligations provided for in the Budget.
SECTION 6.6 EXPENSES OF THE PARTNERSHIP.
6.6.1 PRE-CLOSING EXPENSES. Except with respect to the
brokerage, finder or consultant fees payable by TJI to Lehman Brothers and
Bushkin Associates, and payable by S&O to Bowles Hollowell Conner & Co. (the
"CONSULTANT FEES," respectively), the Partnership shall pay or reimburse the
Partners for all costs and expenses of the Partners and their Affiliates
incurred in their due diligence and in the negotiation, preparation and
execution of this Agreement and the Related Agreements and the transactions
contemplated hereby and thereby, including legal and accounting fees and
disbursements and environmental investigation expenses (the "PRE-CLOSING
EXPENSES"); PROVIDED, however:
(a) to the extent that the total of the Pre-Closing Expenses
incurred by S&O and their Affiliates exceeds the total of the
Pre-Closing Expenses incurred by Norco, the Canadian Subsidiaries
and TJI (the "EXCESS EXPENSE AMOUNT"), the Partnership shall pay
or reimburse TJI for its Consultant Fees in an amount equal to the
Excess Expense Amount; and
(b) to the extent that the total of the Pre-Closing Expenses
incurred by Norco and its Affiliates exceeds the total of the
Pre-Closing Expenses incurred by S&O, the Partnership shall pay or
reimburse S&O for its Consultant Fees in an amount equal to the
Excess Expense Amount.
6.6.2 POST-CLOSING EXPENSES. After the Closing Date, the
Partnership shall pay all the expenses of the Partnership, including, without
limitation, the following:
PARTNERSHIP AGREEMENT - 24
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(a) legal, public accounting and auditing, banking and
custodial fees of the Partnership relating to matters arising after
the Closing Date;
(b) interest, taxes and brokerage expenses of the
Partnership;
(c) consultant, receivership, insolvency and any other fees
and expenses directly related to the purchase, holding, sale or
liquidation of, or any other transactions in, or protection of
security for, property of the Partnership;
(d) organizational expenses of the Partnership relating to
matters arising after the Closing Date, consisting primarily of
legal and accounting fees and disbursements;
(e) all expenses incurred pursuant to the Support Services
Agreement and the Employee Leasing Agreement and all expenses
relating to compensation of employees (including leased employees),
maintaining the books and records of the Partnership, preparing
periodic reports to the Partners, providing office accommodation,
travel expenses and generally any other overhead expenses and
support required to conduct the business of the Partnership;
(f) legal or other expenses incurred by any Partner at the
request of the prospective new CEO and consultant, and expenses
reimbursed to such CEO by any Partner prior to the Closing; and
(g) the costs and expense of all corporate assumed name,
qualification and other filings required to be made by the Partners,
including the franchise taxes of the Partners.
SECTION 6.7 OTHER BUSINESS ACTIVITIES; DISCLOSURE, WAIVER.
Each of the Partners understands that the other Partners or their
Affiliates may be interested, directly or indirectly, in various other
businesses and undertakings not included in the Partnership. Each Partner also
understands that the conduct of the Business of the Partnership may involve
business dealings with such other businesses or undertakings. The Partners
hereby agree that the creation of the Partnership and the assumption by each of
the Partners of their duties hereunder shall be without prejudice to their
rights (or the rights of their Affiliates) to have such other interests and
activities and to receive and enjoy profits or compensation therefrom, and each
Partner waives any rights it
PARTNERSHIP AGREEMENT - 25
<PAGE>
might otherwise have to share or participate in such other interests or
activities of the other Partners or their Affiliates. The Partners may engage
in or possess any interest in any other business venture of any nature or
description independently or with others, and neither the Partnership nor the
other Partners shall have any right by virtue of this Agreement in and to such
venture or the income or profits derived therefrom.
SECTION 6.8 SCOPE OF AUTHORITY; INDEMNIFICATION.
6.8.1 SCOPE OF AUTHORITY. None of the Partners shall take
any action on behalf of or in the name of the Partnership, or enter into any
commitment or obligation binding upon the Partnership, except for: (i) actions
expressly provided for in this Agreement, (ii) actions by the CEO within the
scope of his authority granted by the Management Board, and (iii) actions
authorized by Approval of the Management Board in the manner set forth herein.
6.8.2 INDEMNIFICATION. Each Partner shall indemnify and
hold harmless the Partnership and the other Partners and their Affiliates,
directors and officers against any and all claims, demands, losses, damages,
liabilities, lawsuits and other proceedings, judgments and awards, and costs and
expenses (including, but not limited to, reasonable attorneys' fees) arising
directly or indirectly, in whole or in part, out of any breach of the provisions
of Section 6.8.1 by such Partner or its Affiliates, officers, agents or
employees.
ARTICLE 7
MANAGEMENT BOARD
SECTION 7.1 MANAGEMENT BOARD.
Except as specifically provided otherwise in this Agreement, the
overall management and control of the business and affairs of the Partnership,
including the business and affairs of the Canadian Subsidiaries, shall be vested
in a management board ("MANAGEMENT BOARD"). Except as expressly provided to
the contrary herein, all decisions with respect to the management and control of
the Partnership and the Canadian Subsidiaries by the Management Board shall be
binding on the Partnership and each of the Partners. All decisions of the
Management Board shall be by a majority of the total number of members, except
if a decision requires "APPROVAL OF THE MANAGEMENT BOARD."
PARTNERSHIP AGREEMENT - 26
<PAGE>
SECTION 7.2 COMPOSITION OF MANAGEMENT BOARD.
7.2.1 MANAGEMENT BOARD WITHOUT CEO. It is the intent of the
parties hereto that a chief executive officer ("CEO") of the Partnership shall
have been selected and appointed as of the Effective Date. However, in the
event such appointment is not completed as of the Effective Date or in the event
that the Partnership does not have a CEO at any time, or from time to time, the
Management Board shall consist of:
(a) THREE members appointed from time to time by Norco, of
which one will be the Chairman; and
(b) TWO members appointed from time to time by S&O, of
which one will be the Vice Chairman.
7.2.2 MANAGEMENT BOARD WITH CEO. If the CEO has been
appointed as of the date hereof (or once such appointment has occurred and been
Approved by the Management Board), such individual shall be appointed by the
Partners to the Management Board and shall serve as the SIXTH member thereof.
7.2.3 CHAIRMAN AND VICE CHAIRMAN. The Partners will give
each other notice in writing as to the identity of the members appointed by each
of Norco and S&O, as applicable. Notwithstanding the foregoing, the Partners
expressly acknowledge and agree that:
(a) one of the three members of the Management Board
initially appointed by Norco shall be Walter C. Minnick, who shall
serve as Chairman of the Management Board; and
(b) one of the two members of the Management Board initially
appointed by S&O shall be Charles S. Meyer, who shall serve as Vice
Chairman of the Management Board.
7.2.4 NOT PARTNERS. The members of the Management Board
shall not be, be deemed to be or considered partners of the Partnership and they
shall not have any of the liabilities or obligations of partners.
SECTION 7.3 APPROVAL OF MANAGEMENT BOARD.
7.3.1 DEFINITION. When the phrases "APPROVED BY THE
MANAGEMENT BOARD" or "APPROVAL OF THE MANAGEMENT BOARD" are used in this
Agreement, such phrases shall mean:
(a) until such time as a CEO is elected and appointed to the
Management Board, the affirmative vote
PARTNERSHIP AGREEMENT - 27
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of approval of at least FOUR members of the Management Board; and
(b) except as provided in Section 6.3 above, at such time as
the CEO is appointed to the Management Board, the affirmative vote
of approval of at least FIVE members of the Management Board.
7.3.2 QUORUM. Subject to Section 7.3.3 below, the quorum
for any meeting of the Management Board shall be FOUR members and must include
at least one member or alternate from the appointees of each of Norco and S&O.
7.3.3 NONAPPLICATION. Notwithstanding any provision of this
Agreement to the contrary, in the event there is an Event of Default under the
terms of this Agreement with respect to any Partner, such Partner (and such
Partner's Board representatives) shall not participate in the management of the
Partnership during such Event of Default, and all Board decisions shall be
decided by a simple majority of the remaining Board members.
SECTION 7.4 MAJOR DECISIONS.
7.4.1 DEFINITION. Except as provided in Sections 6.3, 7.4.3
and 7.6 hereof, no act shall be taken, sum expended, decision made or obligation
incurred by the Partnership, the CEO or any Partner with respect to a matter
within the scope of any of the major decisions enumerated below (the "MAJOR
DECISIONS"), unless and until the same has been Approved by the Management
Board or expressly delegated by the Approval of the Management Board in writing.
As used in this Agreement, Major Decision means any of the following matters
(which such matters shall be equally applicable to the Partnership and to the
Canadian Subsidiaries):
(a) any amendment to this Agreement;
(b) approval of the Budget;
(c) subject to Section 6.3, selection, hiring and
termination of the CEO, and approval of senior officer compensation,
including CEO compensation;
(d) any change in the number of members of the Management
Board;
(e) the timing and amount of distributions of cash to the
Partners other than Mandatory Tax Distributions;
(f) redemption by the Partnership of any Partner's Units or
interest in the Partnership, except as provided in the Liquidity
Agreement;
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(g) the granting of a security interest in any asset or
assets of the Partnership (i) not in the ordinary course of business
or (ii) in excess of $100,000 per asset, or $1,000,000 in the
aggregate;
(h) the incurrence, renewal, refinancing or repayment of
indebtedness of the Partnership, unless such indebtedness is
incurred in the ordinary course of business and does not total more
than $1,000,000;
(i) capital expenditures which are not otherwise included in
the Annual Budget, and which exceed $200,000 per expenditure;
(j) the sale of any non-current asset or assets of the
Partnership valued in excess of $1,000,000 per asset;
(k) a change in the nature of the Business or long-range
plans of the Partnership;
(l) subject to the provisions of Article IX, a transaction
or other matter involving a material actual or potential conflict of
interest with any Partner, the Partnership or an Affiliate thereof;
PROVIDED, that any member of the Management Board shall disclose
his interest in respect of such transaction or other matter in which
he is in any way directly or indirectly interested and such member
shall be counted in the quorum at the meeting of the Management
Board at which the proposed transaction or other matter is approved
and shall be entitled to vote thereon;
(m) subject to the provisions of Article IX and except as
provided in the Related Agreements, the entering into any material
transaction with any Partner or Person with whom any Partner or the
Partnership does not deal at arm's length, unless such transaction
provides for the sale of goods or the provision of services by such
Partner or Person for a consideration that is not greater than the
consideration that would be paid by a bona fide purchaser for
similar goods or services in the open market;
(n) any change in the Auditor of the Partnership;
(o) the admission of additional Partners or the selling of
additional equity in the Partnership, other than as provided in the
Liquidity Agreement;
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(p) subject to paragraph (i) above, any investment by the
Partnership or acquisition of any asset or assets by the Partnership
valued in excess of $1,000,000;
(q) the merger, consolidation or other reorganization of the
Partnership, except as provided in the Liquidity Agreement;
(r) the permanent closure or curtailment of any facility,
plant or office owned or leased by the Partnership;
(s) the indemnification of any Partner or other Person;
(t) the commingling of funds of the Partnership with funds
of any other Person; or
(u) loans from the Partnership to any Partner or Affiliate
thereof.
7.4.2 NONAPPLICATION. The provisions of this Section 7.4
shall not apply to the acquisition of any asset or the assumption of any
liability including the novation of any contract pursuant to the Contribution
Agreement.
SECTION 7.5 DEADLOCK.
If the Management Board cannot agree on a matter to be approved by
it, including, without limitation, any Major Decision for which all three Board
members appointed by Norco have cast an affirmative or negative vote, but which
is not Approved by the Management Board, and such inability to agree has
continued for a period of fifteen (15) Business Days, the Partners shall be
deemed to be in "DEADLOCK." In the event of Deadlock, the Management Board
shall submit the matter or matters for the joint determination of the Chairman
and the Vice Chairman of the Board, who shall use their best efforts in good
faith to resolve the matter(s) in dispute. If such Partnership officers are
unable to resolve the Deadlock within a period of fifteen (15) Business Days
after such submission, the Chairman and Vice Chairman shall submit the
Deadlocked matter to the boards of directors of TJI and S&O, respectively. Upon
confirmation by ONE OR BOTH of such boards of directors (by written
resolution) that the Partners are Deadlocked, any Partner may (i) submit the
matter or matters in dispute to mediation/arbitration pursuant to Article XIV,
or (ii) make a Termination Election as provided in Section 12.3 of this
Agreement. In the event one party elects mediation/arbitration pursuant to the
foregoing, and the other party chooses to make a Termination Election, the
matter shall be submitted to mediation/arbitration.
PARTNERSHIP AGREEMENT - 30
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SECTION 7.6 SALE OF CANADIAN SUBSIDIARIES.
7.6.1 SALE OF CANADIAN SUBSIDIARIES. Notwithstanding any
other provision of this Agreement to the contrary, until and including March 31,
1995 (the "SALE PERIOD"), the Partnership, in the sole discretion of Norco,
may sell Dashwood. Such transaction may or may not include LaFlamme, and if it
does not, the Partnership shall cause Dashwood to transfer the voting stock of
LaFlamme to a corporation which, as of February 7, 1992, was an affiliate of
Dashwood and as at the date of the transfer is an affiliate of TJI and such
stock shall be held in trust for the benefit of the Partnership. For the
purposes of this Section 7.6.1, affiliate shall have the meaning attributed to
that term in the Share Purchase Agreement dated February 7, 1992 ("LaFlamme
Agreement"), pertaining to the purchase by Dashwood of the shares of LaFlamme.
