Exhibit 99.1
-----------------------------------------------
ASSET PURCHASE AGREEMENT
among
KADANT COMPOSITES LLC,
KADANT INC.,
LDI COMPOSITES CO.
and
LIBERTY DIVERSIFIED INDUSTRIES, INC.
dated as of
October 21, 2005
-----------------------------------------------
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
------------------------
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
-----------------------
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;
-------------------
(f) Records (Paper and Electronic). All books, records,
-----------------------------
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");
<
2
>
(g) Intellectual Property and Intangible Assets. All
-------------------------------------------
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
---------------
the contracts, agreements, equipment leases, open purchase orders and
commitments specifically described on Schedule 1(i) and assumed by Buyer at
-------------
Closing (the "Assumed Contracts"); and
(j) Leases. The rights of Seller arising out of the
------
lease for the offices located at ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ (the
"Bedford Facility").
2. Excluded Assets. Notwithstanding the foregoing, the following
---------------
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
----------------------------------------------
consideration for the conveyance, transfer and assignment of the Assets shall
consist of the following:
(a) Purchase Price. The purchase price for the Assets
--------------
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.
<
3
>
(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
<
4
>
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)
--------
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
---------
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
---------
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.
-----------
(a) Assumed Liabilities. Buyer shall not assume or be
-------------------
liable for any liabilities, commitments or obligations of Seller, except (i)
liabilities existing on the Closing Date specifically identified on Schedule
--------
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
-------------
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
-------------
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.
<
5
>
(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,
-------------
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
------------
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
---------------------------------------------------
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.
<
6
>
(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
-------------
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.
---------------------------------------------------
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
<
7
>
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").
-------------
(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
<
8
>
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 ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, 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.
<
9
>
(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
<
10
>
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
<
11
>
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.
<
12
>
(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.
<
13
>
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
--------------------------
▇▇▇▇ 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.
<
14
>
(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
<
15
>
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
<
16
>
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 ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, and (ii)
800,000 pounds is currently stored in two locations at Seller's facility at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇. 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
<
17
>
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
------------------------------------------------------
Non-Disparagement.
-----------------
(a) Obligation of Confidentiality. Seller and Kadant
-----------------------------
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 an obligation
of confidentiality to Buyer or an Affiliate of Buyer, (y) such information which
has been or is later disclosed by Buyer or its Affiliates to an unrelated third
party on a non-confidential basis and (z) information which Seller or Kadant are
obliged by applicable law, subpoena, court or other legal proceeding to
disclose, and then only with as much prior written notice to the Buyer as is
practical under the circumstances and only to the extent to which such party's
counsel advises is legally required. Information does not lose its confidential
status merely because it was known by other persons or entities. Buyer
acknowledges that Kadant may be
<
18
>
required to disclose certain information about the Business in its reports to
the Securities and Exchange Commission and such disclosure shall not be deemed
to be a violation of this Agreement, but Kadant shall provide as much prior
written notice to the Buyer as is reasonably practical under the circumstances
and such information may be disclosed only to the extent to which Kadant's
counsel or accountants advise is legally required.
(b) Non-Competition. Each of Seller and Kadant agree
---------------
that, for a period of five (5) years following the Closing Date, it will not,
directly or indirectly, alone or in an active capacity with any person or
entity, anywhere in the world, develop, design, manufacture, sell, promote or
distribute or provide consulting services with respect to or be involved with
the design, development, manufacture, sale, promotion or distribution of
Restricted Products (the "Restricted Business"). "Restricted Products" are
composite resin/fiber building products. The foregoing shall not prohibit
Seller or Kadant from purchasing for investment any securities or interest in
any organization engaged in a Restricted Business so long as its aggregate
holdings in any such organization do not exceed 5% of such organization's total
equity. Kadant represents and warrants to Buyer that Kadant and its current
subsidiaries are not currently conducting any business that would constitute a
Restricted Business and, based on such representation and warranty, Kadant and
its current subsidiaries shall not be restricted in any manner from conducting
its or their business as currently conducted. The foregoing shall not prohibit
Kadant or any of its subsidiaries (a "Kadant Party") from acquiring any person
or entity which conducts a Restricted Business; provided, however, if the
Restricted Business involves composite resin/fiber decking products, the
applicable Kadant Party must commence and pursue the transfer of the Restricted
Business to a third party. If the applicable Kadant Party is not able to
transfer the Restricted Business to a third party within one (1) year following
the acquisition of such Restricted Business by the applicable Kadant Party, the
applicable Kadant Party shall either (i) cease the Restricted Business, or (ii)
offer to sell to Buyer, for the then current book value of the business to be
determined in accordance with GAAP.
(c) Non-Solicitation and Non-Disparagement. Each of
--------------------------------------
Seller and Kadant agrees that (i) for a period of five (5) years following the
Closing Date it will not, directly or indirectly, either for itself or for any
other person solicit any customers of Seller or customers of Buyer or utilize
vendor relationships, vendor lists or customer lists for the purpose of any
activity in connection with any Restricted Products, and (ii) for a period of
three (3) years following the Closing Date it will not, directly or indirectly,
solicit, or induce, or attempt to solicit, or induce any of the Key Employees
for the purpose of providing employment opportunities or to terminate his/her
relationship with Buyer. Each party agrees that at no time following the
Closing Date shall it make any disparaging statements concerning any other party
hereto or such party's businesses, officers, directors, employees, agents or
affiliates.
<
19
>
(d) Remedies. In the event of a violation or threatened
--------
violation of the covenants contained in this Section 11, in addition to any
other remedy available at law or in equity, the injured party shall (i) have the
right and remedy of specific enforcement, including injunctive relief, it being
acknowledged and agreed that any such violation or threatened violation will
cause irreparable injury and that monetary damages will not provide an adequate
remedy, and (ii) if successful in its claim against the violating party, be
reimbursed by the violating party for the actual costs and expenses incurred in
pursuing rights under this Section 11, including reasonable attorneys' fees and
other litigation expenses as incurred.
12. Indemnification.
---------------
(a) Indemnification Obligation of Seller. Each of Kadant
------------------------------------
and Seller, jointly and severally, shall indemnify and save harmless Buyer and
its successors, assigns and legal representatives (each a "Buyer Indemnified
Party") against any loss, claim, liability, expense, cost, including reasonable
attorneys' fees and expenses (collectively, the "Losses") caused to such Buyer
Indemnified Party by or arising out of (i) the failure by Seller or Kadant to
perform any covenant or agreement in this Agreement, including any Schedules or
Exhibits hereto (other than the Assumed Contracts or the Assumed Liabilities),
(ii) any breach of warranty or misrepresentation made by or on behalf of Seller
or Kadant in this Agreement, or (iii) any claim with respect to the Retained
Liabilities.
(b) Indemnification Obligation of Buyer. Each of Buyer
-----------------------------------
Parent and Buyer, jointly and severally, shall indemnify and save harmless
Seller and Kadant and their successors, assigns and legal representatives (each
a "Seller Indemnified Party") against any Losses caused to such Seller
Indemnified Party by or arising out of (i) the failure by Buyer to perform any
covenant or agreement in this Agreement or any other documents delivered
pursuant to the terms of this Agreement; provided, however, that Buyer Parent
-------- -------
shall have no indemnification obligations for Losses caused by Buyer's failure
to perform any covenant or agreement in Section 10(a) of this Agreement, (ii)
any breach of warranty or misrepresentation made by or on behalf of Buyer in
this Agreement, (iii) any claim by any third party for any brokerage, finder's,
agent's or similar fee or commission in connection with the transactions
contemplated hereby insofar as such claim is alleged to be based on arrangements
by Buyer Parent, Buyer or their representatives, (iv) any liability for unpaid
income taxes, sales taxes, unemployment tax, withholding tax or any other taxes
of Buyer or its Affiliates with respect to any tax year or portion thereof, and
(v) any claim with respect to liabilities or obligations specifically assumed by
Buyer or arising from activities of Buyer after the Closing Date, except as
otherwise provided in this Agreement.
(c) Method of Asserting Third Party Claims. As used
--------------------------------------
herein, an "Indemnified Party" shall refer to a "Buyer Indemnified Party" or a
"Seller Indemnified Party," as applicable, and "Indemnifying Party" shall refer
to the party obligated to indemnify the Indemnified Party.
(i) Notification of Claims. If any third party
----------------------
shall notify any Indemnified Party with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against an
Indemnifying Party under this Section 12, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing, provided that no
delay on the part of the Indemnified Party in notifying the Indemnifying Party
shall relieve the Indemnifying Party
<
20
>
from any obligation hereunder unless (and then solely to the extent that the
Indemnifying Party thereby is prejudiced).
(ii) Defense by Indemnifying Party. The
-----------------------------
Indemnifying Party will have the right to defend the Indemnified Party against
the Third Party Claim with counsel of its choice reasonably satisfactory to the
Indemnified Party so long as (i) the Indemnifying Party notifies the Indemnified
Party in writing within ten business days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will defend against
the Third Party Claim and the Indemnifying Party will indemnify the Indemnified
Party in accordance with this Section 12 with respect to the Third Party Claim,
and (ii) the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(iii) Limitation. So long as the Indemnifying
----------
Party is conducting the defense of the Third Party Claim in accordance with
clause (ii) above, (A) the Indemnified Party may retain separate co-counsel at
its sole cost and expense, (B) the Indemnified Party will not consent to the
entry of any judgment, enter into any settlement or take any other action that
may be materially adverse to the interests of the Indemnifying Party with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) unless the
settlement relates solely to monetary claims, the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably). Notwithstanding the foregoing, (x) if
a Third Party Claim seeks solely equitable relief or (y) if the subject matter
of the Third Party Claim relates solely to the ongoing business of an
Indemnified Party, which Third Party Claim, if decided against any Indemnified
Party, would materially and adversely affect t in the first instance and, if the
Indemnified Party does not contest, defend or settle such Third Party Claim, the
Indemnifying Party shall then have the right to contest and defend (but not
settle except as provided above) such Third Party Claim.
