ASSET PURCHASE AND SALE AGREEMENT

Exhibit 2.1

 

ASSET PURCHASE AND SALE AGREEMENT

 

THIS ASSET PURCHASE AND SALE AGREEMENT is entered into as of this 30th day of August 2004, by and between Huttig Building Products, Inc., a Delaware corporation (“ Huttig ”), and McCray Lumber Company, a Missouri corporation (the “ Buyer ”). Capitalized terms are defined in Article 1 .

 

RECITALS

 

A. The Buyer desires to purchase the Purchased Assets and assume the Assumed Liabilities from Huttig, on the following terms and conditions; and

 

B. Huttig desires to sell the Purchased Assets, and to assign the Assumed Liabilities to the Buyer, on the following terms and conditions.

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants, representations, warranties, conditions, and agreements hereinafter expressed, the Parties agree as follows:

 

ARTICLE 1

DEFINITIONS

 

Without limiting the effect of any other terms defined in the text of this Agreement, the following words shall have the meaning given them in this Article 1 :

 

1.1 “ Affiliate ” means, with respect to any Person, any other Person which is controlling, controlled by, or under common control with, directly or indirectly through any Person, the Person referred to, and, if the Person referred to is a natural person, any member of such Person’s immediate family. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”) as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

1.2 “ Agreement ” means this Agreement as executed on the date hereof and as amended or supplemented in accordance with the terms hereof, including the Disclosure Schedule and all Exhibits hereto.

 

1.3 “ Assumed Liabilities ” has the meaning set forth in Section 2.3 .

 

1.4 “ Benefit Plans ” means all written material employee benefit plans and programs of Huttig (in respect of the Business) or otherwise applicable to Employees as of the date hereof, including plans and programs providing for pension, retirement, profit sharing, savings, bonus, deferred or incentive compensation, hospitalization, medical, life or disability insurance, vacation and paid holiday, termination or severance pay, restricted stock, stock option or stock appreciation rights benefit plans.

 

1.5 “ Business ” means the business of the Builder Resource Division of Huttig conducted at the Facilities, as such business has been conducted by Huttig on the date hereof.

1.6 “ Business Day ” means any day which is not a Saturday, Sunday or a legal holiday in the State of Missouri, United States of America.

 

1.7 “ Buyer ” has the meaning set forth in the preamble.

 

1.8 “ CIT Agreement ” has the meaning set forth in Section 2.14 .

 

1.9 “ Closing ” means the consummation of the transactions contemplated by this Agreement, as provided for in Section 2.6 .

 

1.10 “ Closing Date ” means August 30, 2004 or such other date as shall be mutually agreed upon by the Parties.

 

1.11 “ Closing Statement ” has the meaning set forth in Section 2.7 .

 

1.12 “ Code ” means the United States Internal Revenue Code of 1986, as amended.

 

1.13 “ Contract ” means any contract, lease, binding commitment, purchase order, or instrument to which Huttig (in respect of the Business) is a party or by which it is bound.

 

1.14 “ Delayed Equipment ” means all vehicles and equipment located at the Facilities that are subject to the Delayed Lease Agreements.

 

1.15 “ Delayed Lease Agreements ” has the meaning set forth in Section 2.14 .

 

1.16 “ Disclosure Schedule ” means the schedule, dated the date hereof of exceptions to the representation and warranties made, and the listings of information provided, by Huttig hereunder.

 

1.17 “ Effective Time ” means the effective time of the Closing, which shall be deemed to be 12:00 a.m. Central Daylight Time on the Closing Date.

 

1.18 “ Employees ” means the individuals listed on Exhibit A , which shall be updated by Huttig and delivered to the Buyer at the Closing, who as of the date of this Agreement and, as such Exhibit may be updated, as of the Effective Time, are all of the employees of Huttig who are primarily employed in the Business.

 

1.19 “ Encumbrances ” means material mortgages, liens, charges, claims, security interests, easements or other encumbrances.

 

1.20 “ Environmental Law ” means all laws, regulations or orders relating to pollution or protection of the environment, and all permits, approvals, consents or other authorizations by or pursuant to any such laws, regulations, or orders.

 

1.21 “ Equipment Notice ” has the meaning set forth in Section 2.14 .

 

1.22 “ Escrow Agent ” has the meaning set forth in Section 2.12 .