Non-voting stock of LaFlamme which will carry all of the economic benefits shall
be transferred to the Partnership. LaFlamme will not be sold under this Section
7.6 without the concurrent or prior sale of Dashwood. LaFlamme also will not be
sold under this Section 7.6 unless sold during the Sale Period. For purposes
hereof, the term "SELL" shall mean the consummation and completion of a sale
transaction and the receipt of the proceeds therefrom and, in the case of
Dashwood only, pursuant to a binding agreement entered into not later than
December 31, 1994. In the event of a sale during the Sale Period, all benefits
and detriments of such transaction and of the Partnership's ownership of the
stock prior to the sale, including, but not limited to, sale proceeds,
transaction costs and expenses, indemnification obligations, Canadian tax
obligations (including any taxes attributable to the distribution of LaFlamme to
the Partnership, if any) and U.S. (federal, state and local) tax obligations
shall inure solely to the benefit of, and/or be solely borne by, Norco.
Further, the parties agree that in the event of a sale of Dashwood only (and not
LaFlamme), there will be a deemed return to Norco of its contribution of
Dashwood, and a subsequent contribution to the Partnership of LaFlamme, all as
of the Effective Date. Appropriate adjustment to Norco's capital account will
be made as provided in Section 7.6.2 below. Norco shall reimburse the
Partnership in cash for all such detriments paid by the Partnership and all
contributions or loans to Dashwood or LaFlamme, it being intended that neither
the Partnership nor the other Partners shall suffer economically by reason of
such sale or sales or by reason of owning the stock of Dashwood or LaFlamme
prior to such sale or sales.
7.6.2 PAYMENT OF SALE PROCEEDS; REDUCTION IN OWNERSHIP
PERCENTAGES. The net proceeds of any sale of Dashwood, or of Dashwood and
LaFlamme, during the Sale Period shall be distributed solely to Norco. Norco's
capital account shall be reduced by an amount representing the agreed fair
market value of the Canadian Subsidiary (or Subsidiaries) sold (as reflected in
PARTNERSHIP AGREEMENT - 31
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Section 3.1 hereof), and its percentage ownership of the Units in the
Partnership shall be recalculated retroactively to the Effective Date. For
example, in the event Dashwood is sold during the Sale Period, but LaFlamme is
not, Dashwood will be deemed to be returned to Norco, LaFlamme distributed by
Dashwood to Norco, and LaFlamme contributed to the Partnership by Norco, all as
an adjustment to Norco's initial contribution to the Partnership; in such event,
Norco's capital account would be reduced by a net amount equal to $15 million,
with a corresponding deemed reduction in its percentage ownership of the Units
in the Partnership to 66,037 Units, or 66.037% (35/53rds) of the outstanding
Units. If both Dashwood and LaFlamme are sold, Norco's capital account would be
reduced by an amount equal to $18 million, with a corresponding reduction in its
Units and percentage ownership in the Partnership to 64,000 Units, or 64.0%
(32/50ths) of the outstanding Units. In each case, S&O's Units and percentage
ownership in the Partnership would increase proportionately. Upon a sale of
Dashwood and LaFlamme pursuant to this Section 7.6, the amount of the TJI
Effective Date Net Worth (after taking into account the cash adjustment made
pursuant to Section 2.4(e) of the Contribution Agreement) attributable to Norco
only, shall be computed. If the TJI Effective Date Net Worth (attributable to
Norco only) exceeds $32 million, the Partners shall cause the Partnership to
make a cash payment to TJI in the amount of the excess. If the TJI Effective
Date Net Worth is less than $32 million (attributable to Norco only), Norco
shall pay the Partnership the amount of the deficiency. If only Dashwood and
not LaFlamme is sold pursuant to this Section 7.6, the foregoing amount shall be
$35 million (rather than $32 million), and the TJI Effective Date Net Worth
shall be attributable to both Norco and LaFlamme. The foregoing payments and
distributions, if any, will not affect the number of Units held by each Partner.
7.6.3 EFFECT OF SALE. If Dashwood or LaFlamme are sold
pursuant to Section 7.6.1, then, notwithstanding any other provision of this
Agreement, this Agreement shall be deemed to be amended to remove references to
Dashwood and LaFlamme, as applicable, and all calculations, determinations,
payments and adjustments made pursuant to this Agreement which are based on the
inclusion of Dashwood and LaFlamme in the contribution of TJI to the Partnership
shall be adjusted and, where necessary, reversed to reflect such removal.
7.6.4 TERMINATION IF NO SALE. If a binding agreement for
the sale of Dashwood is not entered into on or before December 31, 1994, or if
Dashwood, or Dashwood and LaFlamme are not sold (as defined in Section 7.6.1
above) on or before March 31, 1995, this Section 7.6 shall terminate in its
entirety without any further force or effect.
PARTNERSHIP AGREEMENT - 32
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SECTION 7.7 ALTERNATES AND CHANGE IN APPOINTEES.
7.7.1 ALTERNATES. The Partners may by notice in writing to
the Secretary appoint an alternate for any member or members of the Management
Board appointed by it. Each alternate shall be a member of the Management Board
for all purposes and shall be entitled to attend and vote as a member at a
meeting at which the member for whom he or she is the alternate is not
personally present or otherwise participating. The Partners may at any time by
notice to the Secretary revoke the appointment of any alternate appointed by it.
7.7.2 CHANGE IN APPOINTEES. Each of Norco and S&O may from
time to time by notice in writing to the Secretary change any of its appointees
to the Management Board and shall fill any vacancy caused by the resignation or
other removal of any of its appointees to the Board.
SECTION 7.8 REMUNERATION.
No member of the Management Board (other than the CEO in his role as
CEO) is entitled to remuneration as such except for out-of-pocket expenses
incurred in attending meetings of the Management Board unless Approved by the
Management Board.
SECTION 7.9 COMMITTEES.
The Management Board may from time to time appoint from their number
any committee or committees (with one member appointed by each of Norco and
S&O), including an audit committee, to report to the full Management Board on
any matter. No committee so appointed will have the power or authority to bind
the Partnership or the Partners. The Management Board may at any time rescind
the appointment of any committee or of any member of any committee.
SECTION 7.10 MEETINGS OF THE MANAGEMENT BOARD.
Meetings of the Management Board shall be held regularly, and any
two members of the Management Board may require the convening of a meeting by
the Chairman. Any such requirement must state the purpose of the meeting and a
summary of any special business to be considered at the meeting. All meetings
will be held at such location as determined by the Chairman; PROVIDED,
however, that the Chairman shall make a good faith effort at all times to locate
such meetings where mutually convenient to all Board members. One or more
members of the Management Board may participate in any meeting of the Management
Board by means of telephone or other communications facilities that permit all
persons participating in the meeting to hear each other. Not less than 48
hours' notice of the time and place of any meeting is to
PARTNERSHIP AGREEMENT - 33
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be given to members of the Management Board and their alternates. Each member
or his alternate may in writing waive notice of a meeting either before or after
the meeting and shall be deemed to have waived notice of any meeting attended by
such member in person or by telephone. If within 1/2 hour from the time
appointed for a meeting, a quorum of the Management Board is not present, the
Chairman shall adjourn the meeting to a time and place mutually convenient to
the Board members, at time not more than 30 days from the date of adjournment.
SECTION 7.11 RECORDS AND MINUTES.
7.11.1 RECORDS. The Secretary will keep for a reasonable
time copies of all correspondence and documents delivered to or sent by the
Management Board and will in all respects comply with the applicable provisions
of this Agreement. All records kept by the Secretary will be available to any
Partner in respect of the time it was a Partner and the Partner may copy or make
extracts from them.
7.11.2 MINUTES. The Secretary will keep minutes of each
meeting of the Management Board and a record of decisions made by the Management
Board and copies of the minutes and decisions will be distributed by the
Secretary to each member and alternate member of the Management Board as soon as
practicable following the meeting or decision.
SECTION 7.12 WRITTEN DECISIONS.
Any decision of the Management Board evidenced by writing signed in
one or more counterparts by all the members of the Management Board or their
alternates will be as binding as if decided at a meeting of the Management
Board. Any decision in writing will be effective on the date specified therein
or, if not date is specified, on the date it is signed by the last of the
members required so to sign.
ARTICLE 8
LIABILITIES OF PARTNERS; INDEMNIFICATION
SECTION 8.1 LIABILITIES OF PARTNERS.
Except as expressly provided otherwise in this Agreement, the
Partners shall be liable for the debts, obligations and all other liabilities of
the Partnership, including, without limitation, the Assumed Liabilities, in
proportion to their respective holdings of Units, except as may be otherwise set
forth in this Agreement or as required by the Act.
PARTNERSHIP AGREEMENT - 34
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SECTION 8.2 INDEMNIFICATION.
The Partnership shall indemnify and hold harmless the Partners and
their officers, directors, employees, representatives and agents, and the
Partnership's officers, and members of the Management Board (each, an
"INDEMNIFIED PARTY") from and against any loss, damage, expense, claim,
liability or obligation relating to arising out of or resulting from any act or
omission performed or omitted to be performed by such Indemnified Party on
behalf of the Partnership or in furtherance of the Partnership's interests or as
Tax Matters Partner; PROVIDED, however, such indemnification shall be
recoverable only out of the assets of the Partnership and not from the Partners.
The Partnership shall also advance the expenses of the Indemnified Party to the
same extent as under Delaware corporate law in the case of a Delaware
corporation. The foregoing indemnity shall not apply to acts or omissions which
constitute gross negligence, willful misconduct or fraud.
ARTICLE 9
DEALINGS BETWEEN THE PARTNERSHIP AND A PARTNER
SECTION 9.1 DEALINGS WITH PARTNERS.
In addition to the Related Agreements, the Partnership may, from
time to time, enter into contracts, agreements or arrangements with any or all
of the Partners or their Affiliates to supply services or products to or to
purchase services or products from the Partnership on the terms and conditions
Approved by the Management Board and by the Partner (or Affiliate thereof)
providing or purchasing the services or products. No Partner is obligated to
share with any other Partner any profit earned by it (or its Affiliate) under
the contract, agreement or arrangement with the Partnership provided it has been
so approved.
SECTION 9.2 RATES FOR SERVICES.
Except as may be expressly provided otherwise in the Related
Agreements, where a Partner provides services or products to the Partnership,
the Partnership shall pay no more than would be paid by a bona fide purchaser
for similar services or products in the open market. Where a Partner purchases
products or services from the Partnership, the Partner shall pay the
Partnership's costs and rates for like products and services sold to or
performed for third parties or, if there is no such cost or rate, a reasonable
agreed amount. Costs and service charges shall be agreed to in advance, in
writing, wherever practicable.
PARTNERSHIP AGREEMENT - 35
<PAGE>
SECTION 9.3 LOANS.
The Partners expressly acknowledge and agree that the Partnership is
authorized to make loans to Partners or borrow funds from Partners from time to
time at an interest rate equal to the rate set forth in Section 3.7.2 hereof,
all such loans between the Partnership and the Partners to be made on a demand
basis and to be repaid the first business day after such demand is made.
ARTICLE 10
BOOKS, RECORDS AND FINANCIAL INFORMATION
SECTION 10.1 BOOKS OF ACCOUNT.
At all times during the term hereof, the Partnership shall keep and
maintain, or cause to be kept and maintained, at its principal place of
business, books of account and records of the business of the Partnership. Each
Partner and its authorized representatives shall have access to any information
of the Partnership during normal business hours. The accounts of the
Partnership shall be established and maintained on such basis of accounting as
Approved by the Management Board, in accordance with generally accepted
accounting principles. In addition to the foregoing, the Partnership shall keep
and maintain, or cause to be kept and maintained, such other records as may be
required by law.
SECTION 10.2 APPOINTMENT OF AUDITOR.
The Management Board initially shall retain Arthur Andersen & Co. as
the Auditor to carry out an audit and review and report to the Partners on the
financial statements of the Partnership for, and as at the end of, each Fiscal
Year of the Partnership. Any change in the Auditor shall be a Major Decision
under this Agreement.
SECTION 10.3 BANK ACCOUNTS.
Funds of the Partnership shall be deposited in an account or
accounts of a type, in form and name and in a bank or banks Approved by the
Management Board. Withdrawals from bank accounts shall be made by parties
Approved by the Management Board.
SECTION 10.4 OTHER ACCOUNTING DECISIONS.
So long as the Partnership is consolidated into TJI on a full
consolidation or equity accounting basis, the Partnership agrees to consult with
and accept guidance from TJI with respect to (i) all communications with TJI's
shareholders, regulatory
PARTNERSHIP AGREEMENT - 36
<PAGE>
agencies and other public company constituencies, and (ii) all financial
reporting and accounting decisions (other than those specifically provided for
in other Sections of this Agreement); PROVIDED, however, that nothing in this
Section 10.4 shall affect the rights and obligations of the Partners among
themselves as provided in this Agreement.
SECTION 10.5 TAX RETURNS.
As soon as practicable after the end of each fiscal year, and no
later than ten (10) days before the due date (including any extension thereof)
for the filing of tax returns by calendar-year-end corporations, the Partnership
shall furnish to each Partner a report (E.G., a Form 1065 Schedule K-1)
containing information with respect to the Partnership to be used in preparing
the federal, state and other income tax returns of the Partners. All costs,
fees and expenses relating to the preparation of the tax returns of the
Partnership and the Partners, including any Schedule K-1s, shall be borne by the
Partnership.
SECTION 10.6 NOTICE OF TAX AUDIT.
Prompt notice shall be given to the Partners upon receipt of advice
that the Internal Revenue Service intends to examine Partnership income tax
returns for any year.