(iv) Assumption of Defense by Indemnified Party.
------------------------------------------
If the Indemnifying Party does not conduct the defense of the Third Party Claim
in accordance with clause (ii) above, then (i) the Indemnified Party may assume
the defense of the Third Party Claim with counsel which shall be reasonably
satisfactory to the Indemnifying Party, (ii) the Indemnified Party shall act
reasonably and in accordance with its good faith business judgment and shall not
effect any settlement without the consent of the Indemnifying Party, which
consent shall not be withheld or delayed unreasonably, and (iii) the
Indemnifying Party shall be entitled to participate in such defense with its own
counsel and at its own expense.
(d) Method of Asserting Non-Third Party Claims. In the
------------------------------------------
event an Indemnified Party shall have a claim against an Indemnifying Party that
does not involve a Third Party Claim, the Indemnified Party shall deliver a
written notice of such claim with reasonable promptness to the Indemnifying
Party, which notice shall contain sufficient information and be accompanied by
sufficient supporting material to enable the Indemnifying Party to make a
reasonable determination as to the merits of such claim and Losses resulting
therefrom. If the Indemnifying Party notifies the Indemnified Party in writing
that it does not dispute the claim described in such notice, the Losses
<
21
>
in the amount specified in the Indemnified Party's notice will be conclusively
deemed a liability of the Indemnifying Party for which payment shall be made in
accordance with Section 12(e) below. If the Indemnifying Party fails to notify
the Indemnified Party in writing within 20 days after delivery of such notice
that the Indemnifying Party disputes the claim described in such notice (a
"Dispute Notice"), the Indemnifying Party shall be deemed to have agreed to the
claim. If the Indemnifying Party timely gives a Dispute Notice, then the
parties shall settle the disputed claim by mutual agreement, arbitration if
mutually agreed, or litigation.
(e) Presentation of Claims. The liability of an
----------------------
Indemnifying Party under this Section 12 is conditioned on the Indemnified Party
making a written claim for indemnification against the Indemnifying Party
within the Survival Period as described in Section 13(c), provided that if an
Indemnified Party makes a written notice of claim for indemnification against an
Indemnifying Party under subparagraph (c) or (d) within such Survival Period,
then the Indemnifying Party agrees to indemnify the Indemnified Party against
the Indemnified Party's Losses, to the extent it is an indemnifiable claim,
through and after the date of the claim for indemnification, including any
Losses after the end of the applicable Survival Period, resulting from, arising
out of or relating to the claim. Upon a final determination of an
indemnification claim made by an Indemnified Party, whereby such final
determination is by reason of (a) a failure of the Indemnifying Party to timely
object to an Indemnification Notice or (b) the mutual agreement of the
Indemnifying Party and the Indemnified Party, or (c) a judgment of a court of
competent jurisdiction, then the amount of the Losses stated in such claim or
otherwise agreed to or determined, as the case may be, shall be first offset
against the Holdback Amount, until such amount is exhausted, second, against the
Escrow Amount, until such amount is exhausted, and third if there is any Loss
remaining unpaid after such offset, then such remaining amount shall be paid in
cash or by cashier's check or by wire transfer of immediately available funds to
the Indemnified Party.
(f) Limitation of Claims. No claim or claims may be made
--------------------
against an Indemnifying Party for indemnification (excluding failure to pay the
Holdback) unless the Losses of the Indemnified Party shall exceed an amount
equal to $50,000 (the "Threshold"), in which case the Indemnifying Party shall
be obligated to the Indemnified Party for all Losses. No Indemnifying Party
shall be liable for any Loss, to the extent that the aggregate of all such
Losses for which Indemnified Parties have received indemnification exceed the
Purchase Price. The parties acknowledge and agree that the indemnification
rights set forth in this Section 12 are the parties' sole and exclusive
remedies for any Losses suffered by such party in connection with this Agreement
and the transactions contemplated hereby. In no event shall any Indemnified
Party be awarded punitive, special, consequential (including without limitation
damages for lost profit or diminution in value), or multiple damages. The
Threshold does not apply to Warranty Claims, which are governed by Section 10(a)
of this Agreement.
13. Miscellaneous.
-------------
(a) Assignment; Binding Effect. Without the prior
--------------------------
written consent of the other party, the rights of Seller, Kadant and Buyer under
this Agreement shall not be assignable. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and permitted assigns.
<
22
>
(b) Allocation of Purchase Price. Each of Seller and
----------------------------
Buyer shall agree that the fair market value allocable to each of the Assets to
be purchased by Buyer hereunder, arrived at by arm's length negotiation and used
by each party in reporting the transactions contemplated by this Agreement shall
be as set forth on Schedule 13(b). The allocation of the Purchase Price
--------------
pursuant to this Section 13(b) shall not be construed as a limitation on damages
for breach of any covenant or agreement by Seller in this Agreement, nor shall
such allocation be deemed to limit Buyer's remedies pursuant to Section 11(d)
hereof.
(c) Survival. All of the representations, warranties,
--------
covenants and agreements contained in this Agreement and in all certificates,
schedules, exhibits, documents or other writings delivered pursuant to this
Agreement have been relied upon and shall survive the Closing for the applicable
period specified herein (the "Survival Period"). The representations and
warranties, contained in Sections 6(a), (b), (e), and (v) and Sections 7(a) and
(b) shall survive forever; the representations and warranties contained in
Sections 6(r) and (y) shall survive until the tenth (10th) anniversary of the
Closing Date; the representation and warranties contained in Section 6(s) shall
survive for the applicable statute of limitations period; and all other
representation and warranties shall survive until May 1, 2007.
(d) Expenses. Except as otherwise provided herein, each
--------
of the parties shall bear all expenses incurred by it in connection with this
Agreement and in the consummation of the transactions contemplated hereby.
(e) Notices. Except as otherwise required herein, any
-------
notice or other communication provided for or allowed hereunder shall be
considered to have been validly given upon receipt if delivered personally or by
reputable overnight courier or if delivered by United States mail, registered or
certified, postage prepaid, return receipt requested and addressed as provided
herein:
If to Seller
or Kadant, at: Kadant Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Vice President and
General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
<
23
>
If to Buyer
Or Buyer
Parent, at: LDI Composites Co.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
Vice President - Finance
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. York
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
The addresses to which notices or demands are to be given may be changed from
time to time by notice served as provided above.
(f) Sections and Other Headings. Sections or other
---------------------------
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
(g) Counterpart Execution. This Agreement may be
---------------------
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute but one and the same instrument.
(h) Integrated Agreement. This Agreement, the matters
--------------------
contained herein and the documents referenced in this Agreement, the Exhibits
and the Schedules constitute the entire agreement between the parties hereto
with respect to the subject matter hereof, and there are no agreements,
understandings, restrictions, warranties or representations between the parties
other than those set forth herein or herein provided for.
(i) Separability; Waivers. The invalidity or
---------------------
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement. No waiver
of any of the provisions of this Agreement shall constitute a waiver of any
other provision, nor shall any waiver as to one event constitute a waiver as to
any other event.
(j) Governing Law; Jurisdiction. This Agreement shall be
---------------------------
governed and interpreted in accordance with the internal laws of the State of
Minnesota. If any proceeding is brought by Seller or Kadant with respect to
this Agreement or the transactions described herein or contemplated hereby, it
shall be conducted in the state and federal courts located in Minneapolis,
Minnesota. If any proceeding is brought by Buyer or Buyer Parent with respect
to this Agreement or the transactions described herein or contemplated hereby,
it shall be conducted in the state and federal courts located in Boston,
Massachusetts. Each of the parties hereto irrevocably waives (i) any objection
which it may now or hereafter have to the venue of any such enforcement
proceeding brought in such courts, and (ii) any claim that any proceeding
brought in any of these courts has been brought in an inconvenient forum.
Service of all writs, processes and summons in any such
<
24
>
enforcement proceeding in any of such courts may be made by any means permitted
by law and, to the extent permitted by law, by the mailing of copies of the same
to the addresses provided in Section 13(e).
(k) Amendment. This Agreement may be modified or amended
---------
only by a separate writing signed by the parties.
(l) No Third Party Beneficiaries. This Agreement is
----------------------------
exclusively for the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement shall not be deemed to confer
upon or give to any other third party any remedy, claim, liability,
reimbursement, cause of action or other right.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
KADANT COMPOSITES LLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
KADANT INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
LDI COMPOSITES CO.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Vice President - Chief Financial
Officer
LIBERTY DIVERSIFIED INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Vice President - Chief Financial
Officer
<
25
>
Exhibit A
---------
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is entered into as of October
---------
___, 2005, by and among Kadant Composites LLC, a Delaware limited liability
company ("Seller"), Kadant Inc., a Delaware corporation ("Kadant"), LDI
------ ------
Composites Co., a Minnesota corporation ("Buyer"), and National City Bank (the
-----
"Escrow Agent"). Unless otherwise defined in this Agreement, all capitalized
------------
terms used herein shall have the meanings ascribed to them in the Asset Purchase
Agreement (as defined below).
