Exhibit 99.1
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ASSET PURCHASE AGREEMENT
among
KADANT COMPOSITES LLC,
KADANT INC.,
LDI COMPOSITES CO.
and
LIBERTY DIVERSIFIED INDUSTRIES, INC.
dated as of
October 21, 2005
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made and entered into as of
October
21, 2005, among KADANT COMPOSITES LLC, a
Delaware limited liability company
("Seller"), KADANT INC., a Delaware
corporation ("Kadant"), LDI COMPOSITES CO.,
a Minnesota corporation ("Buyer"), and
LIBERTY DIVERSIFIED INDUSTRIES, INC.,
a Minnesota a corporation, and parent
corporation of Buyer ("Buyer Parent").
WHEREAS, Seller
desires to sell to Buyer all of the tangible and
intangible assets of Seller other than the
Excluded Assets (as hereinafter
defined), and Buyer desires to purchase the
same on the terms set forth herein.
NOW, THEREFORE, in consideration of the covenants and
agreements
hereinafter set forth, the parties hereto
agree as follows:
1. Sale
of Assets Seller
hereby agrees to sell the Assets (as
--------------
hereinafter defined) and, at the Closing
(as defined in Section 5) of the
transactions contemplated by this
Agreement, cause the Assets to be conveyed,
transferred, assigned and delivered to
Buyer, and Buyer hereby agrees to
purchase the Assets. "Assets" as used
herein means all of the assets of the
Seller as of the Closing Date, excluding
therefrom the Excluded Assets (as
defined below) and including, without
limitation:
(a) Finished
Goods Inventory. All
inventory of good
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salable finished goods (the "Finished Goods
Inventory");
(b)
Work-in-Process Inventory. All inventory of work-
-------------------------
in-process (the "Work-in-Process
Inventory");
(c) Raw
Materials Inventory.
All inventory of raw
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materials (the "Raw Materials Inventory"
and, together with the Finished Goods
Inventory and the Work-in-Process
Inventory, the "Inventory");
(d) Customer
Purchase Orders. All
orders in the ordinary
------------------------
course of business by Seller's customers to
purchase items of Inventory;
(e) Accounts
Receivable. All
accounts receivable;
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(f) Records
(Paper and Electronic). All books, records,
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files, software, correspondence and other
papers, electronic data and storage
disks (including without limitation all
price lists, costs and purchasing
records, sales records, sales
correspondence and data processing records);
(f) Prepaid
Expenses. Prepaid
expenses of Seller that,
----------------
in the reasonable opinion of the Buyer,
have value to the Buyer (the "Prepaid
Expenses");
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(g)
Intellectual Property and Intangible Assets. All
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registered and unregistered patents,
trademarks, trade names (including without
limitation the trade name GeoDeck (TM)),
domain names, trade secrets,
copyrights, licenses, product designs,
manufacturing processes, servicemarks and
logos, customer relationships, customer
lists, vendor relationships, vendor
lists, artwork, other creative materials,
literature, brochures, product
advertising or promotional materials,
product names and any other intellectual
or intangible asset owned or used by the
Seller, including the Intellectual
Property (as hereinafter defined);
(h) Equipment
and Fixed Assets. All
equipment, storage
--------------------------
facilities, transfer systems, laboratory
equipment, office furniture, vehicles
and transportation equipment, leasehold
improvements, tooling, dies, molds and
related tooling, dies, molds and fixtures
used in the business currently being
conducted by Seller (the "Fixed
Assets");
(i) Contract
Rights. The rights of
Seller arising out of
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the contracts, agreements, equipment
leases, open purchase orders and
commitments specifically described on
Schedule 1(i) and assumed by Buyer at
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Closing (the "Assumed Contracts"); and
(j) Leases.
The rights of Seller
arising out of the
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lease for the offices located at 8 Alfred
Circle, Bedford, Massachusetts (the
"Bedford Facility").
2.
Excluded Assets.
Notwithstanding the foregoing, the following
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assets of Seller shall be retained by
Seller (the "Excluded Assets"): (i) cash
and cash equivalents, (ii) all rights of
Seller in the corporate name of
"Kadant" or "Kadant Composites", (iii) all
rights of Seller in the domain names
of Kadant or Kadant Composites, (iv) the
Regrind Material (as defined in Section
10(f) below), and (v) all prepaid expenses
(other than Prepaid Expenses),
refunds, and deferred taxes, including the
cash represented by such assets.
3.
Payment of Consideration for Sale and Transfer. The full
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consideration for the conveyance, transfer
and assignment of the Assets shall
consist of the following:
(a) Purchase
Price. The purchase
price for the Assets
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will be (i) Twelve Million Five Hundred
Seventy One Thousand Dollars
($12,571,000), subject to the Net Asset
Adjustment (as hereinafter defined) less
----
(ii) Assumed Payables and Assumed Accrued
Liabilities (as hereinafter defined)
(in the aggregate, the "Purchase
Price").
(b) Closing
Date Payments. On the
Closing Date, Buyer
---------------------
shall pay in immediately available funds
the Purchase Price, less the amount of
One Million Two Hundred Fifty Seven
Thousand One Hundred Dollars ($1,257,100)
(the "Holdback") for application pursuant
to Section 3(d).
(c) Net Asset
Adjustment. (i)
The "Net Asset
--------------------
Adjustment" means the amount equal to (A)
the book value of the Current Assets
(as hereinafter defined) of Seller on the
Closing Date (the "Closing Value"),
minus (B) Four Million Five Hundred Thirty
Three Thousand Ninety Three Dollars
($4,533,093), which is the value of the
Current Assets as of October 1, 2005.
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(ii)
The "Current
Assets" means the portion of the Assets
that constitutes current assets in
accordance with generally accepted accounting
principals applied consistently and in
accordance with Seller's past practices
and accounting methods ("GAAP").
(iii) If
the Net Asset Adjustment is a positive number, the
Purchase Price shall be increased by the
Net Asset Adjustment and if the Net
Asset Adjustment is a negative number, the
Purchase Price shall be decreased by
the Net Asset Adjustment. The Net Asset Adjustment shall be
payable in
accordance with Section 3(c)(vi) below.
(iv)
A Net Asset Adjustment shall be determined by Seller
and Buyer at Closing using information
available to them at the Closing. For
purposes of the Closing Date calculation,
(A) accounts receivable shall be
included as Current Assets net of a
reasonable reserve therefor as set forth in
the Financial Statements and (B) Inventory
shall be included as Current Assets
at book value as of the Closing Date.