SECTION 10.7 DELIVERY OF FINANCIAL STATEMENTS.
In addition to the tax-related information referenced in Section
10.5 above, the Partnership shall deliver, or cause to be delivered, to the
Partners and the members of the Management Board the following financial
statements:
(a) a statement of the financial condition of the
Partnership as of the last day of each quarter of each Fiscal Year,
and income and cash flow statements for each calendar month of each
Fiscal Year within thirty (30) days after the end of each quarter,
to the extent feasible;
(b) an unaudited balance sheet and profit and loss statement
for each Fiscal Year within twenty-five (25) days from the Fiscal
Year end to which they apply, a report from the Auditor confirming
that an unqualified audit opinion will be issued and draft financial
statements within a further ten (10) days; and
PARTNERSHIP AGREEMENT - 37
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(c) the annual audited financial statements of the
Partnership as soon as possible and within sixty (60) days from the
Fiscal Year end to which they apply.
SECTION 10.8 CONFIDENTIALITY.
Each Partner shall keep confidential all information furnished to it
pursuant to Section 10.5, 10.7 or otherwise by virtue of its status as a Partner
unless the prior written consent of each other Partner to disclose any such
information is obtained; PROVIDED, however, that the foregoing shall not apply
to prevent a Partner or its Affiliates and, in the case of S&O, their
shareholders, from disclosing any of such information to its professional
advisors, its bankers or other Persons from whom it seeks financing or to any
Person where such disclosure (i) is required by law, (ii) is common practice for
public companies dealing with the investment community or (iii) is required by
the rules of NASDAQ or other national securities exchange.
ARTICLE 11
DEFAULT
SECTION 11.1 EVENT OF DEFAULT.
Each of the following constitutes an "EVENT OF DEFAULT" with
respect to the Partner in question (the "DEFAULTING PARTNER"):
(a) such Partner is taken over or purchased by a third party
or parties resulting in a change in Control compared with those
controlling the Defaulting Partner at the Effective Date;
(b) the occurrence of an Event of Insolvency with respect to
such Partner; and
(c) any material default by a Partner in the performance or
observance of any of the material covenants, agreements and
obligations on its part to be performed or observed under this
Agreement or the Contribution Agreement or any other Related
Agreement, unless the default is of a nature that can be cured and
it is cured within thirty (30) days following receipt by the
Defaulting Partner of notice from another Partner or Partners
specifying the nature of the default and requiring that the default
be cured, or if such default is of a nature that it reasonably
requires more than thirty (30) days to cure, and is capable of being
fully cured, the Defaulting Partner proceeds diligently to and
PARTNERSHIP AGREEMENT - 38
<PAGE>
does cure such default within ninety (90) days thereafter.
SECTION 11.2 REMEDIES.
If an Event of Default under Section 11.1 occurs, the Partner(s) not
in default (the "NON-DEFAULTING PARTNER(S)"), subject to the provisions of
Section 11.5 below, may do one or more of the following:
(a) pursue any remedy available to it or them in law or
equity, it being acknowledged by each of the Partners that specific
performance, injunctive relief (mandatory or otherwise) or other
equitable relief may be the only adequate remedy for an Event of
Default;
(b) take all actions in its own name or in the name of the
Defaulting Partner or Partnership as reasonably may be required to
cure the Event of Default, in which event all reasonable payments,
costs and expenses incurred therefore shall be payable by the
Defaulting Partner to the Non-Defaulting Partner(s) on demand with
interest thereon at the Interest Rate;
(c) waive the Event of Default, but any waiver of the
particular Event of Default shall not operate as a waiver of any
subsequent or continuing Event of Default;
(d) implement, within 90 days of ascertaining the existence
of such Event of Default, the "BUY" procedure as set out in
Section 11.3 by notifying the Secretary of the Event of Default and
the name of the Defaulting Partner(s);
(e) elect to dissolve and terminate the Partnership pursuant
to Section 12.2; or
(f) submit the matter to binding arbitration under the
provisions of Article XIV.
SECTION 11.3 BUY PROCEDURE.
If the buy procedure is implemented, the Defaulting Partner(s) is
deemed to offer to sell to the Non-Defaulting Partner(s) all but not less than
all of its Units/interest in the Partnership upon the following terms and
conditions:
(a) upon receipt of the notice under Section 11.2(d), the
Secretary shall forthwith:
PARTNERSHIP AGREEMENT - 39
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(i) transmit the notice to each member of the
Management Board;
(ii) transmit the notice to the Defaulting Partner(s);
and
(iii) call a meeting of the Management Board to consider
the notice.
(b) the price payable for the Units/interest of the
Defaulting Partner(s) in the Partnership is the value of such
Units/interest as determined pursuant to Section 11.4 (the "BUY
PRICE");
(c) the Buy Price must be paid in immediately available U.S.
funds to the Defaulting Partner(s), less any amounts payable by the
Defaulting Partner(s) to the Non-Defaulting Partner(s) or the
Partnership pursuant to this Agreement;
(d) upon the exercise of a right to buy by the
Non-Defaulting Partner(s) (the "PURCHASER"), the Purchaser shall
purchase the Units/interest of the Defaulting Partner(s) in the
Partnership and the closing of the purchase and sale is to take
place on the 90th Business Day following the date of the exercise of
the right to buy (or such other day as the parties may agree), at
which time the appropriate party shall execute and deliver such
payment, instruments, conveyances, assignments and releases as may
be reasonably required to effect and complete the purchase and sale;
and
(e) if the Non-Defaulting Partner(s) does not exercise its
right to buy the Units/interest of the Defaulting Partner(s) within
thirty (30) days of the determination of the value pursuant to
Section 11.4, the right to buy lapses.
SECTION 11.4 VALUATION.
The value of the Units/interest of a Partner in the Partnership is
to be determined as of the Valuation Date as follows:
11.4.1 APPOINTMENT OF INVESTMENT BANKER. Each of the
Non-Defaulting Partner(s) and the Defaulting Partner(s) shall promptly appoint a
mutually-acceptable valuation expert or investment banker who possesses a high
degree of professional skill and expertise in valuation matters (the "VALUATION
EXPERT"). The Valuation Expert shall then proceed to establish the value of
PARTNERSHIP AGREEMENT - 40
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the Business of the Partnership as a going concern without any discount for
illiquidity.
11.4.2 ESTABLISHMENT OF VALUE. The Valuation Expert shall
then establish the value of the Units/interest of the Defaulting Partner(s) and
of the Non-Defaulting Partner(s) by multiplying the value of the Business of the
Partnership determined under Section 11.4.1 above by the percentage interest of
such Partner based on the number of Units held related to the total number of
Units outstanding.
11.4.3 DECISION BINDING. The determination of value by the
Valuation Expert shall be final, conclusive and binding upon all parties in
interest.
11.4.4 EXPENSES. The Partnership shall pay all fees and
expenses of the Valuation Expert appointed under this Section 11.5.
SECTION 11.5 LIMITATION ON RIGHTS.
Notwithstanding any provision of this Article XI, the remedies on
default set forth in Section 11.2 above, or any of the other rights set forth in
this Article XI, shall only be available to or exercisable by Norco, SealRite or
Oldach.
ARTICLE 12
TERMINATION OF THE PARTNERSHIP
SECTION 12.1 NO ABANDONMENT.
No Partner may abandon, quit-claim, surrender or terminate its
Interest in the Partnership except in accordance with this Agreement.
SECTION 12.2 DISSOLUTION.
12.2.1 DISSOLUTION EVENTS. The Partnership shall be
dissolved upon the occurrence of any of the following events (a "DISSOLUTION
EVENT"):
(a) the sale or other disposition by the Partnership of
substantially all of its assets;
(b) the agreement in writing of all of the Partners;
PARTNERSHIP AGREEMENT - 41
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(c) upon a Termination Election of one of the Partners (as
described in Section 12.3 below) following a Deadlock, as defined in
Section 7.5 hereof;
(d) an Event of Default has occurred as provided in Section
11.1 and the Non-Defaulting Partner(s) elect to dissolve the
Partnership as provided in Section 11.2(e);
(e) the contribution of the assets of the Partnership to a
successor corporation pursuant to the Liquidity Agreement; and
(f) any other event upon the occurrence of which dissolution
is required by the Act or applicable law.
12.2.2 WAIVER OF DISSOLUTION AND PARTITION RIGHTS. The
Partners hereby agree that notwithstanding any provision of the Act, the
Partnership shall not dissolve except as provided in Section 12.2.1, and each
Partner waives the benefit of all provisions of law, as now in effect or as
enacted in the future, relating to actions of partition of real and personal
property. Each Partner further agrees that it will not resort to any action at
law or in equity to partition the real or personal property held or used by the
Partnership except as provided in this Agreement. If it is determined that the
Partnership has dissolved prior to the occurrence of a Dissolution Event, the
Partners hereby agree to reconstitute the Partnership as of such dissolution and
continue the business of the Partnership without a winding up or liquidation.
SECTION 12.3 TERMINATION ELECTION.
Upon the certification of a Deadlock by the boards of directors of
either TJI or S&O, the party making such certification can give notice to the
other parties of an election to dissolve and terminate the Partnership and to
designate a date upon which the Partnership will be dissolved, which such notice
shall be not less than thirty (30) days prior to its effective date (a
"TERMINATION ELECTION").
SECTION 12.4 APPOINTMENT OF RECEIVER.
Upon notice of a Termination Election, or upon the election of the
Non-Defaulting Partner(s) to dissolve the Partnership pursuant to Section
11.2(e), the Partner(s) giving such notice or making such election shall apply
to a court of competent jurisdiction ("COURT") to appoint a receiver (the
"RECEIVER"), who may be a Partner. Subject to the directions of the Court,
the Receiver shall wind-up the affairs of the Partnership in accordance with
Section 12.5 and while doing so may
PARTNERSHIP AGREEMENT - 42
<PAGE>
manage and operate any property and assets of the Partnership and will have all
necessary powers and authority of the Partners. Any non-Partner Receiver shall
be entitled to reasonable fees and reimbursement of expenses incurred in
carrying out its duties as Receiver.
SECTION 12.5 DISSOLUTION UPON TERMINATION ELECTION OR EVENT OF DEFAULT.
If the Partnership is dissolved pursuant to a Termination Election
or upon the election of the Non-Defaulting Partner(s) pursuant to Section
11.2(e), the Receiver shall sell all of the Partnership's assets if it can or,
if not, shall make whatever allocation of assets and liabilities to the Partners
as it determines in its sole discretion, consistent with ensuring that each
Partner receives its respective percentage interest of the value of the Business
and assets of the Partnership. If so determined by the Receiver, all of the
assets of the Partnership shall be liquidated by the Receiver, and the Receiver
shall use all reasonable efforts to obtain from the sale of the assets of the
Partnership a price approximately equal to or greater than the fair market value
of the assets at the date of sale.
SECTION 12.6 OTHER DISSOLUTION.
12.6.1 WINDING UP. Upon dissolution of the Partnership as a
result of a Dissolution Event OTHER THAN a Termination Election or an election
by the Non-Defaulting Partner(s) pursuant to Section 11.2(e), the Partnership
shall immediately commence to wind up its affairs and the Partners shall proceed
with reasonable promptness to liquidate the business of the Partnership. The
assets of the Partnership may be distributed to a liquidating trust to conduct
the winding up, if Approved by the Management Board. Such liquidating trust
shall be organized and operated in such manner as to be treated for federal
income tax purposes as a trust rather than an association taxable as a
corporation.
12.6.2 MANAGEMENT RIGHTS DURING WINDING UP. During the
period of the wind up of the affairs of the Partnership (other than pursuant to
a Termination Election or an Event of Default), the rights and obligations of
the Partners set forth herein with respect to the management of the Partnership
shall continue. For purposes of winding up, the Management Board shall continue
to act as such and shall make all decisions relating to the conduct of any
business or operations during the winding up period and to the sale or other
disposition of Partnership assets; PROVIDED, however, that if the termination
of the Partnership results from an Event of Default, the Defaulting Partner
shall have no further right to participate in the management or affairs of the
Partnership or to attend Management Board meetings or vote on
PARTNERSHIP AGREEMENT - 43
<PAGE>
decisions by the Management Board, but shall nonetheless be bound by all
decisions made by the Non-Defaulting Partner(s). Each Partner hereby waives any
claims it may have against the Non-Defaulting Partner(s) that may arise out of
the management by the Non-Defaulting Partner(s) of the Partnership, so long as
such Non-Defaulting Partner(s) acts in good faith.
SECTION 12.7 DISTRIBUTIONS ON LIQUIDATION.
The assets of the Partnership shall be applied or distributed in
liquidation in the following order of priority:
(a) FIRST, to payment of all debts and liabilities of the
Partnership owed to third parties, and all expenses of liquidation;
(b) SECOND, to payment of all debts and liabilities of the
Partnership to any Partner;
(c) THIRD, to set up such cash reserves, if any, as the
Receiver may deem reasonably necessary for any contingent
liabilities or obligations of the Partnership. Such cash reserves,
to the extent no longer necessary, shall be distributed as set forth
in Sections 12.7(d) and (e) below;
(d) FOURTH, to the proportionate repayment of each Partner
of the credit balance in the Partner's capital account in the
Partnership;
(e) FIFTH, distributions to Partners (other than in their
capacity as creditors) ("LIQUIDATION DISTRIBUTIONS"), shall be
made upon the wind-up of the Partnership, (i) as provided in Section
5.2.1(a) relating to distributions of Distributable Cash.