WHEREAS, Seller, Kadant, Buyer and Liberty Diversified Industries,
Inc., a Minnesota corporation and parent corporation of Buyer, have entered into
that certain Asset Purchase Agreement, dated as of the date hereof (the "Asset
-----
Purchase Agreement"), pursuant to which Seller will sell the Assets to Buyer;
------------------
WHEREAS, pursuant to the Asset Purchase Agreement, Buyer has agreed to
deposit $628,550 (the "Escrow Amount") into an escrow account at the Closing,
--------------
which is to be disbursed by the Escrow Agent in accordance with Section 3(d) of
the Asset Purchase Agreement and the provisions of this Agreement; and
WHEREAS, the Escrow Agent is willing to act as an escrow agent
hereunder and to hold and disburse the Escrow Amount on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and mutual agreements
contained herein and in the Asset Purchase Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Appointment and Agreement of Escrow Agent. Buyer, Seller and
-----------------------------------------
Kadant hereby appoint the Escrow Agent to serve as, and the Escrow Agent hereby
agrees to act as, an escrow agent upon the terms and conditions of this
Agreement.
2. Escrow Agent Compensation. As compensation for its services to be
-------------------------
rendered under this Agreement, the Escrow Agent shall be paid a fee as set forth
in Schedule A hereto and shall be reimbursed upon request for all actual
expenses, disbursements and advances, including reasonable fees of outside
counsel, if any, incurred or made by it in connection with the carrying out of
its duties under this Agreement (the "Escrow Costs"). Buyer and Seller shall
------------
each pay half of the Escrow Costs of the Escrow Agent.
3. Delivery of Escrow Amount. Pursuant to the Asset Purchase
-------------------------
Agreement, Buyer shall deliver to the Escrow Agent, by wire transfer of
immediately available funds on the date hereof, an amount of $628,550,
representing the Escrow Amount, receipt of which is hereby acknowledged by the
Escrow Agent, to be held and distributed in accordance with the terms of this
Agreement.
<
A-1
>
4. Purpose of Escrow Amount. The Escrow Amount is to be retained by
------------------------
the Escrow Agent in accordance with the terms of this Agreement till May 1, 2007
(the "Escrow Release Date") to secure Seller' obligations with respect to any
-------------------
indemnifiable Loss to any Buyer Indemnified Party pursuant to Section 12 of the
Asset Purchase Agreement.
5. Investment of Escrow Amount. The Escrow Amount shall be deposited
---------------------------
with the Escrow Agent in an interest bearing account and shall be held by the
Escrow Agent in accordance with the terms of this Agreement and disbursed by the
Escrow Agent in accordance with Section 7 hereof. Seller shall deliver written
instructions to the Escrow Agent as to how the Escrow Amount shall be invested
from time to time. Such investments shall be limited to (a) direct obligations
of the United States Government (or agencies or instrumentalities thereof) or
in money market funds which are invested in such direct obligations including
those of the Escrow Agent or an Affiliate thereof that serves as investment
advisor and receives a fee, (b) certificates of deposit, time deposits or other
interest-bearing deposits of commercial banks having total capital and surplus
of at least $250,000,000 and insured by the FDIC, or (c) commercial paper issued
by any corporation organized and existing under the laws of the United States of
America or any state thereof, which at the time of purchase has been rated not
less than "A1" if rated by Standard and Poor's Corporation or "P-1" if rated by
▇▇▇▇▇'▇ Investors Services. Each party shall pay all income, withholding and any
other taxes imposed on or measured by interest income on the Escrow Amount which
is attributable to distributions to such party and such party shall file all tax
and information returns applicable thereto.
6. Escrow Amount Offset. In the event that any Buyer Indemnified
--------------------
Party is entitled to offset Losses against the Escrow Amount pursuant to Section
12(e) of the Asset Purchase Agreement (such Loss an "Escrow Claim"), Buyer shall
------------
notify Seller and Escrow Agent of the Escrow Claim and the Escrow Agent shall
disburse to Buyer the amount of the Escrow Claim together with interest income
on the portion of the Escrow Amount attributable to the amount of the Escrow
Claim in immediately available funds by wire transfer to Buyer's bank account in
accordance with wire instructions as set forth in Schedule B hereto.
----------
7. Disbursement of Escrow Amount.
-----------------------------
7.1 The Escrow Agent shall not authorize or make any
disbursements of the Escrow Amount, except pursuant to Section 6 above or
Sections 7.2 or 7.3 below.
7.2 Prior to the Escrow Release Date, the Escrow Agent shall
only disburse the Escrow Amount, or portions thereof, pursuant to Section 6
above or otherwise upon receipt of a joint instruction in writing signed by both
Buyer and Seller, which instruction shall set forth the amount of disbursement.
Upon receipt of any such joint instruction, the Escrow Agent shall, as soon as
practicable, but in any event within two (2) business days disburse to Buyer
such amount from the Escrow Amount, together with any interest earned on
thereon, in immediately available funds by wire transfer to Buyer's bank account
in accordance with wire instructions as set forth in Schedule B hereto. The
----------
Escrow Agent shall, within seven (7) days after a disbursement described in
Section 6 above or a disbursement described in this Section 7.2, send to both
Buyer and Seller a notice that sets forth the amount of the disbursement and an
updated calculation of the then-remaining balance of the Escrow Amount.
<
A-2
>
7.3 On the Escrow Release Date, the Escrow Agent shall
disburse to Seller the Escrow Balance (as hereinafter defined), together with
any interest earned thereon, in immediately available funds by wire transfer to
Seller's bank account in accordance with wire instructions as set forth in
Schedule B hereto. The "Escrow Balance" means the Escrow Amount less the sum of
---------- --------------
(a) the amount or amounts disbursed or to be disbursed pursuant to Section 7.2
above and (b) the amount of any Escrow Claim not yet disbursed because it its
subject to a dispute pursuant to Section 8 below.
8. Disputes. If any dispute should arise with respect to the
--------
distribution or ownership or right of possession of the Escrow Amount or the
duties of the Escrow Agent under this Agreement, or should any claim be made
upon the Escrow Agent or the Escrow Amount by any third party, the Escrow Agent
shall retain in its possession the portion of the Escrow Amount in dispute until
it receives (a) written instructions signed by both Buyer and Seller directing
the manner in which the disputed amount is to be distributed or (b) an order,
decree or judgment of a court of competent jurisdiction. Upon receipt of such
instructions or court order, decree or judgment, the Escrow Agent shall
distribute the disputed amount in accordance with those instructions or the
order, decree or judgment. The Escrow Agent shall be under no duty to institute
or defend any proceedings.
9. Escrow Agent's Rights and Responsibilities.
------------------------------------------
9.1 Except as expressly contemplated by this Agreement or by
joint written instructions from Buyer and Seller, the Escrow Agent shall not
sell, transfer or otherwise dispose of in any manner all or any of the assets in
the Escrow Amount, except pursuant an order of a court of competent
jurisdiction.
9.2 The duties and obligations of the Escrow Agent shall be
determined solely by this Agreement, and no implied duties or obligations shall
be read into this Agreement against the Escrow Agent. The Escrow Agent shall
not be liable for any act done or omitted to be done in the absence of gross
negligence or willful misconduct.
9.3 In the performance of its duties hereunder, the Escrow
Agent shall be entitled to rely upon any document, instrument or signature
believed by it in good faith to be genuine and signed by any party hereto or an
authorized officer or agent thereof, and shall not be required to investigate
the truth or accuracy of any statement contained in any such document or
instrument. The Escrow Agent may assume that any person purporting to give any
notice in accordance with the provisions of this Agreement has been duly
authorized to do so.
9.4 The Escrow Agent shall not be liable for any error of
judgment, or any action taken, suffered or omitted to be taken, hereunder except
in the case of its gross negligence, bad faith or willful misconduct. The
Escrow Agent may consult with counsel of its own choice and shall have full and
complete authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel.
9.5 The Escrow Agent shall have no duty as to the collection
or protection of the assets in the Escrow Amount or income thereon, nor as to
the preservation of any rights pertaining thereto, beyond the safe custody of
the Escrow Amount actually in its possession.
<
A-3
>
9.6 Buyer and Seller agree, jointly and severally, to
reimburse and indemnify the Escrow Agent for, and hold it harmless against, any
loss, liability or expense, including, without limitation, reasonable attorneys'
fees, incurred without gross negligence, or willful misconduct on the part of
the Escrow Agent arising out of, or in connection with the acceptance of, or the
performance of, its duties and obligations under this Agreement.