(v) The actual
amount of the Net Asset Adjustment shall
be determined within ninety (90) days
following the Closing Date (the
"Settlement Date"). For purposes of the final
calculation, (A) accounts
receivable included as Current Assets shall
be equal to the amount of accounts
receivable actually collected on or before
the Settlement Date, and (B) the
amount to be included for Inventory shall
be determined by physical inventory
inspection taken on the Closing Date by
representatives of both Buyer and
Seller. Buyer agrees that from the Closing
Date through the Settlement Date,
Buyer shall use commercially reasonable
efforts, consistent with Seller's past
practices, to collect the accounts
receivables identified as of the Closing
Date. To the extent that any accounts
receivable that were included in the
Closing Date calculation of the Net Asset
Adjustment remain uncollected as of
the Settlement Date (the "Uncollected
Accounts Receivable"), then Buyer shall
assign to Seller all of its right, title,
and interest in and to Uncollected
Accounts Receivable, and Seller shall be
entitled to seek collection therefor.
If, at any time following the Settlement
Date, Buyer receives payment of any
Uncollected Account Receivable, Buyer shall
pay the amount of such payment to
Seller promptly following Buyer's receipt
of such payment.
(vi)
If Seller and Buyer fail to agree upon the final
calculation of the Net Asset Adjustment by
the Settlement Date, then the Seller
shall submit its proposed amount of the
final Net Asset Adjustment (the
"Seller's Amount"), the Buyer shall submit
its proposed amount of the final Net
Asset Adjustment (the "Buyer's Amount"),
and Seller and Buyer shall submit the
issues in dispute to an independent third
party accounting firm that is mutually
acceptable to Buyer and Seller (the
"Accounting Firm") for resolution. If
issues are submitted to the Accounting Firm
for resolution, Seller and Buyer
shall furnish or cause to be furnished to
the Accounting Firm such books,
records, work papers, documents and
information relating to the disputed issues
as the Accounting Firm may request and make
them available to the parties and
their respective agents. The Accounting Firm shall prepare
and deliver to
Seller and Buyer a written report setting
forth and explaining its determination
of each disputed issue within 30 days after
submission to the Accounting Firm.
The determination of the Accounting Firm
shall be final, binding and conclusive
on the parties and the Net Asset Adjustment
as determined by the Accounting Firm
shall constitute the final determination of
the Net Asset Adjustment (the "Final
Amount"). If the difference between the
Seller's Amount and the Final Amount is
less than one-third (1/3) of the difference
between the Buyer's Amount and the
Seller's Amount, then Buyer shall pay the
fees and expenses
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of the Accounting Firm for such
determination. If the
difference between the
Buyer's Amount and the Final Amount is less
than one-third (1/3) of the
difference between the Buyer's Amount and
the Seller's Amount, then Seller shall
pay the fees and expenses of the Accounting
Firm for such determination. In all
other cases, the parties shall equally
share the fees and expenses of the
Accounting Firm for such determination.
If the Net Asset
Adjustment as finally
determined is positive, then Buyer shall
pay the amount of the difference within
three (3) business days following the date
of final determination of the Net
Asset Adjustment and if the Net Asset
Adjustment as finally determined is
negative, then Seller shall pay the amount
of the difference within three (3)
business days following the date of final
determination of the Net Asset
Adjustment.
(d) Holdback.
The Holdback described
in Section 3(b)
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will be available for offset against
indemnification and other obligations of
Seller and Kadant under this Agreement.
On the Closing Date,
Six Hundred Twenty
Eight Thousand Five Hundred Fifty Dollars
($628,550.00) of the Holdback (the
"Escrow Amount") will be deposited in
escrow with National City Bank (the
"Escrow Agent") and held pursuant to the
terms of an escrow agreement
substantially in the form of Exhibit A
hereto (the "Escrow").
Buyer and Seller
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shall each pay half of the costs of the
Escrow, if any. The
portion of the
Holdback held in the Escrow will be paid to
Seller on May 1, 2007, except to the
extent applied to the indemnification and
other obligations of Seller and Kadant
under Section 12(a) of this Agreement and
except to the extent of Losses for
which notices of claim have been submitted
by Buyer Indemnified Parties under
Sections 12(c) and 12(d) of this Agreement.
The remainder of the
Holdback,
Six Hundred Twenty Eight Thousand Five
Hundred Fifty Dollars ($628,550.00) (the
"Holdback Amount"), will be held by Buyer
and will be paid to Seller on the
first anniversary of the Closing Date in
accordance with the terms of and
subject to reduction as provided in a
Holdback Agreement substantially in the
form of Exhibit B hereto (the "Holdback
Agreement").
Indemnification and other
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obligations of Seller under this Agreement
will be charged first against the
Holdback Amount and then against the Escrow
Amount.
(e) Transfer
Taxes. Seller shall
pay all transfer taxes,
--------------
if any, with respect to the sale of the
Assets.
4.
Liabilities.
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(a) Assumed
Liabilities. Buyer
shall not assume or be
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liable for any liabilities, commitments or
obligations of Seller, except (i)
liabilities existing on the Closing Date
specifically identified on Schedule
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4(a) in the amount set forth thereon (the
"Assumed Payables"), (ii) accrued
----
liabilities specifically identified on
Schedule 4(a) in the amount set forth
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thereon (the "Assumed Accrued
Liabilities"), and (iii) obligations arising after
the Closing Date with respect to Assumed
Contracts specifically identified on
Schedule 1(i) (the "Assumed Contract
Liabilities", and, together with the
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Assumed Payables and Assumed Accrued
Liabilities, the "Assumed Liabilities".
The Purchase Price shall be $12,571,000,
subject to the Net Asset Adjustment,
less the amount of the Assumed Payables and
the Assumed Accrued Liabilities. At
----
the Closing, the Assumed Liabilities shall
be calculated and based on the
Seller's Balance Sheet as of October 1,
2005. The parties
acknowledge that the
Purchase Price shall be subject to
adjustment after the Closing, based on any
changes to the value of the Assumed
Liabilities from October 1, 2005 through and
including the Closing Date.
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(b) Retained
Liabilities. Seller
agrees that, other than
--------------------
the Assumed Liabilities, all liabilities,
commitments and obligations of Seller
(the "Retained Liabilities") are not
assumed by Buyer and shall be paid,
performed and discharged by Seller as of or
after the Closing Date as they
become due, including, without limitation,
leases, contracts, agreements and
indebtedness and all obligations whatsoever
with respect to trade and non-trade
creditors, sales representatives,
employees, any lien or obligation described in
Schedule 6(e) that becomes a charge against
Buyer or any of the Assets,
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employee benefit plans, credit balances,
rebates (to the extent Seller benefited
from the underlying sale), liability for
breach of any contract, breach of
warranty, tort or infringement, liability
of Seller for violation of law,
product liability claims with respect to
finished goods sold by Seller or its
Affiliates (as defined in Section 6(p))
prior to the Closing Date and the
Finished Goods Inventory sold by Buyer
after the Closing Date, claims with
respect to Excluded Assets sold by Seller
or its Affiliates after the Closing
Date, taxes of whatever nature and
obligations with respect to statutory or
other liens imposed by law (such as
materialmen's, mechanic's, carriers',
workmen's and repairmen's liens) and other
similar liens.
