Exhibit 10.2
STOCK PURCHASE AGREEMENT
Dated as of August 31, 2007
By and Among
GIBRALTAR INDUSTRIES, INC.
as Purchaser
FLORENCE CORPORATION
as Company
and
THE SELLERS SPECIFIED HEREIN

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS
[Table of Contents will be revised when
final draft is prepared for circulation.]

             
1.
  DEFINITIONS; INTERPRETATION     1  
1.1
  Definitions     1  
1.2
  Interpretation     10  
1.3
  Table of Contents and Headings     10  
 
           
2.
  SALE AND PURCHASE OF SHARES     10  
2.1
  Sale and Purchase of Shares     10  
2.2
  Amount of Purchase Price     11  
[2.3
  Adjustment of Purchase Price     11  
2.4
  Payment of Purchase Price     12  
 
           
3.
  CLOSING AND TERMINATION     14  
3.1
  Closing Date     14  
3.2
  Termination Agreement     14  
3.3
  Procedure Upon Termination     14  
3.4
  Effect of Termination     15  
 
           
4.
  REPRESENTATIONS AND WARRANTIES OF COMPANY     15  
4.1
  Organization and Good Standing     15  
4.2
  Authorization of Agreement     15  
4.3
  Capitalization     16  
4.4
  Subsidiaries     16  
4.5
  Conflicts; Consents of Third Parties     17  
4.6
  Ownership and Transfer of Shares     18  
4.7
  Financial Statements; Reference Statement     18  
4.8
  No Undisclosed Liabilities     18  
4.9.
  Absence of Certain Developments     18  
4.10
  Taxes     19  
4.11
  Real Property     19  
4.12
  Tangible Personal Property     20  
4.13
  Intellectual Property     20  
4.14
  Material Contracts     22  
4.15
  Employee Benefits Plans     23  
4.16
  Employees and Labor     24  
4.17
  Litigation     25  
4.18
  Compliance with Laws; Permits     25  
4.19
  Environmental Matters     25  
4.20
  Insurance     26  
4.21
  Inventories; Receivables; Payables     26  
4.22
  Major Customers and Vendors     26  

i

--------------------------------------------------------------------------------

 

             
4.23
  Corporate Records     27  
4.24
  Financial Advisors     27  
4.25
  Product Warranties     27  
4.26
  Bank Accounts; Lockboxes     27  
4.27
  No Misrepresentation     27  
 
           
5.
  REPRESENTATIONS AND WARRANTIES OF PURCHASER     27  
5.1
  Organization and Good Standing     28  
5.2
  Authorization of Agreement     28  
5.3
  Conflicts; Consents of Third Parties     28  
5.4
  Litigation     28  
5.5
  Investment Intention     29  
5.6
  Financial Advisors     29  
5.7
  Financial Resources     29  
 
           
6.
  COVENANTS     29  
6.1
  Access to Information     29  
6.2
  Conduct of Business Pending Closing     29  
6.3
  No Solicitation     31  
6.4
  Consents     31  
6.5
  Filings with Governmental Bodies     31  
6.6
  Discharge of Liens     32  
6.7
  Schedule 338(h)(10) Election     32  
6.8
  Tax Benefit Payment     34  
6.9
  Other Actions     34  
6.10
  Preservation of Records     35  
6.11
  Publicity     35  
6.12
  Environmental Matters     35  
6.13
  Updated Schedules     35  
 
           
7.
  CONDITIONS TO CLOSING     35  
7.1
  Conditions Precedent to Obligations of the Purchaser     36  
7.2
  Conditions Precedent to Obligations of Sellers     37  
 
           
8.
  DOCUMENTS TO BE DELIVERED     37  
8.1
  Documents to Be Delivered by Sellers     37  
8.2
  Documents to Be Delivered by the Purchaser     38  
 
           
9.
  INDEMNIFICATION     39  
9.1
  Indemnification     39  
9.2
  Limitations on Indemnification     41  
9.3
  Indemnification Procedures     42  
 
           
10.
  TAX MATTERS     44  
10.1
  Preparation of Tax Returns; Payment of Taxes     44  

ii

--------------------------------------------------------------------------------

 

             
10.2
  Cooperation with Respect to Tax Returns     44  
10.3
  Tax Audits     45  
10.4
  Refund Claims     45  
10.5
  Disputes     45  
 
           
11.
  MISCELLANEOUS     45  
11.1
  Expenses     45  
11.2
  Further Assurances     46  
11.3
  Submission to Jurisdiction; Consent to Service of Process     46  
11.4
  Entire Agreement; Amendments and Waivers     46  
11.5
  Governing Law     46  
11.6
  Notices     46  
11.7
  Severability     49  
11.8
  Binding Effect; Assignment     49  
11.9
  Sellers’ Representative     49  

Annexes
Annex 1 — The Sellers
Annex 2 — Agreed Principles
Annex 3 — Tax Timetable
Exhibits
Exhibit 1 — Escrow Agreement
Exhibit 2 — Noncompetition Agreement
Disclosure Schedule

iii

--------------------------------------------------------------------------------

 

STOCK PURCHASE AGREEMENT
     THIS STOCK PURCHASE AGREEMENT, dated as of August 31, 2007, is by and among
Gibraltar Industries, Inc., a Delaware corporation (the “Purchaser”), Florence
Corporation, an Illinois corporation (the “Company”), and the shareholders of
the Company listed on the signature pages hereof and in Annex 1 (each, a
“Seller” and, collectively, the “Sellers”) and David P. Dailey, an individual
residing in Illinois.
WITNESSETH:
     WHEREAS, the Sellers own an aggregate of 2,440 shares of the Company’s
common stock, $10.00 par value per share (collectively, the “Shares”), which
constitute all of the issued and outstanding shares of capital stock of the
Company; and
     WHEREAS, the Sellers desire to sell to the Purchaser, and the Purchaser
desires to purchase from the Sellers, the Shares for the purchase price and upon
the terms and conditions set forth herein.
     NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter contained, the parties hereby agree as follows:

1.   DEFINITIONS; INTERPRETATION

     1.1 Definitions. In this Agreement, unless the context otherwise requires,
all of the terms defined in the preamble or the recitals hereto shall have the
same meanings herein and the following terms shall have the following meanings:

         
“Affiliate”
  with respect to any Person, any other Person that, directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Person, and the term “control” (including the terms
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through owners of voting securities, by
contract or otherwise.
 
       
“Agreed Principles”
  the accounting principles set forth on Annex 2.
 
       
“Agreement”
  this Stock Purchase Agreement, as amended, modified and supplemented from time
to time.
 
       
“Business Day”
  any day of the year on which national banking institutions in the City of
Chicago, Illinois are open to the public for conducting business and are not
required or authorized by law or other governmental action to close.
 
       
“Capital Lease Obligations”
  any lease of any asset that, in accordance with GAAP, would be required to be
capitalized on the balance sheet of the lessee.
 
       
“CERCLA”
  the Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. § 9601 et seq.), as amended

1

--------------------------------------------------------------------------------

 

         
 
  through the Closing Date, and regulations promulgated thereunder.
 
       
“Claim”
  the term defined in Section 9.3.1.
 
       
“Closing Date”
  the term defined in Section 3.1.
 
       
“Closing Net Working Capital”
  the term defined in Section 2.3.2.
 
       
“Closing Statement”
  the term defined in Section 2.3.2.
 
       
“Code”
  the Internal Revenue Code of 1986, as amended.
 
       
“Common Stock”
  the term defined in Section 4.3.1.
 
       
“Company Property”
  the term defined in Section 4.11.
 
       
“Contract”
  any agreement, contract, indenture, note, bond, loan, instrument, lease,
commitment or other arrangement or agreement.
 
       
“Covered Breach”
  the term defined in Section 9.2.3.
 
       
“Current Company Properties”
  the term defined in Section 4.19.2.
 
       
“Debt”
  the following of the Company and the Subsidiary (without duplication): (1) all
consolidated indebtedness created, assumed or incurred in any manner,
representing money borrowed (including by the issuance of debt securities);
(2) all obligations for the deferred purchase price of property or services
(other than trade accounts payable arising in the ordinary course of business);
(3) all obligations secured by any Lien, whether or not the Company or the
Subsidiary has assumed or become liable for the payment of such indebtedness;
(4) all Capital Lease Obligations; and (5) all obligations on or with respect to
letters of credit, banker’s acceptances and other evidences of indebtedness
representing extensions of credit whether or not representing obligations for
borrowed money provided, however, that the loans to the Corporation from the
City of Manhattan, Kansas and from the Department of Economic Development of the
State of Kansas, in an aggregate outstanding principal amount of $96,000 shall
not be included in the term “Debt”.
 
       
“Deductible”
  the term defined in Section 9.2.3.
 
       
“Disclosure Schedule”
  the Schedules delivered to the Purchaser concurrent with the execution of this
Agreement pursuant to Section 4.
 
       
“Documents”
  all files, documents, instruments, papers, books, reports, records, tapes,
microfilms, photographs, letters, budgets, forecasts, ledgers, journals, title
policies, customer lists, regulatory filings, operating data and plans,
technical documentation (design

2

--------------------------------------------------------------------------------

 

         
 
  specifications, functional requirements, operating instructions, logic
manuals, flow charts, etc.), user documentation (installation guides, user
manuals, training materials, release notes, working papers, etc.), marketing
documentation (sales brochures, flyers, pamphlets, web pages, etc.), and other
similar materials related to the business of the Company in each case whether or
not in electronic form.
 
       
“Effective Time”
  the term defined in Section 2.1.
 
       
“Employee Benefit Plans”
  the term defined in Section 4.15.1.
 
       
“Environmental Costs and Liabilities”
  with respect to any Person, all liabilities, obligations, responsibilities,
Remedial Actions, losses, damages, punitive damages, consequential damages,
treble damages, costs and expenses (including all reasonable fees, disbursements
and expenses of counsel, experts and consultants and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred to the
extent based upon, related to, or arising under or pursuant to any Environmental
Law, Environmental Permit, order or agreement with any Governmental Body, which
relates to any Environmental Law or a Release or threatened Release of Hazardous
Materials.
 
       
“Environmental Law”
  any federal, state or local statute, regulation or ordinance of any
Governmental Body now in effect that is applicable to the Company and which
relates to pollution or protection of human health or the environment, including
any law relating to emissions, discharges, Releases, threatened Releases of
pollutants, contaminants or Hazardous Materials or wastes into ambient air,
surface water, groundwater or land; provided, however, that OSHA shall not be
deemed or considered an Environmental Law.
 
       
“ERISA”
  the term defined in Section 4.15.1.
 
       
“ERISA Affiliate”
  the term defined in Section 4.15.2.
 
       
“Escrow Account”
  the account, established and maintained by the Escrow Agent
 
  for the purpose of temporarily holding a portion of the Purchase Price and
distributing the same pursuant to the terms of the Escrow Agreement.
 
       
“Escrow Agent”
  LaSalle Bank, or any successor thereto under the Escrow Agreement.
 
       
“Escrow Agreement”
  the Escrow Agreement, dated as of the Closing Date, between the Purchaser, the
Sellers’ Representative, the PR Holder and the Escrow Agent, substantially in
the form of Exhibit 1, as amended, modified and supplemented from time to time.

3

--------------------------------------------------------------------------------

 

         
“Estimated Net Working Capital”
  the term defined in Section 2.3.1.
 
       
“FTC”
  the term defined in Section 6.5.
 
       
“Final Net Working Capital”
  the term defined in Section 2.3.6.
 
       
“Financial Statements”
  the term defined in Section 4.7.
 
       
“FIRPTA Affidavit”
  the term defined in Section 7.1 (10).
 
       
“GAAP”
  generally accepted United States accounting principles as of the date hereof
applied on a basis consistent with the basis on which the Financial Statements
were prepared.
 
       
“Governmental Body”
  any government or governmental or regulatory body thereof, or political
subdivision thereof, whether federal, state, or local, or any agency,
instrumentality or authority thereof, or any court or arbitrator (public or
private).
 
       
“Harris Bank
  Harris Trust and Savings Bank, an Illinois banking corporation.
 
       
“Hazardous Material”
  any (i) “hazardous waste” as defined in the Resource Conservation and Recovery
Act of 1976 (42 U.S.C. § 6901 et seq.), as amended through the Closing Date, and
regulations promulgated thereunder; (ii) any “hazardous substance” as defined in
CERCLA; and (iii) petroleum.
 
       
“Hazardous Materials Contamination”
  contamination of the environment, including soil, groundwater or air, by
Hazardous Materials that would give rise to liability under applicable
Environmental Law.
 
       
“Historical Properties”
  the term defined in Section 4.19.
 
       
“HSR Act”
  the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
 
       
“Indemnified Losses”
  the term defined in Section 9.1.1.
 
       
“Indemnified Party”
  the term defined in Section 9.3.1.
 
       
“Indemnifying Party”
  in connection with the rights of the Purchaser Affiliates to indemnification
described in Article 9, the Indemnifying Sellers and, in connection with the
rights of the Seller Affiliates to indemnification described in Article 9, the
Purchaser.
 
       
“Indemnifying Seller”
  each Seller and the PR Holder.
 
       
“Indenture”
  the Trust Indenture, dated as of April 1, 2003, as amended, modified and
supplemented from time to time, from Manhattan to U.S. Bank National
Association.

4

--------------------------------------------------------------------------------

 

         
“Independent Accountant”
  the term defined in Section 2.3.4.
 
       
“Intellectual Property”
  all Patents, copyrights, technology, know-how, processes, trade secrets,
inventions, proprietary data, formulae, research and development data and
computer software programs; all trademarks, trade names, service marks and
service names; all registrations, applications, recordings, licenses and
common-law rights relating thereto, including the right to receive all proceeds
and damages therefrom, and all rights to obtain renewals, continuations,
divisions or other extensions of legal protections pertaining thereto that are
material to the business and operations of the Company or the Subsidiary and
used or held for use in the business and operations of the Company or the
Subsidiary.
 
       
“Intellectual Property Licenses”
  the term defined in Section 4.13.3.
 
       
“IRB Financing”
  $8,000,000 Variable Rate Demand Industrial Development Revenue Bonds (Florence
Corporation of Kansas Project) Series 2003, as amended, modified and
supplemented from time to time, issued by Manhattan under the Indenture and
payable from and secured by: (1) the revenues and receipts derived from the
Lease Agreement and (2) payments to be made under the Letter of Credit.
 
       
“IRS”
  the United States Internal Revenue Service.
 
       
“knowledge of the Company” or “to the Company’s knowledge”
  the actual knowledge of: Lloyd Schooley, David Dailey, Michael Powles, John
Altstadt, Frank Vecchione, Kerri Winter and Stacy Kohlmeier.
 
       
“knowledge of the Purchaser”
  the actual knowledge of Henning Kornbrekke, David W. Kay, Timothy J. Heasley,
Paul M. Murray.
 
       
“knowledge of the Sellers” or “to the Sellers’ knowledge”
  the actual knowledge of the Sellers.
 
       
“Law”
  any federal, state, or local law, statute, code, ordinance, rule, regulation
or other requirement of any Governmental Body.
 
       
“Lease Agreement”
  the Lease Agreement, dated as of April 1, 2003, as amended, modified and
supplemented from time to time, between Manhattan and the Subsidiary.
 
       
“Legal Proceeding”
  any judicial, administrative or arbitral actions, suits, proceedings (public
or private), claims or governmental proceedings.
 
       
“Letter of Credit”
  Letter of Credit Number HACH2093960S (initially issued as Number SPL90010434),
dated April 24, 2003, as amended, modified and supplemented from time to time,
issued by Harris Bank pursuant to a Reimbursement Agreement, dated as of April
1, 2003, as amended, modified and supplemented from time to

5

--------------------------------------------------------------------------------

 

         
“Lien”
  time, between Harris Bank and the Subsidiary.
 
       
 
  any lien, encumbrance, pledge, mortgage, deed of trust, security interest,
claim, lease, charge, option, right of first refusal, easement, servitude, or
transfer restriction under any shareholder or similar agreement.
 
       
“Manhattan”
  the City of Manhattan, Kansas.
 
       
“Material Adverse Change”
  any fact, event, change, circumstance, or occurrence which has resulted in or
would reasonably be expected to result in a Material Adverse Effect.
 
       
“Material Adverse Effect”
  a material adverse effect on: (i) the business, assets, properties, results of
operations or condition (financial or otherwise) of the Company and the
Subsidiary taken as a whole; or (ii) the ability of the Sellers to consummate
the transactions contemplated by this Agreement; provided, however, that,
notwithstanding the foregoing, any changes, circumstance or effects resulting
from or relating to changes or developments in the economy, financial markets,
commodity markets, or in the political climate generally shall not be deemed to
constitute a Material Adverse Effect.
 
       
“Material Contracts”
  the term defined in Section 4.14.
 
       
“Net Working Capital”
  on any day, the consolidated current assets of the Company and Subsidiary
(excluding cash) less the consolidated current liabilities of the Company and
Subsidiary (excluding Debt), as determined on such day in accordance with the
Agreed Principles.
 
       
“Noncompetition Agreement”
  with respect to each of Lloyd Schooley, Darlene Schooley, Deborah Schooley,
David Schooley, Douglas Schooley, Darren Schooley and Michael Powles, the
Noncompetition Agreement, substantially in the form of Exhibit 2, in favor of
the Purchaser and the Company.
 
       
“Off-the-Shelf Software”
  the term defined in Section 4.13.1.
 
       
“Order”
  any order, injunction, judgment, decree, ruling, writ, assessment or
arbitration award of any Governmental Body.
 
       
“Ordinary Course of Business”
  the ordinary and usual course of day to day operations of the business as
conducted prior to the Closing consistent with past practices.
 
       
“Organizational Documents”
  the term defined in Section 4.5.1
 
       
“OSHA”
  the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as amended
through the Closing Date, and regulations promulgated thereunder.

6

--------------------------------------------------------------------------------

 

         
“Permits”
  any approvals, authorizations, consents, licenses, permits or certificates.
 
       
“Permitted Exceptions”
  (i) all defects, exceptions, restrictions, easements, rights of way and
encumbrances disclosed in policies of title insurance; (ii) statutory liens for
current taxes, assessments or other governmental charges not yet delinquent or
the amount or validity of which is being contested in good faith by appropriate
proceedings; (iii) mechanics’, carriers’, workers’, repairers’ and similar Liens
arising or incurred in the Ordinary Course of Business that are not material to
the business, operations and financial condition of the property so encumbered
or the Company; (iv) zoning, entitlement and other land use regulations of any
Governmental Body provided that the business and operations of the Company and
the Subsidiary at any real property subject to any such zoning, land use or
entitlement regulations complies with such zoning, land use or entitlement
regulations in all material respects; (v) all Liens contemplated by the IRB
Financing; and (vi) such other imperfections in title, charges, easements,
restrictions and encumbrances which do not materially detract from the value of
or materially interfere with the present use of any Company Property subject
thereto or affected thereby.
 