9.7 The Escrow Agent may at any time resign by giving 30
business days prior written notice of resignation to Buyer and Seller. Buyer
and Seller may at any time jointly remove the Escrow Agent by giving 30 business
days written notice signed by each of them to the Escrow Agent. If the Escrow
Agent shall resign or be removed, a successor Escrow Agent, which shall be a
bank or trust company having its principal executive offices in the United
States of America and assets in excess of $2 billion shall be appointed by
written instrument executed by Buyer and Seller and delivered to the Escrow
Agent and to such successor Escrow Agent and, thereupon, the resignation or
removal of the predecessor Escrow Agent shall become effective and such
successor Escrow Agent, without any further act, deed or conveyance, shall
succeed to all the rights and obligations with respect to the Escrow Amount held
hereunder of such predecessor Escrow Agent, and such predecessor Escrow Agent
shall, on the written request of Buyer, Seller or the successor Escrow Agent,
deliver to such successor Escrow Agent the Escrow Amount and any other
securities, money or property held by the predecessor Escrow Agent pursuant to
this Agreement. If no successor Escrow Agent shall have been appointed within
30 business days of a notice of resignation by the Escrow Agent, the Escrow
Agent's sole responsibility shall thereafter be to hold the Escrow Amount and
any other securities, money or property held by the Escrow Agent pursuant to
this Agreement until the earliest of its receipt of designation of a successor
Escrow Agent, a joint written instruction by Buyer and Seller, or termination of
this Agreement in accordance with its terms.
10. Termination. This Escrow Agreement shall terminate upon the final
-----------
disbursement of the Escrow Amount pursuant to Section 7.3 hereof.
11. Miscellaneous.
-------------
11.1 Assignment; Binding Effect. Without the prior written
--------------------------
consent of the other parties, the rights of any party under this Agreement shall
not be assignable. Subject to the preceding sentence, this Agreement is binding
upon, inures to the benefit of and is enforceable by the parties hereto and
their respective successors and permitted assigns.
11.2 Notices. Except as otherwise required herein, any notice
-------
or other communication provided for or allowed hereunder shall be in writing and
shall be considered to have been validly given upon receipt if delivered
personally, or by reputable overnight courier, or if delivered by United States
mail, registered or certified, postage prepaid, return receipt requested, to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this
Section 11.2):
<
A-4
>
if to Seller or Kadant, to:
Kadant Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President and
General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ & Lardner LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esquire
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to Buyer, to:
LDI Composites Co.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Vice President -
Finance
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. York
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Escrow Agent, to:
National City Bank
c/o Allegiant Asset Management
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11.3 Governing Law; Jurisdiction and Service of Process.
-------------
This Agreement shall be governed and interpreted in accordance with the internal
laws of the State of Minnesota. If any proceeding is brought by Seller or
Kadant with respect to this Agreement or the transactions described herein or
contemplated hereby, it shall be conducted in the state and federal courts
located in Minneapolis, Minnesota. If any proceeding is brought by Buyer with
respect to this Agreement or the transactions described herein or contemplated
hereby, it shall be
<
A-5
>
conducted in the state and federal courts located in Boston, Massachusetts.
Each of the parties hereto irrevocably waives (i) any objection which it may now
or hereafter have to the venue of any such enforcement proceeding brought in
such courts, and (ii) any claim that any proceeding brought in any of these
courts has been brought in an inconvenient forum. Service of all writs,
processes and summons in any such enforcement proceeding in any of such courts
may be made by any means permitted by law and, to the extent permitted by law,
by the mailing of copies of the same to the addresses provided in Section 11.2
above.
11.4 Amendments. This Agreement may be modified or
----------
amended only by a separate writing signed by the parties.
11.5 Severability; Waivers. The invalidity or
---------------------
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement. No waiver
of any of the provisions of this Agreement shall constitute a waiver of any
other provision, nor shall any waiver as to one event constitute a waiver as to
any other event.
11.6 Waiver of Jury Trial. THE PARTIES HEREBY IRREVOCABLY
--------------------
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF.
11.7 Entire Agreement. This Agreement, the Asset Purchase
----------------
Agreement and the Holdback Agreement constitute the entire agreement of the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, among the parties hereto
with respect to the subject matter hereof.
11.8 No Third Party Beneficiaries. This Agreement is
----------------------------
exclusively for the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement shall not be deemed to confer
upon or give to any other third party any remedy, claim, liability,
reimbursement, cause of action or other right.
11.9 Headings. Sections or other headings contained in
--------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
11.10 Counterparts. This Agreement may be executed in two
------------
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
<
A-6
>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first written above by themselves or by their
respective officers duly authorized.
KADANT COMPOSITES LLC.
By: _______________________________
Name:
Title:
KADANT INC.
By: _______________________________
Name:
Title:
LDI COMPOSITES CO.
By: _______________________________
Name:
Title:
NATIONAL CITY BANK, AS ESCROW AGENT
By: _______________________________
Name:
Title:
<
A-7
>
SCHEDULE A
----------
ESCROW AGENT COMPENSATION
REVIEW, ACCEPTANCE AND SET UP FEE $ 500.00
For providing initial review of the Escrow Agreement and all
supporting documents and for initial services associated with
establishing the account. This is a one (1) time fee payable
upon the opening of the account.
I. Annual Administrative Fee (payable in advance) $ 2,500.00
EXTRAORDINARY SERVICES:
For any services other than those covered by the aforementioned, a special per
hour charge will be made commensurate with the character of the service, time
required and responsibility involved. Such services include but are not
limited to excessive administrative time, specialized reports, record keeping,
unusual certifications, etc.
FEE SCHEDULE IS SUBJECT TO ANNUAL REVIEW AND ADJUSTMENT, or as terms of the
agreement may be amended from time to time. This Schedule A is incorporated by
reference into the Escrow Agreement.
<
A-8
>
SCHEDULE B
----------
WIRE INSTRUCTIONS
To Buyer:
--------
Account Name: Liberty Diversified Industries, Inc.
Account Number: 150250092742
Bank Name: US Bank
Bank ABA#: ▇▇▇▇▇▇▇▇▇
To Seller:
---------
Account Name: Kadant Composites LLC
Account Number: 530-960176
Bank Name: ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank
Bank ABA#: ▇▇▇▇▇▇▇▇▇
Immediate Telephone
Advice: ▇▇▇▇ ▇▇▇▇▇▇, VP, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank
Telephone number: (▇▇▇) ▇▇▇-▇▇▇▇
<
A-9
>
Exhibit B
---------
HOLDBACK AGREEMENT
This HOLDBACK AGREEMENT (this "Agreement") is entered into as of
---------
October ____, 2005 by and 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 corporation and parent corporation of Buyer
("Buyer Parent"). Capitalized terms used but not otherwise defined in this
------------
Agreement shall have the meanings ascribed to such terms in the Asset Purchase
Agreement (as hereinafter defined).
WHEREAS, Seller, Kadant, Buyer and Buyer Parent have entered into that
certain Asset Purchase Agreement (the "Asset Purchase Agreement"), dated as of
------------------------
the date hereof, pursuant to which Buyer has agreed to purchase the Assets and
assume certain of the liabilities of Seller; and
WHEREAS, Seller, Kadant, Buyer and Buyer Parent have agreed to enter
into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and mutual agreements
contained herein and in the Asset Purchase Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Holdback Amount. At the Closing, Buyer shall withhold from
---------------
the Purchase Price Six Hundred Twenty Thousand Dollars ($628,550) (the "Holdback
--------
Amount"), which amount shall be paid to Seller or retained by Buyer in
------
accordance with the terms of this Agreement.
2. Purposes of Holdback Amount. The Holdback Amount shall be
---------------------------
available until the first anniversary of the Closing Date (the "Holdback Release
----------------
Date") to secure Seller's obligations with respect to any indemnifiable Loss to
----
any Buyer Indemnified Party pursuant to Section 12 of the Asset Purchase
Agreement. In the event that any Buyer Indemnified Party is entitled to offset
Losses against the Holdback Amount pursuant to Section 12(e) of the Asset
Purchase Agreement (such Loss a "Holdback Claim"), Buyer shall, within seven
--------------
(7) days after such offset, send to Seller a notice that sets forth the amount
of the Holdback Claim and an updated calculation of the then-remaining balance
of the Holdback Amount. Only after the Holdback Amount is exhausted, may Buyer
offset the amount of indemnifiable Losses from the Escrow Amount, which offset
shall be in accordance with the terms and provisions of that certain Escrow
Agreement entered into by and among Seller, Kadant, Buyer, Buyer Parent and
Allegiant Group, dated as of the even date herewith (the "Escrow Agreement").
----------------
3. Disbursement of Holdback Fund. On Holdback Release Date,
-----------------------------
Buyer shall pay to Seller the then-remaining balance of the Holdback Amount in
immediately available funds by wire transfer to an account set forth in Schedule
--------
A hereto or to an account designated in writing by Seller prior to the Holdback
-
Release Date. Buyer Parent hereby agrees to guaranty Buyer's obligation to pay
the Holdback Amount on the Holdback Release Date.
<
B-1
>
4. Miscellaneous.
-------------
4.1 Assignment; Binding Effect. Without the prior
--------------------------
written consent of the other parties, the rights of any party under this
Agreement shall not be assignable. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and permitted assigns.