Notwithstanding the
foregoing, the parties acknowledge and
agree that any and all Warranty Claims
(as defined in Section 10(a)(ii) below)
shall be governed and subject to the
provisions of Section 10(a) of this
Agreement.
5.
Closing Date. The
closing hereunder shall be held on the date
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hereof, or at such time and place as Seller
and Buyer otherwise may agree (the
"Closing" or the "Closing Date").
The Closing shall be
held by facsimile
exchange of executed closing documents
followed by delivery of originally
executed documents or in such other manner
and at such other place as the
parties may mutually agree in writing.
On the Closing Date,
Seller and Buyer
shall comply with the conditions precedent
specified in Sections 8 and 9. The
Closing of the transactions contemplated
hereby shall be deemed to have occurred
as of 11:59 PM, EST on the Closing
Date.
6.
Representations and Warranties of Seller and Kadant. To
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induce Buyer to enter into this Agreement
and subject to the terms, conditions
and limitations set forth in this
Agreement, Seller and Kadant, jointly and
severally, represent and warrant with and
to Buyer as of the date hereof (which
date is also the "Closing Date"), as
follows:
(a) Corporate
Organization. Seller is limited liability
----------------------
company duly organized, validly existing
and in good standing under the laws of
the state of its formation, duly authorized
under its certificate of formation
and applicable laws to engage in the
business conducted by it and duly licensed
or qualified and in good standing as a
foreign corporation in each jurisdiction
in which the character of the properties
owned or leased by it or the nature of
the business conducted by it makes such
licensing or qualification necessary,
except where the failure to be so licensed
or qualified would not have a
Material Adverse Effect. As used herein, "Material Adverse
Effect" means any
event, change, effect, fact or condition
that has occurred which, individually
or in the aggregate and taken as a whole,
has a material adverse effect upon the
business operations, results of operations
or financial condition of Seller's
business, the Assets or the liabilities of
Seller. Seller is the
successor by
reorganization to Kadant Composites Inc.
(the "Predecessor Company") and all
assets owned and business operated by the
Predecessor Company prior to the
reorganization are now owned and operated
by the Seller.
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(b)
Authorization of Agreement. This Agreement, the
--------------------------
execution and delivery hereof by Seller,
the sale and transfer of the Assets as
herein provided and the performance by
Seller of its obligations and
undertakings hereunder have been duly
authorized and approved by all requisite
corporate action. This Agreement and all of the
documents and instruments
described in Sections 8 and 9 to which
Seller is a party have been duly executed
and delivered by Seller and constitute the
legal, valid and binding obligations
of Seller, enforceable against Seller in
accordance with their terms. The
execution of this Agreement and the
consummation of the transactions
contemplated hereby do not violate (i) the
provisions of any contract,
arrangement or instrument to which Seller
or any of its Affiliates is a party or
by which any of them or their assets are
bound, (ii) any order, decree or
judgment of any court or governmental body
having jurisdiction over Seller or
any of its Affiliates, or (iii) any law or
regulation applicable to Seller or
any of its Affiliates. All consents or approvals of any
court, regulatory
authority or third party required to be
given in connection with the performance
obligations of Seller or the consummation
by Seller of the transactions
contemplated hereby or by such documents
and instruments have been given,
excluding any consents or approvals that
may become applicable as a result of
the business or activities in which Buyer
is or proposes to be engaged or as a
result of any acts or omissions by, or the
status of or any facts pertaining to,
Buyer. All approvals, if any, of local,
state and federal authorities
reasonably necessary to permit performance
by Seller of its obligations
contemplated hereunder have been obtained.
There are no claims,
actions, suits,
arbitrations or other legal or
administrative proceedings pending or, to the
knowledge of Seller, threatened against or
affecting Seller which involve the
validity of this Agreement or the
transactions contemplated hereby.
(c) Financial
Statements; Undisclosed Liabilities.
---------------------------------------------
Seller has delivered to Buyer the financial
statements and financial information
described on Schedule 6(c) (collectively,
the "Financial Statements"). The
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Financial Statements are complete and
accurate and fairly present in all
material respects the financial condition
of Seller as of the dates of the
respective Financial Statements and the
results of operations of Seller for the
periods to which the Financial Statements
relate, provided that the Financial
Statements are subject to normal year-end
adjustments (which will not be
material individually or in the aggregate).
Since the date of the
most recent
Financial Statements, there has not been
any change in the business, financial
condition, operations or results of
operations of Seller that could have a
Material Adverse Effect. Seller has no debts, liabilities
or obligations
(whether known or unknown, asserted or
unasserted, absolute or contingent,
accrued or unaccrued, liquidated or
unliquidated, due or to become due including
any liability for taxes) except (i)
liabilities set forth on the face of or
reflected on the most recent Financial
Statements, (ii) liabilities which have
arisen since the date of the most recent
Financial Statements in the ordinary
course of business and are included as
Assumed Payables or Assumed Accrued
Liabilities, (iii) liabilities that are not
required by generally accepted
accounting principles to be set forth on
the face of or reflected on the most
recent Financial Statements but have been
disclosed to Buyer, and (iv)
liabilities and obligations that are not,
individually or in the aggregate,
material.
(d) Condition
of Assets; Conformity with Law; Approvals.
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The Fixed Assets are in good operating
condition and repair, reasonable wear and
tear and all previously disclosed
conditions and defects excepted. The Fixed
Assets have an original cost, determined in
accordance with GAAP, of not less
than $10,138,000. The Inventory consists of items of
a quality and quantity
usable or saleable in the ordinary course
of business and, as to the classes of
items inventoried and methods of counting
and pricing, such inventories were
determined in a manner consistent with
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prior years. Seller and, to Seller's knowledge,
Seller's properties and
equipment (whether owned or leased) are in
conformity with all applicable laws
(including rules, regulations, orders and
decrees) of federal, state and
local governments and agencies and
applicable ordinances and regulations and
building, zoning and other laws and no
action, suit proceeding, investigation,
demand or notice has been filed or
commenced by any
entity claiming any failure
to conform with such applicable laws,
except where any such nonconformity could
not reasonably be expected to have a
Material Adverse Effect. None of the
Assets have been materially damaged or
destroyed by fire, storm or other
casualty. All governmental approvals,
permits and licenses required for the
conduct of Seller's business have been
obtained, are in full force and effect
and are being complied with by Seller,
excluding any approvals, permits,
consents, requirements, violations,
conflicts, defaults or rights (i) which
would not, individually or in the
aggregate, be material or (ii) which become
applicable as a result of the business or
activities in which Buyer is or
proposes to be engaged or as a result of
any acts or omissions by, or the status
of or any facts pertaining to, Buyer.
