Exhibit 10.25
SALES AGREEMENT
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1.
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PARTIES . This contract is made this
day of
November, 2004 between Huttig
Building Products, Inc. (“Seller”), 555 Maryville
University Drive, Suite 400, St. Louis, MO 63141, and Builder
Resource Supply Corporation, (“Buyer”). Builder
Resource Supply Corporation is a Maryland Sub-Chapter S Corporation
owned by Gary Allshouse (“Allshouse”).
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2.
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AGREEMENT TO
SELL . Seller shall sell
to Buyer, and Buyer shall buy from Seller, on or about December 6,
2004, or such other date as the parties shall mutually agree to in
writing (the “Closing Date”), all of the goods, wares,
and merchandise, including inventory, belonging to Seller and now
located at 7453 Shipley Avenue, Hanover, Maryland 21076 (the
“Facility”), together with all fixed assets owned and
used by Seller in the conduct of its business at the Facility,
except for leasehold improvements and the name change on the
trailers. Title to the purchased assets shall be conveyed by bills
of sale, assignments, transfers, and other instruments of transfer
and delivery in such form as Buyer shall reasonably
request.
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3.
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WAREHOUSE
CLOSED FOR INVENTORY .
Upon execution and delivery of this contract, properly executed by
all necessary parties, an inventory will be taken at a time to be
agreed upon between Seller and Buyer prior to closing and the
warehouse shall be closed temporarily. Seller will give the same
inventory inspection rights to Buyer as provided to Buyer’s
bank.
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4.
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INVOICE
VALUATION . The goods,
wares and merchandise shall be valued at Seller’s cost less
either accumulated depreciation or obsolescence reserves, or both.
Buyer shall purchase all inventory, including amounts reserved for
as excess and obsolete. Seller will be responsible for removing
obsolete goods, wares and merchandise it wishes to keep.
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5.
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SELLER
FINANCING . Seller agrees
to finance the cost of the inventory according to the closing
balance sheet at the time of closing for a period of five (5) years
with a simple interest loan at an annual interest rate of 6%. No
down payment will be required on the part of Buyer for the
inventory. Buyer agrees to make quarterly payments of principal and
interest during the term of the loan commencing six months from the
date of closing. During the first six months after closing, the
loan shall accrue interest and Buyer will make quarterly payments
of interest only to Seller (with such payments due on March 6, 2005
and June 6, 2005, respectively); thereafter, the quarterly payments
of both principal and interest shall commence and become due and
payable on the following schedule:
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DATE
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QUARTERLY PAYMENTS
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March 6, 2005
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Interest only
payment
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June 6, 2005
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Interest only
payment
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September 6, 2005
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First payment
of principal (plus interest)
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Page 1 of 12
Initials
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December 6, 2005
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Second payment
of principal (plus interest)
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March 6,
2006
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Third payment
of principal (plus interest)
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June 6,
2006
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Fourth payment
of principal (plus interest)
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September 6,
2006
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Fifth payment
of principal (plus interest)
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December 6,
2006
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Sixth payment
of principal (plus interest)
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March 6,
2007
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Seventh payment
of principal (plus interest)
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June 6,
2007
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Eighth payment
of principal (plus interest)
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September 6,
2007
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Ninth payment
of principal (plus interest)
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December 6,
2007
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Tenth payment
of principal (plus interest)
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March 6,
2008
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Eleventh
payment of principal (plus interest)
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June 6,
2008
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Twelfth payment
of principal (plus interest)
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September 6,
2008
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Thirteenth
payment of principal (plus interest)
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December 6,
2008
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Fourteenth
payment of principal (plus interest)
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March 6,
2009
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Fifteenth
payment of principal (plus interest)
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June 6,
2009
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Sixteenth
payment of principal (plus interest)
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September 6, 2009
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Seventeenth
payment of principal (plus interest)
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December 6, 2009
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Eighteenth
payment of principal (plus interest)
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There shall be no penalty for early
payment. Buyer will provide the same financial statements and
personal guarantees to Seller as provided to Buyer’s bank.
Any default by Buyer on a payment due to Buyer’s bank shall
be construed as a default on Seller’s loan as well and must
be reported to Seller by Buyer within 10 days of such default.
Seller reserves the right to foreclose the loan and seize inventory
and/or accounts receivable (with secondary lien position to
Buyer’s bank as described in paragraph 11, below) upon notice
of default. Any late payment shall be charged an additional 12%
annual rate of interest for each day late. The amounts due
according to the payment schedule in this paragraph and the terms
of the financing set forth in this Section 5 shall be set forth in
a form of promissory note made by Buyer as maker and to Seller as
payee and to be attached as Schedule 5-1 at time the portion
of the purchase price is agreed to and allocated to inventory.
Buyer agrees to execute and deliver such additional instruments,
agreements and other documents as may be necessary for Seller to
perfect its security interest in the collateral identified in
paragraph 11 below.
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6.
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FIXED
ASSETS . Seller agrees to
sell all equipment, fixtures, machinery, and owned vehicles to
Buyer for the book value of all such fixed assets at time of
closing. Buyer shall pay the book value of all fixed assets at time
of closing with the exception of the fixed asset costs associated
with any leasehold improvements and the name change on the
trailers. If book value of fixed assets bought by Buyer is over
$175,000 at time of closing, Buyer may finance the cost of the
fixed assets in excess of $175,000 under the same financing terms
as are used in the inventory sale and described in paragraph 5 of
this agreement.