       
“Person”
  any individual, corporation, limited liability company, partnership, firm,
joint venture, association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
 
       
“Personal Property Lease”
  the term defined in Section 4.12.1.
 
       
“Phantom Stock Plan”
  each of the following: (1) the Phantom Stock Plan between the Company and John
Altstadt, effective December 25, 2001; (2) the Phantom Stock Plan between the
Company and Michael Powles effective December 25, 2001; (3) the Phantom Rights
Agreement between the Company and David Dailey effective February 8, 2005; and
(4) the Phantom Stock Plan between the Company and Frank Vecchione effective
December 25, 2001 (collectively, the “Phantom Stock Plans”).
 
       
“PR Holder”
  David Dailey, as holder of phantom rights under his Phantom Stock Plan.
 
       
“Pro Rata”
  with respect to this Agreement only: (1) in respect of each Seller (and such
Seller in relation to all of the Sellers), the number of Shares owned by such
Seller as a percentage of the total number of Shares; and (2) in respect of each
Indemnifying Seller (and such Indemnifying Seller in relation to all of the
Indemnifying Sellers): for the PR Holder, 15%, and for each of the Indemnifying
Sellers that are Sellers, such Sellers’ Pro Rata

7

--------------------------------------------------------------------------------

 

         
 
  share of the remaining 85%.
 
       
“Products”
  all cluster box units, 4B and private horizontal units, 4C mailbox suites,
vertical mailboxes, single tenant mailboxes, parcel lockers, key keepers,
collection boxes, mail/book drop boxes, directories, mail-shelters and chimes
manufactured by the Company and its Subsidiary.
 
       
“PSP Holder”
  each of John Altstadt, Michael Powles, Frank Vecchione and David Dailey, as
recipients under the respective Phantom Stock Plans (collectively, the “PSP
Holders”).
 
       
“Purchase Price”
  the term defined in Section 2.2.
 
       
“Purchaser”
  Gibraltar Industries, Inc., a Delaware corporation.
 
       
“Purchaser Affiliates”
  the term defined in Section 9.1.1.
 
       
“Purchaser’s Amount”
  the term defined in Section 6.7.
 
       
“Real Property Lease”
  the term defined in Section 4.11.
 
       
“Release”
  any release, spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, or dumping into the environment, but excludes:
(i) emissions from the engine exhaust of a motor vehicle, rolling stock,
aircraft, vessel or pipeline pumping station engine, and (ii) the normal
application of household chemicals such as pesticides, herbicides and
fertilizers.
 
       
“Remedial Action”
  all actions to: (i) clean up, remove, treat or in any other way address any
Hazardous Material; (ii) prevent the Release of any Hazardous Material so it
does not endanger or threaten to endanger public health or welfare or the indoor
or outdoor environment; (iii) perform pre-remedial studies and investigations or
post-remedial monitoring and care; or (iv) to correct a condition of
noncompliance with Environmental Laws.
 
       
“Section 338(h)(10) Election”
  the term defined in Section 6.7.
 
       
“Securities Act”
  the term defined in Section 5.5.
 
       
“Seller”
  each of the shareholders of the Company listed on the signature pages hereof
and in Annex 1 hereto (collectively, the “Sellers”); provided, however, that,
for purposes of any provision of this Agreement that applies to a Seller by
reason of its status as a taxpayer (including without limitation Sections 6.7,
6.8, 9.2.1, 10.1 and 10.2.2), the term “Seller” shall include the grantor, the
beneficiaries or any other deemed owner of such Seller that is a trust.
 
       
“Seller Affiliates”
  the Sellers, the PSP Holders and their respective Affiliates,

8

--------------------------------------------------------------------------------

 

         
 
  agents, successors and assigns.
 
       
“Sellers’ Representative”
  the term defined in Section 11.10.
 
       
“Shareholders Agreement”
  the Amended and Restated Stock Purchase Agreement, dated December 15, 2003,
among the Sellers, the beneficiaries of the Sellers and the Company.
 
       
“Subsidiary”
  Florence Corporation of Kansas, a Kansas corporation.
 
       
“Target Net Working Capital”
  $13,800,000.  
 
       
“Tax Benefit”
  37.6 % of the amount of the payments made by the Company and the Subsidiary on
the Closing Date and the payments made by the Purchaser on the Closing Date
pursuant to the provisions of Sections 2.4.3, 2.4.4 and 2.4.5 that are not
properly deductible for Federal Income Tax purposes by the Company on the final
S Corporation Tax Return of the Company or by the Sellers.
 
       
“Tax Escrow Agent”
  the Escrow Agent, or such other financial institution acceptable to the
Purchaser and the Sellers’ Representative, which shall act in accordance with
the provisions of Section 6.7.
 
       
“Tax Indemnification Payment”
  the term defined in Section 6.7.
 
       
“Tax Return”
  all returns, declarations, reports, estimates, information, returns and
statements required to be filed in respect of any Taxes.
 
       
“Tax Timetable”
  the timetable set forth on Annex 3.
 
       
“Taxes”
  (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies
or other assessments, including, without limitation, all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation, property
and estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, (ii) all interest, penalties, fines, additions to taxes or
additional amounts imposed by any taxing authority in connection with any item
described in clause (i).
 
       
“Transaction Agreements”
  the Escrow Agreement and the Noncompetition Agreement.
 
       
“WARN”
  the term defined in Section 4.16.
 
       
“Wiring Instructions”
  the wiring instructions executed and delivered by the Sellers’ Representative
at the Closing with respect to various payments contemplated under Section 2.4
and the Phantom Stock Plans.

9

--------------------------------------------------------------------------------

 

     1.2 Interpretation. In this Agreement, unless otherwise specified, any
reference to:
     (1) (i) words of any gender include each other gender; (ii) words using the
singular or plural number also include the plural or singular number,
respectively; (iii) the terms “hereof,” “herein,” “hereby” and derivative or
similar words refer to this entire Agreement; (iv) any reference to any Article,
Section, Exhibit, Annex, Schedule or paragraph shall be deemed to refer to an
Article, Section, Exhibit, Annex, Schedule or paragraph of this Agreement,
unless the context clearly indicates otherwise; and (v) the word “or” shall be
disjunctive but not exclusive;
     (2) references to another agreement or instrument shall be construed as a
reference to that other agreement or instrument as the same may have been, or
may from time to time be, amended or supplemented;
     (3) references to statutes shall include all regulations promulgated
thereunder and references to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation;
     (4) the language used in this Agreement shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against either party;
     (5) the annexes, schedules and exhibits to this Agreement are a material
part hereof and shall be treated as if fully incorporated into the body of the
Agreement.
     (6) whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless Business Days are specified and shall be counted
from the day immediately following the date from which such number of days are
to be counted; and
     (7) any accounting term, any determination of the character or amount of
any asset or liability or item of income or expense, and any consolidation or
other accounting computation shall, to the extent applicable and except as
otherwise specified in this Agreement, be construed or made (as the case may be)
in accordance GAAP applied (in the case of determinations or computations) on a
basis consistent with the past practices of the Company.
     1.3 Table of Contents and Headings. The table of contents and section
headings of this Agreement are for reference purposes only and are to be given
no effect in the construction or interpretation of this Agreement.

2.   SALE AND PURCHASE OF SHARES

     2.1 Sale and Purchase of Shares. Upon the terms and subject to the
conditions contained herein, on the Closing Date, each Seller shall sell,
assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall
purchase from each Seller, the Shares owned by such Seller set forth opposite
such Seller’s name on Annex 1 hereto. Upon completion of the transactions
contemplated by this Agreement, the purchase and sale of the Shares pursuant to
this Agreement shall be deemed to be effective as of 8:00 a.m. (Manhattan,
Kansas time) on the Closing Date (the “Effective Time”) provided, however, that
all payments by the Company under the Phantom Stock Plans, as well as the
distributions and success bonuses contemplated by Section 4.9 and the expenses
paid under this Section 2 by the Company, shall be deemed to be effective
immediately prior to such Effective Time.

10

--------------------------------------------------------------------------------

 

     2.2 Amount of Purchase Price. The aggregate purchase price for the Shares
shall be an amount equal to $116,600,000 (the “Purchase Price”), as adjusted
prior to and after the Closing Date pursuant to the provisions of Section 2.3.
     2.3 Adjustment of Purchase Price.
     2.3.1 Prior to the date hereof, the Company delivered to the Purchaser an
estimate, prepared by the Company in good faith (based upon (i) information then
available to the Company, (ii) the Agreed Principles and (iii) such assumptions
as a reasonably prudent business person would make in preparing such an
estimate), of the Net Working Capital as of the Effective Time (the “Estimated
Net Working Capital”). The Purchase Price payable on the Closing Date under
Section 2.2 shall be (1) increased on a dollar for dollar basis by the amount,
if any, by which the Estimated Net Working Capital exceeds the total of: (i) the
Target Net Working Capital and (ii) $500,000; and (2) decreased, on a dollar for
dollar basis by the amount, if any, by which the total of: (i) the Target Net
Working Capital less (ii) $500,000 exceeds the Estimated Net Working Capital.
     2.3.2 As promptly as practicable, but no later than 60 days after the
Closing Date, the Purchaser shall cause to be prepared and delivered to the
Sellers’ Representative a closing statement (the “Closing Statement”) fairly
presenting the Net Working Capital as determined, as of the Effective Time, in
accordance with the Agreed Principles (the “Closing Net Working Capital”),
together with a certificate based on such Closing Statement setting forth the
Purchaser’s calculation of the Closing Net Working Capital. The preparation of
the Closing Statement and such certificate shall be for the sole purpose of
determining the difference between the Closing Net Working Capital and the
Target Net Working Capital.
     2.3.3 If the Sellers’ Representative disagrees with the Purchaser’s
calculation of the Closing Net Working Capital delivered pursuant to
Section 2.3.2, then the Sellers’ Representative may, within 30 days after
delivery of the Closing Statement, deliver a notice to the Purchaser (with a
copy to each of the Indemnifying Sellers) disagreeing with such calculation and
setting forth the Sellers’ Representative’s calculation of such amount. Any such
notice of disagreement shall specify those items or amounts as to which the
Sellers’ Representative disagrees, and the Sellers’ Representative shall be
deemed to have agreed, on behalf of the Indemnifying Sellers, with all other
items and amounts contained in the Closing Statement and the calculation of
Closing Net Working Capital delivered pursuant to Section 2.3.2.
     2.3.4 If a notice of disagreement shall be duly delivered pursuant to
Section 2.3.3, the Purchaser and the Sellers’ Representative shall, during the
30 days following such delivery, use their best efforts to reach agreement on
the disputed items or amounts in order to determine, as may be required, the
amount of Closing Net Working Capital, which amount shall not be more than the
amount thereof shown in the Sellers’ Representative’s calculation delivered
pursuant to Section 2.3.3 nor less than the amount thereof shown in the
Purchaser’s calculation delivered pursuant to Section 2.3.2. If during such
period, the Purchaser and the Sellers’ Representative are unable to reach such
agreement, they shall promptly thereafter cause KPMG Peat Marwick (the
“Independent Accountant”) to review this Agreement and the disputed items or
amounts for the purpose of calculating the Closing Net Working Capital (it being
understood that, in making such calculation, the Independent Accountant shall be
functioning as an expert and not as an arbitrator). In making such calculation,
the Independent Accountant shall consider only those items or amounts in the
Closing Statement and the Purchaser’s calculation of Closing Net Working Capital
as to which the Sellers’ Representative’s has disagreed. The Independent
Accountant shall deliver to the Purchaser and the Sellers’ Representative and
the Indemnifying

11

--------------------------------------------------------------------------------

 

Sellers, as promptly as practicable (but in any case no later than 30 days from
the date of engagement of the Independent Accountant), a report setting forth
such calculation of Closing Net Working Capital. Such report shall be final and
binding upon the Purchaser and the Indemnifying Sellers. The cost of such review
and report shall be paid equally by the Purchaser and the Sellers.
     2.3.5 The Purchaser and the Sellers shall, and shall cause their respective
representatives to, cooperate and assist in the preparation of the Closing
Statement and the calculation of Closing Net Working Capital and in the conduct
of the review referred to in this Section 2.3, including, without limitation,
promptly making available to both the Purchaser and the Sellers’ Representative
any relevant books, records, work papers and personnel.
     2.3.6 If the Final Net Working Capital exceeds the total of (I) the Target
Net Working Capital and (II) $500,000, then the Purchaser shall pay to each
Indemnifying Seller, in the manner and with interest as provided in
Section 2.3.7, such Indemnifying Seller’s Pro Rata portion of the amount of such
excess and, if the total of (A) the Target Net Working Capital less (B) $500,000
exceeds the Final Net Working Capital, then the Indemnifying Sellers shall,
severally and not jointly, pay to the Purchaser, in the manner and with interest
as provided in Section 2.3.7, such Indemnifying Seller’s Pro Rata portion of the
amount of such excess. “Final Net Working Capital” means the Closing Net Working
Capital (1) as shown in the Purchaser’s calculation delivered pursuant to
Section 2.3.2 if no notice of disagreement with respect thereto is duly
delivered pursuant to Section 2.3.3; or (2) if such a notice of disagreement is
delivered, (i) as agreed by the Purchaser and the Seller’s Representative
pursuant to Section 2.3.4 or (ii) in the absence of such agreement, as shown in
the Independent Accountant’s calculation delivered pursuant to Section 2.3.4;
provided, however, that in no event shall the Final Net Working Capital be less
than the Purchaser’s calculation of Closing Net Working Capital delivered
pursuant to Section 2.3.2 or more than the Sellers’ Representative’s calculation
thereof delivered pursuant to Section 2.3.3.
     2.3.7 Any payment pursuant to Section 2.3.6 shall be: (1) deemed an
adjustment to the Purchase Price, (2) made not later than five Business Days
after the Final Net Working Capital has been determined, and (3) made by wire
transfer of immediately available funds to the account of such recipient thereof
under Section 2.3.6 as such recipient may designate in writing by such other
party. The amount of any payment to be made pursuant to this Section 2.3 shall
bear interest from and including the Closing Date to but excluding the date of
payment at a rate per annum equal to the rate of interest announced by the
Harris Bank as its Prime Rate in Chicago, Illinois in effect from time to time
during the period from the Closing Date to the date of payment. Such interest
shall be payable at the same time as the payment to which it relates and shall
be calculated daily on the basis of a year of 365 days and the actual number of
days elapsed.
     2.4 Payment of Purchase Price; Payments Under Phantom Stock Plans.
     On the Closing Date, by wire transfer of immediately available funds to the
respective accounts designated by the various recipients specified below and set
forth in the Wiring Instructions, the Purchaser shall pay:
     2.4.1 to the Escrow Agent $9,840,000 (the “Escrow Amount”) to be held to
satisfy any claims for indemnification pursuant to Section 9, with such Escrow
Amount to be held and distributed by the Escrow Agent in accordance with the
Escrow Agreement;

12

--------------------------------------------------------------------------------

 

     2.4.2 to BMO Capital Markets, the amount set forth opposite its name on the
Wiring Instructions, such amount representing the total fees and expenses
payable pursuant to the terms of the engagement of BMO Capital Markets by the
Sellers, the Company and the Subsidiary;
     2.4.3 pursuant to the instructions of the Company and the instructions of
the PSP Holders, the following: (1) to each PSP Holder (other than the PR
Holder), the amount set forth opposite such PSP Holder’s name on the Wiring
Instructions, such amount representing the amount due to such individual under
the applicable Phantom Stock Plan resulting from the transaction contemplated by
this Agreement, after subtraction of (i) the employee portion of all applicable
withholding taxes payable in connection with such payment and (ii) any
withholdings made with respect to such PSP Holder and described in
Section 2.4.4(2) and (2) to the PR Holder, the amount due to such individual
under the applicable Phantom Stock Plan after subtraction of (i) the amount
indicated on the Wiring Instructions as being paid to the Escrow Agent and
related to the PR Holder ; and (ii) the full amount of the employee portion of
all applicable withholding taxes payable with respect to the entire amount
payable to the PR Holder under the applicable Phantom Stock Plan; and (iii) any
withholdings made with respect to the PR Holder and described in
Section 2.4.4(2);
     2.4.4 pursuant to the instructions of the Company:
     (1) to ADP Inc. an amount equal to the sum of:
     (i) the full amount of the employee portion of all applicable withholding
taxes payable in connection with the payments under the Phantom Stock Plans
resulting from the transaction contemplated by this Agreement; (including, in
the case of the PR Holder, the portion of such amount, if any, which is paid to
the Escrow Agent); and
     (ii) the full amount of the employer portion of all applicable withholding
taxes payable by the Company or the Subsidiary in connection with the payments
under the Phantom Stock Plans; and
     (2) to Wells Fargo Bank Institutional Trust Services Inc., for credit to
the appropriate accounts of each PSP Holder, the portion of the amount payable
to the PSP Holders under the applicable Phantom Stock Plan which the PSP Holder
has elected to have contributed to the Florence Corporation 401(k) Plan together
with the amount of the employer matching contribution required to be made with
respect to such payment, all as more particularly set forth in the Wiring
Instructions, relating to payments to the PSP Holders under this Section 2.4.
     2.4.5 to the attorneys and other business and financial advisers of the
Sellers, the amount set forth in the Wiring Instructions; and
     2.4.6 to each of the Sellers, the amount set forth in the Wiring
Instructions opposite the name of such Seller, such amount representing such
Seller’s Pro Rata portion of the remaining balance of the Purchase Price.
     2.5 Escrow Agreement. Prior to the Closing, the Purchaser, the Sellers’
Representative, the PR Holder and the Escrow Agent shall execute and deliver the
Escrow Agreement which shall contain terms mutually agreeable to the Purchaser,
the Sellers’ Representative, the PR Holder and the Escrow Agent.