(e) Title to
Assets. Seller has
good and marketable
---------------
title to the Assets, free and clear of all
liens, assignments, claims,
mortgages, encumbrances, charges or
security interests of any kind or nature,
except as described in Schedule 6(e) (as so
described, "Permitted Liens").
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(f) Sale of
Assets. Since the date
of the most recent
--------------
Financial Statements, Seller has not sold,
transferred, removed, encumbered or
otherwise disposed of any assets of the
kind herein described as Assets, except
sales of Inventory made in the usual and
ordinary course of business and the
transfer of the Assets to the Seller by the
Predecessor Company in connection
with the reorganization described in
Section 6(a).
(g) Conduct of
Business. Except as
set forth in Schedule
-------------------
--------
6(g), Seller has not made any purchases or
sales of Inventory except in the
----
usual and ordinary course of its business,
Seller has maintained its Inventory
in accordance with Seller's past practices
and Seller's customer and vendor
base has not changed in any material
respect since January 1, 2004. Except as
set forth in Schedule 6(g), Seller has not
received notice of any change in its
-------------
customer or vendor base nor does Seller
have any knowledge that a customer or
vendor will not continue to be a customer
of or vendor to Buyer after Closing or
that the business of any customer or vendor
will be discontinued after Closing.
The sales reports included as part of the
Financial Statements are true and
correct statements of sales of Seller for
the period described.
(h) No Default
Under Contracts.
Except as set forth on
--------------------------
Schedule 6(h), Seller has fulfilled or has
taken all action reasonably necessary
-------------
to enable it to fulfill on a current basis
as of the Closing Date all
obligations under the Assumed Contracts and
under vendor or customer purchase
orders. Except as set forth on Schedule
6(h), to Seller's knowledge, there has
-------------
not occurred any default or event which,
with the passage of time or the giving
of notice, will become a default under any
Assumed Contract, and all amounts due
and owing by Seller and by any other party
under any such Assumed Contract has
been paid in full or, for obligations which
are due at or after the Closing, no
prepayments have been accepted other than
deposits in the ordinary course of
business.
(i) Assumed
Contracts; Leases; Consents. There are no
-----------------------------------
approvals or consents required to assign
the Assumed Contracts to Buyer other
than as listed on Schedule 6(i).
Seller shall remain
obligated with respect to
-------------
all agreements that are not Assumed
Contracts. True and
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correct copies of all Assumed Contracts (as
described in Schedule 1(i)) have
-------------
been delivered to Buyer.
(j)
Litigation. Except as
set forth on Schedule 6(j),
----------
-------------
there are no claims, actions, suits,
arbitrations or other legal or
administrative proceedings pending or, to
Seller's knowledge, threatened
against or affecting Seller. There are no unsatisfied judgments
or outstanding
orders, injunctions, decrees, stipulations
or awards (whether rendered by a
court or administrative agency or by
arbitration) against Seller or against any
of the properties or business of
Seller.
(k) Employees.
Seller is in
compliance in all material
---------
respects with all federal and state laws,
regulations and orders respecting
employment and employment practices, terms
and conditions of employment and
wages and hours, and Seller has not engaged
in any unfair labor practices.
There have been no unfair labor practice
proceedings against Seller. There
currently are no grievances or unfair labor
practice proceedings or union
representation issues pending or, to the
knowledge of Seller, threatened against
Seller which would have a Material Adverse
Effect. There is no
labor strike,
work stoppage or other labor dispute
pending or, to the knowledge of Seller,
threatened against or affecting Seller.
Seller has not taken
any action that
would require any notices and related
payments under the Worker Adjustment and
Retraining Notification Act ("WARN"), 29
U.S.C.A. Section 2101-2109. All wages,
salaries, commissions, bonuses, benefits
and other compensation which have
become due and payable to any employee of
Seller have been paid or fully accrued
and Seller shall have no obligation for any
such liabilities except to the
extent specifically included in the Assumed
Liabilities.
(l) Purchase
and Sale Obligations.
Each unfilled
-----------------------------
purchase order of Seller, each customer
purchase order and each other commitment
or undertaking for purchases or sales made
by Seller was made in the ordinary
course of business and, except for
purchases of Biodac from Kadant GranTek Inc.
in the ordinary course of business, were
made with entities which are not
Affiliates of Sellers or Kadant.
Each such purchase
order of Seller was made in
an arms' length transaction at market
prices prevailing at the time when such
order was made and was made in accordance
with Seller's past practices.
(m)
Compensation and Commissions. Other than such rights
----------------------------
or obligations of Seller as may arise under
Seller's general company employee
manual, a copy of which has been delivered
to Buyer, there are no employment
agreements or other arrangements between
Seller or any Affiliate of Seller and
any employee of Seller. No employees of Seller are leased
employees or
contractors, other than temporary workers
at Seller's facility located at 1518
South Broadway, Green Bay, Wisconsin, the
Bedford Facility, and Seller's sales
representatives. All commission arrangements or
other bonus or incentive
programs between Seller and its sales
representatives are listed on Schedule
--------
6(m). All sales representatives are
independent contractors of Seller. Seller
----
acknowledges that Buyer is not assuming,
and will have no obligation with
respect to, any such agreements and
arrangements with sales representatives or
any arrangements with employees, including
without limitation any costs or
expenses (including attorneys' fees)
relating to the termination in any manner
of an employee or sales representative
whether such termination occurs or such
costs are incurred before or after Closing
except to the extent specifically
included in the Assumed Liabilities.
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(n) Employee
Benefits. All
obligations of Seller
-----------------
accruing on or before the Closing Date,
whether arising by operation of law, by
contract or by past custom, for payments or
contributions to trusts or other
funds or to any governmental agency, with
respect to unemployment compensation
benefits, profit sharing, pension and
retirement benefits, social security
benefits or any other employee benefits of
similar character have been paid or
will be paid when due by Seller or are
specifically included in the Assumed
Liabilities. All such benefits payable directly
to employees of Seller have
been paid or will be paid by Seller or are
specifically included in the Assumed
Liabilities. All obligations of Seller, whether
arising by operation of law, by
contract or past custom, for vacation pay,
medical benefits, bonuses, severance
and other forms of compensation which are
or may become payable to employees
have been paid or will be paid by Seller
when due or are specifically included
in the Assumed Liabilities.
(o) Insurance.