Notwithstanding any provision to the contrary contained herein, the
amount of any distribution made pursuant to Section 12.7(d) hereof shall vary,
between Norco on the one hand and S&O on the other hand, from their respective
percentage interests in Units only (i) to the extent any Partner has contributed
any additional capital to the Partnership which is not required under the
provisions of this Agreement, or (ii) up to the aggregate amount of
distributions then due to Norco pursuant to Section 5.4.3 hereof, but not yet
paid.
SECTION 12.8 DISPOSITION OF DOCUMENTS AND RECORDS.
All documents and records of the Partnership, including, without
limitation, all financial records, vouchers, cancelled checks and bank
statements, shall be delivered to TJI upon
PARTNERSHIP AGREEMENT - 44
<PAGE>
termination of the Partnership. Unless otherwise approved by the other
Partners, TJI shall retain such documents and records for a period of not less
than seven (7) years and shall make such documents and records available during
normal business hours to the other Partners for inspection and copying at the
other Partners' cost and expense. Notwithstanding the foregoing, no documents
or records of the Partnership shall be destroyed or otherwise disposed of
without prior notice to S&O, in which event S&O shall have the right to retain
such records.
SECTION 12.9 CONTRIBUTION OBLIGATION OF PARTNERS.
Except to the extent otherwise provided in this Agreement, upon a
dissolution of the Partnership and the winding-up of its affairs, to the extent
the Partnership's assets (including unpaid contribution obligations, if any, of
Partners) are insufficient to satisfy the liabilities of the Partnership for
which the Partners are liable under applicable law as partners, the Partners
shall make contributions to the Partnership therefor in proportion to their
respective Units. The Partners shall have rights of contribution among
themselves under the allocation principles of this Section 12.9 for payments
made by Partners with respect to such Partnership liabilities.
ARTICLE 13
NOTICES
Any notices or communications permitted or required hereunder shall
be deemed sufficiently given if hand-delivered, or sent (i) by postage prepaid,
registered or certified mail return receipt requested or (ii) by
nationally-recognized private carrier or facsimile to the parties at their
respective addresses set forth below, or to such other address of which any
party may notify the other parties in writing. Notices delivered by mail shall
be deemed given two (2) business days after being deposited in the United States
mail, return receipt requested. Notices delivered by hand, by facsimile, or by
a nationally recognized private carrier shall be deemed given on the first
business day following receipt; PROVIDED, however, that a notice delivered by
facsimile shall only be effective if such notice is also delivered by hand, or
deposited in the United States mail, postage prepaid, registered or certified
mail, on or before two (2) business days after it is delivered by facsimile.
PARTNERSHIP AGREEMENT - 45
<PAGE>
If to TJI or Norco:
TJI International, Inc.
380 E. ParkCenter Blvd., Suite 300
Boise, Idaho 83706
Telecopier: (208) 345-3431
Attention: Walter C. Minnick
With a copy to:
Hawley Troxell Ennis & Hawley
877 Main Street, Suite 1000
Boise, Idaho 83701
Telecopier: (208) 342-3829
Attention: Paul M. Boyd, Esq.
If to S&O:
LaSalle Capital Group, Inc.
Three First National Plaza, Suite 5710
Chicago, Illinois 60602
Telecopier: (312) 236-0720
Attention: Charles S. Meyer
With a copy to:
Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606
Telecopier: (312) 715-4800
Attention: Robert L. Schlossberg, Esq.
ARTICLE 14
MEDIATION/ARBITRATION
SECTION 14.1 MEDIATION.
Any Partner whose board of directors has certified a Deadlock, or
the Non-Defaulting Partner(s), at their sole option upon an Event of Default,
may require that all disputes, matters arising under Deadlock, claims,
counterclaims and defenses, including those based on or arising from any alleged
tort ("CLAIMS") relating in any way to this Agreement be settled by first
submitting such Claim to mediation administered by the American Arbitration
Association under its Commercial Mediation Rules, before resorting to
arbitration under Section 14.2 below. The Partnership shall pay the fees and
expenses of such mediation.
PARTNERSHIP AGREEMENT - 46
<PAGE>
SECTION 14.2 BINDING ARBITRATION.
Following the failure of non-binding mediation to resolve any Claims
pursuant to Section 14.1 above, such Claim or Claims shall be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. All such Claims will be subject to the statutes of
limitation applicable as if such Claims were litigated. All Claims shall be
decided by a sole arbitrator, who shall be a nationally-recognized management
consulting firm mutually agreeable to the parties. All arbitration hearings
will be held in such venue as is agreed to by the parties. In addition to all
other powers, the arbitrator shall have the exclusive right to determine all
issues of arbitrability. Judgment on any arbitration award may be entered in
any court with jurisdiction. The Partnership shall pay the fees and expenses of
such arbitration.
ARTICLE 15
MISCELLANEOUS
SECTION 15.1 GOVERNING LAW.
This Agreement shall be governed and construed in accordance with
the laws of the State of Delaware.
SECTION 15.2 INTERPRETATION.
For all purposes of this Agreement, except as otherwise expressly
provided, or unless the context otherwise requires:
(a) the headings are for convenience of reference only and
do not form a part of this Agreement nor are they intended to
interpret, define or limit the scope, extent or intent of this
Agreement or any of its provisions;
(b) all accounting terms not otherwise defined have the
meanings ordinarily assigned to them at the date hereof pursuant to
U.S. generally accepted accounting principles and all computations
made pursuant to this Agreement must be made in accordance with U.S.
generally accepted accounting principles in effect as of the date
hereof;
(c) any reference to a currency is a reference to U.S.
currency;
(d) except where otherwise specified, any reference to a
statute includes a reference to such statute or code
PARTNERSHIP AGREEMENT - 47
<PAGE>
and to its regulations, with all amendments in force from time to
time, and to any statute or regulation that may be passed which has
the effect of supplementing or superseding the statute or
regulation;
(e) any reference to an entity includes a reference to any
entity that is a successor to that entity;
(f) words importing the masculine gender include the
feminine or neuter gender and words in the singular include the
plural, and words importing the neuter gender include the masculine
or feminine gender and words in the plural include the singular; and
(g) the Norco Assets and the S&O Assets shall be deemed to
include an interest in any insurance policies which would cover
liability for bodily injury, property damage or personal injury
arising out of accidents or other occurrences arising prior to the
Effective Date.
SECTION 15.3 BINDING EFFECT.
This Agreement shall be binding upon, and inure to the benefit of,
all the parties and their respective successors, legal representatives and
permitted assigns.
SECTION 15.4 EXHIBITS.
All Exhibits attached hereto and the documents and agreements
referred to herein to be delivered and the acts to be performed at or subsequent
to the Effective Date are incorporated herein and expressly made a part of this
Agreement as fully as though completely set forth herein.
SECTION 15.5 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties. In
pleading or proving any provision of this Agreement, it shall not be necessary
to produce more than one such counterpart.
SECTION 15.6 AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented only by
written agreement signed by all of the Partners.
PARTNERSHIP AGREEMENT - 48
<PAGE>
SECTION 15.7 WAIVER.
The failure of any party at any time or times to enforce or require
performance of any provision hereof shall in no way operate as a waiver or
affect the right of such party at a later time to enforce the same. No waiver
by any party of any condition or the breach of any term, covenant,
representation or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach, or a waiver of any
other condition or of any term, covenant, representation or warranty contained
in this Agreement.
SECTION 15.8 SEVERABILITY.
If any provision of this Agreement shall hereafter be held to be
invalid or unenforceable for any reason, that provision shall be reformed to the
maximum extent permitted to preserve the parties' original intent, failing
which, it shall be severed from this Agreement with the balance of this
Agreement continuing in full force and effect. Such occurrence shall not have
the effect of rendering the provision in question invalid in any other
jurisdiction or in any other case or circumstances, or of rendering invalid any
other provisions contained herein to the extent that such other provisions are
not themselves actually in conflict with any applicable law.
SECTION 15.9 ENTIRE AGREEMENT.
This Agreement, all agreements ancillary hereto or executed in
connection herewith, all of the Exhibits attached hereto and thereto, and all
documents and certificates referred to herein or therein and delivered hereunder
or thereunder, constitute the entire understanding of the parties concerning the
transactions contemplated hereby and thereby, cancel and supersede all previous
agreements and understandings, oral or written, between the parties with respect
to the subject matter hereof. If there is a conflict between the provisions of
this Agreement and any agreement ancillary hereto, the provisions of this
Agreement shall govern.
SECTION 15.10 FURTHER ASSURANCES.
Each party hereto agrees to do all acts and things and to make,
execute and deliver such written documents and instruments, as shall from time
to time be reasonably required to carry out the terms and provisions of this
Agreement.
PARTNERSHIP AGREEMENT - 49
<PAGE>
SECTION 15.11 TIME.
Time shall be of the essence hereof.
* * *
PARTNERSHIP AGREEMENT - 50
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Partnership
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
NORCO WINDOWS, INC.
By: /s/ Jody B. Olson
--------------------------------
Name: Jody B. Olson
------------------------------
Its: V.P.
-------------------------------
SEALRITE WINDOWS, INC.
By: /S/ Robert L. Schlossberg
--------------------------------
Name: Robert L. Schlossberg
-------------------------------
Its: Vice President
-------------------------------
OLDACH WINDOW CORP.
By: /s/ Robert L. Schlossberg
--------------------------------
Name: Robert L. Schlossberg
------------------------------
Its: Vice President
-------------------------------
PARTNERSHIP AGREEMENT - 51
<PAGE>
EXHIBIT A
FORM OF GUARANTY AGREEMENT
PARTNERSHIP AGREEMENT - 52
<PAGE>
EXHIBIT B
FORM OF CONTRIBUTION AGREEMENT
PARTNERSHIP AGREEMENT - 53
<PAGE>
October 11, 1994
Norco Windows, Inc.
P.O. Box 65
Boise, ID 83707
RE: Partnership Agreement of even date of N-S&O Partnership among Norco
Windows, Inc., SealRite Windows, Inc., and Oldach Window Corp.
("Partnership Agreement")
Gentlemen:
This letter will amend the Partnership Agreement, as follows: If both Dashwood
and LaFlamme are sold pursuant to Section 7.6 of the Partnership Agreement,
Norco Windows, Inc. shall be responsible for all obligations and liabilities of
Dashwood and/or LaFlamme under Section 2.18 of the LaFlamme Agreement (as
defined in said Section 7.6.1 of the Partnership Agreement). If only Dashwood
is sold pursuant to said Section 7.6, the Partnership shall bear one-third of
such obligations and liabilities and Norco Windows, Inc. will bear two-thirds of
such obligations and liabilities.
If you agree that this letter correctly sets forth our entire amendment to the
Partnership Agreement, please sign and return the enclosed copy.
Very truly yours,
SealRite Windows, Inc.
By: /s/ Robert L. Schlossberg
--------------------------------
Oldach Window Corp.
By: /s/ Robert L. Schlossberg
--------------------------------
Accepted and Agreed:
Norco Windows, Inc.
By: /s/ Jody B. Olson
--------------------------------
Approved:
TJ International, Inc.
By: /s/ Jody B. Olson
--------------------------------
<PAGE>
LIQUIDITY TRANSACTION AGREEMENT
THIS LIQUIDITY TRANSACTION AGREEMENT ("AGREEMENT") is made and
entered into as of October 11, 1994, effective as of October 3, 1994, among TJ
INTERNATIONAL, INC., a Delaware corporation ("TJI"); N-S&O PARTNERSHIP, a
general partnership organized under the laws of the State of Delaware (the
"PARTNERSHIP"); and the persons listed under the caption "S&O SHAREHOLDERS"
on the signature pages hereof (the "S&O SHAREHOLDERS").
RECITALS
A. Concurrently with the execution and delivery of this
Agreement, TJI has caused Norco Windows, Inc. ("NORCO"), a wholly-owned
subsidiary of TJI, and the S&O Shareholders have caused each of SealRite
Windows, Inc. ("SEALRITE") and Oldach Window Corp. ("OLDACH") to enter into
and form the Partnership.
B. In order to induce the S&O Shareholders to enter into the
Partnership, TJI has agreed to enter into this Liquidity Transaction Agreement
in order to grant certain demand and piggyback registration rights to the S&O
Shareholders and to otherwise allow the S&O Shareholders to realize a return on
their investment in the Partnership, on the terms and conditions contained
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS AND TERMS
As used in this Agreement, capitalized terms defined immediately
after their use shall have the respective meanings thereby provided, and the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"AFFILIATE" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person in question. For the purposes of this definition, "CONTROL"
(including, with correlative meanings, the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH"), as used with respect to any Person, means the
possession,
LIQUIDITY TRANSACTION AGREEMENT 1
<PAGE>
directly or indirectly, of the power, alone or as part of a group, to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"COMMON STOCK" means the Company's common stock, or any successor
class of the Company's common stock.
"COMMISSION" means the Securities and Exchange Commission or any
successor thereof.
"COMPANY" means the planned corporate successor to the Partnership
as more specifically defined in Section 2.1.2(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"HOLDER" means the S&O Shareholders and Norco or TJI.
"PARTNERSHIP AGREEMENT" means the Partnership Agreement of the
Partnership of even date herewith by and among Norco, SealRite and Oldach.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or a political subdivision, agency or instrumentality thereof or
other entity or organization of any kind.