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Page 2 of 12
Initials
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7.
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LEASED
VEHICLES AND EQUIPMENT .
To the extent allowed, Seller agrees to transfer all leases on
vehicles and equipment that Buyer wishes to keep. Should the
vehicle or equipment lessor not be willing to transfer the lease to
Buyer, then Seller will allow Buyer to use any leased vehicles or
equipment needed for a period not to exceed 6 months or the
duration of the existing lease, whichever period is shorter. Seller
will charge the Buyer the same amount of lease expense as incurred
by Seller from lessor. . Seller will also allow Buyer to purchase
any vehicles from Seller at the lease buy-out rate at time of
closing. Seller may, at its option, add the purchase price of the
leased vehicles or equipment to the principal of the five-year note
contemplated in paragraph 5 of this agreement. Buyer shall
indemnify, defend, and hold Seller harmless from and against any
loss, liability, cost, expense or damage resulting from
Buyer’s use of any such vehicles or equipment, or
both.
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8.
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LEASED
PROPERTY . Subject to the
terms of the Lease between Bench Bros. Realty LLP, Landlord and
Huttig Sash & Door Company (now known as Huttig Building
Products, Inc.), Tenant dated May 29, 1998, a copy of which is
attached as Schedule 8-1 (the “Current Lease”),
including its provisions limiting the transferability of the lease
by Seller, Seller agrees to sub-lease the Facility until the
expiration of the current lease on May 31, 2005 in accordance with
the terms of the sublease attached as Schedule 8-2
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9.
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POST-CLOSING
SUPPORT . Seller agrees
to support the existing Trend computer system for a period not to
exceed six (6) months after closing. Seller agrees to run parallel
with Buyer’s new computer system 30 days prior to conversion
and will provide two years of historical data regarding the
business conducted at the Facility for downloading into
Buyer’s new system. The framework for the technology support
and additional equipment list with costs that Seller will provide
to Buyer is attached to this agreement and identified as
Schedule 9-1 .
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Seller also agrees to provide
administrative support for the processing and application or
payment of customer receivables and vendor invoices in accordance
with the terms and conditions set forth on Schedule 9-1
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10.
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SUPPLY
CHAIN . Seller agrees to
establish Buyer as a sub-distributor for ThermaTru products. All
ThermaTru products ordered on a direct basis will be handled at 0%
markup through 2005 and 5% mark-up through 2006. After 2006, Seller
and Buyer shall have the option to negotiate a markup or, if no
markup is agreed to, terminate the sub-distributorship. Payment
terms will be the standard Seller terms.
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Seller agrees to sell Buyer
ThermaTru fill-in parts out of Seller’s Fredericksburg,
Virginia, warehouse. All such purchases, including labor, will be
marked up 15% until the end of 2005. Freight will not be charged as
long as orders exceed $400. If an order does not exceed this
minimum amount, Fredericksburg branch will charge standard freight
prices. After 2005 Seller and Buyer shall have the option to
negotiate a new markup.
Page 3 of 12
Initials
Pre-hung ThermaTru doors purchased
from the Fredericksburg branch on a non-direct basis are subject to
standard branch markup.
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11.
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CONDITIONS
OF SALE . This agreement
is subject to Buyer’s diligent application for and final
approval of a $1,500,000 operating line of credit as proposed by K
Bank of 7F Gwynns Mill Court, P.O. Box 429, Owings Mill, Maryland,
or other comparable lender (the “Bank”). Seller agrees
to take a 2 nd lien position behind the Bank. In
consideration of 2 nd lien position Buyer agrees to allow
Seller to hold 2 nd lien position on all assets. Seller
agrees to negotiate an intercreditor agreement with the Bank or
other lender if required. Buyer will provide Seller with a personal
guarantee that is similar in form and substance to the personal
guarantee required by the Bank and will execute financing
agreements reasonably necessary to perfect the foregoing security
interest of Seller
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a.
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Seller shall
assume responsibility for any and all liabilities to include
warranty claims for the period in which it owned the business prior
to closing. Should any such claims arise, Buyer shall notify Seller
immediately and upon notification (written, fax or phone) shall
resolve the issue in accordance with the terms of their existing
contract with the customers on a case-by-case basis.
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b.
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In
consideration of the Purchase Price, Seller will not directly
engage in any business or activity similar to or competitive with
Buyer’s business for a period of five (5) years from closing
within a twenty-five (25) mile radius of Buyer’s location.
Competing is construed as Seller’s knowingly and
intentionally acquiring, operating, or purchasing any One-Step
Distribution business that competes with Buyer within the time
stated in this paragraph.
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c.
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AGREEMENT TO
HIRE SELLER’S EMPLOYEES . Buyer shall offer full-time employment to all
of Seller’s employees identified on Schedule 11.c.-1
attached hereto (the “Employees”). Buyer shall
determine the terms and conditions of such employment in its sole
and absolute discretion. Seller will be responsible for all
compensation, benefits, bonuses or other amounts payable that
accrue before the Closing Date and are related to the services
provided by the Employees as employees of Seller. Buyer will be
responsible for all compensation, benefits, bonuses or other
amounts payable that accrue after the Closing Date and are related
to the services provided by the Employees as employees of Buyer. As
successor employer, Buyer assumes all liability for any claims for
wages, benefits,
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