13

--------------------------------------------------------------------------------

 

3.   CLOSING AND TERMINATION

     3.1 Closing Date. Subject to the satisfaction of the conditions set forth
in Sections 7.1 and 7.2 hereof (or the waiver thereof by the party entitled to
waive that condition), the closing of the sale and purchase of the Shares
provided for in Section 2.1 hereof (the “Closing”) shall take place at
10:00 a.m. at the offices of Masuda, Funai, Eifert & Mitchell, Ltd., 203 North
LaSalle Street, Chicago, Illinois, on the later of: (1) August 31, 2007 or
(2) the date that is 8 Business Days following the termination of the applicable
waiting period under the HSR Act, or at such other place or on such other date
as the Sellers and the Purchaser may agree, including, but not limited to, the
date hereof (the “Closing Date”).
     3.2 Termination of Agreement. This Agreement may be terminated at any time
prior to the Closing (the “Termination Date”) as follows:
     3.2.1 by the Purchaser, effective immediately upon delivery of written
notice to the Seller’s Representative, if, between the date hereof and the time
scheduled for the Closing: (1) an event or condition occurs that has resulted in
or that would reasonably be expected to result in a Material Adverse Effect or
an inability to satisfy any condition to Closing set forth in Section 7.1 and
the Sellers are unable to otherwise satisfy such condition within 30 days
following the delivery of written notice to the Sellers’ Representative of
notice of the occurrence of such event or condition; or (2) the Sellers shall
have breached any material covenant or obligation hereunder and such breach
shall not have been cured within 30 days following the delivery to Sellers’
Representative of written notice of such breach;
     3.2.2 by the Sellers, effective immediately upon delivery of written notice
to the Purchaser, if, between the date hereof and the time scheduled for the
Closing, the Purchaser shall have breached any material covenant or obligation
hereunder and such breach shall not have been cured by the Purchaser within
30 days following the delivery to the Purchaser of written notice of such
breach;
     3.2.3 by the Sellers, effective immediately upon delivery of written notice
to the Purchaser, or by the Purchaser, effective immediately upon delivery of
written notice to the Seller’s Representative, if the Closing shall not have
occurred by September 14, 2007; provided, however, that the right to terminate
this Agreement under this Section 3.2 shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the cause
of, or shall have resulted in, the failure of the Closing to occur on or prior
to such date;
     3.2.4 by the Purchaser, effective immediately upon delivery of written
notice to the Sellers’ Representative, or by the Sellers, effective immediately
upon delivery of written notice to the Purchaser, if a final nonappealable Order
of a Governmental Body of competent jurisdiction shall be been issued
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement; or
     3.2.5 by the mutual written consent of the parties hereto.
     3.3 Procedure Upon Termination. In the event of termination by the
Purchaser or the Sellers, or both, pursuant to Section 3.2 hereof, this
Agreement shall terminate and the purchase of the Shares hereunder shall be
abandoned, without further action by the Purchaser or the Sellers. If this
Agreement is terminated as provided herein, then each party shall redeliver all
documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether obtained before or after the execution
hereof, to the party furnishing the same.

14

--------------------------------------------------------------------------------

 

     3.4 Effect of Termination. If this Agreement is validly terminated as
provided herein, then, from and after the Termination Date, each of the parties
hereto shall be relieved of their respective duties and obligations arising
under this Agreement, except: (1) as set forth in Section 11.1 ; (2) as provided
under any Confidentiality Agreement previously signed by such parties; and
(3) that nothing herein shall relieve either party from liability for breach of
this Agreement. In the event that this Agreement is terminated by the Purchaser,
pursuant to the provisions of Section 3.2.1(2) or by Sellers pursuant to the
provisions of Section 3.2.2 above, the party that terminated this Agreement
shall be entitled to be reimbursed by the other party for all reasonable out of
pocket costs incurred by such party in connection with the investigation and
negotiation of this Agreement, including but not limited to, the fees and
expenses of such party’s attorneys, accountants and financial advisors;
provided; however, that any amounts provided for in this Section 3.4 shall not
exceed $500,000.

4.   REPRESENTATIONS AND WARRANTIES OF COMPANY

     Each of the Indemnifying Sellers and the Company hereby make the following
representations and warranties, as of the date hereof and as of the Effective
Time, which representations and warranties shall be qualified by the Disclosure
Schedule provided that the disclosure of an item in one section of the Schedules
shall be deemed to modify both (i) the representations and warranties contained
in the Section of this Agreement to which it corresponds in number, and (ii) any
other representation and warranty of the Company and the Indemnifying Sellers in
this Agreement to the extent that it is or should be evident from a reading of
such disclosure item that it would also qualify or apply to such other
representation and warranty; provided that the matters required to be disclosed
on Schedule 4.9 (Absence of Certain Developments), Schedule 4.17 (Litigation),
Schedule 4.15 (Employee Benefit Plans), Schedule 4.5 (Conflicts; Consents of
Third Parties), Schedule 4.19 (Environmental Matters) and Schedule 4.10 (Taxes),
shall not be deemed to be disclosed unless disclosed on Schedules corresponding
in number to such Sections. Notwithstanding the foregoing, each of the Sellers
shall, solely with respect to the representations and warranties set forth in
Section 4.6 (Ownership and Transfer of Shares) only be bound by and responsible
for the representations and warranties contained in such Section as they apply
to the shares owned by such Seller.
     4.1 Organization and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of Illinois and has all necessary corporate power and authority to
own, lease and operate its properties and to carry on its business as now
conducted, except where any lack of such power or authority would not reasonably
be expected to result in a Material Adverse Change. Schedule 4.1 attached hereto
contains a list of each jurisdiction in which the Company and the Subsidiary are
qualified to do business as a foreign corporation. The Company and the
Subsidiary are duly qualified to do business as a foreign corporation in each
jurisdiction in which the failure of the Company or the Subsidiary to be so
qualified would reasonably be expected to have a Material Adverse Effect.
     4.2 Authorization of Agreement.
     4.2.1 Authorization of Agreement by Company The Company has all requisite
power and authority to execute and deliver this Agreement, each Transaction
Agreement to which it is a party and each other agreement, document, or
instrument or certificate contemplated by this Agreement to be executed by the
Company in connection with the consummation of the transactions contemplated by
this Agreement, and to consummate the transactions contemplated hereby or
thereby. This Agreement has been, and when executed and delivered, each
Transaction Agreement executed by the Company, will be, duly and validly
executed and delivered by the

15

--------------------------------------------------------------------------------

 

Company and (assuming the due authorization, execution and delivery by the other
parties hereto and thereto) this Agreement and each such Transaction Agreement
constitutes the legal, valid and binding obligations of the Company, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium and similar laws affecting creditors’ rights and remedies
generally, and subject, as to enforceability, to rules of law governing specific
performance, injunctive relief and to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
     4.2.2 Authorization of Agreement by Sellers. Each Seller has all requisite
power, authority and legal capacity to execute and deliver this Agreement, each
Transaction Agreement to which it is a party and each other agreement, document,
or instrument or certificate contemplated by this Agreement to be executed by
such Seller in connection with the consummation of the transactions contemplated
by this Agreement and to consummate the transactions contemplated hereby and
thereby. This Agreement has been, and when executed and delivered by the Sellers
or the Sellers’ Representative, each Transaction Agreement to which such Seller
or the Sellers’ Representative shall be a party will be, duly and validly
executed and delivered by each Seller and the Sellers’ Representative and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of such Transaction
Agreements, when executed and delivered, will constitute, a legal, valid and
binding obligation of such Seller, enforceable against such Seller and the
Sellers’ Representative in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium and similar laws affecting creditors’ rights
and remedies generally, and subject, as to enforceability, to rules of law
governing specific performance, to injunctive relief and to general principles
of equity, including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a proceeding at law
or in equity).
     4.3 Capitalization; Officers and Directors.
     4.3.1 The authorized capital stock of the Company consists of 5,000 shares
of common stock, $10.00 par value per share (the “Common Stock”). As of the date
hereof, there are 2,440 shares of Common Stock issued and outstanding and 2,560
outstanding shares of Common Stock that are held by the Company as treasury
stock. All of the issued and outstanding shares of Common Stock were duly
authorized for issuance and are validly issued, fully paid and non-assessable.
     4.3.2 Except as contemplated by the Shareholders Agreement and the Phantom
Stock Plans, there is no existing option, warrant, call, right, commitment or
other agreement of any character to which any Seller or the Company is a party
or which are binding on the Company or any Seller requiring, and there are no
securities of the Company outstanding which upon conversion or exchange would
require, the issuance, sale or transfer of any additional shares of capital
stock or other equity securities of the Company or other securities convertible
into, exchangeable for or evidencing the right to subscribe for or purchase
shares of capital stock or other equity securities of the Company.
     4.3.3 Schedule 4.3.3 sets forth, for each of the Company and the
Subsidiary, the officers and directors of such corporation, as well as the
outside affiliation or employment of such directors.
     4.4 Subsidiaries. Except for the Subsidiary, the Company does not own any
capital stock or other equity interests in any Person. The Company owns all of
the issued and outstanding shares of the

16

--------------------------------------------------------------------------------

 

Subsidiary. The outstanding shares of capital stock or equity interests of the
Subsidiary are validly issued, fully paid and non-assessable, and all such
shares or other equity interests represented as being owned by the Company are
owned by it free and clear of any and all Liens, except as set forth in
Schedule 4.4 hereto. No shares of capital stock are held by the Subsidiary as
treasury stock. There is no existing option, warrant, call, commitment or
agreement to which the Company or the Subsidiary is a party requiring, and there
are no convertible securities of the Company or the Subsidiary outstanding which
upon conversion would require, the issuance of any additional shares of capital
stock or other equity interests of the Subsidiary or other securities
convertible into shares of capital stock or other equity interests of the
Subsidiary. The Subsidiary is a duly organized and validly existing corporation
in good standing under the laws of Kansas. The Subsidiary has all requisite
corporate power and authority to own its properties and carry on its business as
presently conducted, except where any lack of such power or authority would not
reasonably be expected to result in a Material Adverse Change.
     4.5 Conflicts; Consents of Third Parties.
     4.5.1 Neither the execution and delivery by the Company of this Agreement,
or any other Transaction Agreement, nor the consummation of the transactions
contemplated hereby or thereby, nor compliance by the Company with any of the
provisions hereof or thereof will conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or give rise to any obligation of the
Company to make any payment under, or to the increased, additional, accelerated
or guaranteed rights or entitlements of any person under, or result in the
creation of any Liens upon any of the properties or assets of the Company or any
Subsidiary under any provision of (1) the articles of incorporation and bylaws
or comparable organizational documents of the Company or the Subsidiary
(collectively, “Organizational Documents”), (2) any Contract or Permit or other
obligation to which the Company or the Subsidiary is a party or by which any of
the properties or assets of the Company or the Subsidiary are bound except the
Phantom Stock Plans and as set forth in Schedule 4.5.1; or (3) any Order of any
court, Governmental Body or arbitrator applicable to the Company or any
Subsidiary or any of the properties or assets of the Company or any Subsidiary
as of the date hereof, except in the case of clauses (2) and (3), for such
violations, breaches or defaults as would not, individually or in the aggregate,
have a Material Adverse Effect.
     4.5.2 Neither the execution and delivery by the Sellers of this Agreement
and the Transaction Agreements to which the Sellers are a party, nor the
compliance by the Sellers with any of the provisions hereof or thereof, will
conflict with or result in any violation of or default (with or without notice
or lapse of time or both) under any provisions of: (1) the agreements which
contain the terms of the trusts which are the holders of the Shares; (2) any
Contract or other obligation to which any of the Sellers is a party, or any
Contract or other obligation pertaining to the interests in the trusts
comprising the Sellers to which any of the beneficiaries of such trusts is a
party, other than the Shareholder Agreement which shall be terminated on or
prior to the Closing Date; or (3) any Order of any court, Governmental Body or
arbitrator applicable to any of the trusts comprising the Sellers or any Order
of any court, Governmental Body or arbitrator known by the Sellers, which is
applicable to the beneficiaries of the trusts comprising the Sellers.
     4.5.3 Except as set forth in Schedule 4.5.3, no consent, waiver, approval,
Order, Permit or authorization of, or declaration or filing with, or
notification to, any Person or Governmental Body is required on the part of the
Company, the Subsidiary or any Seller in connection with the execution and
delivery of this Agreement or the Transaction Agreements to be executed and
delivered by the Company or the Sellers in connection with the consummation of
the transactions contemplated hereunder or the compliance by the Company, the
Subsidiary or any Seller with any

17

--------------------------------------------------------------------------------

 

of the provisions hereof or thereof, the consummation of the transactions
contemplated hereby or thereby or the taking of any other action contemplated
hereby, or the continuing validity and effectiveness immediately following the
Closing of any Permit or Contract of the Company, except for compliance with the
applicable requirements of the HSR Act and the rules and regulations promulgated
thereunder.
     4.6 Ownership and Transfer of Shares. Each Seller is the record owner of
the Shares and the beneficiary or beneficiaries of such Seller, as the case may
be, is the beneficial owner or are the beneficial owners of the Shares indicated
as being owned by such Seller on Annex 1. At the Closing, the Purchaser will
acquire good title to the Shares free and clear of any and all Liens (other than
as contemplated by Section 5.5).
     4.7 Financial Statements. Set forth as Schedule 4.7 are: (1) the audited
consolidated balance sheets of the Company and its Subsidiary as of December 31,
2006, 2005, and 2004 and the related audited consolidated statements of income
and of cash flows of the Company and its Subsidiary for the years then ended;
and (2) the unaudited non-consolidated and consolidated balance sheets of the
Company and its Subsidiary as of January, February, March and April 2007 and the
related non-consolidated and consolidated statements of profit and loss of the
Company and its Subsidiary for the four month period then ended (such audited
and unaudited statements, including the related notes and schedules thereof, the
“Financial Statements”). Each of the Financial Statements has been prepared in
accordance with GAAP consistently applied by the Company and presents fairly in
all material respects the financial position, results of operations of the
Company and the Subsidiary as of the dates and for the periods indicated.
     4.8 No Undisclosed Liabilities. To the Company’s knowledge, except as set
forth in the Financial Statements and in Schedule 4.8, neither the Company nor
the Subsidiary has any indebtedness, obligations or liabilities of any kind
(whether accrued, absolute, contingent or otherwise, and whether due or to
become due) that would have been required to be reflected in, reserved against
or otherwise described in the Financial Statements in accordance with GAAP or
would have a Material Adverse Effect on the assets of the Company or the
Subsidiary.
     4.9 Absence of Certain Developments. Except as expressly contemplated by
this Agreement or as set forth on Schedule 4.9 and in the Financial Statements,
since the date of the last set of Financial Statements: (1) the Company has
conducted its business in all material respects only in the Ordinary Course of
Business and in substantially the same manner as previously conducted; (2) has
not made any change in any method of accounting or accounting practice or policy
used by the Company or the Subsidiary; (3) has not made any material changes in
the customary methods of operating the business of the Company or the Subsidiary
including, without limitation, practices and policies relating to marketing,
selling and pricing; (4) has not amended, terminated, cancelled or compromised
any material claims of the Company or the Subsidiary or waived any rights of
substantial value; (5) has not entered into any agreement, arrangement or
transaction with any directors, officers, employees or shareholders of the
Company or the Subsidiary other than those contemplated by this Agreement or for
compensation in the Ordinary Course of Business consistent with past practices;
(6) has not granted any general increase in the compensation payable or to
become payable to officers or employees (including any such increase pursuant to
any bonus, pension, profit-sharing or other plan or commitment), of the Company
or the Subsidiary or any special increase in the compensation payable or to
become payable to any such officer or employee, or made any bonus payments to
any such officer or employee, except for normal, bargained, merit or cost of
living payments or increases made in the Ordinary Course of Business; (7) has
not made capital expenditures or commitments on behalf of or relating to the
business in excess of $50,000 in the aggregate; (8) has not agreed, whether in
writing or otherwise, to take any action described in this Section 4.9; or
(9) to the knowledge of the Company and the Sellers, there has not been any
event, change,

18

--------------------------------------------------------------------------------

 

occurrence or circumstance that has had or would reasonably be expected to have
a Material Adverse Effect. For purposes of the “Effective Time”, the
distributions and success bonuses described in this Section shall be deemed to
have occurred prior to the Effective Time.
     4.10 Taxes.
     4.10.1 Except as set forth on Schedule 4.10.1: (1) all Tax Returns required
to be filed by or on behalf of the Company and the Subsidiary have been timely
filed with the appropriate taxing authorities in all jurisdictions in which such
Tax Returns are required to be filed (after giving effect to any valid
extensions of time in which to make such filings) and all such Tax Returns are
accurate and complete in all respects; (2) all Taxes payable by or on behalf of
the Company or the Subsidiary or in respect of their respective income, assets
or operations have been fully and timely paid and adequate reserves or accruals
for Taxes have been provided in the Financial Statements with respect to any
period to which such Financial Statements relate and for which Tax Returns have
not yet been filed or for which Taxes are not yet due and owing; (3) neither the
Company nor the Subsidiary has executed or filed with the IRS or any other
taxing authority any agreement, waiver or other document or arrangement
extending or having the effect of extending the period for assessment or
collection of Taxes (including, but not limited to, any applicable statute of
limitation), and no power of attorney with respect to any Tax matter is
currently in force; and (4) there are no pending or, to the knowledge of the
Company, threatened actions or proceedings for the assessment or collection of
Taxes against the Company or the Subsidiary.
     4.10.2 The Company and the Subsidiary have: (1) complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes; (2) duly and timely withheld from employee salaries,
wages and other compensation; and (3) paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods
under all applicable laws.
     4.10.3 No Seller is a foreign person within the meaning of Section 1445 of
the Code.
     4.10.4 Neither the Company nor the Subsidiary is liable for the Taxes of
any Person under Treasury Regulation Section 1.1502-6 or any similar provision
of state, local or foreign Tax Law, as a transferee or successor, by Contract,
or otherwise.
     4.10.5 The Company is and has been an “S corporation” within the meaning of
Section 1361(a)(1) of the Code at all times since January 1, 2001, and the
Subsidiary is and has been “qualified subchapter S subsidiary” within the
meaning of Section 1361(b)(3)(B) of the Code at all times since July 25, 2003.
Except as set forth on Schedule 4.10.5, neither the Company nor the Subsidiary
owns any assets that would give rise to a potential tax liability under
Section 1374 of the Code, whether as a result of a deemed sale of the Company’s
and the Subsidiary’s assets caused by a Section 338(h)(10) Election (including
in connection with the transactions contemplated by this Agreement).
     4.11 Real Property.
     4.11.1 Neither the Company nor the Subsidiary currently owns any real
property. Schedule 4.11.1 sets forth a complete list of all real property and
interests in real property leased by the Company and its Subsidiary
(collectively, “Real Property Leases” and the real properties specified in such
leases being referred to herein individually as a “Company Property” and,
collectively, as the “Company Properties”) as lessee. The Company Properties
constitute all