4.2 Notices. Except as otherwise required herein, any
-------
notice or other communication provided for or allowed hereunder shall be in
writing and shall be considered to have been validly given upon receipt if
delivered personally, or by reputable overnight courier, or if delivered by
United States mail, registered or certified, postage prepaid, return receipt
requested, to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 4.2):
if to Seller or Kadant, to:
Kadant Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President and
General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esquire
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to Buyer or Buyer Parent, to:
Liberty Diversified Industries, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Vice President -
Finance
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. York
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
<
B-2
>
4.3 Governing Law; Jurisdiction and Service of Process.
--------------------------------------------------
This Agreement shall be governed and interpreted in accordance with the internal
laws of the State of Minnesota. If any proceeding is brought by Seller or
Kadant with respect to this Agreement or the transactions described herein or
contemplated hereby, it shall be conducted in the state and federal courts
located in Minneapolis, Minnesota. If any proceeding is brought by Buyer or
Buyer Parent with respect to this Agreement or the transactions described herein
or contemplated hereby, it shall be conducted in the state and federal courts
located in Boston, Massachusetts. Each of the parties hereto irrevocably waives
(a) any objection which it may now or hereafter have to the venue of any such
enforcement proceeding brought in such courts, and (b) any claim that any
proceeding brought in any of these courts has been brought in an inconvenient
forum. Service of all writs, processes and summons in any such enforcement
proceeding in any of such courts may be made by any means permitted by law and,
to the extent permitted by law, by the mailing of copies of the same to the
addresses provided in Section 4.2 above.
4.4 Amendments. This Agreement may be modified or
----------
amended only by a separate writing signed by the parties.
4.5 Severability; Waivers. The invalidity or
---------------------
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement. No waiver
of any of the provisions of this Agreement shall constitute a waiver of any
other provision, nor shall any waiver as to one event constitute a waiver as to
any other event.
4.6 Waiver of Jury Trial. THE PARTIES HEREBY IRREVOCABLY
--------------------
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF.
4.7 Entire Agreement. This Agreement, the Asset Purchase
----------------
Agreement and the Escrow Agreement constitute the entire agreement of the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, among the parties hereto
with respect to the subject matter hereof.
4.8 No Third Party Beneficiaries. This Agreement is
----------------------------
exclusively for the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement shall not be deemed to confer
upon or give to any other third party any remedy, claim, liability,
reimbursement, cause of action or other right.
4.9 Headings. Sections or other headings contained in
--------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
<
B-3
>
4.10 Counterparts. This Agreement may be executed in two
------------
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed by its duly authorized officers as of the day and year first above
written.
KADANT COMPOSITES LLC
By: _______________________________
Name:
Title:
KADANT INC.
By: _______________________________
Name:
Title:
LDI COMPOSITES CO.
By: _______________________________
Name:
Title:
LIBERTY DIVERSIFIED INDUSTRIES, INC.
By: _______________________________
Name:
Title:
<
B-4
>
Schedule A
----------
Seller's Account Information:
Account Name: Kadant Composites LLC.
Account Number: 530-960176
Bank Name: ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank
Bank ABA: ▇▇▇▇▇▇▇▇▇
Immediate Telephone
Advice: ▇▇▇▇ ▇▇▇▇▇▇, VP, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank
Telephone number: (▇▇▇) ▇▇▇-▇▇▇▇
<
B-5
>
Exhibit C
---------
GENERAL CONVEYANCE, ▇▇▇▇ OF SALE AND ASSIGNMENT
This GENERAL CONVEYANCE, ▇▇▇▇ OF SALE AND ASSIGNMENT (this "▇▇▇▇ of
Sale"), is entered into and delivered as of October ___, 2005 by Kadant
Composites LLC, a Delaware limited liability company ("Seller"), to LDI
Composites Co., a Minnesota corporation ("Buyer"). All capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in
that certain Asset Purchase Agreement by and among Seller, Buyer, Kadant Inc., a
Delaware corporation, and Liberty Diversified Industries, Inc., a Minnesota
corporation, dated even date herewith (the "Asset Purchase Agreement").
WHEREAS, upon the terms and subject to the conditions set forth in the
Asset Purchase Agreement, Seller has agreed to sell, transfer, convey, assign
and deliver to Buyer, and Buyer has agreed to acquire and accept, all of
Seller's right, title and interest in and to the Assets, as set forth in Section
1 of the Asset Purchase Agreement and defined therein as the "Assets."
NOW, THEREFORE, in consideration of the premises, and of the assumption
by Buyer of certain liabilities and obligations of Seller under the Asset
Purchase Agreement, and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged:
(1) Seller hereby sells, transfers, conveys, assigns and delivers
to Buyer all of its right, title and interest in and to the Assets;
TO HAVE AND TO HOLD, the Assets unto Buyer, and its successors
and assigns, for its or their use forever.
(2) Seller agrees that it will execute and deliver any further
assignments, instruments of transfer or bills of sale, and take all such
actions, that may reasonably be deemed necessary by Buyer in order to fully vest
in Buyer title to the Assets hereby intended to be transferred.
(3) If for any reason Buyer shall not be authorized or qualified
to receive any specific contract, lease, permit, license, claim, demand or right
owned by Seller that constitutes the Assets, Seller further covenants to use
commercially reasonable efforts to execute appropriate acts, transfers,
assignments, instruments and conveyances of any such contract, lease, permit,
license, claim, demand or right now owned by it when and as Buyer shall be
authorized or qualified to receive the same.
(4) This ▇▇▇▇ of Sale may not be amended, nor shall any waiver,
change, modification, consent or discharge be effected, except by an instrument
in writing executed by or on behalf of Seller, with the written consent of
Buyer.
<
C-1
>
(5) Each and every covenant, agreement, warrant and understanding
of Seller in this ▇▇▇▇ of Sale shall be binding upon Seller and its successors
and assigns, and shall inure to the benefit of the Buyer, and its successors and
assigns, whether expressly stated herein or not.
(6) This ▇▇▇▇ of Sale shall be governed by and construed and
enforced in accordance with the laws of the State of Minnesota, without regard
to its conflicts of law principles.
(7) This ▇▇▇▇ of Sale shall be subject to the provisions of the
Asset Purchase Agreement, and if and to the extent they are inconsistent, the
provisions of the Asset Purchase Agreement shall be controlling.
IN WITNESS WHEREOF, Seller has caused this ▇▇▇▇ of Sale to be executed
by an officer duly authorized, on and as of the day and year first above
written.
KADANT COMPOSITES LLC
By: ______________________________
Name:
Title:
<
C-2
>
Exhibit D
---------
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment and
Assumption"), dated as of October ___, 2005, is made by and between Kadant
Composites LLC, a Delaware limited liability company ("Seller"), and LDI
Composites Co., a Minnesota corporation ("Buyer"), and shall be deemed to be
effective as of the date hereof. All capitalized terms used in this Assignment
and Assumption and not defined herein shall have the respective meanings
ascribed to them in the Asset Purchase Agreement by and among Seller, Buyer,
Kadant Inc., a Delaware corporation, and Liberty Diversified Industries, Inc., a
Minnesota corporation, dated as of October ___, 2005 (the "Agreement").
WHEREAS, pursuant to the Agreement, Seller has agreed to convey
Seller's interests in the Assumed Contracts to Buyer and Buyer has agreed to
assume the future payment and performance of the Assumed Contracts and the
Assumed Liabilities.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer hereby assumes and agrees to
pay, discharge and perform, as and when the same shall become due and in the
manner required, all of the obligations pursuant to the Assumed Contracts and
Assumed Liabilities. Buyer shall have whatever rights Seller has relating to
any Assumed Contracts, including the right to contest in good faith the
legality, validity or enforceability of any of the Assumed Contracts or Assumed
Liabilities. Nothing herein shall be deemed to deprive Buyer of any defenses,
set-offs or counterclaims which Seller may have had or which Buyer shall have
with respect to any of the Assumed Contracts and Assumed Liabilities. Buyer, by
its execution of this Assignment and Assumption, and Seller, by its acceptance
hereof, each acknowledges and agrees that neither the representations and
warranties nor the rights and remedies of the parties under the Agreement shall
be deemed to be enlarged, modified or altered in any way by such execution and
acceptance of this instrument. The provisions of this Assignment and Assumption
shall be binding upon Buyer, its respective successors, assigns, and legal
representatives and shall inure to the benefit of Seller, its successors,
assigns, and legal representatives.
IN WITNESS WHEREOF, the parties have caused this Assignment and
Assumption Agreement to be duly executed by authorized representatives as of
and on the date first above written.
KADANT COMPOSITES LLC
By: ____________________________
Name:
Title:
LDI COMPOSITES CO.
By: ____________________________
Name:
Title:
<
D-1
>
Exhibit E
---------
BIODAC SUPPLY AGREEMENT
This Supply Agreement (the "Agreement") is dated October 21, 2005, and
---------
is between KADANT GRANTEK INC., a Wisconsin corporation ("Seller"), and LDI
------
COMPOSITES CO., a Minnesota corporation ("Buyer").
