THIS ASSET
PURCHASE AGREEMENT (this “ Agreement ”) is
entered into as of May 31, 2005, by and among Torgo Ltd., a
Texas limited partnership (the “ Purchaser ”),
ELK TECHNOLOGY GROUP, INC., a Delaware corporation (the “
Parent ”), and OEL, Ltd., d.b.a. “Ortloff
Engineers, Ltd.”, a Nevada corporation (the “
Company ”). Certain capitalized terms used in this
Agreement are defined in the attached Exhibit A
.
The Parent owns
all of the outstanding shares of capital stock (the “
Shares ”) of the Company. The Purchaser desires to
purchase certain assets of the Company and to assume certain of the
obligations and liabilities of the Company, and the Company desires
to sell such assets to the Purchaser and to assign such obligations
and liabilities to the Purchaser on the terms and conditions set
forth in this Agreement (such sale, purchase, assignment and
assumption, the “ Transaction ”).
In consideration
of the foregoing recitals, the mutual representations, warranties
and covenants set forth in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which the
parties acknowledge, the parties agree as follows:
1.1 Purchase
and Sale of Assets . Subject to the terms and conditions of
this Agreement, at the Closing, except as otherwise specifically
provided in this Agreement, the Company will grant, sell, assign,
transfer and deliver to the Purchaser, and the Purchaser will
purchase and acquire from the Company, all right, title and
interest of the Company in and to (a) the business of the
Company as a going concern (the “ Business ”)
and (b) all of the assets, properties and rights of the
Company of every kind and description, real, personal and mixed,
tangible and intangible, wherever situated other than the Excluded
Assets including, but not limited to, those assets set forth on
Schedule 1.1 (which Business, assets, properties and
rights are collectively referred to in this Agreement as the
“ Assets ”), free and clear of all mortgages,
liens, pledges, security interests, charges, claims, restrictions
and encumbrances of any nature whatsoever, except Assumed
Liabilities and liens for taxes not yet due and payable. The
Company and the Parent shall use commercially reasonable efforts to
obtain consents, to the extent required pursuant to
Sections 6.1(f) and 6.2(f), of other parties to the Contracts
included in the Assets.
1.2 Excluded
Assets . Notwithstanding anything to the contrary set forth in
this Agreement, the Assets will not include (a) if the
Effective Date is the Closing Date, cash, cash equivalents and
marketable securities, (b) the corporate charter,
qualifications to conduct business as a foreign corporation,
arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and
other documents relating to the organization, maintenance, and
existence of the Company as a corporation, (c) the rights that
accrue to the Company under this Agreement and any documents,
instruments or agreements executed in connection herewith,
(d) the Company Long Term Receivables, (e) 25% of the
Scheduled Relationships Receivables, (f) prepaid Taxes,
(g) prepaid insurance, (h) notes payable by the
Company’s employees to ElkCorp or any of its Affiliates and
(i) all accounts receivable owed by OGP/PGB in the approximate
amount of $242,892 (collectively, the “ Excluded
Assets ”).
1.3 Assumed
Liabilities . The Purchaser will assume, in connection with the
Contemplated Transactions, the liabilities and obligations of the
Company described on Schedule 1.3 (collectively, the “
Assumed Liabilities ”). To the extent that Parent or
the Company pay any Assumed Liabilities after Closing, Purchaser
shall promptly reimburse Purchaser or Company for the amount of
such payment upon
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1
presentation of
reasonably appropriate documentation. If any third-party’s
consent or approval to the assignment or other transfer to the
Purchaser of a contract to be transferred pursuant to this
Agreement has not been obtained prior to the Closing, then as to
the burdens, obligations, rights or benefits under or pursuant to
such contracts (collectively, the “ Rights ”)
not assignable to the Purchaser because such consent or approval
has not been obtained: (a) Company or Parent, as the case may
be, shall hold the Rights in trust for Purchaser, for the account
and benefit of Purchaser; (b) after the Closing,
(i) Company or Parent, as the case may be, shall take such
reasonable actions and do all such things as shall be reasonably
necessary or desirable in order that the value of the Rights shall
be preserved and shall inure to the benefit of Purchaser and such
that all benefits under the Rights may be received by Purchaser,
and (ii) Purchaser shall perform the burdens and obligations
under such Rights; and (c) after the Closing, Company, Parent
and Purchaser shall continue to use their respective reasonable
efforts to obtain such consent or approval. All liabilities of the
Company other than the Assumed Liabilities shall remain the sole
responsibility of and shall be retained, paid, performed and
discharged solely by the Company. Purchaser is not assuming any
debt, liability or obligation of the Company, whether known or
unknown, fixed or contingent, except as herein specifically
otherwise provided.
1.4 Purchase
Price . The cash purchase price (the “ Purchase
Price ”) for the Assets is the sum of (a) $14,257,108
plus (b) the amount of the Purchase Price
Adjustment calculated pursuant to Section 1.8
plus (c) if the Effective Date is May 1,
2005, the amount of the cash advances (including by way of loans)
by the Parent to the Company subsequent to April 30, 2005 and
prior to the Closing Date in the Ordinary Course of Business
less the aggregate amounts of cash distributed
(including by way of repayment of loans) by the Company to the
Parent subsequent to April 30, 2005 and prior to the Closing
Date. As of the date of this Agreement, the cash amount to be paid
is $13,619,722. At the Closing, the Purchaser will pay to the
Parent the Purchase Price by wire transfer of immediately available
funds to an account designated by the Parent on the Closing Date.