"REGISTRABLE SECURITIES" means any TJI Shares or S&O Shares until
such time as they have been (i) distributed to the public pursuant to a
registration statement (but excluding the S-4 registration statement referred to
in Section 2.1.2(a)) covering such securities that has been declared effective
under the Securities Act or (ii) distributed to the public in accordance with
the provisions of Rule 144 (or any similar provision then in force) under the
Securities Act or (iii) repurchased by the Company.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"S&O SHARES" means (i) the shares of Company Common Stock to be
issued to the S&O Shareholders pursuant to Section 2.1.2(a) and (ii) any shares
of Common Stock or other securities issued in exchange for, as a dividend on, or
in replacement or upon conversion of, or otherwise issued in respect of
(including Common Stock and other securities issued in a stock dividend, split
or recombination or pursuant to the exercise of preemptive rights, if any), any
such shares of Common Stock described in clause (i) or securities (including
Common Stock) referred to in this clause (ii).
LIQUIDITY TRANSACTION AGREEMENT 2
<PAGE>
"TJI SHARES" means (i) the shares of Company Common Stock to be
issued to TJI or Norco pursuant to Section 2.1.2(a) and (ii) any shares of
Common Stock or other securities issued in exchange for, as a dividend on, or in
replacement or upon conversion of, or otherwise issued in respect of (including
Common Stock and other securities issued in a stock dividend, split or
recombination or pursuant to the exercise of preemptive rights, if any), any
such shares of Common Stock described in clause (i) or securities (including
Common Stock) referred to in this clause (ii).
"UNDERWRITER" a recognized investment banking firm of regional or
national standing mutually acceptable to TJI and the S&O Shareholders.
ARTICLE 2
REGISTRATION RIGHTS
SECTION 2.1 INITIAL PUBLIC OFFERING.
2.1.1 TJI covenants and agrees with the S&O Shareholders that
it shall use its reasonable best efforts to cause the Company to file a
registration statement for, and to consummate a firm commitment underwritten
initial public offering of, Company Common Stock ("INITIAL PUBLIC OFFERING")
at a time mutually agreed upon by the parties during calendar year 1995;
PROVIDED, however, that the Company may delay the filing of any such
registration statement for up to 12 months if the Underwriter shall advise the
Company and the S&O Shareholders that, in its good faith opinion, an Initial
Public Offering during 1995 would materially adversely affect the success of the
offering or otherwise materially adversely affect the price of the shares of
Company Common Stock to be offered solely for the Company's account. The period
of any delay hereunder shall not exceed the period of delay recommended by the
Underwriter within such twelve (12) month period. If by the end of 1995 (or
1996 in the event that the first proviso to the next preceding sentence is
applicable), the Company has not consummated an Initial Public Offering or if
such an Initial Public Offering was so consummated but any S&O Shareholder was
unable to include in such Initial Public Offering all of the Registrable
Securities sought to be included therein by such Person pursuant to Section 2.2
below (without giving effect to any reductions required by Section 2.2.4), the
Company shall be obligated to satisfy its obligations under Sections 2.3 and 2.4
below relating to the S&O Shareholders' special demand registration rights.
With respect to a registration in connection with an Initial Public Offering,
the Company, in consultation with the S&O Shareholders, shall have sole
authority to make all decisions in connection with the filing, effectiveness and
consummation of the proposed offering, subject to the express provisions hereof
(including,
LIQUIDITY TRANSACTION AGREEMENT 3
<PAGE>
without limitation, the selection of an underwriter mutually acceptable to TJI
and the S&O Shareholders as provided by the definition of the term
"UNDERWRITER").
2.1.2 The parties agree that at such time as it is determined
to undertake an Initial Public Offering as provided in Section 2.1.1 above, or
the Company is otherwise required pursuant to any of the terms of this Agreement
to publicly sell its securities, the parties will (and cause SealRite and
Oldach, and Norco and other Affiliates, respectively, to) execute and deliver
all documents and perform all acts as will be necessary or appropriate to:
(a) merge SealRite and Oldach with and into Norco with Norco
as the surviving entity (the "COMPANY"), for which the S&O
Shareholders shall receive, pursuant to an S-4 registration
statement under the Act, common stock in the Company in exchange for
their common stock in SealRite and Oldach, the fully-diluted
percentage of such shares of common stock in the Company to be the
same as the fully-diluted percentage of the Units of the S&O
Shareholders in the Partnership.
(b) dissolve and wind-up the Partnership and distribute its
assets to the Company, in which event the Company shall assume all
of the liabilities of the Partnership, including the Partnership's
obligations to pay the amount of the Canadian NOLs pursuant to
Section 5.4.5 of the Partnership Agreement.
(c) cause the Company to, for a period of at least three
years, timely file all reports required to be filed pursuant to
Section 13 and 15(d) of the Exchange Act, as the case may be, and if
the Company is subject to neither Section 13 nor 15(d) of the
Exchange Act, make publicly available on a timely basis the
information specified in paragraphs (a)(15)(i) to (xiv), inclusive,
and (xvi) and of Rule 15c2-11 under the Exchange Act and other
information, if any, from time to time required to meet the
so-called public information requirements of Rule 144 under the
Securities Act (or any successor rule or regulation).
(d) amend, if necessary, the Company's bylaws and
certificate of incorporation and to enter into a shareholders
agreement so that, until the first public sale of the Company's
equity securities (i) the governance provisions with respect to the
Company's board of directors will be substantially similar to the
governance provisions with respect to the Partnership's Management
Board as set forth in the Partnership
LIQUIDITY TRANSACTION AGREEMENT 4
<PAGE>
Agreement, including, without limitation, the provisions governing
Major Decisions, (ii) there will be transfer restrictions on the
transfer of shares of stock held by all of the shareholders of the
Company substantially similar to the restrictions on the transfer of
the Partnership interests in the Partnership Agreement (and after
the first public sale of the Company's equity securities, customary
"tag along" rights shall be imposed upon TJI (in the case of a sale
of control transaction involving the Company) for the benefit of the
S&O Shareholders, and (iii) there is only one class of authorized
capital stock.
It is the intent of the parties that the foregoing actions shall be accomplished
on a tax free basis to the parties. The Partnership and/or the Company shall
pay all of the costs and expenses, including reasonable attorneys' fees, of all
such actions. Immediately prior to such merger, the Partnership shall make a
Mandatory Tax Distribution with respect to the taxable income of the Partnership
through the date immediately prior to the effective date of such merger in
accordance with the Partnership Agreement, it being understood that such
Mandatory Tax Distribution shall not exceed the amount of the Mandatory Tax
Distribution required under the Partnership Agreement.
SECTION 2.2 PIGGYBACK REGISTRATION RIGHTS.
2.2.1 If the Company proposes to file a registration statement
under the Securities Act (i) with respect to an Initial Public Offering for its
own account or (ii) otherwise (but not including a Demand Registration) (each of
the foregoing registrations referred to in clauses (i) and (ii) next above being
a "PIGGYBACK REGISTRATION"), then the Company shall give written notice of
such proposed filing to each S&O Shareholder holding Registrable Securities at
least 20 days before the anticipated filing date, and such notice shall offer
such S&O Shareholders the opportunity to register such number of Registrable
Securities as each such S&O Shareholder may request (a "PIGGYBACK
REGISTRATION").
2.2.2 Such notice by the Company pursuant to Section 2.2.1
above (a "PIGGYBACK NOTICE") shall specify, at a minimum, the number and kind
of securities so proposed to be registered, the proposed date of filing of such
registration statement with the Commission, the proposed means of distribution,
the proposed managing underwriter or underwriters (if any and if known), and a
good faith estimate by the Company of the proposed minimum offering price
thereof, as such price is proposed to appear on the facing page of such
registration statement. Upon the written request of an S&O Shareholder given
within ten (10) business days of such holder's receipt of the Piggyback Notice
(which written request shall specify the number and kind of Registrable
Securities
LIQUIDITY TRANSACTION AGREEMENT 5
<PAGE>
intended to be disposed of by such holder and the intended method of
distribution thereof), the Company shall, subject to Section 2.2.4 below,
include in such registration all Registrable Securities with respect to which
the Company has received such written requests for inclusion.
2.2.3 Notwithstanding the foregoing, the S&O Shareholders
specifically acknowledge and agree that TJI, at its option, may, subject to
Section 2.2.4, include its Registrable Securities in any Piggyback Registration.
2.2.4 If the Underwriter in connection with the Piggyback
Registration delivers gives its good faith opinion to the Company and the S&O
Shareholders holding Registrable Securities that the total amount of securities
which they, the Company and TJI propose to be included in such offering is
sufficiently large to materially and adversely affect the success of such
offering or materially adversely affect the price of the securities to be
offered solely for the account of the Company, then the amount or kind of
Registrable Securities to be offered for the accounts of the S&O Shareholders
and TJI shall be reduced pro rata on the basis of the number of Registrable
Securities sought to be included thereby to the extent necessary to reduce the
total amount of securities to be included in the offering to the amount
recommended by the Underwriter without creating such an effect.
2.2.5 The Company may withdraw any Piggyback Registration
(including proposed Initial Public Offering) initiated by the Company without
the consent of any S&O Shareholder, notwithstanding the request of the S&O
Shareholders to participate therein in accordance with this Section 2.2;
provided, however that any Initial Public Offering which is withdrawn and not
consummated shall not satisfy the obligations of TJI and the Company under
Section 2.1.
2.2.6 Further notwithstanding anything to the contrary
contained in this Agreement, the Company shall not be required to include
Registrable Securities in any registration statement if the proposed
registration is (i) a registration on Form S-8 (or any successor form) of a
stock option or other employee incentive compensation plan, (ii) a registration
of securities issued or issuable pursuant to a stockholder reinvestment plan, or
other similar plan, or (iii) a registration of securities pursuant to a
shareholders rights plan (a so-called "POISON PILL") or other similar plan
designed to protect the Company's stockholders from a coercive or other attempt
to take control of the Company (each of the foregoing being a "PERMITTED
REGISTRATION").
LIQUIDITY TRANSACTION AGREEMENT 6
<PAGE>
SECTION 2.3 DEMAND REGISTRATION RIGHTS.
2.3.1 Subject to the conditions of this Section 2.3 and
Section 2.4 below, S&O Shareholders holding at least 40% of the total number of
Registrable Securities then held by such Shareholders (such amount being the
"DEMAND MINIMUM AMOUNT") may make a written request (a "DEMAND") to the
Company for registration with the Commission for the resale of such Registrable
Securities under and in accordance with the provisions of the Securities Act (a
"DEMAND REGISTRATION"). Each Demand shall specify: (i) the aggregate number
and kind of Registrable Securities requested to be registered, and (ii) the
intended method of distribution in connection with such Demand Registration to
the extent then known. Within 10 business days after receipt of such request,
TJI shall cause the Company to, and the Company will serve written notice (the
"NOTICE") of such registration request to all S&O Shareholders holding
Registrable Securities and TJI shall cause the Company to, and the Company will,
include in such registration all Registrable Securities with respect to which
the Company has received from an S&O Shareholder written requests for inclusion
therein within 20 days after the receipt by the applicable holder of the Notice.
SECTION 2.4 NUMBER OF DEMAND REGISTRATIONS.
2.4.1 S&O Shareholders holding Registrable Securities, as a
class, shall, subject to the provisions of Section 2.4.2 below, be entitled to
TWO Demand Registrations. The Company shall not be required to effect any
such Demand Registration until there has been an Initial Public Offering as
provided in Section 2.3, and then, not within 6 months from the effective date
of such offering; PROVIDED, however, that the Company shall be required to
effect such Demand Registration at any time at the request of S&O Shareholders
holding the Demand Minimum Amount in the event that a Qualified Initial Public
Offering (as herein defined) has not been consummated by the end of 1995 or 1996
(as the case may be) in accordance with Section 2.1.1. A "QUALIFIED INITIAL
PUBLIC OFFERING" shall mean an Initial Public Offering in which each S&O
Shareholder was able to include all Registrable Securities sought to be included
therein by each such S&O Shareholder pursuant to Section 2.2 hereof (but without
reduction pursuant to Section 2.2.4 hereof).
2.4.2 Neither the Company nor any Person (other than TJI and
other than an S&O Shareholder, in each case with respect to Registrable
Securities) shall include any securities in a Demand Registration, except with
the written consent of the S&O Shareholders holding a majority of the
Registrable Securities sought to be registered by such Shareholders pursuant to
such Demand Registration. If the Underwriter of a Demand Registration (or in
the case of a Demand Registration not being underwritten, S&O Shareholders
holding a majority of the Registrable Securities
LIQUIDITY TRANSACTION AGREEMENT 7
<PAGE>
sought to be included therein by such Shareholders), advise the Company that in
its or their good faith opinion the number of securities proposed to be sold in
such Demand Registration by the S&O Shareholders, TJI and, if authorized
pursuant to the first sentence of this Section 2.4.2, the Company or any other
Person exceeds the number which can be sold in such offering at the desired
price, the Company will include in such registration only the number of
securities which, in the opinion of the Underwriter (or such S&O Shareholders,
as the case may be) can be sold, selected first, pro rata among the S&O
Shareholders on the basis of the number of Registrable Securities sought to be
included thereby in such Demand Registration and second (and only after all
S&O Shareholders have included all Registrable Securities sought to be included
thereby in such Demand Registration) TJI and third (and only after all S&O
Shareholders and TJI have included all Registrable Securities sought to be
included thereby in such Demand Registration) other Persons, authorized pursuant
to the first sentence of this Section 2.4.2, who have requested to be included
in such Demand Registration pro rata on the basis of the number of securities
sought to be included thereby in such Demand Registration.
SECTION 2.5 CONDITIONS TO DEMAND REGISTRATION.
Sections 2.3 and 2.4 hereof are subject to each of the following
limitations, conditions and qualifications:
2.5.1 The Company shall be entitled to postpone for a
reasonable period of time (but in any event, not past the date on which the
Company is next required to (or, if earlier, does) file an annual, quarterly or
special report under the Exchange Act (or if the Company is then not then
subject to the Exchange Act, a period not exceeding 90 days) the filing (but not
the preparation) of any registration statement otherwise required to be prepared
and filed by it pursuant hereto if, at the time the Company receives a request
for such registration, the Company is in possession of material non-public
information that would be required to be disclosed in a registration statement
but that has not been and will otherwise not be disclosed to the public (and
which is not otherwise required to be disclosed under law or applicable exchange
or NASDAQ rule), and, within ten (10) days after receipt of a request for Demand
Registration, the Company advises the S&O Shareholders in writing such
disclosure would materially adversely affect the Company and its stockholders.
The Company shall be entitled to postpone the filing of such a registration
statement pursuant to this paragraph only once in respect of any Demand
Registration.
2.5.2 In addition, the Company shall be entitled to postpone
for a reasonable period of time (not exceeding 120 days, but in the case of an
acquisition referred to below (including,
LIQUIDITY TRANSACTION AGREEMENT 8
<PAGE>
without limitation, by tender offer), 135 days) the filing (but not the
preparation) of any registration statement otherwise required to be prepared and
filed by it pursuant hereto if, within 10 days after it receives a request for a
Demand Registration, the Board of Directors of the Company determines in the
good faith exercise of its business judgment (and the Company notifies the S&O
Shareholders of such determination ) that such registration and offering would
materially interfere with any material financing, acquisition, tender offer,
corporate reorganization or other material transaction involving the Company
that prior to such request the Board of Directors of the Company had agreed by
resolution to pursue. The right of the Company to postpone a Demand
Registration under this paragraph shall be limited to one postponement with
respect to each Demand Registration.
2.5.3 A registration shall not be treated as one (1) of the
two (2) permitted Demand Registrations until (i) the applicable registration
statement under the Securities Act has been filed with the Securities and
Exchange Commission ("COMMISSION") with respect to such Demand Registration
and (ii) such registration statement shall have been maintained continuously
effective for a period of at least one hundred eighty (180) days or such shorter
period when all Registrable Securities included therein have been sold
thereunder in accordance with the manner of distribution set forth in such
Demand.
2.5.4 If the S&O Shareholders holding a majority of the
Registrable Securities sought to be registered thereby pursuant to a Demand
Registration request that such Demand Registration be an underwritten offering,
then such holders shall select an Underwriter or Underwriters to manage and
administer such offering, such underwriter or underwriters, as the case may be,
to be subject to the approval of TJI, which such approval shall not be
unreasonably withheld (and such underwriter or underwriters, as the case may be,
shall constitute the Underwriter hereunder).
2.5.5 If the Company has received a Demand and if the
applicable registration statement in respect of such Demand has not been
withdrawn or abandoned, the Company will not file or cause to be effected any
other registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except a Permitted Registration), whether on its own behalf or at the
request of any holder or holders of such securities, until a period of at least
one hundred eighty (180) days has elapsed from the effective date of a firm
commitment underwritten Demand Registration or a period of at least ninety (90)
days have elapsed from the effective date of any other Demand Registration,
unless, in each case, a shorter period of time is approved by the S&O
Shareholders holding a majority of the Registrable Securities included thereby
in such Demand Registration.
LIQUIDITY TRANSACTION AGREEMENT 9
<PAGE>
SECTION 2.6 ADDITIONAL REGISTRATION RIGHTS.
Except as expressly contemplated in this Agreement (including with
respect to TJI as provided in Sections 2.2.3 and 2.2.4 hereof), the Company
shall not grant to any Person he right to require or request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the S&O Shareholders; PROVIDED, HOWEVER, that the Company shall be
entitled to grant rights to other Persons to participate in Piggyback
Registrations so long as such rights are subordinate to the rights of the S&O
Shareholders with respect to such Piggyback Registrations. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the S&O Shareholders in this Agreement
ARTICLE 3
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 3.1 RESTRICTIONS ON PUBLIC SALE BY HOLDERS.
Each Holder (other than an Exempted Holder (as defined below))
agrees not to effect any public sale or distribution (including pursuant to
Rule 144) of the issue being registered or a similar security of the Company or
any securities convertible into or exchangeable or exercisable for such
securities, during the 7 days prior to, and during the 180-day period beginning
on, the effective date of a registration statement filed by the Company (except
as part of such registration) in connection with a firm commitment underwritten
public offering of securities of the same class as or substantially similar to
the Registrable Securities, but only if and to the extent requested in writing
(with reasonable prior notice) by the Underwriter with respect thereto. An
"EXEMPTED HOLDER" shall be a Person (other than an officer or director of the
Company from whom the Underwriter reasonably requests, in writing, a so-called
"holdback" or "lockup" agreement) who does not beneficially own (within the
meaning of the Exchange Act and the rules and regulations thereunder) 1% or more
of the Company's Common Stock.
SECTION 3.2 RESTRICTIONS ON PUBLIC SALE BY THE COMPANY.
TJI agrees to cause the Company not to effect (whether for itself or
for any other Person) any public sale or distribution of any securities of the
same class as or substantially similar to those being registered, or any
securities convertible into or exchangeable or exercisable for such securities,
during the 7 days prior to, and during the 180-day period beginning on, the
effective
LIQUIDITY TRANSACTION AGREEMENT 10
<PAGE>
date of any registration statement in connection with a Demand Registration or a
Piggyback Registration in which S&O Shareholders are participating (except a
public sale or distribution pursuant to such registration statement to the
extent permitted by this Agreement.) In addition, the Company shall (and TJI
shall cause the Company to), in connection with a Demand Registration, cause
each of the Company's officers and directors to agree not to effect any public
sale or distribution (including sales pursuant to Rule 144) of any such
securities of the Company during such period (except as part of such
underwritten registration to the extent permitted pursuant to the terms of this
Agreement). This Section 3.2 shall not be deemed to limit the exercise of
Demands hereunder by the S&O Shareholders or the disposition of securities by
such Shareholders as permitted (or expressly not restricted) by the other terms
of this Agreement.
SECTION 3.3 COOPERATION BY HOLDERS.
3.3.1 The offering of Registrable Securities by any Holder
shall comply in all respects with the applicable terms, provisions and
requirements set forth in this Agreement, and each such Holder shall timely
provide the Company with all information and materials required to be included
in a registration statement that (i) relate to the offering, (ii) are in
possession of such Holder, and (iii) relate to such Holder, and to take all such
action as may be reasonably required in order not to delay the registration and
offering of the securities by the Company. The Company shall have no obligation
to include in such registration statement shares of a Holder who has failed to
furnish such information which, in the written opinion of counsel to the Company
(which counsel is reasonably acceptable to the S&O Shareholders), is required in
order for the registration statement to be in compliance with the Securities
Act.
3.3.2 In addition to the foregoing, no Holder who holds
Registrable Securities may participate in any underwritten registration
hereunder unless such Holder (i) agrees to sell such Holder's securities on the
terms of and on the basis provided in any underwriting agreements applicable to
such registration and (ii) subject to the remainder of this Section 3.3.2,
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
Without limiting any of the foregoing, in the event that the
offering of Registrable Securities is to be made by or through an Underwriter,
the Company shall enter into an underwriting agreement with a managing
Underwriter or Underwriters containing representations, warranties, indemnities
and agreements customarily included (but not inconsistent with the agreements
contained herein) by an issuer of common stock in underwriting agreements
LIQUIDITY TRANSACTION AGREEMENT 11
<PAGE>
with respect to offerings of common stock for the account of, or on behalf of,
such issuers. In connection with the sale of Registrable Securities hereunder
by an S&O Shareholder, any such seller of such Registrable Securities may, at
its option, require that any and all representations and warranties by, and
indemnities and agreements of, the Company to or for the benefit of such
Underwriter or Underwriters (or which would be made to or for the benefit of
such an underwriter or underwriters if such sale of Registrable Securities were
pursuant to an underwritten offering) be made to and for the benefit of such
seller and that any or all of the conditions precedent to the obligations of
such Underwriter or Underwriters (or which would be so for the benefit of such
underwriter or underwriters under a customary underwriting agreement) be
conditions precedent to the obligations of such seller in connection with the
disposition of its securities pursuant to the terms hereof (if being agreed that
in connection with any Demand Registration, without limiting any rights or
remedies of the S&O Shareholders, in the event any such condition precedent
shall not be satisfied and, if not so satisfied, shall not be waived by such S&O
Shareholders holding a majority of the Registerable Securities to be included
thereby in such Demand Registration, such Demand Registration shall not be
counted as one (1) of the two (2) permitted Demands hereunder). No such seller
of Registrable Securities pursuant to the terms of this Agreement shall be
required to make any representations or warranties to, or agreements with, the
Company or underwriter or underwriters or any other Person, other than
representations and warranties regarding such seller's authority and ownership
of such Registrable Securities and the intended method of distribution and other
than any agreements expressly contemplated by the terms of this Agreement.
SECTION 3.4 RULE 144.
TJI covenants that, upon any registration statement covering Company
securities becoming effective, it will cause the Company to timely file the
reports required to be filed by the Company under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission thereunder
(or, if the Company is not required to file such reports, it will, upon the
request of S&O Shareholders holding Registrable Securities then constituting the
Demand Minimum Amount, cause the Company to make timely publicly available such
other information as is necessary to permit sales under Rule 144 under the
Securities Act), and it will cause the Company to take such other action as S&O
Shareholders holding Registrable Securities then constituting the Demand Minimum
Amount may reasonably request, all to the extent required from time to time to
enable such S&O Shareholders to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided by (a)
Rule 144 under the Securities Act, as such Rule may be amended from time
LIQUIDITY TRANSACTION AGREEMENT 12
<PAGE>
to time, or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of S&O Shareholders holding Registrable Securities
then constituting the Demand Minimum Amount, TJI will cause the Company to
deliver to such S&O Shareholders a written statement as to whether it has
complied with such requirements.
ARTICLE 4
REGISTRATION EXPENSES
All expenses incident to the Company's performance of or compliance
with the registration and related provisions of this Agreement, including
without limitation, all Commission and securities exchange or National
Association of Securities Dealers, Inc. registration and filing fees, fees and
expenses required to comply with state securities or blue sky laws (including
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), rating agency fees, printing expenses, messenger
and delivery expenses, internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the fees and expenses incurred in connection with the
listing of the securities to be registered on a securities exchange or the
inclusion of such securities in an automated quotation system and fees and
disbursements of counsel for the Company and its independent certified public
accountants (including the expenses of any special audit or "cold comfort"
letters required by or incident to such performance), securities act liability
insurance (but EXCLUDING any other counsel or accountants fees of the S&O
Shareholders) (all such expenses being herein called "REGISTRATION EXPENSES"),
will be borne by the Company.
ARTICLE 5
REGISTRATION PROCEDURES
SECTION 5.1 GENERAL.
Whenever any Registrable Securities are to be registered pursuant to
this Agreement, TJI will cause the Company to use its reasonable best efforts to
effect the registration of such Registrable Securities in accordance with the
intended method of disposition thereof as quickly as practicable. In connection
with any Piggyback Registration or Demand Registration, TJI will cause the
Company to, as expeditiously as possible, perform the following:
LIQUIDITY TRANSACTION AGREEMENT 13
<PAGE>
5.1.1 Prepare and file with the Commission a registration
statement which includes the Registrable Securities and use its reasonable best
efforts to cause such registration statement to become effective; PROVIDED,
that before filing a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of the registration statement, the Company will furnish to the
S&O Shareholders holding Registrable Securities covered by such Registration
Statement; and to the Underwriter, if any, draft copies of all such documents
proposed to be filed at least 5 business days prior thereto, which documents
will be subject to the reasonable review of such S&O Shareholders and
Underwriter, and the Company will not file any registration statement or
amendment thereto or any prospectus or any supplement thereto (including such
documents incorporated by reference) to which S&O Shareholders holding a
MAJORITY of the Registrable Securities covered by such registration statement
or the Underwriter, if any, shall reasonably object, and will notify each S&O
Shareholder holding Registrable Securities of any stop order issued or
threatened by the Commission in connection therewith and use its reasonable best
efforts to prevent the entry of such stop order or to remove it if entered.
Promptly notify the selling holders of Registrable Securities of each of (x) the
filing and effectiveness of the registration statement and prospectus and any
amendments or supplements thereto and, (y) the receipt of any comments from the
Commission or any state securities law authorities or any other governmental
authorities with respect to any such registration statement or prospectus or any
amendments or supplements thereto.
5.1.2 Prepare and file with the Commission such amendments and
post-effective amendments to the registration statement as may be necessary to
keep the registration statement effective for a period of not less than 180
DAYS (or such shorter period which will terminate when all Registrable
Securities covered by such registration statement have been sold or withdrawn,
but not prior to the expiration of the 90-day period referred to in Section 4(3)
of the Securities Act and Rule 174 thereunder, if applicable); cause the
prospectus to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act applicable to it with respect
to the disposition of all securities covered by such registration statement
during the applicable period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement or
supplement to the prospectus; the Company shall not be deemed to have complied
with its obligations hereunder to keep a registration statement effective during
the applicable period if it voluntarily takes any action that would result in
selling S&O Shareholders of the Registrable Securities being prevented from
LIQUIDITY TRANSACTION AGREEMENT 14
<PAGE>
selling such Registrable Securities during that period whether or not such
action is required by applicable law.
5.1.3 Furnish to any S&O Shareholder holding Registrable
Securities included in such registration statement and the Underwriter, if any,
without charge, such number of conformed copies of the registration statement
and any post-effective amendment thereto and such number of copies of the
prospectus (including each preliminary prospectus) and any amendments or
supplements thereto, and any documents incorporated by reference therein, as
such S&O Shareholder or Underwriter may request in order to facilitate the
disposition of the Registrable Securities (it being understood that the Company
consents to the use of the prospectus and any amendment or supplement thereto by
each holder of Registrable Securities covered by the registration statement and
the Underwriter, if any, in connection with the offering and sale of the
Registrable Securities covered by the prospectus or any amendment or supplement
thereto); PROVIDED, that before filing a registration statement or prospectus
or any amendments or supplements thereto, the Company will furnish to one
counsel selected by S&O Shareholders holding a majority of the Registrable
Securities covered by such registration statement, copies of all documents
proposed to be filed, which such documents will be subject to the reasonable
review of such counsel.
5.1.4 Notify each S&O Shareholder holding Registrable
Securities included in such Registration Statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, when the Company becomes aware of the happening of any event as a result of
which the prospectus included in such registration statement (as then in effect)
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
in light of the circumstances under which they were made, not misleading and, as
promptly as practicable thereafter, prepare and file with the Commission and
furnish a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
5.1.5 Use its reasonable best efforts to register or qualify
the Registrable Securities under the securities or blue sky laws of such
jurisdictions in the United States as S&O Shareholders may reasonably request
(including registration or qualification for resale and for secondary trading)
and do any and all other acts which may be reasonably necessary or advisable to
enable S&O Shareholders to dispose of the Registrable Securities in such
jurisdictions (including, without limitation, obtaining the
LIQUIDITY TRANSACTION AGREEMENT 15
<PAGE>
withdrawal of any order suspending registration or qualification (or the
effectiveness thereof) or suspending or preventing the use of any related
prospectus in any such jurisdiction with respect thereto) and keep such
registration or qualification in effect for so long as the registration
statement remains effective under the Securities Act; PROVIDED, however, that
the Company shall not be required for any such purpose to (i) qualify generally
or use efforts to cause itself to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not otherwise be required to
qualify but for the requirements of this Section 5.1.5 or (ii) consent generally
to service of process in any such jurisdiction.
5.1.6 Use its reasonable best efforts to cause all such
Registrable Securities to be listed on each securities exchange and included in
each established over-the-counter market on which or through which similar
securities of the Company are then listed or traded and, if not so listed or
traded, to be listed on the NASD automated quotation system ("NASDAQ") and if
listed on NASDAQ, use its reasonable efforts to secure designation of all such
Registrable Securities covered by such registration statement as a NASDAQ
"NATIONAL MARKET SYSTEM SECURITY" within the meaning of Rule 11Aa2-1 under the
Securities Exchange Act of 1934, as amended, or, failing that, to secure NASDAQ
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two (2) market makers to
register as such with respect to such Registrable Securities with the NASD; and
provide a transfer agent, registrar and CUSIP number for all of such Registrable
Securities not later than the effective date of such registration statement.
5.1.7 Enter into an underwriting agreement in customary form
in connection with an underwritten offering referred to herein and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities pursuant to such underwritten
offering.
5.1.8 Make available for inspection, at reasonable times and
on such other reasonable terms and conditions as TJI may cause the Company to
specify, by the S&O Shareholders, by the Underwriters, if any, participating in
any disposition pursuant to the registration statement, and by not more than one
attorney and one accountant retained to represent the S&O Shareholders and not
more than one attorney and one accountant retained to represent all of such
Underwriters (collectively, "INSPECTORS"), such financial and other records,
pertinent corporate documents and properties of the Company (collectively,
"RECORDS") as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, if any. Any such Inspector retained by or on
behalf of the S&O Shareholders or such Underwriter shall certify to TJI that
such Inspector has been retained by or on behalf of the
LIQUIDITY TRANSACTION AGREEMENT 16
<PAGE>
S&O Shareholders or such Underwriters, as the case may be. The S&O Shareholder
agree to use their reasonable best efforts, and to use their reasonable best
efforts to cause their agents (but not including the Underwriters or their
agents) who are Inspectors, to keep confidential and not to disclose the matters
contained in any Records which TJI or the Company determines, in good faith, to
be confidential and as to which TJI or the Company so notifies in writing the
Inspectors and which (i) are not publicly known or otherwise known to the
Inspectors at the time of disclosure, (ii) do not subsequently become public
through no act or omission by the Inspectors and (iii) do not otherwise become
known to the Inspectors other than through disclosure by TJI or the Company,
except that (A) the S&O Shareholders or the Inspectors may make such disclosures
as may be required by law or applicable legal process and (B) the S&O
Shareholders or the Inspectors may disclose such matters to officers, directors,
employees and other representatives of the S&O Shareholders in connection with
the due diligence relating to the registration statement.
5.1.9 Fully cooperate with the S&O Shareholders (and the
Underwriter, if any) to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends and enable such Registrable Securities to be in such
denominations and registered in such names as S&O Shareholders and the
Underwriter may request at least two business days prior to any sale of
Registrable Securities.
5.1.10 Otherwise comply with all applicable rules and
regulations of the Commission and make generally available to the security
holders of the Company an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act as soon as practicable (but in any event not
later than fifteen (15) months after the effectiveness of such registration
statement), which requirement will be deemed to be satisfied if the Company
timely files complete and accurate information on Forms 10-Q, 10-K and 8-K under
the Exchange Act and otherwise complies with Rule 158 under the Securities Act
as soon as feasible.
5.1.11 Furnish to each seller of Registrable Securities a
signed counterpart of (x) an opinion of counsel for the Company (which counsel
shall be reasonably acceptable to the holder of a majority of the Registrable
Securities being so registered) and (y) a "COMFORT" letter signed by the
independent public accountants who have certified the Company's financial
statements included or incorporated by reference in such registration statement
and, in the case of the accountants' comfort letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' comfort letters delivered to
the underwriters in underwritten public offerings of securities for
LIQUIDITY TRANSACTION AGREEMENT 17
<PAGE>
the account of, or on behalf of, an issuer of common stock, such opinion and
comfort letters to be dated the date such opinions and comfort letters are
customarily dated in such transactions.
5.1.12 Take all such other actions as the S&O Shareholders
holding a majority of the Registrable Securities being sold thereby reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities.
SECTION 5.2 COOPERATION OF HOLDERS.
5.2.1 Each Holder, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 5.1.4 above, will
forthwith discontinue disposition of the Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 5.1.4 or until it is advised in writing (the "ADVICE")
by the Company that the use of the prospectus may be resumed, and has received
copies of any additional or supplemental filings which are incorporated by
reference in the prospectus, and, if so directed by the Company, each Holder
will, or will request the Underwriter, if any, to, deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the time periods mentioned in Sections 2.5 and 5.1.2 above
shall be extended by the number of days during the period from and including the
date of the giving of such notice to and including the date when each seller of
Registrable Securities covered by such registration statement shall have
received copies of the supplemented or amended prospectus contemplated by
Section 5.1.4 or of the Advice.
SECTION 5.3 ADDITIONAL RIGHTS OF HOLDERS.
If any registration statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance satisfactory to such Holder, to the effect that the holding by such
Holder of such securities is not to be construed as a recommendation of such
holder of the investment quality of the Company's securities covered thereby and
that such holding does not imply that such holder will assist in meeting any
future financial requirements of the Company, or (ii) in the event that such
reference to such Holder by name or otherwise is not required by the Securities
Act or any similar federal statute then in force, the deletion of the reference
to such Holder. In addition, if requested by the managing Underwriter or
Underwriters of any registration or by the S&O Shareholders holding a majority
of the Registrable Securities included thereby in a registration, the Company
shall, subject to
LIQUIDITY TRANSACTION AGREEMENT 18
<PAGE>
approval of counsel to the Company in its reasonable judgment, promptly
incorporate in a prospectus, supplement or post-effective amendment to the
registration statement such information concerning underwriters and the plan of
distribution of the Registrable Securities as such managing underwriter or
underwriters or such holders reasonably shall furnish to the Company in writing
and request be included therein, including, without limitation, with respect to
the number of Registrable Securities being sold by such holders to such
underwriter or underwriters, the purchase price being paid therefor by such
underwriter or underwriters and with respect to any other terms of the
underwritten offering of the Registerable Securities to be sold in such
offering; and make all required filings of such prospectus, supplement or
post-effective amendment as soon as possible after being notified of the matters
to be incorporated in such prospectus, supplement or post-effective amendment.
In addition, TJI shall cause the Company to, and the Company shall, permit any
holder of Registrable Securities, which holder, in the opinion of counsel to
such holder (which counsel is reasonably acceptable to the Company), might be
deemed to be an underwriter or controlling person of the Company, to be
consulted in connection with the preparation of such registration statement.
ARTICLE 6
SALE OF THE BUSINESS
SECTION 6.1 GENERAL.
If, on or before the third anniversary of the date hereof, the S&O
Shareholders have not sold 80% of the Registrable Securities (other than
Excluded Registrable Securities (as defined below)) held by them as a result of
a public sale of the Registrable Securities pursuant to one or more registration
statements under the Act or as a result of a public sale under Rule 144, then
the S&O Shareholders shall have the right, after consulting with an investment
banker or other valuation expert who possesses a high degree of professional
skill and expertise in valuation matters and who is reasonably acceptable to TJI
(the "VALUATION EXPERT"), to establish the value ("VALUE") of the entire
business of the Partnership (or the Company, as the case may be) as a going
concern. For purposes of this Section 6.1 "EXCLUDED REGISTRABLE SECURITIES"
shall mean Registrable Securities which an S&O Shareholder failed to seek to
include in a prior Demand Registration or a prior Piggyback Registration (or
sought to include, but withdrew) and which such Registrable Securities, if
sought to be included in such Demand Registration or Piggyback Registration,
would have been included in such Registration.
LIQUIDITY TRANSACTION AGREEMENT 19
<PAGE>
SECTION 6.2 RIGHT OF FIRST OPTION.
6.2.1 Upon establishing the Value, the S&O Shareholders shall
give TJI written notice thereof ("VALUATION NOTICE"). TJI shall have the
option to purchase all of the Partnership interests (or shares of stock in the
Company, as the case may be) held by the S&O Shareholders at a cash price equal
to the pro rata portion of the value represented by the Partnership interests
held by SealRite and Oldach or shares of stock in the Company held by the S&O
Shareholders, as the case may be, by notifying the S&O Shareholders of the
exercise of such option within 30 days after service of the Valuation Notice.
If TJI exercises its option, the closing of the purchase shall occur at a
mutually satisfactory time and place within 30 days from the date on which TJI
exercises its option. At the closing, the parties shall execute and deliver
such documents as may be reasonably requested by the other party to consummate
the sale and the price shall be paid by wire transfer. The S&O Shareholders
will represent and warrant authority to sell their Partnership interests or
shares of stock and free and clear title to their Partnership interests or
shares of stock, but will not be required to make any other representation or
warranty.
6.2.2 If TJI does not exercise its option under Section 6.2.1
within the 30 day time period, the S&O Shareholders shall have the right to
cause the entire Partnership or the Company to be sold (in a stock, asset or
other form of transaction) at a price (which price, in the event of an asset or
other transaction, shall be appropriately and equitable adjusted to give effect
to any tax consequences with respect to the form of such transaction as compared
to a stock transaction) equal to or greater than the Value. The S&O
Shareholders shall give TJI written notice of any offer which the S&O
Shareholders receive ("OFFER NOTICE") along with copies of all documents
received in connection therewith. If the offered purchase price in any such
offer is not payable entirely in cash, the Valuation Expert shall determine
whether the value of the offered purchase price is equal to or greater than the
Value. The decision of the Valuation Expert shall be conclusive and binding on
all of the parties.
6.2.3 If the offered purchase price is less than the Value,
TJI shall have the right, exercisable by serving written notice on the S&O
Shareholders within 15 days from the service of the Offer Notice by the S&O
Shareholders on TJI, to purchase the interests of the S&O Shareholders for cash
at the lower offered price in the manner set forth in Section 6.2.1.
6.2.4 If TJI does not exercise such right within such 15 day
time period, the S&O Shareholders shall have the right to cause the entire
Partnership or Company to be sold (in a stock, asset or other form of
transaction) at the offered price (which
LIQUIDITY TRANSACTION AGREEMENT 20
<PAGE>
price, in the event of an asset or other transaction, shall be appropriately and
equitable adjusted to give effect to any tax consequences with respect to the
form of such transaction as compared to a stock transaction).
6.2.5 TJI shall cooperate with the S&O Shareholders and take
all necessary actions in connection with the sale of the Partnership or the
Company and shall execute and deliver all documents and perform all acts
reasonably required in connection therewith and shall cause Norco and its other
Affiliates to execute and deliver all such documents and perform all such acts.
6.2.6 The Partnership (or the Company, as the case may be)
shall bear all of the costs and expenses of the Valuation Expert and all other
reasonable costs and expenses incurred by the S&O Shareholders in connection
with this Article 6, including reasonable attorneys' and accountants' fees.
6.2.7 If the sale referred to in either Sections 6.2.2 or
6.2.3 (other than a sale to TJI) is not consummated within 180 days of the date
of the Offer Notice, the procedure set forth in Sections 6.2.1, 6.2.2, 6.2.3 and
6.2.4 shall be repeated.
ARTICLE 7
INDEMNIFICATION; CONTRIBUTION
SECTION 7.1 INDEMNIFICATION BY THE COMPANY.
7.1.1 TJI covenants and agrees to cause the Company to
indemnify and hold harmless each Holder who holds Registrable Securities, its
officers, directors and each Person who controls such holder (within the meaning
of the Securities Act), and any Agent (as hereinafter defined) or investment
advisor thereof against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) (collectively, "LIABILITIES")
arising out of or based upon any untrue or alleged untrue statement of material
fact contained in any registration statement, any amendment or supplement
thereto, any prospectus or preliminary prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as any
such Liabilities arise out of or are based upon untrue statements or omissions
based upon information with respect to such indemnified person furnished in
writing to the Company by such indemnified person expressly for use therein.
7.1.2 In connection with an underwritten offering, TJI will
cause the Company to indemnify the underwriters thereof, their officers and
directors and each Person who controls such
LIQUIDITY TRANSACTION AGREEMENT 21
<PAGE>
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of Holders holding
Registrable Securities or to such other extent as the Company and the
underwriters may agree. For purposes of this Section 7.1, an "AGENT" of an
Holder holding Registrable Securities is any person (other than an Underwriter
or placement or sales agent) acting for or on behalf of such Holder with respect
to the holding or sale of such Registrable Securities.
SECTION 7.2 INDEMNIFICATION BY HOLDERS.
7.2.1 In connection with any registration statement in which
an Holder holding Registrable Securities is participating, each such Holder will
furnish to the Company in writing such information with respect to the name and
address of such Holder and the amount of Registrable Securities held by such
Holder and such other information as the Company shall reasonably request for
use in connection with any such registration statement or prospectus, and agrees
to indemnify, to the extent permitted by law, the Company, its directors and
officers and each Person who controls the Company (within the meaning of the
Securities Act) against all Liabilities and expenses resulting from any untrue
or alleged untrue statement of material fact or any omission of a material fact
required to be stated in the registration statement, any amendment or supplement
thereto, any prospectus or preliminary prospectus or necessary to make the
statements therein not misleading, to the extent, but only to the extent, that
such untrue statement or omission is based upon any information with respect to
such Holder so furnished in writing by such Holder specifically for inclusion in
any registration statement or prospectus.
7.2.2 In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the proceeds received
by such Holder upon the sale of Registrable Securities giving rise to such
indemnification obligation.
SECTION 7.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS.
7.3.1 Any Person entitled to indemnification hereunder
("INDEMNIFIED PARTY") agrees to give prompt written notice to the indemnifying
party ("INDEMNIFYING PARTY") after the receipt by such Indemnified Party of
any written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such Indemnified Party
will claim indemnification or contribution pursuant to this Agreement and,
unless in the written opinion of counsel for such Indemnified Party a conflict
of interest may exist between such Indemnified Party and the Indemnifying Party
with respect to such claim, shall permit the Indemnifying Party to assume the
defense of such claim with counsel reasonably satisfactory to such Indemnified
Party. It is agreed that the failure to give notice
LIQUIDITY TRANSACTION AGREEMENT 22
<PAGE>
required by this paragraph shall not release the Indemnifying Party from its
obligation under this Section, except to the extent that the Indemnifying Party
has been materially prejudiced by such failure to provide such notice.
7.3.2 Whether or not such defense is assumed by the
Indemnifying Party, the Indemnifying Party will not be subject to liability for
any settlement made without its consent. No Indemnifying Party will consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
7.3.3 If the Indemnifying Party is not entitled to, or elects
not to, assume the defense of a claim, it will not be obligated to pay the fees
and expenses of more than one counsel with respect to such claim, unless in the
opinion of counsel for any Indemnified Party a conflict of interest may exist
between such Indemnified Party and any other of such Indemnified Parties with
respect to such claim, in which event the Indemnifying Party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
SECTION 7.4 CONTRIBUTION.
7.4.1 If the indemnification provided for in this Article 7
from the Indemnifying Party is unavailable to an Indemnified Party hereunder in
respect of any Liabilities, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Liabilities in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Parties in connection with the actions which resulted in such
Liabilities, as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact, has been
made by, or relates to information supplied by such Indemnifying Party or
Indemnified Parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of any Liabilities referred to above shall be
deemed to include, subject to the limitations set forth in Section 8.3, any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
7.4.2 The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.4 were determined by pro
rata allocation or by any other method of
LIQUIDITY TRANSACTION AGREEMENT 23
<PAGE>
allocation which does not take account of the equitable considerations referred
to in Section 7.4.1 above. Notwithstanding the provisions of this Section 7.4,
no selling Holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of the
selling Holder were offered to the public exceeds the amount of any damages
which such selling Holder has otherwise been required to pay by reason of such
untrue statement or omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
7.4.3 The obligations of the Company pursuant to this Article
7 shall be further subject to such additional express agreements of the Company
as may be required to facilitate an underwritten offering; PROVIDED, that no
such agreement shall in any way limit the rights of Holders holding Registrable
Securities under this Agreement, or create additional obligations of such
Holders not set forth herein, except as otherwise expressly agreed in writing by
any such Holders.
7.4.4 The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified Person and will survive the transfer of the
Registrable Securities.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 RECAPITALIZATIONS, EXCHANGES, ETC.
The provisions of this Agreement shall apply, to the full extent set
forth herein, with respect to the Common Stock, to any and all shares of capital
equity of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) which may be issued in
respect of, in exchange for, or in substitution of the shares of Common Stock,
in each case as the amounts of such securities outstanding are appropriately
adjusted for any equity dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date of this Agreement.
SECTION 8.2 COMPLETE AGREEMENT; MODIFICATION.
This Agreement, together with the other agreements referenced
herein, shall constitute the entire agreement between the parties with respect
to the subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter hereof. Any
modification of the
LIQUIDITY TRANSACTION AGREEMENT 24
<PAGE>
Agreement will be effective only if it is in writing and signed by each party
whose rights hereunder are affected thereby; PROVIDED, that any such
modification must be authorized or approved by the Management Board of the
Partnership (or Board of Directors of the Company, if applicable).
SECTION 8.3 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the principles of conflicts
of laws thereof.
SECTION 8.4 NOTICES.
All notices and other communications hereunder shall be in writing
and shall be delivered by hand, mailed by registered or certified mail (return
receipt requested) or sent by courier or other express delivery that provides
for independent delivery verification to the parties at the following addresses
(or at such other addresses for a party as shall be specified by like notice)
and shall be deemed given on the date on which such notice or communication is
delivered to the addressees at the address specified below:
(a) If to the S&O Shareholders:
to the address set below each S&O Shareholder's name on
the signature pages hereof.
with a copy to:
Robert L. Schlossberg, Esq.
c/o Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, IL 60606
(b) If to TJI:
TJ International, Inc.
300 E. ParkCenter Blvd., Suite 300
Boise, Idaho 83706
Attention: Walter C. Minnick
(c) If to the Partnership/Company:
300 E. ParkCenter Blvd., Suite 300
Boise, Idaho 83706
Attention: Nicholas M. Dye
LIQUIDITY TRANSACTION AGREEMENT 25
<PAGE>
SECTION 8.5 BINDING EFFECT.
This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties and their respective heirs, legal
representatives, successors and permitted assigns, and is not intended to confer
upon any other Person any right or remedies hereunder; PROVIDED, however, that
a transferee of an Holder or S&O Shareholder, whether or not an express
assignment has been made, shall be deemed to be an Holder or S&O Shareholder as
the case may be for purposes of obtaining the benefits or enforcing the rights
of an Holder.
SECTION 8.6 REFERENCES TO COMPANY.
Obligations of, and actions to be taken by, the Company referred to
herein shall be expressly assumed as obligations by the Company upon its
formation. In addition, upon its formation, the Company shall expressly assume
as obligations all action with TJI has agreed hereunder to cause the Company to
carry out. Notwithstanding such assumptions, for so long as TJI owns, directly
or indirectly (including, without limitation, as part of a group), at least 50%
of the Company's common stock (or has the right, directly or indirectly, to
appoint a majority of the Board of Directors of the Company), such obligations
and actions to be taken shall continue to constitute obligations of TJI to cause
the Company to meet such obligations and carry out such actions. TJI shall
cause any purchaser from TJI of at least 51% of the Company's common stock to
assume such obligations.
SECTION 8.7 ACTIONS BY S&O SHAREHOLDERS.
Except as otherwise expressly provided herein, any decision required
or desired to be made or any action required or desired to be taken hereunder by
the S&O Shareholders may be made or taken, as the case may be, by those S&O
Shareholders holding a majority of the combined interests in SealRite and
Oldach. The combined interest of each S&O Shareholder in SealRite and Oldach is
set forth after his name on the signature page hereof.
SECTION 8.8 TITLES AND HEADINGS.
Titles and headings to sections herein are inserted for the
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
SECTION 8.9 SEVERABILITY.
It is a desire and intent of the parties that the terms, provisions,
covenants and remedies contained in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term, provision, covenant or
remedy of this Agreement or
LIQUIDITY TRANSACTION AGREEMENT 26
<PAGE>
the application thereof to any person or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant or remedy shall be construed in a manner so as to permit its
enforceability under the applicable law to the fullest extent permitted by law.
In any case, the remaining provisions of this Agreement or the application
thereof to any person or circumstance other than those to which they have been
held invalid or unenforceable, shall remain in full force and effect.
SECTION 8.10 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together will
constitute one and the same Agreement.
* * *
LIQUIDITY TRANSACTION AGREEMENT 27
<PAGE>
TJ INTERNATIONAL, INC., a Delaware
corporation
By: /s/ JODY B. OLSON
--------------------------------
Its: VP
----------------------------
N-S&O PARTNERSHIP, a Delaware general
partnership
By: Norco Windows, Inc., a Wisconsin
corporation and a general partner
By: /s/ JODY B. OLSON
---------------------------
Its: VP
-----------------------
LIQUIDITY TRANSACTION AGREEMENT 28
<PAGE>
/s/ Robert L. Schlossberg /s/ Craig A. Anderson
- - ----------------------------- -----------------------------
Robert L. Schlossberg (S,O) Craig A. Anderson (S,O)
Altheimer & Gray SealRite Windows, Inc.
10 South Wacker Drive 3500 North 44th Street
Suite 4000 Lincoln, NE 68504
Chicago, IL 60606 COMBINED PERCENTAGE: 11.88%
COMBINED PERCENTAGE: 4.68%
/s/ James T. Grigsby /s/ Charles S. Meyer
- - ----------------------------- -----------------------------
James T. Grigsby (S,O) Charles S. Meyer (S,O)
SealRite Windows, Inc. LaSalle Capital Group
3500 North 44th Street Three First National Plaza
Lincoln, NE 68504 70 West Madison, Suite 5710
COMBINED PERCENTAGE: 11.88% Chicago, IL 60602
COMBINED PERCENTAGE: 19.28%
/s/ I. Peter Polansky /s/ Robert I. Berger
- - ----------------------------- -----------------------------
I. Peter Polansky (S,O) Robert I Berger (S,O)
Gold & Polansky Altheimer & Gray
203 North LaSalle Street 10 South Wacker Drive
Suite 1410 Suite 4000
Chicago, IL 60601 Chicago, IL 60606
COMBINED PERCENTAGE: 3.12% COMBINED PERCENTAGE: 4.68%
/s/ S. Michael Peck /s/ David W. Schoenberg
- - ----------------------------- -----------------------------
S. Michael Peck (S,O) David W. Schoenberg (S,O)
Altheimer & Gray Altheimer & Gray
10 South Wacker Drive 10 South Wacker Drive
Suite 4000 Suite 4000
Chicago, IL 60606 Chicago, IL 60606
COMBINED PERCENTAGE: 4.68% COMBINED PERCENTAGE: 4.68%
/s/ Myron Lieberman /s/ Robert H. Oldach
- - ----------------------------- -----------------------------
Myron Lieberman (S,O) Robert H. Oldach (O)
Altheimer & Gray Oldach Wood Windows & Doors
10 South Wacker Drive 1813 North Union
Suite 4000 Colorado Springs, CO 80909
Chicago, IL 60606 COMBINED PERCENTAGE: 13.23%
COMBINED PERCENTAGE: 4.68%
LIQUIDITY TRANSACTION AGREEMENT 29
<PAGE>
/s/ Phillip H. Sommerfeld /s/ William Houston
- - ----------------------------- -----------------------------
Phillip H. Sommmerfeld (S&O) William Houston (S,O)
SealRite Windows, Inc. 3225 Sharon, Apt. 121
3500 North 44th Street Menlo Park, CA 94025
Lincoln, NE 68504 COMBINED PERCENTAGE: 4.99%
COMBINED PERCENTAGE: 4.41%
/s/ Barbara Gold /s/ Thomas M. Foess
- - ----------------------------- -----------------------------
Barbara Gold (O) Thomas M. Foess (O)
Altheimer & Gray Oldach Window Corp.
10 South Wacker Drive 1813 North Union
Suite 4000 Colorado Springs, CO 80909
Chicago, IL 60606 COMBINED PERCENTAGE: 2.45%
COMBINED PERCENTAGE: 2.83%
/s/ Aubrey J. Greenberg /s/ S. Michael Peck
- - ----------------------------- -----------------------------
Aubrey J. Greenberg, not S. Michael Peck, not
personally, but solely as personally, but solely as
Trustee of the Barbara Gold Trustee of the Andrew Kenneth
Trust U/A/D April 12, 1983 (S) Meyer Trust U/A/D August 19,
3 East Huron Street 1987 and the Jeffrey Sherman
Chicago, IL 60611 Meyer Trust U/A/D August 19,
COMBINED PERCENTAGE: 1.85% 1987 (S)
Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, IL 60606
COMBINED PERCENTAGE: (AKM): .34%
COMBINED PERCENTAGE: (JSM): .34%
(S,O) = Stockholder of both SealRite and Oldach
(S) = Stockholder of SealRite
(O) = Stockholder of Oldach
LIQUIDITY TRANSACTION AGREEMENT 30