 

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1.23 “ Escrowed Funds ” has the meaning set forth in Section 2.12 .

 

1.24 “ Excluded Assets ” has the meaning set forth in Section 2.2 .

 

1.25 “ Excluded Liabilities ” has the meaning set forth in Section 2.4 .

 

1.26 “ Facilities ” means the facilities of the Business at the addresses listed on Exhibit B .

 

1.27 “ Financial Statements ” means the unaudited balance sheets of the Business as of December 31, 2002 and 2003 and the related unaudited statements of operations for the periods then ended, and the unaudited statement of operations for the 7-month period ended July 31, 2004.

 

1.28 “ GAAP ” means generally accepted accounting principles and practices which are used in the United States and recognized as such by the American Institute of Certified Public Accountants acting through its Accounting Principles Board or by the Financial Accounting Standards Board or through other appropriate boards or committees thereof, as in effect as of the date of this Agreement.

 

1.29 “ Huttig ” has the meaning set forth in the preamble.

 

1.30 “ IBM Agreement ” has the meaning set forth in Section 2.14 .

 

1.31 “ Indemnifying Party ” has the meaning set forth in Section 9.3 .

 

1.32 “ Indemnity Threshold ” has the meaning set forth in Section 9.6 .

 

1.33 “ Injured Party ” has the meaning set forth in Section 9.3 .

 

1.34 “ Knowledge ” or “ knowledge ” means a Person’s actual knowledge (i.e., the conscious awareness of facts or other information) after due inquiry. The words “know,” “knowing” and “known” shall be construed accordingly. In the case of Huttig, “Knowledge” or “knowledge” means the knowledge of the persons listed on Exhibit C

 

1.35 “ Law ” means any statute, law, ordinance, decree, order, injunction, rule, directive, or regulation of any government or quasi-governmental authority, and includes rules and regulations of any regulatory or self-regulatory authority compliance with which is required by Law.

 

1.36 “ Leased Personal Property ” has the meaning set forth in Section 3.9 .

 

1.37 “ Leased Real Property ” has the meaning set forth in Section 3.9 .

 

1.38 “ Leases ” has the meaning set forth in Section 3.9 .

 

1.39 “ Loss ” or “ Losses ” means each and all of the following items to the extent actually paid or incurred: losses, liabilities, damages, judgments, fines, costs, penalties, amounts paid in settlement and reasonable out-of-pocket costs and expenses incurred in connection therewith (including, without limitation, costs and expenses of suits and proceedings, and reasonable fees and

 

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disbursements of counsel), but net of any insurance proceeds received or receivable by the Injured Party with respect to such Losses and net of any tax benefit received or receivable by the Injured Party in respect of such Losses.

 

1.40 “ Master Leases ” has the meaning set forth in Section 2.14 .

 

1.41 “ Material Adverse Effect ” means a material adverse effect on the assets, business, financial condition or results of operations of the Business taken as a whole, but shall not be deemed to include (i) any changes resulting from general economic, regulatory or political conditions, (ii) acts attributable to, omissions by or circumstances affecting the Buyer and/or its Affiliates, (iii) circumstances that affect the industries in which the Business operates generally, or (iv) any changes resulting from the announcement or pendency of the transactions provided for in this Agreement.

 

1.42 “ Material Contract ” has the meaning set forth in Section 3.12 .

 

1.43 “ Maximum Indemnity Amount ” has the meaning set forth in Section 9.6 .

 

1.44 “ Notice of Claim ” has the meaning set forth in Section 9.3 .

 

1.45 “ Ordinary Course ” means, with respect to the Business, the ordinary course of commercial operations customarily engaged in by the Business.

 

1.46 “ Party ” means either Huttig or the Buyer, and “Parties” means both of them.

 

1.47 “ Permitted Encumbrances ” means, collectively, (a) Encumbrances that are disclosed in the Disclosure Schedule, (b) liens for Taxes, fees, levies, duties or other governmental charges of any kind which are not yet delinquent or are being contested in good faith by appropriate proceedings, and (c) liens for mechanics, materialmen, laborers, employees, suppliers or similar liens arising by operation of law for amounts which are owed, but not yet delinquent.

 

1.48 “ Person ” shall be construed broadly and shall include an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity (or any department, agency or political subdivision thereof).