In addition, the Purchaser shall pay to the Parent the Company Long
Term Receivables and Scheduled Relationship Receivables referred to
in Section 1.2 pursuant to Section 9.5 promptly after
Purchaser’s receipt of payment for such
receivables.
1.5 Allocation
of Purchase Price . The parties hereto agree that the Purchase
Price shall be allocated to the Assets in accordance with
Schedule 1.5 hereto. The parties hereto acknowledge
that such allocation is based on the fair market value of the
Assets and shall be binding upon the parties hereto for Tax
purposes. Each party covenants to report gain or loss or cost
basis, as the case may be, in a manner consistent with
Schedule 1.5 for Tax purposes. As soon as practicable
following Closing, the parties shall exchange mutually acceptable
and completed IRS Forms 8594 which they shall use to report the
Contemplated Transactions to the Internal Revenue Service in
accordance with such allocation.
1.6 Closing
. The parties agree to conduct the closing of the Transaction
(“ Closing ”) at the offices of Baker &
McKenzie LLP, counsel for the Parent, at 2300 Trammell Crow Center,
2001 Ross Avenue, Dallas, Texas 75201, on May 31, 2005, or, if
all of the conditions set forth in Article 6 have not been
satisfied or waived on such date, on such mutually agreeable later
date as soon as practicable but in no event later than three
(3) business days after satisfaction or waiver of such
conditions, or at such other time and place as the Company, the
Parent and the Purchaser may agree in writing (such date of the
Closing, the “ Closing Date ”).
1.7 Closing
Deliveries . At the Closing:
(a) the
Parent and the Company will deliver to the Purchaser the various
certificates, instruments, documents and agreements referred to in
Section 6.2 of this Agreement; and
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2
(b) the
Purchaser will deliver to the Parent and the Company (i) the
various certificates, instruments and documents referred to in
Section 6.1 of this Agreement and (ii) the Purchase
Price.
1.8 Purchase
Price Adjustment . If the Effective Date is May 1, 2005,
the Purchase Price Adjustment described in Section 1.4 shall
be $78,462, which is the difference, if any between the Initial
Date Net Working Capital (as defined below) shown on the Initial
Working Capital Detail and the net working capital as of
April 30, 2005, as agreed between the parties. If the
Effective Date is the Closing Date, the Purchase Price Adjustment
described in Section 1.4 shall be calculated as
follows:
(a) The
net working capital of the Company as of March 31, 2005
(“ Initial Date Net Working Capital ”) to be
transferred as part of the Assets was calculated in accordance with
GAAP and is defined as set forth on the Working Capital Detail
attached as Schedule 1.8 and referred to in this
Section 1.8 as “ Initial Working Capital Detail
.” Within 30 days after the Closing Date, the Parent
shall deliver to the Purchaser a written calculation (“
Closing Date Working Capital Detail ”) of the net
working capital of the Company as of the Closing Date (“
Closing Date Net Working Capital ”). The Closing Date
Working Capital Detail shall be (i) prepared by the Company at
the Company’s expense on a basis consistent with the Initial
Working Capital Detail and with adjustments on the same basis as
the adjustments set forth in the Initial Working Capital Detail and
(ii) delivered to the Purchaser together with a written
statement by the Company of the difference, if any between the
Initial Date Net Working Capital shown on the Initial Working
Capital Detail and the Closing Date Net Working Capital shown on
the Closing Date Working Capital Detail, such difference, if any,
to be referred to herein as the “ Closing Date
Adjustment ”). The Parent shall consult with the
Purchaser in good faith in connection with the preparation of the
Closing Date Working Capital Detail and employees of the Parent
shall be permitted to meet with employees of the Purchaser in
connection with the preparation of the Closing Date Working Capital
Detail.
(b) The
Purchaser shall have 30 days after delivery to the Purchaser
of the Closing Date Working Capital Detail (the “ Review
Period ”) to review the Closing Date Working Capital
Detail and the Company’s calculation of the Closing Date
Adjustment. The Purchaser shall notify the Company in writing prior
to the expiration of the Review Period of the Purchaser’s
acceptance of or disagreement with the Closing Date Working Capital
Detail and the Closing Date Adjustment. Failure by the Purchaser to
notify the Company of either acceptance of or disagreement with the
Company’s calculation of the Closing Date Adjustment shall be
deemed acceptance thereof. If the Purchaser disputes the
Company’s determination of the Closing Date Adjustment, the
Purchaser shall, prior to the expiration of the Review Period,
notify the Company of the Purchaser’s objections and deliver
with such notice the Purchaser’s proposed calculation of the
Closing Date Adjustment. The Company shall have 20 days after
delivery of the Purchaser’s proposed calculation of the
Closing Date Adjustment to review the Purchaser’s proposed
Closing Date Adjustment. If the Company disputes the
Purchaser’s proposed Closing Date Adjustment, then the
Purchaser and the Company shall engage an independent accounting
firm of national reputation (other than the Purchaser’s CPA
or the Company’s CPA) to resolve the dispute and determine
the Closing Date Adjustment, which determination shall be final and
binding upon the parties. The fees and expenses of such independent
accounting firm shall be paid one-half by the Company and one-half
by the Purchaser.