Schedule 6(o) sets
forth an accurate
---------
-------------
description of each insurance policy
(including policies providing property,
casualty, liability and workers'
compensation coverage and bond and surety
arrangements) to which Seller has been or
is a party, named insured, or
otherwise the beneficiary of coverage.
With respect to each
such insurance
policy, Seller is not and, to the knowledge
of Seller, no other party to the
policy is, in breach or default (including
with respect to the payment of
premiums or the giving of notices), no
event has occurred which, with notice or
the lapse of time or the giving of notice,
would constitute such a breach or
default or permit termination, modification
or acceleration under the policy,
and no party to the policy has repudiated
any provisions thereof. Seller has
been covered during the past five years by
insurance in scope and amount
customary and reasonable for the business
in which it has engaged in all
material respects.
(p) Parties in
Interest. Except as
set forth on Schedule
-------------------
--------
6(p), for the periods to which the
Financial Statements relate, there have been
----
no material transactions between Seller and
any Affiliate of Seller. "Affiliate"
means, with respect to any person or
entity, any other person or entity which,
directly or indirectly, controls or is
controlled by or is under common control
with such person or entity, and "control"
and its variations mean possession,
directly or indirectly, of the power to
direct or cause the direction of the
management and policies of such person or
entity, whether through ownership of
voting securities or partnership or member
interests or otherwise.
(q) Product
Liability and Warranty Claims. Except as set
-------------------------------------
forth on Schedule 6(q), to Seller's
knowledge, each product manufactured, sold,
-------------
leased or delivered by or on behalf of
Seller has been and will be in conformity
with all applicable contractual commitments
and all express or implied
warranties. Except as set forth on Schedule
6(q), to Seller's knowledge, there
-------------
are no product liability or warranty
claims, claims by any customer asserting
rights to a return credit for goods in its
possession, demands, liabilities or
assertions of any nature whatsoever, or, to
Seller's knowledge, any basis
therefor, relating to any product which is
or has ever been a product designed,
manufactured or sold by Seller.
Seller has not been
refused coverage or
withdrawn any application for products
liability insurance.
(r)
Intellectual Property.
Seller owns or has the right
---------------------
to use pursuant to license or other
permission all inventions, patents,
trademarks, service marks, trade dress,
logos, trade names, corporate names,
domain names, copyrightable works
(including computer software and related
data), all other proprietary rights and all
registrations or rights to
registration thereof used in
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connection with Seller's business
("Intellectual Property") as set forth on
Schedule 6(r). Schedule 6(r) sets forth a list of
Intellectual Property
------------- -------------
currently used by Seller relating to the
Seller's business, and, if applicable,
registration numbers issued by the United
States Patent and Trademark Office and
any other issuing body, and the ownership
of such Intellectual Property. All
renewal and maintenance fees due with
respect to the Intellectual Property have
been paid if currently due. Each item of Intellectual Property
owned or used by
Seller immediately prior to Closing will be
transferred by Seller to Buyer at
Closing by appropriate conveyance
documentation, subject to filing of such
conveyance documentation in the appropriate
filing offices. No
Intellectual
Property infringes upon a United States
copyright, trademark or trade name or
violates the proprietary copyright,
trademark or trade name rights of any third
party and, except as set forth on Schedule
6(r), the Company has not received
-------------
any notice of any third party claim of any
such infringement.
Seller has the
right to use, free and clear of any
security interests, royalty or other payment
obligation or claim of infringement, all
such Intellectual Property, subject
only to any obligations under the Assumed
Contracts.
(s) Tax
Matters. There have
been filed all tax returns
-----------
which are required to be filed by Seller
and all such tax returns are true,
correct and complete in all material
respects. To Seller's
knowledge, Seller
has paid all income, premium, payroll,
unemployment, excise, withholding, social
security, real property personal property,
sales, transfer and other taxes, and
all interest, penalties, assessments or
deficiencies thereon shown on such
returns to be payable by Seller which have
become due and could constitute a
lien on the Assets, and adequate provision
has been made for all taxes which
will become due and payable. Kadant is responsible to pay the
full amount of
any such taxes shown on such returns that
have not been paid in full as of
the date thereof. There is not pending or, to
Seller's knowledge, threatened,
any action, suit, claim, proceeding or
investigation by any domestic or foreign
governmental authority for assessment or
collection of taxes which could result
in a lien on the Assets. To Seller's knowledge, Seller has
withheld and paid
and will withhold and pay all taxes
required to be have been withheld and paid
in connection with amounts paid or owed to
any employee, independent contractor,
creditor, stockholder or other third party.
No taxing authority is
expected to
assess any additional taxes against Seller
for any period for which tax returns
have been filed. Seller has not waived any
statute of limitations in respect of
taxes or agreed to any extension of time
with respect to a tax assessment or
deficiency. Except as set forth on Schedule
6(s), no audits of Seller have been
-------------
conducted or are currently being conducted
by the Internal Revenue Service or
any state, local or other tax authority.
Seller will file or
cause to be filed
all tax returns which may be required to be
filed for the period or periods
ending prior to or after the Closing Date
and will pay all taxes due with
respect to such periods including interest
and penalties, if any.
(t)
Disclosure. This
Agreement, the matters contained
----------
herein and the documents referenced in this
Agreement, the Exhibits and the
Schedules, and the Financial Statements do
not contain on the date hereof any
misrepresentation of a material fact and do
not omit to state any material fact
necessary to make the statements made, in
light of the circumstances in which
made, not misleading to the extent such the
matter to which such statement or
omission relates has a Material Adverse
Effect on the Assets or the business of
Seller.
(u) Brokers.
Except for Matrix
Capital, no person is
-------
entitled to any broker's, finder's or
similar fee or commission in connection
with the transactions contemplated by
this
<
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Agreement based on arrangements made by or
on behalf of Seller or any Affiliate.
Seller agrees to pay all amounts payable to
Matrix Capital in connection with
the transactions contemplated by this
Agreement.
(v) Kadant.
Kadant has full and
absolute legal right,
------
power and authority to enter into this
Agreement and to perform its obligations
hereunder. This Agreement has been duly and
validly executed and delivered by
Kadant, and this Agreement is the valid and
binding obligation of Kadant,
enforceable against Kadant in accordance
with its terms. None of the execution,
delivery or performance of this Agreement
by Kadant or the consummation of the
transactions contemplated hereby or
compliance by Kadant with any of the
provisions hereof will (i) conflict with,
or result in any violations of, or
cause a default (with or without notice or
lapse of time, or both) under, or
give rise to a right of termination,
amendment, cancellation or acceleration of
any obligation contained in or the loss of
any benefit under any term, condition
or provision of any instrument or agreement
to which Kadant is a party or by
which Kadant or any of its properties may
be bound, (ii) violate any law,
statute, rule or regulation or order, writ,
injunction or decree of any
governmental entity applicable to Kadant or
any of its properties, or (iii)
result in an encumbrance on or against any
assets, rights or properties of
Kadant. No permit, authorization, consent
or approval of or by, or any
notification of or filing with, any person
(government or private) is required
in connection with the execution, delivery
and performance by Kadant of
this Agreement or the consummation by
Kadant of the transactions contemplated
hereby.