 

1.49 “ Prepaid Expenses ” means all payments made and deposits with suppliers for inventory, goods and services used in the conduct of the Business which have not been delivered to the Business.

 

1.50 “ Proratable Items ” has the meaning set forth in Section 2.8(c) .

 

1.51 “ Purchase Price ” has the meaning set forth in Section 2.5 .

 

1.52 “ Purchased Assets ” has the meaning set forth in Section 2.1 .

 

1.53 “ Records ” has the meaning set forth in Section 6.3 .

 

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1.54 “ Retention Bonus Agreements ” means the phantom stock and retention bonus agreements listed in Exhibit D.

 

1.55 “ Ryder Agreement ” has the meaning set forth in Section 2.14 .

 

1.56 “ Straddle Period ” means any taxable period or billing period that begins prior to and ends after the Effective Time.

 

1.57 “ Subleases ” has the meaning set forth in Section 6.8 .

 

1.58 “ Taxes ” means all taxes, charges, fees, levies, or other like governmental assessments applicable to the Business that are assessed on income, capital, or property, in the countries in which it operates, including, without limitation, all material federal, possession, state, city, county and foreign (or governmental unit, agency, or political subdivision of any of the foregoing) income, profits, franchise, gross receipts, sales, use, transfer, stamp, occupation, property, capital, windfall profits, customs, duties, ad valorem, value-added and excise taxes; and all penalties, additions to tax and interest relating to any such taxes, or charges. Any one of the foregoing Taxes shall be referred to sometimes as a “Tax.”

 

1.59 “ Third-Party Claim ” has the meaning set forth in Section 9.4 .

 

1.60 “ Transferred Employees ” means those Employees who accept employment with the Buyer or any of its Affiliates pursuant to Section 5.1 .

 

1.61 “ Use Period ” has the meaning set forth in Section 2.14 .

 

ARTICLE 2

PURCHASE AND SALE OF THE BUSINESS

 

2.1 Transfer of Assets . Upon the terms and subject to the conditions of this Agreement, at the Closing and as of the Effective Time, Huttig shall sell, assign, transfer and convey to the Buyer and the Buyer shall purchase, acquire and accept from Huttig, all of Huttig’s right, title and interest to and in all assets, properties and rights owned by Huttig as of the Effective Time that are located at the Facilities (other than the Excluded Assets) (the “ Purchased Assets ”), free and clear of all Encumbrances other than Permitted Encumbrances. The Purchased Assets shall include, but not be limited to:

 

(a) all equipment, machinery, supplies, vehicles, spare parts, tools, furniture and other tangible personal property owned by Huttig and set forth on Exhibit F ;

 

(b) all inventory of Huttig with respect to the Business, including without limitation raw materials, works-in-progress and finished goods, whether stored at a Business location or stored at a third-party location or other location of Huttig;

 

(c) all Prepaid Expenses;

 

(d) all of Huttig’s rights pursuant to the Contracts;

 

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(e) all customer and vendor lists to the extent relating primarily to the Business, and all files and documents to the extent relating solely to customers and vendors of the Business, and all other Records (whether in hard copy, computer format or any other storage media) to the extent relating primarily to the Business, provided, however, this information does not include any information owned by Huttig that is not related to the Business, including but not limited to customer and vendor lists or pricing information;

 

(f) all advertising, marketing, sales, creative and promotional materials relating primarily to the Business; and

 

(g) all warranties and all claims in respect of rights of set off against third parties, that relate primarily to the Purchased Assets.

 

2.2 Excluded Assets of the Business . Notwithstanding any provision in this Agreement to the contrary, the following assets of Huttig (the “ Excluded Assets ”) are not part of the sale and purchase contemplated hereunder, are excluded from the Purchased Assets and shall remain the property of Huttig after the Closing:

 

(a) all cash, cash equivalents, including without limitation, bank deposits, investments in “money market” funds, commercial paper funds, certificates of deposit, Treasury Bills and accrued interest thereon;

 

(b) all accounts receivable, promissory notes, and other amounts owed to Huttig in connection with the Business;

 

(c) the corporate minute books and records of Huttig;

 