(c) Upon
the final determination of the Closing Date Adjustment, the
Purchase Price shall be (i) decreased dollar-for-dollar to the
extent that the Initial Date Net Working Capital shown on the
Initial Working Capital Detail is greater than the Closing Date Net
Working Capital shown on the Closing Date Working Capital Detail
and (ii) increased dollar-for-dollar to the extent that the
Initial Date Net Working Capital shown on the Initial Working
Capital Detail is less than the Closing Date Net Working Capital
shown on the Closing Date Working Capital Detail. The Company shall
promptly pay to the Purchaser the amount of any such decrease in
the Purchase Price in cash no later than 10 days
after
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3
the date of
determination of the Closing Date Adjustment, by wire transfer of
immediately available funds to an account designated by the
Purchaser. The Purchaser shall promptly pay to the Company the
amount of any such increase in the Purchase Price in cash no later
than 10 days after the date of determination of the Closing
Date Adjustment, by wire transfer of immediately available funds to
an account designated by the Company.
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
Except as set
forth on the disclosure schedule attached as
Exhibit B-1 to this Agreement (the “ Company
Disclosure Schedule ”) (it being agreed that an item
included on a particular section of the Company Disclosure Schedule
referenced in any Section or subsection of this Article 2 is
deemed to relate to each other Section or subsection of this
Article 2 to the extent such relationship is reasonably
apparent), the Company represents and warrants to the Purchaser
that the statements set forth in this Article 2 are true and
complete. Notwithstanding any other provision of this Agreement,
the Company will not be deemed to have breached the representations
and warranties contained in this Article 2 (a) if the
Company’s Senior Management has, on or before the Closing
Date, knowledge of any fact, event or circumstance giving rise to
the alleged breach or inaccuracy or (b) unless the fact, event
or circumstance giving rise to the alleged breach or inaccuracy,
individually or taken together with all other facts, events or
circumstances inconsistent with any representation or warranty
contained in this Article 2, has had or would reasonably be
expected to have a Material Adverse Effect (whether or not any
provisions of this Article 2 are qualified individually by any
references to materiality).
2.1 Corporate
Organization .
(a) The
Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada, and is duly
qualified to conduct business and is in good standing under the
laws of each jurisdiction in which any facts require qualification,
except where the failure to so qualify would not result in a
Material Adverse Effect. The Company has all corporate power and
corporate authority it needs to carry on its operations and own its
assets.
(b) Section 2.1(b)
of the Company Disclosure Schedule sets forth the corporate name
and jurisdiction of incorporation of each Subsidiary.
2.2
Capitalization . As of the date of this Agreement, the
authorized capital stock of the Company consists of 1,000 shares of
common stock, par value $0.01 per share, all of which have been
duly authorized and are validly issued, fully paid and
nonassessable. There are no outstanding or authorized options,
warrants, rights, agreements or commitments to which the Company is
a party or which are binding upon the Company providing for the
issuance or redemption of any shares of the Company’s capital
stock.
2.3
Authorization . The Company has all corporate power and
corporate authority it requires to execute, deliver and perform its
obligations under this Agreement. The Company has obtained all
approvals from its directors, and all other corporate approvals, if
any, necessary for the due and valid authorization prior to the
Closing Date of the Company’s execution, delivery and
performance of this Agreement and the consummation by the Company
of the Transaction and each of the other transactions contemplated
by this Agreement (collectively, the “ Contemplated
Transactions ”). The Company has duly and validly
executed and delivered this Agreement. Assuming the due
authorization, execution and delivery of this Agreement by the
Purchaser, this Agreement is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, subject to (a) laws of general
A sset P urchase A greement
4
application
relating to bankruptcy, insolvency, and the relief of debtors and
(b) rules of law governing specific performance, injunctive
relief and other equitable remedies.
2.4 No
Conflict . Except for the disclosures on Section 2.4 of
the Company Disclosure Schedule, the requirements of the HSR Act
and any antitrust or other competition law of jurisdictions outside
the United States of America (if and to the extent any of the
foregoing laws may apply), the Company’s execution, delivery,
and performance of this Agreement and/or the consummation by the
Company of the Contemplated Transactions do not (a) conflict
with or violate any provision of the Company’s articles of
incorporation or bylaws, (b) require the Company to make any
filing with, or obtain any permit, authorization, consent or
approval of, any Governmental Entity, (c) result in a breach
or default under, create in any person the right to accelerate,
terminate, modify or cancel, or require any notice, consent or
waiver under, any Material Contract, material governmental permit,
indebtedness, Security Interest or other material agreement or
obligation to which the Company is a party or to which any of its
assets is subject, in any case with or without due notice or lapse
of time or both, (d) result in the imposition of any Security
Interest upon any assets of the Company or (e) violate any
law, order, writ, or injunction applicable to the Company or any of
its assets; provided, however, that this Section 2.4 shall not
apply with respect to those agreements, contracts, leases,
licenses, and other arrangements described on Exhibit B
to the Assignment and Assumption Agreement of even date
herewith.
(a) Attached
as Appendix A to the Company Disclosure Schedule is the
balance sheet of the Company at March 31, 2005 (the “
Most Recent Balance Sheet ”), together with the
related statement of operations for the eight-month period so
ended, and the balance sheets of the Company at June 30, 2000,
2001, 2002, 2003 and 2004, together with related statements of
operations for the twelve month periods so ended (collectively, the
“ Financial Statements ”). The Financial
Statements fairly present in all material respects the financial
condition and results of operations of the Company as of the dates
and periods stated.
(b) Since
the date of the Most Recent Balance Sheet, (i) there has not
been any Material Adverse Change, nor has there occurred any event
or development which would reasonably likely result in such a
Material Adverse Change in the future, and (ii) neither the
Company nor any Subsidiary has taken any of the actions set forth
in paragraphs (i) through (ix) of Section 5.1(a)
hereof.