(w) No
Restraining Action; Approvals. No legal actions
--------------------------------
or proceedings have been instituted to
restrain or prohibit the consummation of
the transactions contemplated by this
Agreement, and all approvals, if any, of
local, state and federal authorities
reasonably necessary to permit performance
by Seller of its obligations contemplated
hereunder have been obtained.
(x) Damage and
Destruction. None of
the Assets have been
----------------------
materially damaged or destroyed by fire,
storm or other casualty.
(y)
Environmental and Safety Laws. Seller and Seller's
-----------------------------
properties and equipment (whether owned or
leased) are in conformity with all
applicable environmental, hazardous
substances and occupational safety laws,
rules, regulations and orders to the extent
nonconformity would have a Material
Adverse Effect.
7.
Representations and Warranties of Buyer. To induce Seller to
---------------------------------------
enter into this Agreement and subject to
the terms, conditions and limitations
set forth in this Agreement, Buyer and
Buyer Parent, jointly and severally,
represents and warrants with and to Seller
as follows:
(a) Corporate
Organization. Buyer is
a corporation duly
----------------------
organized, validly existing and in good
standing under the laws of the State of
Minnesota, duly authorized under its
articles of incorporation and applicable
laws to engage in the business conducted by
it and duly qualified and in good
standing as a foreign corporation
authorized to do business in each jurisdiction
in which the character of the properties
owned or leased by it or the nature of
the business conducted by it makes such
licensing or qualification necessary,
except where failure to be so licensed or
qualified, individually or in the
aggregate, would not have a Materially
Adverse Effect on the business, financial
condition, operations or results of
operations of Buyer.
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(b)
Authorization; Noncontravention. This Agreement, the
-------------------------------
execution and delivery hereof by Buyer and
Buyer Parent, the payment of the
Purchase Price as herein provided and the
performance by Buyer and Buyer Parent
of its respective obligations and
undertakings hereunder have been duly
authorized and approved by all requisite
corporate actions of Buyer or Buyer
Parent, as applicable. This Agreement and each of the
documents and instruments
described in Sections 8 and 9 to which
Buyer or Buyer Parent is a party has been
duly executed and delivered by Buyer or
Buyer Parent, as applicable. This
Agreement and each of the documents and
instruments described in Sections 8 and
9 to which Buyer or Buyer Parent is a party
constitutes the legal, valid and
binding obligations of Buyer or Buyer
Parent, as applicable, enforceable against
Buyer or Buyer Parent in accordance with
their respective terms. The execution
of this Agreement and such other documents
and instruments by the Buyer or Buyer
Parent, as applicable, and the consummation
of the transactions contemplated
hereby and thereby do not violate (i) the
articles of incorporation or bylaws of
Buyer or Buyer Parent, as applicable, (ii)
the provisions of any contract,
arrangement or instrument to which Buyer or
Buyer Parent is a party or by which
Buyer, Buyer Parent, or their respective
assets are bound, (iii) any order,
decree or judgment of any court or
governmental body having jurisdiction over
Buyer or Buyer Parent, or (iv) any law or
regulation applicable to Buyer or
Buyer Parent. All consents or approvals of any
court or regulatory authority
required to be given in connection with the
obligations of Buyer and Buyer
Parent contemplated hereby and thereby have
been given.
(c) Brokers.
No person is entitled
to any broker's,
-------
finder's or similar fee or commission in
connection with the transactions
contemplated by this Agreement based on
arrangements made by or on behalf of
Buyer or Buyer Parent.
(d)
Litigation. There are
no claims, actions, suits,
----------
arbitrations or other legal or
administrative proceedings pending or, to the
knowledge of Buyer or Buyer Parent,
threatened against or affecting Buyer or
Buyer Parent which involve the validity or
performance of this Agreement.
(e) No
Restraining Action; Approvals. No legal action or
--------------------------------
proceeding has been instituted to restrain
or prohibit the consummation of the
transactions contemplated by this
Agreement, and all approvals, if any, of
local, state or federal authorities
reasonably necessary to permit performance
by Buyer or Buyer Parent of its respective
obligations contemplated hereunder
have been obtained.
(f) Due
Diligence Investigation. Buyer, Buyer Parent,
---------------------------
and their respective representatives have
had the opportunity to ask questions
of and receive answers from representatives
of Seller and to obtain information
of Seller concerning Seller, its business
and its financial condition, and based
on the information provided by (i) Seller
to Buyer, Buyer Parent, or their
representatives or consultants, or (ii)
Buyer's or Buyer Parent's
representatives or consultants to Buyer or
Buyer Parent, neither Buyer, nor
Buyer Parent is aware of any breaches of
any of Seller's or Kadant's
representations and warranties in this
Agreement.
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8.
Closing Deliverables to Buyer. Unless waived, in whole or in
-----------------------------
part, in writing by Buyer, the obligations
of Buyer hereunder are subject to
receipt of the following deliverables at
Closing:
(a)
Certificate of Seller.
Seller shall provide Buyer
---------------------
with a certificate with respect to Seller's
certificate of formation, limited
liability company agreement, certificate of
good standing and the written action
of the board of managers and members of
Seller approving the execution and
delivery of this Agreement and related
documents and instruments, and the
consummation of the transactions
contemplated hereby.
(b) General
Transfer Documents.
Buyer shall receive a
--------------------------
Bill of Sale conveying the Assets to Buyer
in the form attached hereto as
Exhibit C.
---------
(c) Purchase
Orders. Seller shall
provide Buyer with a
---------------
copy of all purchase orders which have not
been filled by Seller or by vendors
to Seller as of Closing.
(d)
Intellectual Property Assignments. Seller shall
---------------------------------
deliver unconditional assignments of all
Intellectual Property described on
Schedule 6(r) in the form of Schedule
8(d).
-------------
-------------
(e) Assignment
of Contracts and Agreements. Seller shall
--------------------------------------
have assigned the Assumed Contracts to
Buyer in the form of the Assignment and
Assumption Agreement attached hereto as
Exhibit D.
---------
(f) Service of
Key Employees. The key
employees of
------------------------
Seller, as identified on Schedule 8(f),
(the "Key Employees") shall have
-------------
accepted employment with Buyer.
(g)
Escrow
Agreement. Seller
shall execute and deliver
----------------
the Escrow Agreement.
(h) Biodac
Supply Agreement.