(d) all refunds of Taxes and interest thereon received by, or credited against Tax liability of the Buyer or any Affiliate of the Buyer attributable to Taxes paid by Huttig or an Affiliate of Huttig for periods or portions thereof ending on or prior to the Effective Time;

 

(e) any assets utilized by Huttig in connection with businesses other than the Business, provided that such assets are not located at the Facilities or primarily used by the Business;

 

(f) all current and prior insurance policies; and any reimbursement for, or other benefit associated with prepaid insurance, and any rights associated with any prepaid expense for which the Buyer will not receive the benefit after the Effective Time, including without limitation any insurance proceeds with respect to events occurring prior to the Effective Time;

 

(g) all assets of any Benefit Plan;

 

(h) the “Huttig” and “Builder Resource” names and any derivations thereof;

 

(i) non-transferable software licenses;

 

(j) licenses, permits and government authorizations which by their terms are not transferable;

 

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(k) the Contracts and leases set forth on Exhibit E attached hereto; and

 

(l) any rights, claims or causes of action that Huttig may have against any Person arising from or related to the ownership or use of the Purchased Assets or operation of the Business before the Effective Time.

 

2.3 Liabilities to be Transferred with the Business . On the Closing Date, the Buyer shall assume and discharge when and as due only the following specifically enumerated debts, liabilities and obligations of Huttig, as of the Effective Time, arising out of or pertaining to the Business or the Purchased Assets (the “ Assumed Liabilities ”):

 

(a) all liabilities to suppliers for materials and services relating to the Business ordered in the Ordinary Course prior to the Effective Time, but scheduled to be delivered or provided thereafter, and all liabilities to customers under purchase orders for products of the Business which have not yet been shipped at the Effective Time;

 

(b) executory obligations arising after the Effective Time under the Contracts included in the Purchased Assets, but excluding any obligations arising from or relating to any breach of a performance under such Contracts prior to the Effective Time;

 

(c) all liabilities related to the Transferred Employees arising after the Effective Time, including without limitation those liabilities arising after the Closing Date pursuant to the Retention Bonus Agreements listed on Exhibit D ;

 

(d) any accrued vacation liability and accrued holiday pay liability, as of the Closing Date with respect to the Transferred Employees whether or not vested;

 

(e) any fines, back pay liabilities, penalties, losses, or other obligations imposed on Huttig pursuant to Worker Adjustment and Retraining Notification Act or similar state or local “plant shutdown” laws pursuant to the transactions contemplated hereby;

 

(f) any and all returns of goods sold by the Business prior to the Closing Date; and

 

(g) all other liabilities and obligations arising, and related to periods, after the Effective Time relating to the operation of the Business or ownership or use of the Purchased Assets following the Effective Time.

 

2.4 Excluded Liabilities of the Business . Except as specifically provided in Section 2.3, Buyer shall not assume or be liable for, and Huttig shall remain liable for and pay and discharge all liabilities and obligations of the Business and Huttig, including without limitation the following (the “ Excluded Liabilities ”):

 

(a) all trade accounts payable and other current liabilities of the Business not included in the Assumed Liabilities;

 

(b) any and all product and installation warranty and liability claims in respect of goods or services sold by the Business prior to the Closing Date; and

 

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(c) all liabilities related to the Transferred Employees arising at the Effective Time as a result of the Closing pursuant to the Retention Bonus Agreements listed on Exhibit D ;

 

(d) any and all unfunded Benefit Plan liabilities;

 

(e) any and all Taxes owed by Huttig arising out of the transactions contemplated by this Agreement or otherwise, except to the extent otherwise set forth of Section 2.8(a) ;

 

(f) any and all liabilities arising outside the ordinary course of the Business prior to the Effective Time;

 

(g) any and all tort liabilities with respect to the Business arising out of events occurring prior to the Effective Time;

 

(h) the Contracts and leases set forth on Exhibit E hereto and any and all Contract liabilities not specifically assumed by Buyer; and

 

(i) any and all pending litigation as of the Effective Time.

 

2.5 Consideration . The consideration that the Buyer shall pay Huttig for the Purchased Assets and other rights hereunder shall be the purchase price amount set forth on the Closing Statement (the “ Purchase Price ”).