(a) Each
of the Company and each Subsidiary has filed all Tax Returns that
it was required to file, and all such Tax Returns were complete and
accurate, except for any errors or omissions that would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. Each Affiliated Group has filed all Tax
Returns that it was required to file with respect to any Affiliated
Period, and all such Tax Returns were complete and accurate, except
for any errors or omissions which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse
Effect.
(b) Each
of the Company and each Subsidiary and each member of an Affiliated
Group has paid all Taxes shown as due and payable on the Tax
Returns referred to in Section 2.6(a) above, except for any
failures to pay which are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect. Neither the
Company nor any Subsidiary has any actual or overtly threatened
liability for any Tax obligation of any taxpayer (including without
limitation any Affiliated Group) other than the Company and the
Subsidiaries, including any obligation under any Tax sharing
agreement or under Treasury Regulations Section 1.1502-6 or
any similar provision of law.
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5
(c) All
Taxes that the Company or any Subsidiary is or was required by law
to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper Governmental
Entity, except for any such Taxes with respect to which the failure
to withhold, collect or pay would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse
Effect.
(d) To
the knowledge of the Company, no examination or audit of any Tax
Return of the Company or any Subsidiary by any Governmental Entity
is currently in progress or threatened. Neither the Company nor any
Subsidiary has waived any statute of limitations with respect to
Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency affecting the Company or its Subsidiaries,
which waiver or extension of time is currently outstanding. No
Assets are subject to any lien arising in connection with any
failure or alleged failure to pay any Tax.
2.7 Assets
Generally . Each of the Company and each Subsidiary owns or
leases all tangible assets necessary for the conduct of its
businesses as presently conducted and planned to be conducted. Each
such tangible asset is free from defects, has been maintained in
accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear) and is
suitable for the purposes for which it presently is used. No asset
of the Company or any Subsidiary (tangible or intangible) is
subject to any Security Interest.
2.8
Intellectual Property .
(a) Each
of the Company and each Subsidiary owns, or has the right to use,
or at the Closing will own or have the right to use, all
Intellectual Property necessary for, or used in, the operation of
its business as presently conducted (the “ Company
Intellectual Property ”). The Company has taken
reasonable measures to protect the proprietary nature of each item
of Company Intellectual Property, except for any failure that would
not reasonably be expected to have a Material Adverse Effect. To
the knowledge of the Company, no other person is infringing,
violating or misappropriating any of the Company Intellectual
Property, except for any infringement, violation or
misappropriation that would not reasonably be expected to have a
Material Adverse Effect. Section 2.8(a) of the Company
Disclosure Schedule lists each patent, patent application,
copyright registration or application therefor, mask work
registration or application therefor, and trademark, service mark
and domain name registration or application therefor of the Company
or any Subsidiary, including such registrations and applications to
be transferred from the Parent to the Company pursuant to
Section 5.2(c) and included in the Assets.
(b) None
of the activities or business presently conducted by the Company or
any Subsidiary infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any
person, except for any infringement, violation or misappropriation
that would not reasonably be expected to have a Material Adverse
Effect.
(c) The
Company Intellectual Property constitutes all Intellectual Property
necessary to conduct the business of the Company as currently
conducted and as it will be conducted through the Closing Date and
to conduct the business of the Company immediately after the
Closing Date as it is being conducted as of the date hereof and as
it will be conducted through the Closing Date.
2.9 Owned Real
Property . Neither the Company nor any Subsidiary owns any real
property.
2.10 Legal
Compliance . Each of the Company and each Subsidiary, and the
conduct and operations of its business, are and have been in
compliance with each law, which (a) affects or relates to this
Agreement or the consummation of any Contemplated Transaction or
(b) is applicable to the
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6
Company or any
Subsidiary or its respective business except where the failure to
so comply would not have a Material Adverse Effect.
(a) Except
for the contracts described in Section 2.11 of the Company
Disclosure Schedule (collectively, the “ Material
Contracts ”) or to which the Purchaser has consented
(which consent shall not be unreasonably withheld, conditioned or
delayed), the Company is not a party to or bound by the
following:
(i) any
material distributor, sales, advertising or manufacturer’s
representative contract that is not terminable within sixty
(60) days by the Company and involving the payment by the
Company of more than $100,000;
(ii) any
continuing contract for the purchase of materials, supplies,
equipment or services involving payment by the Company of more than
$100,000 over the life of the contract;
(iii) any
contract that expires, or may be renewed at the option of any
person other than the Company so as to expire, more than one year
from the date of this Agreement, and that involves payment by the
Company of more than $100,000 over the remaining life of the
contract;
(iv) any
trust indenture, mortgage, promissory note, loan agreement or other
contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement involving more than
$100,000 or any material leasing transaction of the type required
to be capitalized in accordance with GAAP;
(v) any
contract requiring capital expenditures by the Company in excess of
$100,000 in the aggregate;
(vi) any
contract materially limiting the freedom of Company to engage in
any line of business or to compete;
(vii) any
contract pursuant to which the Company is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or
other personal tangible property involving in the case of any such
contract more than $100,000 in payments to the Company over the
remaining life of the contract;
(viii) any
contract pursuant to which the Company has obtained a license to
use the Intellectual Property of any other person and such use by
the Company is material to the Company’s business;
(ix) any
material agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment to become
liable for the obligations or other Liabilities of any other person
in an amount in excess of $100,000 other than in connection with
the license or sale of products in the Ordinary Course;
or
(x) any
lease of (A) real property by the Company or (B) personal
property used in the business of the Company and involving payment
by the Company of more than $100,000.