19

--------------------------------------------------------------------------------

 

interests in real property currently used or currently held for use in
connection with the business of the Company and its Subsidiary and which are
necessary for the continued operation of the business of the Company and its
Subsidiary as such business is currently conducted. The Company and its
Subsidiary have a valid and enforceable leasehold interest under each of the
Real Property Leases, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity), and neither the Company nor the Subsidiary has received any written
notice of any default or event that, with notice or lapse of time, or both,
would constitute a default by the Company or the Subsidiary under any of the
Real Property Leases, and, to the knowledge of the Company, no other party is in
default thereof, and no party to the Real Property Leases has exercised any
termination rights with respect thereto. True, correct and complete copies of
all Real Property Leases have been provided to the Purchaser.
     4.11.2 The Company and the Subsidiary have all material certificates of
occupancy and Permits of any Governmental Body necessary for the current use and
operation of each Company Property, except for such Permits the failure to hold
of which would not reasonably be expected to have a Material Adverse Effect .
     4.12 Tangible Personal Property.
     4.12.1 Schedule 4.12.1 sets forth each lease of personal property
(collectively, the “Personal Property Leases”) involving annual payments in
excess of $50,000 relating to personal property used in the business of the
Company or its Subsidiary or to which the Company or its Subsidiary is a party
or by which the properties or assets of the Company or its Subsidiary is bound.
     4.12.2 A copy of each of the Personal Property Leases listed on
Schedule 4.12.1 has been delivered to the Purchaser. The Company and its
Subsidiary have a valid leasehold interest under each of the Personal Property
Leases under which it is a lessee, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity), and there is no default under any Personal Property Leases by the
Company or its Subsidiary or, to the knowledge of the Company, by any other
parties thereto, other than such defaults by the Company, the Subsidiary or such
other parties as would not reasonably be expected to result in a Material
Adverse Effect.
     4.12.3 Except as set forth on Schedule 4.12.3, the Company and its
Subsidiary have good and marketable title to all of the items of tangible
personal property reflected in the balance sheet of the most recent of the
Financial Statements (except as sold or disposed of subsequent to the date
thereof in the Ordinary Course of Business consistent with past practice), free
and clear of any and all Liens other than Permitted Exceptions. Except as set
forth on Schedule 4.12.3, no material maintenance, replacement or repair of any
fixtures or equipment currently used in the business (other than spare parts)
has been deferred or neglected.
     4.13 Intellectual Property
     4.13.1 Schedule 4.13.1 lists all Intellectual Property that, as of the date
hereof and at the Effective Time, is owned or used under license or similar
agreements by the Company or Subsidiary other than that acquired pursuant to the
purchase of off-the-shelf software (“Off-the-Shelf Software”). The Company is
the sole and exclusive owner of, or has valid and continuing

20

--------------------------------------------------------------------------------

 

rights to use, sell and license, as the case may be, all of the Intellectual
Property set forth on Schedule 4.13.1 and Products sold or licensed by the
Company in the business as presently conducted and as currently proposed to be
conducted, free and clear of all Liens or obligations to others (except for
those specified licenses included in Schedule 4.13.6).
     4.13.2 Neither the Company nor the Subsidiary has received any notice that
the use of any Intellectual Property identified on Schedule 4.13.1 violates or
infringes the rights of any other Person. To the knowledge of the Company, the
Intellectual Property owned, used, practiced or otherwise commercially exploited
by the Company, the manufacturing, licensing, marketing, offering for sale, sale
or use of the products in connection with the business as presently and as
currently proposed to be conducted, and the Company’s present and currently
proposed business practices and methods do not constitute an unauthorized use or
misappropriation of any patent, copyright, trade secret or other similar right,
of any Person and, to the knowledge of the Company, does not infringe,
constitute an unauthorized use of, or violate any other right of any Person
(including, without limitation, pursuant to any non-disclosure agreements or
obligations to which the Company is a party). The Intellectual Property owned by
or licensed to the Company includes all of the intellectual property rights
necessary to enable the Company to conduct the business of the Company and the
Subsidiary in the manner in which such business is currently being conducted.
     4.13.3 Except with respect to licenses of Off-the-Shelf Software, and
except pursuant to the licenses for the use of the Intellectual Property
(“Intellectual Property Licenses”) listed in Schedule 4.13.3, the Company is not
required, obligated, or under any liability whatsoever, to make any payments by
way of royalties, fees or otherwise to any owner, licensor of, or other claimant
to any Intellectual Property, or other third party, with respect to the use
thereof or in connection with the conduct of the business as currently conducted
or proposed to be conducted.
     4.13.4 Neither the execution nor delivery of this Agreement nor the
carrying on of the business as currently conducted will conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any of the Intellectual Property Licenses or any other material Contract
relating to the Intellectual Property under which the Company is now obligated.
     4.13.5 Schedule 4.13.5 sets forth an accurate and complete list of all
patents or applications therefor, trademarks, trade names, software (other than
“Off the Shelf”), domain names, pending applications for registrations of any
trademarks and unregistered trademarks, registered copyrights, and pending
applications for registration of copyrights, owned or filed by the Company.
Schedule 4.13.5 lists the jurisdictions in which each such item of Intellectual
Property has been issued or registered or in which any such application for such
issuance and registration has been filed.
     4.13.6 Schedule 4.13.6 sets forth a complete and accurate list of all
Contracts to which the Company is a party: (1) as grantor, granting any rights
to third parties to use the Intellectual Property; (2) as a grantee of any
rights in the Intellectual Property; or (3) containing a covenant not to compete
or otherwise limiting the Company’s ability to (i) exploit fully any of the
Intellectual Property or (ii) conduct the business in any market or geographical
area or with any Person.
     4.13.7 No secret information of the Company used in the manufacturing of
the Products or any other non-public, proprietary information material to the
business of the Company as presently conducted has been authorized to be
disclosed or, to the knowledge of the Company, has been actually disclosed by
the Company to any third party other than pursuant to a non-

21

--------------------------------------------------------------------------------

 

disclosure agreement restricting the disclosure and use of the Intellectual
Property. The Company has taken adequate security measures to protect the
secrecy and confidentiality of all the secret information of the Company and any
other confidential information, including invention disclosures, not covered by
any patents owned or patent applications filed by the Company, which measures
are reasonable in the industry in which the Company operates.
     4.13.8 As of the date hereof, the Company is not the subject of any pending
or, to the Company’s knowledge, overtly threatened Legal Proceedings that
involve a claim of infringement, unauthorized use, or violation by any Person
against the Company or challenging the ownership, use, validity or
enforceability of, any material Intellectual Property.
     4.13.9 To the knowledge of the Company, no Person is infringing, violating,
misusing or misappropriating any Intellectual Property of the Company, and no
such claims have been made against any Person by the Company.
     4.13.10 No present or former employee has any right, title, or interest,
directly or indirectly, in whole or in part, in any material Intellectual
Property owned or used by the Company.
     4.14 Material Contracts. Schedule 4.14 sets forth all of the following
Contracts to which the Company or its Subsidiary is a party or by which it is
bound (collectively, the “Material Contracts”): (1) Contracts with any Seller or
any current officer or director of the Company or of its Subsidiary;
(2) Contracts pursuant to which any party is required to purchase or sell a
stated portion of its requirements or output from or to another party;
(3) Contracts for the sale of the assets of the Company or its Subsidiary other
than in the Ordinary Course of Business or for the grant to any person of any
preferential rights to purchase any of its material assets; (4) Contracts
containing covenants of the Company or its Subsidiary not to compete in any line
of business or with any other Person in any geographical area or covenants of
any other Person not to compete with the Company or its Subsidiary in any line
of business or in any geographical area; (5) Contracts relating to the borrowing
of money, including indebtedness under capital leases; (6) any other Contracts,
other than Real Property Leases, that: (i) involve, individually, the
expenditure by the Company or the Subsidiary of more than $50,000 annually,
(ii) are not cancelable upon 30 or fewer days notice without any liability or
(iii) require performance by any party more than one year from the date hereof;
(7) Contracts that provide for the receipt of payment by the Company or the
Subsidiary of $100,000 or more annually; (8) Contracts requiring the Company or
the Subsidiary to pay, perform, discharge or otherwise guarantee any Debt or
obligation of any Person; or (9) Contracts containing any provisions that are
contingent upon the occurrence of or prohibit any change in ownership of the
capital stock of the Company or the Subsidiary. Except as set forth on
Schedule 4.14, all of the Material Contracts and other agreements to which the
Company or the Subsidiary is a party: (i) are the legal, valid and binding
obligation of the Company and/or its Subsidiary, enforceable against the Company
and/or the Subsidiary in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and subject, as to
enforceability, to rules of law governing specific performance, to injunctive
relief, and to general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity) and (ii) to the Company’s
knowledge, are in full force and effect. Unless otherwise stated in Schedule
4.14, neither the Company nor the Subsidiary is in default in any material
respect under any Material Contracts and to the Company’s knowledge, no other
party is in default under the terms of any Material Contract. True, correct and
complete copies of all Material Contracts have been provided to the Purchaser.

22

--------------------------------------------------------------------------------

 

     4.15 Employee Benefits Plans.
     4.15.1 Schedule 4.15.1 sets forth a correct and complete list of the
following (collectively, the “Employee Benefit Plans”): all “employee pension
benefit plans” (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”)), any “employee welfare benefit plan
(as defined in Section 3(1) of ERISA) and any other written or oral plan,
agreement or arrangement involving direct or indirect compensation, including
insurance coverage, retirement, life and health insurance, hospitalization,
severance benefits, disability benefits, holiday, vacation, severance pay, sick
pay, sick leave, disability, tuition refund, service award, company car,
scholarship, relocation, patent award, fringe benefit, deferred compensation,
Bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation currently
maintained or contributed to by the Company or its Subsidiary on behalf of
employees, former employees, directors or former directors of the Company or its
Subsidiary.
     4.15.2 None of the Employee Benefit Plans is a “multiemployer plan,” (as
defined in Section 4001(a)(3) of ERISA) and at no time has the Company or any
ERISA Affiliate been obligated to contribute to any multiemployer plan. As used
herein, the term “ERISA Affiliate” shall mean any Person that is, or at any
applicable time was, a member of: (1) a controlled group of corporations (as
defined in Section 414(b) of the Code, (2) a group of trades or businesses under
common control (as defined in Section 414(c) of the Code), or (3) an affiliated
service group (as defined in Section 414(m) of the Code or the regulations under
Section 414(o) of the Code), any of which includes or included the Company or
its Subsidiary.
     4.15.3 Neither the Company nor any ERISA Affiliate has ever maintained an
Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.
     4.15.4 All Employee Benefit Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the IRS to
the effect that such Employee Benefit Plans are qualified and the plans and the
trusts related thereto are exempt from federal income taxes under Sections
401(a) and 501(a), respectively, of the Code, no such determination letter has
been revoked and revocation has not been threatened, and no such Employee
Benefit Plan has been amended since the date of its most recent determination
letter or application therefor in any material respect. Except as set forth in
Schedule 4.15.4, all Employee Benefit Plans have, in all material respects, been
operated and administered in accordance with their terms.
     4.15.5 Except as set forth in Schedule 4.15.5, all filings and reports as
to each Employee Benefit Plan required to have been submitted to the IRS or to
the United States Department of Labor have been duly submitted. No Employee
Benefit Plan has assets that include securities issued by any of the Company or
any ERISA Affiliate.
     4.15.6 There are no claims or Legal Proceedings (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and Legal
Proceedings with respect to qualified domestic relations orders) against or
involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any material
liability.
     4.15.7 Schedule 4.15.7 discloses each: (1) agreement with any shareholder,
director, executive officer or other key employee of the Company or its
Subsidiary (i) the benefits of which are contingent, or the terms of which are
altered, upon the occurrence of a transaction involving

23

--------------------------------------------------------------------------------

 

the Company of the nature of any of the transactions contemplated by this
Agreement, (ii) providing any term of employment or compensation guarantee or
(iii) providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee; (2) agreement,
plan or arrangement under which any Person may receive payments from the Company
or its Subsidiary that may be subject to the tax imposed by Section 4999 of the
Code (or any similar applicable foreign tax law) or included in the
determination of such Person’s “parachute payment” under Section 280G of the
Code (or any similar applicable foreign tax law); and (3) other than the Phantom
Stock Plans, agreement or plan binding the Company or its subsidiary, including
any stock option plan, stock appreciation right plan, restricted stock plan,
stock purchase plan, severance benefit plan or Employee Benefit Plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
     4.15.8 Except as set forth in Schedule 4.15.8, there are no unfunded
obligations under any Employee Benefit Plan providing benefits after termination
of employment to any employee of the Company or the Subsidiary (or to any
beneficiary of any such employee), including but not limited to retiree health
coverage and deferred compensation, but excluding continuation of health
coverage required to be continued under Section 4980B of the Code or other
applicable law (or any similar applicable foreign tax law) and insurance
conversion privileges under state law. Except as set forth in Schedule 4.15.8 or
as provided herein, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, either alone or upon
the occurrence of subsequent events: (1) result in any payment becoming due to
any employee (current, former or retired) of the Company or the Subsidiary,
(2) increase any benefits otherwise payable under any Employee Benefit Plan,
(3) result in the acceleration of the time of payment or vesting of any benefits
under any Employee Benefit Plan, or (4) constitute a “change in control” or
similar event under any Employee Benefit Plan, for which the Purchaser, the
Company or the Subsidiary shall become liable.
     4.15.9 Schedule 4.15.9 sets forth the policy of the Company and its
Subsidiary with respect to accrued vacation, accrued sick time and earned time
off and the amount of such liabilities as of April 30, 2007.
     4.16 Employees and Labor. Schedule 4.16 contains a complete and correct
list of all employees employed by the Company and the Subsidiary as of 2
business days prior to the date hereof, including, each active employee and each
employee classified as inactive as a result of disability, leave of absence or
other absence (collectively, the “Employees”). Neither the Company nor its
Subsidiary is currently a party to any collective bargaining agreement or union
contract recognizing any labor organization as the bargaining agent of any
Employees. To the Company’s knowledge, except as set forth in Schedule 4.16,
there is no union organization activity involving any of the Employees, pending
or threatened. Each of the Company and its Subsidiary is in material compliance
with all Laws relating to the employment of labor, including all such Laws
relating to wages, hours, the Worker Adjustment and Retraining Notification Act
and any similar state or local “mass layoff” or “plant closing” Law (“WARN”).
There has been no “mass layoff” or “plant closing” (as defined by WARN) with
respect to the Company or its Subsidiary within the six months prior to Closing.
Except as set forth on Schedule 4.16, neither the Company nor the Subsidiary,
during the last three (3) years, has experienced any material labor disputes or
any material work stoppages due to labor disagreements.

24

--------------------------------------------------------------------------------

 

     4.17 Litigation. Except as set forth in Schedule 4.17, there is no Legal
Proceeding pending or, to the knowledge of the Company, overtly threatened
against the Company or its Subsidiary before any court, or before any
governmental department, commission, board, agency, or instrumentality.
     4.18 Compliance with Laws; Permits. Except as set forth on Schedule 4.18
hereto: (1) to the Company’s knowledge, the Company is in compliance in all
material respects with all Laws of any Governmental Body applicable to its
business or operations, except where noncompliance thereof would not reasonably
be expected to have a Material Adverse Effect; (2) within the past 18 months,
neither the Company nor the Subsidiary has received any written or other notice
of or been charged with the violation of any Laws; and (3) to the Company’s
knowledge, neither the Company nor the Subsidiary is under investigation with
respect to the violation of any Laws. Schedule 4.18(i) contains a list of all
Permits that are required for the operation of the Business as presently
conducted and as presently intended to be conducted other than those the failure
to hold of which would not reasonably be expected to result in a Material
Adverse Effect. The Company and the Subsidiary currently have all Permits that
are required for the operation of the business as presently conducted, except
where failure to have any such Permit would not reasonably be expected to have a
Material Adverse Effect. Except as set forth on Schedule 4.18, all of the
Permits are valid and will not be lost or otherwise forfeited as a result of the
purchase of the Shares by the Purchaser.
     4.19 Environmental Matters.
     4.19.1 Schedule 4.19.1 attached hereto sets forth a list, by date of
occupancy, of all real property owned or leased by the Company or the Subsidiary
at any time prior to January 1, 2003 (such real property, the “Historical
Properties”); provided, however, that such Schedule and the definition of the
term Historical Properties does not include any real property owned by an entity
acquired by the Company or the Subsidiary and disposed of by such entity prior
to such entity’s acquisition by the Company or the Subsidiary. Other than
Releases that have occurred in de minimis quantities or that in the aggregate
are not material, and except as set forth on Schedule 4.19.1, no Release of
Hazardous Materials in violation of any Environmental Law has occurred on any
Company Properties or Historical Properties during the period of the Company’s
ownership, occupancy, or operation thereof in a manner or quantity that
triggered or would have triggered a reporting obligation under Section 103 of
CERCLA or constituted a reportable event under an existing permit, or in a
manner that would reasonably be expected to require remediation by the Company
under any Environmental Law, nor does the Company know of any such Release prior
to the Company’s ownership, occupancy or operation of any Company Properties.
     4.19.2 To the knowledge of the Company, the operations of the Company
presently comply and, except as set forth on Schedule 4.19.2, have at all times
complied with applicable Environmental Laws except where failure so to comply
would not reasonably be expected to have a Material Adverse Effect. To the
knowledge of the Company, there is no condition in or under any Company
Properties at the date of this Agreement (“Current Company Properties”) that
would require remediation under applicable Environmental Law. Except as set
forth on Schedule 4.19.2, the Company has not received any written communication
in the last 10 years from or on behalf of any Governmental Body or other third
party: (1) of any noncompliance of any Current Company Properties or Historical
Properties with Environmental Laws or of any condition thereon that would
require remediation under applicable Environmental Law or (2) that any Current
Company Properties, any Historical Properties or any property to which the
Company has directly or indirectly transported or arranged for the
transportation of any Hazardous Material is currently on any federal or state
“Superfund” list. No Current Company Properties is on any federal or state
“Superfund” list.