Seller shall execute and
-----------------------
deliver the Biodac Supply Agreement
attached hereto as Exhibit E.
---------
(i) Warranty
Fund Escrow Agreement. Seller shall execute
------------------------------
and deliver the Warranty Fund Escrow
Agreement attached hereto as Exhibit F (the
---------
"Warranty Fund Escrow Agreement").
9.
Closing Deliverables to Seller. Unless waived, in whole or in
------------------------------
part, in writing by Seller, the obligations
of Seller hereunder are subject to
receipt of the following deliverables at
Closing:
(a)
Certificate of Buyer.
Buyer shall provide Seller
--------------------
with a certificate with respect to Buyer's
articles of incorporation, bylaws,
certificate of good standing and the
written action of the board of directors
approving the execution and delivery of
this Agreement and related documents and
instruments and the consummation of the
transactions contemplated hereby.
<
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(b) Purchase
Price; Escrow. Buyer
shall (i) pay the
----------------------
Purchase Price as described in Section 3(b)
and required to be made at Closing,
and (ii) deposit the Escrow Amount into
Escrow as provided in Section 3(b) and
execute and deliver the Escrow
Agreement.
(c) Assignment
and Assumptions Agreement. Seller shall
------------------------------------
have received the Assignment and Assumption
Agreement, duly executed by Buyer.
(d) Biodac
Supply Agreement.
Buyer shall execute and
-----------------------
deliver the Biodac Supply Agreement.
(e) Warranty
Fund Escrow Agreement. Buyer shall execute
------------------------------
and deliver the Warranty Fund Escrow
Agreement.
10.
Post-Closing Agreements. Following Closing, Buyer and
Seller
-----------------------
agree as follows:
(a)
Warranty
Fund.
-------------
(i) On
the Closing Date, Kadant and Seller will
deposit Three Million Five Hundred Thousand
Dollars ($3,500,000.00) with the
Escrow Agent to be held in a separate and
distinct escrow account from the
Escrow Amount (the "Warranty Fund").
Amounts held in the
Warranty Fund shall be
invested in money market funds with
earnings credited to the Warranty Fund.
(ii) The
Warranty Fund shall be administered by
and available to the Buyer to cover
Warranty Claim Costs and Expenses (defined
below) related to the replacement of
products produced by Seller prior to
Closing and claimed by purchasers
("Claimants") of those products to be faulty,
defective or otherwise unacceptable
("Warranty Claims").
For a period of the
earlier of (A) five (5) years following the
Closing Date or (B) the date that
the Warranty Fund is exhausted ("Buyer's
Administration Period"), Buyer shall
administer Warranty Claims and Buyer may
withdraw funds from the Warranty Fund
to pay for Warranty Costs and Expenses.
"Warranty Costs and Expenses" means
actual direct costs and expenses incurred
during the warranty period by Buyer
in connection with remedying Warranty
Claims, including replacement at cost
(not selling price) of material, but
excluding any internal administrative
costs. The Warranty Fund may be used only
for the costs and expenses of
remedying Warranty Claims with no right of
setoff against any claims for
indemnification or other obligations of
Seller to Buyer hereunder. If, during
Buyer's Administration Period, a Claimant
has notified Seller that Buyer has not
resolved that Claimant's Warranty Claim to
the reasonable satisfaction of the
Claimant, Seller may take reasonable and
necessary action to resolve the
Warranty Claim and Seller may withdraw
funds from the Warranty Fund to pay for
Warranty Costs and Expenses incurred in
taking such action.
(iii) Within five (5)
business days after the end
of each calendar quarter during Buyer's
Administration Period, Buyer shall
provide written reports to Seller with
respect to Warranty Claim activity for
immediately preceding calendar quarter,
including an analysis of Warranty Claim
history and Buyer's warranty claim log, and
Seller shall have the right at any
time to audit the Warranty Fund and the
activity with respect to Warranty
Claims. In addition, with five (5)
business days after the end of each month,
Buyer shall provide Seller with information
as requested by Seller that is
necessary to be included in Seller's
monthly report which Seller files
<
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with the Consumer Product Safety Commission
("CPSC") regarding Seller's recall
that has been filed with the CPSC.
Within five (5)
business days after the end
of the Buyer's Administration Period, the
balance of funds remaining in the
Warranty Fund (less the amount of any
Warranty Claims made prior to such date
but for which payment has not been made by
the Buyer or to reimburse the Buyer)
shall be paid to Seller. At the end of the Buyer's
Administration Period,
Seller shall reassume responsibility for
the administration, correction and
settlement of Warranty Claims. During its respective period of
administration,
each party shall administer Warranty Claims
in its sole discretion, provided
that each party shall honor applicable
warranty obligations.
During the period
that Seller is administering Warranty
Claims, Buyer shall provide reasonable
assistance in obtaining information about
applicable Warranty Claims, and Buyer
shall provide to Seller material for use on
Warranty Claims at cost plus ten
percent (10%). The Warranty Fund shall be
held and disbursed by the Escrow
Agent pursuant to the Warranty Fund Escrow
Agreement.
(b) Access to
and Retention of Books and Records. All of
--------------------------------------------
the books, records, files and other
information, including electronic records,
acquired by Buyer shall remain reasonably
available to Seller, and all books,
records, files and other information,
including electronic records, retained by
Seller relating to the Assets shall remain
reasonably available to Buyer, for
review and copying for a period of seven
(7) years following the Closing Date or
for any longer periods as may be required
specifically by any governmental
entity or ongoing litigation, provided that
such access shall not unreasonably
interfere with the business operation of
the party in possession, reasonable
advance written notice shall have been
given and the requesting party may only
use such information for legitimate
business purposes relating to the period
prior to the Closing Date. Books and
records, including without limitation,
historical financial and tax information,
acquired by Buyer or retained by
Seller shall be retained by the parties in
compliance with applicable
governmental requirements for records
retention. If at any
time within seven
(7) years following Closing Buyer or Seller
wishes to dispose of books and
records related to the Business, the party
wishing to dispose shall give prior
written notice to the other party of its
intention, specifying the books and
records of which it wished to dispose.
If, within 45 days of
receipt of such
notice, the notified party has not given
instructions to the notifying party to
deliver specified books and records to it,
the notifying party may dispose of
such books and records. Notice shall be given as described
in Section 13(e)
below. The parties acknowledge that the
foregoing time limitations shall not
apply to any sales records of Seller
acquired by Buyer, and all such sales
records shall be retained indefinitely so
that Buyer and Seller can have access
to such records in connection with any
Warranty Claims.