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(b) The
Company has performed in all material respects all of the
obligations required to be performed by it and is entitled to in
accordance with the terms hereof all material benefits under each
Material Contract, and has not received notice that it is in
default in any material respect in respect of any Material
Contract. Each of the Material Contracts is in full force and
effect and has not been amended, and there exists no default or
event of default or event, occurrence, condition or act, with
respect to Company, or to Company’s knowledge with respect to
the other contracting party, which, with the giving of notice, the
lapse of time or the happening of any other event or conditions,
would become a default or event of default under any Material
Contract.
(c) Notwithstanding
the foregoing, this Section 2.11 shall not apply with respect
to those agreements, contracts, leases, licenses, and other
arrangements described on Exhibit B to the Assignment
and Assumption Agreement of even date herewith.
2.12 Powers of
Attorney . There are no outstanding powers of attorney executed
on behalf of the Company or any Subsidiary.
2.13 Legal
Proceedings . Except as described in Section 2.13 of the
Company Disclosure Schedule, there is no Legal Proceeding pending
or, to the Company’s knowledge, threatened against the
Company, any Subsidiary or its assets. Neither the Company nor any
Subsidiary is subject to any outstanding judgment, injunction or
other order or ruling of, or settlement issued or approved by, any
court or other Governmental Entity.
2.14
Brokers’ Fees . Neither the Company nor any Subsidiary
has any Liability to pay any fees or commissions to any broker,
finder or agent with respect to the Contemplated
Transactions.
2.15
Licensees . Section 2.15 of the Company Disclosure
Schedule sets forth an accurate and complete list of each licensee
of the Company Intellectual Property and the amount of revenues
accounted for by each such licensee through December 31,
2004.
2.16
Insurance . Section 2.16 of the Company Disclosure
Schedule lists each insurance policy (including fire, theft,
casualty, general liability, workers’ compensation, business
interruption, environmental, product liability and automobile
insurance policies and bond and surety arrangements) to which the
Company or any Subsidiary is a party, a named insured, or otherwise
the beneficiary of coverage at any time within the past year. All
premiums due and payable under those policies have been paid. Each
of the Company and each Subsidiary is covered by insurance in scope
and amount customary and reasonable for the businesses in which it
is engaged.
2.17
Employees . Section 2.17 of the Company Disclosure
Schedule contains an accurate and complete list of (a) all
current executive officers of the Company and each Subsidiary along
with the position, date of hire or engagement, and the compensation
and benefits of such individuals and (b) the aggregate number
of employees and independent contractors in each division of the
Company. To the knowledge of the Company, no employee or group of
employees has any plans to terminate employment with the Company or
enter into any business which would compete with or would be
similar to the business of the Company. Neither the Company nor any
Subsidiary is a party to or bound by any collective bargaining
agreement, nor has the Company experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining
disputes. The Company has no knowledge of any organizational effort
made or threatened, either currently or within the past two years,
by or on behalf of any labor union with respect to employees of the
Company or any Subsidiary.
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(a) Section 2.18(a)
of the Company Disclosure Schedule contains a complete and accurate
list of all “employee pension benefit plans” (as
defined in Section 3(2) of ERISA), all “employee welfare
benefit plans” (as defined in Section 3(1) of ERISA),
and any other plan, agreement or arrangement involving direct or
indirect compensation, including without limitation insurance
coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom
stock, stock appreciation or other forms of incentive compensation
or post-retirement compensation maintained by the Company or any
Subsidiary for the benefit of any current or former employee,
director or consultant of the Company or any Subsidiary and with
respect to which the Company or any Subsidiary may have any
Liability following the Closing Date (the “ Employee
Benefit Plans ”). The Company does not have any
commitment to establish any Employee Benefit Plans for the
employees of the Company or any Subsidiary (except to the extent
required by law). Each Employee Benefit Plan has been administered
in all material respects in accordance with its terms and each of
the Company and its Subsidiaries has in all material respects met
its obligations with respect to those Employee Benefit Plan and
has, in all material respects, made all required contributions
thereto. Each Employee Benefit Plan has, in all material respects,
been operated in compliance with the currently applicable
provisions of ERISA and the Code and the regulations
thereunder.
(b) Any
Employee Benefit Plan intended to be qualified under Section 401(a)
of the Code and each trust intended to qualify under Section 501(a)
of the Code has obtained a favorable determination, notification,
advisory and/or opinion letter, as applicable, as to its
tax-qualified status from the Internal Revenue Service.
(c) Except
as disclosed on Section 2.18(c) of the Company Disclosure
Schedule, neither the Company nor any affiliate within the meaning
of Section 414(b), (c), (m) or (o) of the Code and
the regulations thereunder (“ ERISA Affiliate ”)
has ever maintained an Employee Benefit Plan subject to
Section 412 of the Code or Title IV of ERISA.
(d) Except
as disclosed on Section 2.18(d) of the Company Disclosure
Schedule, at no time has the Company or any ERISA Affiliate been
obligated to contribute to any “multiemployer plan” (as
defined in Section 4001(a)(3) of ERISA).
(e) No
Employee Benefit Plan promises or provides retiree medical or other
retiree life, disability or other insured benefits to any person,
except as required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or similar state
law.
(f) Section 2.18(f)
of the Company Disclosure Schedule lists the following:
(i) employment, severance and change of control agreement with
any executive officer or other key employee of the Company or any
Subsidiary (A) the benefits of which are contingent upon the
occurrence of a transaction involving the Company or any Subsidiary
of the nature of the Contemplated Transactions (either alone or
upon termination of employment following such transactions) or
(B) providing any term of employment or compensation
guarantee; and (ii) agreement or plan binding the Company or
any Subsidiary, including without limitation any stock option plan,
stock appreciation right plan, restricted stock plan, stock
purchase plan, severance benefit plan or Employee Benefit Plan, any
of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the consummation of the
Contemplated Transactions (either alone or upon the termination of
employment following such transactions).