25

--------------------------------------------------------------------------------

 

     4.19.3 Except as set forth on Schedule 4.19.3, no administrative order,
consent order, settlement agreement, suit or material citation to which the
Company is a party with respect to any Environmental Law, Hazardous Materials or
Hazardous Materials Contaminations has been received by the Company during the
last 10 years with respect to or in connection with the operation of any Current
Company Properties or, to the knowledge of the Company, Historical Properties or
any off-site location to which Hazardous Materials used or generated by the
Company have been transported or disposed of or have come to be located.
     4.19.4 Except as set forth on Schedule 4.19.4, to the knowledge of the
Company, all Hazardous Materials used, generated or disposed of by the Company
in the last 10 years have been disposed in compliance in all material respects
with all applicable Environmental Laws except where any such non-compliance
would not reasonably be expected to have a Material Adverse Effect.
     4.19.5 This Section 4.19 contains the only representations and warranties
of the Company with regard to Environmental Laws or Hazardous Materials.
     4.19.6 The term “Company” as used in this Section shall be deemed to
include the Company and the Subsidiary.
     4.20 Insurance. Schedule 4.20 sets forth a complete and accurate list of
all policies of insurance of any kind or nature covering the Company or the
Subsidiary or any of their respective employees, properties or assets,
including, without limitation, policies of life, disability, fire, theft,
workers compensations, employee fidelity and other casualty and liability
insurance. All such policies are valid and in full force and effect, and neither
the Company nor its Subsidiary is in default of any provision thereof, except
for such defaults as would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect.
     4.21 Inventories; Receivables; Payables. Except as set forth in Schedule
4.21:
     4.21.1 The inventories of the Company and its Subsidiary are in good and
marketable condition, and are usable and saleable in the Ordinary Course of
Business. Adequate reserves have been reflected in the Financial Statements for
short, obsolete or otherwise unusable inventory, which reserves were calculated
in a manner consistent with past practice and in accordance with GAAP
consistently applied.
     4.21.2 All accounts receivable of the Company and its Subsidiary have
arisen from bona fide transactions in the Ordinary Course of Business consistent
with past practice, including applicable reserves for returns or doubtful
accounts reflected thereon, which reserves were calculated in a manner
consistent with past practice and in accordance with GAAP.
     4.21.3 All accounts payable of the Company and its Subsidiary reflected in
the Financial Statements or arising after the date thereof are the result of
bona fide transactions in the Ordinary Course of Business and have been paid or
are not yet due and payable.
     4.22 Major Customers and Vendors. Schedule 4.22 sets forth: (1) the names
of the top 10 customers of the Company and the Subsidiary (with the term
“customer”, for purposes of this Section, including distributors) by dollar
purchase volume during the calendar year 2006 (measured by the net amount
invoiced to such party during the fiscal year of the Company and Subsidiary
ended on December 31, 2006); and (2) the names and addresses of the top 10
suppliers to the Company and Subsidiary from which the Company and Subsidiary
ordered raw materials, components, supplies, merchandise, finished

26

--------------------------------------------------------------------------------

 

goods, other goods and services (collectively, “Goods”) during calendar year
2006 by dollar purchase volume during such year (measured by the net amount
invoiced to the Company and Subsidiary by such party during the fiscal year of
the Company and Subsidiary ended on December 31, 2006), together with a brief
description of the Goods provided. Except as set forth in Schedule 4.22, neither
the Company nor the Subsidiary is engaged in any material dispute with any
customers or suppliers identified on Schedule 4.22. Except as set forth in
Schedule 4.22, neither the Company nor the Subsidiary has received notice of,
or, to Company’s knowledge, obtained credible information reasonably suggesting,
the loss of a supplier or customer identified on Schedule 4.22 or the loss of
any group of suppliers or customers of the Company or the Subsidiary where such
loss would have a Material Adverse Effect. Except as set forth in Schedule 4.22,
no supplier is the sole source of supply of any materials used by the Company or
the Subsidiary.
     4.23 Corporate Records. The respective minute books of the Company and the
Subsidiary contain true, complete and accurate records of all meetings and
accurately reflect all other corporate action of the Stockholders and directors
of the Company and the Subsidiary. The stock certificate book and stock transfer
ledgers are true, complete and correct.
     4.24 Financial Advisors. No Person has acted, directly or indirectly, as a
broker, finder or financial advisor for the Company, the Subsidiary or the
Sellers in connection with the transactions contemplated by this Agreement and
no person is entitled to any fee or commission or like payment in respect
thereof except for BMO Capital Markets.
     4.25 Product Warranties. The standard product or service warranties,
indemnifications and guarantees which the Company and the Subsidiary extend to
customers in the Ordinary Course of Business, copies of which have been
delivered to the Purchaser, are identified and described in Schedule 4.25. No
warranties, indemnifications or guarantees are now in effect or outstanding with
respect to the products or services manufactured, produced or performed by the
Company or the Subsidiary, except for the warranties, indemnifications and
guarantees identified and described in Schedule 4.25. Except for product
returns, the scope and magnitude of which are consistent with the product
returns experienced by the Company and the Subsidiary prior to the date hereof,
to the knowledge of the Company, the products sold by the Company and the
Subsidiary prior to the date hereof do not have any defects or failure rates
that have given rise to material warranty, product liability or related claims.
     4.26 Bank Accounts; Lockboxes. Schedule 4.26 contains a true, correct and
complete list of each bank account maintained by the Company and the Subsidiary
together with a true, correct and complete list of each bank or other financial
institution at which any lock box for the collection of accounts receivable of
the Company or the Subsidiary is maintained, together with the identity of all
Persons authorized to withdraw any funds contained in such accounts or
lockboxes.
     4.27 No Misrepresentation. To the knowledge of the Company and the Sellers
: (i), neither this Agreement (including the Schedules and Exhibits hereto) nor
any document, certificate or instrument furnished in connection therewith
contains, with respect to any Seller or the Company, any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein not misleading; and (ii) there is no fact known to any Sellers, the
Company or the Subsidiary which has or would reasonably be expected in the
future to result in a Material Adverse Effect and which has not been set forth
in this Agreement (including the Schedules and Exhibits hereto).

5.   REPRESENTATIONS AND WARRANTIES OF PURCHASER

     The Purchaser hereby represents and warrants to the Company and each of the
Sellers that:

27

--------------------------------------------------------------------------------

 

     5.1 Organization and Good Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
     5.2 Authorization of Agreement. The Purchaser has full corporate power and
authority to execute and deliver this Agreement, each Transaction Agreement to
which it is a party, and each other document, instrument or certificate
contemplated by this Agreement or to be executed by the Purchaser in connection
with the consummation of the transactions contemplated hereby and thereby and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Purchaser of this Agreement, the Transaction
Agreements and each other agreement to be executed and delivered by the
Purchaser in connection with the consummation of the transactions contemplated
hereby has been duly authorized by all necessary corporate action on behalf of
the Purchaser. This Agreement has been, and the Transaction Agreements to be
executed and delivered by the Purchaser in connection with the consummation of
the transactions contemplated hereby will be at or prior to the Closing, duly
executed and delivered by the Purchaser and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto) this Agreement
constitutes, and the Transaction Agreements to be executed and delivered by the
Purchaser in connection with the consummation of the transactions contemplated
hereby when so executed and delivered will constitute, legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to rules of law governing
specific performance, to injunctive relief and to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
     5.3 Conflicts; Consents of Third Parties.
          5.3.1 Except as set forth on Schedule 5.3.1 hereto, neither of the
execution and delivery by the Purchaser of this Agreement and the Transaction
Agreements executed and delivered by the Purchaser in connection with the
consummation of the transactions contemplated hereby, nor the compliance by the
Purchaser with any of the provisions hereof and thereof will: (1) conflict with,
or result in the breach of, any provision of the constituent documents of the
Purchaser, (2) conflict with, violate, result in the breach of, or constitute a
default under any Contract, instrument or Permit or other obligation to which
the Purchaser is a party or by which the Purchaser or its properties or assets
are bound or (3) violate any statute, rule, regulation, order or decree of any
governmental body or authority by which the Purchaser is bound, except, in the
case of clauses (2) and (3), for such violations, breaches or defaults as would
not have a material adverse effect on the business, properties, results of
operations, conditions (financial or otherwise) of the Purchaser and its
subsidiaries, taken as a whole.
          5.3.2 Except as set forth in Schedule 5.3.2, no consent, waiver,
approval, Order, Permit or authorization of, or declaration or filing with, or
notification to, any Person or Governmental Body is required on the part of the
Purchaser in connection with the execution and delivery of this Agreement or the
compliance by the Purchaser of any of the provisions hereof, the consummation of
the transactions contemplated hereby or the taking of any other action
contemplated hereby, except for compliance with the applicable requirements of
the HSR Act and the rules and regulations promulgated thereunder.
     5.4 Litigation. There is no Legal Proceeding pending or, to the knowledge
of the Purchaser, threatened against the Purchaser or its Affiliates, which, if
adversely determined, is reasonably likely to prohibit or restrain the ability
of the Purchaser to enter into this Agreement or consummate the transactions
contemplated hereby.

28

--------------------------------------------------------------------------------

 

     5.5 Investment Intention. The Purchaser is acquiring the Shares for its own
account, for investment purposes only and not with a view to the distribution
(as such term is used in Section 2(11) of the Securities Act of 1933, as amended
(the “Securities Act”). The Purchaser understands that the Shares have not been
registered under the Securities Act and cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration is
available.
     5.6 Financial Advisors. No Person has acted, directly or indirectly, as a
broker, finder or financial advisor for the Purchaser in connection with the
transactions contemplated by this Agreement and no person is entitled to any fee
or commission or like payment in respect thereof.
     5.7 Financial Resources. The Purchaser has sufficient financial resources
to consummate the transactions contemplated by this Agreement.

6.   COVENANTS

     6.1 Access to Information. Prior to the Closing Date, the Purchaser shall
be entitled, through its officers, employees and representatives (including,
without limitation, its legal advisors and accountants), to make such
investigation of the properties, businesses and operations of the Company and
its Subsidiary and such examination of the books, records and financial
condition of the Company and its Subsidiary as it reasonably requests and to
make extracts and copies of such books and records. Any such investigation and
examination shall be conducted during regular business hours and under
reasonable circumstances, and the Sellers shall cooperate, and shall direct the
Company and its Subsidiary to cooperate, fully therein. In order that the
Purchaser may have full opportunity to make such physical, business, accounting
and legal review, examination or investigation as it may reasonably request of
the affairs of the Company and its Subsidiary, the Sellers shall direct the
officers, employees, consultants, agents, accountants, attorneys and other
representatives of the Company and its Subsidiary to cooperate fully with such
representatives in connection with such review and examination.
     6.2 Conduct of Business Pending Closing.
     6.2.1 Except as otherwise expressly contemplated by this Agreement or with
the prior written consent of the Purchaser, the Sellers shall, and shall direct
the Company and its Subsidiary to:
     (1) conduct the business of the Company and its Subsidiary only in the
Ordinary Course of Business;
     (2) use its commercially reasonable best efforts to: (i) preserve its
present business operations, organization (including, without limitation,
management and the sales force) and goodwill of the Company and its Subsidiary;
and (ii) preserve its present relationship with Persons having material business
dealings with the Company and its Subsidiary; and
     (3) maintain the books, accounts and records of the Company and its
Subsidiary in the Ordinary Course of Business.
     6.2.2 Except as set forth in Section 6.2.3 and except as otherwise
expressly contemplated by this Agreement or with the prior written consent of
the Purchaser, the Sellers shall not, and shall cause the Company and its
Subsidiary not to:

29

--------------------------------------------------------------------------------

 

          (1) declare, set aside, make or pay any dividend or other distribution
in respect of the capital stock of the Company or repurchase, redeem or
otherwise acquire any outstanding shares of the capital stock or other
securities of, or other ownership interests in, the Company or its Subsidiary;
          (2) transfer, issue, sell or dispose of any shares of capital stock or
other securities of the Company or its Subsidiary or grant options, warrants,
calls or other rights to purchase or otherwise acquire shares of the capital
stock or other securities of the Company or its Subsidiary;
          (3) effect any recapitalization, reclassification, stock split or like
change in the capitalization of the Company or its Subsidiary;
          (4) amend the Organizational Documents;
          (5) enter into any Contract that, upon execution, would constitute a
Material Contract;
          (6) incur, assume or guarantee any Debt other than in the Ordinary
Course of Business;
          (7) create, assume or incur any Lien on any material asset of the
Company or the Subsidiary other than the Permitted Exceptions;
          (8) grant any increase in compensation or benefits to employees or
officers of the Company or the Subsidiary, pay any severance or termination pay
or any bonus, enter into or amend any severance agreements or change in control
agreements with officers or employees of the Company or the Subsidiary;
          (9) adopt any new Employee Benefit Plans or amend or terminate any
existing Employee Benefit Plans (other than as set forth in all of the Schedules
to Section 4.15);
          (10) acquire any material properties or assets or sell, assign,
transfer, convey, lease or otherwise dispose of any of the material properties
or assets of the Company and its Subsidiary;
          (11) permit the Company or its Subsidiary to enter into or agree to
enter into any merger or consolidation with, any corporation or other entity, or
engage in any material new line of business or invest in, make a loan, advance
or capital contribution to, or otherwise acquire the securities of any other
Person; or
          (12) take any other action or omit to take any other action that would
reasonably be expected to have a Material Adverse Change.
     6.2.3 Notwithstanding Sections 6.2.1 and 6.2.2, but subject to the
Shareholders Agreement, the Phantom Stock Plans and applicable law, at any time
prior to the Closing Date, the Sellers may cause the Company and the Subsidiary:
(1) to pay the bonuses described in Section 4.9; and (2) to distribute, and the
Company and the Subsidiary may distribute, any amount to the Sellers (including,
without limitation, distributions to enable the Sellers to pay Taxes or
estimated Taxes based upon the operations of the Company and the Subsidiary);

30

--------------------------------------------------------------------------------

 

provided that, notwithstanding the foregoing, the Sellers shall not cause the
Company or the Subsidiary to pay such bonuses or make any distribution if and to
the extent that, following such bonus payment or distribution, the aggregate
amount of cash or immediately available funds held in all bank accounts
maintained by the Company and the Subsidiary is less than the aggregate dollar
amount of all outstanding checks written, as well as all payment instructions
(including standing and automatic payment instructions) given, by the Company or
the Subsidiary and not yet debited from the actual amount of the funds held by
the Company and the Subsidiary in such bank accounts.
     6.2.4 Notwithstanding Sections 6.2.1 and 6.2.2, the Sellers shall cause the
Company and the Subsidiary, as the case may be, to: (1) pay in full, prior to
the Closing Date, all amounts payable to members of the Board of Directors of
the Company and members of the Board of Directors of the Subsidiary for services
rendered on or prior to the Closing Date; and (2) insure that, following the
payment of the amounts described in Section 6.2.4(1) above, the aggregate amount
of cash or immediately available funds held in all bank accounts maintained by
the Company and the Subsidiary is not less than the aggregate dollar amount of
all outstanding checks written, as well as all payment instructions (including
standing and automatic payment instructions) given by the Company or the
Subsidiary and not yet debited from the actual amount of the funds held by the
Company and the Subsidiary in such bank accounts.
     6.3 No Solicitation. None of the Company, the Subsidiary, the Sellers’ or
any of their respective directors, officers, employees or agents, as the case
may be, shall, directly or indirectly, encourage, solicit, initiate or enter
into any discussions or negotiations concerning, any disposition of all or
substantially all of the Shares or assets of the Company or the Subsidiary
(other than pursuant to this Agreement), or any proposal therefor, or furnish or
cause to be furnished any information concerning the Shares, the Company or the
Subsidiary to any party in connection with any transaction involving the
acquisition of the Shares or the assets of the Company or the Subsidiary by any
person other than the Purchaser. The Sellers will promptly inform the Purchaser
of any inquiry (including the terms thereof and the Person making such inquiry)
that any Seller, the Company or the Subsidiary may receive or learn of in
respect of any such proposal.
     6.4 Consents. The Company shall use its commercially reasonable best
efforts, and the Purchaser shall cooperate with the Company and the Sellers, to
obtain at the earliest practicable date all consents and approvals required to
consummate the transactions contemplated by this Agreement, including, without
limitation, the consents and approvals referred to in Section 4.5.2 hereof.
     6.5 Filings with Governmental Bodies. Each of the Purchaser, the Company
(if necessary) and the Indemnifying Sellers shall: (1) make or cause to be made
all filings required of each of them or any of their respective Affiliates under
the HSR Act or other applicable antitrust Laws with respect to the transactions
contemplated hereby as promptly as practicable and, in any event, not later than
10 Business Days after the date of this Agreement in the case of all filings
required under the HSR Act and within four weeks in the case of all other
filings (if any) required by other such antitrust Laws; (2) comply at the
earliest practicable date with any request under the HSR Act or other such
antitrust Laws for additional information, documents, or other materials
received by each of them or any of their respective subsidiaries from the
Federal Trade Commission (the “FTC”), the Antitrust Division or any other
Governmental Body in respect of such filings or such transactions; and
(3) cooperate with each other in connection with any such filing (including, to
the extent permitted by applicable law, providing copies of all such documents
to the non-filing parties prior to filing and considering all reasonable
additions, deletions or changes suggested in connection therewith). The filing
fees payable in connection with the filing of the HSR Act Notification and
Report form shall be paid by the Purchaser.