 

2.6 Closing . The Closing shall take place at 9:00 a.m. on the Closing Date at the offices of Bryan Cave LLP, in Kansas City, Missouri, or on such other date (which shall in any event be within 5 Business Days from the satisfaction or waiver of all applicable conditions to Closing set out herein) and at such other place as the Parties may agree in writing. At Closing, Huttig shall deliver or cause to be delivered to the Buyer the documents and other items identified in Article 7 , and the Buyer shall deliver to Huttig (a) by wire transfer of immediately available funds, in accordance with the wire transfer instructions set forth on Exhibit H , an amount equal to the Purchase Price less the Escrowed Funds and (b) the documents and other items identified in Article 8 . At Closing, Buyer shall deliver the Escrowed Funds to the Escrow Agent.

 

2.7 Closing Statement and Closing Inventory .

 

(a) At Closing, Huttig and the Buyer shall agree upon a transaction closing statement (the “ Closing Statement ”) which shall include a calculation of the aggregate purchase price to be paid at Closing which shall be the sum of:

 

(i) the net depreciated book value of all of the equipment, machinery, supplies, vehicles, spare parts, tools, furniture and other tangible personal property of the Business included in the Purchased Assets;

 

(ii) plus an amount which represents the agreed upon value of certain equipment that carries no book value on the Financial Statements;

 

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(iii) plus the cost of all inventory included in the Purchased Assets;

 

(iv) plus the Prepaid Expenses;

 

(v) plus an amount equal to the Escrowed Funds for goods and services under ongoing contracts as described in Section 2.12 ;

 

(vi) minus the value of the Assumed Liabilities described in Section 2.3(e);

 

(vii) minus $10,500, representing the cost of services provided by the Buyer in accordance with Section 2.11 .

 

(b) On August 21, 2004, the Buyer and Huttig conducted a physical inventory to determine the quantity of the inventory of the Business (the “Physical Inventory”). The physical inventory was conducted pursuant to procedures reasonably satisfactory to the Buyer and Huttig and in a manner that can be accurately rolled forward to the Closing Date. The quantity and value of the inventory determined to be set forth on the Closing Statement shall be the quantity from the Physical Inventory, as rolled forward to the Closing Date under Huttig’s normal accounting system.

 

2.8 Proration and Sales Taxes .

 

(a) All sales, use, value-added, gross receipts, registration, stamp duty or other similar transfer Taxes, if any, together with all recording or filing fees, notarial fees and other similar costs of Closing, that may be imposed upon, or payable, collectible or incurred solely in connection with the transfer and sale of the Purchased Assets as contemplated by the terms of this Agreement shall be borne by the Buyer.

 

(b) Huttig, upon request, shall use its reasonable efforts to provide or obtain from any taxing authority any certificate or other document necessary to mitigate, reduce or eliminate any Taxes (including additions thereto or interest and penalties thereon) that otherwise would be imposed with respect to the transactions contemplated in this Agreement.

 

(c) For any personal property, ad valorem and any other similar local or state Taxes, any power and utilities charges and deposits, any rents, and any similar prepaid and deferred items not otherwise specifically allocated between the parties in this Agreement (collectively, the “ Proratable Items ”) relating solely to the Purchased Assets or the Business for a Straddle Period, Huttig shall pay to the Buyer within 15 days after the date on which any Proratable Item is paid by the Buyer an amount that relates to the portion of the period to which such Proratable Item relates ending on the Closing Date to the extent such Proratable Item is not paid by Huttig prior to Closing, and the Buyer shall pay all Proratable Items. For purposes of this Section, the portion of any Proratable Item that is allocated to Huttig shall be deemed to be the amount of such Proratable Item for the entire period to which the Proratable Item relates multiplied by a fraction, the numerator of which is the number of days in the period to which the Proratable Item relates ending on the Closing Date, and the denominator of which is the number of days in the entire period to which the Proratable Item relates. Any credits relating to a period to which a Proratable Item relates that begins before and ends after the Closing Date shall be taken into

 

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account as though the relevant period ended on the Closing Date. All determinations necessary to give effect to the allocations described in this Section shall be made in a manner consistent with the prior practice of Huttig, except for changes required by changes in Law or fact.