2.19
Environmental Matters . Neither the Company nor any
Subsidiary has released any hazardous materials or waste or other
substances regulated by any Environmental law into the
A sset P urchase A greement
9
environment at
any real property or other facility formerly or currently owned,
leased, operated or controlled by the Company or any Subsidiary.
Section 2.19 of the Company Disclosure Schedule lists all
environmental reports, investigations and audits possessed or
controlled by the Company that were obtained from, or conducted by
or on behalf of the Company or any Subsidiary, any Governmental
Entity, or any person during the past five (5) years and
relating to premises currently or previously owned, leased,
operated or controlled by the Company.
2.20 Certain
Business Relationships with Affiliates . Except for
ElkCorp’s rights in Company Intellectual Property and the
agreements described on Section 2.20(a) of the Company
Disclosure Schedule, which are to be conveyed to the Company at or
prior to Closing in accordance with Section 5.2(c) below, or
as disclosed on Section 2.20(b) of the Company Disclosure
Schedule, neither Parent nor, to the knowledge of the Company, any
director, officer or Affiliate of the Company (a) owns any
material tangible or intangible property or right which is used in
the business of the Company, (b) has any claim or cause of
action against the Company or (c) owes any money to the
Company or is owed money by the Company (other than compensation
and benefits owed to employees under agreements disclosed in the
Company Disclosure Schedule).
2.21
Relationship with UOP . The Parent and the Company have no
knowledge that UOP expects or intends to materially reduce its
business with the Business.
2.22 Title to
Assets . The Company has (or will have at Closing) good and
valid title to all of its properties and assets which are included
in the Assets, including, without limitation, the Company
Intellectual Property described in Schedule 2.8(a) ,
free and clear of all mortgages, liens, pledges, security
interests, charges, claims, restrictions, and other encumbrances
and defects of title of any nature whatsoever, except for liens for
current ad valorem or similar taxes which are not yet due and
payable and Assumed Liabilities.
2.23 Absence of
Certain Changes . Since December 31, 2004, there has not
been (i) any amendment, termination or revocation, or
threatened termination, revocation or modification of any license,
permit or franchise required for the continued operation of the
Business or the Assets, other than in the Ordinary Course of
Business; (ii) any sale or transfer of the Assets other than
in the Ordinary Course of Business; (iii) any pledge or
subjection to lien, charge or encumbrances of any kind, of, on or
affecting any of the Assets other than for taxes which are not yet
due and payable; or (iv) any material damage, destruction or
loss of or to the Assets, whether or not covered by
insurance.
REPRESENTATIONS AND WARRANTIES OF
THE PARENT
Except as set
forth on the disclosure schedule attached as
Exhibit B-2 to this Agreement (the “ Parent
Disclosure Schedule ”) (it being agreed that an item
included on a particular section of the Parent Disclosure Schedule
referenced in any Section or subsection of this Article 3 is
deemed to relate to each other Section or subsection of this
Article 3 to the extent such relationship is reasonably
apparent), the Parent represents and warrants to the Purchaser that
the statements contained in this Article 3 are true and
complete.
3.1 Corporate
Organization . The Parent is a corporation duly organized,
validly existing, and in good standing under the laws of the State
of Delaware.
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10
3.2 Ownership
of Capital Stock . Parent owns beneficially and of record all
of the Shares, free and clear of any Claims. There are no
agreements to which either the Parent is a party or is bound with
respect to the voting (including voting trusts or proxies) of the
Shares.
3.3
Authorization . The Parent has all corporate power and
corporate authority it requires to execute, deliver and perform its
obligations under this Agreement. The Parent has obtained all
corporate approvals necessary for the due and valid authorization
prior to the Closing Date of the Parent’s execution, delivery
and performance of this Agreement and the consummation by the
Parent of the Contemplated Transactions. The Parent has duly and
validly executed and delivered this Agreement. Assuming the due
authorization, execution and delivery of this Agreement by the
Purchaser, this Agreement is a valid and binding obligation of the
Parent, enforceable against the Parent in accordance with its
terms, subject to (a)laws of general application relating to
bankruptcy, insolvency, and the relief of debtors and (b)rules of
law governing specific performance, injunctive relief and other
equitable remedies.
3.4 No
Conflict . Except for the requirements of the HSR Act and any
antitrust or other competition law of jurisdictions outside the
United States of America (if and to the extent any of the foregoing
laws may apply) or as disclosed on Section 3.4 of the Parent
Disclosure Schedule, the Parent’s execution, delivery, and
performance of this Agreement and/or the consummation by the Parent
of the Contemplated Transactions do not (a)conflict with or violate
any provision of the Parent’s certificate of incorporation or
bylaws, (b)require the Parent to make any filing with, or obtain
any permit, authorization, consent or approval of, any Governmental
Entity, (c)result in a breach or default under, create in any
person the right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under any agreement or
instrument to which the Parent is a party or (d)violate any law,
order, writ, or injunction applicable to the Parent or any of its
assets, except in any case that would not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse
Effect.
3.5
Brokers’ Fees . Except with respect to Texas Corporate
Capital Advisors, the Parent has no Liability to pay any fees or
commissions to any broker, finder or agent with respect to the
Contemplated Transactions.