31

--------------------------------------------------------------------------------

 

     6.6 Discharge of Liens. On or before the Closing Date, the Sellers will
take such action as may be necessary to discharge any Lien (other than Permitted
Exceptions) on the assets and properties of the Company and the Subsidiary.
     6.7 Section 338(h)(10) Election. Subject to compliance by the Purchaser
with the Tax Timetable, with respect to the acquisition of the Shares hereunder,
the Purchaser reserves the right to make an election under Section 338(h)(10) of
the Code at any time on or prior to the due date for making any such election as
provided for by Section 338(h)(10) of the Code and the Regulations thereunder;
provided, however, that the Sellers shall have no obligation to cooperate with
the Purchaser with respect to such an election if (1) the Purchaser has not
complied in all material respects with the requirements of the Tax Timetable
required to be performed by the Purchaser or (2) the Sellers have not received
the Tax Indemnification Payment by April 11, 2008. If the Purchaser makes such
election and the Purchaser makes the Tax Indemnification Payment (as defined
below) to each of the Sellers, the Sellers and the Purchaser shall jointly make
an election under Section 338(h)(10) of the Code (and any corresponding
elections under state or local tax law) (collectively, a “Section 338(h)(10)
Election”). The term “Tax Indemnification Payment” shall mean, for each Seller,
the amount that the Purchaser shall be required to pay to such Seller equal to
the aggregate amount reasonably required to reimburse such Seller on a net,
after-tax basis for any cost, loss, liability or expense (including any increase
in liability for Taxes, penalties, and interest and any reasonable legal and
accounting fees) reasonably incurred in connection with: (1) the aforesaid
Section 338(h)(10) Election, and (2) the receipt not later than April 11, 2008
by such Seller from the Purchaser of the Tax Indemnification Payment. If the
Purchaser makes a Tax Indemnification Payment to a Seller (or, as provided by
the following paragraph), to the Tax Escrow Agent on or prior to April 11, 2008,
such Seller will take, and will cooperate with the Purchaser and with each other
Seller to take, all actions necessary and appropriate (including filing such
forms, returns, elections, schedules and other documents as may be required) to
effect and preserve a timely Section 338(h)(10) Election in accordance with the
Code and the regulations thereunder, or any successor provisions. If the
Purchaser has elected to make the Section 338(h)(10) Election, and makes the Tax
Indemnification Payment to each of the Sellers, the Sellers and the Purchaser
shall, for Tax purposes, report the sale of the Shares pursuant to this
Agreement in a manner which is consistent with the Section 338(h)(10) Election
and shall take no position contrary thereto or inconsistent therewith in any Tax
return or in any discussion with or proceeding before any taxing authority, or
otherwise. Promptly after deciding to make a Section 338(h)(10) Election, the
Purchaser shall notify the Sellers in writing of such decision so that each
Seller has sufficient time to calculate the Tax Indemnification Payment to be
made by the Purchaser to such Seller but in no event later than the date
specified in the Tax Timetable. As soon as practicable following the receipt by
such Seller of the irrevocable written notice from the Purchaser of its decision
to make the 338(h)(10) Election, but in any event not later than the date
specified in the Tax Timetable for the same, each Seller shall deliver a written
statement containing the amount of the Tax Indemnification Payment which is
claimed to be due to such Seller and the manner in which the amount of such Tax
Indemnification Payment has been calculated to the Purchaser.
     If the Purchaser disagrees with a Seller’s calculation of the Tax
Indemnification Payment, then the Purchaser shall pay (1) to such Seller the
amount of the Tax Indemnification Payment as calculated by the Purchaser for
such Seller (the “Purchaser’s Amount”) and (2) to the Tax Escrow Agent an amount
equal to (i) the amount of the Tax Indemnification Payment which the Purchaser
disagrees with (and as calculated by such Seller) less (ii) the Purchaser’s
Amount. The Tax Escrow Agent shall agree to hold the Purchaser’s Amount for the
Purchaser and such Seller until the Purchaser and such Seller resolve their
differences with respect to the amount of the disputed Tax Indemnification
Payment in accordance with the procedures described in Section 2.3.4 (with
respect to the calculation of the Closing Net Working Capital). Upon payment by
the Purchaser to the Tax Escrow Agent of the amount of the disputed Tax
Indemnification Payment, the Seller that has computed the Tax Indemnification
Payment which is in

32

--------------------------------------------------------------------------------

 

dispute shall take, and cooperate with the Purchaser and each other Seller to
take, all actions necessary and appropriate to effect and preserve a timely
Section 338(h)(10) Election.
     By way of clarification, if the Purchaser elects to make the
Section 338(h)(10) Election, the Tax Indemnification Payment that is to be made
by the Purchaser to each such Seller shall be computed individually for each
such Seller, in an amount which is not only necessary to offset fully any
additional Tax (whether denominated as income, excise, sales or use, transfer,
Built-In Gains (net of any deduction available to the Sellers which is
attributable to the Company’s payment of such Built-in-Gains Tax), penalty and
interest or other Tax and regardless of whether such additional Tax, penalty or
interest is imposed by any Federal, state or local governmental authority)
incurred by such Seller as a result of the Section 338(h)(10) Election having
been made, but also any additional Tax (whether denominated as income, excise,
sales or use, transfer, Built-In Gains (net of any deduction available to the
Sellers which is attributable to the Company’s payment of such Built-in-Gains
Tax), penalty or interest or other Tax and regardless of whether such additional
Tax is imposed by any Federal, state or local governmental authority)
attributable to the receipt by each such Seller of the Tax Indemnification
Payment. The Tax Indemnification Payment for a Seller shall be paid by wire
transfer of immediately available funds to such Seller (or, if applicable, to
the Tax Escrow Agent) at the Account specified in the Wiring Instructions, no
later than April 11, 2008. By way of further clarification, it is the intention
of all the parties that the Tax Indemnification Payment that will be paid by the
Purchaser to each of the Sellers will be an amount sufficient so that each
Seller will receive the same after-tax proceeds from the sale of its Shares,
after payment of all such additional Taxes (including penalties, interest, and
reasonable legal and accounting fees), that it would have received had the
Section 338(h)(10) Election not been made. If any subsequent adjustment made by
any taxing authority to the Taxes payable as a result of the Section 338(h)(10)
Election increases the Taxes payable by the Sellers as a result of the
338(h)(10) Election, other than any adjustment to the amount of the aggregate
payments by the Company under the Phantom Stock Plans which is deductible, the
Purchaser shall pay an amount to the Sellers to compensate for such increase
within 30 days of written demand by the Sellers Representative. If any such
adjustment causes a decrease in the Taxes payable by the Sellers as a result of
the Section 338(h)(10) Election, then the Sellers shall reimburse the Purchaser
for such amount within 30 days following Purchaser’s delivery of written notice
of such determination to the Sellers’ Representative.
     If the Purchaser elects to make the Section 338(h)(10) Election, then the
consideration paid for the Shares (and any other amounts required to be
capitalized pursuant to Section 338 of the Code) shall be allocated among the
Company’s and Subsidiary’s assets in accordance with the principles of
Section 338 of the Code and the regulations thereunder. The Purchaser shall
prepare, using its goods faith efforts, and deliver to the Sellers a proposed
allocation of such consideration in accordance with the Tax Timetable. Unless,
within 10 days from receipt thereof, the Sellers disagree in writing with such
allocation, the amount so allocated to each asset shall be as proposed by the
Purchaser and shall constitute the agreed upon allocation. The Purchaser and the
Sellers shall utilize the allocation of consideration described in and agreed
upon pursuant to this Section 6.7 in the preparation of all Tax Returns or forms
and for all other Tax purposes, including, but not limited to, the preparation
of IRS Form [8883. Neither the Purchaser nor the Sellers shall agree to any
adjustment relating to the manner in which the consideration has been allocated
as set forth in this Section 6.7 without the prior written approval of the
other, which approval shall not be unreasonably withheld. The parties agree to
consult and resolve in good faith any disputes in allocating the consideration
under this Section 6.7. Any adjustment to the Purchase Price paid pursuant to
this Agreement shall result in an appropriate adjustment to such allocation.
     For purposes of the Tax Indemnification Payment (including the calculation
thereof) under this Section 6.7, the terms “Seller” and “Sellers” shall mean the
grantor, the beneficiaries or any other deemed owner of such Seller.

33

--------------------------------------------------------------------------------

 

     6.8 Tax Benefit Payment.
          6.8.1 If the Purchaser does not elect to make a Section 338(h)(10)
Election as contemplated by Section 6.7, then the Purchaser shall, not later
than the due date (without extension) for filing its Tax Return for the year
ending December 31, 2007, pay to each of the Sellers, a Pro Rata portion of the
Tax Benefit that will be available to the Company and/or the Purchaser (or their
respective successors or assignees) for the tax period ending December 31, 2007,
arising from the aggregate amount paid by the Company or the Purchaser (or their
respective successors or assignees) and included in the calculation of the Tax
Benefit.
          6.8.2 In addition, if the Purchaser does not elect to make a
Section 338(h)(10) Election, the Sellers shall, promptly following the last day
for filing of the Section 338(h)(10) Election set forth in the Tax Timetable,
take such action as may be necessary to apply to the applicable Governmental
Body for a refund of the full amount of the payment, if any, made by the
Purchaser as an estimate of the amount of the Built-in-Gains Tax payable by the
Company. If and to the extent that the amount of any refund received by the
Company is less than the payment made by the Purchaser as an estimate of the
Built-in-Gains Tax payable by the Company, the Sellers shall, jointly and
severally pay to the Company, within 30 days following delivery by the Purchaser
to the Sellers’ Representative of a written demand for payment, the amount by
which the amount paid by the Purchaser as an estimate of the Built-in-Gains Tax
payable by the Company exceeds the amount of the refund received by the Company.
          6.8.3 If the Purchaser makes a Section 338(h)(10) Election and the IRS
denies a deduction to the Sellers on their final S Corporation Tax Return for
all or any part of the payments made to the PSP Holders, the Purchaser shall
cause the Company to pay to the Sellers the Tax Benefit, if any, attributable to
the Company’s deduction of the portion of the payment made to the PSP Holders
that was disallowed by the IRS but only if the IRS approves a full current
deduction to the Purchaser, for the first Tax period following the Closing Date,
of the portion of the Phantom Stock Plan payment for which the deduction has
been disallowed to the Sellers, in addition to a deduction as goodwill of an
amount equal to: (1) the portion of the Purchase Price used to make the Phantom
Stock Payments; reduced by (2) the portion of the Phantom Stock Plan payment
which the IRS has approved as being deductible by the Purchaser. The payment
required to be made by the Company to the Sellers pursuant to this Section 6.8.3
shall be paid to the Sellers not later than 30 days after the IRS allows the
Purchaser or the Company to claim such deduction.
     6.9 Payment of Withholding Taxes. On the Closing Date the Sellers and the
Purchaser shall cooperate with each other and take such action as may be
reasonably required to cause the employee portion of all applicable withholding
taxes payable in connection with the payments made under the Phantom Stock Plans
and the employer portion of all applicable withholding taxes payable in
connection with the payments made under the Phantom Stock Plans to be paid, on
the Closing Date by check or other payment authorization, from funds paid to the
Company by Purchaser pursuant to Section 2.4.4.
     6.10 Post Closing Severance Payments. The Sellers shall be responsible for
and pay, promptly following the Closing Date, any and all severance payments
payable to the individuals identified in Schedule 6.10 as required by the Terms
of Florence Corporation’s Non-Solicitation, Non-Competition and Confidentiality
Agreement.
     6.11 Other Actions. Each of the Sellers and the Purchaser shall use
commercially reasonable efforts to (i) take all actions necessary or appropriate
to consummate the transactions contemplated by this Agreement and (ii) cause the
fulfillment at the earliest practicable date of all of the conditions to their
respective obligations to consummate the transactions contemplated by this
Agreement.

34

--------------------------------------------------------------------------------

 

     6.12 Preservation of Records. Subject to Section 10.2 hereof (relating to
the preservation of Tax records), the Sellers and the Purchaser shall preserve
and keep the records held by them relating to the business of the Company and
its Subsidiary for a period of 7 years from the Closing Date and shall make such
records and personnel available to the other as may be reasonably required by
such party in connection with, among other things, any insurance claims by,
legal proceedings against or governmental investigations of the Sellers or the
Purchaser or any of their Affiliates or in order to enable the Sellers or the
Purchaser to comply with their respective obligations under this Agreement.
     6.13 Publicity. Prior to the Closing Date, none of the Sellers, the
Company, the Subsidiary, nor the Purchaser shall issue any press release or
public announcement concerning this Agreement or the transactions contemplated
hereby without obtaining the prior written approval of the other party hereto,
which approval will not be unreasonably withheld or delayed, unless, in the sole
judgment of the Purchaser or the Sellers, disclosure is otherwise required by
applicable Law or by the applicable rules of any stock exchange, provided that,
to the extent required by applicable Law, the party intending to make such
release shall use its best efforts consistent with such applicable Law to
consult with the other party with respect to the text thereof. Following the
Closing, the Purchaser shall use its best efforts consistent with applicable law
to consult with the Sellers’ Representative and the PR Holder regarding any
regulatory filings, including securities laws filings, regarding the
transactions contemplated by this Agreement, and, if this Agreement or any
portion hereof is required to be included in any such filing, any redactions of
provisions of this Agreement.
     6.14 Environmental Matters. The Company shall permit, and the Sellers shall
cause the Company to permit, the Purchaser and the Purchaser’s environmental
consultant, to conduct a Phase I investigation of the environmental conditions
of any real property owned, operated or leased by or for the Company or its
Subsidiary and the operations conducted thereat (subject to any limitations
contained in valid, previously executed leases).
     6.15 Updated Schedules. All of the Schedules shall be updated by the
Company and the Sellers, as provided in this Section 6.15, and delivered to the
Purchaser at the Closing (collectively, the “Updated Schedules”). The Updated
Schedules shall be updated as of the Closing Date to reflect changes occurring
between the date hereof and the Closing Date to the information set forth in
relation to the corresponding representations and warranties; provided, that, no
such changes or Updated Schedules shall have a Material Adverse Effect on the
representations and warranties (and corresponding Schedules) made as of the date
hereof and, without the consent of the Purchaser, no such changes or Updated
Schedules shall be deemed or construed to cure any breach of any representation
or warranty made as of the date hereof.
     6.16 Confidentiality. The parties hereto shall not, without the prior
written consent of the other parties hereto disclose or acquiesce in the
disclosure by any person or entity, or use or enable the use to the competitive
detriment of the other parties hereto, any non-public information regarding the
other parties hereto or the financial condition of such other parties, contained
in any documents or otherwise furnished at any time pursuant to the provisions
of this Agreement, including, without limitation, all information and documents
furnished pursuant to Sections 6.7, 6.8 and 9, except to the legal counsel,
accountants, financial advisors, investment bankers and the other authorized
agents and representatives of the parties hereto, and to such persons only to
the extent required for activities directly related to the obligations of the
receiving parties under this Agreement, except to the extent such information
has been publicly disclosed or is otherwise in the public domain or is required
to be disclosed by law or by a court of competent jurisdiction or Governmental
Authority.
7. CONDITIONS TO CLOSING

35

--------------------------------------------------------------------------------

 

     7.1 Conditions Precedent to Obligations of Purchaser. The obligation of the
Purchaser to consummate the transaction contemplated by this Agreement is
subject to the fulfillment, on or prior to the Closing Date, of each of the
following conditions (any or all of which may be waived by the Purchaser in
whole or in part to the extent permitted by applicable law):
     (1) all representations and warranties of the Company and the Sellers
contained herein qualified as to materiality shall be true and correct, and the
representations and warranties of the Company and the Sellers contained herein
not qualified as to materiality shall be true and correct in all material
respects, at and as of the Effective Time with the same effect as though those
representations and warranties had been made again at and as of that time;
     (2) the Company and the Sellers shall have performed and complied in all
material respects with all obligations and covenants required by this Agreement
to be performed or complied with by them on or prior to the Closing Date;
     (3) the Purchaser shall have been furnished with certificates (dated the
Closing Date and in form and substance reasonably satisfactory to the Purchaser)
executed by each Seller certifying as to the fulfillment of the conditions
specified in Sections 7.1.(1) and 7.1.(2) hereof;
     (4) the Purchaser shall have been furnished with certificates from the
Company, executed by its President and Secretary, certifying as to the
fulfillment of the conditions specified in Sections 7.1(1) and 7.1(2) hereof;
     (5) no action, suit or proceeding shall have been instituted by any Person
before any Governmental Body seeking to restrain, modify or prevent the carrying
out of the transactions contemplated hereby, or seeking damages or a discovery
order in connection with such transactions, or that has or may have, in the
reasonable opinion of the Purchaser, a Material Adverse Effect;
     (6) certificates representing 100% of the Shares shall at the Closing be
validly delivered and transferred to the Purchaser;
     (7) the Purchaser shall have obtained all consents and waivers referred to
in Section 5.3 hereof with respect to the transactions contemplated by this
Agreement and the Purchaser Documents;
     (8) except for bonus payments and distributions permitted under
Section 6.2.3, there shall not have been or occurred any Material Adverse Change
between the date of this Agreement and the Closing Date;
     (9) the Sellers shall have obtained all consents and waivers referred to in
Section 4.5 hereof, in a form reasonably satisfactory to the Purchaser, with
respect to the transactions contemplated by this Agreement and the Seller
Documents;
     (10) the Sellers shall have provided the Purchaser with an affidavit of
non-foreign status that complies with Section 1445 of the Code;
     (11) the Purchaser shall have received the items set forth in Section 8.1;
and

36

--------------------------------------------------------------------------------

 

     (12) the waiting period under the HSR Act shall have expired or early
termination shall have been granted.
     7.2 Conditions Precedent to Obligations of Sellers. The obligations of the
Sellers to consummate the transactions contemplated by this Agreement are
subject to the fulfillment, prior to or on the Closing Date, of each of the
following conditions (any or all of which may be waived by the Sellers in whole
or in part to the extent permitted by applicable law):
     (1) all representations and warranties of the Purchaser contained herein
qualified as to materiality shall be true and correct, and all representations
and warranties of the Purchaser contained herein not qualified as to materiality
shall be true and correct in all material respects, at and as of the Effective
Time with the same effect as though those representations and warranties had
been made again at and as of that date;
     (2) the Purchaser shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by the Purchaser on or prior to the Closing Date;
     (3) the Sellers shall have been furnished with certificates (dated the
Closing Date and in form and substance reasonably satisfactory to the Sellers)
executed by the President and Chief Financial Officer of the Purchaser
certifying as to the fulfillment of the conditions specified in Sections 7.2.(1)
and 7.2.(2);
     (4) there shall not be in effect any order by a Governmental Body of
competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby;
     (5) the waiting period under the HSR Act shall have expired or early
termination shall have been granted;
     (6) the Sellers shall have received a copy of each agreement, amendment or
other document that, as of the Closing Date, terminates, assigns, transfers or
otherwise amends, modifies or supplements any existing agreement, instrument or
document relating to the IRB and to which the Company or the Subsidiary is a
party; and
     (7) the Sellers’ Representative shall have received the items set forth in
Section 8.2, in form and substance satisfactory to the Sellers’ Representative.
8. DOCUMENTS TO BE DELIVERED
     8.1 Documents to Be Delivered by Sellers. At the closing, the Sellers shall
deliver, or cause to be delivered, to the Purchaser the following:
     (1) stock certificates representing the Shares, duly endorsed in blank or
accompanied by stock transfer powers and with all requisite stock transfer tax
stamps attached;
     (2) the certificates referred to in Section 7.1(3) and 7.1(4);
     (3) the opinion of Masuda, Funai, Eifert & Mitchell, Ltd., special counsel
to the Sellers, in a form customary for transactions of the type contemplated by
this Agreement;

37

--------------------------------------------------------------------------------

 

     (4) copies of all consents and waivers referred to in Section 7.1.(7)
hereof;
     (5) a duly executed W-9 from each beneficiary of each Seller;
     (6) certificates of good standing with respect to the Company issued by the
Secretary of the State of Illinois and with respect to the Subsidiary issued by
the Secretary of State of Kansas;
     (7) a written resignation from each director and officer of the Company and
the Subsidiary;
     (8) an employment arrangement between David Dailey and the Company
(including a release and non-competition agreement) satisfactory to the
Purchaser and David Dailey;
     (9) from each Employee that is a party to a Salary Continuation Death
Benefit Only Plan, an executed waiver and release of the requirement set forth
in the paragraph thereto entitled “Successor Companies”;
     (10) the Escrow Agreement, duly executed by the Seller’s Representative (on
behalf of the Sellers), the PR Holder and the Escrow Agent;
     (11) from each of Lloyd Schooley, Darlene Schooley, Deborah Schooley, David
Schooley, Douglas Schooley and Darren Schooley, a duly executed Non-Competition
Agreement;
     (12) from Lloyd Schooley, such documents as may be required to release the
Company from any obligation to pay Lloyd Schooley any amount he might be
entitled to receive from the Company under the terms of the Lloyd Schooley
Deferred Compensation Plan; provided that, nothing in this Section shall be
deemed to require that Lloyd Schooley release his right to receive any payments
he may be entitled to under the profit sharing plan maintained by the Company,
under the 401(k) plan maintained by the Company, under the individual retirement
account established for Lloyd Schooley in connection with the termination of the
defined benefit pension plain maintained by the Company or under the trust
established in connection with the Lloyd Schooley Deferred Compensation Plan;
     (13) a termination of the Shareholders Agreement;
     (14) the Wiring Instructions; and
     (15) such other documents as the Purchaser shall reasonably request.
     8.2 Documents to Be Delivered by Purchaser. At the Closing, the Purchaser
shall deliver to the Sellers the following:
     (1) evidence of the wire transfers referred to in Section 2.4 hereof;
     (2) the certificates referred to in Section 7.2.(3) hereof;
     (3) a certificate from the Secretary of the Purchaser to which is attached
a true and correct copy of each the constituent documents of the Purchaser;