-----
WHEREAS, Seller manufactures a Biodac granule as more fully described
on Exhibit A attached hereto (the "Product"); and
-------
WHEREAS, Seller as supplied and sold the Product to Kadant Composites
LLC (formerly known as Kadant Composites, Inc.), a Delaware limited liability
company ("Composites"), in connection with Composites operation and conduct of a
----------
business that manufactures and produces composite resin/fiber building products
(the Business); and
--------
WHEREAS, in connection with the sale of the Business by Composites to
Buyer, Buyer wishes to purchase the Product from Seller and Seller wishes to
sell the Product to Buyer on the terms set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
1. Sale and License of the Product.
-------------------------------
a. During the term of this Agreement, Seller agrees to
supply and sell to Buyer and Buyer agrees to purchase from Seller the quantities
of the Product from time to time ordered by Buyer at the price for the Product
at the time of such order. Buyer shall submit its orders for Products to
Seller, which shall be acknowledged by Seller. Each such order shall be subject
to Seller's standard terms and conditions of sale, including delivery terms,
which shall be consistent with the past practices of Seller in selling the
Product to the Business.
b. The parties acknowledge that the maximum amount of
Product that Seller shall be required to supply hereunder in any one year during
the Term (as defined below) shall be 30,000 tons (the "Maximum Supply Amount").
c. To the extent that Buyer seeks to purchase more than
the Maximum Supply Amount in any year during the Term, and Seller is unable or
unwilling (other than as a result of a Force Majeure Event (as defined below))
to supply the Product to Buyer in excess of the Maximum Supply Amount, then the
parties shall enter into an agreement whereby Seller will grant Buyer a non-
exclusive, royalty-free, perpetual license produce the Product on its own for
composite exterior building products (the "Product License"). In connection
with the grant of the Product License pursuant to the terms and conditions of
the immediately preceding sentence, Seller shall provide Buyer with reasonable
technical assistance at then prevailing market rates.
<
E-1
>
d. To the extent that for any reason other than as set
forth in Section 1(c) above Seller is unable or unwilling (other than as a
result of a Force Majeure Event) to supply the Product to Buyer, then the
parties shall enter into the Product License. In connection with the grant of
the Product License pursuant to the terms and conditions of this Section 1(d),
Seller shall provide Buyer with reasonable technical assistance at no charge for
up to one year from the date of the Product License.
2. Price.
-----
a. For the first year of the Term, the "Price" for the
-----
Product shall be as set forth on Exhibit B attached hereto; provided, however,
-------- -------
that the Price shall be subject to surcharges (charges incurred by Seller from
suppliers of raw materials, which may include charges for increased cost of
natural gas) imposed by Seller on its other customers.
b. After the first year of the Term, on such date or
dates as the Seller implements changes in the price at which Seller sells its
product to its general customer base (each such date being sometimes hereinafter
referred to as an "Adjustment Date"), the Price shall be adjusted (i.e., either
---------- ----
increased or decreased) to the amount that is determined by multiplying the
Price in effect immediately prior to such Adjustment Date by a fraction (a) the
numerator of which is the price charged for the Product by the Seller to its
customers other than the Buyer on such Adjustment Date and (b) the denominator
of which is the price charged for the Product by the Seller to its customers
immediately prior to such Adjustment Date. In addition, surcharges may be
imposed if such surcharges are imposed by Seller on its other customers.
Notwithstanding the foregoing, in no event (other than surcharges) shall any
increase in the Price for any year during the first five years of the Term be
greater than seven percent (7%) over the Price for the prior year. After the
expiration of the first five years of the Term, the Buyer and Seller shall
negotiate new pricing for the Products for each year of the remainder of the
Term, which pricing shall be no higher than those prices that are comparable to
and consistent with the pricing in place with other customers of the Seller at
such time.
3. Payment by Buyer. Promptly following the date of shipment
----------------
(the "Shipment Date") of Products by Seller, Seller shall prepare and send to
-------------
Buyer a written invoice (each, an "Invoice") bearing the Shipment Date and
-------
detailing the quantity of Product shipped and the aggregate Price for the
quantity of Product covered by such Invoice. Except for disputed Invoices,
Buyer will pay Seller within 30 days after receipt of each Invoice. If Buyer in
good faith disputes the amount of any sum claimed by Seller to be due and
payable by Buyer under this Agreement, Seller and Buyer shall use their best
efforts to reach agreement promptly as to the amount due and payable.
4. Term. The term (the "Term") of this Agreement shall commence
---- ----
on the date of this Agreement and shall terminate on the tenth (10th)
anniversary of such date, subject to earlier termination as set forth in Article
5. Upon expiration of the Term, the parties may seek to enter into an
additional five (5) year term, upon terms and conditions that are mutually
acceptable to each party.
<
E-2
>
5. Termination. This Agreement may be terminated (i) by Buyer
-----------
upon 30 days notice to Seller, or (ii) by either party if the other party
breaches any of its material obligations or agreements hereunder, and such
breaching party fails to cure such breach within 90 days of receiving written
notice from the non-breaching party of such breach, provided, however, that
during any cure period or any dispute pertaining to an alleged breach by either
party, the parties shall continue to comply with its ongoing obligations
hereunder.
6. Title; Risk of Loss. Title to and the risk of loss of all
-------------------
Products sold to Buyer under this Agreement shall pass to Buyer at such time as
such Products are placed F.O.B. carrier at Seller's facility, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, and shall be at the risk of Buyer from and after
such time. Buyer will pay for all costs of transportation from Seller's
facility to Buyer's facility for any and all Products purchased by Buyer
hereunder.
7. Force Majeure.
-------------
(a) Subject to the limitations set forth in this
Agreement, in the event that either party is rendered unable by reason of a
Force Majeure Event to perform, wholly or in part, any obligation set forth in
this Agreement, then such obligations of such party shall be suspended or
excused to the extent and during the continuance of such Force Majeure Event.
(b) For the purposes of this Agreement, a "Force Majeure
-------------
Event" shall mean any act, event or condition that causes delay in or failure of
-----
performance of obligations under this Agreement, to the extent such act, event
or condition (x) is beyond the reasonable control of the party relying thereon,
(y) is not the result of any acts, omissions or delays of such party (or any
third person over whom such party has control) and (z) cannot be cured,
remedied, avoided, offset, negotiated or otherwise overcome by the prompt
exercise of due diligence of the party relying thereon (or any third person over
whom such party has control). Subject to the foregoing, Force Majeure Events
shall include (i) lightning, storm, flood, typhoon, hurricane or other unusually
severe weather conditions, (ii) earthquake, landslide, explosion or fire, (iii
accident to or breakdown of equipment not attributable to failure to follow
prudent industry operating practices (including, without limitation, a shutdown
of operations in anticipation of any such breakdown), (iv) strikes and/or other
work stoppage, lockout imposed by an employers' organization, or other
industrial or labor shortage, or labor disputes or disturbance affecting the
performance of such party, (v) acts of war (whether declared or undeclared),
threat of war, mobilization or other unexpected call-up of armed forces,
actions of terrorists, blockade, riot, insurrection, civil commotion, public
demonstrations, revolution, coup d'etat, sabotage, vandalism or acts of public
enemies, (vi) a change in law, (vii) expropriation, condemnation or compulsory
acquisition of any material assets or rights or any other act, omission or
default by any governmental entity which adversely affects Seller or Buyer, or
any of its rights under this Agreement or any other project agreement to which
it is a party, (viii) failure to obtain or renew any permit, (ix)
unavailability or interruption or reduction in the supply of fuel, raw material,
or water or the supply of other utility services and materials necessary for the
operation of any facility of Seller and (x) any Force Majeure Event described in
the foregoing clauses (i) through (ix) affecting the performance of any entity
that is a party to any material maintenance, construction, service, fuel
transportation, fuel supply or other material contract relating to the
ownership, operation or maintenance of any facility of Seller. In no event
shall any change in the financial condition of Seller or Buyer or any change in
market conditions affecting the market or the manufacture of Products constitute
a Force Majeure Event hereunder.
<
E-3
>
(c) Neither Seller nor Buyer shall be liable to the other
for any loss or damage arising out of or relating to the occurrence or existence
of any Force Majeure Event or the inability of Seller or Buyer to perform its
obligations under this Agreement to the extent such performance is excused in
accordance with this Article 7. Any failure by Seller or Buyer to perform any
of its obligations under this Agreement shall not constitute a breach by Seller
or Buyer of any such obligations under this Agreement to the extent such
performance is excused in accordance with this Article 7.
(d) In the event of the occurrence of a Force Majeure
Event that prevents a party from performing any of its obligations hereunder,
such party shall (i) promptly notify the other party in writing of such Force
Majeure Event, (ii) not be entitled to suspend performance under this Agreement
for any greater scope or longer duration than is required by the Force Majeure
Event, (iii) use all reasonable efforts to remedy its inability to perform and
to resume full performance hereunder as soon as practicable (provided, however,
that such party shall not be required by this clause (iii) to settle any strike
or other labor dispute on terms or to accept any condition or other governmental
restriction in connection with any governmental approval that are materially
adverse to such party or otherwise not commercially reasonable), (iv) keep such
other party apprised of such efforts on a regular basis and (v) provide written
notice of the resumption of performance hereunder.
8. Product Quality/Warranty. Seller covenants and agrees that
------------------------
the Product shall conform to the specifications set forth on Exhibit A, and
shall be of a quality that is comparable to and consistent with the quality of
the Product that Seller has supplied to Composites prior to the date of this
Agreement. Except as set forth in the immediately preceding sentence, SELLER
PROVIDES THE PRODUCT WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY,
NONINFRINGEMENT, OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTIES OF QUALITY OR
PERFORMANCE.
9. Severability. The invalidity of any portion of this Agreement
------------
will not and shall not be deemed to affect the validity of any other provision.
If any provision of this agreement is declared by a court of competent
jurisdiction to be invalid, the parties agree that the remaining provisions
shall be in full force and effect as if they had been executed by both parties
subsequent to expungement of the invalid provision.