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER
The Purchaser
represents and warrants to the Parent and the Company that the
statements contained in this Article 4 are true and
complete.
4.1
Organization and Good Standing . The Purchaser is a limited
partnership duly organized and validly existing under the laws of
Texas, and has full power and authority to carry on its business as
now conducted.
4.2
Authorization of Transaction . The Purchaser has all power
and authority it requires to execute, deliver and perform its
obligations under this Agreement. The Purchaser has obtained all
approvals necessary for the due and valid authorization prior to
the Closing Date of the Purchaser’s execution, delivery and
performance of this Agreement and the consummation by the Purchaser
of the Contemplated Transactions. The Purchaser has duly and
validly executed and delivered this Agreement. Assuming the due
authorization, execution and delivery of this Agreement by the
Parent and the Company, this Agreement is a valid and binding
obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, subject to (a)laws of general
application relating to bankruptcy,
A sset P urchase A greement
11
insolvency, and
the relief of debtors and (b)rules of law governing specific
performance, injunctive relief and other equitable
remedies.
4.3
Noncontravention . Except for the requirements of the HSR
Act and any antitrust or other competition law of jurisdictions
outside the United States of America (if and to the extent any of
the foregoing laws may apply), the Purchaser’s execution,
delivery, and performance of this Agreement and/or the consummation
by the Purchaser of the Contemplated Transactions do not
(a)conflict with or violate any provision of the Purchaser’s
agreement or certificate of limited partnership, (b)require the
Purchaser to make any filing with, or obtain any permit,
authorization, consent or approval of, any Governmental Entity,
(c)result in a breach or default under, create in any person the
right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under any agreement or instrument to
which the Purchaser is a party or (d)violate any law, order, writ,
injunction, or decree applicable to the Purchaser, except in any
case that would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse
Effect.
4.4
Litigation . There is no Legal Proceeding pending or, to the
Purchaser’s knowledge, threatened against the Purchaser which
questions or challenges the validity of this Agreement or the
ability of the Purchaser to consummate the Contemplated
Transactions.
4.5
Brokers’ Fees . The Purchaser has no Liability to pay
any fees or commissions to any broker, finder or agent with respect
to the Contemplated Transactions for which the Parent or its
Affiliates could become liable or obligated.
4.6 Adequacy of
Funds . The Purchaser has adequate financial resources to
satisfy its monetary and other obligations under this Agreement
including, without limitation, the payment of the Purchase Price in
accordance herewith.
4.7 Terms of
Sale . The Purchaser has had the opportunity to inspect the
Assets, visit with the Parent and the Company and meet with the
Parent’s and the Company’s representatives to discuss
the Business. The Purchaser acknowledges that EXCEPT AS OTHERWISE
SPECIFICALLY SET FORTH IN THIS AGREEMENT, THE ASSETS ARE BEING SOLD
TO THE PURCHASER ON AN “AS-IS, WHERE-IS” BASIS WITHOUT
ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED.
4.8 No
Knowledge of Inaccuracies . As of the date of this Agreement,
the Purchaser has no knowledge of any inaccuracies in any
representation or warranty made by the Parent or Company in this
Agreement.
5.1 Covenants
of the Parent and the Company .
(a)
Conduct of Business . Except as otherwise required by this
Agreement, during the period from the date of this Agreement to the
Closing Date, the Company and each Subsidiary will conduct its
operations in the Ordinary Course. Without limiting the generality
of the foregoing and except as required by this Agreement, prior to
the Closing Date, the Company and each Subsidiary will not take or
cause to be taken any of the following actions, without the prior
written consent of the Purchaser (which shall not unreasonably be
withheld):
A sset P urchase A greement
12
(i) except
for borrowings that will not be Assumed Liabilities or borrowings
from the Parent or an Affiliate in the Ordinary Course of Business,
borrow any money;
(ii) voluntarily
incur any Liability other than in the Ordinary Course or in
connection with the performance or consummation of the Contemplated
Transactions;
(iii) incur
or commit to incur any capital expenditures in excess of $100,000
other than capital expenditures and commitments which were made
prior to the date of this Agreement;
(iv) lease,
license, sell, transfer, encumber or permit to be encumbered any
asset, Intellectual Property or other property associated with the
business of the Company or any Subsidiary (including sales or
transfers to Affiliates of the Company), except for (A)licenses
granted and property sold in the Ordinary Course and (B)cash
applied in payment of Liabilities in the Ordinary
Course;
(v) dispose
of any of its material assets;
(vi) waive
or release any material right or claim;
(vii) (A)issue
or sell any shares of capital stock of the Company or any
Subsidiary, or issue or create any warrants, obligations,
subscriptions, options, convertible securities, or other
commitments to issue shares of capital stock of the Company or any
Subsidiary or (B)merge, consolidate or reorganize with any
person;
(viii) make
or change any election, change any annual accounting period, adopt
or change any accounting method, file any amended Tax Return, enter
into any closing agreement, settle any Tax claim or assessment
relating to the Company or any Subsidiary, surrender any right to
claim refund of Taxes, consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment
relating to the Company or any Subsidiary, or take any other action
or omit to take any action, if any such election, adoption, change,
amendment, agreement, settlement, surrender, consent or other
action or omission would have the effect of increasing the Tax
Liability of the Company or any Subsidiary;
(ix) do
anything that would cause there to be a Material Adverse Change;
or
(x) agree
to do any of the things described in the preceding clauses(i)
through (ix) of this Section 5.1(a).