(c) Public
Announcements. None of
Seller, Buyer or any
--------------------
Affiliate of either shall issue any report,
statement or press release or
otherwise make any public statement with
respect to this Agreement and the
transactions contemplated hereby without
prior consultation with and approval of
Buyer or Seller, as the case may be, except
as may be required by law or as may
be necessary in order to discharge its
disclosure obligations, in which case
such party nevertheless shall advise Buyer
or Seller, as the case may be, and
discuss the content of the disclosure
before issuing any such report, statement
or press release.
(d) Further
Assurances. From time
to time at the
------------------
reasonable request of Buyer, Seller and
Kadant shall take such other actions,
make such payments and execute and/or
deliver such books, records, documents,
certificates and instruments better to
effect the transactions
<
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contemplated hereby, including (i) those
reasonably necessary to vest Seller's
rights (if any) to the Assets in Buyer,
(ii) prompt payment of and any filings
necessary to pay any lien, including
Permitted Liens, which becomes a charge
against the Buyer or the Assets and proof
reasonably acceptable to Buyer of such
disposition and (iii) prompt payment and
discharge of any liability described in
Section 4 that attaches to and becomes a
charge against the Assets or becomes a
claim made against Buyer.
(e) Certain
Employee Matters.
------------------------
(i)
Offers of Employment of Employees;
----------------------------------
Termination. At or prior to the Closing, Buyer
shall offer employment as of
-----------
Closing Date to those employees of Seller
identified in writing by Buyer at
comparable positions, compensation, and
benefits as are in place immediately
prior to the Closing (those employees to
whom Buyer shall offer employment shall
be the "Employees", and those to whom Buyer
does not offer employment shall be
referred to as the "Retained Employees").
At or prior to the
Closing, Buyer
shall offer to enter into agreements or
arrangements with the sales
representatives identified on Schedule
10(e)(i) attached hereto.
--------------
(ii)
Responsibility of Seller for Retained
-------------------------------------
Employees. Seller shall be responsible for
any notices and related payments
---------
required under WARN with respect to the
transactions contemplated under this
Agreement. Seller shall be responsible for,
and hold Buyer harmless against,
any severance payments or other obligations
(including without limitation, any
liability for wrongful discharge, unused
vacation days and accrued but unused
sick days) that may be due by reason of the
employment by Seller or termination
of the employment by Seller of any
Employees on or prior to the Closing Date
(other than to the extent such payments or
obligations are included in the
Assumed Payables or Assumed Accrued
Liabilities), and by reason of the
employment or termination of the employment
of any Retained Employees at any
time. All agreements and arrangements
between Seller and its sales
representatives will be terminated at
Closing or as soon as possible after
Closing as complies with the terms of such
agreement or arrangement, and all
obligations of Seller with respect to such
agreements and arrangements will be
satisfied by Seller when due.
(f) Regrind
Material. Buyer has
elected not to acquire
----------------
approximately 2,700,000 pounds of certain
material of Seller that has been
recalled and is currently used as regrind
material in the production of
composite resin/fiber building products
(the "Regrind Material"), of which
approximately (i) 1,900,000 pounds is
currently stored at a storage facility
located at K & K Warehousing 770
McDonald Street, Green Bay, Wisconsin, and (ii)
800,000 pounds is currently stored in two
locations at Seller's facility at 1518
South Broadway, Green Bay, Wisconsin.
The Regrind Material
is valued on
Seller's Balance Sheet as of October 1,
2005 at approximately $593,000. During
the three years immediately following the
Closing (the "Regrind Usage Period"),
Buyer hereby agrees to use commercially
reasonable efforts to utilize the
Regrind Material in production of composite
resin/fiber building products after
the Closing, provided, however, that Buyer
shall not be obligated to use any
Regrind Material that adversely effects the
quality of the composite resin/fiber
products in which the Regrind Material is
being used. Seller
shall supply such
Regrind Material to Buyer, and Buyer agrees
to purchase such Regrind Material
from Seller at a price of $.22/lb,
representing Seller's cost for such Regrind
Material. Buyer further agrees to use
commercially reasonable efforts (i) to
seek to develop, determine, or establish an
effective means to
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test the Regrind Material so that its
efficacy can be determined prior to
manufacturing of product that will include
such Regrind Material, and (ii)
modify its production process, which may
include adding an additional regrind
feeder, to effectively utilize the Regrind
Material; provided, however, in no
-------- -------
event shall Buyer be required to incur
expenses in excess of $50,000 in
connection with such efforts to modify its
production process.
Until Seller has
sold all of its Regrind Material to Buyer,
Buyer agrees to pay the actual costs
associated with storing the Regrind
Material, but in no event shall such costs
exceed $1,000 per month. Within 10 business days after the
end of each quarter
after the Closing Date, commencing with the
quarter ending January 31, 2006,
Buyer agrees to provide Seller a written
statement detailing its usage of the
Regrind Material, together with payment
therefor. Seller shall
have the right
to audit Buyer's usage of the Regrind
Material once every 12 months until the
Regrind Material is completely used or
disposed of. At any
time after the
Regrind Usage Period, to the extent that
Buyer does not purchase or does not
wish to continue to purchase the Regrind
Material, Buyer shall notify Seller in
writing of same (the "Disposal Notice"),
and agrees to pay for all costs
associated with the disposal of all
unpurchased Regrind Material (the "Disposal
Fees"), up to a cap (the "Disposal Fee
Cap") of $50,000 for such disposal. Upon
Seller's receipt of the Disposal Notice,
the terms and conditions of this
Section 10(f) shall cease and be of no
further force or legal effect, and the
parties obligations hereunder shall
terminate, except for Buyer's obligation to
pay the Disposal Fees, up to the Disposal
Fee Cap.
11.
Confidentiality, Non-Competition, Non-Solicitation and
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Non-Disparagement.
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(a) Obligation
of Confidentiality.
Seller and Kadant
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acknowledge that in connection with their
association with the business of
Seller, they have confidential information
pertaining to the business of Seller
and the Assets (collectively, the
"Confidential Information"). In consideration
of this Agreement, Seller and Kadant
covenant and agree jointly and severally
that:
(i) neither
they nor their Affiliates (as that term is
defined in Section 6(p)) will disclose,
directly or indirectly, to any person or
entity any Confidential Information, except
to Buyer and its attorneys,
accountants or other representatives, as
may be necessary or appropriate in (A)
the ordinary course of performing duties
for Seller or Buyer, or (B) otherwise
with the express prior written consent of
Buyer and
(ii)
they and their Affiliates will deliver to Buyer
promptly at any time that Buyer may so
request, all memoranda, notes, records
(including electronic data records),
reports and other documents (and all copies
thereof) relating to the Confidential
Information which they may then possess or
have within their control.
Confidential Information does not include
(w) information which has been or
later becomes generally available to the
public, (x) information which is
received by Seller or Kadant from a third
party not known to owe