10. Limitation of Liability. In no event shall either party be
-----------------------
liable to the other for damages resulting from any breach of any covenant,
agreement, representation, or otherwise set forth or contained in this
Agreement, in an aggregate amount that is in excess of $1,000,000 (the "Cap");
provided, however, that the Cap shall be $2,500,000 in the event that Seller (a)
-------- -------
decides to exit its current business through (i) a sale of all or substantially
all of its assets, or a majority of its capital stock, or (ii) the
discontinuation of its operations, and in such circumstances the Seller does not
offer to sell its business to Buyer, or (b) ceases to supply the Product
hereunder for any other reason (other than a Force Majeure Event) without
providing Buyer at least six months notice of such discontinuance.
<
E-4
>
11. Binding on Successors; Assignment. This Agreement shall be
---------------------------------
binding upon and inure to the benefit of the respective parties hereto, their
legal representatives, successors, and permitted assigns. Neither Seller nor
Buyer shall have the right to assign any or all of its right, title or interest
in, to or under this Agreement, without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed; provided,
however, that either party may, without the prior written consent of the other
party, assign all of its right, title and interest in, to and under this
Agreement to a purchaser of its business or substantially all of its assets or a
majority of its capital stock.
12. Entire Agreement. This Agreement contains the entire
----------------
Agreement of the parties with respect to the specific subject matter hereof and
no representations, inducements, provisions or agreements, oral or otherwise,
not embodied herein shall be of any force and effect. All other agreements
between Buyer and Seller with respect to the specific subject matter hereof are
terminated as of the date that this Agreement is executed.
13. Amendments. This Agreement may not be amended, altered,
----------
modified or supplemented at any time unless by a writing executed by the parties
hereto, and all such amendments, alterations, modifications, and supplements
shall, except as otherwise provided hereinafter, be binding upon all other
persons interested herein.
14. Further Assurances. Both parties covenant and agree that they
------------------
shall execute and deliver any and all additional writings, instruments and other
documents and shall take such further action as shall be reasonably required in
order to effectuate the terms and conditions of this Agreement.
15. Waiver. Failure to insist upon strict compliance with any
------
terms, covenants or conditions herein shall not be deemed a waiver of such, nor
shall any waiver or relinquishment of such right or power at any time be taken
to be a waiver of any other breach. No waiver of any provision of this
Agreement and no consent to any departure by Seller or Buyer herefrom shall be
effective unless the same shall be in writing and signed by the party purported
to have given such waiver or consent; and then any such waiver or consent shall
be effective only in the specific instance and for the specified purpose for
which it was given.
16. Captions; Counterparts. The article headings contained in
----------------------
this Agreement are for reference purposes only and shall not effect in any way
the meaning or interpretation of this Agreement or any Article hereof. This
Agreement may be executed in counterparts, all of which shall constitute one
agreement binding on both parties hereto and shall have the same force and
effect as an original instrument, notwithstanding that both parties may not be
signatories to the same original or the same counterparts.
17. Notices. Except as otherwise required herein, any notice or
-------
other communication provided for or allowed hereunder shall be in writing and
shall be considered to have been validly given upon receipt if delivered
personally, or by reputable overnight courier, or if delivered by United States
mail, registered or certified, postage prepaid, return receipt requested, to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a
<
E-5
>
notice given in accordance with this Section 17):
if to Seller, to:
Kadant GranTek Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
if to Buyer, to:
LDI Composites Co.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Vice President - Finance
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
18. Governing Law. This Agreement shall be governed and
-------------
interpreted in accordance with the internal laws of the State of Wisconsin. If
any proceeding is brought by Seller or Buyer with respect to this Agreement or
the transactions described herein or contemplated hereby, it shall be conducted
in the state and federal courts located in Madison, Wisconsin. Each of the
parties hereto irrevocably waives (a) any objection which it may now or
hereafter have to the venue of any such enforcement proceeding brought in such
courts, and (b) any claim that any proceeding brought in any of these courts has
been brought in an inconvenient forum. Service of all writs, processes and
summons in any such enforcement proceeding in any of such courts may be made by
any means permitted by law and, to the extent permitted by law, by the mailing
of copies of the same to the addresses provided in Section 17 above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date stated in the preamble above.
KADANT GRANTEK INC.
By:___________________________
Name:
Title:
LDI COMPOSITES CO.
By:___________________________
Name:
Title:
<
E-6
>
EXHIBIT A
---------
Description of the Product
--------------------------
Biodac-Cellulose based complex; Grey; Free Flowing; Void of any foreign matter.
Particle size - 20/70 US MESH
Moisture - <5%
<
E-7
>
EXHIBIT B
---------
Price
-----
Biodac 20/70 - $70.00 per US Ton - FOB Kadant GranTek, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇▇
Natural Gas Surcharge - $20.00 per US Ton in bulk, effective December 1, 2005,
assuming that such pricing is imposed on approximately 2/3rds of Seller's
customers (based on tons supplied)
<
E-8
>
Exhibit F
---------
WARRANTY FUND ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is entered into as of
October ___, 2005, by and among Kadant Composites LLC, a Delaware limited
liability company ("Seller"), Kadant Inc., a Delaware corporation ("Kadant"),
------ ------
LDI Composites Co., a Minnesota corporation ("Buyer"), and National City Bank
-----
(the "Escrow Agent"). Unless otherwise defined in this Agreement, all
------------
capitalized terms used herein shall have the meanings ascribed to them in the
Asset Purchase Agreement (as defined below).
WHEREAS, Seller, Kadant, Buyer and Liberty Diversified Industries,
Inc., a Minnesota corporation, and parent corporation of Buyer, have entered
into that certain Asset Purchase Agreement, dated as of the date hereof (the
"Asset Purchase Agreement"), pursuant to which Seller will sell the Assets to
------------------------
Buyer;
WHEREAS, pursuant to the Asset Purchase Agreement, Kadant and Seller
have agreed to deposit $3,500,000 into an escrow account at the Closing (the
"Warranty Fund"), which is to be disbursed by the Escrow Agent after the Closing
-------------
in accordance with Section 10(a) of the Asset Purchase Agreement and the
provisions of this Agreement; and
WHEREAS, the Escrow Agent is willing to act as an escrow agent
hereunder and to hold and disburse the Warranty Fund on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and mutual agreements
contained herein and in the Asset Purchase Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Appointment and Agreement of Escrow Agent Seller, Kadant,
-----------------------------------------
and Buyer hereby appoint the Escrow Agent to serve as, and the Escrow Agent
hereby agrees to act as, an escrow agent upon the terms and conditions of
this Agreement.
2. Escrow Agent Compensation. As compensation for its services
-------------------------
to be rendered under this Agreement, the Escrow Agent shall be paid a fee as set
forth in Schedule A hereto and shall be reimbursed upon request for all actual
expenses, disbursements and advances, including reasonable fees of outside
counsel, if any, incurred or made by it in connection with the carrying out of
its duties under this Agreement (the "Escrow Costs"). Buyer and Seller shall
each pay half of the Escrow Costs for each year or any portion thereof.
3. Delivery of Warranty Fund. Pursuant to the Asset Purchase
-------------------------
Agreement, Kadant and Seller shall deliver to the Escrow Agent, by wire transfer
of immediately available funds on the date hereof, an amount of $3,500,000,
representing the Warranty Fund, receipt of which is hereby acknowledged by the
Escrow Agent, to be held in accordance with the terms of this Agreement. The
Warranty Fund shall be held by the Escrow Agent in a separate and distinct bank
account from the Escrow Amount.
<
F-1
>
4. Purpose of Warranty Fund. The Warranty Fund shall be
------------------------
administered by and available to Buyer to cover Warranty Claim Costs and
Expenses solely related to the Warranty Claims pursuant to Section 10(a)(ii) of
the Asset Purchase Agreement for the shorter period of (a) five (5) years after
the Closing Date or (b) the date on which the Warranty Fund is exhausted (such
period, the "Buyer Administration Period"). The Warranty Fund shall be used
---------------------------
only to cover the costs or expenses of remedying Warranty claims with no right
to offset against any claims for indemnification or other obligations of Seller
or Kadant to Buyer under the Asset Purchase Agreement. 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.
5. Investment of Warranty Fund. The Warranty Fund shall be
---------------------------
deposited with the Escrow Agent in money market funds with earnings credited to
the Warranty Fund.
6. Disbursement of Warranty Fund.
-----------------------------
6.1 The Escrow Agent shall not authorize or make any
disbursements of the Warranty Fund, except pursuant to Sections 6.2 and 6.3
below.
6.2 During the Buyer Administration Period, the Escrow
Agent shall only disburse the Warranty Fund, or portions thereof, upon receipt
of a written instruction signed by an officer of Buyer and acknowledged by
Seller or upon receipt of a written instruction signed by an officer of Seller
and acknowledged by Buyer in the event that Seller shall be entitled to withdraw
funds from the Warranty Fund pursuant to Section 4 above, which instruction
shall certify that such funds are for a Warranty Claim under Section 10(a)(ii)
of the Asset Purchase Agreement and shall set forth the amount of disbursement.
Upon receipt of any such instruction, the Escrow Agent shall, as soon as
practicable, but in any event within two (2) business days, disburse to Buyer
such amount from the Warranty Fund, in immediately available funds by wire
transfer to Buyer's bank account in accordance with wire instructions as set
forth in Schedule B hereto. The Escrow Agent shall each month send to Buyer,
Seller and Kadant a notice that sets forth the amount of the disbursement and an
updated calculation of the then-remaining balance of the Warranty Fund.