38

--------------------------------------------------------------------------------

 

     (4) the Escrow Agreement, duly executed by the Purchaser and the Escrow
Agent;
     (5) the opinion of Lippes Mathias Wexler Friedman LLP, special counsel to
the Purchaser, in a form customary for transactions of the type contemplated by
this Agreement; and
     (6) such other documents as the Sellers shall reasonably request.
9. INDEMNIFICATION
     9.1 Indemnification.
     9.1.1 Indemnification by Sellers. Subject always to Sections 9.2 and 9.3,
each Indemnifying Seller, severally, but not jointly, in proportion to such
Indemnifying Seller’s Pro Rata share of the Indemnified Losses (as defined
below), and the Company shall indemnify and hold the Purchaser, the Company, the
Subsidiary and their respective directors, officers, employees, Affiliates,
agents, successors and assigns (collectively, the “Purchaser Affiliates”)
harmless from and against any and all notices, actions, causes of action, suits,
proceedings, claims, demands, obligations, assessments, judgments, damages,
losses, costs, penalties and expenses, including reasonable attorneys’ and other
professionals’ fees and disbursements (collectively, “Indemnified Losses”)
resulting from:
          (1) the failure of any representation or warranty of the Indemnifying
Sellers or the Company set forth in Section 4 hereof, other than representations
and warranties contained in Section 4.10, or any representation or warranty
contained in any certificate delivered by or on behalf of the Sellers or the
Company pursuant to this Agreement, to be true and correct as of the date made;
          (2) the failure prior to the Closing Date of the Company to file on a
timely basis any required Form 5500 Annual Return/Reports of any Employee
Benefit Plan that was required to be filed by the Company prior to the Closing
Date for any Employee Benefit Plan that is a welfare benefit plan under
Section 3(1) of ERISA and the regulations thereunder, including any penalties
that may be imposed upon the Company for late filings of such Form 5500 Annual
Returns/Reports permitted under the U.S. Department of Labor Delinquent Filer
Voluntary Compliance (DFVC) Program;
          (3) the breach of any covenant or other agreement on the part of the
Sellers under this Agreement or any other agreement entered into between the
Company and the Sellers or any of the beneficiaries of the trusts comprising the
Sellers in connection with the closing of the transactions contemplated by this
Agreement; and
          (4) (i) the failure of any representation or warranty made by the
Indemnifying Sellers or the Company in Section 4.10 hereof to be true and
correct; and (ii) any Taxes payable by the Company or the Subsidiary for any Tax
period (or portion thereof) ending prior to or on the Closing Date (if a
Section 338(h)(10) Election is made) or the day prior to the Closing Date (if no
Section 338(h)(10) Election is made) to the extent such Taxes are not taken into
account as a current liability for purposes of determining Net Working Capital
(other than the amount of Taxes payable by the Company pursuant to Section 1374
of the Code if a Section 338(h)(10) Election is made). For this purpose, in the
case of a Tax period that begins before and ends after the Closing Date, the
amount of Taxes attributable to the period prior to the Closing Date shall be
determined (A) in the case of any Taxes based on or measured by income or
receipts, by closing the books of the

39

--------------------------------------------------------------------------------

 

Company and the Subsidiary as of the close of business on the Closing Date (if a
Section 338(h)(10) Election is made) or the day prior to the Closing Date (if no
Section 338(h)(10) Election is made) and (B) in the case of all other Taxes, by
multiplying such Taxes by a fraction the numerator of which is the number of
days from the beginning of such Tax period through the close of business on the
Closing Date (if a Section 338(h)(10) Election is made) or the day prior to the
Closing Date (if no Section 338(h)(10) Election is made) and the denominator of
which is the total number of days in such Tax period.
     9.1.2 Indemnification by Purchaser. Subject always to Section 9.2 and 9.3,
the Purchaser shall indemnify and hold each of the Sellers, the PSP Holders and
their respective Affiliates, agents, successors and assigns harmless from and
against any and all Indemnified Losses resulting from:
          (1) the failure of any representation or warranty of the Purchaser set
forth in Section 5, or any representation or warranty contained in any
certificate delivered by or on behalf of the Purchaser pursuant to this
Agreement, to be true and correct as of the date made;
          (2) the breach of any covenant or other agreement on the part of the
Purchaser under this Agreement;
          (3) any event, circumstance, occurrence or condition that occurs on or
after the Closing Date and is attributable to the ownership, holding, leasing,
possession, operation, transfer, disposition, shutting down, liquidation or
abandonment directly or indirectly by the Purchaser, on or after the Closing
Date of: (i) any of the Shares; (ii) the assets of the Company or the
Subsidiary; (iii) the trade or business of the Company or the Subsidiary; or
(iv) the operations, results of operations, financial reporting or tax assets or
liabilities of the Company or the Subsidiary; or
          (4) if the Purchaser has notified the Seller of the Purchaser’s
decision to make a Section 338(h)(10) Election, the failure of the Purchaser:
(i) to make such election (other than as a result of the Sellers’ failure to
perform their obligations under Section 6.7) or (ii) to pay the Tax
Indemnification Payment to the Sellers on or prior to April 11, 2008.
     9.1.3 Furthermore, from and after the Closing Date, the Company and the
Subsidiary shall indemnify and hold harmless the current and former directors
and officers of the Company and the Subsidiary for actions or omissions by such
Persons in their capacities as directors and officers of the Company or the
Subsidiary, and provide to the current and former directors and officers of the
Company and the Subsidiary exculpation or advancement of expenses existing in
favor of current and former directors and of the Company and the Subsidiary, to
the same extent and subject to the same conditions provided under the
“Organization Documents” as in effect on the date of this Agreement and relating
to acts or omissions occurring at or prior to the Effective Time; provided,
however, that (1) any determination required to be made with respect to whether
an indemnified Person’s conduct complies with standards set forth in (as
applicable) the Illinois Business Corporation Act, as amended, the Kansas
General Corporation Code, as amended, or the Organizational Documents, as the
case may be, shall be made by independent legal counsel selected by the
indemnified Person, paid for by the Company, and reasonably acceptable to the
Purchaser; (2) the provisions of this Section 9.1.3 shall not limit or impair
any other claims or rights available to any indemnified Person; and (3) the
provisions of this Section 9.1.3 and the obligations of the Purchaser, the
Company and the Subsidiary hereunder shall not limit, impair or

40

--------------------------------------------------------------------------------

 

supersede any claims or rights of the Purchaser under Section 9.1.2. The
provisions of this Section 9.1.3 are intended to be for the benefit of, and
shall be enforceable by, the Company’s and the Subsidiary’s current and former
directors and officers.
     9.2 Limitations on Indemnification.
     9.2.1 Provided that no claim for payment of a Tax Indemnification Payment
has been made by a Seller against the Purchaser, the obligation of the Purchaser
to pay to each Seller the amount of the Tax Indemnification Payment shall
terminate and expire 60 days following the expiration of the statute of
limitations applicable to the assessment and collection of Taxes for the tax
year of the Sellers in which the Closing Date occurs.
     9.2.2 The Indemnifying Sellers shall not have any liability under
Section 9.1.1 nor shall the Purchaser be entitled to indemnification for any
Indemnified Losses based upon, attributable to or resulting from matters within
the actual knowledge of the Purchaser at the Effective Time or accounted for or
included in the calculation of the Purchase Price pursuant to the procedures of
Section 2.3. Notwithstanding anything to the contrary contained in
Section 9.1.1, the obligation of the Company to indemnify any party identified
in Section 9.1.1, shall terminate, expire and cease to exist at the Effective
Time.
     9.2.3 Except as otherwise set forth above, an Indemnifying Party shall not
have any liability under Section 9.1.1(1) or Section 9.1.2(1) hereof unless:
(1) the aggregate amount of Indemnified Losses to the indemnified parties
(“Collectible Damages”), as finally determined to arise thereunder resulting
from the failure of any representation or warranty to be true and correct
exceeds $15,000 (each breach, non-fulfillment or other indemnified matter
described in Section 9.1.1(1) or Section 9.1.2(1) for which the Collectible
Damages exceeds such amount being referred to as “Covered Breach”), and (ii) the
aggregate amount of Indemnified Losses, collectively, resulting from Covered
Breaches (including the first $15,000 of each Covered Breach), exceed $1,000,000
(the “Deductible”); it being understood that, if the aggregate amount of
Indemnified Losses attributable to Covered Breaches exceeds the Deductible, the
Indemnified Party shall only be entitled to recover the amount by which the
aggregate amount of Indemnified Losses attributable to Covered Breaches exceeds
the Deductible. Notwithstanding the foregoing, the obligation of an Indemnifying
Party to indemnify the Indemnified Party from and against Indemnified Losses
arising from any matter other than the matters described in Section 9.1.1(1) and
Section 9.1.2(1) above shall not, except as set forth in the proviso to this
sentence, be limited to the extent that such Indemnified Losses are less than
$15,000 or less than the amount of the Deductible, it being the intent of this
sentence that an Indemnified Party shall be entitled to be indemnified from and
against the full amount of all Indemnified Losses suffered by such Indemnified
Party as a result of all matters for which indemnification is provided for by
Section 9.1.1 and Section 9.1.2 hereof other than the matters described in
Section 9.1.1(1) and Section 9.1.2(1) above, whether or not such Indemnified
Losses exceed the Deductible and whether or not such Indemnified Losses are
Covered Breaches provided, however, that in no event shall the aggregate
obligations of the Indemnifying Sellers with respect to indemnification relating
to all matters described in: (I) Section 9.1.1 (other than those under
Section 9.1.1(4)) exceed $11,800,000; and (II) Section 9.1.1(4) exceed
$20,000,000.
     9.2.4 The Indemnifying Sellers acknowledge and agree that the maximum
aggregate amount of the Indemnified Losses that the Indemnifying Sellers may be
obligated to pay exceeds the portion of the Purchase Price that is to be paid to
the Escrow Agent. Accordingly, if the aggregate amount of the Indemnified Losses
payable by the Sellers under this Section 9 exceeds the amount held by the
Escrow Agent under the Escrow Agreement, each of the Indemnifying

41

--------------------------------------------------------------------------------

 

Sellers shall be liable for its Pro Rata share of the amount of any such excess.
Each Indemnifying Seller shall pay its share of any such excess to the
Indemnified Party within 15 days following receipt of written notice from the
Seller’s Representative of the amount of such Indemnifying Seller’s Pro Rata
share. Notwithstanding the foregoing, in no event shall the aggregate
liabilities of any Indemnifying Seller under this Section 9 exceed an amount
equal to such Indemnifying Sellers’ Pro Rata share of $11,800,000 with respect
to Indemnified Losses suffered by the Purchaser Affiliates as a result of the
matters described in Section 9.1.1 (other than the matters described in Section
9.1.1(4)) or $20,000,000 with respect to Indemnified Losses suffered by the
Purchaser Affiliates as a result of the matters described in Section 9.1.1(4).
     9.2.5 Except as provided in Section 9.2.1, the obligation of the Purchaser
to indemnify the Sellers from and against Indemnified Losses arising from the
matters described in Sections 6.7, 6.8 and 9.1.2(4) shall not be limited in any
way.
     9.3 Indemnification Procedures.
     9.3.1 In the event that any Legal Proceedings shall be instituted or that
any claim or demand (such Legal Proceedings, claim or demand, a “Claim”) shall
be asserted by any Person in respect of which payment may be sought under
Section 9.1 hereof, the Person entitled to indemnification (the “Indemnified
Party”) shall: (1) if the Indemnified Party is any of the Purchaser Affiliates,
reasonably and promptly cause written notice of the assertion of any Claim of
which it has knowledge which is covered by this indemnity to be forwarded to the
Seller’s Representative and the Escrow Agent; and (2) if the Indemnified Party
is any of the Seller Affiliates, reasonably and promptly cause written notice of
the assertion of any Claim of which it has knowledge which is covered by this
indemnity to be forwarded to the Purchaser. The Indemnifying Party shall have
the right, at its sole option and expense, to be represented by counsel of its
choice, which must be reasonably satisfactory to the Indemnified Party, and to
defend against, negotiate, settle or otherwise deal with any Claim which relates
to any Indemnified Losses hereunder; provided that no settlement of any Claim
shall be made by the Indemnifying Party, without the written consent of the
Indemnified Party. If the Indemnifying Party elects to defend against,
negotiate, settle or otherwise deal with any Claim which relates to any
Indemnified Losses, it shall within 5 days (or sooner, if the nature of the
Claim so requires) notify the Indemnified Party of its intent to do so. If the
Indemnifying Party elects not to defend against, negotiate, settle or otherwise
deal with any Claim which relates to any Indemnified Losses, fails to notify the
Indemnified Party of its election as herein provided or contests its obligation
to indemnify the Indemnified Party for such Indemnified Losses under this
Agreement, the Indemnified Party may defend against, negotiate, settle or
otherwise deal with such Claim. If the Indemnifying Party shall assume the
defense of such Claim, the Indemnified Party may participate, at his or its own
expense, in the defense of such Claim. The Indemnifying Party shall not be
required to pay for more than one counsel for all indemnified parties in
connection with any Claim. The parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
Claim.
     9.3.2 Upon: (1) final determination of the amount of the Indemnified Losses
as a result of any final judgment or award rendered by a court, arbitration
board or administrative agency of competent jurisdiction and the expiration of
the time in which to appeal therefrom; or (2) the consummation of a settlement
of a Claim; or (3) the execution and delivery of a mutually binding agreement
between the Indemnified Party and the Indemnifying Party with respect to a Claim
hereunder; then (4) if the Indemnified Party is: (i) the Purchaser or any of the
Purchaser Affiliates and the amount by which the final amount of the Indemnified
Losses exceeds the Deductible is less than or equal to the amount then remaining
in the Escrow Account, the Indemnified Party

42

--------------------------------------------------------------------------------

 

shall forward to the Sellers’ Representative and the Escrow Agent written notice
of the sums due and the Sellers’ Representative shall take such action as may be
necessary to cause the Escrow Agent to pay to the Purchaser or the Purchaser
Affiliates, all of the sums so due and owing within 5 Business Days following
receipt of such written notice; (ii) the Purchaser or any of the Purchaser
Affiliates and the amount by which the Indemnified Losses exceeds the Deductible
is greater than the amount then remaining in the Escrow Account, the Indemnified
Party shall forward the Sellers’ Representative and, if any amount is then
remaining in the Escrow Account, forward the Escrow Agent, written notice of the
amount of the sums due to the Indemnified Party and the Sellers’ Representative
shall take such action as may be necessary to cause the Escrow Agent to pay to
the Purchaser or the Purchaser’s Affiliates, the amount, if any, then remaining
in the Escrow Account within 30 days following receipt of such written notice
and shall further deliver written notice to each of the Sellers and the PR
Holder of the amount of their respective Pro Rata shares of the amount due to
the Indemnified Party after payment to the Indemnified Party of the amount, if
any, remaining in the Escrow Account; and (iii) any of the Sellers, the Sellers’
Representative shall forward to the Purchaser written notice of any sums due and
owing by the Purchaser pursuant to this Agreement with respect to such matter
and the Purchaser shall be required to pay all of the sums so due and owing to
the Sellers by wire transfer of immediately available funds within 30 days after
the date of such notice.
     9.3.3 The failure of an Indemnified Party to give reasonably prompt notice
of any Claim shall not release and waive the Indemnifying Party’s obligations
with respect thereto unless the Indemnified Party can demonstrate that there was
actual loss and prejudice to the Indemnifying Party as a result of such failure.
     9.3.4 The representations and warranties of the parties contained in this
Agreement shall survive for a period of 365 days beginning on the day
immediately following the Closing Date; provided that, notwithstanding the
foregoing: (1) the representations and warranties contained in Sections 4.2,
4.3.1, 4.3.2, 4.6 and 5.2 shall survive indefinitely and shall not expire;
(2) the representations and warranties contained in Section 4.10 shall survive
for a period of 60 days following the expiration of the statute of limitations
applicable to the assessment and collection of the Taxes covered by such
representations and warranties; and (3) the representations and warranties
contained in Section 4.19 shall survive for a period of 731 days beginning on
the first day following the Closing Date.
     9.3.5 The Purchaser Affiliates shall have no right to be indemnified and
the Indemnifying Sellers shall have no obligation to indemnify the Purchaser
Affiliates with respect to any Claim which is based upon the failure of any
representation or warranty set forth in Section 4 hereof or any representation
or warranty contained in any certificate delivered by or on behalf of the
Sellers or the Company to be true and correct as of the date made and as of the
Closing Date if written notice of the Claim is not delivered to the Seller’s
Representative prior to the expiration of the period during which the applicable
representation or warranty survives the closing as set forth in Section 9.3.4
hereof.
     9.3.6 The Seller Affiliates shall have no right to be indemnified and the
Purchaser shall have no obligation to indemnify the Seller Affiliates with
respect to any Claim which is based upon the failure of any representation or
warranty set forth in Section 5 hereof or any representation or warranty
contained in any certificate delivered by or on behalf of the Purchaser to be
true and correct as of the date made and as of the Closing Date if written
notice of the Claim is not delivered to the Purchaser prior to the expiration of
the period during which the applicable representation or warranty survives the
Closing as set forth in Section 9.3.4 hereof.