 

(d) The Buyer and Huttig agree to furnish or cause to be furnished to each other, upon request, as promptly as practical, such information (including reasonable access to books and records) and assistance as is reasonably necessary for the filing of any Tax return, the conduct of any Tax audit, and for the prosecution or defense of any claim, suit or proceeding relating to any Tax matter. The Buyer and Huttig shall cooperate with each other in the conduct of any Tax audit or other Tax proceedings. Any Tax audit or other Tax proceeding that gives rise to a Loss subject to indemnification pursuant to Article 9 shall be deemed to be a Third Party Claim subject to the procedures set forth in Section 9.4 of this Agreement.

 

2.9 Allocation of Purchase Price . The Purchase Price of the Business shall be allocated as set forth on Exhibit I . The Buyer and Huttig hereby agree and acknowledge that such allocation shall be made in accordance with Section 1060 of the Code and the regulations thereunder, and to report such allocation for all Tax purposes in a consistent manner and take no position contrary thereto. The allocation may not be amended or changed without the mutual written consent of the Parties.

 

2.10 Completion of Transfers .

 

(a) The entire beneficial interest in and to, and the risk of loss with respect to, the Purchased Assets and the Assumed Liabilities, shall, regardless of when legal title thereto shall be transferred to the Buyer, pass to the Buyer at Closing as of the Effective Time. All operations of the Business shall be for the account of Huttig up to the Effective Time and shall be for the account of the Buyer thereafter. In the event legal title to any of the Purchased Assets or the Assumed Liabilities is not transferred at Closing, Huttig shall hold such Purchased Assets or the Assumed Liabilities as nominee for the Buyer until completion of such transfers and shall cooperate with the Buyer in any lawful and reasonable arrangements designed to provide the benefits of ownership thereof to the Buyer.

 

(b) In the event that the legal interest in any of the Purchased Assets or the Assumed Liabilities to be sold, assigned, transferred or conveyed pursuant to this Agreement, or any claim, right or benefit arising thereunder or resulting therefrom cannot be sold, assigned, transferred or conveyed hereunder as of the Closing Date because any waiting or notice period has not expired or any consents or approvals required for such sale, assignment, transfer or conveyance have not been obtained or waived, then the legal interest in such Purchased Assets or the Assumed Liabilities shall not be sold, assigned, transferred or conveyed unless and until such waiting or notice period shall have expired or until approval, consent or waiver thereof is obtained. In such event, and notwithstanding any waiver by the Buyer of the closing conditions contained in Section 7.2 , Huttig shall, at its expense, and the Buyer shall, at its expense, use reasonable efforts to cooperate in obtaining such consents, approvals or waivers as may be necessary to complete such transfers as soon as practicable. Notwithstanding the forgoing, to the extent a landlord or lessor, under a Material Contract, requires any reasonable administrative, processing, expediting or legal fees to be paid in connection with obtaining the consents or approvals for assignment required under this Agreement, Huttig shall pay any such fee. Except as set forth in Section 7.2 , the failure of Huttig to obtain any required consents or approvals prior to Closing shall not affect the Buyer’s obligations to

 

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close under this Agreement or to pay, or cause to be paid, the Purchase Price. Nothing in this Agreement shall be construed as an attempt to assign to the Buyer any legal interest in any of the Purchased Assets or the Assumed Liabilities which, as a matter of law or by the terms of any legally binding contract, engagement or commitment to which Huttig is subject, is not assignable without the consent of any other party, unless such consent shall have been given. Notwithstanding the foregoing, if any equipment lease included in the Purchased Assets has not been assigned to the Buyer within 90 days following the Closing Date, then the Buyer shall have the option to require Huttig to exercise any purchase option of Huttig under such equipment lease and either (i) sell such equipment to the Buyer at a price equal to the amount paid by Huttig to the lessor in order to exercise Huttig’s purchase option, or (ii) continue to lease such equipment to Buyer under the same terms as those in such equipment lease.

 

(c) Pending the assignments, conveyances and transfers referred to in paragraph (b), Huttig shall hold any such non-assigned, non-conveyed and non-transferred Purchased Assets or Assumed Liabilities for the benefit and at the risk of the Buyer and shall cooperate with the Buyer in any lawful and reasonable arrangements designed to provide the benefits of ownership thereof to the Buyer.