6.3 At the end of the Buyer Administration Period, within
five (5) business days after the end of the Buyer Administration Period the
Escrow Agent shall disburse to Seller the then-remaining balance of the Warranty
Fund, if any, in immediately available funds by wire transfer to Seller's bank
account in accordance with wire instructions as set forth in Schedule B hereto.
7. Disputes. If any dispute should arise with respect to the
--------
distribution or ownership or right of possession of the Warranty Fund or the
duties of the Escrow Agent under this Agreement, or should any claim be made
upon the Escrow Agent or the Warranty Fund by any third party, the Escrow Agent
shall retain in its possession the portion of the Warranty Fund in dispute until
it receives (a) written instructions signed by both Buyer and Seller directing
the manner in which the disputed amount is to be distributed or (b) an order,
decree or judgment of a court of competent jurisdiction. Upon receipt of such
instructions or court order, decree or
<
F-2
>
judgment, the Escrow Agent shall distribute the disputed amount in accordance
with those instructions or the order, decree or judgment. The Escrow Agent
shall be under no duty to institute or defend any proceedings.
8. Escrow Agent's Rights and Responsibilities.
------------------------------------------
8.1 Except as expressly contemplated by this Agreement or
by joint written instructions from Buyer and Seller, the Escrow Agent shall not
sell, transfer or otherwise dispose of in any manner all or any of the assets in
the Warranty Fund, except pursuant an order of a court of competent
jurisdiction.
8.2 The duties and obligations of the Escrow Agent shall
be determined solely by this Agreement, and no implied duties or obligations
shall be read into this Agreement against the Escrow Agent. The Escrow Agent
shall not be liable for any act done or omitted to be done in the absence of
gross negligence or willful misconduct.
8.3 In the performance of its duties hereunder, the
Escrow Agent shall be entitled to rely upon any document, instrument or
signature believed by it in good faith to be genuine and signed by any party
hereto or an authorized officer or agent thereof, and shall not be required to
investigate the truth or accuracy of any statement contained in any such
document or instrument. The Escrow Agent may assume that any person purporting
to give any notice in accordance with the provisions of this Agreement has been
duly authorized to do so.
8.4 The Escrow Agent shall not be liable for any error of
judgment, or any action taken, suffered or omitted to be taken, hereunder except
in the case of its gross negligence, bad faith or willful misconduct. The
Escrow Agent may consult with counsel of its own choice and shall have full and
complete authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel.
8.5 The Escrow Agent shall have no duty as to the
collection or protection of the assets in the Warranty Fund or income thereon,
nor as to the preservation of any rights pertaining thereto, beyond the safe
custody of the Warranty Fund actually in its possession.
8.6 Buyer and Seller agree, jointly and severally, to
reimburse and indemnify the Escrow Agent for, and hold it harmless against, any
loss, liability or expense, including, without limitation, reasonable attorneys'
fees, incurred without gross negligence, or willful misconduct on the part of
the Escrow Agent arising out of, or in connection with the acceptance of, or the
performance of, its duties and obligations under this Agreement.
8.7 The Escrow Agent may at any time resign by giving 30
business days prior written notice of resignation to Buyer and Seller. Buyer
and Seller may at any time jointly remove the Escrow Agent by giving 30 business
days written notice signed by each of them to the Escrow Agent. If the Escrow
Agent shall resign or be removed, a successor Escrow Agent, which shall be a
bank or trust company having its principal executive offices in the United
States of America and assets in excess of $2 billion shall be appointed by
written instrument executed by Buyer and Seller and delivered to the Escrow
Agent and to such successor Escrow Agent and, thereupon, the resignation or
removal of the predecessor Escrow Agent shall become effective and such
successor Escrow Agent, without any further act, deed or conveyance, shall
succeed to
<
F-3
>
all the rights and obligations with respect to the Warranty Fund held hereunder
of such predecessor Escrow Agent, and such predecessor Escrow Agent shall, on
the written request of Buyer, Seller or the successor Escrow Agent, deliver to
such successor Escrow Agent the Warranty Fund and any other securities, money or
property held by the predecessor Escrow Agent pursuant to this Agreement. If no
successor Escrow Agent shall have been appointed within 30 business days of a
notice of resignation by the Escrow Agent, the Escrow Agent's sole
responsibility shall thereafter be to hold the Warranty Fund and any other
securities, money or property held by the Escrow Agent pursuant to this
Agreement until the earliest of its receipt of designation of a successor Escrow
Agent, a joint written instruction by Buyer and Seller, or termination of this
Agreement in accordance with its terms.
9. Termination. This Escrow Agreement shall terminate upon the
-----------
final disbursement of the Warranty Fund pursuant to Section 6.3 hereof.
10. Miscellaneous.
-------------
10.1 Assignment; Binding Effect. Without the prior
--------------------------
written consent of the other parties, the rights of any party under this
Agreement shall not be assignable, except that Seller shall have the right to
assign this Agreement to Kadant. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and permitted assigns.
10.2 Notices. Except as otherwise required herein, any
-------
notice or other communication provided for or allowed hereunder shall be in
writing and shall be considered to have been validly given upon receipt if
delivered personally, or by reputable overnight courier, or if delivered by
United States mail, registered or certified, postage prepaid, return receipt
requested, to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 10.2):
if to Seller or Kadant, to:
Kadant Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President and
General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ & Lardner LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esquire
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
<
F-4
>
if to Buyer, to:
LDI Composites Co.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Vice President - Finance
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. York
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Escrow Agent, to:
National City Bank
c/o Allegiant Asset Management
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
10.3 Governing Law; Jurisdiction and Service of Process.
--------------------------------------------------
This Agreement shall be governed and interpreted in accordance with the internal
laws of the State of Minnesota. If any proceeding is brought by Seller or
Kadant with respect to this Agreement or the transactions described herein or
contemplated hereby, it shall be conducted in the state and federal courts
located in Minneapolis, Minnesota. If any proceeding is brought by Buyer with
respect to this Agreement or the transactions described herein or contemplated
hereby, it shall be conducted in the state and federal courts located in Boston,
Massachusetts. Each of the parties hereto irrevocably waives (a) any objection
which it may now or hereafter have to the venue of any such enforcement
proceeding brought in such courts, and (b) any claim that any proceeding brought
in any of these courts has been brought in an inconvenient forum. Service of
all writs, processes and summons in any such enforcement proceeding in any of
such courts may be made by any means permitted by law and, to the extent
permitted by law, by the mailing of copies of the same to the addresses provided
in Section 10.2 above.
10.4 Amendments. This Agreement may be modified or
----------
amended only by a separate writing signed by the parties.
10.5 Severability; Waivers. The invalidity or
---------------------
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement. No waiver
of any of the provisions of this Agreement shall constitute a waiver of any
other provision, nor shall any waiver as to one event constitute a waiver as to
any other event.
<
F-5
>
10.6 Waiver of Jury Trial. THE PARTIES HEREBY IRREVOCABLY
--------------------
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF THE PARTIES IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF.
10.7 Entire Agreement. This Agreement, the Asset Purchase
----------------
Agreement and the Holdback Agreement constitute the entire agreement of the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, among the parties hereto
with respect to the subject matter hereof.
10.8 No Third Party Beneficiaries. This Agreement is
----------------------------
exclusively for the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement shall not be deemed to confer
upon or give to any other third party any remedy, claim, liability,
reimbursement, cause of action or other right.
10.9 Headings. Sections or other headings contained in
--------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
10.10 Counterparts. This Agreement may be executed in two
------------
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by themselves or by their respective
officers duly authorized.
KADANT COMPOSITES LLC.
By:________________________________________
Name:
Title:
KADANT INC.
By:________________________________________
Name:
Title:
LDI COMPOSITES CO.
By:________________________________________
Name:
Title:
<
F-6
>
NATIONAL CITY BANK, AS ESCROW AGENT
By:________________________________________
Name:
Title:
<
F-7
>
SCHEDULE A
----------
ESCROW AGENT COMPENSATION
REVIEW, ACCEPTANCE AND SET UP FEE $ 500.00
For providing initial review of the Escrow Agreement and all
supporting documents and for initial services associated with
establishing the account. This is a one (1) time fee payable
upon the opening of the account.
I. Annual Administrative Fee (payable in advance) $ 2,500.00
EXTRAORDINARY SERVICES:
For any services other than those covered by the aforementioned, a special per
hour charge will be made commensurate with the character of the service, time
required and responsibility involved. Such services include but are not limited
to excessive administrative time, specialized reports, record keeping, unusual
certifications, etc.
FEE SCHEDULE IS SUBJECT TO ANNUAL REVIEW AND ADJUSTMENT, or as terms of the
agreement may be amended from time to time. This Schedule A is incorporated by
reference into the Escrow Agreement.
<
F-8
>
SCHEDULE B
----------
WIRE INSTRUCTIONS
To Buyer:
--------
Account Name: Liberty Diversified Industries, Inc.
Account Number: 150250092742
Bank Name: US Bank
Bank ABA#: ▇▇▇▇▇▇▇▇▇
To Seller:
---------
Account Name: Kadant Composites LLC
Account Number: 530-960176
Bank Name: ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank
Bank ABA#: ▇▇▇▇▇▇▇▇▇
Immediate Telephone
Advice: ▇▇▇▇ ▇▇▇▇▇▇, VP, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank
Telephone number: (▇▇▇) ▇▇▇-▇▇▇▇
<
F-9
>