43

--------------------------------------------------------------------------------

 

10. TAX MATTERS
     10.1 Preparation of Tax Returns; Payment of Taxes.
          10.1.1 The parties hereto understand that the Company: (1) is a “S
Corporation”, within the meaning of Section 1361 of the Code, and (2) will
retain that status until the Closing Date (if a Section 338(h)(10) Election is
made) or until the day prior to the Closing Date (if no Section 338(h)(10)
Election is made). Each of the Sellers shall include on his, her or its income
Tax Return, such Seller’s Pro Rata share of the taxable income of the Company.
The Sellers will cause the Company to file: (i) the United States federal income
Tax Returns of the Company for the taxable periods of the Company ending on the
Closing date or on the day prior to the Closing Date, as the case may be, and
(ii) where applicable, all other Tax Returns of the Company for the taxable
periods of the Company ending (or the portion of any taxable period ending) on
the Closing Date or prior to the Closing Date or on the day prior to the Closing
Date, as the case may be. Except for any Built-in-Gains Tax, which shall be paid
by the Purchaser, the Sellers shall cause the Company to pay any and all Taxes
due with respect to the returns referred to in Section 10.1.1(i) and (ii). The
Sellers also shall cause the Company to file all other Tax Returns of the
Company required to be filed (taking into account any extensions) prior to or on
the Closing Date and shall cause the Company to pay any and all Taxes (other
than any Built-in-Gains Tax) due with respect to such Tax Returns. All Tax
Returns described in this Section 10.1.1 shall be prepared in a manner
consistent with prior practice unless a past practice has been finally
determined to be incorrect by the applicable taxing authority or a contrary
treatment is required by applicable tax laws (or the judicial or administrative
interpretations thereof). The Sellers shall, prior to the filing of any Tax
Returns required to be filed after the Closing Date, permit the Purchaser to
review and comment upon all such Tax Returns. The Sellers and the Purchaser
shall attempt in good faith mutually to resolve any disagreements regarding such
Tax Returns prior to the due date for filing thereof. Any disagreements
regarding such Tax Returns which are not resolved prior to the filing thereof
shall be promptly resolved pursuant to Section 10.5 which shall be binding on
the parties.
          10.1.2 Following the Closing, the Purchaser shall be responsible for
preparing or causing to be prepared all federal, foreign, state and local Tax
Returns required to be filed by the Company and the Subsidiary for all taxable
periods ending after the Closing Date. The Purchaser shall file or cause to be
filed all such Tax Returns and shall pay the Taxes shown due thereon.
          10.1.3 For federal income tax purposes, the taxable year of the
Company shall end on the Closing Date (if a Section 338(h)(10) Election is made)
or on the day prior to the Closing Date (if no Section 338(h)(10) Election is
made), and, with respect to all other Taxes, the Sellers and the Purchaser will,
unless prohibited by applicable law, close the taxable period of the Company as
of the Closing Date (if a Section 338(h)(10) Election is made) or as of the day
prior to the Closing Date (if no Section 338(h)(10) Election is made). None of
the Sellers nor the Purchaser shall take any position inconsistent with the
preceding sentence on any Tax Return.
     10.2 Cooperation with Respect to Tax Returns. The Purchaser and the Sellers
shall furnish or cause to be furnished to each other, and each at their own
expense, as promptly as practicable, such information (including access to books
and records) and assistance, including making employees available on a mutually
convenient basis to provide additional information and explanations of any
material provided, relating to the Company as is reasonably necessary for the
filing of any Tax Return, for the preparation for any audit, and for the
prosecution or defense of any claim, suit or proceeding relating to any
adjustment or proposed adjustment with respect to Taxes. The Purchaser or the
Company shall retain in its possession, and shall provide the Sellers reasonable
access to (including the right to make copies of ), such supporting books and
records and any other materials that the Sellers may specify with

44

--------------------------------------------------------------------------------

 

respect to Tax matters relating to any taxable period ending on the Closing Date
or on the day prior to the Closing Date, as the case may be, until the relevant
statute of limitations has expired. After such time, the Purchaser may dispose
of such material, provided that, prior to such disposition, the Purchaser shall
give the Sellers a reasonable opportunity to take possession of such materials.
     10.3 Tax Audits.
     10.3.1 After the Closing Date, the Purchaser and the Company shall have the
right to participate in any Tax audit or administrative or court proceeding
relating to any Tax period ending on or prior to the Closing Date that may have
the effect of increasing the Purchaser’s, the Company’s or the Subsidiary’s Tax
liability for any Tax period ending before or after the Closing Date and the
Sellers shall not settle or compromise any such proceeding without the prior
written consent of the Purchaser. In connection with any such proceeding, the
Sellers shall bear their own costs and expenses and the Purchaser and the
Company shall bear their own costs and expenses.
     10.3.2 If any taxing authority asserts a claim, makes an assessment or
otherwise disputes or affects any Tax for which the Sellers are responsible
hereunder, the Purchaser shall, promptly upon receipt by the Purchaser or the
Company of notice thereof, inform the Sellers thereof.
     10.3.3 After the Closing Date, the Sellers’ Representative shall have the
right to participate in any Tax audit or administrative or court proceeding
relating to any Tax period beginning on or after the Closing Date that may have
the effect of increasing the Tax liability of the Sellers for any Tax period
beginning before the Closing Date and the Purchaser and the Company shall not
settle or compromise any such proceeding without the prior written consent of
the Sellers’ Representative. In connection with any such proceeding, the
Purchaser and the Company shall bear their own costs and expenses and the
Sellers shall bear their own costs and expenses.
     10.4 Refund Claims. To the extent any determination of tax liability of the
Company, whether as the result of an audit or examination, a claim for refund,
the filing of an amended return or otherwise, results in any refund of Taxes
paid (other than Built-in-Gains Taxes under Section 1374 of the Code paid by the
Purchaser with respect to the Tax period ending on the Closing Date), any such
refund shall belong to the Sellers. To the extent any determination of the
liability of the Company for Built-in-Gains Taxes for the Tax period ending on
the Closing Date, whether as a result of an audit or examination, a claim for a
refund, the filing of an amended return or otherwise, results in a refund of any
such Built-in-Gains Taxes, any such refund shall belong to the Purchaser. Any
payments made under this Section 10.4 shall be net of any Taxes payable with
respect to such refund, credit or interest thereon (taking into account any
actual reduction in tax liability realized upon the payment pursuant to this
Section 10.4).
     10.5 Disputes. Except as specifically provided in Section 2.3: (a) any
dispute as to any matter covered hereby shall be resolved by an independent
accounting firm mutually acceptable to the Sellers and the Purchaser; and
(b) the fees and expenses of such accounting firm shall be borne equally by the
Sellers and the Purchaser.
11. MISCELLANEOUS
     11.1 Expenses. Except as otherwise provided in this Agreement, each of the
Company and the Purchaser shall bear its own expenses incurred in connection
with the negotiation and execution of this

45

--------------------------------------------------------------------------------

 

Agreement and each other agreement, document and instrument contemplated by this
Agreement and the consummation of the transactions contemplated hereby and
thereby; provided, however, that the Purchaser shall pay for all sales, use,
transfer, intangible, recordation, documentary stamp or similar Taxes or
charges, of any nature whatsoever, applicable to, or resulting from, the
transactions contemplated by this Agreement.
     11.2 Further Assurances. The Sellers and the Purchaser each agree to
execute and deliver such other documents or agreements and to take such other
action as may be reasonably necessary or desirable for the implementation of
this Agreement and the consummation of the transactions contemplated hereby.
     11.3 Submission to Jurisdiction; Consent to Service of Process.
     11.3.1 The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of any federal or state court located within the State of Illinois,
County of Cook, with respect to any legal action or proceeding arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action or proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such action or proceeding brought in such court or
any defense of inconvenient forum for the maintenance of such action or
proceeding may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
     11.3.2 Each of the parties hereto hereby consents to process being served
by any party to this Agreement in any suit, action or proceeding by the mailing
of a copy thereof in accordance with the provisions of Section 11.6.
     11.4 Entire Agreement; Amendments and Waivers. This Agreement (including
the schedules and exhibits hereto) represents the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof
and can be amended, supplemented or changed, and any provision hereof can be
waived, only by written instrument making specific reference to this Agreement
signed by the party against whom enforcement of any such amendment, supplement,
modification or waiver is sought. No action taken pursuant to this Agreement,
including without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representation, warranty, covenant or agreement contained
herein. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent breach. No failure on the
part of any party to exercise, and no delay in exercising, any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or remedy by such party preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.
     11.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois without regard to conflicts of
laws principles.
     11.6 Notices. All notices and other communication under this Agreement
shall be in writing and shall be deemed given when delivered personally or
mailed by certified mail, return receipt requested, to the parties (and shall
also be transmitted by facsimile to the Persons receiving copies thereof) at the

46

--------------------------------------------------------------------------------

 

following addresses (or to such other address as a party may have specified by
notice given to the other party pursuant to this provision):

     
If to any Seller, to:
  the Contact Information set forth on Annex A
 
   
     With a copy to:
  BMO Capital Markets
 
  111 West Monroe Street
 
  20th Floor, East
 
  Chicago, Illinois 60603
 
   
 
  Telephone: (312) 765-8186
 
  Facsimile: (312) 293-5325
 
   
 
  Attention: Paul Johnson
 
   
     With a copy to:
  Masuda, Funai, Eifert & Mitchell, Ltd.
 
  203 North LaSalle Street
 
  Suite 2500
 
  Chicago, Illinois 60601
 
   
 
  Telephone (312) 245-7500
 
  Facsimile: (312) 245-7467
 
   
 
  Attention: Thomas P. McMenamin, Esq.
 
   
If to the Purchaser, to:
  Gibraltar Industries, Inc.
 
  3556 Lake Shore Road
 
  Buffalo, New York 14219
 
   
 
  Telephone: (716) 826-6500
 
  Facsimile: (716) 826-1589
 
   
 
  Attention: David W. Kay
 
   
     With a copy to:
  Lippes Mathias Wexler Friedman LLP
 
  665 Main Street, Suite 300
 
  Buffalo, New York 14203
 
   
 
  Telephone: (716) 853-5100
 
  Facsimile: (716) 853-5199
 
   
 
  Attention: Paul J. Schulz, Esq.
 
   
If to the PR Holder, to:
  Dave Dailey
 
  P.O. Box 812
 
  Geneva, Illinois 60134
 
  Telephone: (630) 667-8766
 
   
     With a copy to:
  Masuda, Funai, Eifert & Mitchell, Ltd
 
  203 North LaSalle Street
 
  Suite 2500
 
  Chicago, Illinois 60601

47

--------------------------------------------------------------------------------

 

     
 
  Telephone (312) 245-7500
 
  Facsimile: (312) 245-7467
 
   
 
  Attention: Thomas P. McMenamin, Esq.
 
   
If to the Sellers’ Representative, to:
  Lloyd Schooley
 
  40 Shuman Boulevard, Suite 290
 
  Naperville, Illinois 60653
 
   
 
  Telephone: (630) 258-3677
 
  Facsimile: (630) 428-1886

48

--------------------------------------------------------------------------------

 

     
     With a copy to:
  Masuda, Funai, Eifert & Mitchell, Ltd
 
  203 North LaSalle Street
 
  Suite 2500
 
  Chicago, Illinois 60601
 
   
 
  Telephone (312) 245-7500
 
  Facsimile: (312) 245-7467
 
   
 
  Attention: Thomas P. McMenamin, Esq.

     11.7 Severability. If any provision of this Agreement is invalid or
unenforceable, such invalidity shall not affect any other provision of this
Agreement that can be given effect without the invalid provision, and, to this
end, the provisions hereof are enforceable.
     11.8 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not a party to this
Agreement except as provided below. No assignment of this Agreement or of any
rights or obligations hereunder may be made by either the Sellers or the
Purchaser (by operation of law or otherwise) without the prior written consent
of the other parties hereto and any attempted assignment without the required
consents shall be void; provided, however, that, upon the consent of the
Sellers, which consent shall not be unreasonably withheld, the Purchaser may
assign this Agreement and any or all rights or obligations hereunder (including,
without limitation, the Purchaser’s rights to purchase the Shares and the
Purchaser’s rights to seek indemnification hereunder) to any Affiliate of the
Purchaser. Upon any such permitted assignment, the references in this Agreement
to the Purchaser shall also apply to any such assignee unless the context
otherwise requires.
     11.9 Sellers’ Representative. Lloyd Schooley, or such other persons as
shall succeed him pursuant to this Section 11.9, is hereby designated as the
representative to act for and represent the Sellers and the Indemnifying Sellers
(the “Sellers’ Representative”) with respect to all matters arising out of
Sections 2.3, 9 and 10 hereof and in those other matters with respect to which
this Agreement specifies that the Sellers’ Representative shall so act, as well
as matters which require notice to be given to the Indemnifying Sellers under
this Agreement. In the event of the death or incapacity of the Sellers’
Representative, then such other person or persons as may be designated by a
majority of the Sellers, shall succeed as the Sellers’ Representative.
[Signature Page Follows]

49

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date first written above, by themselves or their
respective officers or signatories thereunto duly authorized.

            PURCHASER:

GIBRALTAR INDUSTRIES, INC.
      By:    /s/  David W. Kay       Name:   David W. Kay        Title:   Chief
Financial Officer,
Executive Vice President and Treasurer       COMPANY:

FLORENCE CORPORATION
      By:    /s/  David P. Dailey       Name:   David P. Dailey        Title:  
President     

[Signature pages continue.]

 

--------------------------------------------------------------------------------

 

            SELLERS:

Darlene M. Schooley Living Trust u/a/d 12/6/94
      By:    /s/  Darlene M. Schooley       Name:   Darlene M. Schooley       
Title:   Trustee     

            Deborah Schooley Irrevocable Trust u/a/d 12/21/88
      By:    /s/  Suzanne B. Dallmeyer        Name:   Suzanne B. Dallmeyer     
  Title:   Trustee     

            David, Douglas and Darren Schooley Irrevocable Trust
u/a/d 12/21/88
      By:    /s/  Suzanne B. Dallmeyer       Name:   Suzanne B. Dallmeyer       
Title:   Trustee        PR HOLDER:
      By:    /s/  David Dailey       Name:   David Dailey             

          Solely with respect to the appointment as the
Sellers’ Representative under Section 11.9:
      By:    /s/  Lloyd Schooley       Name:   Lloyd Schooley      Title:  
Sellers’ Representative       

 

--------------------------------------------------------------------------------

 

Annex 1

                              Pro Rata     Number of   Percentage Seller and
Seller’s Contact Information   Shares Owned   of Shares Darlene M. Schooley
Living Trust,
u/a/d 12/6/94
c/o Lloyd Schooley
40 Shuman Boulevard, Suite 290
Naperville, Illinois 60653     156       6.4 %   David, Douglas and Darren
Schooley Irrevocable Trust,
u/a/d 12/21/88
c/o Suzanne Dallmeyer, Esq.
466 Central Avenue, Suite 47
Northfield, Illinois 60093     1,764       72.3 %   Deborah Schooley Irrevocable
Trust,
u/a/d 12/21/88
c/o Suzanne Dallmeyer, Esq.
466 Central Avenue, Suite 47
Northfield, Illinois 60093     520       21.3 %

 

--------------------------------------------------------------------------------

 

Annex 2
Agreed Principles
Agreed Principles for Calculating
Estimated Net Working Capital and Closing Net Working Capital
as of August 31, 2007.
Current assets and current liabilities shall be computed in accordance with GAAP
and shall be derived in a manner consistent with the Company’s internal
consolidated financial statements (with a copy of the July, 2007 balance sheet
of the Company included for reference as Attachment 1 hereto).
Current assets shall be adjusted to eliminate the following items, to the extent
they are reflected on the balance sheet:
(a) Shareholder Receivable: Represents a loan to Debbie Cummings
(b) Prepaid Officer Life Insurance: Prepaid expenses relating to the salary
continuation plans for John Alstadt, Frank Vecchione, David Dailey and Mike
Powles
(c) Pre-Paid Consulting Fees: Consulting fees prepaid to Kerry Krafthefer
Current liabilities shall be adjusted to eliminate the following items, to the
extent they are reflected on the balance sheet:
(a) Accrued Bonus: Accrued bonuses for Lloyd Schooley and Mike Powles
(b) Accrued Legal Fees: Accrued expenses to Suzanne Dallmeyer
(c) Accrued Interest: Accrued interest on the IRB.
In addition, current liabilities shall exclude liabilities related to the
transaction contemplated by the Agreement to which this Annex is attached], to
the extent they are reflected on the balance sheet, including phantom stock
payments, transaction related bonuses, related payroll costs such as FICA,
transaction costs, and Section 338 (h) (10) Acquisition Costs that have not been
paid on or before the Closing.
For purposes of illustration only, Attachment 1 hereto presents an example of
the foregoing methodology to be followed for calculating Net Working Capital.
As used herein, the term “Section 338(h)(10) Acquisition Costs” means all taxes
paid or payable by the Company and the Subsidiary as a result of a
Section 338(h)(10) Election.

 

--------------------------------------------------------------------------------

 

Annex 3
Tax Timetable**

     
Friday, August 31, 2007
  Closing of sale of shares of the Company to the Purchaser.
 
   
Prior to October 15, 2007
  Cooperation between the Purchaser and the Sellers regarding preparation of
good faith estimate of tax amount payable by the Company which is to be paid by
the Purchaser for the final “S” corporation Federal and State income tax returns
by the Company, together with the payment, if any, of the estimated tax owed by
the Company.
 
   
Thursday, November 15, 2007
  Filing of Extension Requests for final Federal and State income tax returns of
the Company as an “S” corporation.
 
   
On or prior to Friday, December 21, 2007
  Delivery to Crowe Chizek, tax advisors to the Sellers, with a copy to the
Sellers’ Representative, of the following: (1) valuation reports arranged by the
Purchaser of tangible assets of the Company and (2) proposed allocation of
purchase price to such assets of the Company.
 
   
On or prior to Friday, February 29, 2008
  Delivery to the Purchaser by Crowe Chizek, on behalf of Sellers, of
information and calculations of the amount of the Tax Indemnification Payments
payable to the Sellers if a Section 338(h)(10) Election is made.
 
   
Prior to April 11, 2008
  Delivery to the Sellers’ Representative by the Purchaser of an Irrevocable
Notice of the Purchaser’s decision on whether it will make a Section 338(h)(10)
Election. If the Purchaser’s Irrevocable Notice indicates that the Purchaser is
making a Section 338(h)(10) Election, then cooperation between Crowe Chizek, as
tax advisors to the Sellers, and the Purchaser regarding finalization of the Tax
Indemnification Payment amounts.
 
   
On or prior to Friday, April 11, 2008
  If the Purchaser’s Irrevocable Notice indicates that the Purchaser is making a
Section 338(h)(10) Election, then: (1) payment of the Tax Indemnification
Payment amounts by the Purchaser to the Sellers; and (2) execution of
Section 338(h)(10) Election documents by the Purchaser and the Sellers.
 
   
April 15, 2008
  Filing of Tax Returns by the Sellers.
 
   
On or prior to Thursday, May 15, 2008
  Filing of Section 338(h)(10) Election.

 
Capitalized terms used in this Tax Timetable have their respective meanings set
forth in the Stock Purchase Agreement to which this Annex is attached.