 

2.11 Collection of Accounts Receivable . The Buyer agrees to use reasonable business efforts for a period of 90 days following the Closing Date to collect accounts receivable arising from Huttig’s operation of the Business prior to the Effective Time on behalf of Huttig. The Buyer shall pay any and all of Huttig’s accounts receivable collected by the Buyer to Huttig on a weekly basis. Huttig shall pay any and all of the Buyer’s accounts receivable collected by Huttig to the Buyer on a weekly basis. During such 90-day period, Huttig shall refrain from making any efforts to collect accounts receivable arising in connection with Huttig’s conduct of the Business prior to the Effective Time. After the expiration of such 90-day period, (i) Huttig shall be free to pursue such remedies as it may, in its sole discretion, determine to be necessary or advisable for the collection of any remaining accounts receivable arising out of Huttig’s conduct of the Business prior to the Effective Time, and (ii) the Buyer shall provide Huttig with any and all information and documentation it has obtained during the 90-day period with respect to the remaining accounts receivable.

 

2.12 Ongoing Contracts . At Closing, Huttig shall provide to the Buyer on Exhibit K a list of all executory customer Contracts being assigned to the Buyer with respect to which Huttig has provided goods or services prior to the Effective Time. Exhibit K shall set forth with respect to each such executory customer Contract (a) Huttig’s cost of all goods and services provided prior to the Effective Time with respect to such Contract and (b) an itemized description of all such goods and services. At Closing, the Buyer shall place in escrow an amount equal to the aggregate cost of the goods and services provided by Huttig with respect to the Contracts disclosed on Exhibit K (the “ Escrowed Funds ”). The Escrowed Funds shall be deposited with an escrow agent mutually acceptable to Huttig and the Buyer (the “ Escrow Agent ”) who shall be instructed to release the Escrowed Funds as described in this Section 2.12 . The amount of Escrowed Funds deposited with respect to each Contract described on Exhibit K shall be released to Huttig upon the Buyer’s receipt of payment in full with respect to such Contract; provided, however, that if the Buyer does not receive payment in full with respect to such Contract, then the amount released with respect to such Contract will be an amount mutually agreed upon by the Buyer and Huttig. Any liability, including but not limited to refund and warranty claims, related to or arising out of the Contracts identified on Exhibit K shall be allocated to the party that sold the goods or services out of which such liability arose, and such party shall bear the cost associated with such liability.

 

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2.13 Removal of Names . Promptly following Closing, the Buyer shall make reasonable efforts to remove all of Huttig’s trademarks, including but not limited to, the name “Builders Resource,” from the Purchased Assets and the Facilities. The Buyer shall remove all such trademarks from the Purchased Assets and the Facilities prior to December 31, 2004. Only to the extent necessary to give effect to the foregoing limited right to continue to use the trademarks of Huttig, Huttig hereby grants to the Buyer a limited license to retain such marks on the Facilities and the Purchased Assets until December 31, 2004.

 