(b)
Access to Information . Until the Closing, the Parent will
allow the Purchaser, at its sole expense, and its legal, accounting
and other representatives and agents free access upon reasonable
notice and during normal working hours to the following information
about the Company and each Subsidiary: files; books; records; and
offices, including, without limitation, any and all information
relating to Taxes, commitments, contracts, leases, licenses, and
personal property and financial condition. Until the Closing, the
Parent will cause the Company’s accountants, at the
Purchaser’s sole expense, to cooperate with the Purchaser and
its representatives and agents in making available the consolidated
financial information and Tax information of the Company and each
Subsidiary as reasonably requested, including, without limitation,
the right to examine all working papers pertaining to all of the
consolidated financial statements of the Company and the
Subsidiaries prepared by such accountants.
(c)
Exclusivity . Between the date of this Agreement and the
Closing or the date this Agreement is terminated pursuant to
Article 7 hereof (the “ Expiration Date ”),
each of the Parent and the
A sset P urchase A greement
13
Company will
not take any action to solicit, initiate, seek, encourage or
support any inquiry, proposal or offer from, furnish any
information to, or participate in any negotiations with, any person
(other than with the Purchaser) regarding an Acquisition. The
Parent agrees that any such negotiations in progress as of the date
of this Agreement will be terminated or suspended during such
period.
(i) For
purposes of securities law compliance, each party agrees not to
issue any press release or make any other public announcement
relating to this Agreement without the prior written approval of
the other party, except that each of the Parent and the Purchaser
reserves the right, without the other party’s prior consent,
to make any public disclosure it believes in good faith is required
by applicable securities laws or securities listing standards (in
which case the disclosing party agrees to use reasonable efforts to
advise the other party prior to making the disclosure).
(ii) Each
party agrees to continue to abide by that certain confidentiality
letter agreement dated as of September 15, 2004 (the “
Nondisclosure Agreement ”), by and between the Parent
and the Purchaser, the terms of which are incorporated by reference
in this Agreement, and which terms will survive the Closing or the
termination of this Agreement in accordance with its
terms.
(iii) Each
party acknowledges that it has reviewed with its own tax advisers,
to the extent it desired to do so, the Tax consequences of the
Contemplated Transactions. Each party agrees that (A)it is not
relying upon the other parties or the other parties’
professional advisers for any Tax advice relating to the
Contemplated Transactions and (B)no party is making any
representations to the other parties as to the particular Tax
consequences that will or will not arise in connection with those
transactions.
(b)
Regulatory Filings; Consents . Subject to the terms and
conditions of this Agreement, the parties agree to use their
respective Best Efforts to (A) make all necessary and
appropriate filings with all applicable Governmental Entities and
obtain required approvals and clearances with respect thereto,
(B) obtain all consents, waivers, approvals, authorizations
and orders required in connection with the authorization, execution
and delivery of this Agreement and the consummation of the
Transaction and (C) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the
transactions contemplated hereby as promptly as practicable, with
the objective of consummating the Transaction and completing the
Closing no later than May 27, 2005.
(c)
Arrangements with the Parent . At or prior to the Closing,
the Parent shall cause ElkCorp and its Affiliates (other than the
Company and each Subsidiary) to transfer and assign to the Company
any and all of their respective rights in and to (A) the
Company Intellectual Property described on Section 5.2(c) of
the Company Disclosure Schedule or otherwise exclusively used in
connection with the business of the Company and (B) the
agreements described on Section 2.20(a) of the Company
Disclosure Schedule and the accounts receivable under such
agreements, and cause the Company to assume any and all of ElkCorp
and its Affiliates’ respective obligations
thereunder.
(d)
Satisfaction of Conditions Precedent . Each party agrees to
use its respective Best Efforts to satisfy or cause to be satisfied
all the conditions precedent that are set forth in Article 6,
and the parties will use their respective Best Efforts to cause the
Contemplated Transactions to be consummated, and, without limiting
the generality of the foregoing, to obtain all consents and
authorizations of third
A sset P urchase A greement
14
parties and to
make all filings with, and give all notices to, third parties which
may be necessary or reasonably required on their part in order to
effect the transactions contemplated hereby.
(e)
Further Assurances . Prior to and following the Closing,
each party agrees to cooperate fully with the other parties and to
execute such further instruments, documents and agreements, and to
give such further written assurances, as may be reasonably
requested by any other party to evidence and reflect better the
transactions described and contemplated in this Agreement and to
carry into effect the intents and purposes of this Agreement. This
covenant to provide further assurances shall include without
limitation the Company’s covenant to execute such further
instruments, documents and agreements reasonably necessary to
assign, and the Purchaser’s covenant to execute such further
instruments, documents and agreements reasonably necessary to
assume, the agreements, contracts, leases, licenses, and other
arrangements referred to in the definition of Assets
(f)
Taxes . The Company and the Purchaser shall each pay 50% of
any sales and transfer taxes arising out of or in connection with
the sale and transfer of the Assets and Assumed Liabilities to the
Purchaser pursuant to this Agreement. The Company shall pay all
Taxes, file all Tax Returns and be responsible for all Tax Contests
related to the Business and the Assets for any and all taxable
periods ending on or before the Effective Date. The Purchaser shall
pay all Taxes, file all Tax Returns and be responsible for all Tax
Contests related to the Business, the Assets and the Assumed
Liabilities for any and all taxable periods beginning after the
Effective Date. For any taxable period beginning before and ending
after the Effective Date (“ Straddle Period ”),
the responsibility for the payment of ad valorem Taxes
assessed with respect to any of the Assets (whether for real or
personal property) will be prorated between the parties with the
Parent being responsible for a proportional share based
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