2.14 Certain Equipment Leases . Exhibit G sets forth all master lease agreements to which Huttig is a party and pursuant to which Huttig leases vehicles and equipment located at the Facilities (the “ Master Leases ”), including the following Master Leases: (i) that certain Security Agreement dated June 18, 2003 between The CIT Group/Equipment Financing, Inc. and Huttig (the “ CIT Agreement ”); (ii) that certain Truck Lease Agreement dated December 7, 2001 between Ryder Truck Rental, Inc. and Huttig (the “ Ryder Agreement ”); and (iii) that certain Term Lease Master Agreement dated August 15, 1984 between IBM Credit Corporation and Huttig f/k/a Huttig Sash and Door Company, as amended by an Amendment to Term Lease Master Agreement dated November 13, 2000, an Addendum to Term Lease Supplement dated April 19, 2001 (Supplement No. R00962640), an Addendum to Term Lease Supplement dated May 10, 2001 (Supplement No. R00962640), an Addendum to Term Lease Supplement dated June 26, 2001 (Supplement No. D00985264), an Addendum to Term Lease Supplement dated August 24, 2001 (Supplement No. R00001527), and an Addendum to Term Lease Supplement dated February 1, 2002 (Supplement No. R00042871) (the “ IBM Agreement ” and, together with the CIT Agreement and the Ryder Agreement, the “ Delayed Lease Agreements ”). Effective as of the Effective Time, Huttig shall grant the Buyer the right to purchase the Delayed Equipment directly from the lessors under the Master Leases. To the extent the Buyer does not exercise this right, Huttig shall grant the Buyer the right to exclusive use of each item of Delayed Equipment until Huttig shall have acquired each such item and transferred title to the Buyer or partially assigned, leased or subleased such item to the Buyer. The Buyer shall reimburse Huttig for all of Huttig’s payments pursuant to the Delayed Lease Agreements with respect to the Delayed Equipment during the period beginning on the Closing Date and ending with respect to each item of Delayed Equipment upon transfer of title for, or a valid leasehold interest in, such item to the Buyer (with respect to each such item, the “ Use Period ”). During the Use Period, the Buyer shall bear the risk of loss of the Delayed Equipment. Huttig shall as soon as reasonably practicable following Closing use commercially reasonable efforts, at its expense, to either purchase the Delayed Equipment or, upon obtaining the appropriate consent from a lessor under the Delayed Lease Agreements, partially assign the Delayed Lease Agreement to the Buyer with respect to such Delayed Equipment or enter into a sublease with the Buyer of the Delayed Equipment under such Delayed Lease Agreement on the same terms as the Delayed Lease Agreement. Promptly after acquiring any item of Delayed Equipment, Huttig shall provide notice of such acquisition to the Buyer (an “ Equipment Notice ”). Each Equipment Notice shall specify the items of Delayed Equipment acquired and the purchase price paid by Huttig for each such item. Within 7 days of receiving an Equipment Notice, the Buyer shall elect by notice to Huttig either to purchase the Delayed Equipment covered by the Equipment Notice for the purchase price specified by Huttig in the Equipment Notice or to lease such Delayed Equipment from Huttig on terms and conditions substantially identical to those contained in the Delayed Lease Agreement applicable to such Delayed Equipment. Within 5 days following receipt of an election of Buyer to purchase or

 

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lease an item of Delayed Equipment, Huttig shall either sell such item of Delayed Equipment to Buyer, free and clear of all liens, or enter into an applicable lease agreement with the Buyer, all in accordance with this Section 2.14 . Notwithstanding the foregoing, however, the Buyer’s aggregate purchase price for the Delayed Equipment covered by the IBM Agreement shall not exceed $7,500. Nothing in this Agreement shall be construed as an attempt to assign to the Buyer any legal interest in the Delayed Equipment which, as a matter of law or by the terms of the Delayed Lease Agreements, is not assignable without the consent of any other party, unless such consent shall have been given.

 

2.15 Further Assurances . From and after the Closing, the Parties shall do such acts and execute such documents and instruments as may be reasonably required to make effective the transactions contemplated hereby.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF HUTTIG

 

Huttig hereby makes the following representations and warranties, each of which is true and correct on the date hereof and shall survive the Closing Date and the transactions contemplated hereby to the extent set forth herein.

 

3.1 Existence and Power .

 

(a) Huttig has the corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder, to transfer the Purchased Assets, to assign the Assumed Liabilities and to consummate the transactions contemplated hereby.

 

(b) Huttig is a corporation validly existing and in good standing under the laws of its jurisdiction of formation and each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure to be so qualified and in good standing would not have a Material Adverse Effect.

 

(c) Huttig is not a party to, subject to or bound by any Contract, Encumbrance or Law which would (i) be breached or violated or its obligations thereunder accelerated or increased (whether or not with notice or lapse of time or both) by the execution or delivery by Huttig of this Agreement or the performance by Huttig of the transactions contemplated by this Agreement, or (ii) prevent the carrying out of the transactions contemplated hereby. Except as set forth on Disclosure Schedule Section 3.1(c) , no permit, consent, waiver, approval or authorization of, or declaration to or filing or registration with, any governmental or regulatory authority or third party is required in connection with the execution, delivery or performance of this Agreement by Huttig or the consummation by Huttig of the transactions contemplated hereby and thereby. The transactions contemplated hereby will not result in the creation of any Encumbrance against the Purchased Assets.

 

(d) Huttig has the power and authority to own, lease and use its assets and to transact the business in which it is engaged, and holds all material authorizations, franchises, licenses and permits required therefore.

 

3.2 Valid and Enforceable Agreement; Authorization . This Agreement has been duly executed and delivered by Huttig and constitutes a legal, valid and binding obligation of Huttig,

 

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enforceable against Huttig in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganiz