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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)  
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: July 3, 2021
 
or
 
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from          to    
 
Commission file number: 1-14315
 
  CNR-20210703_G1.JPG
Cornerstone Building Brands, Inc.
(Exact name of registrant as specified in its charter)

 
Delaware 76-0127701
(State or other jurisdiction of
incorporation or organization) 		(I.R.S. Employer
Identification No.)
5020 Weston Parkway Suite 400 Cary NC 27513
(Address of principal executive offices) (Zip Code)
 
(866) 419-0042
(Registrant’s telephone number, including area code)

 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes ¨ No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ☐ Accelerated filer ý
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company ☐
Emerging growth company ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ý No
 
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
Common Stock $0.01 par value per share CNR New York Stock Exchange

APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Common Stock, $0.01 par value - 126,051,017 shares as of July 27, 2021.



TABLE OF CONTENTS 
    PAGE
   
Item 1.
1
 
1
 
2
 
3
4
 
5
 
7
Item 2.
34
Item 3.
47
Item 4.
48
     
   
Item 1.
49
Item 1A.
49
Item 2.
49
Item 6.
50
 

i

PART I — FINANCIAL INFORMATION 
Item 1. Unaudited Consolidated Financial Statements. 
CORNERSTONE BUILDING BRANDS, INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
  Three Months Ended Six Months Ended
  July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Sales $ 1,400,121  $ 1,084,936  $ 2,667,153  $ 2,198,747 
Cost of sales
1,088,393  830,205  2,095,696  1,713,129 
Gross profit 311,728  254,731  571,457  485,618 
Selling, general and administrative expenses 163,518  134,371  316,686  299,325 
Intangible asset amortization 46,809  45,240  93,011  90,101 
Restructuring and impairment charges, net 4,652  15,411  6,490  29,246 
Strategic development and acquisition related costs (61) 784  3,252  5,641 
Goodwill impairment —  —  —  503,171 
Income (loss) from operations 96,810  58,925  152,018  (441,866)
Interest income 23  341  140  679 
Interest expense (47,458) (52,384) (103,957) (107,219)
Foreign exchange gain (loss) 229  2,025  203  (2,112)
Loss on extinguishment of debt (42,234) —  (42,234) — 
Other income (expense), net 493  660  830  (2)
Income (loss) before income taxes 7,863  9,567  7,000  (550,520)
Benefit for income taxes (1,064) (17,332) (272) (35,346)
Net income (loss) 8,927  26,899  7,272  (515,174)
Net income allocated to participating securities (123) (442) (93) — 
Net income (loss) applicable to common shares $ 8,804  $ 26,457  $ 7,179  $ (515,174)
Income (loss) per common share:    
Basic $ 0.07  $ 0.21  $ 0.06  $ (4.09)
Diluted $ 0.07  $ 0.21  $ 0.06  $ (4.09)
Weighted average number of common shares outstanding:    
Basic 125,863  125,754  125,683  125,927 
Diluted 126,841  125,755  126,469  125,927 
See accompanying notes to consolidated financial statements.
 


1

CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
  Three Months Ended Six Months Ended
  July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Comprehensive income (loss):        
Net income (loss) $ 8,927  $ 26,899  $ 7,272  $ (515,174)
Other comprehensive income (loss), net of tax:        
Foreign exchange translation gains (losses) 4,589  8,566  10,663  (997)
Unrealized gain (loss) on derivative instruments, net of income tax of $891, $1,182, $(1,799) and $13,214, respectively
(5,055) (3,729) 4,121  (41,905)
Amount reclassified from Accumulated other comprehensive income (loss) into earnings 6,669  —  6,669  — 
Other comprehensive income (loss) 6,203  4,837  21,453  (42,902)
Comprehensive income (loss) $ 15,130  $ 31,736  $ 28,725  $ (558,076)
See accompanying notes to consolidated financial statements.
2

CORNERSTONE BUILDING BRANDS, INC. 
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
  July 3,
2021 		December 31,
2020
ASSETS    
Current assets:    
Cash and cash equivalents $ 88,978  $ 674,255 
Restricted cash 6,224  6,223 
Accounts receivable, less allowances of $10,340 and $13,313, respectively
613,193  554,649 
Inventories, net 549,736  431,937 
Income taxes receivable 46,358  39,379 
Investments in debt and equity securities, at market 2,695  2,333 
Prepaid expenses and other 88,942  77,751 
Assets held for sale 390,025  4,644 
     Total current assets 1,786,151  1,791,171 
Property, plant and equipment, less accumulated depreciation of $593,555 and $644,308, respectively
568,901  631,821 
Lease right-of-use assets 272,366  264,107 
Goodwill 1,107,758  1,194,729 
Intangible assets, net 1,488,426  1,584,604 
Deferred income taxes 2,178  1,867 
Other assets, net 28,283  10,191 
     Total assets $ 5,254,063  $ 5,478,490 
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current liabilities:    
Current portion of long-term debt $ 26,000  $ 25,600 
Accounts payable 266,067  211,441 
Accrued compensation and benefits 75,966  81,548 
Accrued interest 21,406  25,485 
Accrued income taxes 6,560  5,060 
Current portion of lease liabilities 68,198  70,125 
Other accrued expenses 280,236  247,893 
Liabilities held for sale 75,927  — 
     Total current liabilities 820,360  667,152 
Long-term debt 3,180,759  3,563,429 
Deferred income taxes 233,602  269,792 
Long-term lease liabilities 205,530  198,875 
Other long-term liabilities 334,565  337,437 
     Total long-term liabilities 3,954,456  4,369,533 
Stockholders’ equity:    
Common stock, $0.01 par value; 200,000,000 authorized; 126,072,088 and 126,051,017 shares issued and outstanding at July 3, 2021, respectively; and 125,425,931 and 125,400,599 shares issued and outstanding at December 31, 2020, respectively
1,261  1,255 
Additional paid-in capital 1,265,887  1,257,262 
Accumulated deficit (757,413) (764,685)
Accumulated other comprehensive loss, net (30,064) (51,517)
Treasury stock, at cost (21,071 and 25,332 shares at July 3, 2021 and December 31, 2020, respectively)
(424) (510)
     Total stockholders’ equity 479,247  441,805 
     Total liabilities and stockholders’ equity $ 5,254,063  $ 5,478,490 
See accompanying notes to consolidated financial statements.
3

CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
  Six Months Ended
  July 3, 2021 July 4, 2020
Cash flows from operating activities:    
Net income (loss) $ 7,272  $ (515,174)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Depreciation and amortization 145,901  140,480 
Non-cash interest expense 10,924  4,593 
Share-based compensation expense 8,593  8,543 
Loss on extinguishment of debt 42,234  — 
Goodwill impairment —  503,171 
Asset impairment 3,988  3,490 
Loss on sale of assets, net —  169 
Provision for credit losses 1,428  252 
Deferred income taxes (24,758) (48,190)
Changes in operating assets and liabilities, net of effect of acquisitions:    
Accounts receivable (119,813) (24,844)
Inventories (176,077) 36,872 
Income taxes (6,979) 12,226 
Prepaid expenses and other (15,960) 9,782 
Accounts payable 73,627  (7,818)
Accrued expenses 38,347  (53,834)
Other, net (448) (2,756)
Net cash provided by (used in) operating activities (11,721) 66,962 
Cash flows from investing activities:    
Acquisitions, net of cash acquired (94,383) (41,841)
Capital expenditures (47,643) (47,609)
Proceeds from sale of property, plant and equipment 715  114 
Net cash used in investing activities (141,311) (89,336)
Cash flows from financing activities:    
Proceeds from ABL facility 160,000  345,000 
Payments on ABL facility —  (30,000)
Proceeds from cash flow revolver —  115,000 
Proceeds from term loan 108,438  — 
Payments on term loan (12,905) (12,810)
Payments on senior notes (670,800) — 
Payments of financing costs (13,187) — 
Purchases of treasury stock —  (6,428)
Payments on derivative financing obligations (2,848) — 
Other (61) (467)
Net cash provided by (used in) financing activities (431,363) 410,295 
Effect of exchange rate changes on cash and cash equivalents (881) (508)
Net increase (decrease) in cash, cash equivalents and restricted cash (585,276) 387,413 
Cash, cash equivalents and restricted cash at beginning of period 680,478  102,307 
Cash, cash equivalents and restricted cash at end of period $ 95,202  $ 489,720 
Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized $ 102,045  $ 101,142 
Taxes paid, net $ 23,968  $ 1,109 
 See accompanying notes to consolidated financial statements.
4


CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
Fiscal Quarters Common Stock Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Treasury Stock Stockholders’ Equity
  Shares Amount Shares Amount
Balance, April 3, 2021 125,807,655  $ 1,258  $ 1,260,946  $ (766,340) $ (36,267) (131,363) $ (1,950) $ 457,647 
Retirement of treasury shares (110,292) (1) (1,525) —  —  110,292  1,526  — 
Issuance of restricted stock 257,991  3  (3) —  —  —  —  — 
Issuance of common stock for the Ply Gem merger 15,220  —  185  —  —  —  —  185 
Stock options exercised 101,514  1  993  —  —  —  —  994 
Other comprehensive income —  —  —  —  6,203  —  —  6,203 
Share-based compensation —  —  5,291  —  —  —  —  5,291 
Net income —  —  —  8,927  —  —  —  8,927 
Balance, July 3, 2021 126,072,088  $ 1,261  $ 1,265,887  $ (757,413) $ (30,064) (21,071) $ (424) $ 479,247 
Balance, April 4, 2020 126,167,645  $ 1,262  $ 1,251,252  $ (823,980) $ (80,137) (25,332) $ (509) $ 347,888 
Treasury stock purchases —  —  —  —  —  (1,129,085) (6,568) (6,568)
Retirement of treasury shares (1,128,767) (11) (6,555) —  —  1,128,767  6,566  — 
Issuance of restricted stock 84,110  1  (1) —  —  —  —  — 
Other comprehensive income —  —  —  —  4,837  —  —  4,837 
Share-based compensation —  —  5,156  —  —  —  —  5,156 
Net income —  —  —  26,899  —  —  —  26,899 
Balance, July 4, 2020 125,122,988  $ 1,252  $ 1,249,852  $ (797,081) $ (75,300) (25,650) $ (511) $ 378,212 
See accompanying notes to consolidated financial statements.
5




CORNERSTONE BUILDING BRANDS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(In thousands, except share data)
(Unaudited)
Fiscal Year to Date Periods Common Stock Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Treasury Stock Stockholders’ Equity
  Shares Amount Shares Amount
December 31, 2020 125,425,931  $ 1,255  $ 1,257,262  $ (764,685) $ (51,517) (25,332) $ (510) $ 441,805 
Treasury stock purchases —  —  —  —  —  (111,868) (1,541) (1,541)
Retirement of treasury shares (111,868) (1) (1,540) —  —  111,868  1,541  — 
Issuance of restricted stock 596,930  6  (6) —  —  —  —  — 
Issuance of common stock for the Ply Gem merger 15,220  —  185  —  —  —  —  185 
Stock options exercised 145,875  1  1,479  —  —  —  —  1,480 
Other comprehensive income —  —  —  —  21,453  —  —  21,453 
Deferred compensation obligation —  —  (86) —  —  4,261  86  — 
Share-based compensation —  —  8,593  —  —  —  —  8,593 
Net income —  —  —  7,272  —  —  —  7,272 
Balance, July 3, 2021 126,072,088  $ 1,261  $ 1,265,887  $ (757,413) $ (30,064) (21,071) $ (424) $ 479,247 
Balance, December 31, 2019 126,110,000  $ 1,261  $ 1,248,787  $ (281,229) $ (32,398) (55,513) $ (1,103) $ 935,318 
Treasury stock purchases —  —  —  —  —  (1,166,879) (6,895) (6,895)
Retirement of treasury shares (1,166,973) (12) (6,883) —  —  1,166,973  6,895  — 
Issuance of restricted stock 179,961  2  (2) —  —  —  —  — 
Other comprehensive loss —  —  —  —  (42,902) —  —  (42,902)
Deferred compensation obligation —  1  (593) —  —  29,769  592  — 
Share-based compensation —  —  8,543  —  —  —  —  8,543 
Cumulative effect of accounting change —  —  —  (678) —  —  —  (678)
Net loss —  —  —  (515,174) —  —  —  (515,174)
Balance, July 4, 2020 125,122,988  $ 1,252  $ 1,249,852  $ (797,081) $ (75,300) (25,650) $ (511) $ 378,212 
See accompanying notes to consolidated financial statements.

6

CORNERSTONE BUILDING BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 3, 2021
(Unaudited)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements for Cornerstone Building Brands, Inc. (together with its subsidiaries, unless otherwise indicated, the “Company,” “Cornerstone,” “we,” “us” or “our”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, the unaudited consolidated financial statements included herein contain all adjustments, which consist of normal recurring adjustments, necessary to fairly present the Company’s financial position, results of operations and cash flows for the periods indicated. Operating results for the period from January 1, 2021 through July 3, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021.
 Certain reclassifications have been made to the prior period amounts in the consolidated financial statements to conform to the current presentation.
For additional information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (the “SEC”) on March 4, 2021.
Reporting Periods
The Company’s fiscal quarters are based on a four-four-five week calendar with periods ending on the Saturday of the last week in the quarter except that December 31st will always be the year-end date. Therefore, the financial results of certain fiscal quarters may not be comparable to prior fiscal quarters.
Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that total the amounts shown in the consolidated statements of cash flows (in thousands):
  July 3,
2021 		December 31,
2020
Cash and cash equivalents $ 88,978  $ 674,255 
Restricted cash(1)
6,224  6,223 
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 95,202  $ 680,478 
(1)Restricted cash primarily relates to escrow balances held for an outstanding earn-out agreement and other indemnification agreements.
Accounts Receivables and Related Allowance
The Company reports accounts receivable net of the allowance for expected credit losses. Trade accounts receivable are the result of sales of vinyl windows, aluminum windows, vinyl siding, metal siding, injection molded products, metal building products, insulated metal panels, metal coating, and other products and services to customers throughout the United States and Canada and affiliated territories, including international builders who resell to end users. Sales are primarily denominated in U.S. dollars. Credit sales do not normally require a pledge of collateral; however, various types of liens may be filed to enhance the collection process and we require payment prior to shipment for certain international shipments.
The Company establishes provisions for expected credit losses based on the Company’s assessment of the collectability of amounts owed to us by our customers. Such provisions are included in selling, general and administrative expenses. In establishing these reserves, the Company considers changes in the financial position of a customer, age of the accounts receivable balances, availability of security, unusual macroeconomic conditions, lien rights and bond rights as well as disputes, if any, with our customers. Our allowance for credit losses reflects reserves for customer receivables to reduce receivables to amounts expected to be collected. Interest on delinquent accounts receivable is included in the trade accounts receivable balance and recognized as interest income when earned and collectability is reasonably assured. Uncollectible accounts are written off when a settlement is reached for an amount that is less than the outstanding historical balance, all collection efforts have been exhausted, and/or any legal action taken by the Company has concluded.
7

The following table represents the rollforward of the allowance for credit losses for the periods indicated (in thousands):
Six Months Ended
July 3,
2021 		July 4,
2020
Ending balance, prior period $ 13,313  $ 9,962 
Cumulative effect of accounting change(1)
—  678 
Provision for expected credit losses 1,428  252 
Amounts charged against allowance for credit losses, net of recoveries (750) (2,076)
Held for sale adjustment (3,651) — 
Allowance for credit losses of acquired company at date of acquisition —  810 
Ending balance $ 10,340  $ 9,626 
(1)Cumulative effect of accounting change reflects the modified retrospective effect of adopting ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
Net Sales
The Company enters into contracts that pertain to products, which are accounted for as separate performance obligations and are typically one year or less in duration. Given the nature of the Company's sales arrangements, we are not required to exercise significant judgment in determining the timing for the satisfaction of performance obligations or the transaction price. Revenue is measured as the amount of consideration expected to be received in exchange for our products. Revenue is generally recognized when the product has shipped from our facility and control has transferred to the customer. For a portion of our business, when we process customer owned material, control is deemed to transfer to the customer as the processing is being completed.
The Company’s revenues are adjusted for variable consideration, which includes customer volume rebates and prompt payment discounts. The Company measures variable consideration by estimating expected outcomes using analysis and inputs based upon anticipated performance, historical data, and current and forecasted information. Customer returns are recorded as a reduction to sales on an actual basis throughout the year and also include an estimate at the end of each reporting period for future customer returns related to sales recorded prior to the end of the period. The Company generally estimates customer returns based upon the time lag that historically occurs between the sale date and the return date while also factoring in any new business conditions that might impact the historical analysis such as new product introduction. Measurement of variable consideration is reviewed by management periodically and revenue is adjusted accordingly. We do not have significant financing components. The Company recognizes installation revenue, primarily within the stone veneer business, over the period for which the stone is installed, which is typically a very short duration.
Shipping and handling activities performed by us are considered activities to fulfill the sales of our products. Amounts billed for shipping and handling are included in net sales, while costs incurred for shipping and handling are included in cost of sales.
In accordance with certain contractual arrangements, we receive payment from our customers in advance related to performance obligations that are to be satisfied in the future and recognize such payments as deferred revenue, primarily related to the Company’s weathertightness warranties (see Note 12 — Warranty).
A portion of the Company’s revenue, exclusively within the Commercial segment, includes multiple-element revenue arrangements due to multiple deliverables. Each deliverable is generally determined based on customer-specific manufacturing and delivery requirements. Because the separate deliverables have value to the customer on a stand-alone basis, they are typically considered separate units of accounting. A portion of the entire job order value is allocated to each unit of accounting. Revenue allocated to each deliverable is recognized upon shipment. The Company uses estimated selling price (“ESP”) based on underlying cost plus a reasonable margin to determine how to separate multiple-element revenue arrangements into separate units of accounting, and how to allocate the arrangement consideration among those separate units of accounting. The Company determines ESP based on normal pricing and discounting practices.
8

The following table presents disaggregated revenue disclosure details of net sales by segment (in thousands):
Three Months Ended Six Months Ended
July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Windows Net Sales Disaggregation:
Vinyl windows $ 548,590  $ 398,843  $ 1,045,607  $ 817,865 
Aluminum windows 21,636  19,806  41,916  39,282 
Other 9,518  9,626  19,484  19,578 
Total $ 579,744  $ 428,275  $ 1,107,007  $ 876,725 
Siding Net Sales Disaggregation:
Vinyl siding $ 175,873  $ 131,426  $ 326,102  $ 240,974 
Metal 79,500  64,424  150,593  117,090 
Injection molded 21,680  15,857  39,289  29,096 
Stone 23,803  22,201  43,634  41,011 
Other products & services(1)
61,331  51,341  118,960  98,121 
Total $ 362,187  $ 285,249  $ 678,578  $ 526,292 
Commercial Net Sales Disaggregation:
Metal building products $ 318,856  $ 269,088  $ 618,794  $ 561,524 
Insulated metal panels 89,683  72,093  175,286  171,322 
Metal coil coating 49,651  30,231  87,488  62,884 
Total $ 458,190  $ 371,412  $ 881,568  $ 795,730 
Total Net Sales: $ 1,400,121  $ 1,084,936  $ 2,667,153  $ 2,198,747 
(1)Other products & services primarily consist of installation of stone veneer products.
NOTE 2 — ACCOUNTING PRONOUNCEMENTS
Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. Effective January 1, 2021, the Company adopted this guidance. The application of ASU 2019-12 did not have a material effect on the consolidated financial statements.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the reference rate transition. The amendments in these ASUs are elective, apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of rate reform, and may be adopted as of March 12, 2020 through December 31, 2022. The Company is evaluating the impact of electing to apply the amendments.

9

NOTE 3 — ACQUISITIONS
2021 Acquisition
On April 30, 2021, the Company acquired Prime Windows LLC (“Prime Windows”) for total consideration of $93.0 million, exclusive of a $2.0 million working capital adjustment which has not been finalized as of July 3, 2021. Prime Windows serves residential new construction and repair and remodel markets with energy efficient vinyl window and door products from two manufacturing facilities in the United States, expanding our manufacturing capabilities and creating new opportunities for us in the Western United States. This acquisition was funded through borrowings under the Company’s existing credit facilities. Prime Windows’ results are reported within the Windows segment.
The Company preliminarily determined the fair value of the tangible and intangible assets and the liabilities acquired, and recorded goodwill based on the excess of the fair value of the acquisition consideration over such fair values, as follows (in thousands):
Assets acquired:
Cash $ 997 
Accounts receivable 5,500 
Inventories 4,295 
Prepaid expenses and other current assets 823 
Property, plant and equipment 2,000 
Lease right of use assets 2,637 
Intangible assets (trade names/customer relationships) 52,700 
Goodwill 31,770 
Other assets 50 
Total assets acquired 100,772 
Liabilities assumed:
Accounts payable 1,676 
Other accrued expenses 1,429 
Lease liabilities 2,637 
Total liabilities assumed 5,742 
Net assets acquired $ 95,030 
The $31.8 million of goodwill was allocated to the Windows segment and is expected to be deductible for tax purposes. The goodwill is primarily attributable to the synergies expected to be realized.
During the three and six months ended July 3, 2021, the Company incurred $0.7 million of acquisition-related costs for Prime Windows, $0.3 million of which are recorded in strategic development and acquisition related costs in the Company’s consolidated statements of operations.
Due to the recent closing of the transaction, the purchase price allocation is preliminary and will be finalized when valuations are complete and final assessments of the fair value of acquired assets and assumed liabilities are completed. There can be no assurance that such finalization will not result in material changes from the preliminary purchase price allocations. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date), as the Company finalizes the valuations of accounts receivable, inventories, prepaid expenses, property, plant and equipment, lease right of use assets, goodwill, intangible assets, other assets, accounts payable, other accrued expenses, deferred income taxes and lease liabilities.
2020 Acquisition
On March 2, 2020, the Company acquired 100% of the issued and outstanding shares of the common stock of Kleary Masonry, Inc. (“Kleary”) for total consideration of $40.0 million, exclusive of the $2.0 million working capital adjustment that was finalized during the three months ended July 4, 2020. The transaction was financed with cash on hand and through borrowings under the Company’s asset-based revolving credit facility. Kleary’s results are reported within the Siding segment.
10

The Company determined the fair value of the tangible and intangible assets and the liabilities acquired, and recorded goodwill based on the excess of the fair value of the acquisition consideration over such fair values, as follows (in thousands):
Assets acquired:
Cash $ 143 
Accounts receivable 7,135 
Inventories 670 
Prepaid expenses and other current assets 277 
Property, plant and equipment 1,042 
Lease right of use assets 445 
Intangible assets (trade names/customer relationships) 22,350 
Goodwill 12,539 
Total assets acquired 44,601 
Liabilities assumed:
Accounts payable 1,149 
Other accrued expenses 1,020 
Lease liabilities 339 
Other long-term liabilities 109 
Total liabilities assumed 2,617 
Net assets acquired $ 41,984 
The $12.5 million of goodwill from the Kleary acquisition was allocated to the Siding segment and will be deductible for tax purposes. The goodwill is attributable to the workforce of the acquired business and the synergies expected to be realized. The fair value of all assets acquired and liabilities assumed was finalized during the first quarter of 2021.
Strategic development and acquisition related costs in the consolidated statements of operations for the three and six months ended July 3, 2021 included a reduction of $4.2 million to the previously estimated accrual to reflect the final contingent earnout for the Kleary acquisition at approximately $5.4 million.
Unaudited Pro Forma Financial Information
During the three and six months ended July 3, 2021, Prime Windows contributed net sales of $13.0 million and net income of $0.7 million which has been included within the Company’s consolidated statement of operations. The following table provides unaudited supplemental pro forma results for Cornerstone for the three and six months ended July 3, 2021 and July 4, 2020 as if the Prime Windows and Kleary acquisitions had occurred on January 1, 2020 (in thousands, except for per share data):
Three Months Ended Six Months Ended
July 3, 2021 July 4, 2020 July 3, 2021 July 4, 2020
Net sales $ 1,406,296  $ 1,098,542  $ 2,691,089  $ 2,234,251 
Net income (loss) applicable to common shares 9,609  28,649  9,827  (510,707)
Net income (loss) per common share:
Basic $ 0.08  $ 0.23  $ 0.08  $ (4.06)
Diluted $ 0.08  $ 0.23  $ 0.08  $ (4.06)
The unaudited supplemental pro forma financial information was prepared based on the historical information of Cornerstone, Prime Windows and Kleary. The unaudited supplemental pro forma financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the acquisitions or any integration costs. Unaudited pro forma balances are not necessarily indicative of operating results had the Prime Windows and Kleary acquisitions occurred on January 1, 2020 or of future results.
11

NOTE 4 — RESTRUCTURING
The Company has various initiatives and programs in place within its business units to reduce selling, general, and administrative expenses (“SG&A”), manufacturing costs and to optimize the Company’s combined manufacturing footprint. During the six months ended July 3, 2021, the Company incurred restructuring charges of $1.0 million, $0.2 million and $3.0 million in the Windows, Siding and Commercial segments, respectively, and $2.3 million in restructuring charges at Corporate headquarters. Restructuring charges incurred to date since the current restructuring initiatives began in 2019 are $58.8 million. The following table summarizes the costs related to those restructuring plans for the three and six months ended July 3, 2021 and costs incurred to date since inception of those initiatives and programs (in thousands):
  Three Months Ended Six Months Ended Costs Incurred to Date
  July 3, 2021 July 3, 2021 (Since inception)
Severance $ 1,157  $ 2,479  $ 38,710 
Asset impairments 3,495  3,988  11,856 
Gain on sale of facilities, net —  —  (1,298)
Other restructuring costs —  23  9,559 
Total restructuring costs $ 4,652  $ 6,490  $ 58,827 
For the three and six months ended July 3, 2021, total restructuring costs are recorded within restructuring and impairment costs in the consolidated statements of operations. The asset impairments of $4.0 million for the six months ended July 3, 2021 primarily included assets held for sale that were recorded at fair value less cost to sell, which was less than the assets’ carrying amount, and the write-off of previously capitalized software development costs.
The following table summarizes our severance liability, included within other accrued expenses on the consolidated balance sheets, and cash payments made pursuant to the restructuring plans from inception through July 3, 2021 (in thousands):
  Windows Siding Commercial Corporate Total
Balance, December 31, 2018 $ —  $ 85  $ —  $ 2,333  $ 2,418 
Costs incurred 1,094  1,834  2,721  4,009  9,658 
Cash payments (676) (1,437) (2,721) (4,579) (9,413)
Balance, December 31, 2019 $ 418  $ 482  $ —  $ 1,763  $ 2,663 
Costs incurred 4,294  2,705  16,561  3,013  26,573 
Cash payments (4,406) (2,352) (14,570) (4,346) (25,674)
Balance, December 31, 2020 $ 306  $ 835  $ 1,991  $ 430  $ 3,562 
Costs incurred 674  131  1,517  157  2,479 
Cash payments (774) (802) (1,611) (587) (3,774)
Balance, July 3, 2021 $ 206  $ 164  $ 1,897  $ —  $ 2,267 
We expect to fully execute our restructuring initiatives and programs over the next 12 to 24 months and we may incur future additional restructuring charges associated with these plans.
12

NOTE 5 — GOODWILL
The Company’s goodwill balance and changes in the carrying amount of goodwill by segment are as follows (in thousands):
Windows Siding Commercial Total
Balance, December 31, 2019 $ 714,023  $ 807,280  $ 148,291  $ 1,669,594 
Goodwill recognized from acquisition —  12,539  —  12,539 
Impairment(1)
(320,990) (176,774) (5,407) (503,171)
Currency translation 3,991  10,000  —  13,991 
Purchase accounting adjustments from prior year acquisitions —  1,776  —  1,776 
Balance, December 31, 2020 $ 397,024  $ 654,821  $ 142,884  $ 1,194,729 
Goodwill recognized from acquisitions 31,770  122  —  31,892 
Asset held for sale adjustment —  —  (121,464) (121,464)
Currency translation 1,487  1,114  —  2,601 
Balance, July 3, 2021 $ 430,281  $ 656,057  $ 21,420  $ 1,107,758 
(1)Goodwill impairment charges occurred during the quarter ended April 4, 2020 as a result of a decline in the Company’s market valuation and near-term economic uncertainties related to the COVID-19 pandemic.
NOTE 6 — INVENTORIES
The components of inventory are as follows (in thousands):
  July 3, 2021 December 31, 2020
Raw materials $ 311,231  $ 241,353 
Work in process and finished goods 238,505  190,584 
Total inventory $ 549,736  $ 431,937 
 As of July 3, 2021, the Company had inventory purchase commitments of $73.6 million.
13

NOTE 7 — INTANGIBLES
The table that follows presents the major components of intangible assets as of July 3, 2021 and December 31, 2020 (in thousands). Intangible assets that are fully amortized have been removed from the disclosures.
Range of Life (Years) Weighted Average Amortization Period (Years) Cost Accumulated Amortization Net Carrying Value
As of July 3, 2021
Amortized intangible assets:
Trademarks/Trade names 5 – 15 7 $ 233,267  $ (62,953) $ 170,314 
Customer lists and relationships 7 – 20 9 1,717,411  (399,299) 1,318,112 
Total intangible assets 9 $ 1,950,678  $ (462,252) $ 1,488,426 
As of December 31, 2020
Amortized intangible assets:
Trademarks/Trade names 5 – 15 8 $ 248,155  $ (51,722) $ 196,433 
Customer lists and relationships 7 – 20 9 1,758,611  (370,440) 1,388,171 
Total intangible assets 9 $ 2,006,766  $ (422,162) $ 1,584,604 
The Company expects to recognize amortization expense over the next five fiscal years as follows (in thousands):

2021 $ 91,068 
2022 181,971 
2023 181,971 
2024 181,689 
2025 181,118 
NOTE 8 — ASSETS AND LIABILITIES HELD FOR SALE
An asset or business is classified as held for sale when: (i) management has the authority and commits to a plan to sell the asset; (ii) the asset is available for immediate sale in its present condition; (iii) there is an active program to locate a buyer and the plan to sell has been initiated; (iv) the sale is probable within one year; (v) the asset is being actively marketed at a reasonable sale price relative to its current fair value; and (vi) it is unlikely that the plan to sell will be withdrawn or that significant changes to the plan will be made. Upon being classified as held for sale, the recoverability of the carrying value must be assessed. Evaluating the recoverability of the assets of a business classified as held for sale follows a defined order in which property and intangible assets subject to amortization are considered only after the recoverability of goodwill and other assets are assessed. In determining the fair value of the assets less cost to sell, we consider factors including current sales prices for comparable assets in the area, recent market analysis studies, appraisals and any recent legitimate offers. After the valuation process is completed, the assets held for sale are reported at the lower of the carrying value or fair value less cost to sell, and the assets are no longer depreciated or amortized. An impairment charge is recognized if the carrying value exceeds the fair value less cost to sell. The assets and related liabilities are aggregated and reported on separate lines of the balance sheet.
In June 2021, we entered into definitive agreements to sell our insulated metal panels (IMP) business for $1.0 billion in cash and roll-up sheet door (DBCI) business for $168 million in cash within the Commercial segment. The transactions are expected to close in the second half of 2021, subject to regulatory approval and other customary closing conditions. We determined that the assets and liabilities associated with each of these transactions met the held for sale criteria during the three months ended July 3, 2021. Accordingly, the respective assets and liabilities were classified in the consolidated balance sheet at July 3, 2021 as held for sale. Additionally, we ceased recording depreciation and amortization for the held for sale assets upon meeting the held for sale criteria. The transactions do not represent strategic shifts that will have a major effect on our operations and financial results, so they are not presented as discontinued operations. We determined the estimated fair value of these transactions based on the sales price defined by each respective definitive agreement. The estimated fair value less cost to sell exceeds the respective carrying amount for the IMP and DBCI businesses, therefore no impairment was recognized in the three months ended July 3, 2021.
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The following table reconciles the carrying amounts of major classes of assets and liabilities that are classified as held for sale in the consolidated balance sheets (in thousands):
July 3, 2021 December 31, 2020
Carrying amounts of major classes of assets held for sale:
Accounts receivable, net $ 65,812  $ — 
Inventories, net 62,755  — 
Prepaid expenses and other 5,507  — 
Total current assets 134,074  — 
  Property, plant and equipment, net 62,473  4,644 
  Lease right-of-use assets 10,134  — 
  Goodwill 121,464  — 
  Intangible assets, net 60,623  — 
  Other assets 1,257  — 
Total assets held for sale $ 390,025  $ 4,644 
Carrying amounts of major classes of liabilities held for sale:
Accounts payable $ 20,672  $ — 
Accrued compensation and benefits 7,399  — 
Short-term lease liabilities 2,929  — 
Other accrued expenses 19,224  — 
Total current liabilities 50,224  — 
  Deferred income taxes 14,372  — 
  Long-term lease liabilities 8,490  — 
  Other long-term liabilities 2,841  — 
Total non-current liabilities 25,703  — 
  Total liabilities held for sale $ 75,927  $ — 
There were no asset sales completed in the three months ended July 3, 2021. During the six months ended July 3, 2021, the Company completed the sale of certain real property assets resulting in approximately $0.7 million in net proceeds and an immaterial loss from the transaction.
Due to uncertainties in the estimation process, actual results could differ from the estimates used in our historical analysis. Our assumptions about property sales prices require significant judgment because the current market is highly sensitive to changes in economic conditions. We determined the estimated fair values of real property assets held for sale based on current market conditions and assumptions made by management, which may differ from actual results and may result in impairments if market conditions deteriorate.
NOTE 9 — LEASES
The Company leases certain manufacturing, warehouse and distribution locations, vehicles and equipment, including fleet vehicles. Many of these leases have options to terminate prior to or extend beyond the end of the term. The exercise of the majority of lease renewal options is at the Company’s sole discretion. Some lease agreements have variable payments, the majority of which are real estate agreements in which future increases in rent are based on an index. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company accounts for lease and non-lease components as a single lease component for all leases other than leases of durable tooling. The Company excludes leases with an initial term of 12 months or less from the consolidated balance sheets and recognizes related lease payments in the consolidated statements of operations on a straight-line basis over the lease term.
Operating lease liabilities are recognized based on the present value of the future minimum lease payments over the reasonably expected holding period at the commencement date of the leases. Few of the Company’s lease contracts provide a readily determinable implicit rate. For these contracts, an estimated incremental borrowing rate (“IBR”) is utilized, based on information available at the inception of the lease. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.
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Accounting for leases may require judgment, including determining whether a contract contains a lease, the incremental borrowing rates to utilize for leases without a stated implicit rate, the reasonably certain holding period for a leased asset, and the allocation of consideration to lease and non-lease components. The allocation of the lease and non-lease components for leases of durable tooling is based on the Company’s best estimate of standalone price.
Weighted average information about the Company’s lease portfolio as of July 3, 2021 was as follows:
Weighted-average remaining lease term 6.0 years
Weighted-average IBR 5.91  %
Operating lease costs were as follows (in thousands):
Three Months Ended Six Months Ended
July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Operating lease costs
Fixed lease costs $ 27,258  $ 29,033  $ 53,225  $ 56,963 
Variable lease costs(1)
28,062  15,587  52,788  35,175 
(1)Includes short-term lease costs, which are immaterial
Cash and non-cash activities were as follows (in thousands):
Three Months Ended Six Months Ended
July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 22,721  $ 25,114  $ 49,740  $ 55,388 
Right-of-use assets obtained in exchange for new operating lease liabilities $ 11,811  $ 12,609  $ 17,515  $ 16,870 
Future minimum lease payments under non-cancelable leases as of July 3, 2021 are as follows (in thousands):
Operating Leases
2021 (excluding the six months ended July 3, 2021) $ 39,785 
2022 78,733 
2023 53,181 
2024 41,470 
2025 34,485 
Thereafter 94,170 
Total future minimum lease payments 341,824 
Less: interest 56,677 
Present value of future minimum lease payments $ 285,147 
As of July 3, 2021
Liabilities held for sale $ 11,419 
Current portion of lease liabilities 68,198 
Long-term portion of lease liabilities 205,530 
Total $ 285,147 
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NOTE 10 — SHARE-BASED COMPENSATION
Our 2003 Long-Term Stock Incentive Plan, as amended (the “Incentive Plan”), is an equity-based compensation plan that allows us to grant a variety of types of awards, including stock options, restricted stock awards, stock appreciation rights, cash awards, phantom stock awards, restricted stock unit awards (“RSUs”) and long-term incentive awards with performance conditions (“performance share units” or “PSUs”). Awards are generally granted once per year, with the amounts and types of awards determined by the Compensation Committee of our Board of Directors (the “Committee”). In connection with the Merger (as defined herein) with Ply Gem Parent, LLC (“Ply Gem”), on November 16, 2018 awards were granted to certain senior executives and key employees (the “Founders Awards”), which included stock options, RSUs, and PSUs. A portion of the Founders Awards was not granted under the Incentive Plan but was instead granted pursuant to a separate equity-based compensation plan, the Long-Term Incentive Plan. These Founders Awards were subject award agreements with the same terms and provisions as awards of the same type granted under the Incentive Plan.
As of July 3, 2021, and for all periods presented, the Founders Awards and our share-based awards under the Incentive Plan have consisted of RSUs, PSUs and stock option grants, none of which can be settled through cash payments. Both our stock options and restricted stock awards are subject only to vesting requirements based on continued employment through the end of a specified time period and typically vest in annual increments over three to five years or earlier upon death, disability or a change in control. As a general rule, option awards expire on the earlier of (i) 10 years from the date of grant, (ii) 60 days after termination of employment or service for a reason other than death, disability or retirement, or (iii) 180 days after death, disability or retirement. Awards are non-transferable except by disposition on death or to certain family members, trusts and other family entities as the Committee may approve.
Our time-based restricted stock awards are typically subject to graded vesting over a service period, which is three to five years. Our performance-based and market-based restricted stock awards are typically subject to cliff vesting at the end of the service period, which is typically three years. Our share-based compensation arrangements are equity classified and we recognize compensation cost for these awards on a straight-line basis over the requisite service period for each award grant. In the case of performance-based awards, expense is recognized based upon management’s assessment of the probability that such performance conditions will be achieved. Certain of our awards provide for accelerated vesting upon a change of control or upon termination without cause or for good reason.
Vesting of the PSUs granted as part of the Founders Awards is contingent upon the achievement of synergies captured from the Merger and continued employment. Based on achieved synergies during the period comprising the two fiscal years ended December 31, 2020, the Founders Awards will vest at 200% of target amounts, subject to continuing employment through the requisite service period ending on November 16, 2021. Vesting of the PSUs granted under the Incentive Plan during the six months ended July 3, 2021 and July 4, 2020 are contingent upon achievement of a cumulative three-year EBITDA growth target with an additional modifier based on total shareholder return. The grant-date fair value of the PSUs granted during the six months ended July 3, 2021 and July 4, 2020 were determined by a Monte Carlo simulation.
Stock option awards
During the six months ended July 3, 2021 and July 4, 2020, we granted 0.6 million and 1.0 million stock options, respectively. The average grant date fair value of options granted during the six months ended July 3, 2021 and July 4, 2020 was $6.50 and $1.96 per share, respectively. There were 0.1 million options with an intrinsic value of $0.7 million exercised during the six months ended July 3, 2021 and cash received from the options exercised was $1.5 million. No options were exercised during the six months ended July 4, 2020.
Restricted stock units and performance share units
Annual awards to our key employees generally have a three-year performance period. The fair value of RSUs awarded is based on the Company’s stock price as of the date of grant. During the six months ended July 3, 2021, we granted RSUs to key employees with a fair value of $11.6 million representing approximately 0.8 million shares. During the six months ended July 4, 2020, we granted RSUs to key employees with a fair value of $6.1 million, representing 1.3 million shares. During the six months ended July 3, 2021 and July 4, 2020, we granted PSUs with a total fair value of approximately $14.4 million and $5.4 million, respectively, to key employees.
Share-based compensation expense
During the three and six months ended July 3, 2021, we recorded share-based compensation expense for all awards of $5.3 million and $8.6 million, respectively. During the three and six months ended July 4, 2020, we recorded share-based compensation expense for all awards of $5.2 million and $8.5 million, respectively.
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NOTE 11 — EARNINGS PER COMMON SHARE
Basic earnings per common share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding. Diluted earnings per common share, if applicable, considers the dilutive effect of common stock equivalents. The reconciliation of the numerator and denominator used for the computation of basic and diluted earnings per common share is as follows (in thousands, except per share data):
  Three Months Ended Six Months Ended
  July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Numerator for Basic and Diluted Earnings Per Common Share    
Net income (loss) applicable to common shares $ 8,804  $ 26,457  $ 7,179  $ (515,174)
Denominator for Basic and Diluted Earnings Per Common Share    
Weighted average basic number of common shares outstanding 125,863  125,754  125,683  125,927 
Common stock equivalents:
Employee stock options 978  1  786  — 
PSUs and Performance Share Awards —  —  —  — 
Weighted average diluted number of common shares outstanding 126,841  125,755  126,469  125,927 
Basic income (loss) per common share $ 0.07  $ 0.21  $ 0.06  $ (4.09)
Diluted income (loss) per common share $ 0.07  $ 0.21  $ 0.06  $ (4.09)
Incentive Plan securities excluded from dilution(1)
130  4,358  216  3,338 
(1)Represents securities not included in the computation of diluted earnings per common share because their effect would have been anti-dilutive.
We calculate earnings per share using the “two-class” method, whereby unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are “participating securities” and, therefore, these participating securities are treated as a separate class in computing earnings per share. The calculation of earnings per share presented here excludes the income attributable to unvested restricted stock units from the numerator and excludes the dilutive impact of those shares from the denominator. Awards subject to the achievement of performance conditions or market conditions for which such conditions had been met at the end of any of the fiscal periods presented are included in the computation of diluted earnings per common share if their effect was dilutive.
NOTE 12 — WARRANTY
The Company offers a number of warranties associated with the products it sells. The specific terms and conditions of these warranties vary depending on the product sold. The Company’s warranty liabilities are undiscounted and adjusted for inflation based on third party actuarial estimates. Factors that affect the Company’s warranty liabilities include the number of units sold, historical and anticipated rates of warranty claims, cost per claim and new product introduction. Warranties are normally limited to replacement or service of defective components for the original customer. Some warranties are transferable to subsequent owners and are generally limited to ten years from the date of manufacture or require pro-rata payments from the customer. A provision for estimated warranty costs is recorded based on historical experience and the Company periodically adjusts these provisions to reflect actual experience. Warranty costs are included within cost of goods sold. The Company assesses the adequacy of the recorded warranty claims and adjusts the amounts as necessary. Separately, upon the sale of a weathertightness warranty in the Commercial segment, the Company records the resulting revenue as deferred revenue, which is included in other accrued expenses and other long-term liabilities on the consolidated balance sheets depending on when the revenues are expected to be recognized.
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The following table represents the rollforward of our accrued warranty obligation and deferred warranty revenue activity for the six months ended July 3, 2021 and July 4, 2020 (in thousands):
Six Months Ended
  July 3, 2021 July 4, 2020
Beginning balance $ 216,230  $ 216,173 
Acquisition 162  109 
Held for sale adjustments (2,256) — 
Warranties sold 1,158  1,231 
Revenue recognized (1,391) (1,364)
Expense 15,674  15,468 
Settlements (15,137) (15,712)
Ending balance 214,440  215,905 
Less: current portion 26,702  26,375 
Total warranty, less current portion $ 187,738  $ 189,530 
The current portion of the warranty liabilities are recorded within other accrued expenses and the long-term portion of the warranty liabilities are recorded within other long-term liabilities in the Company’s consolidated balance sheets.
NOTE 13 — DEFINED BENEFIT PLANS
RCC Pension Plan — With the acquisition of Robertson-Ceco II Corporation (“RCC”) on April 7, 2006, we assumed a defined benefit plan (the “RCC Pension Plan”). Benefits under the RCC Pension Plan are primarily based on years of service and the employee’s compensation. The RCC Pension Plan is frozen and, therefore, employees do not accrue additional service benefits. Plan assets of the RCC Pension Plan are invested in broadly diversified portfolios of government obligations, mutual funds, stocks, bonds, fixed income securities and master limited partnerships.
CENTRIA Benefit Plans — As a result of the CENTRIA Acquisition on January 16, 2015, we assumed noncontributory defined benefit plans covering certain hourly employees (the “CENTRIA Benefit Plans”) and which are closed to new participants. Benefits under the CENTRIA Benefit Plans are calculated based on fixed amounts for each year of service rendered, although benefits accruals for one of the plans previously ceased. Plan assets of the CENTRIA Benefit Plans are invested in fixed income funds. CENTRIA also sponsors postretirement medical and life insurance plans that cover certain of its employees and their spouses (the “OPEB Plans”). Currently, the Company’s policy is to fund the CENTRIA Benefit Plans as required by minimum funding standards of the Internal Revenue Code.
Ply Gem Pension Plans — As a result of the Merger on November 16, 2018, we assumed the Ply Gem Group Pension Plan (the “Ply Gem Plan”) and the MW Manufacturers, Inc Retirement Plan (the “MW Plan”). The Ply Gem Plan was frozen during 1998, and no further increases in benefits for participants may occur as a result of increases in service years or compensation. The MW Plan was frozen for salaried participants during 2004 and non-salaried participants during 2005. No additional participants may enter the plan, but increases in benefits for participants as a result of increase in service years or compensation will occur.
We refer to the RCC Pension Plan, the CENTRIA Benefit Plans, the Ply Gem Plan and the MW Plan collectively as the “Defined Benefit Plans” in this Note.
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The following tables set forth the components of the net periodic benefit cost, before tax for the periods indicated (in thousands):
Defined Benefit Plans
  Three Months Ended Six Months Ended
July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Service cost $ 13  $ 11  $ 27  $ 23 
Interest cost 636  802  1,271  1,603 
Expected return on assets (1,359) (1,398) (2,719) (2,795)
Amortization of prior service cost 16  16  32  31 
Amortization of net actuarial loss 104  753  208  1,504 
Net periodic benefit cost (income) $ (590) $ 184  $ (1,181) $ 366 
OPEB Plans
  Three Months Ended Six Months Ended
July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Service cost $ 5  $ 4  $ 9  $ 8 
Interest cost 45  59  89  118 
Amortization of net actuarial loss 17  27  35  54 
Net periodic benefit cost $ 67  $ 90  $ 133  $ 180 
We expect to contribute $3.2 million to the Defined Benefit Plans and $0.7 million to OPEB Plans in the year ending December 31, 2021. Our policy is to fund the CENTRIA Benefit Plans as required by minimum funding standards of the Internal Revenue Code. The contributions to the OPEB Plans by retirees vary from none to 25% of the total premiums paid.
NOTE 14 — LONG-TERM DEBT
Debt is comprised of the following (in thousands):
July 3,
2021 		December 31,
2020
Asset-based revolving credit facility due April 2026 $ 160,000  $ — 
Term loan facility due April 2028 2,593,500  2,497,967 
8.00% senior notes due April 2026
—  645,000 
6.125% senior notes due January 2029
500,000  500,000 
Less: unamortized discounts and unamortized deferred financing costs(1)
(46,741) (53,938)
Total long-term debt, net of unamortized discounts and unamortized deferred financing costs 3,206,759  3,589,029 
Less: current portion of long-term debt 26,000  25,600 
Total long-term debt, less current portion $ 3,180,759  $ 3,563,429 
(1)Includes the unamortized discounts and unamortized deferred financing costs associated with the term loan facility, the 8.00% senior notes due April 2026 (included in December 31, 2020 balance only as the notes were redeemed in full in April 2021), and the 6.125% senior notes due January 2029. The unamortized deferred financing costs associated with the asset-based and revolving credit facilities of $1.5 million and $1.7 million as of July 3, 2021 and December 31, 2020, respectively, are classified in other assets on the consolidated balance sheets.
Term Loan Facility due April 2028 and Cash Flow Revolver
On April 12, 2018, Ply Gem Midco entered into a Cash Flow Agreement (the "Current Cash Flow Credit Agreement"), which provides for (i) a term loan facility (the “Existing Term Loan Facility”) in an original aggregate principal amount of $1,755.0 million, issued with a discount of 0.5%, and (ii) a cash flow-based revolving credit facility (the “Existing Cash Flow Revolver” and together with the Existing Term Loan Facility, the “Existing Cash Flow Facilities”) of up to $115.0 million.
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On November 16, 2018, the Company entered into an incremental term loan facility in connection with the Merger, which increased the aggregate principal amount of the Existing Term Loan Facility by $805.0 million. The proceeds of this incremental term loan facility were used to, among other things, (a) finance the Merger and to pay certain fees, premiums and expenses incurred in connection therewith, (b) repay in full amounts outstanding under the Pre-merger Term Loan Credit Agreement and the Pre-merger ABL Credit Agreement and (c) repay $325.0 million of borrowings outstanding under the ABL Facility. On November 16, 2018, in connection with the consummation of the Merger, NCI and Ply Gem Midco entered into a joinder agreement with respect to the Existing Cash Flow Facilities, and the Company became the Borrower (as defined in the Current Cash Flow Credit Agreement) under the Existing Cash Flow Facilities.
On April 15, 2021, the Company entered into a Second Amendment to the Current Cash Flow Credit Agreement (the “Second Amendment"), among the Company, the several banks and other financial institutions party thereto (the "Cash Flow Lenders") and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “Cash Flow Agent”), which amended the Current Cash Flow Credit Agreement to, among other things:
•Terminate $92.0 million of commitments by Cash Flow Lenders under the Company’s cash flow-based revolving credit facility of up to $115.0 million, maturing on April 12, 2023 (the “Existing Cash Flow Revolver”) and;
•Replace such commitments with $92.0 million of extended cash flow-based revolving commitments, maturing on April 12, 2026 (the “Extended Cash Flow Revolver” and together with the Existing Cash Flow Revolver, the “ Current Cash Flow Revolver”).
On April 15, 2021, the Company entered into (i) a Third Amendment to Current Cash Flow Credit Agreement (the “Third Amendment”), among the Company, the subsidiary guarantors parties thereto, the Cash Flow Lenders party thereto and the Cash Flow Agent and (ii) an Increase Supplement (the “Increase Supplement”), between the Company and JPMorgan Chase Bank, N.A., as the increasing lender. The Third Amendment amended the Current Cash Flow Credit Agreement to, among other things, refinance the Existing Term Loan Facility in an original aggregate principal amount of $1,755.0 million with Tranche B Term Loans in an aggregate principal amount of approximately $2,491.6 million, maturing on April 12, 2028. The Increase Supplement supplemented the Current Cash Flow Credit Agreement to, among other things, increase the aggregate principal amount of the Tranche B Term Loan Facility by approximately $108.4 million (the “Incremental Tranche B Term Loans”), for a total principal amount of $2,600.0 million (the “Current Term Loan Facility” and together with the Current Cash Flow Revolver, the “Current Cash Flow Facilities”). Proceeds of the Incremental Tranche B Term Loans were used, together with cash on hand, (i) for the redemption of all of the 8.00% Senior Notes (as defined below) (the “Senior Notes Redemption”) and (ii) to pay any fees and expenses incurred in connection with the extension and refinancing of the Company’s senior credit facilities and the Senior Notes Redemption.
In connection with the Third Amendment and the Increase Supplement to the Current Cash Flow Credit Agreement, we incurred $21.8 million and $24.8 million in financing costs for the three and six months ended July 3, 2021, respectively, of which $13.1 million and $13.2 million, respectively, were deferred and will be amortized using the effective interest method.
The Current Term Loan Facility amortizes in nominal quarterly one installments equal to one percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity. The Current Term Loan Facility bears annual interest at a floating rate measured by reference to, at the Company’s option, either (i) an adjusted LIBOR rate (subject to a floor of 0.50%) plus an applicable margin of 3.25% per annum or (ii) an alternate base rate plus an applicable margin of 2.25% per annum. At July 3, 2021, the interest rates on the Current Term Loan Facility were as follows:
July 3, 2021
Interest rate 3.75  %
Effective interest rate 4.02  %
The Company entered into certain interest rate swap agreements in 2019 and 2021 to effectively convert a portion of its variable rate debt to fixed. See Note 15 — Derivatives.
Loans outstanding under the Current Cash Flow Revolver bear annual interest at a floating rate measured by reference to, at the Company’s option, either (i) an adjusted LIBOR rate (subject to a floor of 0.00%) plus an applicable margin ranging from 2.50% to 3.00% per annum depending on the Company’s secured leverage ratio or (ii) an alternate base rate plus an applicable margin ranging from 1.50% to 2.00% per annum depending on the Company’s secured leverage ratio. There are no amortization payments under the Current Cash Flow Revolver. Additionally, unused commitments under the Current Cash Flow Revolver are subject to a fee ranging from 0.25% to 0.50% per annum depending on the Company’s secured leverage ratio.
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Both the Current Term Loan Facility and Current Cash Flow Revolver may be prepaid at the Company’s option at any time without premium or penalty (other than customary breakage costs), subject to minimum principal amount requirements.
Subject to certain exceptions, the Current Term Loan Facility is subject to mandatory prepayments in an amount equal to:
•the net cash proceeds of (1) certain asset sales, (2) certain debt offerings and (3) certain insurance recovery and condemnation events; and
•50% of annual excess cash flow (as defined in the Current Cash Flow Credit Agreement), subject to reduction to 25% and 0% if specified secured leverage ratio targets are met to the extent that the amount of such excess cash flow exceeds $10.0 million. For 2020, no payments were required under the excess cash flow calculation.
The obligations under the Current Cash Flow Credit Agreement are guaranteed by each direct and indirect wholly-owned U.S. restricted subsidiary of the Company, subject to certain exceptions, and are secured by:
•a perfected security interest in substantially all tangible and intangible assets of the Company and each subsidiary guarantor (other than ABL Priority Collateral (as defined below)), including the capital stock of each direct material wholly-owned U.S. restricted subsidiary owned by the Company and each subsidiary guarantor, and 65% of the capital stock of any non-U.S. subsidiary held directly by the Company or any subsidiary guarantor, subject to certain exceptions (the “Cash Flow Priority Collateral”), which security interest will be senior to the security interest in the foregoing assets securing the Current ABL Facility; and
•a perfected security interest in the ABL Priority Collateral, which security interest will be junior to the security interest in the ABL Priority Collateral securing the Current ABL Facility.
The Current Cash Flow Revolver includes a financial covenant set at a maximum secured leverage ratio of 7.75:1.00, which will apply if the outstanding amount of loans and drawings under letters of credit which have not then been reimbursed exceeds a specified threshold at the end of any fiscal quarter.
ABL Facility due April 2026
On April 12, 2018, Ply Gem Midco entered into an ABL Credit Agreement (the "Current ABL Credit Agreement"), which provides for an asset-based revolving credit facility (the “Existing ABL Facility”) of up to $360.0 million, consisting of (i) $285.0 million available to U.S. borrowers (subject to U.S. borrowing base availability) (the “ABL U.S. Facility”) and (ii) $75.0 million available to both U.S. borrowers and Canadian borrowers (subject to U.S. borrowing base and Canadian borrowing base availability) (the “ABL Canadian Facility”). The Company and, at their option, certain of their subsidiaries are the borrowers under the Existing ABL Facility.
On October 15, 2018, Ply Gem Midco entered into an incremental asset-based revolving credit facility of $36.0 million, which upsized the Existing ABL Facility to $396.0 million in the aggregate, and with (x) the ABL U.S. Facility being increased from $285.0 million to $313.5 million and (y) the ABL Canadian Facility being increased from $75.0 million to $82.5 million.
On November 16, 2018, Ply Gem Midco entered into an incremental asset-based revolving credit facility of $215.0 million in connection with the Merger, which upsized the Existing ABL Facility to $611.0 million in the aggregate, and with (x) the ABL U.S. Facility being increased from $313.5 million to approximately $483.7 million and (y) the ABL Canadian Facility being increased from $82.5 million to approximately $127.3 million. On November 16, 2018, in connection with the consummation of the Merger, the Company and Ply Gem Midco entered into a joinder agreement with respect to the Existing ABL Facility, and the Company became the Parent Borrower (as defined in the ABL Credit Agreement) under the Existing ABL Facility.
On April 15, 2021, the Company entered into Amendment No. 6 to the Current ABL Credit Agreement, by and among the Company, the subsidiary borrowers party thereto, the several banks and financial institutions party thereto and UBS AG, Stamford Branch, as administrative agent and collateral agent, which amended the ABL Credit Agreement in order to, among other things:
•Terminate the existing revolving commitments of each of the Extending ABL Credit Lenders (as defined in therein), originally maturing on April 12, 2023 (the “Existing ABL Commitments”); and
•Replace the Existing ABL Commitments with an extended revolving commitment of $611.0 million, maturing on April 12, 2026 (the “Current ABL Facility”).
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Borrowing availability under the Current ABL Facility is determined by a monthly borrowing base collateral calculation that is based on specified percentages of the value of eligible inventory, eligible accounts receivable and eligible credit card receivables, less certain reserves and subject to certain other adjustments as set forth in the Current ABL Credit Agreement. Availability is reduced by issuance of letters of credit as well as any borrowings. As of July 3, 2021, the Company had the following in relation to the Current ABL Facility (in thousands):
July 3, 2021
Excess availability $ 403,994 
Revolving loans outstanding 160,000 
Letters of credit outstanding 40,902 
Loans outstanding under the Current ABL Facility bear interest at a floating rate measured by reference to, at the Company’s option, either (i) an adjusted LIBOR rate (subject to a LIBOR floor of 0.00%) plus an applicable margin ranging from 1.25% to 1.75% per annum depending on the average daily excess availability under the Current ABL Facility or (ii) an alternate base rate plus an applicable margin ranging from 0.25% to 0.75% per annum depending on the average daily excess availability under the ABL Facility. Additionally, unused commitments under the ABL Facility are subject to a 0.25% per annum fee.
The obligations under the Current ABL Credit Agreement are guaranteed by each direct and indirect wholly-owned U.S. restricted subsidiary of the Company, subject to certain exceptions, and are secured by:
•a perfected security interest in all present and after-acquired inventory, accounts receivable, deposit accounts, securities accounts, and any cash or other assets in such accounts and other related assets owned by the Company and the U.S. subsidiary guarantors and the proceeds of any of the foregoing, except to the extent such proceeds constitute Cash Flow Priority Collateral, and subject to certain exceptions (the “ABL Priority Collateral”), which security interest is senior to the security interest in the foregoing assets securing the Current Cash Flow Facilities; and
•a perfected security interest in the Cash Flow Priority Collateral, which security interest will be junior to the security interest in the Cash Flow Collateral securing the Current Cash Flow Facilities.
Additionally, the obligations of the Canadian borrowers under the Current ABL Credit Agreement are guaranteed by each direct and indirect wholly-owned Canadian restricted subsidiary of the Canadian borrowers, subject to certain exceptions, and are secured by substantially all assets of the Canadian borrowers and the Canadian subsidiary guarantors, subject to certain exceptions.
The Current ABL Credit Agreement includes a minimum fixed charge coverage ratio of 1.00:1.00, which is tested only when specified availability is less than 10.0% of the lesser of (x) the then applicable borrowing base and (y) the then aggregate effective commitments under the Current ABL Facility, and continuing until such time as specified availability has been in excess of such threshold for a period of 20 consecutive calendar days.
6.125% Senior Notes due January 2029
On September 24, 2020, the Company issued $500.0 million in aggregate principal amount of 6.125% Senior Notes due January 2029 (“the 6.125% Senior Notes”). Proceeds from the 6.125% Senior Notes were used to repay outstanding amounts under the Company’s Current ABL Facility and Current Cash Flow Revolver. The 6.125% Senior Notes bear interest at 6.125% per annum and will mature on January 15, 2029. Interest is payable semi-annually in arrears on January 15 and July 15 commencing on January 15, 2021. The effective interest rate for the 6.125% Senior Notes was 6.33% as of July 3, 2021, after considering each of the different interest expense components of this instrument, including the coupon payment and the deferred debt issuance costs.
The 6.125% Senior Notes are guaranteed on a senior unsecured basis by each of the Company’s existing and future wholly-owned domestic subsidiaries that guarantee the Company’s obligations under the Current Cash Flow Facilities or the Current ABL Facility (including by reason of being a borrower under the Current ABL Facility on a joint and several basis with the Company or a subsidiary guarantor). The 6.125% Senior Notes are unsecured senior indebtedness and are effectively subordinated to all of the Company’s existing and future senior secured indebtedness, including indebtedness under the Current Term Loan Facility, Current Cash Flow Revolver and Current ABL Facility, and are senior in right of payment to future subordinated indebtedness of the Company.
The Company may redeem the 6.125% Senior Notes in whole or in part at any time as set forth below:
•prior to September 15, 2023, at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date, plus the applicable make-whole premium;
•prior to September 15, 2023, up to 40% of the aggregate principal amount with the proceeds of certain equity offerings at a redemption price of 106.125% plus accrued and unpaid interest, if any, to but not including the redemption date;
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•on or after September 15, 2023 and prior to September 15, 2024, at a price equal to 103.063% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date;
•on or after September 15, 2024 and prior to September 15, 2025, at a price equal to 101.531% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date; and
•on or after September 15, 2025, at a price equal to 100.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to but not including the redemption date.
Redemption of 8.00% Senior Notes
On April 15, 2021, the Company redeemed the outstanding $645.0 million aggregate principal amount of the 8.00% Senior Notes due April 2026 (the “8.00% Senior Notes”) for $670.8 million using cash on hand and proceeds from the Incremental Tranche B Term Loans. The redemption resulted in a pre-tax loss on extinguishment of debt of $41.9 million during the three and six months ended July 3, 2021, comprising a make-whole premium of $25.8 million and a write-off of $16.1 million in unamortized deferred financing costs.
Debt Covenants
The Company’s debt agreements contain a number of covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries to incur additional indebtedness; make dividends and other restricted payments; incur additional liens; consolidate, merge, sell or otherwise dispose of all or substantially all assets; make investments; transfer or sell assets; enter into restrictive agreements; change the nature of the business; and enter into certain transactions with affiliates. As of July 3, 2021, the Company was in compliance with all covenants that were in effect on such date.
NOTE 15 — DERIVATIVES
We utilize derivative instruments, including interest rate swap agreements and foreign currency hedging contracts, to manage our exposure to interest rate risk and currency fluctuations. We only hold such instruments for economic hedging purposes, not for speculative or trading purposes. Our derivative instruments are transacted only with highly rated institutions, which reduces our exposure to credit risk in the event of nonperformance.
Interest Rate Swaps
We are exposed to interest rate risk associated with fluctuations in interest rates on our floating-rate Current Term Loan Facility. The objective in using interest rate derivatives is to manage our exposure to interest rate movements. To accomplish this objective, we have entered into interest rate swap agreements as part of our interest rate risk management strategy. Interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
On a monthly basis, we net settle with our swap counterparties for the difference between the fixed rate specified in each swap agreement and the variable rate as applied to the notional amount of the swap.
In May 2019, the Company entered into four-year interest rate swaps to mitigate variability in forecasted interest payments on $1,500.0 million of the Company’s Current Term Loan Facility. The interest rate swaps effectively converted a portion of the floating rate interest payment into a fixed rate interest payment. Three interest rate swaps each covered of notional amount of $500.0 million. The Company designated the interest rate swaps as qualifying hedging instruments and accounted for these derivatives as cash flow hedges.
As discussed in Note 14 — Long-Term Debt, the Company refinanced its Term Loan Facility. Contemporaneously with the refinancing on April 15, 2021, we completed a series of transactions to modify our interest rate swap positions as follows: (i) we de-designated all existing interest rate swaps as cash flow hedges; (ii) we terminated two existing interest rate swaps with a notional value of $500 million each; (iii) we entered into two receive-fixed interest rate swaps with a notional amount of $250 million each, which are designed to offset the terms of an existing, active interest rate swap with a notional amount of $500 million; and (iv) we entered into two pay-fixed interest rate swaps with a notional amount of $750 million each, effectively blending the liability position of our existing interest rate swap agreements into the new swaps and extending the term of our hedged position to April 2026.
The amount remaining in accumulated other comprehensive loss for the de-designated and terminated swaps at the de-designation date was approximately $65.5 million and will be amortized as an increase to interest expense over the effective period of the original swap agreements.
The new receive-fixed interest rate swaps will remain undesignated to economically offset the now undesignated existing, active swap. The new receive-fixed and the existing, active swaps mature on July 12, 2023. Cash settlements related to these receive-fixed interest rate swaps will offset and are classified as operating activities in the consolidated statements of cash flows.
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The new pay-fixed interest rate swaps also qualify as hybrid instruments in accordance with ASC 815, Derivatives and Hedging, consisting of a loan and an embedded at-market derivative that was designated as a cash flow hedge. The loan is accounted for at amortized cost over the life of the swap while the embedded at-market derivative is accounted for at fair value. The new swaps are indexed to one-month LIBOR and will be net settled on a monthly basis with the counterparty for the difference between the fixed rate of 2.0369% and 2.0340%, respectively, and the variable rate based upon one-month LIBOR (subject to a floor of 0.5%) as applied to the notional amount of the swaps. In connection with the transactions discussed above, no cash was exchanged between the Company and the counterparty. The liability of the terminated interest rate swaps as well as the inception value of the receive-fixed interest rate swap was blended into the new pay-fixed interest rate swap. The cash flows related to the portion treated as debt will be classified as financing activities in the consolidated statements of cash flows while the portion treated as an at-market derivative will be classified as operating activities.
The key terms of interest rate swaps are as follows (amounts in thousands):
July 3, 2021 December 31, 2020
Effective Date Fixed Rate Paid (Received) Notional Amount Status Notional Amount Status Maturity Date
Entered into May 2019:
July 12, 2019 2.1570  % $ —  Terminated $ 500,000  Active July 12, 2023
July 12, 2019 2.1560  % —  Terminated 500,000  Active July 12, 2023
July 12, 2019 2.1680  % 500,000  Active 500,000  Active July 12, 2023
Entered into April 2021:
April 15, 2021 2.0369  % 750,000  Active April 15, 2026
April 15, 2021 2.0340  % 750,000  Active April 15, 2026
April 15, 2021 (2.1680) % (250,000) Active July 12, 2023
April 15, 2021 (2.1680) % (250,000) Active July 12, 2023
$ 1,500,000  $ 1,500,000 
Our interest rate swap agreements, excluding the portion treated as debt, are recognized at fair value in the consolidated balance sheets and are valued using pricing models that rely on market observable inputs such as yield curve data, which are classified as Level 2 inputs within the fair value hierarchy.
Foreign Currency Hedging Contracts
In December 2020, the Company entered into forward contracts to hedge approximately $66.0 million of its 2021 non-functional currency inventory purchases. These forward contracts were established to protect the Company from variability in cash flows attributable to changes in the U.S. dollar relative to the Canadian dollar. The forward contracts are highly correlated to the changes in the U.S. dollar relative to the Canadian dollar. Unrealized gains and losses on these contracts are designated as effective or ineffective. The effective portion of such gains or losses is recorded as a component of accumulated other comprehensive income or loss, while the ineffective portion of such gains or losses is recorded as a component of cost of goods sold. Future realized gains and losses in connection with each inventory purchase will be reclassified from accumulated other comprehensive income or loss to cost of goods sold. The gains and losses on the derivative contracts that are reclassified from accumulated other comprehensive income or loss to current period earnings are included in the line item in which the hedged item is recorded in the same period the forecasted transaction affects earnings.
During the three months ended July 3, 2021, the Company entered into forward contracts to hedge approximately $20.2 million of its 2022 non-functional currency inventory purchases. Similar to the December 2020 contracts described above, these contracts were established to protect the Company from variability in cash flows attributable to changes in the U.S dollar relative to the Canadian dollar. All of the Company’s foreign currency forward contracts are designated as qualifying hedging instruments and are accounted for as cash flow hedges in accordance with ASC 815, Derivatives and Hedging.
During the three and six months ended July 3, 2021, the Company realized a loss of approximately $0.4 million and $0.5 million, respectively within cost of goods sold in the consolidated statements of operations based on the foreign currency forward contracts described above. The changes in fair values of derivatives that have been designated and qualify as cash flow hedges are recorded in accumulated other comprehensive income or loss and are reclassified into cost of goods sold in the same period the hedged item affects earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures being hedged, fluctuations in the value of the derivative instruments are generally offset by changes in the fair value or cash flows of the underlying exposures being hedged. The changes in the fair value of derivatives that do not
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qualify as effective are immediately recognized in earnings. As of July 3, 2021, the Company had a hedge liability of approximately $1.3 million and a loss of approximately $1.4 million in accumulated other comprehensive loss on the consolidated balance sheets. No hedge liability or asset or deferred gain or loss in accumulated other comprehensive loss existed as of December 31, 2020 related to the forward contracts.
Fair Values of Derivatives on the Consolidated Balance Sheets
The fair values of our derivatives and their presentation on the consolidated balance sheets as of July 3, 2021 and December 31, 2020 were as follows (in thousands):
July 3, 2021 December 31, 2020
Assets Liabilities Assets Liabilities
Derivatives not designated as hedging instruments Financial statement line item
Interest rate swaps
Other assets(1)
$ 19,518  $ —  $ —  $ — 
Other long-term liabilities(2)
—  19,518  —  — 
Total $ 19,518  $ 19,518  $ —  $ — 
Derivatives designated as hedging instruments Financial statement line item
Interest rate swaps
Other accrued expenses(3)
$ —  $ 13,055  $ —  $ — 
Other long-term liabilities(4)
—  53,945  —  75,770 
Foreign currency contracts Other accrued expenses —  —  —  — 
Other long-term liabilities —  1,273  —  — 
Total $ —  $ 68,273  $ —  $ 75,770 
(1)The balance as of July 3, 2021 of $19,518 is related to receive-fixed interest rate swap for which the fair value option has been elected.
(2)The balance as of July 3, 2021 of $19,518 is related to pay-fixed May 2019 active interest rate swap which has been de-designated as cash flow hedge.
(3)The balance as of July 3, 2021 of $13.1 million is related to the financing component of the pay-fixed interest rate swaps.
(4)The balance as of July 3, 2021 includes $50.0 million related to the financing component of the pay-fixed interest rate swaps.
Effect of Derivatives on the Consolidated Statements of Operations
The effect of our derivatives and their presentation on the consolidated statements of operations for the three and six months ended July 3, 2021 and July 4, 2020 were as follows (in thousands):
Three Months Ended Six Months Ended
July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Derivatives not designated as hedging instruments Financial statement line item
Interest rate swaps
Interest expense(1)
$ 6,669  $ —  $ 6,669  $ — 
Foreign currency contracts Cost of sales 448  —  527  — 
Derivatives designated as hedging instruments
Interest rate swaps Interest expense 3,061  6,456  10,882  9,182 
$ 10,178  $ 6,456  $ 18,078  $ 9,182 
(1)For the three and six months ended July 3, 2021, the entire balance related to the reclassification from accumulated other comprehensive loss to interest expense due to de-designation from hedge accounting of all May 2019 interest rate swaps.
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NOTE 16 — CD&R INVESTOR GROUP
On August 14, 2009, the Company entered into an Investment Agreement (as amended, the “Investment Agreement”), by and between the Company and Clayton, Dubilier & Rice Fund VIII, L.P., a Cayman Islands exempted limited partnership (“CD&R Fund VIII”). In connection with the Investment Agreement and the Stockholders Agreement dated October 20, 2009 (the “Old Stockholders Agreement”), CD&R Fund VIII and CD&R Friends & Family Fund VIII, L.P., a Cayman Islands exempted limited partnership (“CD&R FF Fund” and, together with CD&R Fund VIII, the “CD&R Fund VIII Investor Group”) purchased convertible preferred stock of the Company, which was converted into shares of our common stock on May 14, 2013.
Ply Gem Holdings was acquired by CD&R Fund X and Atrium Intermediate Holdings, LLC, GGC BP Holdings, LLC and AIC Finance Partnership, L.P. (collectively, the “Golden Gate Investor Group”) and merged with Atrium on April 12, 2018.
On July 17, 2018, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ply Gem, and for certain limited purposes as set forth in the Merger Agreement, Clayton, Dubilier & Rice, LLC (“CD&R”), pursuant to which, at the closing of the merger, Ply Gem would be merged with and into the Company, with the Company continuing its existence as a corporation organized under the laws of the State of Delaware (the “Merger”). The Merger was consummated on November 16, 2018 pursuant to the Merger Agreement.
Pursuant to the terms of the Merger Agreement, on November 16, 2018, the Company entered into (i) a stockholders agreement (the “New Stockholders Agreement”) between the Company, and each of the CD&R Fund VIII Investor Group, CD&R Pisces Holdings, L.P., a Cayman Islands exempted limited partnership (“CD&R Pisces”, and together with the CD&R Fund VIII Investor Group, the “CD&R Investor Group”) and the Golden Gate Investor Group (together with the CD&R Investor Group, the “Investors”), pursuant to which the Company granted to the Investors certain governance, preemptive and subscription rights and (ii) a registration rights agreement (the “New Registration Rights Agreement”) between the Company and each of the Investors, pursuant to which the Company granted the Investors customary demand and piggyback registration rights, including rights to demand registrations and underwritten shelf registration statement offerings with respect to the shares of the Company’s Common Stock held by the Investors following the consummation of the Merger.
On August 25, 2020, the Company filed a shelf registration statement on Form S-3, declared effective by the SEC on September 2, 2020, registering the resale of shares of the Company’s Common Stock held by CD&R Pisces. The Company had previously registered the resale of shares of the Company’s Common Stock held by the CD&R Fund VIII Investor Group and the Golden Gate Investor Group.
Pursuant to the terms of the New Stockholders Agreement, the Company and the CD&R Fund VIII Investor Group terminated the Old Stockholders Agreement. Pursuant to the terms of the New Registration Rights Agreement, the Company and the CD&R Fund VIII Investor Group terminated the Registration Rights Agreement, dated as of October 20, 2009, by and among the Company and the CD&R Fund VIII Investor Group.
As of July 3, 2021 and December 31, 2020, the CD&R Investor Group owned approximately 49.1% and 49.4% of the outstanding shares of the Company’s Common Stock, respectively.
NOTE 17 — STOCK REPURCHASE PROGRAM
The Company announced that its Board of Directors authorized new stock repurchase programs for the repurchase of up to $50.0 million of the Company’s outstanding Common Stock on October 10, 2017 and March 7, 2018, for a cumulative total of $100.0 million. Under these repurchase programs, the Company is authorized to repurchase shares at times and in amounts that it deems appropriate in accordance with all applicable securities laws and regulations. Shares repurchased pursuant to the repurchase programs are usually retired. There is no time limit on the duration of the programs. Following repurchases made during the three months ended July 4, 2020, no authorized amount remained available under the program announced on October 10, 2017.
During the six months ended July 3, 2021, there were no stock repurchases under the stock repurchase programs. The Company repurchased 1.1 million shares for $6.4 million under the stock repurchase programs during the six months ended July 4, 2020. As of July 3, 2021, $49.1 million remained available for stock repurchases under the program announced on March 7, 2018. The timing and method of any repurchases, which will depend on a variety of factors, including market conditions, are subject to results of operations, financial conditions, cash requirements and other factors, and may be suspended or discontinued at any time.
During the six months ended July 3, 2021 and July 4, 2020, the Company withheld approximately 0.1 million and 0.1 million shares, respectively, of stock to satisfy minimum tax withholding obligations arising in connection with the vesting of stock awards, which are included in treasury stock purchases in the consolidated statements of stockholders’ equity.
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During the six months ended July 3, 2021 and July 4, 2020, the Company cancelled approximately 0.1 million and 1.2 million shares that had been previously withheld to satisfy minimum tax withholding obligations arising in connection with the vesting of stock awards and shares repurchased under the stock repurchase programs. The cancellations resulted in $1.5 million and $6.9 million decreases in both treasury stock and additional paid in capital during the six months ended July 3, 2021 and July 4, 2020, respectively.
NOTE 18 — FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, restricted cash, trade accounts receivable and accounts payable approximate fair value as of July 3, 2021 and December 31, 2020, respectively, because of their relatively short maturities. The carrying amounts of the indebtedness under the Current ABL Facility and Current Cash Flow Revolver approximate fair value as the interest rates are variable and reflective of market rates. At July 3, 2021, there was $160.0 million of borrowings outstanding under the Current ABL Facility and no outstanding indebtedness under the Current Cash Flow Revolver. The fair values of the remaining financial instruments not currently recognized at fair value on our consolidated balance sheets at the respective period ends were (in thousands):
  July 3, 2021 December 31, 2020
Carrying
Amount 		Fair Value Carrying
Amount 		Fair Value
Term Loan Facility $ 2,593,500  $ 2,589,610  $ 2,497,967  $ 2,485,477 
8.00% Senior Notes
—  —  645,000  674,025 
6.125% Senior Notes
500,000  536,250  500,000  530,000 
The fair value of the term loan facility was based on recent trading activities of comparable market instruments, which are level 2 inputs and the fair values of the 8.00% and 6.125% senior notes were based on quoted prices in active markets for the identical liabilities, which are level 1 inputs.
Fair Value Measurements
ASC Subtopic 820-10, Fair Value Measurements and Disclosures, requires us to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:
Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.
Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities or market-corroborated inputs.
Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants would price the assets or liabilities.
The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used as of July 3, 2021 and December 31, 2020.
Money market: Money market funds have original maturities of three months or less. The original cost of these assets approximates fair value due to their short-term maturity.
Mutual funds: Mutual funds are valued at the closing price reported in the active market in which the mutual fund is traded. 
Assets held for sale: Assets held for sale are valued based on current market conditions, prices of similar assets in similar condition and expected proceeds from the sale of the assets.
Deferred compensation plan liability: Deferred compensation plan liability is comprised of phantom investments in the deferred compensation plan and is valued at the closing price reported in the active markets in which the money market and mutual funds are traded.
Interest rate swaps liability: Interest rate swap liability is based on cash flow hedge contracts that have fixed rate structures and are measured against market-based LIBOR yield curves. These interest rate swaps were classified within Level 2 of the fair value hierarchy because they were valued using alternative pricing sources or models that utilized market observable inputs, including current and forward interest rates.
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Foreign currency hedges: The fair value of the foreign currency forward contracts are estimated using industry standard valuation models using market-based observable inputs, including spot rates, forward points, interest rates and volatility inputs (Level 2).
The following tables summarize information regarding our financial assets and liabilities that are measured at fair value on a recurring basis as of July 3, 2021 and December 31, 2020, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):
July 3, 2021
  Level 1 Level 2 Level 3 Total
Assets:        
Short-term investments in deferred compensation plan(1):
       
Money market $ 237  $ —  $ —  $ 237 
Mutual funds – Growth 536  —  —  536 
Mutual funds – Blend 1,333  —  —  1,333 
Mutual funds – Foreign blend 438  —  —  438 
Mutual funds – Fixed income —  151  —  151 
Total short-term investments in deferred compensation plan(2)
2,544  151  —  2,695 
Interest rate swap assets(3)
—  19,518  —  19,518 
Total assets $ 2,544  $ 19,669  $ —  $ 22,213 
Liabilities:        
Deferred compensation plan liability(2)
$ —  $ 2,709  $ —  $ 2,709 
Foreign currency hedges —  1,273  —  1,273 
Interest rate swap liabilities(4)
—  86,518  —  86,518 
Total liabilities $ —  $ 90,500  $ —  $ 90,500 

December 31, 2020
  Level 1 Level 2 Level 3 Total
Assets:        
Short-term investments in deferred compensation plan(1):
       
Money market $ 349  $ —  $ —  $ 349 
Mutual funds – Growth 487  —  —  487 
Mutual funds – Blend 1,006  —  —  1,006 
Mutual funds – Foreign blend 338  —  —  338 
Mutual funds – Fixed income —  153  —  153 
Total short-term investments in deferred compensation plan(2)
2,180  153  —  2,333 
Total assets $ 2,180  $ 153  $ —  $ 2,333 
Liabilities:        
Deferred compensation plan liability(2)
$ —  $ 2,339  $ —  $ 2,339 
Interest rate swap liabilities —  75,770  —  75,770 
Total liabilities $ —  $ 78,109  $ —  $ 78,109 
(1)Unrealized holding gains (losses) for the six months ended July 3, 2021 and July 4, 2020 were $0.2 million and $(0.7) million, respectively. These unrealized holding gains (losses) were substantially offset by changes in the deferred compensation plan liability.
(2)The Company records the short-term investments in deferred compensation plan within investments in debt and equity securities, at market, and the deferred compensation plan liability within accrued compensation and benefits on the consolidated balance sheets.
(3)The balance as of July 3, 2021 of $19,518 is related to receive-fixed interest rate swap for which the fair value option has been elected.
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(4)The balance as of July 3, 2021 includes $63.1 million related to the financing component of pay-fixed interest rate swaps and $19.5 million related to pay-fixed May 2019 active interest rate swap which has been de-designated as cash flow hedge.
The following table summarizes information regarding our financial assets that are measured at fair value on a nonrecurring basis as of July 3, 2021, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):
July 3, 2021
  Level 1 Level 2 Level 3 Total
Assets:        
Assets held for sale(1)
$ —  $ —  $ 3,948  $ 3,948 
Total assets $ —  $ —  $ 3,948  $ 3,948 
(1)Assets held for sale are reported at fair value, if, on an individual basis, the fair value of the asset less cost to sell is less than its carrying amount. The fair value of assets held for sale is estimated using Level 3 inputs, such as broker quotes for like-kind assets or other market indications of a potential selling value that approximates fair value.
NOTE 19 — INCOME TAXES
Under FASB ASC 740-270, Income Taxes - Interim Reporting, each interim period is considered an integral part of the annual period and tax expense is measured using an estimated annual effective tax rate. Estimates of the annual effective tax rate at the end of interim periods are, of necessity, based on evaluations of possible future events and transactions and may be subject to subsequent refinement or revision. The Company calculates its quarterly tax provision consistent with the guidance provided by ASC 740-270, whereby the Company forecasts its estimated annual effective tax rate then applies that rate to its year-to-date ordinary pre-tax book income (loss). In addition, the Company excludes jurisdictions with a projected loss for the year or the year-to-date ordinary loss where the Company cannot recognize a tax benefit from its estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections. In addition to the tax resulting from applying the estimated annual effective tax rate to pre-tax book income (loss), the Company includes certain items treated as discrete events to arrive at an estimated effective tax rate. Future changes in the forecasted annual income (loss) projections, tax rate changes, or discrete tax items could result in significant adjustments to quarterly income tax expense in future periods in accordance with ASC 740-270.
For the six months ended July 3, 2021, the Company’s estimated annual effective income tax of ordinary forecasted pre-tax book income was approximately 31.9%, which varied from the statutory rate primarily due to state income tax expense, valuation allowances, and foreign income taxes. For the six months ended July 3, 2021, the effective tax rate was (3.9)%, which varied from the annual effective tax rate due to discrete items recorded during the period, including interest recorded on unrecognized tax benefits, adjustments to state income tax rates, and stock compensation.
Valuation allowance
As of July 3, 2021, the Company remained in a valuation allowance position, in the amount of $12.0 million, against its deferred tax assets for certain state jurisdictions of certain entities as it is currently deemed “more likely than not” that the benefit of such net tax assets will not be utilized as the Company continues to be in a three-year cumulative loss position for these state jurisdictions. The Company will continue to monitor the positive and negative factors for these jurisdictions and make further changes to the valuation allowances as necessary.
Unrecognized tax benefits
Despite the Company’s belief that its tax return positions are consistent with applicable tax laws, the Company believes that certain positions could be challenged by taxing authorities. The Company’s tax reserves reflect the difference between the tax benefit claimed on tax returns and the amount recognized in the consolidated financial statements. These reserves have been established based on management’s assessment as to potential exposure attributable to permanent differences as well as interest and penalties applicable to both permanent and temporary differences. The tax reserves are reviewed periodically and adjusted in light of changing facts and circumstances, such as progress of tax audits, lapse of applicable statutes of limitations and changes in tax law. The Company is currently under examination by various taxing authorities. During the six months ended July 3, 2021, the tax reserves increased by approximately $6.2 million. The increase is primarily due to a new uncertain tax benefit and additional interest expense related to previously recorded unrecognized tax benefits.
The liability for unrecognized tax benefits as of July 3, 2021 was approximately $17.9 million and is recorded in other long-term liabilities in the consolidated balance sheet.
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CARES Act
Under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) that was signed into law on March 27, 2020, the Company elected to defer employer side social security payments for approximately $19.9 million as of December 31, 2020, $10 million of which is recorded in current liabilities on the consolidated balance sheet. Approximately $10 million of the deferral will be paid by December 31, 2021 and the remainder will be paid by December 31, 2022.
NOTE 20 — SEGMENT INFORMATION
Operating segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and is evaluated on a regular basis by the chief operating decision maker to make decisions regarding the allocation of resources to the segment and assess the performance of the segment. The Company has three reportable segments: Windows, Siding and Commercial.
These operating segments follow the same accounting policies used for our consolidated financial statements. We evaluate a segment’s performance on a U.S. GAAP basis primarily upon operating income before corporate expenses.
Corporate assets consist primarily of cash, investments, prepaid expenses, current and deferred taxes and property, plant and equipment associated with our headquarters in Cary, North Carolina and office in Houston, Texas. These items (and income and expenses related to these items) are not allocated to the operating segments. Corporate unallocated expenses primarily include share-based compensation expenses, restructuring charges, acquisition-related costs, and other expenses related to executive, legal, finance, tax, treasury, human resources, information technology and strategic sourcing, and corporate travel expenses. Additional unallocated amounts primarily include non-operating items such as interest income, interest expense, loss on extinguishment of debt and other income (expense).
The following table represents summary financial data attributable to the segments for the periods indicated (in thousands):
  Three Months Ended Six Months Ended
  July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Net sales:    
Windows $ 579,744  $ 428,275  $ 1,107,007  $ 876,725 
Siding 362,187  285,249  678,578  526,292 
Commercial 458,190  371,412  881,568  795,730 
Total net sales $ 1,400,121  $ 1,084,936  $ 2,667,153  $ 2,198,747 
Operating income (loss):    
Windows $ 38,783  $ 23,101  $ 68,145  $ (290,089)
Siding 53,383  30,638  80,911  (138,229)
Commercial 53,330  36,664  94,915  53,505 
Corporate (48,686) (31,478) (91,953) (67,053)
Total operating income (loss) 96,810  58,925  152,018  (441,866)
Unallocated other expense, net (88,947) (49,358) (145,018) (108,654)
Income (loss) before taxes $ 7,863  $ 9,567  $ 7,000  $ (550,520)
July 3,
2021 		December 31,
2020
Total assets:
Windows $ 1,776,745  $ 1,717,032 
Siding 2,146,321  2,123,615 
Commercial 1,009,460  890,380 
Corporate 321,537  747,463 
Total assets $ 5,254,063  $ 5,478,490 

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NOTE 21 — CONTINGENCIES
As a manufacturer of products primarily for use in building construction, the Company is inherently exposed to various types of contingent claims, both asserted and unasserted, in the ordinary course of business. As a result, from time to time, the Company and/or its subsidiaries become involved in various legal proceedings or other contingent matters arising from claims or potential claims arising out of its operations and businesses that cover a wide range of matters, including, among others, environmental, contract, employment, intellectual property, securities, personal injury, property damage, product liability, warranty, and modification, adjustment or replacement of component parts or units sold, which may include product recalls. The Company insures (or self insures) against these risks to the extent deemed prudent by its management and to the extent insurance is available. The Company regularly reviews the status of ongoing proceedings and other contingent matters along with legal counsel. Liabilities for such items are recorded when it is probable that the liability has been incurred and when the amount of the liability can be reasonably estimated. Liabilities are adjusted when additional information becomes available. Management believes that the ultimate disposition of these matters will not have a material adverse effect on the Company’s results of operations, financial position or cash flows. However, such matters are subject to many uncertainties and outcomes and are not predictable with assurance.
Further, due to the lack of adequate information and the potential impact of present regulations and any future regulations, there are certain circumstances in which no range of potential exposure may be reasonably estimated. Also, it is not possible to ascertain the ultimate legal and financial liability with respect to certain contingent liabilities, including lawsuits, and therefore no such estimate has been made as of July 3, 2021.
Environmental
The Company’s operations are subject to various federal, state, local and foreign environmental, health and safety laws. Among other things, these laws regulate the emissions or discharge of materials into the environment; govern the use, storage, treatment, disposal and management of hazardous substances and wastes; protect the health and safety of its employees and the end-users of its products; regulate the materials used in its products; and impose liability for the costs of investigating and remediating (as well as other damages resulting from) present and past releases of hazardous substances. Violations of these laws or of any conditions contained in environmental permits could result in substantial fines or penalties, injunctive relief, consent orders, requirements to install pollution controls or other abatement equipment, or civil sanctions.
The Company could be held liable for costs to investigate, remediate or otherwise address contamination at any real property it has ever owned, operated or used as a disposal site, or at other sites where we or predecessors may have released hazardous materials. The Company could incur fines, penalties or sanctions or be subject to third-party claims, including indemnification claims, for property damage, personal injury or otherwise as a result of violations of (or liabilities under) environmental, health and safety laws, or in connection with releases of hazardous or other materials.
MW Manufacturers Inc. (“MW”), a subsidiary of Ply Gem Industries, Inc., entered into a September 2011 Administrative Order on Consent with the EPA under the Corrective Action Program to address known releases of hazardous substances at MW’s Rocky Mount, Virginia property. A Phase I RCRA Facility Investigation (“RFI”) was submitted to the Virginia Department of Environmental Quality (“VDEQ”) in December 2015, and a Phase II RFI and the Human Health Risk Assessment and Baseline Ecological Risk Assessment were submitted in October 2018. A Limited Corrective Measures Study (“LCMS”) based on the investigations was submitted to the VDEQ for review and approval in September 2019. The VDEQ concurred with the LCMS and prepared a Statement of Basis, which was published for a 30-day public review and comment in April 2021. Upon completion, the VDEQ issued its Final Decision and Response to Comments on May 19, 2021 to approve the final remedy proposed in the LCMS. The Company has recorded a liability of $4.5 million for this MW site, of which $1.0 million is in other current liabilities in the Company’s consolidated balance sheet as of July 3, 2021. 
The EPA is investigating groundwater contamination at a Superfund site in York, Nebraska, referred to as the PCE/TCE Northeast Contamination Site (“PCE/TCE Site”). Kroy Building Products, Inc. (“KBP”), a subsidiary of Ply Gem Industries, Inc., has been identified as a potentially responsible party (“PRP”) at the site and has liability for investigation and remediation costs associated with the contamination. On May 17, 2019, KBP and an unrelated respondent, Kroy Industries, Inc., entered into an Administrative Settlement Agreement and Order on Consent with the EPA to conduct a Remedial Investigation/Feasibility Study (“RI/FS”) of the PCE/TCE Site. A final RI/FS Work Plan was submitted to EPA in November 2019 and approved in December 2019. RI Phase I field sampling and mobile laboratory analysis was initiated in Spring 2020. After a delay due to the COVID-19 pandemic, Phase 2 of the R1 Phase field work was completed in May 2021, and results are being analyzed to determine scope of additional investigation. The Company has recorded a liability of $4.4 million within other current liabilities in its consolidated balance sheet as of July 3, 2021. The Company will adjust our remediation liability in future periods, if necessary, as the RI/FS progresses or if additional requirements are imposed. The Company may be able to recover a portion of costs incurred in connection with the PCE/TCE Site from other potentially responsible parties, though there is no assurance we would receive any funds.
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Based on current information, the Company is not aware of any environmental compliance obligations, claims or investigations that will have a material adverse effect on its results of operations, cash flows or financial position except as otherwise disclosed in the Company’s consolidated financial statements. However, there can be no guarantee that previously known or newly discovered matters will not result in material costs or liabilities.
Litigation
The Company believes it has valid defenses to the outstanding claims discussed below and will vigorously defend all such claims; however, litigation is subject to many uncertainties and there cannot be any assurance that the Company will ultimately prevail or, in the event of an unfavorable outcome or settlement of litigation, that the ultimate liability would not be material and would not have a material adverse effect on the business, results of operations, cash flows or financial position of the Company.
In November 2018, Aurora Plastics, LLC (“Aurora”) initiated an arbitration demand against Atrium Windows and Doors, Inc., Atrium Extrusion Systems, Inc., and North Star Manufacturing (London) Ltd. (collectively, “Atrium”) pursuant to a Third Amended and Restated Vinyl Compound and Supply Agreement dated as of December 22, 2016. A settlement was reached in this case during the fourth quarter of 2019. The Company has a $3.9 million liability related to the settlement, of which $2.3 million is in other current liabilities in the Company’s consolidated balance sheet as of July 3, 2021.
On November 14, 2018, an individual stockholder, Gary D. Voigt, filed a putative class action Complaint in the Delaware Court of Chancery against Clayton Dubilier & Rice, LLC (“CD&R”), Clayton, Dubilier & Rice Fund VIII, L.P. (“CD&R Fund VIII”), and certain directors of the Company. Voigt purports to assert claims on behalf of himself, on behalf of a class of other similarly situated stockholders of the Company, and derivatively on behalf of the Company, the nominal defendant. An Amended Complaint was filed on April 11, 2019. The Amended Complaint asserts claims for breach of fiduciary duty and unjust enrichment against CD&R Fund VIII and CD&R, and for breach of fiduciary duty against twelve director defendants in connection with the Merger. Defendants moved to dismiss the Amended Complaint and, on February 10, 2020, the court denied the motions except as to four of the director defendants. Voigt seeks damages in an amount to be determined at trial.
Other contingencies
The Company’s imports of fabricated structural steel (“FSS”) from its Mexican affiliate, Building Systems de Mexico S.A. de C.V. (“BSM”) were subject to antidumping (“AD”) and countervailing duty (“CVD”) tariff proceedings before the U.S. Department of Commerce (“DOC”) and the U.S. International Trade Commission (“USITC”). The proceedings were initiated in February 2019 by the American Institute of Steel Construction against FSS being imported into the USA from Mexico, Canada, and China. In 2019, the DOC issued preliminary tariff rates and in 2020 finalized CVD and AD tariff rates of 0% and 8.47%, respectively, for the Company’s imports of FSS from BSM. However, in February 2020, in a 3 to 2 vote, the USITC concluded there was no injury or threat of injury to the domestic FSS industry. In March 2020 the USITC opinion was published in the Federal Register, ceasing the Company’s requirement to pay the AD and CVD tariffs. The Company received full reimbursement for the $4.1 million in tariffs previously deposited with United States Customs and Border Protection and recorded a reduction in costs of sales during the fiscal year ended December 31, 2020. This matter has been appealed and the Company will continue to vigorously advocate its position that its import of FSS from BSM should not be subject to any CVD or AD tariffs.
NOTE 22 — SUBSEQUENT EVENTS
On July 30, 2021, the Company entered into an agreement to acquire Cascade Windows for $245 million in cash, subject to customary adjustments. We expect the transaction to close during the third quarter of 2021, subject to regulatory approval and the satisfaction of customary closing conditions. Cascade Windows serves the residential new construction and repair and remodel markets with energy efficient vinyl window and door products from various manufacturing facilities in the United States, expanding our manufacturing capabilities and creating new opportunities for us in the Western United States. We anticipate funding the acquisition with cash available on the balance sheet. The Company expects Cascade Window’s results to be reported within the Windows segment.


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CORNERSTONE BUILDING BRANDS, INC.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following information should be read in conjunction with the unaudited consolidated financial statements included herein under “Item 1. Unaudited Consolidated Financial Statements” and the audited consolidated financial statements and the notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

FORWARD LOOKING STATEMENTS
This Quarterly Report includes statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. In some cases, our forward-looking statements can be identified by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “will,” “target” or other similar words. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, we cannot assure you that actual results will not differ materially from those expressed or implied by our forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, these expectations and the related statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected. These risks, uncertainties and other factors include, but are not limited to:
•industry cyclicality;
•seasonality of the business and adverse weather conditions;
•challenging economic conditions affecting the residential, non-residential and repair and remodeling construction industry and markets;
•commodity price volatility and/or limited availability of raw materials, including polyvinyl chloride (“PVC”) resin, glass, aluminum, and steel;
•our ability to identify and develop relationships with a sufficient number of qualified suppliers and to avoid a significant interruption in our supply chains;
•increasing difficulty in credit or financing availability of consumers or builders;
•increase in inflationary activity;
•ability to successfully achieve price increases;
•success of automation initiatives;
•successful integration of our acquired businesses;
•ability to recruit and retain employees;
•volatility in the United States (“U.S.”) and international economies and in the credit markets;
•the severity, duration and spread of the COVID-19 pandemic, as well as actions that may be taken by the Company or governmental authorities to contain COVID-19 or to treat its impact;
•an impairment of our goodwill and/or intangible assets;
•our ability to successfully develop new products or improve existing products;
•the effects of manufacturing or assembly realignments;
•retention and replacement of key personnel;
•enforcement and obsolescence of our intellectual property rights;
•costs related to compliance with, violations of or liabilities under environmental, health and safety laws;
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•changes in building codes and standards;
•competitive activity and pricing pressure in our industry;
•our ability to make strategic acquisitions accretive to earnings and dispositions at favorable prices and terms;
•our ability to fund acquisitions using available liquidity;
•our ability to carry out our restructuring plans and to fully realize the expected cost savings;
•global climate change, including legal, regulatory or market responses thereto;
•breaches of our information system security measures;
•damage to our computer infrastructure and software systems;
•necessary maintenance or replacements to our enterprise resource planning technologies;
•potential personal injury, property damage or product liability claims or other types of litigation;
•compliance with certain laws related to our international business operations;
•increases in labor costs, potential labor disputes, union organizing activity and work stoppages at our facilities or the facilities of our suppliers;
•significant changes in factors and assumptions used to measure certain of our defined benefit plan obligations and the effect of actual investment returns on pension assets;
•the cost and difficulty associated with integrating and combining acquired businesses;
•our ability to realize the anticipated benefits of acquisitions and dispositions and to use the proceeds from dispositions;
•volatility of the Company’s stock price;
•substantial governance and other rights held by the Investors;
•the effect on our common stock price caused by transactions engaged in by the Investors, our directors or executives;
•our substantial indebtedness and our ability to incur substantially more indebtedness;
•limitations that our debt agreements place on our ability to engage in certain business and financial transactions;
•our ability to obtain financing on acceptable terms;
•downgrades of our credit ratings;
•the effect of increased interest rates on our ability to service our debt; and
•other risks detailed under the caption “Risk Factors” in this Quarterly Report on Form 10-Q, and in Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Form 10-K”), and other filings we make with the SEC.
A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, we caution you that assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report, including those described under the caption “Risk Factors” in this report and the 2020 Form 10-K, and other risks described in documents subsequently filed by the Company from time to time with the SEC. We expressly disclaim any obligations to release publicly any updates or revisions to these forward-looking statements to reflect any changes in our expectations unless the securities laws require us to do so. 
OVERVIEW
Cornerstone Building Brands, Inc. is the largest manufacturer of exterior building products in North America. The Company serves residential and commercial customers across new construction and the repair and remodel markets. Our mission is to be relentlessly committed to our customers and to create great building solutions that enable communities to grow and thrive.
We have developed and continue to implement a well-defined business strategy focused on: (i) driving profitable growth in new and existing markets; (ii) leveraging operational excellence across our businesses; (iii) implementing a capital allocation
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framework balanced between a focus on opportunistic investment in high return initiatives and continued debt repayment; and (iv) operating every part of our business with an ongoing commitment to sustainability.
We believe that by focusing on operational excellence every day, creating a platform for future growth and investing in market-leading residential and commercial building brands, we will deliver unparalleled financial results. We design, engineer, manufacture, install and market external building products through our three operating segments: Windows, Siding, and Commercial.
Our manufacturing processes are vertically integrated, which we believe provides cost and competitive advantages. As the leading manufacturer of vinyl windows, vinyl siding, insulated metal panels, metal roofing and wall systems and metal accessories, Cornerstone Building Brands combines a diverse portfolio of products with an expansive national footprint that includes over 20,000 employees at manufacturing, distribution and office locations primarily in North America.
At Cornerstone Building Brands, corporate stewardship is a responsibility that is deeply embedded. Our sustainable business practices have given us the staying power to make a real difference in countless cities and neighborhoods.
Our sales and earnings are subject to both seasonal and cyclical trends and are influenced by general economic conditions, interest rates, the price of material costs relative to other building materials, the level of residential and nonresidential construction activity, repair and remodel demand and the availability and cost of financing for construction projects. Our sales normally are lower in the first and fourth fiscal quarters of each year compared to the second and third fiscal quarters because of unfavorable weather conditions for construction and typical business planning cycles affecting construction.
Markets We Serve
Our products are available across several large and attractive end markets, including residential new construction, repair and remodel and low-rise non-residential construction. We believe that there are favorable underlying fundamental factors that will drive long-term growth across the end markets in which we operate. We also believe that the ongoing COVID-19 pandemic, while still causing economic uncertainty worldwide, has driven strong demand for residential repair and remodel activity, residential new construction and select segments of the low-rise non-residential construction market, such as distribution, warehouse, healthcare and educational facilities in suburban regions; however, the COVID-19 pandemic has also caused challenges in other areas of non-residential construction, most notably in retail and commercial office facilities in densely populated urban centers, where we have minimal, if any, participation. We believe our business is well-positioned to benefit from broader societal and population trends favoring suburban regions, as employment and living preferences shift towards such regions.
Cornerstone Building Brands is deeply committed to the communities where our customers and employees live, work and play. We recognize that our customers are increasingly environmentally conscious in their purchasing behavior, and we believe our sustainable solutions favorably address these evolving consumer preferences. For example, certain products in our portfolio are high in recycled end content, virtually 100% recyclable at the end of their useful life and often manufactured to meet or exceed specified sustainability targets, such as ENERGY STAR and LEED certifications. We recognize that efficient use of recycled materials helps to conserve natural resources and reduces environmental impact, and we are committed to driving these sustainable practices throughout our business.
COVID-19 Update
We experienced an overall decrease in customer demand across all our markets during 2020 as the COVID-19 pandemic caused temporary closures of non-life sustaining businesses and delayed construction activity. Throughout this pandemic, the Company has been adhering to mandates and other guidance from local governments and health authorities as well as taken extraordinary measures and invested significantly in practices to protect the health and safety of our employees and our communities. During 2020, the Company quickly implemented a range of actions aimed at reducing costs and preserving liquidity. These actions included plant closures, permanent workforce reductions, employee furloughs, a hiring freeze, a deferral of annual wage raises, and reducing discretionary and non-essential expenses, such as consulting expenses. Additionally, we reduced capital expenditures to focus on key strategic initiatives, such as automation, product innovation, and critical maintenance items. We believe our business model, our existing balances of domestic cash and cash equivalents, availability under our revolving credit facilities, currently anticipated operating cash flows, and overall liquidity will be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months. We will continue to evaluate the nature and extent of the COVID-19 pandemic’s impact on our financial condition, results of operations and cash flows.
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RESULTS OF OPERATIONS
The following table represents key results of operations on a consolidated basis for the periods indicated:
  Three Months Ended Six Months Ended
 (Amounts in thousands) July 3,
2021 		July 4,
2020 		$
change 		% change July 3,
2021 		July 4,
2020 		$
change 		% change
Net sales $ 1,400,121  $ 1,084,936  315,185  29.1  % $ 2,667,153  $ 2,198,747  468,406  21.3  %
Gross profit 311,728  254,731  56,997  22.4  % 571,457  485,618  85,839  17.7  %
% of net sales 22.3  % 23.5  % 21.4  % 22.1  %
Selling, general and administrative expenses 163,518  134,371  29,147  21.7  % 316,686  299,325  17,361  5.8  %
% of net sales 11.7  % 12.4  % 11.9  % 13.6  %
Restructuring and impairment charges, net 4,652  15,411  (10,759) (69.8) % 6,490  29,246  (22,756) (77.8) %
Strategic development and acquisition related costs (61) 784  (845) (107.8) % 3,252  5,641  (2,389) (42.4) %
Interest expense 47,458  52,384  (4,926) (9.4) % 103,957  107,219  (3,262) (3.0) %
Net income (loss) 8,927  26,899  (17,972) (66.8) % 7,272  (515,174) 522,446  (101.4) %

Net sales - Consolidated net sales for the three and six months ended July 3, 2021 increased by approximately 29.1% and 21.3%, respectively, as compared to the same period last year. The net sales growth was driven by improved volume of 13.4% and price actions in response to rising commodity costs and other inflationary impacts. Strong demand for residential products sold through the Windows and Siding segments was 18.2% higher than last year, while demand for non-residential improved approximately 3.6%.
For the first half of 2021, net sales grew 21.3% as compared to the same period last year with approximately 55% of the increase driven by strong demand within the Windows and Siding segments coupled with higher price realization.
Gross profit % of net sales - The Company’s gross profit percentage was 22.3% and 21.4% for the three and six months ended July 3, 2021, respectively, which was a 120 and 70 basis point decline over the three and six months ended July 4, 2020, respectively. As a result of the quick pace of recovery experienced across many end-markets, there has been a rapid rise in raw materials and many other manufacturing input costs. While we have responded by remaining disciplined with price leadership, the timing delay between when costs were incurred and when the price increase was realized compressed margins. Additionally, the pace and length of time we remain in an inflationary environment can have the effect of reducing gross profit margins. We remain focused on structurally improving our highly variable cost structure with cost savings initiatives. Also contributing to the lower gross profit as a % of net sales are higher manufacturing costs incurred to serve customers. These costs include increased freight, labor, and maintenance expenses.
Selling, general, and administrative expenses increased 21.7% and 5.8% during the three and six months ended July 3, 2021, respectively, compared to the three and six months ended July 4, 2020. The increase was primarily driven by return of near-term costs, such as variable compensation, IT and professional services, to support market recovery and further growth. Additionally, selling, general, and administrative expenses at July 4, 2020 included near-term cost savings initiatives executed in response to the COVID-19 pandemic.
Restructuring and impairment charges, net decreased $10.8 million and $22.8 million during the three and six months ended July 3, 2021, respectively, compared to the three and six months ended July 4, 2020, primarily due to completion of operational and organizational actions taken in response to the COVID-19 pandemic.
Strategic development and acquisition related costs decreased $0.8 million and $2.4 million during the three and six months ended July 3, 2021, respectively, compared to the three and six months ended July 4, 2020, due to the timing of these activities, primarily acquisition related.
Interest expense decreased $4.9 million or 9.4% and $3.3 million or 3.0% in the three and six months ended July 3, 2021, respectively, as compared to the three and six months ended July 4, 2020, primarily as a result of the redemption of the $645 million 8.00% Senior Notes coupled with the refinancing of the Current Term Loan Facility.
Consolidated provision (benefit) for income taxes was a benefit of $1.1 million and $0.3 million for the three and six months ended July 3, 2021, respectively, compared to a benefit of $17.3 million and $35.3 million for the three and six months ended July 4, 2020, respectively. The effective tax rate for the three and six months ended July 3, 2021 was (13.5)% and (3.9)%, respectively, compared to (181.2)% and 6.4% for the three and six months ended July 4, 2020, respectively. The change
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in the effective tax rate was primarily driven by the improved financial results for the three and six months ended July 3, 2021, in addition to the impact associated with the goodwill impairment recorded during the three months ended April 4, 2020.
Net income (loss) was $8.9 million or $0.07 per diluted share and $7.3 million or $0.06 per diluted share for the three and six months ended July 3, 2021, respectively.
We continue to experience positive momentum from residential single-family and repair and remodel end-markets due to demand and historic backlog levels. Single family housing starts were on a historic pace before construction delays and stoppage due to the COVID-19 pandemic. Housing starts have rebounded above prior levels and are expected to grow for the next couple of years. We are experiencing historic backlog levels from the improving non-residential end-markets as the Architecture Billings Index (“ABI”) increases. In the current marketplace, we continue to face significant raw material and labor inflation.
Segment Results of Operations
We report our segment information in the same way management internally organizes the business in assessing performance and making decisions regarding allocation of resources in accordance with ASC 280, Segment Reporting. We have determined that we have three reportable segments, organized and managed principally by the different industry sectors they serve. While the segments often operate using shared infrastructure, each reportable segment is managed to address specific customer needs in these diverse market sectors. We report all other business activities in Corporate and unallocated costs. Corporate assets consist primarily of cash, investments, prepaid expenses, current and deferred taxes and property, plant and equipment associated with our headquarters in Cary, North Carolina and office in Houston, Texas. These items (and income and expenses related to these items) are not allocated to the operating segments. Corporate unallocated expenses primarily include share-based compensation expenses, restructuring charges, acquisition costs, and other expenses related to executive, legal, finance, tax, treasury, human resources, information technology and strategic sourcing, and corporate travel expenses. Additional unallocated amounts primarily include non-operating items such as interest income, interest expense and other income (expense).
One of the primary measurements used by management to measure the financial performance of each segment is Adjusted EBITDA, a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss), adjusted for the following items: income tax (benefit) expense; depreciation and amortization; interest expense, net; restructuring and impairment charges; acquisition costs; non-cash charges; goodwill impairment; share-based compensation expense; non-cash foreign exchange transaction/translation (income) loss; other non-cash items; and other items.
The presentation of segment results below includes a reconciliation of the changes for each segment reported in accordance with U.S. GAAP to a pro forma basis to allow investors and the Company to meaningfully evaluate the percentage change on a comparable basis from period to period. The pro forma financial information is based on the historical information of Cornerstone, Prime Windows LLC (“Prime Windows”), which the Company acquired on April 30, 2021, and Kleary Masonry, Inc. (“Kleary”), which the Company acquired on March 2, 2020. The pro forma financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the Prime Windows and Kleary acquisitions or any integration costs. Pro forma balances are not necessarily indicative of operating results had the Prime Windows and Kleary acquisitions occurred on January 1, 2020 or of future results.
See Note 20 — Segment Information in the notes to the unaudited consolidated financial statements for more information on our segments.
NON-GAAP FINANCIAL MEASURES
Set forth below are certain “non-GAAP financial measures” as defined under the Securities Exchange Act of 1934 and in accordance with Regulation G. Management believes the use of such non-GAAP financial measures assists investors in understanding the ongoing operating performance of the Company by presenting the financial results between periods on a more comparable basis. Such non-GAAP financial measures should not be construed as an alternative to reported results determined in accordance with U.S. GAAP. We have included reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and provided in accordance with U.S. GAAP.
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The following tables presents a comparison of net sales as reported to pro-forma net sales for Cornerstone as if the Prime Windows and Kleary acquisitions had occurred on January 1, 2020:
Three months ended July 3, 2021 Three months ended July 4, 2020
(Amounts in thousands) Reported Acquisitions Pro Forma Reported Acquisitions Pro Forma
Net Sales
Windows $ 579,744  $ 6,175  $ 585,919  $ 428,275  $ 13,606  $ 441,881 
Siding 362,187  —  362,187  285,249  —  285,249 
Commercial 458,190  —  458,190  371,412  —  371,412 
Total Net Sales $ 1,400,121  $ 6,175  $ 1,406,296  $ 1,084,936  $ 13,606  $ 1,098,542 
Six Months Ended July 3, 2021
Six months ended July 04, 2020
Reported Acquisitions Pro Forma Reported Acquisitions Pro Forma
Net Sales
Windows $ 1,107,007  $ 23,936  $ 1,130,943  $ 876,725  $ 27,146  $ 903,871 
Siding 678,578  —  678,578  526,292  8,358  534,650 
Commercial 881,568  —  881,568  795,730  —  795,730 
Total Net Sales $ 2,667,153  $ 23,936  $ 2,691,089  $ 2,198,747  $ 35,504  $ 2,234,251 
The following tables reconcile Adjusted EBITDA and pro forma Adjusted EBITDA to operating income (loss) for the periods indicated.
Consolidated
Three Months Ended Six Months Ended
(Amounts in thousands) July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Net sales $ 1,400,121  $ 1,084,936  $ 2,667,153  $ 2,198,747 
  Impact of Prime Windows and Kleary acquisitions(1)
6,175  13,606  23,936  35,504 
Pro forma net sales $ 1,406,296  $ 1,098,542  $ 2,691,089  $ 2,234,251 
Operating income (loss), GAAP $ 96,810  $ 58,925  $ 152,018  $ (441,866)
Restructuring and impairment charges, net 4,652  15,411  6,490  29,403 
Strategic development and acquisition related costs (61) 784  3,252  5,641 
Goodwill impairment —  —  —  503,171 
Depreciation and amortization 73,286  70,711  145,901  140,480 
Other (2)
14,616  13,288  20,792  18,501 
Adjusted EBITDA 189,303  159,119  328,453  255,330 
Impact of Prime Windows and Kleary acquisitions(1)
876  1,583  2,903  4,528 
Pro Forma Adjusted EBITDA $ 190,179  $ 160,702  $ 331,356  $ 259,858 
Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales 13.5  % 14.6  % 12.3  % 11.6  %
(1)Reflects the net sales and Adjusted EBITDA of Kleary for the period January 1, 2020 to March 1, 2020 and Prime Windows for the periods January 1, 2020 to July 4, 2020 and January 1, 2021 to April 29, 2021.
(2)Primarily includes $5.3 million and $8.6 million of share based compensation for the three and six months ended July 3, 2021, respectively, and $5.2 million and $8.5 million for the three and six months ended July 4, 2020, respectively; $8.6 million and $11.6 million in costs for the three and six months ended July 3, 2021, respectively, associated with debt refinancing transactions; and $0.2 million and $(0.4) million of COVID-19 related costs for the three and six months ended July 3, 2021, respectively, and $6.8 million and $8.0 million for the three and six months ended July 4, 2020, respectively.
Operating income (loss) for the three months ended July 3, 2021 increased to $96.8 million of operating income as compared to $58.9 million for the three months ended July 4, 2020, primarily due to strong residential demand and price actions
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offsetting inflationary impacts, partially reduced by higher manufacturing costs incurred to serve customers and higher SG&A expense primarily driven by return of near-term costs. Restructuring and impairment charges were also lower versus prior year periods. Operating income for the six months ended July 3, 2021 increased to $152.0 million as compared to an operating loss of $441.9 million in the six months ended July 4, 2020 primarily as a result of a goodwill impairment of $503.2 million in the comparable period.
Pro forma Adjusted EBITDA for the three months ended July 3, 2021 was $190.2 million or 13.5% of pro forma net sales, a decrease of 110 basis points from the pro forma period a year ago. On a year-to-date basis, pro forma Adjusted EBITDA as a percentage of pro forma net sales increased 70 basis points versus the comparable period. The improvement was driven by strong residential demand and price actions offsetting inflationary impacts partially reduced by higher manufacturing costs incurred to serve customers. For the first half of 2021, pro forma Adjusted EBITDA was $331.4 million, 12.3% of pro forma net sales, which increased 70 basis points over the same pro forma period a year ago.
Windows
Three Months Ended Six Months Ended
(Amounts in thousands) July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Net Sales $ 579,744  $ 428,275  $ 1,107,007  $ 876,725 
Impact of Prime Windows acquisition(1)
6,175  13,606  23,936  27,146 
Pro forma net sales $ 585,919  $ 441,881  $ 1,130,943  $ 903,871 
Operating income (loss), GAAP $ 38,783  $ 23,101  $ 68,145  $ (290,089)
Restructuring and impairment charges, net 23  4,184  955  5,650 
Strategic development and acquisition related costs 1,314  —  1,314  16 
Goodwill impairment —  —  —  320,990 
Depreciation and amortization 32,174  30,182  62,972  60,035 
Other 13  3,179  (74) 4,892 
Adjusted EBITDA $ 72,307  $ 60,646  $ 133,312  $ 101,494 
Impact of Prime Windows acquisition(1)
876  1,583  2,903  2,659 
Pro Forma Adjusted EBITDA $ 73,183  $ 62,229  $ 136,215  $ 104,153 
Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales 12.5  % 14.1  % 12.0  % 11.5  %
(1)Reflects the net sales and Adjusted EBITDA of Prime Windows for the periods January 1, 2020 to July 4, 2020 and January 1, 2021 to April 29, 2021.
Pro forma net sales for the three and six months ended July 3, 2021 were 32.6% and 25.1% higher, respectively, than pro forma net sales in the same period a year ago. Strong volumes across all sales channels drove increased volume of 22.5% coupled with disciplined price actions in response to rising commodity costs and other inflationary impacts.
Operating income (loss) for the three months ended July 3, 2021 increased to $38.8 million of operating income as compared to operating income of $23.1 million for the three months ended July 4, 2020, primarily due to volume leverage coupled with favorable price, net of inflation. Operating income for the six months ended July 3, 2021 increased to $68.1 million as compared to an operating loss of $290.1 million for the six months ended July 4, 2020, primarily due to a goodwill impairment in the comparable period.
Pro forma Adjusted EBITDA for the three months ended July 3, 2021 was $73.2 million or 12.5% of pro forma net sales, a decrease of 160 basis points from the pro forma period a year ago. Pro forma Adjusted EBITDA increased 17.6% over prior year quarter, primarily due to increased volume of 47.2% and favorable price, net of commodity and other inflation impacts, partially offset by increased manufacturing costs to serve customers and inefficiencies caused by labor shortages. On a year-to-date basis, pro forma net sales increased 25.1%, and pro forma Adjusted EBITDA margin increased 50 basis points.
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Siding
Three Months Ended Six Months Ended
(Amounts in thousands) July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Net Sales $ 362,187  $ 285,249  $ 678,578  $ 526,292 
  Impact of Kleary acquisition(1)
—  —  —  8,358 
Pro forma net sales $ 362,187  $ 285,249  $ 678,578  $ 534,650 
Operating income (loss), GAAP $ 53,383  $ 30,638  $ 80,911  $ (138,229)
Restructuring and impairment charges, net 13  2,524  154  3,615 
Strategic development and acquisition related costs (3,167) 955  (2,844) 976 
Goodwill impairment —  —  —  176,774 
Depreciation and amortization 29,209  28,514  58,357  56,521 
Other —  642  (19) 350 
Adjusted EBITDA 79,438  63,273  $ 136,559  $ 100,007 
Impact of Kleary acquisition(1)
—  —  —  1,869 
Pro Forma Adjusted EBITDA $ 79,438  $ 63,273  $ 136,559  $ 101,876 
Adjusted EBITDA as a % of Net Sales 21.9  % 22.2  % 20.1  % 19.0  %
Pro Forma Adjusted EBITDA as a % of Pro Forma Net Sales 21.9  % 22.2  % 20.1  % 19.1  %
(1)Reflects the net sales and Adjusted EBITDA of Kleary for the period January 1, 2020 to March 1, 2020.
Net sales for the three and six months ended July 3, 2021 were 27.0% and 26.9% higher than the net sales and pro forma net sales, respectively, in the same period a year ago. Rapid recovery of residential demand coupled with rising raw material costs resulted in favorable price/mix of approximately 15% versus prior year. Additionally, strong order momentum in the wholesale and retail channels drove a 12% volume increase in net sales.
Operating income (loss) for the three months ended July 3, 2021 increased to $53.4 million of operating income, as compared to operating income of $30.6 million for the three months ended July 4, 2020, primarily due to increased volume leverage from strong demand coupled with price actions offsetting inflationary impacts from commodities and other manufacturing costs partially offset by higher freight charges and return of near-term costs in SG&A. Operating income for the six months ended July 3, 2021 increased to $80.9 million, as compared to an operating loss of $138.2 million for the six months ended July 4, 2020, primarily due to a goodwill impairment in the comparable period.
Adjusted EBITDA for the three months ended July 3, 2021 was $79.4 million or 21.9% of net sales, an increase of 25.5%, primarily due to increased volume of 20.1% and favorable price, net of commodity and other inflation impacts, partially offset by increased manufacturing costs to serve customers. On a year-to-date basis, net sales increased 26.9%, and Adjusted EBITDA1 margin increased 100 basis points.
Commercial
Three Months Ended Six Months Ended
(Amounts in thousands) July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Net Sales $ 458,190  $ 371,412  $ 881,568  $ 795,730 
Operating income, GAAP $ 53,330  $ 36,664  $ 94,915  $ 53,505 
Restructuring and impairment charges, net 2,374  7,364  3,046  19,069 
Strategic development and acquisition related costs 774  (149) 832  (254)
Goodwill impairment —  —  —  5,407 
Depreciation and amortization 10,643  11,020  22,003  21,921 
Other 385  1,632  128  2,859 
Adjusted EBITDA $ 67,506  $ 56,531  $ 120,924  $ 102,507 
Adjusted EBITDA as a % of Net Sales 14.7  % 15.2  % 13.7  % 12.9  %

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Net sales for the three and six months ended July 3, 2021 were 23.4% and 10.8% higher than the same period a year ago, respectively, driven by disciplined price actions to mitigate rising steel costs. This combined with an increase in volume of 3.6% and flat volume of 0.1% respectively during the three and six months ended July 3, 2021 driven by strong demand despite supply constraints.
Operating income for the three months ended July 3, 2021 increased $16.7 million or 45.5% compared to the three months ended July 4, 2020, primarily due to realization of price actions taken to offset rising steel and other manufacturing costs coupled with higher volume from positive end-market demand offsetting return of near-term costs and manufacturing inefficiencies as a result of supply constraints. Operating income for the six months ended July 3, 2021 increased $41.4 million or 77.4% compared to the six months ended July 4, 2020, due to lower selling, general and administrative expenses, and lower restructuring and impairment charges, improved manufacturing efficiencies and structural cost, $5.4 million of a goodwill impairment incurred in the comparable period, favorable price/mix, net of inflation.
Adjusted EBITDA for the three months ended July 3, 2021 was $67.5 million or 14.7% of net sales, a decrease of 50 basis points from the same period a year ago primarily due to favorable price, net of commodity and other inflation impacts, partially offset by manufacturing inefficiencies caused by material constraints and labor shortages. On a year-to-date basis, net sales increased 10.8%, and Adjusted EBITDA margin increased 80 basis points.
Unallocated Operating Losses
Three Months Ended Six Months Ended
(Amounts in thousands) July 3,
2021 		July 4,
2020 		July 3,
2021 		July 4,
2020
Statement of operations data:
SG&A expenses $ (47,669) $ (31,484) $ (88,003) $ (62,134)
Acquisition related expenses (1,017) 6  (3,950) (4,919)
Operating loss (48,686) (31,478) $ (91,953) $ (67,053)
Unallocated operating losses include items that are not directly attributed to or allocated to our reporting segments. Such items include legal costs, corporate payroll, and unallocated finance and accounting expenses. The unallocated operating loss for the three months ended July 3, 2021 increased by $17.2 million or 55% compared to the three months ended July 4, 2020, and increased by $24.9 million or 37.1% compared to the six months ended July 4, 2020. The change is due primarily to the return of near-term expenses such as bonus and commission costs. Unallocated operating loss includes $5.3 million and $5.2 million of share-based compensation expense for the three months ended July 3, 2021 and July 4, 2020, respectively, and $8.6 million and $8.5 million for the six months ended July 3, 2021 and July 4, 2020, respectively.
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LIQUIDITY AND CAPITAL RESOURCES
General
Our principal source of funds is cash generated from operations, supplemented by borrowings against our asset-based lending and revolving credit facility. We typically invest our excess cash in various overnight investments that are issued or guaranteed by the U.S. federal government. Our cash, cash equivalents and restricted cash decreased from $680.5 million as of December 31, 2020 to $95.2 million as of July 3, 2021. The following table summarizes our consolidated cash flows for the six months ended July 3, 2021 and July 4, 2020 (in thousands):
  Six Months Ended
  July 3,
2021 		July 4,
2020
Net cash provided by (used in) operating activities $ (11,721) $ 66,962 
Net cash used in investing activities (141,311) (89,336)
Net cash provided by (used in) financing activities (431,363) 410,295 
Effect of exchange rate changes on cash and cash equivalents (881) (508)
Net increase (decrease) in cash, cash equivalents and restricted cash (585,276) 387,413 
Cash, cash equivalents and restricted cash at beginning of period 680,478  102,307 
Cash, cash equivalents and restricted cash at end of period $ 95,202  $ 489,720 
Operating Activities
The Company used cash in operating activities during the six months ended July 3, 2021 to invest in working capital items to support strong market demand.

The following table shows the impact of working capital items on cash during the six months ended July 3, 2021 and July 4, 2020, respectively (in thousands):
Six Months Ended
July 3,
2021 		July 4,
2020 		$ Change
Net cash (used in) provided by:
Accounts receivable $ (119,813) $ (24,844) $ (94,969)
Inventories (176,077) 36,872  (212,949)
Accounts payable 73,627  (7,818) 81,445 
Net cash (used in) provided by working capital items $ (222,263) $ 4,210  $ (226,473)

The use of cash for working capital between periods was due to robust market demand across the segments coupled with aggressive price actions in response to rising commodity costs and other inflationary impacts. See the Consolidated Statements of Cash Flows in the unaudited consolidated financial statements for additional information.
Investing Activities
Net cash used in investing activities was $141.3 million during the six months ended July 3, 2021 compared to $89.3 million used in investing activities during the six months ended July 4, 2020. During the six months ended July 3, 2021, we paid approximately $94.4 million toward acquisitions and we used $47.6 million for capital expenditures. In the six months ended July 4, 2020, we paid approximately $41.8 million, net of cash acquired, for the acquisition of Kleary and used $47.6 million for capital expenditures.
Financing Activities
Net cash used in financing activities was $431.4 million during the six months ended July 3, 2021 compared to $410.3 million provided by financing activities in the six months ended July 4, 2020. During the six months ended July 3, 2021, we borrowed an additional $108.4 million on our Current Term Loan Facility, borrowed $160.0 million on our Current ABL Facility, paid $670.8 million to redeem the 8.00% Senior Notes and paid quarterly installments of $12.9 million on the Current Term Loan Facility.
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During the six months ended July 4, 2020, we borrowed $40.0 million on our Current ABL Facility to finance the acquisition of Kleary, borrowed an additional $305.0 million on our Current ABL Facility and repaid $30.0 million of that amount, and $115.0 million on our Current Cash Flow Revolver to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic, paid $12.8 million on quarterly installments on our Current Term Loan Facility and used $6.4 million to repurchase shares of our outstanding common stock under our stock repurchase programs.
Debt
Below is a reconciliation of the Company’s net debt (in thousands) as of the dates indicated. Management considers net debt to be more representative of the Company’s financial position than total debt due to the amount of cash and cash equivalents held by the Company and the ability to utilize such cash and cash equivalents to reduce debt if needed.
July 3,
2021 		December 31,
2020
Asset-based revolving credit facility due April 2026 $ 160,000  $ — 
Term loan facility due April 2028 2,593,500  2,497,967 
Cash flow revolver due April 2026 —  — 
8.00% senior notes due April 2026 —  645,000 
6.125% senior notes due January 2029 500,000  500,000 
Total Debt 3,253,500  3,642,967 
Less: Cash and cash equivalents 88,978  674,255 
Net Debt $ 3,164,522  $ 2,968,712 
On April 15, 2021, the Company fully redeemed its $645 million aggregate principal amount of 8.00% Senior Notes using available cash from the balance sheet and net proceeds from its extended and upsized senior term loan facility. The Company successfully upsized and extended the maturity of its $2,492 million senior term loan facility due 2025 in the form of $2,600 million in Tranche B term loans due April 12, 2028. Additionally, the Company amended and refinanced its senior cash flow based and asset-based revolving credit facilities, extending the maturities to April 12, 2026.
In connection with the new Tranche B term loans, the Company also terminated existing two interest rate swaps and entered into two new swaps maturing in April 2026 on an aggregate notional value of $1.5 billion. The interest rate swaps effectively convert a portion of the floating rate interest payment into a fixed rate interest payment.
We may not be successful in refinancing, extending the maturity or otherwise amending the terms of our outstanding indebtedness in the future because of market conditions, disruptions in the debt markets, our financial performance or other reasons. Furthermore, the terms of any refinancing, extension or amendment may not be as favorable as the current terms of our indebtedness. If we are not successful in refinancing our indebtedness or extending its maturity, we and our subsidiaries could face substantial liquidity problems and may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure our indebtedness.
For additional information, see Note 14 — Long-Term Debt and Note 15 — Derivatives in the notes to the unaudited consolidated financial statements.
Additional Liquidity Considerations
We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of inventory levels, expansion plans, debt service requirements and other operating cash needs. To meet our short-term and long-term liquidity requirements, including payment of operating expenses and repayment of debt, we rely primarily on cash from operations. The following table summarizes key liquidity measures under the Current ABL Credit Agreement and the Current Cash Flow Credit Agreement in effect as of July 3, 2021 and December 31, 2020 (in thousands):
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July 3,
2021 		December 31,
2020
Asset-based revolving credit facility due April 2026 $ 611,000  $ 611,000 
Eligible borrowing base 611,000  568,000 
Less: Borrowings 160,000  — 
Less: LCs outstanding and priority payables 47,000  40,000 
Net ABL availability 404,000  528,000 
Plus: Cash flow revolver due April 2026 115,000  115,000 
Plus: Cash and cash equivalents 88,978  674,255 
Total Liquidity $ 607,978  $ 1,317,255 
We expect to contribute $3.2 million to the defined benefit plans and $0.7 million to the postretirement medical and life insurance plans in the year ending December 31, 2021.
On April 15, 2021, the Company fully redeemed its $645 million aggregate principal amount of 8.00% Senior Notes using available cash from the balance sheet and net proceeds from its extended and upsized senior term loan facility, which reduced total liquidity. We expect that cash generated from operations and our availability under the ABL Credit Facility and Current Cash Flow Revolver will be sufficient to provide us the ability to fund our operations and to provide the increased working capital necessary to support our strategy and fund planned capital expenditures for fiscal 2021 and expansion when needed. The Company expects total capital expenditures to be approximately 2.0% to 2.5% of net sales during fiscal 2021.
Consistent with our growth strategy, we evaluate potential acquisitions that would provide additional synergies in our Windows, Siding and Commercial segments. From time to time, we may enter into letters of intent or agreements to acquire assets or companies in these business lines. The consummation of these transactions could require substantial cash payments and/or issuance of additional debt.
On April 30, 2021, the Company acquired Prime Windows. Prime Windows serves residential new construction and repair and remodel markets with energy efficient vinyl window and door products from two manufacturing facilities in the United States, expanding our manufacturing capabilities and creating new opportunities for us in the Western United States. This acquisition was funded through borrowings under the Company’s existing credit facilities.
On July 30, 2021, the Company entered into an agreement to acquire Cascade Windows. We expect the transaction to close during the third quarter of 2021, subject to regulatory approval and the satisfaction of customary closing conditions. Cascade Windows serves the residential new construction and repair and remodel markets with energy efficient vinyl window and door products from various manufacturing facilities in the United States, expanding our manufacturing capabilities and creating new opportunities for us in the Western United States. We anticipate funding the acquisition with cash available on the balance sheet.
We also evaluate from time-to-time possible dispositions of assets or businesses when such assets or businesses are no longer core to our operations and do not fit into our long-term strategy.
On June 7, 2021, the Company announced that it has entered into a definitive agreement to sell its insulated metal panels (“IMP”) business to Nucor Insulated Panel Group Inc and certain of its subsidiaries (collectively, “Nucor”) in a cash transaction for $1 billion. The IMP transaction includes products sold under the Metl-Span and CENTRIA brands. On July 27, 2021, the Company announced that it has entered into a definitive agreement to sell its roll-up sheet door business to Janus International Group, Inc. (“Janus”) in a cash transaction for $168 million. The roll-up sheet door transaction includes products sold under the DBCI brand. Both transactions are expected to close in the second-half of 2021, subject to regulatory approval and other customary closing conditions. The Company expects post-tax proceeds of approximately $875 million from these transactions to be used to pay down a portion of its secured credit facilities, invest in organic growth and efficiency projects, and make strategic acquisitions.
From time to time, we have used available funds to repurchase shares of our common stock under our stock repurchase programs. On March 7, 2018, we announced that our Board of Directors authorized a new stock repurchase program for the repurchase of up to an aggregate of $50.0 million of our outstanding Common Stock. Under this repurchase programs, we are authorized to repurchase shares, if at all, at times and in amounts that we deem appropriate in accordance with all applicable securities laws and regulations. Shares repurchased are usually retired. There is no time limit on the duration of the program. During the six months ended July 3, 2021, there were no stock repurchases under the stock repurchase program. As of July 3, 2021, approximately $49.1 million remained available for stock repurchases under the program announced on March 7, 2018. In addition to repurchases of shares of our common stock under our stock repurchase program, we also withhold shares of
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restricted stock to satisfy minimum tax withholding obligations arising in connection with the vesting of share-based compensation.
We may from time to time take steps to reduce our debt or otherwise improve our financial position. These actions could include prepayments, open market debt repurchases, negotiated repurchases, other redemptions or retirements of outstanding debt, opportunistic refinancing of debt and raising additional capital. The amount of prepayments or the amount of debt that may be refinanced, repurchased or otherwise retired, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations. Our affiliates may also purchase our debt from time to time through open market purchases or other transactions. In such cases, our debt may not be retired, in which case we would continue to pay interest in accordance with the terms of the debt, and we would continue to reflect the debt as outstanding on our consolidated balance sheets.
OFF-BALANCE SHEET ARRANGEMENTS
As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of July 3, 2021, we were not involved in any material unconsolidated SPE transactions.
CONTRACTUAL OBLIGATIONS
Our contractual obligations principally include obligations associated with our outstanding indebtedness, operating lease obligations and inventory purchase commitments. Contractual obligations did not materially change during the six months ended July 3, 2021, except for debt related activities as disclosed in Note 14 — Long-Term Debt in the notes to the unaudited consolidated financial statements and in Liquidity and Capital Resources — Financing Activities, and lease activity as disclosed in Note 9 — Leases in the notes to the unaudited consolidated financial statements.
CRITICAL ACCOUNTING POLICIES 
Critical accounting policies are those that are most important to the portrayal of our financial position and results of operations. These policies require our most subjective judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. Our most critical accounting policies include those that pertain to accounting for acquisitions, intangible assets and goodwill; warranty; and income taxes, which are described in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
RECENT ACCOUNTING PRONOUNCEMENTS 
See Note 2 — Accounting Pronouncements in the notes to the unaudited consolidated financial statements for information on recent accounting pronouncements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Windows and Siding Businesses
We are subject to market risk with respect to the pricing of our principal raw materials, which include PVC resin, aluminum and glass. If prices of these raw materials were to increase dramatically, we may not be able to pass such increases on to our customers and, as a result, gross margins could decline significantly. We manage the exposure to commodity pricing risk by increasing our selling prices for corresponding material cost increases, continuing to diversify our product mix, strategic buying programs and vendor partnering. The average market price for PVC resin was estimated to have increased approximately 57.6% for the six months ended July 3, 2021 compared to the six months ended July 4, 2020.
Commercial Business
We are subject to market risk exposure principally related to volatility in the price of steel. For the six months ended July 3, 2021, material costs (predominantly steel costs) constituted approximately 64% of our Commercial segment’s cost of sales. Our business is heavily dependent on the price and supply of steel. Our various products are fabricated from steel produced by mills to forms including bars, plates, structural shapes, sheets, hot-rolled coils and galvanized or Galvalume® — coated coils (Galvalume® is a registered trademark of BIEC International, Inc.). The steel industry is highly cyclical in nature, and steel prices have been volatile in recent years and may remain volatile in the future. Steel prices are influenced by numerous factors beyond our control, including general economic conditions, domestically and internationally, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions. Based on the cyclical nature of the steel industry, we expect steel prices will continue to be volatile.
With material costs (predominantly steel costs) accounting for approximately 64% of our Commercial segment's cost of sales for the six months ended July 3, 2021, a one percent change in the cost of steel could have resulted in a pre-tax impact on cost of sales of approximately $4.3 million for our six months ended July 3, 2021. The impact to our financial results of operations of such an increase would be significantly dependent on the competitive environment and the costs of other alternative building products, which could impact our ability to pass on these higher costs.
Other Commodity Risks
In addition to market risk exposure related to the volatility in the price of steel, aluminum, PVC resin, and glass, we are subject to market risk exposure related to volatility in the price of natural gas. As a result, we occasionally enter into both index-priced and fixed-price contracts for the purchase of natural gas. We have evaluated these contracts to determine whether the contracts are derivative instruments. Certain contracts that meet the criteria for characterization as a derivative instrument may be exempted from hedge accounting treatment as normal purchases and normal sales and, therefore, these forward contracts are not marked to market. At July 3, 2021, all of our forward contracts for commodities met the scope exemption for normal purchases and normal sales.
Interest Rates
We are subject to market risk exposure related to changes in interest rates on our Current Cash Flow Facilities and Current ABL Facility, which provides for borrowings of up to $2,715.0 million on the Current Cash Flow Facilities and up to $611.0 million on the Current ABL Facility. These instruments bear interest at an agreed upon percentage point spread from either LIBOR or an alternate base rate. Assuming the Current Cash Flow Revolver is fully drawn, each quarter point increase or decrease in the interest rate would change our interest expense by approximately $6.8 million per year for the Current Cash Flow Facilities. Assuming the Current ABL Facility is fully drawn, each quarter point increase or decrease in the interest rate would change our interest expense by approximately $1.5 million per year. The fair value of our term loan credit facility at July 3, 2021 and December 31, 2020 was approximately $2,589.6 million and $2,485.5 million, respectively, compared to a face value of approximately $2,593.5 million and $2,498.0 million, respectively. In April 2021, we entered into cash flow interest rate swap hedge contracts for $1.5 billion to mitigate the exposure risk of our floating interest rate debt. The interest rate swaps effectively convert a portion of the floating rate interest payment into a fixed rate payment. As of July 3, 2021, our cash flow hedge contracts had a fair value liability of $86.5 million and are recorded as a non-current liability on our consolidated balance sheet.
See Note 14 — Long-Term Debt and Note 15 — Derivatives in the notes to the unaudited consolidated financial statements for information on the material terms of our long-term debt and interest rate swaps.
Foreign Currency Exchange Rates
We are exposed to the effect of exchange rate fluctuations on the U.S. dollar value of foreign currency denominated operating revenue and expenses.
The functional currency for our Canada operations is the Canadian dollar. Translation adjustments resulting from translating the functional currency financial statements into U.S. dollar equivalents are reported separately in accumulated other
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comprehensive income (loss) in stockholders’ equity. The net foreign currency exchange gain (loss) included in net income (loss) for the three and six months ended July 3, 2021 was $38 thousand and $0.3 million, respectively; and $1.7 million and $(1.4) million for the three and six months ended July 4, 2020, respectively. Net foreign currency translation adjustment, net of tax, and included in other comprehensive income (loss) for the three and six months ended July 3, 2021 was $4.6 million and $10.7 million, respectively; and was $8.6 million and $(1.0) million for the three and six months ended July 4, 2020, respectively.
The functional currency for our Mexico operations is the U.S. dollar. Adjustments resulting from the re-measurement of the local currency financial statements into the U.S. dollar functional currency, which uses a combination of current and historical exchange rates, are included in net income (loss) in the current period. Net foreign currency re-measurement gain (loss) was $0.2 million and $(0.1) million for the three and six months ended July 3, 2021, respectively; and $0.4 million and $(0.6) million for the three and six months ended July 4, 2020, respectively.
We have entered into currency forward contracts with a financial institution through May 2022 to hedge primarily inventory purchases in Canada of approximately $57.5 million in the aggregate at fixed USD/CAD rates ranging from 1.2120 to 1.2726. In the future, we may enter into additional currency hedging contracts, to further mitigate the exposure risk of currency fluctuation against the Canadian dollar and/or the Mexican peso. See Note 15 — Derivatives in the notes to the unaudited consolidated financial statements for information on our currency hedges.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of July 3, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management believes that our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and based on the evaluation of our disclosure controls and procedures as of July 3, 2021, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at such reasonable assurance level. 
Internal Control over Financial Reporting
We are currently in the process of assessing the internal controls of Prime Windows LLC (“Prime Windows”) as part of the post-close integration process. Prime Windows has been excluded from our assessment of internal control over financial reporting as of July 3, 2021. The total assets and revenues excluded from management’s assessment represent 0.1% and 0.5%, respectively, of the consolidated financial statements as of and for the six months ended July 3, 2021.
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended July 3, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
48

CORNERSTONE BUILDING BRANDS, INC.

PART II — OTHER INFORMATION
 
Item 1. Legal Proceedings.
See Part I, Item 1, “Unaudited Consolidated Financial Statements”, Note 21 — Contingencies, which is incorporated herein by reference.
Item 1A. Risk Factors.
In addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The risks disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and information provided elsewhere in this report, could materially affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known or we currently deem to be immaterial may materially adversely affect our business, financial condition or results of operations. Except for such additional information, we believe there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 7, 2018, the Company announced that its Board of Directors authorized a stock repurchase program for up to an aggregate of $50.0 million of the Company’s Common Stock. Under this repurchase program, the Company is authorized to repurchase shares at times and in amounts that we deem appropriate in accordance with all applicable securities laws and regulations. Shares repurchased are usually retired. There is no time limit on the duration of the program.
During the second quarter of fiscal 2021, there were no stock repurchases under the program. At July 3, 2021, approximately $49.1 million remained available for stock repurchases under the program.
49

Item 6. Exhibits.
Index to Exhibits
Exhibit No. Description
*10.1
*31.1   
*31.2   
**32.1  
**32.2  
*101.INS   Inline XBRL Instance Document
*101.SCH   Inline XBRL Taxonomy Extension Schema Document
*101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF   Inline XBRL Taxonomy Definition Linkbase Document
*101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
*101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
* Filed herewith
** Furnished herewith

50

SIGNATURE
 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  CORNERSTONE BUILDING BRANDS, INC.
     
Date: August 3, 2021 By: /s/ James S. Metcalf
    James S. Metcalf
Chairman of the Board and Chief Executive Officer
   
Date: August 3, 2021 By: /s/ Jeffrey S. Lee
  Jeffrey S. Lee
  Executive Vice President, Chief Financial Officer and Chief Accounting Officer

51

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

by and among
NUCOR INSULATED PANEL GROUP INC
VULCRAFT CANADA INC.,
and
CORNERSTONE BUILDING BRANDS, INC.
Dated as of June 5, 2021




Table of Contents
Page
Article 1
Transfer of Equity Interests and Canada Transferred Assets and Assumption of Canada Assumed Liabilities
Section 1.1 Closing 2
Section 1.2 Purchase Price 3
Section 1.3 Withholding 7
Article 2
Representations and Warranties of Seller
Section 2.1 Organization and Power 8
Section 2.2 Authorization 8
Section 2.3 Non-Contravention 9
Section 2.4 Capitalization; Title to Equity Interests 9
Section 2.5 Ownership Interests 10
Section 2.6 Financial Statements 10
Section 2.7 Other Liabilities 11
Section 2.8 Absence of Certain Changes 11
Section 2.9 Material Contracts 11
Section 2.10 Properties 12
Section 2.11 Intellectual Property; IT Systems; Data Privacy and Security 14
Section 2.12 Litigation 16
Section 2.13 Compliance with Laws; Licenses and Permits 16
Section 2.14 Environmental Matters 17
Section 2.15 Employees. Labor Matters, etc. 18
Section 2.16 Employee Benefit Plans and Related Matters; ERISA 19
Section 2.17 Tax Matters 20
Section 2.18 Insurance 21
Section 2.19 Finders’ Fees 22
Section 2.20 Contracts with Affiliates 22
Section 2.21 Assets 22
Section 2.22 Inventory 23
Section 2.23 Accounts Receivable 23
Section 2.24 Customers; Suppliers 23
Section 2.25 No Other Representations and Warranties 23
Article 3
Representations and Warranties of Buyer
Section 3.1 Organization and Power 24
Section 3.2 Authorization 24
Section 3.3 Non-Contravention 25
i
Table of Contents
(continued)
Page
Section 3.4 Availability of Funds 25
Section 3.5 Solvency 25
Section 3.6 Purchase for Investment 26
Section 3.7 Litigation 26
Section 3.8 Finders’ Fees 26
Section 3.9 No Additional Representations and Warranties; Inspection 26
Section 3.10 No Other Representations and Warranties 26
Article 4
Certain Covenants
Section 4.1 Conduct of the Business 27
Section 4.2 Access to Information; Confidentiality; Books and Records 29
Section 4.3 Governmental Approvals 31
Section 4.4 Employees and Employee Benefits 33
Section 4.5 Public Announcements 38
Section 4.6 D&O Indemnification 39
Section 4.7 R&W Insurance 40
Section 4.8 Resignations 40
Section 4.9 Affiliate Agreements; Intercompany Balances 40
Section 4.10 Pre-Closing Steps; Third-Party Consents 40
Section 4.11 Divided Commingled Contracts 42
Section 4.12 Wrong-Pockets 42
Section 4.13 Ancillary Agreements 43
Section 4.14 Use of Intellectual Property 43
Section 4.15 Transition Plan 44
Section 4.16 Non-Competition; Non-Solicitation 44
Section 4.17 Exclusivity 45
Section 4.18 Further Assurances 45
Article 5
Tax Matters
Section 5.1 Cooperation 45
Section 5.2 Transfer Taxes 46
Section 5.3 Tax Elections 46
Section 5.4 Overlap 47
Article 6
Conditions Precedent
Section 6.1 Conditions to Obligations of Buyer and Seller 47
Section 6.2 Conditions to Obligations of Buyer 47
Section 6.3 Conditions to Obligations of Seller 48
ii
Table of Contents
(continued)
Page
Section 6.4 Frustration of Closing Conditions 49
Article 7
Termination
Section 7.1 Termination 49
Section 7.2 Effect of Termination 50
Section 7.3 Termination Fee; Expenses 50
Article 8
Indeminifications
Section 8.1 Survival 52
Section 8.2 Indemnification by Seller 52
Section 8.3 Indemnification by Buyer 52
Section 8.4 Limitations on Indemnity 52
Section 8.5 Notification of Claims; Third-Party Claims 53
Section 8.6 Exclusive Remedy 55
Article 9
Definitions
Section 9.1 Certain Terms 55
Section 9.2 Construction 70
Article 10
Miscellaneous
Section 10.1 Notices 70
Section 10.2 Amendment; Waivers, etc 71
Section 10.3 Expenses 71
Section 10.4 Governing Law, etc 72
Section 10.5 Successors and Assigns 72
Section 10.6 Entire Agreement 73
Section 10.7 Severability 73
Section 10.8 Counterparts 73
Section 10.9 Specific Performance 73
Section 10.10 Parties in Interest 73
Section 10.11 Representation of the Company and Seller and its other Affiliates 74
Section 10.12 Exhibits and Schedules 74
Section 10.13 Release 74
Section 10.14 Bulk Sales Laws 75

iii
Table of Contents
(continued)
Page
Exhibit A: Accounting Principles
Exhibit B: Pre-Closing Steps
Exhibit C: Form of Transitional Services Agreement
Exhibit D: Form of Supply Agreements
Exhibit E-1 Assignment and Assumption Agreement
Exhibit E-2 Lease Assignment Agreement
Exhibit E-3 Patent Assignment Agreement
Exhibit E-4 Trademark Assignment Agreement
Exhibit E-5 Motor Vehicle Assignment Agreements And Bills Of Sale
Exhibit E-6 Certificate of Canada Seller shareholders/directors


iv


SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT, dated as of June 5, 2021 (this “Agreement”), is made by and among Nucor Insulated Panel Group Inc, a Delaware corporation (“Buyer”), Vulcraft Canada Inc., a British Columbia corporation (“Canada Buyer”), and Cornerstone Building Brands, Inc., a Delaware corporation (“Seller”). Capitalized terms used herein shall have the meanings assigned to such terms in the text of this Agreement or in Section 9.1.
R E C I T A L S:
WHEREAS, Seller is engaged, directly and indirectly, throughout the United States and Canada in the business of manufacturing, distributing and selling single-component and foam-core insulated metal panels, in each case, under the brands Metl-Span and CENTRIA (the “Business”);
WHEREAS, in connection with the transactions contemplated hereby, Seller has caused or will cause certain Pre-Closing Steps to be completed prior to the Closing, including having formed Iguana NewCo, LLC, a Delaware Limited Liability Company, on May 18, 2021 for the purposes of holding all of the Transferred Assets (other than the Canada Transferred Assets) and Assumed Liabilities (other than the Canada Assumed Liabilities) (the “Company”);
WHEREAS, following completion of the Pre-Closing Steps, the Company will hold all of the Transferred Assets (other than the Canada Transferred Assets) and Assumed Liabilities (other than the Canada Assumed Liabilities) and Seller or certain of its Affiliates will hold all of the Retained Assets and Retained Liabilities;
WHEREAS, as of immediately prior to Closing, Seller will own, directly or indirectly, all of the issued and outstanding equity interests of the Company (the “Equity Interests”);
WHEREAS, the Canada Transferred Assets will not be transferred to the Company pursuant to the Pre-Closing Steps and will instead remain owned directly by an Affiliate of Seller following the Pre-Closing Steps and prior to the Closing;
WHEREAS, the Canada Assumed Liabilities will not be assigned to and assumed by the Company pursuant to the Pre-Closing Steps and will instead remain Liabilities of an Affiliate of Seller following the Pre-Closing Steps and prior to the Closing;
WHEREAS, Seller wishes to sell, directly or indirectly, the Equity Interests to Buyer and the Canada Transferred Assets to Canada Buyer and assign, indirectly, the Canada Assumed Liabilities to Canada Buyer, and Buyer wishes to purchase the Equity Interests and Canada Buyer wishes to purchase the Canada Transferred Assets and assume the Canada Assumed Liabilities, upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, in connection with the transactions contemplated hereby, at the Closing, Seller or certain of its Affiliates, on the one hand, and the Company, on the other hand, will enter into the Ancillary Agreements;


WHEREAS, contemporaneously herewith, Nucor Corporation, a Delaware corporation (“Nucor”) and the ultimate parent corporation of Buyer and Canada Buyer, is executing and delivering to Seller a guarantee whereby it will guarantee the obligations of Buyer and Canada Buyer hereunder; and
WHEREAS, contemporaneously herewith, Seller has obtained and delivered to Buyer a written consent under that certain Stockholders Agreement dated as of November 16, 2018, by and between NCI Building Systems, Inc., and each of Clayton, Dubilier & Rice Fund VIII, L.P., CD&R Friends & Family Fund VIII, L.P., CD&R Pisces Holdings, L.P., Atrium Intermediate Holdings, LLC, GGC BP Holdings, LLC, and AIC Finance Partnership, L.P., evidencing the consent of the CD&R Investor Group (as defined in such Stockholders Agreement) with respect to the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements contained herein, the parties, intending to be legally bound hereby, do agree as set forth herein:
Article 1
Transfer of Equity Interests and Canada Transferred Assets and Assumption of Canada Assumed Liabilities
Section 1.1     Closing. The closing of the sale and purchase of the Equity Interests and Canada Transferred Assets and the assignment and assumption of the Canada Assumed Liabilities (the “Closing”) shall take place at the offices of Debevoise & Plimpton LLP, 919 Third Avenue, New York, New York 10022 or at such other place as the parties shall mutually agree, at 10:00 a.m. on the date that is three (3) Business Days after the conditions set forth in Article 6 have been satisfied or waived (other than those conditions which by their nature are to be satisfied at the Closing but subject to the satisfaction or waiver of those conditions at such time), unless another time, date or place is agreed to in writing by the parties, provided that the transfer of the Canada Transferred Assets and the assignment and assumption of the Canada Assumed Liabilities to Canada Buyer shall each occur immediately following the transfer of the Equity Interests. The date on which the Closing actually occurs is referred to hereinafter as the “Closing Date”. At the Closing:
(a)Transfer of Equity Interests and Canada Transferred Assets and Assumption of Canada Assumed Liabilities. Seller shall, sell, convey, assign, transfer, grant and deliver, or cause to be sold, conveyed, assigned, transferred, granted and delivered, (i) to Buyer all of the Equity Interests, free and clear of all Liens, other than Liens arising under applicable securities Laws, and (ii) to Canada Buyer, the Canada Transferred Assets free and clear of all Liens, other than Permitted Liens, and Canada Buyer shall assume the Canada Assumed Liabilities and cause all such Canada Assumed Liabilities to be paid, performed and discharged when due, without further recourse to Seller or its Affiliates.
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(b)Estimated Purchase Price. Buyer shall pay Seller or other Persons designated by Seller, by wire transfer of immediately available funds to such account(s) as Seller shall designate in writing to Buyer not less than two (2) Business Days prior to the Closing Date (the “Seller Designated Account(s)”), an aggregate amount in cash equal to the Estimated Purchase Price, provided that any payments made under this Agreement by Buyer with respect to the Canada Transferred Assets shall be made on behalf of Canada Buyer and may, at the election of Buyer and Canada Buyer, be made directly by Canada Buyer.
(c)Indebtedness. Seller shall arrange for the Company, the Transferred Assets and the Canada Transferred Assets to be released, prior to or at the Closing, from all guarantee and collateral obligations under the Credit Facilities and any other Indebtedness of Seller or its Subsidiaries (other than the Company), pursuant to customary documentation (including obligations to fully release any Liens relating thereto) reasonably acceptable to Buyer, such that the Transferred Assets and Canada Transferred Assets are free and clear of any Liens other than Permitted Liens at Closing.
(d)Transaction Expenses. Simultaneously with Closing, Buyer shall pay, or cause to be paid, on behalf of Seller and its Affiliates (including the Company), as applicable, the Transaction Expenses (based on the estimates provided by Seller pursuant to Section 1.2(b)) by wire transfer of immediately available funds as directed by Seller.
Section 1.2    Purchase Price.
(a)Final Purchase Price. The aggregate consideration for the Equity Interests and Canada Transferred Assets shall be (x) an amount in cash equal to (i) the Enterprise Value, plus (ii) the Final Closing Date Cash, minus (iii) the Final Closing Date Indebtedness, plus (iv) the Final Net Working Capital Adjustment Amount (which may be a positive or negative number), minus (v) the Final Transaction Expenses (the calculation resulting from clauses (i), (ii), (iii), (iv) and (v), the “Final Purchase Price”) and (y) the assumption by Canada Buyer of the Canada Assumed Liabilities. Buyer shall prepare and deliver to Seller a statement allocating the Final Purchase Price between the aggregated Transferred Assets (other than the Canada Transferred Assets) (the “U.S. Purchase Price”) and the aggregated Canada Transferred Assets (the “Canadian Purchase Price”), which in the case of the U.S. Purchase Price shall include the Assumed Liabilities and in the case of the Canadian Purchase Price shall include the Canada Assumed Liabilities.
(b)Estimated Purchase Price. Beginning no later than five (5) Business Days prior to the Closing Date, or such other time as Buyer and Seller may mutually agree, Buyer and Seller, or their designated representatives, shall reasonably cooperate to jointly conduct a physical count and tally of the finished products, raw materials and supplies of the Company or attributable to the Transferred Assets (the “Inventory” and such count and tally, the “Inventory Count”) of the Company or attributable to the Transferred Assets (which for the avoidance of doubt, shall include amounts attributable to the Canada Transferred Assets) and shall use commercially reasonably efforts to jointly agree on a valuation (the “Inventory Valuation”) of the same to be included in the Net Working
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Capital Adjustment Amount, which physical count and tally shall be rolled forward to the Closing Date in order to determine the amount of the Inventory for the good-faith estimate of the Net Working Capital Adjustment Amount; provided that in no event shall such Inventory Count or the determination of the Inventory Valuation delay the date that the Closing would otherwise occur as contemplated by Section 1.1 hereof and if the parties are unable to agree in good faith on the Inventory Valuation, Seller’s good faith determination of the Inventory Valuation shall control for purposes of the Estimated Closing Statement. Such Inventory shall be valued in accordance with the Accounting Principles. No later than two (2) Business Days prior to the Closing Date, Seller shall provide to Buyer a statement (the “Estimated Closing Statement”) setting forth an estimate of the Final Purchase Price which shall be based upon (i) the Enterprise Value and (ii) good-faith estimates of the Closing Date Cash, the Closing Date Indebtedness, the Net Working Capital Adjustment Amount and the Transaction Expenses (the “Estimated Purchase Price”), in each case, delivered with reasonable supporting detail with respect to the calculation of such amounts.
(c)Post-Closing Adjustments.
(i)Post-Closing Adjustment. As soon as practicable, but no later than ninety (90) days after the Closing Date, Seller shall prepare and deliver to Buyer a statement setting forth Seller’s calculation of (A) the Closing Date Cash, (B) the Closing Date Indebtedness, (C) the Net Working Capital Adjustment Amount, (D) the Transaction Expenses and (E) based thereon, Buyer’s calculation of the Final Purchase Price (such calculations, collectively, the “Proposed Purchase Price Calculations”), together with reasonable supporting detail with respect to the calculation of such amounts (the “Closing Statement”).
(ii)Within forty-five (45) days of receipt of the Closing Statement, Buyer may provide written notice to Seller disputing all or a part of the Proposed Purchase Price Calculations (such notice, a “Purchase Price Dispute Notice”). If Buyer does not provide a Purchase Price Dispute Notice to Seller within such forty-five (45)-day period, then the parties agree that the Proposed Purchase Price Calculations set forth in the Closing Statement shall become final and binding on the parties hereto. If a Purchase Price Dispute Notice is provided to Seller within such forty-five (45)-day period, then Seller and Buyer shall use reasonable best efforts to resolve the disputed items during the thirty (30)-day period commencing on the date of Seller’s receipt of the Purchase Price Dispute Notice.
(iii)If Seller and Buyer do not agree upon a final resolution with respect to any disputed items within such thirty (30)-day period, then the remaining items in dispute shall be submitted immediately to KPMG, or, if such firm declines to be retained to resolve the dispute, another nationally recognized, independent accounting firm reasonably acceptable to Seller and Buyer (in either case, the “Accounting Firm”). The parties agree to instruct the Accounting Firm to render a determination of the applicable dispute within forty-five (45) days after referral of the matter to such Accounting Firm, which determination must be in writing and must set forth, in reasonable detail, the basis therefor. The terms of
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appointment and engagement of the Accounting Firm shall be as agreed upon between Seller and Buyer, and any associated engagement fees shall be initially borne fifty percent (50%) by Seller and fifty percent (50%) by Buyer; provided that such fees shall ultimately be borne by Seller and Buyer in inverse proportion as they may prevail on matters resolved by the Accounting Firm, which proportionate allocations shall also be determined by the Accounting Firm at the time the determination of the Accounting Firm is rendered on the merits of the disputed items. Except as provided in the preceding sentence, all other costs and expenses incurred by the parties hereto in connection with resolving any dispute hereunder before the Accounting Firm shall be borne by the party incurring such cost and expense. In resolving the disputed items, the Accounting Firm (A) shall be bound by the terms of this Agreement, (B) may not assign a value to any item greater than the greatest value claimed for such item or less than the smallest value claimed for such item by either Seller or Buyer, (C) shall rely solely on the written submissions of the parties and shall not conduct an independent investigation, (D) shall limit its decision to such items as are in dispute and to only those adjustments as are necessary for the Proposed Purchase Price Calculations to comply with the provisions of this Agreement and (E) shall act as an expert and not as an arbitrator. Such determination of the Accounting Firm shall be conclusive and binding upon the parties hereto, absent fraud, bad faith or manifest mathematical error. No ex parte conferences, oral examinations, testimony, depositions, discovery or other form of evidence gathering or hearings shall be conducted or allowed; provided that at the Accounting Firm’s request, or as mutually agreed by Seller and Buyer, Seller and Buyer may meet with the Accounting Firm so long as representatives of both Seller and Buyer are present.
(iv)The parties agree that they will, and agree to cause their respective independent accountants and their respective Subsidiaries to, cooperate and assist in all commercially reasonable respects in the calculation of the Final Purchase Price and in the conduct of the review by the other party and its representatives or, if applicable, the Accounting Firm of any proposed calculations of the Final Purchase Price or the components thereof, including the making available, to the extent necessary, of books, records, work papers and personnel.
(v)Within five (5) Business Days after the date on which the Final Purchase Price is finally determined pursuant to this Section 1.2(c):
(A)if the Final Purchase Price is greater than the Estimated Purchase Price, Buyer shall pay to Seller or other Persons designated by Seller, a cash amount equal to such excess by wire transfer of immediately available funds to the Seller Designated Account(s) (or such other accounts as Seller shall designate in writing to Buyer), or
(B)if the Estimated Purchase Price is greater than the Final Purchase Price, Seller or its designees shall pay to Buyer a cash amount equal to such excess, by wire transfer of immediately available funds to an account that Buyer designates in writing to Seller.
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(vi)Any amount paid pursuant to Section 1.2(c)(v) shall be (A) made by wire transfer of immediately available funds to an account designated in accordance with Section 1.2(c)(v) and (B) treated as an adjustment to the Final Purchase Price, as applicable, for Tax reporting purposes.
(d)Accounting Procedures. The Estimated Purchase Price, the Proposed Purchase Price Calculations, the Final Purchase Price, the Estimated Closing Statement and the Closing Statement and the calculations contained therein shall be determined in accordance with the Accounting Principles (including the same format (and for purposes of calculating Closing Date Net Working Capital, including only those line items) as the sample calculations set forth therein).
(e)Allocation of the Final Purchase Price.
(i)Buyer and Seller acknowledge and agree that, for U.S. federal and applicable state and local income tax purposes, the purchase of the Equity Interests hereunder shall be treated a purchase and sale of the Transferred Assets (excluding the Canada Transferred Assets). The purchase price for the Transferred Assets (excluding the Canada Transferred Assets) as determined for income tax purposes shall be allocated among the Transferred Assets (excluding the Canada Transferred Assets), and otherwise in accordance with their fair market values consistent with Section 1060 of the Code, and such allocation shall be binding upon the parties hereto for all applicable federal, state, local and foreign tax purposes (“Purchase Price Allocation”). Buyer shall deliver a Purchase Price Allocation to Seller within 120 days following the Closing Date. If within thirty (30) days after the delivery of the Purchase Price Allocation, Seller notifies Buyer in writing that Seller objects to the Purchase Price Allocation, Buyer and Seller shall use commercially reasonable efforts to resolve such dispute within thirty (30) days. In the event that Buyer and Seller are unable to resolve such dispute within such 30-day period, the disputed items shall be resolved in accordance with the provisions set forth in Section 1.2(c)(iii), mutatis mutandis. Buyer and Seller shall use the asset values determined from such agreed or determined allocation for all applicable income tax purposes including Internal Revenue Service Form 8594.
(ii)Canada Buyer and Canada Seller agree that the allocation of the Canadian Purchase Price (including the Canada Assumed Liabilities) among the Canada Transferred Assets, for Canadian income tax purposes, shall be made in accordance with, and governed by, the principles set forth in Section 1.2(e)(i), mutatis mutandis. Canada Buyer and Canada Seller shall execute and file all Tax Returns and prepare all financial statements and other instruments on the basis of this allocation and agree to not take any position during the course of any audit or other action inconsistent with such allocation unless required by a determination of the applicable Governmental Authority that is final.
Section 1.3    Closing Deliveries. At or before the Closing, the parties will deliver the documents and instruments that are set forth in this Section 1.3.
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(a)At or before the Closing, Buyer will deliver to Seller duly executed copies of each of the Ancillary Agreements, each dated as of the Closing Date.
(b)At or before the Closing, Seller will deliver to Buyer each of the following:
(i)equity powers of the Equity Interests to be transferred to Buyer;
(ii)duly executed copies of each of the Ancillary Agreements, each dated as of the Closing Date;
(iii)those resignations contemplated by Section 4.8;
(iv)reasonable evidence of the termination of those Affiliate agreements contemplated by Section 4.9; and
(v)reasonable evidence of the release of any Liens securing any Indebtedness contemplated by Section 1.1.
Section 1.4    Canada Transferred Assets and Canada Assumed Liabilities Deliveries. At or before the Closing, Seller shall have caused Canada Seller to have taken such actions as are necessary to sell the Canada Transferred Assets to Canada Buyer, and to have Canada Seller to have assigned the Canada Assumed Liabilities to Canada Buyer, and in that respect shall have delivered, or caused to be delivered, the following documents with respect to the Canada Transferred Assets and Canada Assumed Liabilities:
(a)a general assignment and assumption agreement substantially in the form attached as Exhibit E-1;
(b)a lease assignment agreement in a form and substance acceptable to Canada Buyer, acting reasonably, and attached as Exhibit E-2;
(c)a patent assignment agreement in a form and substance acceptable to Canada Buyer, acting reasonably, and attached as Exhibit E-3;
(d)a trademark assignment agreement in a form and substance acceptable to Canada Buyer, acting reasonably, and attached as Exhibit E-4;
(e)a motor vehicle assignment agreements and bills of sale in a form and substance acceptable to Canada Buyer, acting reasonably, and attached as Exhibit E-5; and
(f)a certificate certifying the resolutions of Canada Seller’s directors/shareholders approving the transactions contemplated thereby, and attached as Exhibit E-6.
Section 1.5    Withholding. Buyer and Seller may withhold from amounts otherwise payable pursuant to this Agreement such amount as is required to be deducted and withheld with
7

respect to such payment under applicable Law. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. If a party intends to withhold, such party shall provide notice to the party in respect of whom such payment is to be made at least ten (10) Business Days in advance of any such withholding or deduction (such notice to include the legal authority and the calculation method for the expected withholding), and such parties shall cooperate with each other to take commercially reasonable steps to minimize or eliminate such withholding or deduction.
Article 2
Representations and Warranties of Seller
Except as set forth in the Seller Disclosure Letter, Seller represents and warrants to Buyer as of the date of this Agreement and of the Closing Date, assuming for the purposes of such representations and warranties that the Pre-Closing Steps have occurred prior to the execution and delivery of this Agreement, as follows:
Section 2.1    Organization and Power. Each of Seller, Canada Seller, and the Company is an entity duly organized, validly existing and in good standing (or the equivalent thereof, where such concept is recognized) under the laws of its jurisdiction of organization and has all requisite corporate, limited liability company or other entity power and authority to own, lease and operate its material properties and to carry on its businesses as presently conducted. Each of the Company and Canada Seller is duly qualified or licensed to do business and is in good standing (or the equivalent thereof, where such concept is recognized) in the jurisdictions in which the property and assets owned, leased or operated by it, or the nature of the business conducted by it, makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not reasonably be expected to have a Material Adverse Effect.
Section 2.2    Authorization.
(a)Seller and its Affiliates have all requisite corporate, limited liability company or other entity power and authority to execute and deliver this Agreement and the Ancillary Agreements to which Seller or any of its Affiliates is a party, as applicable, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements to which Seller or any of its Affiliates is a party and the consummation of the transactions contemplated hereby and thereby by Seller or any Affiliate of Seller, as applicable, have been duly authorized by all requisite corporate, limited liability company or other entity power action of Seller or such Affiliate of Seller, as applicable. This Agreement has been (and the execution and delivery of each of the Ancillary Agreements to which Seller or any Affiliate of Seller will be a party will be) duly executed and delivered by Seller (and, in the case of the Ancillary Agreements, by Seller or the applicable Affiliate of Seller) and constitutes (and each such Ancillary Agreement when so executed and delivered by Seller or the applicable Affiliate of Seller will constitute) a valid, legal and binding agreement of Seller (and in the case of the Ancillary Agreements, Seller or Affiliates of Seller party
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thereto) (assuming that this Agreement has been, and the Ancillary Agreements to which Seller or any Affiliate of Seller is a party will be, duly and validly authorized, executed and delivered by the other Persons party thereto), enforceable against Seller (and in the case of the Ancillary Agreements, Seller or Affiliates of Seller party thereto) in accordance with its terms, except (i) to the extent that enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other Laws affecting the enforcement of creditors’ rights generally and (ii) that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding thereof may be brought.
(b)Assuming the truth and accuracy of the representations and warranties of Buyer set forth in Section 3.2(b), no notices to, filings with or authorizations, registrations, declarations, consents or approvals of any Governmental Authority are necessary for the execution, delivery or performance by Seller or any Affiliate of Seller of this Agreement or the Ancillary Agreements to which Seller or any Affiliate of Seller is a party or the consummation by Seller or its Affiliates of the transactions contemplated hereby or thereby, including the pre-Closing amalgamation of Robertson Building Systems Limited and Gienow Canada Inc. and transfer of the Canada Transferred Assets and assignment of the Canada Assumed Liabilities, except for (i) compliance with and filings under the HSR Act and any other applicable Competition Laws, (ii) those the failure of which to obtain or make would not reasonably be expected to be materially adverse to the ongoing conduct of the Business, taken as a whole and (iii) those that may be required solely as a result of facts specific to Buyer and its Affiliates.
Section 2.3    Non-Contravention. The execution and delivery by Seller and its Affiliates of this Agreement and the Ancillary Agreements to which Seller or any Affiliate of Seller is a party and the performance of Seller or such Affiliate of Seller’s obligations hereunder and thereunder (including the Pre-Closing Steps and consummation of the transactions contemplated hereunder and thereunder) do not (a) conflict with or result in any breach of any provision of the Organizational Documents of Seller or any applicable Affiliate of Seller, (b) assuming compliance with the matters referred to in Section 2.2(b), violate any applicable Law of any Governmental Authority having jurisdiction over Seller or any applicable Affiliate of Seller, (c) require any consent of or other action by any Person under, or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default or give rise to any right of termination, cancellation or acceleration under, any of the terms, conditions or provisions of any Material Contract or (d) except as contemplated by this Agreement, result in the creation or imposition of any Lien other than Permitted Liens on any Transferred Asset, except, in the case of clauses (b), (c) and (d), as would not reasonably be expected to be materially adverse to the ongoing conduct of the Business, taken as a whole.
Section 2.4    Capitalization; Title to Equity Interests.
(a)The Equity Interests, collectively, constitute all of the equity securities of the Company. Seller is the holder of record and beneficially owns all of the Equity Interests, and has good and valid title to such Equity Interests, free and clear of all Liens (other than Liens that will be fully released at or prior to Closing). All of the Equity Interests have been duly authorized, validly issued and are fully paid and non-assessable
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and are owned free and clear of any Liens (other than those arising under this Agreement or existing under Indebtedness to be repaid at Closing or arising under, or in connection with, the Credit Facilities, which shall be fully released at or prior to Closing). Effective as of the Closing, good and valid title to the Equity Interests will pass to Buyer, free and clear of all Liens (other than any Liens created or imposed by Buyer), including, but not limited to, Liens arising under Indebtedness to be repaid at Closing and arising under, or in connection with, the Credit Facilities.
(b)Other than the Equity Interests, there are no outstanding (i) equity securities of the Company, (ii) securities of the Company convertible into or exchangeable or exercisable for Equity Interests, (iii) options, warrants or other rights to acquire from the Company or obligations of the Company to issue, any equity securities or securities convertible into or exchangeable or exercisable for Equity Interests or (iv) equity appreciation, phantom equity, profit participation or similar rights with respect to any Equity Interests.
(c)Neither Seller nor any of its Affiliates is party to any right of first refusal, right of first offer, proxy, voting agreement, registration rights agreement, equityholders agreement or any other contract with respect to the sale, repurchase, redemption, transfer or voting of the Equity Interests.
Section 2.5    Ownership Interests. Section 2.5 of the Seller Disclosure Letter lists all shares of capital stock of or other voting or equity interests in (including any securities exercisable or exchangeable for or convertible into shares of capital stock of or other voting or equity interests in) any Person that are owned by the Company.
Section 2.6    Financial Statements.
(a)Seller has delivered to Buyer copies of the unaudited trial balances of the Business as of and for the (i) twelve months ended December 31, 2020 and (ii) three months ended March 31, 2021 (collectively, the “Trial Balances”).
(b)The Trial Balances (i) have been prepared in good faith and in accordance with Seller’s regular accounting policies, practices, and methodologies applied on a consistent basis for the purposes of this Agreement based on the books and records of Seller and its Affiliates and (ii) are derived from the books and records of Seller and its Affiliates which are maintained by Seller or its Affiliates in a manner that permits Seller to prepare financial statements of Seller in accordance with U.S. GAAP, consistently applied.
(c)Notwithstanding the foregoing, the Trial Balances and the representations and warranties in clauses (a) and (b) of this Section 2.6 are qualified by the fact that (i) the Business has not operated on a separate standalone basis and historically has not been separately reported within Seller’s and its Affiliates’ consolidated financial statements, and (ii) the Trial Balances are not necessarily indicative of what the results of operations and financial position and cash flows of the Business will be in the future.
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Section 2.7    Other Liabilities. There are no Liabilities of the Business that would be required under GAAP to be disclosed on a balance sheet of the Business as of the date hereof, except (a) Liabilities disclosed in the Trial Balances, (b) Liabilities incurred in the Ordinary Course of Business since March 31, 2021, (c) the Retained Liabilities, (d) Liabilities incurred pursuant to or in connection with the transactions contemplated hereby, and (e) other Liabilities that are not or could not reasonably be expected to be material to the Business.
Section 2.8    Absence of Certain Changes. During the period beginning on December 31, 2020, (a) there has not been a Material Adverse Effect and (b) the Business has been conducted in the Ordinary Course of Business, except, in each case, as disclosed in Section 2.8 of the Seller Disclosure Letter or as otherwise contemplated by this Agreement (including Section 4.9 and Section 4.10(a)).
Section 2.9    Material Contracts.
(a)Section 2.9 of the Seller Disclosure Letter lists the following Transferred Business Contracts, except for this Agreement, and excluding any Benefit Plan (collectively, the “Material Contracts”):
(i)any agreement relating to any incurrence, assumption or guarantee of indebtedness for borrowed money in excess of $100,000;
(ii)any joint venture agreement or partnership agreement or other similar agreements or arrangements with a third party;
(iii)any agreement or series of related agreements, including any option agreement, relating to the acquisition or disposition of any business, capital stock or other equity securities or assets of any other Person (whether by merger, consolidation or other business combination, sale of stock or other securities, sale of assets or otherwise), including any agreement under which the Business has a material obligation with respect to an “earn out”, contingent purchase price or similar contingent payment obligation;
(iv)any agreement that contains exclusivity obligations, most favored nation obligations, or non-competition obligations or restrictions binding on the Business; other than any such agreement that is terminable on less than ninety (90) days’ notice without penalty or that can be terminated at an aggregate cost of less than $100,000.
(v)any (A) agreement material to the Business pursuant to which the Business receives a license from a third party to any Intellectual Property (other than licenses to commercially available software or licenses granted in connection with the purchase or lease of IT Systems or IT services) or (B) agreement material to the Business pursuant to which Transferred Owned Intellectual Property is licensed to a third party other than licenses granted in the Ordinary Course of Business pursuant to the Company’s standard terms, including in connection with the sale or licensing of products or services of the Business, in each case of (A)
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and (B), that involved aggregate payments by or to the Business in excess of $200,000 during the twelve (12)-month period immediately preceding January 31, 2021;
(vi)any agreement involving a remaining commitment by the Business to pay any single capital expenditure in excess of $100,000 or series of capital expenditures in excess of, in the aggregate, $200,000;
(vii)any agreement to sell or otherwise dispose of any capital assets having a fair market value in excess of $100,000;
(viii)any agreement relating to any interest rate, derivatives or hedging transactions;
(ix)any Real Property Lease, the breach or termination of which would reasonably be expected to be materially adverse to the ongoing conduct of the Business, taken as a whole;
(x)any agreements with any Persons under which the aggregate payments made to or received by the Business during the fiscal year ended December 31, 2020 exceeded $2,000,000;
(xi)any agreement with a Governmental Authority; and
(xii)any Affiliate Contracts.
(b)Each Material Contract is in full force and effect and is a valid and binding agreement of the Company or, with respect to any Material Contract constituting a Canada Transferred Asset, the applicable Affiliate of Seller party to such Material Contract (except (i) to the extent that enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium or other Laws affecting the enforcement of creditors’ rights generally and (ii) that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding thereof may be brought), and neither the Company the applicable Affiliate of Seller party to any Material Contract constituting a Canada Transferred Asset nor, to the Knowledge of Seller, any other party thereto, is in default or breach in any material respect under (or is as of the date of this Agreement alleged to be in default or breach in any material respect under) the terms of, or as of the date of this Agreement has provided or received any notice of any intention to terminate, any such Material Contract, and, to the Knowledge of Seller, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default thereunder or result in a termination thereof or would cause or permit the acceleration of or other changes of or to any right or obligation or the loss of any benefit thereunder.
Section 2.10    Properties.
(a)Owned Real Property. Schedule 2.10(a) sets forth all real property and interests in real property owned by Seller or its Affiliates that are used exclusively in
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connection with the Business (the “Owned Real Property”). Except as set forth on Schedule 2.10(a), Seller has good, valid and marketable fee simple title to the Owned Real Property, free and clear of all Liens other than Permitted Liens. Seller has not (i) leased, subleased or otherwise granted to any Person the right to use or occupy the Owned Real Property; (ii) granted to any third party any outstanding option, right of first offer or right of first refusal to purchase, use or possess any Owned Real Property or any portion thereof or interest therein; and (iii) received written notice of any proceedings in eminent domain, condemnation or other similar proceedings that are pending with respect to the Owned Real Property, and to the Knowledge of Seller, no such eminent domain, condemnation or other similar proceedings are anticipated or threatened which may affect the Owned Real Property. As of the Closing, the Owned Real Property shall have been conveyed to the Company via warranty deed or special warranty deed.
(b)Real Property Leases. Schedule 2.10(b) sets forth all real property leased, subleased, licensed or otherwise occupied (but not owned) by Seller that are used exclusively in connection with the operation of the Business (the “Leased Real Property”), along with a list of all leases for the Leased Real Property (collectively, the “Leases”). Except as set forth on Schedule 2.10(b), (i) the Leases governing the Leased Real Property are in full force and effect and are valid and binding obligations of Seller or any Subsidiary of Seller that is a party thereto and enforceable in accordance with its terms against Seller or such Subsidiary of Seller except (A) to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other Laws affecting the enforcement of creditors’ rights generally and (B) that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding thereof may be brought; (ii) the Seller’s and its Subsidiaries’ possession and quiet enjoyment of the leased premises under each such Lease has not been disturbed and, to the Knowledge of Seller, there are no material disputes with respect to such Leases; (iii) neither Seller nor any of its Subsidiaries nor, to the Knowledge of Seller, any other party is in material default or material breach of such Leases, and Seller has not received written notice of, and to the Knowledge of Seller, there does not exist any event, condition or omission that would constitute such material default or breach; (iv) there are no material disputes, oral agreements, or forbearance programs in effect as to any such Leases and (v) Seller and each of its Subsidiaries have not assigned, transferred, subleased, licensed or otherwise granted any Person the right to use or occupy such leased premises or any portion thereof.
(c)Additional Real Property Representations. (i) The only real property used by Seller and its Subsidiaries in connection with their respective Business is the Owned Real Property and the Leased Real Property (collectively, the “Real Property”); (ii) Seller and each applicable Subsidiary has received all required approvals from the applicable Governmental Authorities (including permits and certificates of occupancy or other such certificates permitting lawful occupancy and use of the Real Property) required in connection with its use of the Real Property; (iii) except as otherwise set forth on Section 2.10(c) of the Seller Disclosure Letter, as of the Closing Date, all costs for labor and material for the construction, equipment, maintenance, or repair of any improvements to the Real Property shall have been paid in full; (iv) neither Seller nor any applicable Subsidiary has received any written notice for assessments for public improvements
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against the Real Property that are either proposed, or delinquent and remain unpaid or that will become due and payable on or prior to the Closing Date, other than ad valorem property taxes payable in the Ordinary Course of Business and, to the Knowledge of Seller, no Governmental Authority has proposed any public improvements that shall result in any assessments being levied against the Real Property and (v) except as otherwise set forth in Section 2.10(c) of the Seller Disclosure Letter, there are no material structural defects in any of the buildings, infrastructure (including walls, roofs or parking) or other improvements situated on the Real Property, and all of the building systems are, in all material respects, in good condition and working order, and sufficient to conduct the business of Seller and each applicable Subsidiary in the manner currently and historically conducted and do not require any material repairs or replacements, except, in the case of clauses (i) through (v), as would not reasonably be expected to be materially adverse to the ongoing conduct of the Business, taken as a whole. With respect to this Section 2.10(c), a “material repair or replacement” shall mean any repair, replacement, retrofitting or other restoration with respect to any Real Property, the cost of which is reasonably expected to exceed $100,000.
(d)Personal Property. The Company, or, with respect to any such asset constituting a Canada Transferred Asset, Canada Seller, has (or shall have at Closing following completion of the Pre-Closing Steps) good and valid title to, or otherwise have the right to use pursuant to a valid and enforceable lease or similar contractual arrangement, all of the tangible assets constituting Material Assets, free and clear of any Liens other than Permitted Liens.
(e)All tangible assets constituting the Canada Transferred Assets are located in the Province of Ontario, and the Business is conducted in every Province in Canada.
Section 2.11    Intellectual Property; IT Systems; Data Privacy and Security.
(a)Section 2.11(a) of the Seller Disclosure Letter lists all registrations and pending applications for patents, trademarks, service marks, domain names and copyrights included in the Transferred Owned Intellectual Property (the “Owned Registered Intellectual Property”). Except as would not be materially adverse to the ongoing conduct of the Business, the Owned Registered Intellectual Property set forth in Section 2.11(a) of the Seller Disclosure Letter is valid and enforceable. Except as would not be materially adverse to the ongoing conduct of the Business, all necessary registration, maintenance and renewal fees currently due in connection with the Owned Registered Intellectual Property have been paid and all necessary documents, recordations and certificates in connection with such Owned Registered Intellectual Property have been filed with the relevant Governmental Authorities for the purposes of prosecuting, establishing ownership and maintaining such Owned Registered Intellectual Property. There are no oppositions, cancellations, invalidity proceedings, interferences or re-examination proceedings presently pending with respect to such Owned Registered Intellectual Property. The Company, or to the extent constituting a Canada Transferred Asset, an Affiliate of Seller, exclusively owns each of the items set forth in Section 2.11(a) of the Seller Disclosure Letter and all other Intellectual Property included in the Transferred Assets, in each case, free and clear of all Liens except for Permitted Liens.
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The Transferred Owned Intellectual Property constitutes all Intellectual Property owned by Seller or its Affiliates that is exclusively related to the Business and, except as would not be materially adverse to the ongoing conduct of the Business, the Company has a valid and enforceable right to use, pursuant to a written agreement, all other Intellectual Property necessary to conduct the Business in the same manner as currently conducted.
(b)Except as would not be materially adverse to the ongoing conduct of the Business, (i) no Open Source Software is or has been included, incorporated or embedded in, linked to, combined or distributed with or used in the development, delivery, or provision of any Proprietary Software in a manner that subjects any Proprietary Software to any Copyleft License, (ii) the Proprietary Software does not contain Harmful Code, and (iii) none of the source code or related materials for any Proprietary Software has been licensed or provided to, or used or accessed by, any Person other than employees, consultants and contractors of the Company that are subject to written confidentiality obligations with respect to such source code or related materials and who have used such source code and related materials only for the internal business of the Company. The Company is not party to any source code escrow agreement or contract or any other agreement or contract requiring the deposit of any source code or related materials for any Proprietary Software.
(c)Neither Seller nor any of its Affiliates has received any written notice or claim (i) that the Business, the Transferred Owned Intellectual Property or the use thereof, is infringing on or has misappropriated or otherwise violated the Intellectual Property rights of any Person, (ii) challenging Seller’s or its Affiliates ownership or use of any Transferred Owned Intellectual Property, or (iii) challenging Seller’s or its Affiliates use of any Intellectual Property used in the Business. Except as would not be materially adverse to the ongoing conduct of the Business, the operation of the Business, the Transferred Owned Intellectual Property and the use thereof, does not infringe the Intellectual Property of any third Person and to the Knowledge of Seller, no Person is infringing or misappropriating any of the Transferred Owned Intellectual Property. Seller and its Affiliates have taken commercially reasonable steps that are (i) designed to maintain the performance, security and integrity of the IT Systems and to protect the IT Systems and the information stored therein from any unauthorized access, interruption or modification by any third party and (ii) consistent with applicable industry data security standards. The IT Systems are adequate and sufficient, in all material respects, for the operation of the Business as currently conducted by the Company. Except as would not be materially adverse to the ongoing conduct of the Business, since January 1, 2018, there have been no (i) breakdowns or outages of the IT Systems that have caused any material disruption or interruption in the operation of the Business, or (ii) material security breaches of, or other material unauthorized access to, any IT Systems or any information stored thereon. To the Knowledge of Seller, the IT Systems do not contain any Harmful Code that would reasonably be expected to interfere with the conduct of the Business or present a risk of unauthorized access, disclosure, use, corruption, destruction or loss of the IT Systems or any information stored thereon.
(d)Except as would not be materially adverse to the ongoing conduct of the Business (i) Seller and its Affiliates have maintained privacy policies concerning the
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Company’s collection, use, storage, retention, disclosure and disposal of Personal Information that comply with applicable Laws in all material respects and have provided materially accurate notice of the Company and its Subsidiaries’ practices concerning the processing of Personal Information, (ii) such notices, together with all other privacy-related communications from the Company to users or customers have not contained and do not contain any material omissions of the Company’s practices concerning the collection, use, storage, retention, disclosure and disposal of Personal Information, and (iii) the Company’s privacy practices conform, and at all times since January 1, 2018, have conformed, in all material respects to the applicable written privacy policies then in effect. The Company has complied in all material respects with, is not in violation of, and has not received any notices of violation with respect to, any applicable Laws, contracts, and other commitments, obligations or representations known to the Company concerning Personal Information. Except as would not be materially adverse to the ongoing conduct of the Business, the consummation of the transaction contemplated by this Agreement will not violate the Company’s written obligations with respect to Personal Information in any material respect.
(e)This Section 2.11 contains the sole and exclusive representations made by Seller with respect to infringement, misappropriation or other violation of Intellectual Property.
Section 2.12    Litigation. As of the date hereof, (a) there is no Litigation pending or, to the Knowledge of Seller, threatened in writing against the Company or the Business and (b) there is no outstanding order, writ, judgment, injunction, decision, ruling, award or decree issued against the Company or the Business, except, in each case of clauses (a) and (b), as would not reasonably be expected to be materially adverse to the ongoing conduct of the Business, taken as a whole.
Section 2.13    Compliance with Laws; Licenses and Permits.
(a)The Business is operated in compliance with applicable Law, except as would not reasonably be expected to be materially adverse to the ongoing conduct of the Business.
(b)The Company and Canada Seller, as applicable, hold all licenses, franchises, permits, certificates, consents, approvals or other similar authorizations issued by applicable Governmental Authorities necessary for the lawful conduct of the Business (the “Permits”), except as would not reasonably be expected to be materially adverse to the ongoing conduct of the Business, taken as a whole. The material Permits are valid and in full force and effect, no Seller or any of their applicable Affiliates is in default under the Permits, and no suspension, revocation, cancellation or material modification of any Permit is pending or, to the Knowledge of Seller, has been threatened and none of the Permits will be terminated as a result of the transactions contemplated hereby, except, in each case, as would not reasonably be expected to be materially adverse to the ongoing conduct of the Business.
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(c)Since January 1, 2018, none of Seller or its Affiliates, or any employee, officer, director, or, to the extent that it would constitute a breach of applicable Law by Seller or its applicable Affiliates, any agent or representative of Seller or its applicable Affiliates has, in connection with or acting on behalf of the Business, (i) made or offered any unlawful payment, or offered or promised to make any unlawful payment, or provided or offered or promised to provide anything of value (whether in the form of property or services or in any other form), to any foreign or domestic government official or employee, or to any finder, agent, or other party acting on behalf of or under the auspices of any Governmental Authority, (ii) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity or (iii) taken any other action or made any omission, in each case, in violation of any law applicable to the Company or the Business governing corrupt practices, money laundering, anti-bribery or anticorruption or that otherwise prohibits payments to any government or public officials, including, if applicable, the Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd 1, et seq., the UK Bribery Act 2010, Corruption of Foreign Public Officials Act (Canada), and any Law implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (all such Laws, “Anticorruption Laws”). As of the date hereof, none of Seller or its Affiliates has, in connection with or relating to the Business, received any written notice alleging any such violation or conducted any material internal investigation with respect to any actual or alleged violation of any Anticorruption Law.
(d)Each of the Company, and solely with respect to the Business, Seller and its Affiliates (other than the Company) is in compliance with all applicable statutory and regulatory requirements relating to economic sanctions or embargoes, including all Laws administered and enforced by the Office of Foreign Assets Control of the United States Department of the Treasury (“OFAC Laws”). None of the Company or, solely with respect to the Business, Seller or its Affiliates (other than the Company) is party to any contract or is engaged in any transaction or other business (i) in breach of OFAC Laws, or (ii) with any Person that is included, at the time of the relevant transaction, in the list of Specially Designated Nationals and Blocked Persons published by the United States Department of the Treasury, in each case, to the extent OFAC Laws apply to the Company. As of the date hereof, none of the Company or, solely with respect to the Business, Seller or its Affiliates (other than the Company) has received from any Governmental Authority or any other Person any written notice of any material violation or alleged material violation of any OFAC Laws.
(e)Seller makes no representation or warranty in this Section 2.13 with respect to environmental matters, employee benefit matters or Tax matters, which matters are exclusively addressed in, respectively, Section 2.14, Section 2.15, Section 2.16 and Section 2.17.
Section 2.14    Environmental Matters.
(a)The Company and the Business are, and for the past five years have been, in compliance in all material respects with all applicable Environmental Laws.
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(b)The Business is in possession of, and in compliance in all material respects with, all material Permits that are required pursuant to applicable Environmental Laws.
(c)Seller and its Affiliates have not received from any Governmental Authority any written notice of material violation of any Environmental Law the substance of which has not been resolved with respect to the Business.
(d)Neither the Company nor, to the Knowledge of Seller, any other Person has released any Hazardous Substances at any Transferred Real Property which requires any material investigation, removal, remedial or cleanup actions by the Company pursuant to any applicable Environmental Law.
(e)As of the date hereof, no material action or proceeding is pending or, to the Knowledge of Seller, threatened in writing against the Business under any Environmental Law.
This Section 2.14 contains the sole and exclusive representations made by Seller relating to matters arising under Environmental Laws.
Section 2.15    Employees, Labor Matters, etc.
(a)Neither the Company, Seller nor any Affiliate of Seller with respect to the conduct of the Business is party to or is otherwise bound by any collective bargaining agreement, and there are no labor unions, trade unions, employee bargaining agency, affiliated bargaining agent or other organizations or groups representing, purporting to represent or attempting to represent any Business Employee identified as of the date hereof and no Person has applied to have the Company, Seller or any Affiliate of Seller declared a common or related employer pursuant to applicable Laws. As of the date of this Agreement there is no pending or, to the Knowledge of Seller, threatened unfair labor practice complaint, grievance, arbitration proceeding, strike, slowdown, picketing or work stoppage by, or lockout of, or other similar labor activity or organizing campaign with respect to, any Business Employees identified as of the date hereof. The Company, Seller and any Affiliates of Seller with respect to the conduct of the Business are and have been for the preceding three years in compliance in all material respects with all applicable Laws respecting worker engagement, worker eligibility, labor, employment, fair employment and labor practices, immigration, pay equity, human rights, accommodation, workers’ compensation, occupational health and safety (including, but not limited to, any safety requirements related to COVID-19), terms and conditions of employment, employee classification and wages and hours.
(b)Each Canadian Business Employee is located in the Province of Ontario. There are no outstanding assessments, penalties, fines, liens, charges, surcharges, or other amounts due or owing pursuant to any workplace safety and insurance legislation and neither the Company, Seller nor any Affiliate of Seller has been reassessed in any material respect under such legislation during the past three years and, to the Knowledge of Seller, no audit of the Company, Seller nor any Affiliate of Seller is currently being
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performed pursuant to any applicable workplace safety and insurance legislation. There are no claims or potential claims in respect of Business Employees which may result in a Material Adverse Effect on the Company, Seller or any Affiliate of Seller’s accident cost experience in respect of the Business and there are no orders under applicable occupational health and safety legislation relating to the Business which are currently outstanding.
(c)The Company has made available to Buyer a list that sets forth the name, compensation, location, job title, and active or inactive status of each Business Employee.
Section 2.16    Employee Benefit Plans and Related Matters; ERISA.
(a)Section 2.16(a)(i) of the Seller Disclosure Letter lists all material Benefit Plans maintained solely for the benefit of Business Employees (the “Transferred Plans”). Section 2.16(a)(ii) of the Seller Disclosure Letter lists all material Seller Plans. With respect to each Seller Plan, Seller has made available to Buyer copies (to the extent applicable) of (i) the plan and trust documents (with all amendments thereto) and the most recent summary plan description, (ii) the most recent annual report (Form 5500 series) and (iii) the most recent IRS determination or opinion letter.
(b)No Seller Plan is a Multiemployer Plan or a plan that is subject to Title IV of ERISA, and no Seller Plan provides health or other welfare benefits to former employees of the Business other than health continuation coverage pursuant to Section 4980B of the Code. Neither the Company nor any of the Company’s assets could be subject to any Liability to a Multiemployer Plan or a plan subject to Title IV of ERISA as a result of being considered a single employer with Seller. No Benefit Plan is a “registered pension plan” or a “retirement compensation arrangement”, as such terms are defined under the Income Tax Act (Canada).
(c)Each Seller Plan has been registered (if required by Law), maintained and administered in all material respects in compliance with its terms, the applicable requirements of ERISA, the Code and any other applicable Law. Each Seller Plan intended to be qualified under Section 401(a) of the Code, and the trust (if any) forming a part thereof, has received a favorable determination or opinion letter from the IRS and, to the Knowledge of Seller, there are no existing circumstances or events that would reasonably be expected to result in any revocation of, or a change to, such determination letter.
(d)Other than routine claims for benefits, there are no pending or, to the Knowledge of Seller, threatened claims by or on behalf of any participant in any of the Seller Plans and, to the Knowledge of Seller, there currently exists no state of facts which would reasonably be expected to give rise to any such claim or other proceeding.
(e)Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement would reasonably be expected to, either alone or in combination with any other event, (i) result in any payment becoming due to any Business Employee, (ii) materially increase any benefits under any
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Seller Plan with respect to any Business Employee or (iii) result in the acceleration of the time of payment, vesting or funding or increase the amount of, any compensation or benefits due to any Business Employee.
(f)All material premiums, contributions or other payments required to be made to the Seller Plans with respect to all Business Employees by the Company or Seller pursuant to the terms of such Seller Plans and provisions and applicable Law as of the Closing Date have been timely made and all benefits accrued under any unfunded Seller Plan have been paid, accrued or otherwise adequately reserved to the extent required by, and in accordance with, GAAP.
(g)Neither the Company nor Seller are party to any contract containing an indemnity or gross-up obligation on or after the Closing for any Taxes imposed under Section 4999 or Section 409A of the Code (or any corresponding provisions of state, local or foreign Tax Law) with respect to any Business Employee.
(h)The Company and Seller are and have, with respect to the Business Employees, been in material compliance with the Patient Protection and Affordable Care Act and all reporting obligations thereunder.
Section 2.17    Tax Matters.
(a)Filing and Payment. All material Tax Returns required to be filed in connection with the operation of the Business have been duly and timely filed and are complete and correct. All material Taxes shown as due on such Tax Returns required to be paid with respect to, or that could give rise to a Lien on the assets of, the Business have been duly and timely paid. All material Taxes required to be withheld by Seller in connection with the operation of the Business have been duly and timely withheld, and such withheld Taxes have been either duly and timely paid to the proper Governmental Authority or properly set aside in accounts for such purpose.
(b)Procedure and Compliance. As of the date hereof (i) no written agreement waiving or extending, or having the effect of waiving or extending, the statute of limitations or the period of assessment or collection of any material Taxes, in each case, currently in effect, Seller in connection with the operation of the Business, and no written power of attorney with respect to any such Taxes has been filed or entered into with any Governmental Authority, (ii) no material Taxes of Seller in connection with the operation of the Business are under audit, examination or investigation by any Governmental Authority and (iii) no Governmental Authority has asserted in writing any deficiency, adjustment or claim with respect to material Taxes against Seller in connection with the operation of the Business with respect to any taxable period for which the period of assessment or collection remains open.
(c)Closing Agreements. Seller in connection with the operation of the Business has not received or applied for a material Tax ruling or entered into a material closing agreement pursuant to Section 7121 of the Code (or any predecessor provision or
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any similar provision of state or local law), in either case that would be binding upon the Company after the Closing Date.
(d)Certain Events. Seller in connection with the operation of the Business will not be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date, as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481 of the Code (or any corresponding provision of state, local or foreign income Tax law) or (ii) installment sale or open transaction disposition made on or prior to the Closing Date.
(e)Listed Transactions. Seller in connection with the operation of the Business has not participated in a “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(c) within the last five (5) years.
(f)The Company is and always has been disregarded as an entity separate from Seller for U.S. federal and applicable state and local income tax purposes.
(g)There are no material liens for Taxes upon the Business and/or any Transferred Assets, other than Permitted Liens.
(h)None of Seller or its Affiliates are making any representation or warranty about the existence of, amount of or ability to otherwise use any net operating loss, asset basis or any other tax attribute of the Business.
(i)Canada Seller has paid all Taxes required to be paid by it, has withheld and remitted all material Taxes required to be withheld and remitted (including from non-residents of Canada and employees) and has collected and remitted all material sales or similar Taxes required to be collected by it, in each case with respect to the Canada Business, to the extent that not doing so would give rise to a material lien on the assets of the Canada Business or to the extent that Canada Buyer would otherwise be liable. There are no outstanding claims for Taxes with respect to the Canada Business, that would give rise to a material lien on the assets of the Canada Business or for which Canada Buyer would otherwise be liable by any Governmental Authority against Canada Seller or an adequate reserve or provision has been properly set aside in accounts for such purpose.
(j)Canada Seller is not a non-resident of Canada within the meaning of the Income Tax Act (Canada) (the “Tax Act”) and none of the Canada Transferred Assets are used or held by Seller or its Affiliates that are non-residents of Canada in a business carried on by them in Canada for purposes of the Tax Act.
(k)Following its formation, Canada Seller will, for the purposes of the goods and services tax imposed under Part IX of the Excise Tax Act (Canada) (the “ETA”), register for a Federal registration number, which number shall be provided to Canada Buyer prior to Closing.
Section 2.18    Insurance. Section 2.18 of the Seller Disclosure Letter sets forth a list of all material insurance policies maintained by (or for the benefit of) the Business as of the date
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hereof. Except as would not reasonably be expected to have a Material Adverse Effect, Seller and its Affiliates are in compliance with all current property and liability insurance policies covering the Business (and all premiums due and payable thereon have been paid in full on a timely basis), and as of the date hereof no written notice of cancellation, termination or revocation has been received by Seller or its Affiliates.
Section 2.19    Finders’ Fees. No broker, finder, financial advisor or investment banker, other than Rothschild & Co, whose fees shall be included in the Transaction Expenses or otherwise paid at Closing by Seller or its Affiliates (other than the Company), is entitled to any broker’s, finder’s, financial advisor’s, investment banker’s fee or commission or similar payment in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller or any Affiliate of Seller (including the Company) for which Buyer or any of its Affiliates may become liable.
Section 2.20    Contracts with Affiliates. Section 2.20 of the Seller Disclosure Letter lists all contracts as of the date hereof to which the Company, or in the case of any contract constituting a Canada Transferred Asset, an Affiliate of Seller, on the one hand, and Seller or any of its Affiliates (other than the Company or an Affiliate of Seller party to a contract constituting a Canada Transferred Asset) directors or officers (other than any employment, severance, bonus and similar arrangements concerning the compensation of directors or officers), on the other hand, are parties or are otherwise bound or affected (each such contract, an “Affiliate Contract”).
Section 2.21    Assets.
(a)Upon (i) the purchase and acquisition of the Equity Interests and Canada Transferred Assets in accordance with this Agreement, (ii) the receipt by Buyer or its Affiliates (including, after the Closing, the Company) of the services and benefits available or otherwise offered by Seller or its Affiliates to Buyer or its Affiliates under the Ancillary Agreements and access to the assets specified therein or made available thereunder (including the Services Intellectual Property), (iii) the receipt of the benefits of the Divided Commingled Contracts, (iv) the receipt of any third party consents necessary for the transfer of the Transferred Business Contracts (or the receipt by Buyer of the benefits of any such Transferred Business Contract with respect to which consent has not been obtained in accordance with Section 4.10(c)) and (v) replacement of cash, debt financing, insurance, letters of credit, guarantee and credit support arrangements that are not included in the transaction, Buyer and Canada Buyer, as the case may be, shall have, directly or indirectly, immediately following the Closing the assets and properties and services necessary for the ongoing conduct of the Business immediately following the Closing in all material respects as the Business is currently being conducted, provided that the foregoing is not a representation or warranty with respect to infringement or misappropriation of the Intellectual Property of any third Person.
(b)Neither Seller nor any of its Affiliates is party to any right of first refusal, right of first offer, proxy, voting agreement, registration rights agreement, equityholders agreement or any other contract with respect to the sale, repurchase, redemption, transfer or voting with respect to the Transferred Assets or the Equity Interests.
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Section 2.22    Inventory. All Inventory of the Company or included in the Canada Transferred Assets, as the case may be, consists of items of a quality and quantity usable and salable in the Ordinary Course of Business in all material respects, and the level of Inventory is consistent with the level maintained by the Business in the Ordinary Course of Business in all material respects. The values at which such Inventory is carried are stated in accordance with GAAP at the lower of historic cost or market. An adequate reserve has been established for missing, damaged, spoiled, obsolete, defective or slow moving inventory, and such reserve is consistent with the Ordinary Course of Business. The Company does not have any inventory that, and none of the inventory included in the Canada Transferred Assets, has been consigned to third parties or that otherwise is not in the physical possession of the Company or Canada Seller, as applicable.
Section 2.23    Accounts Receivable. All accounts receivable of the Company or in connection with the Canada Transferred Assets, as the case may be, reflected in the Trial Balances represent bona fide claims for goods or services sold.
Section 2.24    Customers; Suppliers.
(a)The Company has delivered to Buyer a true, complete and correct list of the top ten (10) customers of the Business for the most recent complete fiscal year as measured by revenues derived from such customers. No such customer has canceled or terminated its relationship with the Business during the twelve (12) months immediately preceding the date of this Agreement. To the Knowledge of Seller, no such customer has otherwise modified, or threatened to cancel, terminate or otherwise modify, its relationship with the Business during the twelve (12) months immediately preceding the date hereof or has during such twelve (12)-month period decreased its business with the Business, except as would not reasonably be expected to be materially adverse to the ongoing conduct of the Business, taken as a whole.
(b)The Company has delivered to Buyer a true, complete and correct list of the top ten (10) suppliers or vendors of the Business for the most recent complete fiscal year as measured by revenues derived from such suppliers or vendors. No such supplier or vendor has canceled or terminated its relationship with the Business during the twelve (12) months immediately preceding the date of this Agreement. To the Knowledge of Seller, no such supplier or vendor has modified, or threatened to cancel, terminate or otherwise modify, its relationship with the Business during the twelve (12) months immediately preceding the date hereof or has during such twelve (12)-month period decreased its business with the Business, except as would not reasonably be expected to be materially adverse to the ongoing conduct of the Business, taken as a whole.
Section 2.25    No Other Representations and Warranties. Except for the representations and warranties expressly set forth in this Article 2 and the Ancillary Agreements to be entered into at or prior to the Closing, neither Seller, Canada Seller nor any Affiliate of Seller nor any of their respective directors, officers, employees, stockholders, agents or representatives nor any other Person makes or shall be deemed to make any representation or warranty to Buyer, express or implied, at law or in equity, on behalf of Seller, Canada Seller or any Affiliate of Seller, and each of Seller, Canada Seller and their respective Affiliates by this Agreement disclaims any
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such representation or warranty, whether by Seller, Canada Seller, any Affiliate of Seller or any of their respective directors, officers, employees, stockholders, agents or representatives or any other Person, notwithstanding the delivery or disclosure to Buyer, or any of its directors, officers, employees, stockholders, agents or representatives or any other Person of any documentation or other information by Seller, Canada Seller or any Affiliate of Seller or any of their respective directors, officers, employees, stockholders, agents or representatives or any other Person with respect to any one or more of the foregoing.
Article 3
Representations and Warranties of Buyer
Each of Buyer and Canada Buyer represents and warrants to Seller as of the date of this Agreement and as of the Closing Date as follows:
Section 3.1    Organization and Power. Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted. Canada Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the Province of British Columbia and has all requisite corporate power and authority to carry on its business as now conducted.
Section 3.2    Authorization.
(a)Each of Buyer and Canada Buyer has all requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements to which Buyer, Canada Buyer, or any of their respective Affiliates is a party by Buyer, Canada Buyer or any of their respective Affiliates and the consummation of the transactions contemplated hereby and thereby (including the consummation of the transactions contemplated hereunder and thereunder) have been duly authorized by all requisite corporate action of Buyer, Canada Buyer and/or their respective applicable Affiliates. This Agreement has been (and the Ancillary Agreements to which Buyer, Canada Buyer, or any of their respective Affiliates is a party will be) duly and validly executed and delivered by Buyer, Canada Buyer, and/or their respective applicable Affiliates and constitutes (and each such Ancillary Agreement when so executed and delivered by Buyer, Canada Buyer and/or their applicable Affiliates will constitute) a valid, legal and binding agreement of Buyer or Canada Buyer (and in the case of Ancillary Agreements, Buyer, Canada Buyer, or their respective Affiliates party thereto) (assuming this Agreement has been, and the Ancillary Agreements to which Buyer, Canada Buyer, or their respective applicable Affiliates is a party will be, duly authorized, executed and delivered by the other parties thereto), enforceable against Buyer or Canada Buyer (and in the case of the Ancillary Agreements, Buyer, Canada Buyer or their respective Affiliates party thereto) in accordance with its terms, except (i) to the extent that enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other Laws affecting the enforcement of creditors’ rights generally and (ii) that the availability
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of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding thereof may be brought.
(b)Assuming the truth and accuracy of Seller’s representations and warranties contained in Section 2.2(b), no material notices to, filings with or authorization, registration, declaration, consent or approval of any Governmental Authority is necessary for the execution, delivery or performance by Buyer, Canada Buyer or any of their respective Affiliates of this Agreement or the Ancillary Agreements to which Buyer, Canada Buyer or any of their respective Affiliates is a party or the consummation by Buyer and Canada Buyer of the transactions contemplated hereby or thereby, except for compliance with and filings under the HSR Act and any other applicable Competition Law.
Section 3.3    Non-Contravention. The execution and delivery by Buyer, Canada Buyer and their respective Affiliates of this Agreement and the Ancillary Agreements to which Buyer, Canada Buyer or any of their respective Affiliates is a party, and the performance of Buyer’s, Canada Buyer’s or any such Affiliate of Buyer’s or Canada Buyer’s obligations hereunder and thereunder do not (a) conflict with or result in any violation or breach of any provision of any of the Organizational Documents of Buyer, Canada Buyer or any of their respective applicable Affiliates, (b) assuming compliance with the matters referred to in Section 3.2(b), violate any provision of any applicable Law or (c) require any consent of or other action by any Person under, or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default or give rise to any right of termination, cancellation or acceleration under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which Buyer or Canada Buyer is a party or by which any of them or any of their respective properties or assets may be bound, except in the case of clauses (b) and (c), as would not reasonably be expected to be, individually or in the aggregate, materially adverse to Buyer’s, Canada Buyer’s, and their respective applicable Affiliates’ ability to consummate the transactions contemplated hereby.
Section 3.4    Availability of Funds. Buyer has available and will have available at Closing sufficient cash in immediately available funds to pay the Estimated Purchase Price and to pay any and all other amounts payable by Buyer and Canada Buyer pursuant to this Agreement and to effect the transactions contemplated hereby.
Section 3.5    Solvency. Assuming the satisfaction of the conditions to Buyer’s and Canada Buyer’s obligation to consummate the transactions set forth herein, or the waiver of such conditions, immediately after giving effect to the consummation of the transactions contemplated by this Agreement, Buyer, Canada Buyer, and their respective Subsidiaries will be Solvent. For purposes of this Section 3.5, “Solvent” means, with respect to any Person, that the fair saleable value (determined on a going concern basis) of the assets of such Person shall be greater than the total amount of such Person’s Liabilities (including all Liabilities, whether or not reflected in a balance sheet prepared in accordance with applicable accounting principles, and whether direct or indirect, fixed or contingent, secured or unsecured, disputed or undisputed), such Person shall be able to pay its debts and obligations in the Ordinary Course of Business as they become due, and such Person shall have adequate capital to carry on its businesses and all businesses in which it is about to engage.
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Section 3.6    Purchase for Investment. Buyer is purchasing the Equity Interests for investment for its own account and not with a view to, or for sale in connection with, any distribution thereof. Buyer (either alone or together with its advisors) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Equity Interests and is capable of bearing the economic risks of such investment. Buyer acknowledges that the Equity Interests have not been registered under the Securities Act or any state securities Laws, and agrees that the Equity Interests may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under the Securities Act, except pursuant to an exemption from such registration available under the Securities Act, and without compliance with foreign securities Laws, in each case, to the extent applicable.
Section 3.7    Litigation. There is no Litigation pending against, or, to the knowledge of Buyer, threatened against or affecting, Buyer or Canada Buyer before any court or arbitrator or any Governmental Authority which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement.
Section 3.8    Finders’ Fees. Except for Moelis & Company LLC, whose fees and expenses will be paid by Buyer, no broker, finder, financial advisor or investment banker is entitled to any brokerage, finder’s, financial advisor’s or investment banker’s fee or commission or similar payment in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of Buyer, Canada Buyer or any of their respective Affiliates for which Seller or any Affiliates of Seller may become liable.
Section 3.9    Sales Tax. Canada Buyer is a registrant for the purposes of the goods and services tax imposed under Part IX of the ETA.
Section 3.10    No Additional Representations and Warranties; Inspection. Each of Buyer and Canada Buyer acknowledges and agrees that it (a) has conducted its own independent review and analysis of, and, based thereon, has formed an independent judgment concerning, the Business and the assets, condition, operations, prospects and liabilities of the Company, including the Transferred Assets and Assumed Liabilities, and (b) has been furnished with or given access to such information about the Business, the Transferred Assets, Assumed Liabilities and the Company as it has reasonably requested to form such independent judgment. In entering into this Agreement, each of Buyer and Canada Buyer has relied solely upon such investigation and analysis and the representations and warranties set forth in Article 2, and acknowledges that (i) neither Seller or any Affiliate of Seller nor any of their respective directors, officers, employees, stockholders, agents or representatives makes or has made any representation or warranty, either express or implied, at law or in equity, (A) as to the accuracy or completeness of any of the information provided or made available to Buyer, its Affiliates or any of Buyer’s and its Affiliates respective directors, officers, employees, stockholders, agents, representatives or lenders or any other Person prior to the execution of this Agreement or (B) with respect to any projections, forecasts, estimates, plans or budgets of future revenues, expenses or expenditures, future results of operations (or any component thereof), future cash flows (or any component thereof) or future financial condition (or any component thereof) of the Business, the Company, the Canada Transferred Assets or Canada Assumed Liabilities heretofore or hereafter delivered to or made available to Buyer, its Affiliates or any of Buyer’s and its Affiliates respective
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directors, officers, employees, stockholders, agents, representatives or lenders or any other Person and (ii) it has not been induced by or relied upon any representation, warranty or other statement, express or implied, made by Seller or any Affiliate of Seller or any of their respective directors, officers, employees, stockholders, agents or representatives or any other Person, except in the case of this clause (ii) for the representations and warranties set forth in Article 2 and the Ancillary Agreements to be entered into at or prior to the Closing.
Section 3.11    No Other Representations and Warranties. Except for the representations and warranties expressly set forth in this Article 3 and the Ancillary Agreements to be entered into at or prior to the Closing, neither Buyer, Canada Buyer, their respective Affiliates or any of Buyer’s, Canada Buyer’s and their respective Affiliates’ respective directors, officers, employees, stockholders, agents, representatives or lenders or any other Person makes or shall be deemed to make any representation or warranty to Seller or any Affiliate of Seller or any of their respective directors, officers, employees, stockholders, agents or representatives, express or implied, at law or in equity, on behalf of Buyer, Canada Buyer, or any of their respective Affiliates, and Buyer, Canada Buyer, their respective Affiliates and any of Buyer’s, Canada Buyer’s and their respective Affiliates’ respective directors, officers, employees, stockholders, agents, representatives or lenders by this Agreement disclaims any such representation or warranty, whether by Buyer, Canada Buyer, their respective Affiliates or any of Buyer’s, Canada Buyer’s and their respective Affiliates’ respective directors, officers, employees, stockholders, agents, representatives or lenders or any other Person, notwithstanding the delivery or disclosure to Seller or any Affiliate of Seller or any of their respective directors, officers, employees, stockholders, agents or representatives or any other Person of any documentation or other information by Buyer, Canada Buyer, their respective Affiliates or any of Buyer’s, Canada Buyer’s, and their respective Affiliates’ respective directors, officers, employees, stockholders, agents, representatives or lenders or any other Person with respect to any one or more of the foregoing.
Article 4
Certain Covenants
Section 4.1    Conduct of the Business. From the date hereof until the earlier of the Closing or the termination of this Agreement in accordance with its terms, except for (i) as required by Law, (ii) any Emergency Measures, (iii) as contemplated or permitted by this Agreement (including Section 4.9 and Section 4.10) or the Ancillary Agreements or as set forth in Section 2.8 or Section 4.1 of the Seller Disclosure Letter or (iv) as otherwise requested or consented to in writing by Buyer, which consent shall not be unreasonably conditioned, withheld or delayed, Seller and its Affiliates shall use commercially reasonable efforts to cause the Business to be conducted in all material respects in the Ordinary Course of Business and Seller shall not permit:
(a)the Company to amend its certificate of incorporation or by-laws (or other comparable Organizational Documents);
(b)except (i) as may be required by any Benefit Plan, (ii) in the Ordinary Course of Business or (iii) in connection with any action that applies uniformly to Business Employees and other similarly situated employees of Seller and its Affiliates,
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the grant to any Business Employee of any material increase in compensation or benefits, including severance or termination pay or adopt, entry into or the material amendment of any Seller Plan;
(c)the Company to issue, sell or grant options, warrants or rights to purchase or subscribe to, enter into any arrangement or contract with respect to the issuance or sale of any Equity Interests;
(d)any material change to the accounting policies or practices presently used by the Company or the Business, except as required by GAAP or applicable Law;
(e)the Company to effect any merger, consolidation recapitalization, reclassification, stock split or like change in its capitalization;
(f)the amendment or modification or termination of any Material Contract or adoption or entering into a new contract that would have been a Material Contract if adopted or entered into prior to the date hereof, except in each case (i) in the Ordinary Course of Business or as required by applicable Law, (ii) any such activity otherwise permitted pursuant to another clause of this Section 4.1, or (iii) as otherwise contemplated or permitted by this Agreement (including Section 4.9 and Section 4.10);
(g)the Company (or, to the extent it would constitute an Assumed Liability, Seller or any of its Affiliates) to incur, create, assume or otherwise become liable for any indebtedness for borrowed money in excess of $100,000, other than any indebtedness for borrowed money that will be repaid, settled and/or as to which the Company will be released from obligations thereunder pursuant to Section 1.1;
(h)the sale, assignment, transfer, conveyance, lease or other disposal of any properties, rights or assets of the Business other than assets sold or disposed of in the Ordinary Course of Business or which are otherwise immaterial to the Business (and excluding any Material Assets, other than Inventory);
(i)the Business to make any capital expenditures or commitments for capital expenditures, other than (i) in the Ordinary Course of Business or (ii) made in response to a current risk of personal injury or damage to property;
(j)the Company to divest or acquire, by merger, consolidation, acquisition of stock or assets, or otherwise, any Person or business or division thereof;
(k)the Company to: (i) make or change any material method of Tax accounting or Tax accounting period; (ii) make, change, rescind or revoke any material election in respect of Taxes; (iii) enter into any closing agreement or other similar agreement in respect of a material amount of Taxes; (iv) file any claim for a refund of material Taxes or surrender any right to claim a material refund or credit of Taxes or other material Tax benefit; (v) settle or compromise or dispute, claim, or assessment with a Governmental Authority with respect to a material amount of Tax; or (vi) file any material Tax Return;
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(l)cancel or reduce in any material respect any insurance coverage covering the Business, whether through a third party provider or captive, except for any cancellation in connection with the replacements of a policy by a new or successor policy of similar coverage; or
(m)any agreement or commitment by Seller in connection with the conduct of the Business to do any of the foregoing.
Section 4.2    Access to Information; Confidentiality; Books and Records.
(a)From the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, upon reasonable notice, Seller shall provide to Buyer and its authorized representatives during normal business hours reasonable access to all books and records of the Business, provided that any such access shall be conducted at Buyer’s expense, in accordance with applicable Law (including any applicable Law relating to antitrust, competition, employment or privacy issues) and any Emergency Measures, under the supervision of Seller’s or its Affiliates’ personnel and in such a manner as to maintain confidentiality and not to unreasonably interfere with the normal operations of the Business and the other businesses of Seller and its Affiliates.
(b)Notwithstanding anything to the contrary in Section 4.2(a), Seller may withhold any document (or portions thereof) or information (i) that is subject to the terms of a non-disclosure agreement with a third party, (ii) that may constitute privileged attorney-client communications or attorney work product and the transfer of which, or the provision of access to which, as reasonably determined by such party’s counsel, constitutes a waiver of any such privilege, (iii) if the provision of access to such document (or portion thereof) or information, as determined by such party’s counsel, would reasonably be expected to conflict with applicable Laws or any Emergency Measures or (iv) relating to the sale process regarding the Business or the Company or any alternative transaction with respect to all or a portion of the Business, bids received from others in connection with such sale process or alternative transactions and information and analysis (including financial analysis) relating to such alternative transactions.
(c)All information provided to Buyer pursuant to this Section 4.2 prior to the Closing shall be held by Buyer as confidential under the terms of that certain Confidentiality Agreement, dated as of January 14, 2021, by and between Nucor and Seller (the “Confidentiality Agreement”) and shall be subject to the Confidentiality Agreement, the terms of which are incorporated herein by reference. Buyer and Seller agree that, if the Closing occurs, the Confidentiality Agreement shall automatically terminate effective upon the Closing. For a period of two (2) years following the Closing Date, (i) Seller shall, and shall cause its Affiliates (excluding the Company) to keep confidential, and not disclose or use, except as otherwise expressly permitted herein or as required for the performance of the Ancillary Agreements, all Business Confidential Information and (ii) Buyer shall, and shall cause its Affiliates (including the Company) to keep confidential, and not disclose or use, except as otherwise expressly permitted herein
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or as required for the performance of the Ancillary Agreements, all Excluded Confidential Information; provided that Seller and its Affiliates may disclose Business Confidential Information and Buyer and its Affiliates may disclose Excluded Confidential Information, in each case (A) to the extent requested or required under any Law, rule or regulation applicable to such party (including reports required to be filed by Seller under the Exchange Act) or (B) to their respective Affiliates and their and their respective Affiliates’ directors, offices, employees, agents and advisors (including auditors, legal counsel and insurance providers) who need to know such information and who are bound by obligations of confidentiality to the disclosing party or one of its Affiliates with respect to such information; provided, further, that, in the event of any such request or requirement, to the extent permitted by Law, the party requested or required to make such disclosure shall (x) give Buyer (in the case of Business Confidential Information) or Seller (in the case of Excluded Confidential Information) prompt written notice of such request or requirement and reasonably consult with Buyer or Seller, as applicable, regarding the timing and content of such disclosure, (y) use commercially reasonable efforts (at Buyer’s or Seller’s, as applicable, expense) to cooperate with Buyer’s or Seller’s, as applicable, reasonable efforts to obtain a protective order or other remedy and (z) with respect to any disclosure, use commercially reasonable efforts to obtain assurances that confidential treatment will be accorded to the information being disclosed. It is understood that the foregoing shall not restrict Seller or its Affiliates from making such disclosure (1) as Seller or its Affiliates deem appropriate in their reasonable judgment (x) in connection with any issuance, incurrence or refinancing of any Indebtedness (including in any relevant offering documents or information memoranda), (y) in connection with any repayment or repurchase offer to the holders of Indebtedness under the Credit Facilities or any other Indebtedness of Seller or its Affiliates pursuant to the terms thereof or (z) pursuant to its reporting obligations under the Credit Facilities or the terms of any other Indebtedness of Seller or its Affiliates or (2) to potential acquirers of all or a material part of, or investors in, Seller’s business (other than the Business), in each case, so long as the recipients of such information are bound by customary confidentiality obligations with respect to such information.
(d)Buyer acknowledges and agrees that Seller and its Affiliates (excluding the Company) shall have the right to retain copies of all books, data, files, information and records in any media of the Company or the Business relating to periods ending on or prior to the Closing Date (i) relating to information (including employment and medical records) regarding the Business Employees, (ii) as may be required by any Governmental Authority, including pursuant to any applicable Law or regulatory request, (iii) as may be necessary for Seller or its Affiliates to perform their respective obligations pursuant to this Agreement or any of the Ancillary Agreements or (iv) constituting an Excluded Asset, in each case subject to compliance with all applicable privacy Laws (such retained books, data, files, information and records, collectively, the “Retained Information”). After the Closing Date, Seller and its Affiliates shall, until the seventh (7th) anniversary of the Closing Date, (A) make the Retained Information (other than any such Retained Information constituting an Excluded Asset) available for inspection and copying by Buyer or its Affiliates (at Buyer’s expense) and (B) cause the employees, counsel and financial advisors of Seller and its Affiliates to reasonably cooperate with Buyer and its Affiliates in connection with their ongoing financial reporting, accounting or other
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purpose related to Buyer’s ownership of the Business after the Closing (including the provision of relevant parts of the books and records of the Company), during normal business hours, upon reasonable request and upon reasonable notice; provided that Seller and its Affiliates may, prior to the seventh (7th) anniversary, elect to destroy any such Retained Information so long as Seller notifies Buyer prior to the destruction of any such material Retained Information and gives Buyer a reasonable opportunity (at Buyer’s expense) to obtain possession thereof.
(e)After the Closing Date, Buyer shall, and shall cause the Company to, until the seventh (7th) anniversary of the Closing Date, (i) retain all material books, records and other documents pertaining to the Business that are in existence on the Closing Date and make the same available for inspection and copying by Seller and its Affiliates (at Seller’s expense) and (ii) cause the employees, counsel and financial advisors of Buyer and its Affiliates to reasonably cooperate with Seller and its Affiliates in connection with their ongoing financial reporting, accounting or other purpose related to Seller and its Affiliates ownership of the Business prior to the Closing (including the provision of relevant parts of the books and records of the Company), during normal business hours, upon reasonable request and upon reasonable notice; provided that Buyer and the Company may, prior to the seventh (7th) anniversary, elect to destroy any such information so long as Buyer notifies Seller prior to the destruction of any such information and give Seller a reasonable opportunity to obtain possession thereof.
(f)Each of Buyer and Seller shall, upon advance written request the other party, shall cause it and its Affiliates to make available, at reasonable times, such books and records and such directors, employees, and agents for fact finding, consultation, and interviews and as witnesses to the extent that any such Person may reasonably be requested by such party in connection with any pending or threatened Litigation, claim or demand asserted by a third party against Buyer, Seller or their respective Affiliates relating to pre-Closing Matters of the Business (excluding any threatened Litigation, claim or demand asserted by Buyer, Seller or their respective Affiliates against another party hereto). The requesting party shall promptly reimburse the other party and/or its Affiliates for any and all reasonable out-of-pocket costs in complying with its obligations under this Section 4.2(f).
(g)Upon advance written request by Buyer, Seller shall, and shall cause its Affiliates to make available, at reasonable times, the Retained Information and such directors, employees, and agents of Seller or its Affiliates for fact finding, consultation, and interviews and as witnesses to the extent that any such Person may reasonably be requested by Buyer in connection with any pending or threatened Litigation, claim or demand asserted by a third party (excluding Seller or their Affiliates) against Buyer or its Affiliates relating to pre-Closing matters of the Business (other than any Retained Assets and Retained Liabilities). Buyer shall promptly reimburse Seller and/or its Affiliates for any and all reasonable out-of-pocket costs in complying with its obligations under this Section 4.2(g).
Section 4.3    Governmental Approvals.
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(a)Subject to the terms and conditions herein provided, each of Buyer and Seller shall, and shall cause their respective Affiliates to, use reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective as promptly as practicable, and not take any action that would reasonably be expected to prevent, materially delay, impair, or impede, the transactions contemplated by this Agreement (including the satisfaction, but not waiver, of the conditions precedent set forth in Article 6). Each of Buyer and Seller shall, and shall cause their respective Affiliates to, use reasonable best efforts to promptly obtain consents of all Governmental Authorities necessary, proper or advisable to consummate the transactions contemplated by this Agreement. Each party hereto shall ensure that filings pursuant to the HSR Act and all other filings required by applicable Competition Laws for the jurisdictions set forth on Section 4.3 of the Seller Disclosure Letter with respect to the transactions contemplated by this Agreement are submitted promptly (and in any event, within ten (10) Business Days) after the date of this Agreement and shall resubmit any such filings as soon as is practicable in the event such filings are rejected for any reason whatsoever by the relevant Governmental Authority. Each party shall supply as promptly as practicable to any Governmental Authority information and documentary material that may be requested by such Governmental Authority in connection with this Agreement or the consummation of the transactions contemplated hereby (including, pursuant to the HSR Act, other Competition Laws or other applicable Laws). Without limiting the foregoing, Buyer, Seller and their respective Affiliates shall not extend any waiting period or comparable period under the HSR Act, other Competition Laws or other applicable Laws or enter into any agreement with any Governmental Authority not to consummate the transactions contemplated hereby, except with the prior written consent of the other party hereto. Notwithstanding the foregoing, nothing in this Section 4.3 or otherwise in this Agreement shall require Buyer, Canada Buyer or any of their respective Affiliates to propose or agree to the sale, divestiture, license or other disposition of any assets or businesses of Buyer, Canada Buyer or any of their respective Affiliates (including the Business) or otherwise take any action that limits its ability to retain any of the businesses, product lines or assets of Buyer, Canada Buyer or any of their respective Affiliates (including the Business).
(b)Each of Buyer and Seller will promptly notify the other party hereto of any written communication made to or received by either Buyer or Seller or any of their respective Affiliates, as the case may be, from any Governmental Authority regarding any of the transactions contemplated hereby, and, subject to applicable Law permit the other party hereto to review in advance any proposed written communication to any such Governmental Authority and consider in good faith and incorporate the other party’s reasonable comments, not agree to participate in any substantive meeting or discussion with any such Governmental Authority in respect of any filing, investigation or inquiry concerning this Agreement or the transactions contemplated hereby unless it consults with the other party hereto in advance and, to the extent permitted by such Governmental Authority, gives the other party the opportunity to attend, and furnish the other party with copies of all correspondence, filings and written communications (and summaries of any oral communications which a Governmental Authority does not permit the other party to attend) between them and their Affiliates and their respective representatives on one hand
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and any such Governmental Authority or its respective staff on the other hand, with respect to this Agreement and the transactions contemplated hereby. Buyer and Seller shall consult with each other prior to taking any material position in discussions with or filings to be submitted to any Governmental Authority in connection with this Agreement. Buyer shall consult with Seller regarding process and strategy but shall have final decision making authority, including as to process and strategy, with respect to obtaining the required consents of any Governmental Authority to the transactions contemplated hereby.
(c)In the event any claim, action, suit, investigation or other proceeding by any Governmental Authority or other Person is commenced which questions the validity or legality of the transactions contemplated hereby or seeks damages in connection therewith, the parties hereto agree to cooperate and use reasonable best efforts to defend against such claim, action, suit, investigation or other proceeding and, if an injunction or other order is issued in any such action, suit or other proceeding, to use reasonable best efforts to have such injunction or other order lifted, and to cooperate reasonably regarding any other impediment to the consummation of the transactions contemplated hereby, in each case, in order to permit the consummation of the transactions contemplated hereby to occur as promptly as practicable. Buyer shall consult with Seller regarding any Litigation in connection with this Section 4.3 involving any Governmental Authority, but shall have final decision making authority regarding whether or not the parties will litigate to oppose any claim, action, suit, investigation or other proceeding or remove any court or regulatory orders impeding the ability to consummate the transactions contemplated by this Agreement (any such matter, an “Antitrust Proceeding”). In the event that Buyer determines not to defend or oppose any such Antitrust Proceeding, Buyer shall promptly give written notice of its decision to Seller (an “Antitrust Notice”).
Section 4.4    Employees and Employee Benefits
(a)Prior to the Closing Date, the employment of any Business Employee (other than the Canadian Business Employees) who is not employed by the Company as of the date of this Agreement shall (unless such Person has ceased to be employed by Seller and its Subsidiaries prior thereto) be transferred to, and each such employee shall become an employee of, the Company, without any interruption or cessation of employment, terms and conditions of employment or break in service. Each Business Employee employed by Seller or its Affiliates (including the Company) as of the Closing Date shall be referred to herein as a “Transferred Business Employee”. As of the Closing Date, Seller shall cause Transferred Business Employees to cease accruing any benefits under any Benefit Plan or Seller Plan with respect to services rendered or compensation paid on or after the Closing Date.
(i)At least ten (10) days prior to the Closing Date, Buyer shall, or shall cause one of its Affiliates to, offer employment in writing to each Canadian Business Employee conditional and effective on the Closing. Offers pursuant to this Section 4.4(a)(i) shall be for employment on substantially the same terms (including the same work location and comparable hours) as applicable to such
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Canadian Business Employee immediately prior to the Closing, and shall otherwise comply with applicable Law with respect to such offers and this Section 4.4. Each Canadian Business Employee who accepts such offer of employment from Buyer or its Affiliate shall, upon the Closing Date, become a Transferred Business Employee for all purposes of this Agreement. A Canadian Business Employee shall be deemed to have accepted such offer of employment from Buyer or its Affiliate if such Canadian Business Employee presents himself or herself as available for work on the first Business Day for which such Canadian Business Employee is scheduled to work following the Closing. Notwithstanding the foregoing, Buyer may make an offer of employment pursuant to this Section 4.4(a)(i) to any Canadian Business Employee who is absent from work on the Closing Date due to approved leave (an “Inactive Business Employee”) that is conditional and effective on the date that such Inactive Business Employee returns to active employment (with or without accommodation required by applicable Law), and the Inactive Business Employee shall be deemed to be a “Transferred Business Employee” on the date such Inactive Business Employee returns to active employment.
(ii)In the event that either (a) a Canadian Business Employee does not, for any reason, become a Transferred Business Employee or (b) the consummation of the transactions contemplated by this Agreement, any action taken in order to effectuate such transactions, or Buyer’s or its Affiliates’ failure to provide to any Transferred Business Employee the terms and conditions of employment required under applicable Law, and in any such case such failure results in any obligation, contingent or otherwise, of Seller or its Affiliates to pay any termination pay, severance pay, pay in lieu of notice or other compensation or benefits to any Business Employee, or any additional Liability is incurred by Seller or its Affiliates in connection therewith, Buyer shall, and shall cause its Affiliates to, reimburse and otherwise hold harmless Seller and its Affiliates for all such compensation benefits and additional Liabilities (each, a “Business Employee Liability”).
(iii)Seller and its Affiliates shall use commercially reasonable efforts to assist the transition of the Canadian Business Employee to Buyer or one of its Affiliates, and shall instruct its officers not to attempt in any way to discourage any Canadian Business Employee from accepting the offer of employment made by Buyer or one of its Affiliates, provided, that nothing herein shall be construed as a representation or guarantee by Seller and its Subsidiaries that any particular Canadian Business Employee will accept such offer of employment.
(iv)Buyer shall not assume any of the Canada Benefit Plans. The Canadian Business Employees shall, as of the Closing Date, cease to accrue further benefits under the Canada Benefit Plans (or the date such Inactive Business Employee becomes a Transferred Business Employee). Buyer agrees that it shall permit the Canadian Business Employees who become Transferred Business Employees to participate in benefit plans sponsored by Buyer (such plans to be called the “Canada Replacement Plans”).
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(b)During the period beginning on the Closing Date and ending on the first (1st) anniversary of the Closing Date (the “Continuation Period”), Buyer shall provide each Transferred Business Employee with (i) at least the same wage rate or base salary, level in effect for such Transferred Business Employee immediately prior to the Closing, and (ii) qualified retirement plan and welfare plan employee benefits (within the meaning of Section 3(1) of ERISA) that are no less favorable in the aggregate than those provided to such Transferred Business Employee immediately prior to the Closing. Through the conclusion of the 2021 calendar year, Buyer shall provide Transferred Benefit Employees, who were eligible under each applicable Seller Plan, with cash incentive compensation opportunities comparable to those provided to such Transferred Business Employees immediately prior to the Closing under the following Seller Plans: (i) annual Short-Term Incentive Plan; (ii) manufacturing gain share plan; and (iii) sales commission program (the “Continuing Incentive Opportunities”). For the duration of the Continuation Period following the end of the 2021 calendar year, each Transferred Business Employee shall be provided with cash incentive (including commission) opportunities comparable to those provided to Buyer’s (or its Affiliate’s) similarly situated employees. Except with respect to payments forfeited in connection with a termination of employment, the aggregate amount actually paid to the Transferred Business Employees for 2021 under the Continuing Incentive Opportunities shall be no less than the aggregate accrued amount of cash incentive compensation included in the Closing Date Working Capital, as governed by plans, programs or arrangements of Buyer and its Affiliates (including the Company) in Buyer’s discretion. Notwithstanding the foregoing, Buyer shall (x) not be prohibited by this Section 4.4(b) from terminating the employment of any Transferred Business Employee following the Closing Date and (y) in addition to meeting the applicable requirements of this Section 4.4, comply with any additional obligations arising under applicable Laws governing the terms and conditions or termination of employment of the Transferred Business Employees.
(c)As of and after the Closing, Buyer shall, or shall cause the Company to, give each Transferred Business Employee full credit for all purposes under (i) each employee benefit plan, policy or arrangement, and (ii) any paid time off policy, in each case maintained or made available for the benefit of Transferred Business Employees as of and after the Closing by Buyer or any of its Affiliates, for such Transferred Business Employee’s service prior to the Closing with Seller and its applicable Affiliates (including the Company) and their respective predecessors, to the same extent such service is recognized by Seller and its applicable Affiliates (including the Company) for analogous Seller Plans immediately prior to the Closing; provided that such credit shall not be given for purposes of benefit accrual under any defined benefit pension plan or to the extent that it would result in a duplication of benefits for the same period of service. With respect to US based Transferred Business Employees and in accordance the applicable plan terms, Buyer shall use commercially reasonable efforts to waive pre-existing condition exclusions, eligibility and waiting periods and evidence of insurability requirements under Buyer’s employee benefit plans in which Transferred Business Employees will participate following the Closing, as well as to provide credit for deductibles, coinsurance and other out-of-pocket costs incurred prior to the Closing Date for the year of Closing under such benefit plans.
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(d)Buyer will recognize and assume all Liabilities with respect to accrued but unused vacation time for all Transferred Business Employees (including, without limitation, any Liabilities to Transferred Business Employees for payments in respect of earned but unused vacation time that arise as a result of the transfer of employment contemplated by this Section 4.4), to the extent such Liabilities are accrued and accounted for in the calculation of the Closing Date Net Working Capital (the “Transferred Business Employees Paid Time Off Liability”). Buyer shall allow Transferred Business Employees to use the vacation, sick leave and personal time recognized or established in accordance with the first sentence of this Section 4.4(d) in accordance with the terms of the paid time off programs of applicable to such Transferred Business Employees immediately prior to the Closing Date.
(e)Buyer and its Affiliates shall not at any time prior to ninety (90) days after the Closing Date effectuate a “plant closing” or “mass layoff” as such terms are defined in the Worker Adjustment and Retraining Notification Act of 1988 (“WARN”) or effectuate any similar triggering event under any other applicable Law, affecting in whole or in part any site of employment, facility, operating unit or Transferred Business Employee. Buyer agrees to provide any required notice under WARN and any other applicable Law and to otherwise comply with any such statute with respect to any “plant closing” or “mass layoff” (as defined in WARN) or any similar triggering event under any other applicable Law occurring on or after the Closing or arising as a result of the transactions contemplated hereby.
(f)Buyer and Seller acknowledge and agree that, with effect from the Closing Date, the Transferred Business Employees shall cease to be eligible to contribute to Seller’s and its Affiliates’ defined contribution savings plan(s) that are qualified under Section 401(a) of the Code (the “Seller’s Savings Plans”). With effect from the Closing Date, Buyer shall establish or otherwise maintain, or shall cause one or more of its Affiliates to establish or otherwise maintain, one or more defined contribution savings plans that are qualified under Section 401(a) of the Code (the “Buyer’s Savings Plan”) that shall permit immediate participation as of the Closing Date for the Transferred Business Employees who remain employed by a U.S. employer, credit all service that was credited under Seller’s Savings Plans for purposes of the eligibility, vesting and match eligibility requirements of Buyer’s Savings Plan, provide for tax-deferred contributions pursuant to Section 401(k) of the Code and accept elective direct rollovers of Transferred Business Employees’ accounts (including any loans) under Seller’s Savings Plans.
(g)With respect to the Transferred Business Employees who participate in the Seller Long-Term Incentive Plan prior to the Closing Date (as identified in the document described in Section 4.4(g) of the Seller Disclosure Letter, the “LTIP Summary”), Buyer shall compensate each such participant for any unvested equity-based awards under the Seller Long-Term Incentive Plan, as described in the LTIP Summary, that remain outstanding immediately prior to the Closing, pursuant to a cash-based bonus opportunity that will become payable on the terms described below (the “LTIP Replacement Bonus”). The portion of the LTIP Replacement Bonus available to be received by any holder of restricted stock units (“RSUs”) with respect to each award allocation, as described in the
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LTIP Summary, shall equal the value of one (1) share of Seller’s common stock determined by using the average per share closing price reported on the New York Stock Exchange for each trading day over the preceding thirty (30) day look back period prior to the Closing Date (the “Per Share Value”) multiplied by the number of RSUs held on the Closing Date (the “Cash RSU Value”). Unless the value of such an award has otherwise been fixed prior to the Closing Date, the portion of the LTIP Replacement Bonus available to be received by any holder of performance restricted stock units (“PSUs”), as described in the LTIP Summary, shall be calculated with respect to the target number of such PSUs multiplied by the Per Share Value (the “Cash PSU Value”). The portion of the LTIP Replacement Bonus available to be received by any holder of options, as described in the LTIP Summary, shall equal, in the aggregate, the product of (x) the difference between the Per Share Value minus the applicable exercise price, multiplied by (y) the Per Share Value (such aggregate value, the “Cash Option Value”). For the avoidance of doubt, the total value of the LTIP Replacement Bonus that each individual described in the LTIP Summary shall be eligible to receive shall equal, to the extent applicable for each such individual, the sum of the Cash RSU Value (if any), the Cash PSU Value (if any) and the Cash Option Value (if any). Any amounts in respect of an LTIP Replacement Bonus potentially payable pursuant to this Section 4.4(g) shall be paid in accordance with the applicable vesting schedule for the RSUs, PSUs and options on which the value of such LTIP Replacement Bonus is based, in each case as identified in the LTIP Summary. Notwithstanding the foregoing, all compensation potential payable pursuant to the LTIP Replacement Bonuses described in this Section 4.4(g) shall be subject to the applicable participant’s remaining actively employed through the payment date consistent with the terms of the Seller Long-Term Incentive Plan. From the date hereof through the Closing, neither Seller nor any of its Affiliates shall grant any award pursuant to the Seller Long-Term Incentive Plan.
(h)From and after the Closing, Buyer shall honor (and assume as necessary), or shall cause the Company to honor (and assume as necessary), the Transferred Plans set forth on Section 4.4(h) of the Seller Disclosure Letter as in effect immediately prior to the Closing. Nothing contained in this Agreement is intended to prevent Buyer, the Company or any of their Affiliates from amending or terminating any Transferred Plan in accordance with its terms after the Closing.
(i)Buyer and Seller hereby agree to follow the alternate procedure for United States employment tax withholding as provided in Section 5 of Rev. Proc. 2004-53, 2004-34 I.R.B. 320. Accordingly, Seller shall have no United States employment tax reporting responsibilities, and Buyer or its Affiliate, as the successor employer to Seller, shall have full United States employment tax reporting responsibilities, for Transferred Business Employees subject to United States employment taxes following the close of business on the Closing Date. In addition, Buyer and Seller hereby agree to adopt the “alternative procedure” of Revenue Procedure 2004-53 for purposes of filing IRS Forms W-4 (Employee’s Withholding Allowance Certificate) and W-5 (Earned Income Credit Advance Payment Certificate).
(j)Without limiting the provisions of Exhibit B or this Agreement, Buyer and Seller hereby agree that with respect to all Pre-Closing Employment Liabilities provided
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for in subsection (c) of the definition thereof (costs for timely submitted outstanding and unpaid health claims arising prior to the Closing Date for Business Employees and their dependents and beneficiaries under any self-insured Seller Plan providing for group health benefits), Seller shall or shall through the applicable Seller Plan pay or satisfy all valid claims incurred prior to the Closing in full in a timely manner in accordance with the terms of the applicable Seller Plan and shall provide Buyer with a written request for reimbursement for such payments (after applying any applicable stop loss coverage reimbursement), which shall contain evidence, which shall not include “Protected Health Information” (within the meaning of the Health Insurance Portability and Protection Act of 1996), of such payment accompanying any requests for reimbursement. Buyer shall reimburse Seller for the amount of such payments subject to the reimbursement request within thirty (30) days of the receipt of the applicable request for reimbursement; provided, however, that Buyer shall have no obligation to reimburse Seller with respect to any claim submitted to Seller or the applicable Seller Plan following the (6) month anniversary of the Closing Date that was not paid by Seller with ninety (90) days of the receipt of claim. In the event of a dispute regarding whether a payment is validly subject to reimbursement under this provision, including the determination of whether such claim is covered by the reimbursement mechanism contained herein, Buyer and Seller agree to take commercially reasonable steps to resolve such dispute in a timely manner.
(k)Seller acknowledges and agrees that from and after the Closing Date Seller shall have no right to enforce any non-competition covenant contained in any Retention Letter identified on Schedule 2.16(a)(i) in respect of the services performed from and after the Closing Date by any Retention Letter holder on behalf of the Company, any Affiliate or Buyer.
(l)Nothing contained in this Section 4.4, expressed or implied, is intended to confer upon any Person any benefits under any benefit plans, programs, policies or other arrangements, including severance benefits or right to employment or continued employment with Buyer for any period. In addition, the provisions of this Agreement, in particular this Section 4.4, are solely for the benefit of the parties to this Agreement and no current or former employee shall be regarded for any purpose as a third-party beneficiary of this Agreement or otherwise entitled to enforce the provisions of this Section 4.4.
Section 4.5    Public Announcements. Neither Buyer nor Seller shall make, or permit any of their respective Affiliates or representatives to make, any public announcement in respect of this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby without the prior written consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed), except as may be required (a) to obtain consents and approvals, and to provide such notices and make such filings, necessary, proper or reasonably advisable to consummate the transactions contemplated by this Agreement, (b) by Law, rule or regulation applicable to Buyer or Seller or any of their respective Affiliates, including reporting required of Buyer or Seller under the Exchange Act (and only to the extent so required) or (c) in the case of Buyer or Seller, pursuant to internal announcements to employees; provided, that the announcing party shall inform the other party prior to any such announcement and consider in good faith any comments from such other party prior to making any such announcement, and any
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such disclosure is generally consistent with the parties’ prior public disclosures regarding the transactions contemplated hereby. It is understood that the foregoing shall not restrict Seller and its Affiliates from making disclosure (i) as Seller or its Affiliates deem appropriate in its reasonable judgment (A) in connection with any issuance, incurrence or refinancing of any Indebtedness (including in any relevant offering documents or information memoranda), (B) in connection with any repayment or repurchase offer to the holders of indebtedness for borrowed money under the Credit Facilities or any other indebtedness for borrowed money of Seller or its Affiliates pursuant to the terms thereof or (C) pursuant to its reporting obligations under the Credit Facilities or the terms of any other Indebtedness of Seller or its Affiliates or (ii) to potential acquirers of all or a material part of, or investors in, Seller’s business (other than the Business), in each case, so long as the recipients of such information are bound by customary confidentiality obligations with respect to such information.
Section 4.6    D&O Indemnification.
(a)From and after the Closing Date until six (6) years from the Closing Date, Buyer shall or shall cause the Company to indemnify, defend, hold harmless, and advance expenses to (to the extent consistent with the Company’s Organizational Documents as of the Closing Date), the individuals who on or prior to the Closing Date were directors or officers of the Company with respect to all acts or omissions by them in their capacities as such or taken at the request of the Company at any time on or prior to the Closing Date.
(b)Except as required by applicable Law, the certificates of incorporation, by-laws and all other organization documents of the Company shall not be amended, repealed or otherwise modified for a period of three (3) years from the Closing Date in any manner that would adversely affect the rights thereunder of individuals who at or at any time prior to the Closing Date were directors, officers, agents or employees of the Company or otherwise entitled to indemnification pursuant to the Company’s certificate of incorporation, by-laws or other Organizational Documents.
(c)Buyer shall cause the Company to obtain with effect from the Closing Date and shall cause the Company to maintain in effect for six (6) years after the Closing Date a “run-off” or “tail” directors’ and officers’ liability insurance policy to the current policy for the Company with respect to matters occurring prior to the Closing and having coverage limits in at least the same aggregate amount as provided in the current policy for such six (6)-year period and terms and conditions otherwise no less advantageous to the indemnitees than the terms and conditions of the current policy for the Company. The provisions of this Section 4.6 are intended to be for the benefit of, and shall be enforceable by, each officer and director entitled to indemnification under this Section 4.6, his or her heirs and his or her representatives and are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. From and after the Closing Date, Buyer hereby agrees that the Company is the indemnitor of first resort (i.e., their obligations to such officers and directors are primary and any obligation of any secondary indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by any such officer or director are secondary).
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Section 4.7    R&W Insurance. At its election, on or prior to the Closing, Buyer may procure a buyer-side representation and warranty insurance policy (the “R&W Insurance Policy”) the cost of the premium of which will be borne fifty percent (50%) by Buyer and fifty percent (50%) by Seller. Seller’s portion of the cost of such premium shall be treated as a Transaction Expense. Any such R&W Insurance Policy shall include a provision whereby the insurer under the R&W Insurance Policy expressly waives, and agrees not to pursue, directly or indirectly, any subrogation rights against Seller or its Affiliates or any former or current equityholder(s), managers, members, directors, officers, employees, agents or representatives of Seller or its Affiliates in connection with this Agreement and the transactions contemplated hereby with respect to any claim made by an insured thereunder, except in the case of Fraud by any such Person in connection with this Agreement. Buyer shall not waive, amend or modify such subrogation provision, or allow such subrogation provision to be waived, amended or modified, without the prior written consent of Seller.
Section 4.8    Resignations. On the Closing Date, Seller shall cause to be delivered to Buyer duly signed resignations, effective immediately after the Closing, of all of the directors of the Company and the officers thereof, and shall take such other action as is necessary to cause such persons to no longer be directors or officers of the Company, as the case may be, immediately after the Closing.
Section 4.9    Affiliate Agreements; Intercompany Balances. Prior to the Closing Date, Seller shall cause all Affiliate Contracts to be settled or terminated prior to the Closing without any Liability on the part of the Company (following Closing), Buyer or any of its Affiliates (including Liability arising from such termination), except for this Agreement, the Ancillary Agreements, as contemplated by Section 4.10, those contracts or other transactions set forth on Section 4.9 of the Seller Disclosure Letter. For the avoidance of doubt, such settlement shall, to the extent applicable, include Seller causing to be paid or discharged any intercompany Indebtedness owed by or to the Company.
Section 4.10    Pre-Closing Steps; Third-Party Consents.
(a)Prior to the Closing, Seller shall, and shall cause its applicable Affiliates to, take all actions necessary to effect and carry out the steps set forth in Exhibit B (such steps set forth in Exhibit B, the “Pre-Closing Steps”) as the same may be amended by mutual written agreement between Seller and Buyer, including making timely requests for any required third party consents or approvals to transfer any Material Contracts; provided that, and subject to the proviso at the end of this clause (a), in the event the Pre-Closing Steps (other than Clause 2 thereof) have not been completed as of Closing notwithstanding the reasonable best efforts of Seller, due solely to the failure to obtain one or more third party consents or approvals or other action of a Governmental Authority or other third party, in each case, that is legally necessary for a Transferred Business Contract to be transferred or an Assumed Liability relating thereto to be assumed, in each case, as contemplated hereby, or because such transfer or assumption would violate any applicable Law, Seller shall be deemed to have complied with this clause (a) for purposes of satisfying the condition to Closing; provided, however, (i) the foregoing shall not be deemed to include the failure by Seller to (A) obtain the Required Consents, (B) complete the amalgamation of Robertson Building Systems, Limited and
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Gienow Canada Inc. (per Clause 2 of Exhibit B) immediately prior to Closing, and (C) to assign in full to the Company any Transferred Business Contract which does not require the consent or approval of the counterparty to such assignment to the Company; (ii) following the Closing, Seller shall continue to take such actions as are required to complete the Pre-Closing Steps to assign the Transferred Business Contracts as well as any Transferred Assets not assigned or conveyed to the Company at or prior to the Closing, and the Assumed Liabilities relating thereto to the Company for the benefit of Buyer, consistent with this Section 4.10.
(b)Each party to this Agreement agrees to reasonably cooperate in using commercially reasonable efforts to seek to obtain any consents and approvals of Persons other than Governmental Authorities that may be required in connection with the Pre-Closing Steps and the other transactions contemplated by this Agreement. Seller agrees that in executing the Pre-Closing Steps it shall use its commercially reasonable best efforts to make such filings, and obtain such consents or approvals, as may be required to cause the Company to receive the Transferred Assets and the Assumed Liabilities.
(c)Notwithstanding anything to the contrary in this Agreement, if any consent, approval or other action necessary for the transfer of any Transferred Business Contracts as contemplated herein is not obtained or does not occur, as the case may be, prior to the Closing or the transfer or assumption of any Transferred Business Contracts or Assumed Liabilities relating thereto cannot be completed due to the fact that such transfer would violate applicable Law, the Closing shall (subject to the satisfaction or waiver of the conditions set forth in Article 6) nonetheless take place on the terms set forth herein and, thereafter until the earlier of when such consent, approval or other action is obtained or occurs, as the case may be, or such transfer would no longer violate applicable Law, and the one year anniversary of the Closing Date, (i) Seller shall use commercially reasonable efforts to cause any such Transferred Business Contracts and Assumed Liabilities relating thereto not transferred for any reason prior to the Closing to be transferred, assigned and assumed by the Company for the benefit of Buyer’s acquisition of the Company (including using Seller’s best reasonable commercial efforts to obtain any required third party consent or action or permission of Governmental Authority); (ii) each of Seller and Buyer shall, and shall cause each of their respective Subsidiaries to, in cooperation with each other, use their commercially reasonable efforts to obtain or effect, as the case may be, such consent, approval or other action or effectuate such transfer in compliance with applicable Law, as promptly as practicable; and (iii) prior to receiving any such consent or approval, Seller and Buyer shall, and shall cause their respective Subsidiaries to, enter into alternative reasonable arrangements under which (A) Buyer shall obtain the economic claims, rights and benefits under any Transferred Business Contract with respect to which such consent has not been obtained (including with Seller remaining responsible under any Transferred Business Contract under a pass through or back to back arrangement with the Company or Buyer, as applicable) and (B) the Company or Buyer shall assume any related economic burden with respect to such Transferred Business Contract, including any Taxes, except with respect to any Retained Liability. In such case, Seller shall agree to take such actions as are reasonably necessary to maintain such Transferred Business Contract in good standing, on substantially the same commercial terms, not to amend, terminate, nor act in breach or default of same, and otherwise use all commercially reasonable best efforts to
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provide to the Company and/or Buyer substantially the same economic benefits as the Company and/or Buyer would have enjoyed under such Transferred Business Contract had any required third party consent or approval been obtained to fully assign such Transferred Business Contract to the Company (but, for the avoidance of doubt, with the Company or Buyer, as the case may be, responsible for all liabilities under such Transferred Business Contract to the same extent as the Company or Buyer would have owned such Transferred Business Contract. Notwithstanding any other provisions of this Section 4.10, Section 4.11 or otherwise, and except with respect to the Required Consents, the efforts referred to herein shall not require (x) the payment of any consideration (monetary or otherwise) or the concession or provision of any right, other than the payment of de minimis costs and expenses, or (y) the amendment or modification in any manner materially adverse to any party hereto of any contract with any third Person, unless the party affected is Buyer and its Affiliates, in which case Buyer shall make the determination whether or not to amend or modify such contract.
Section 4.11    Divided Commingled Contracts. Seller and Buyer acknowledge that Seller and its Affiliates are parties to certain contracts set forth on Section 4.11 of the Seller Disclosure Letter (the “Divided Commingled Contracts”). Seller, on the one hand, and Buyer, on the other hand shall reasonably cooperate with each other and use their respective reasonable best efforts (i) to notify the third party that is the counterparty to each Divided Commingled Contract and, to the extent reasonably within the contractual or other ability or control of Seller or Buyer or their respective Affiliates, as the case may be, to cause the applicable Divided Commingled Contract to be apportioned (including by obtaining the consent of such counterparty to enter into a new contract or amendment, splitting or assigning in relevant part such Divided Commingled Contract) between (A) the Company, upon terms reasonably acceptable to Buyer, and (B) Seller and its Affiliates (other than the Company), pursuant to which Seller and its Affiliates (other than the Company) will assume all of the rights and obligations under such Divided Commingled Contract that relate to businesses other than the Business, on the one hand, and the Company will assume all of the post-Closing rights and obligations under such Divided Commingled Contract that relate to the Business, on the other hand, and (ii) to the extent reasonably within the contractual or other ability or control of Seller or Buyer or their respective Affiliates, (A) in the case of Seller and its Affiliates, cause the applicable counterparty to release the Company, as applicable, from the obligations of Seller and its Affiliates arising after the Closing Date under the portion of the Divided Commingled Contract apportioned to Seller and its Affiliates and, (B) in the case of the Company, cause the applicable counterparty to release Seller and its Affiliates from the obligations of the Company arising after the Closing Date under the portion of the Divided Commingled Contract apportioned to the Company. From and after the Closing, (x) Buyer and its Affiliates shall indemnify and hold harmless Seller and its Affiliates for all Losses arising from or relating to the portion of any Divided Commingled Contract apportioned to the Company and (y) Seller shall indemnify and hold harmless Buyer and its Affiliates (including the Company) for all Losses arising from or relating to the portion of any Divided Commingled Contract apportioned to Seller and its Affiliates.
Section 4.12    Wrong-Pockets.
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(a)If, following Closing and prior to the one (1)-year anniversary of the Closing, Buyer or the Company (i) except to the extent reflected or otherwise taken into account in the Final Purchase Price, receives a payment with respect to an Excluded Asset or (ii) becomes aware that it owns any Excluded Asset, Buyer shall or shall cause the Company to promptly inform Seller of that fact in writing. Thereafter, at the request of Seller, Buyer undertakes (and Seller shall reasonably cooperate with Buyer), as applicable, (A) to reimburse and/or cause the Company to reimburse Seller or the relevant Affiliate (excluding the Company) of Seller the amount referred to in clause (i) above or (B) to execute and/or cause the Company to execute such documents as may be reasonably necessary to procure the transfer of any such Excluded Asset to Seller or an Affiliate of Seller nominated by Seller.
(b)If, following Closing and prior to the one (1)-year anniversary of the Closing, Seller or any Affiliate of Seller (other than the Company) (i) receives a payment with respect to an Transferred Asset or (ii) becomes aware that it owns any Transferred Asset, Seller shall, or shall cause such Affiliate (other than the Company) of Seller to, promptly inform Buyer of that fact in writing. Thereafter, at the request of Buyer, Seller shall undertake (and Buyer shall reasonably cooperate with Seller), as applicable, (A) to reimburse and/or cause its relevant Affiliate (other than the Company) to reimburse the Company the amount referred to in clause (i) above or (B) to execute and/or cause the relevant Affiliate (other than the Company) of Seller to execute such documents as may be reasonably necessary to procure the transfer of any such Transferred Asset to the Company.
Section 4.13    Ancillary Agreements. Seller and Buyer shall, or shall cause their respective Affiliates to, at or prior to the Closing enter into the Ancillary Agreements.
Section 4.14    Use of Intellectual Property.
(a)Buyer acknowledges and agrees that (i) Seller and its Affiliates (other than the Company) are retaining all rights with respect to the Seller Marks and (ii) except as provided in the following sentence, neither Buyer nor its Affiliates (including, following the Closing, the Company) will have any right to use any of the Seller Marks or any derivative thereof. As soon as reasonably practicable after the Closing Date, but in any event within three (3) months after the Closing Date, Buyer shall, and shall cause its Affiliates who receive any Transferred Assets or Assumed Liabilities (including the Company) to, cease all use of Seller Marks and any other Trademark confusingly similar to any of the foregoing (including any derivation, translation, adaptation, combination or variation thereof in any language that is confusingly similar thereto) alone or together with other words, or logos, slogans, symbols or designs in any form, variation or manner, including by removing the Seller Marks from (A) any and all exterior signs and other identifiers located on or attached to any property, buildings, vehicles, signs or premises of the Business, (B) all letterhead, envelopes, invoices, supplies, labels, product packaging and inserts, websites, promotional materials, marketing collateral, advertisements and other communications media or materials of any kind, and (C) any corporate name of, or trade name used by, the Company. Buyer and its Affiliates (including the Company) shall assure that all products and services provided in connection with the Seller Marks
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are of a level of quality equal to or greater than the quality of goods and services with respect to which Seller and its Affiliates used the Seller Marks prior to the Closing and, at Seller’s request, shall provide appropriate documentation to confirm compliance with the foregoing.
Section 4.15    Transition Plan. From the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, Seller and Buyer shall cooperate in good faith and use commercially reasonable efforts to develop a mutually agreed transition plan (the “Transition Plan”) for winding down the provision of the Services, which shall include plans for migrating the IT Systems, data, records and processes of the Business. Seller and Buyer shall use commercially reasonable efforts to agree on the Transition Plan prior to the Closing Date; provided that to the extent the Transition Plan, or any parts thereof, has not been agreed to on or prior to the Closing Date, the parties shall continue to cooperate in good faith and use commercially reasonable efforts to reach agreement on such the remaining portions of the Transition Plan and update the Transition Plan accordingly upon reaching such agreement; provided, further, that in no event shall a Service Provider be obligated to provide any of the Services beyond the Term. As used in this Section 4.15, the terms “Service Provider,” “Services” and “Term” shall have the respective meanings ascribed to such terms in the form Transitional Services Agreement attached hereto as Exhibit C.
Section 4.16    Non-Competition; Non-Solicitation. Except as expressly provided in any Ancillary Agreement or with the prior written consent of Buyer, Seller shall not, and shall cause each of its Subsidiaries not to, directly or indirectly:
(a)for a period of four (4) years from and after the Closing Date, engage in the business of, directly or indirectly, manufacturing composite panels containing metal skins with an insulated foam or mineral wool core in the United States or Canada for use in the architectural, commercial, industrial institutional and cold storage markets, for both wall and roof applications (the “Competing Activity”) or own or operate any business conducting the Competing Activity; provided that, notwithstanding the foregoing, this Section 4.16(a) shall not be deemed breached as a result of (i) Seller or its Subsidiaries performing any act or conducting any business expressly required by this Agreement or any Ancillary Agreement, (ii) the acquisition or ownership, directly or indirectly, by Seller or its Subsidiaries of (A) the securities of any Person that engages in the Competing Activity if Seller or its Subsidiaries, directly or indirectly, do not own more than 5% of the aggregate outstanding equity securities of such Person or (B) any Person that engages in the Competing Activity if such Competing Activity accounts for 15% or less of the consolidated annual revenues of such Person (based on such Person’s latest annual financial statements); provided that if the revenue of any such acquired Person derived from a Competing Activity exceeds 15% of such Person’s consolidated revenue, then this Section 4.16(a) shall not be deemed breached so long as Seller or its Subsidiaries, as the case may be, divests its ownership of such Person within twelve (12) months following such acquisition or (iii) Seller or its Subsidiaries engaging in any activity (other than the Competing Activity) to the extent Seller or its Subsidiaries engages in such activity as of the date hereof, and any reasonable extensions thereof; or
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(b)for a period of eighteen (18) months from and after the Closing Date, solicit, induce for employment or hire any managerial, executive or comparable leadership level employee of the Business as of the Closing Date (any such person, a “Covered Person”); provided that the foregoing restriction shall not prohibit the solicitation for employment or hiring of (i) any Covered Person who contacts Seller or its Affiliates in response to any general solicitation or advertising not specifically directed at such Covered Person, (ii) any Covered Person who has not been employed by the Company or the Buyer for a period of at least six (6) months prior to the date of such solicitation or hire and (iii) any Covered Person who contacts Seller or its Subsidiaries on his or her own initiative without any solicitation by Seller or its Subsidiaries.
This Section 4.16 shall not apply with respect to any Person that owns or acquires, directly or indirectly, an interest in all or any portion of the stock or assets of Seller or any of its Affiliates.
Section 4.17    Exclusivity. Until the earlier of (a) the Closing or (b) such time as this Agreement has been validly terminated pursuant to Article 7, Seller shall not, and each shall cause its Affiliates and its and their respective officers, directors, agents, and any other Persons acting at the direct of Seller or its Affiliates, not to, directly or indirectly, solicit, initiate, knowingly encourage or entertain any inquiries or proposals from, discuss or negotiate with, provide any nonpublic information to, or consider the merits of any inquiries or proposals from, any Person (other than Buyer) which may lead, directly or indirectly, to (i) a sale or disposition of any of the Transferred Assets, the Equity Interests, or the Business (in whole or in part) (other than the sale of Inventory or dispositions of obsolete or unused equipment, in each case, in the Ordinary Course of Business), (ii) issuance or sale of any shares or ownership interests in the Company (or the right to acquire the same) or, other than as contemplated by this Agreement, other merger, consolidation, restructuring or reorganization involving the Company or the Transferred Assets, or (iii) any other transaction or action that would have a material and adverse effect on the ability of Seller or any of its Subsidiaries to consummate the transaction contemplated hereby on the terms hereof. Seller hereby confirms that it has previously terminated any and all other negotiations related to any such disposition of the Business (whether in whole or in part) with all Persons other than Buyer.
Section 4.18    Further Assurances. Each party hereto shall, and shall cause its Affiliates and its Affiliates’ representatives to, execute and deliver such additional instruments, documents, conveyances or assurances and take such other actions as shall be necessary, or otherwise reasonably be requested by the other party, to confirm and assure the rights and obligations provided for in this Agreement and the other Ancillary Agreements and render effective the consummation of the transactions contemplated hereby and thereby, or otherwise to carry out the intent and purposes of this Agreement.
Article 5
Tax Matters
Section 5.1    Cooperation. Buyer and Seller shall (and shall cause their respective Affiliates to) (a) provide the other party and its Affiliates with such assistance as may be
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reasonably requested in connection with such Person’s Tax affairs and (b) retain (and provide the other party and its Affiliates with reasonable access to) all records or information which may be relevant to such Tax Return, audit, examination or proceeding; provided that the foregoing shall be done in a manner so as not to interfere unreasonably with the conduct of the business of the parties.
Section 5.2    Transfer Taxes. All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with the Pre-Closing Steps contemplated by this Agreement and the Ancillary Agreements (including any real property transfer Tax and any similar Tax) shall be paid by Seller when due, and Seller will, at its own expense, file all necessary Tax Returns and other documentation with respect to all such Taxes and fees. All other transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with the transactions contemplated by this Agreement shall be paid by Buyer and Canada Buyer when due and Buyer and Canada Buyer will, at their own expense, file all necessary Tax Returns and other documentation with respect to all such Taxes and fees, and, if required by applicable Law, Seller will, and will cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.
Section 5.3    Tax Elections.
(a)Canada Buyer and Canada Seller shall, if applicable, jointly execute and file elections under subsection 167(1) of the ETA and the equivalent or corresponding provisions of any other applicable provincial statutes, in the form prescribed for such purposes, such that the goods and services tax and the harmonized sales tax levied under the ETA (“HST”) and any other applicable provincial sales tax will not be payable in respect of the sale of the Canada Transferred Assets. Canada Buyer shall timely file such election forms with the appropriate Governmental Authorities in the prescribed manner.
(b)Canada Buyer and Canada Seller shall, if applicable, jointly execute and file elections under Section 22 of the Tax Act and the equivalent or corresponding provisions of any other applicable provincial or territorial statutes with respect to the sale of the accounts receivable and to designate in such election an amount equal to the portion of the Canadian Purchase Price allocated to accounts receivable pursuant to Section 1.2(e)(ii). Canada Buyer and Canada Seller shall file within the prescribed time the prescribed election forms required to give effect to the foregoing.
(c)Canada Buyer and Canada Seller shall, if applicable, jointly execute and file elections under subsection 20(24) of the Tax Act in the manner required by subsection 20(25) of the Tax Act and the equivalent or corresponding provisions of any other applicable provincial or territorial statute, in the prescribed forms and within the time required, as to such amount paid by Canada Seller to Canada Buyer for assuming future obligations. In this regard, Canada Buyer and Canada Seller acknowledge that a portion of the Canada Transferred Assets transferred by Seller pursuant to this Agreement and having a value equal to the amount elected under subsection 20(24) of the Tax Act and the equivalent provincial provisions is being transferred by Seller as a payment for the assumption of such future obligations by Canada Buyer.
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(d)If requested by Canada Seller, Canada Buyer and Canada Seller shall make, and Canada Seller shall file, an election in prescribed form (or such other form as a party may reasonably request) and within the prescribed time limits pursuant to subsection 56.4(7) of the Tax Act and any analogous provision of provincial or territorial statute
Section 5.4    Overlap. To the extent of any inconsistency between this Article 5 and any other provision of this Agreement, this Article 5 shall control as to Tax matters.
Article 6
Conditions Precedent
Section 6.1    Conditions to Obligations of Buyer and Seller. The obligations of Buyer and Seller to consummate the transactions contemplated hereby shall be subject to the fulfillment at or prior to the Closing of the following conditions:
(a)Competition Laws. Any applicable waiting period under the HSR Act relating to the transactions contemplated by this Agreement shall have expired or been terminated and Buyer and Seller shall have obtained all consents, waivers, clearances and approvals required under any applicable Competition Laws for the jurisdictions set forth on Section 4.3 of the Seller Disclosure Letter.
(b)No Injunction, etc. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other Governmental Authority or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements shall be in effect.
(c)Material Adverse Effect. No Material Adverse Effect shall have occurred and remain ongoing since the date hereof.
Section 6.2    Conditions to Obligations of Buyer. The obligation of Buyer to consummate the transactions contemplated hereby shall be subject to the fulfillment at or prior to the Closing, or, if permitted by applicable Law, waiver by Buyer, of the following additional conditions:
(a)Representations and Warranties. (i) Each of the representations and warranties of Seller contained in Article 2, other than the Seller Fundamental Representations and the representations and warranties contained in clause (a) of Section 2.8 (without giving effect to any limitations as to “materiality” or “Material Adverse Effect” set forth therein) shall be true and correct at and as of the Closing Date with the same effect as though made at and as of such time (except for representations and warranties that are as of a specific date, which representations and warranties shall be true and correct as of such date), except where the failure of such representations and warranties to be so true and correct would not reasonably be expected to have a Material Adverse Effect, and (ii) each of the Seller Fundamental Representations shall be true and correct in all material respects at and as of the Closing Date with the same effect as
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though made at and as of such time (except for representations and warranties that are as of a specific date, which representations and warranties shall be true and correct in all material respects as of such date) and (iii) the representations and warranties in clause (a) of Section 2.8 shall be true and correct in all respects.
(b)Covenants and Agreements. Seller shall have performed and complied in all material respects with all covenants required by this Agreement to be performed or complied with by Seller at or prior to the Closing.
(c)Officer’s Certificate. Seller shall have delivered to Buyer a certificate, dated as of the Closing Date, signed by a duly authorized officer of Seller stating that the conditions specified in Section 6.2(a) and Section 6.2(b) have been satisfied.
(d)FIRPTA Certificate. Seller shall have delivered to Buyer a duly executed IRS Form W-9 of Seller as the regarded owner of the Company for U.S. federal income tax purposes.
(e)Required Consents. Seller will have delivered to Buyer copies of all third-party consents set forth in Section 6.2(e) of the Seller Disclosure Letter (the “Required Consents”).
(f)Material Assets. Seller or its Affiliates shall have caused the Material Assets to have been transferred and assigned to the Company, and received and assumed by the Company, as set forth in the Pre-Closing Steps, and the closing of the sale of the Canada Transferred Assets shall be occurring in accordance with this Agreement as of the Closing Date.
Section 6.3    Conditions to Obligations of Seller. The obligation of Seller to consummate the transactions contemplated hereby shall be subject to the fulfillment at or prior to the Closing, or, if permitted by applicable Law, waiver by Seller, of the following additional conditions:
(a)Representations and Warranties. Each of the representations and warranties of Buyer contained in this Agreement (without giving effect to any limitations as to “materiality” set forth therein) shall be true and correct in all material respects at and as of the Closing Date with the same effect as though made at and as of such time (except for representations and warranties that are as of a specific date, which representations and warranties shall be true and correct in all material respects as of such date).
(b)Covenants and Agreements. Buyer shall have performed and complied in all material respects with all covenants required by this Agreement to be performed or complied with by Buyer at or prior to the Closing.
(c)Officer’s Certificate. Buyer shall have delivered to Seller a certificate, dated as of the Closing Date, signed by a duly authorized officer of Buyer stating that the conditions specified in Section 6.3(a) and Section 6.3(b) have been satisfied.
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Section 6.4    Frustration of Closing Conditions. No party hereto may rely on the failure of any condition set forth in this Article 6 to be satisfied if such failure was caused by such party’s failure to use reasonable best efforts to cause the Closing to occur or such party’s material breach of its obligations hereunder.
Article 7
Termination
Section 7.1    Termination. This Agreement may be terminated at any time prior to the Closing Date:
(a)by the mutual written agreement of Buyer and Seller;
(b)by either Buyer or Seller by notice to the other party, if:
i.the Closing shall not have been consummated on or before the close of business on February 5, 2022 (the “Initial End Date”); provided that if on the Initial End Date any of the conditions set forth in Section 6.1(a) or Section 6.1(b) (but for the purposes of Section 6.1(b), only to the extent related to the approvals described in Section 6.1(a)) shall not have been satisfied but all other conditions set forth in Article 6 shall have been satisfied or waived or shall then be capable of being satisfied, then, the Initial End Date shall, at the election of either Buyer or Seller, be automatically extended to the date that sixty (60) days after the Initial End Date (the “Second End Date”); provided, further, that if the Initial End Date is so extended and on the Second End Date any of the conditions set forth in Section 6.1(a) or Section 6.1(b) (but for the purposes of Section 6.1(b), only to the extent related to the approvals described in Section 6.1(a)) shall not have been satisfied but all other conditions set forth in Article 6 shall have been satisfied or waived or shall then be capable of being satisfied, then the Second End Date shall, at the election of either Buyer or Seller, be automatically extended to the date that is sixty (60) days after the Second End Date (the “Third End Date”). As used in this Agreement, the term “End Date” shall mean the Initial End Date, unless extended pursuant to the foregoing sentence, in which case, the term “End Date” shall mean the Second End Date unless the Second End Date is also extended pursuant to the foregoing sentence, in which case, the term “End Date” shall mean the Third End Date. Notwithstanding the foregoing, the right to terminate this Agreement pursuant to this Section 7.1(b)(i) shall not be available to any party whose breach of any provision of this Agreement results in the failure of the Closing to be consummated by the End Date;
ii.A) there shall be any Law that makes consummation of the Closing illegal or otherwise prohibited or (B) any injunction, order or decree of any Governmental Authority having competent jurisdiction permanently enjoining Buyer or Seller from consummating the Closing is entered and such injunction, order or decree shall have become final and nonappealable; provided that the party hereto seeking to terminate this Agreement pursuant to this Section
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7.1(b)(ii)(B) shall have used reasonable best efforts to remove such injunction, order or decree in accordance with Section 4.3(c); or
iii.Buyer has delivered to Seller an Antitrust Notice pursuant to Section 4.3(c);
(c)by Buyer, upon two (2) days prior written notice to Seller, if a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Seller set forth in this Agreement shall have occurred that would cause a condition set forth in Section 6.2(a) or Section 6.2(b) not to be satisfied, and such breach is incapable of being cured or is not cured prior to the earlier of (i) the Business Day prior to the End Date or (ii) the date that is thirty (30) days from the date that Seller is notified in writing by Buyer of such breach or failure to perform; provided that Buyer shall not have the right to terminate this Agreement pursuant to this Section 7.1(c) if Buyer is then in material breach or violation of its representations, warranties or covenants contained in this Agreement;
(d)by Seller, upon two (2) days prior written notice to Buyer, if a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Buyer set forth in this Agreement shall have occurred that would cause a condition set forth in Section 6.3(a) or Section 6.3(b) not to be satisfied, and such breach is incapable of being cured or is not cured prior to the earlier of (i) the Business Day prior to the End Date or (ii) the date that is thirty (30) days from the date that Buyer is notified in writing by Seller of such breach or failure to perform; provided that Seller shall not have the right to terminate this Agreement pursuant to this Section 7.1(d) if Seller is then in material breach or violation of its representations, warranties or covenants contained in this Agreement; or
(e)by Seller, if all of the conditions set forth in Section 6.1 and Section 6.2 have been satisfied or waived (other than those conditions which by their nature cannot be satisfied until the Closing, but which conditions at the time of termination shall be capable of being satisfied) and Buyer fails to consummate the transactions contemplated hereby within two (2) Business Days following the date on which the Closing should have occurred pursuant to Section 1.1.
Section 7.2    Effect of Termination. If this Agreement is terminated pursuant to Section 7.1, this Agreement shall become void and of no effect without Liability of any party (or any of its directors, officers, employees, stockholders, Affiliates, agents, successors or assigns) to the other party except as provided in this Section 7.2 and Section 7.3; provided that no such termination (nor any provision of this Agreement) shall relieve any party from Liability for any damages for Willful Breach of this Agreement prior to such termination (which, for the avoidance of doubt, shall be deemed to include any failure by Buyer or Seller to consummate the transactions contemplated by this Agreement if it is obligated to do so hereunder). The provisions of Section 4.2(c), this Section 7.2, Section 7.3, Article 9, Section 10.1 and Section 10.4 and the Confidentiality Agreement shall survive any termination hereof pursuant to Section 7.1.
Section 7.3    Termination Fee; Expenses.
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(a)In the event that (X)(i) this Agreement is terminated by either Buyer or Seller pursuant to (A) Section 7.1(b)(i) at a time when the conditions set forth in Section 6.1(a) or Section 6.1(b) are not satisfied or (B) Section 7.1(b)(ii) if any such Law that makes consummation of the Closing illegal or otherwise prohibited or any such injunction, order or decree of any Governmental Authority, in each case, relates to Competition Laws, and (ii) the failure of the conditions set forth in Section 6.1(a) or Section 6.1(b) to be satisfied did not primarily result from the Willful Breach by Seller of any covenant or obligation set forth in this Agreement, including in Section 4.3, or (Y) this Agreement is terminated by either Buyer or Seller pursuant to Section 7.1(b)(iii), then Buyer shall pay, or cause to be paid, to Seller by wire transfer of immediately available funds, a fee in the amount of $45,000,000 as promptly as practicable (and, in any event, within two (2) Business Days) following such termination (the “Antitrust Termination Fee”). In the event of a dispute between the parties regarding whether any material breach of this Agreement by Seller has primarily caused the failure of the conditions set forth in Section 6.1(a) or Section 6.1(b) to be satisfied, Buyer shall deposit promptly by wire transfer or delivery of other immediately available funds into an escrow account with a third party reasonably acceptable to Seller, on terms reasonably acceptable to Seller, an amount equal to the Antitrust Break Fee until such dispute is resolved. Notwithstanding anything in this Agreement to the contrary, except in the case of fraud or a Willful Breach of this Agreement, in the event that the Antitrust Termination Fee becomes payable, then payment to Company of the Antitrust Termination Fee, together with any amounts due under Section 7.3(b), shall be Seller’s sole and exclusive remedy as liquidated damages for any and all losses or damages of any nature against Buyer, Canada Buyer or any of their respective Affiliates in respect of this Agreement and the transactions contemplated hereby.
(b)The parties acknowledge that (i) the agreements contained in Section 7.3 are an integral part of the transactions contemplated by this Agreement, and (ii) without these agreements, the parties would not have entered into this Agreement. Accordingly, if Buyer fails to timely pay any amount due pursuant to this Section 7.3, and, in order to obtain such payment for the amount due pursuant to this Section 7.3, or any portion of such amount, then (A) in the event a court of competent jurisdiction issues a final verdict (not subject to further appeal) in favor of Seller, Buyer shall pay Seller its reasonable and documented out-of-pocket costs and expenses (including reasonable attorneys’ fees and expenses) in connection with such suit, together with interest on the amount due pursuant to this Section 7.3 from the date such payment was required to be made until the date of payment at the annual rate of 5% plus the prime lending rate as published in The Wall Street Journal in effect on the date such payment was required to be made (or such lesser rate as is the maximum permitted by applicable Law); or (B) in the event a court of competent jurisdiction issues a final verdict (not subject to further appeal) in favor of Buyer, Seller shall pay Buyer its reasonable and documented out-of-pocket costs and expenses (including reasonable attorneys’ fees and expenses) in connection with such suit, together with interest on the amount due pursuant to this Section 7.3 from the date such payment was required to be made until the date of payment at the annual rate of 5% plus the prime lending rate as published in The Wall Street Journal in effect on the date such payment was required to be made (or such lesser rate as is the maximum permitted
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by applicable Law). All payments under this Section 7.3 shall be made by wire transfer of immediately available funds to the account(s) designated in writing by Seller.
Article 8
Indemnification
Section 8.1    Survival. None of the representations and warranties made in this Agreement, nor in any certificate delivered pursuant to Section 6.2(b), Section 6.2(d) or Section 6.3(c), shall survive the Closing Date. All covenants and agreements of Seller and Buyer contained in this Agreement shall survive the Closing Date in accordance with their respective terms, but not to exceed the applicable statute of limitations in the event of a breach of such covenant; provided that all covenants and agreements of the parties contained in this Agreement which by their terms are to be performed at or prior to the Closing shall not survive the Closing.
Section 8.2    Indemnification by Seller. From and after the Closing, and subject to this Article 8, Seller shall defend, indemnify and hold harmless Buyer and each of its Affiliates and their respective officers, directors, employees and agents (collectively, the “Buyer Indemnitees”) from and against, and pay or reimburse the Buyer Indemnitees for, any and all Losses to the extent resulting from (a) the portion of any Divided Commingled Contracts apportioned to Seller and its Affiliates as provided in Section 4.11, (b) any breach in performance by Seller of any of its covenants or agreements contained herein which by their terms are to be performed after the Closing, (c) the Pre-Closing Steps or failure to complete same, (d) any Excluded Assets, and (e) any Retained Liabilities.
Section 8.3    Indemnification by Buyer. From and after the Closing, and subject to this Article 8, Buyer shall defend, indemnify and hold harmless Seller and each of its Affiliates and their respective officers, directors, employees and agents (collectively, the “Seller Indemnitees”) from and against, and pay or reimburse the Seller Indemnitees for, any and all Losses to the extent resulting from (a) the portion of any Divided Commingled Contracts apportioned to Buyer or its Affiliates, as provided in Section 4.11, (b) any breach in performance by Buyer of its covenants or agreements contained herein which by their terms are to be performed after the Closing, (c) any Assumed Liability or (d) any Transferred Assets (excluding (i) claims, causes of action, or proceedings instituted by third parties that any required third party consents or approvals were not obtained that were required for such transfer or (ii) for Losses arising out of or related to a breach of Seller of any of its representations and warranties in Article 2 or other material breach of this Agreement).
Section 8.4    Limitations on Indemnity. Buyer and Seller agree, for themselves and on behalf of Buyer Indemnitees and Seller Indemnitees:
(a)The amount of any and all Losses indemnifiable pursuant to Section 8.2 or Section 8.3 shall be determined net of any amounts recovered by an Indemnified Party under insurance policies or other collateral sources (such as contractual indemnities of any Person which are contained outside of this Agreement) with respect to such Losses, in each case, net of costs of collection and any increase to premiums resulting from making any claim thereunder. In any case where an Indemnified Party recovers, under
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insurance policies or from other collateral sources, any amount in respect of a matter for which such Indemnified Party was indemnified pursuant to Section 8.2 or Section 8.3, as applicable, in each case to the extent not already taken into account pursuant to this Section 8.4(a), such Indemnified Party shall promptly pay over to the applicable Indemnifying Party the amount so recovered (after deducting therefrom the amount of the expenses incurred by such Indemnified Party in procuring such recovery), but not in excess of the sum of (A) any amount previously so paid to or on behalf of such Indemnified Party in respect of such matter and (B) any amount expended by the applicable Indemnifying Party in pursuing or defending any claim arising out of such matter.
(b)Buyer Indemnitees shall not be entitled to indemnification pursuant to Section 8.2 for any Loss to the extent that the Loss was taken into account in the Final Purchase Price as finally determined pursuant to Section 1.2(c).
(c)If an Indemnifying Party makes an indemnification payment to an Indemnified Party with respect to any Loss, then such Indemnifying Party will be subrogated, to the extent of such payment, to all related rights and remedies of such Indemnified Party under any insurance policy or otherwise against or with respect to such Loss, except with respect to amounts relating to such Loss that have not yet been recovered by such Indemnified Party (or any other such Person entitled to indemnification hereunder). If any portion of any Loss to be reimbursed by the Indemnifying Party may be covered, in whole or in part, by third-party insurance coverage or otherwise, the Indemnified Party shall promptly give notice thereof to the Indemnifying Party. Promptly following such Indemnifying Party’s request, such Indemnified Party will take all reasonably necessary, proper or desirable actions (including the execution and delivery of any document reasonably requested) to accomplish the foregoing.
(d)In no event shall an Indemnifying Party have Liability to the Indemnified Party for any consequential, special, incidental, indirect or punitive damages or similar items, except if and to the extent any such damages are recovered against an Indemnified Party pursuant to a Third-Party Claim.
Section 8.5    Notification of Claims; Third-Party Claims.
(a)A Person that may be entitled to be indemnified under this Agreement (the “Indemnified Party”) shall promptly notify the party or parties liable for such indemnification (the “Indemnifying Party”) in writing of any claim in respect of which indemnity may be sought under this Article 8, describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article 8 except to the extent the Indemnifying Party is prejudiced by such failure. The parties agree that (i) in this Article 8 they intend to shorten (in the case of the limited survival periods specified in Section 8.1) the applicable statute of limitations period with respect to certain claims, (ii) notices for claims in respect of a breach of a representation, warranty, covenant or agreement must be
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delivered prior to the expiration of any applicable survival period specified in Section 8.1 for such representation, warranty, covenant or agreement and (iii) any claims for indemnification for which notice is not timely delivered in accordance with this Section 8.5 shall be expressly barred and are hereby waived; provided that if, prior to such applicable date, a party shall have notified any other party in accordance with the requirements of this Section 8.5 of a claim for indemnification under this Article 8 (whether or not formal legal action shall have been commenced based upon such claim), such claim shall continue to be subject to indemnification in accordance with this Article 8 notwithstanding the passing of such applicable date.
(b)Upon receipt of notice of a claim for indemnity from an Indemnified Party pursuant to this Section 8.5 in respect of a pending or threatened claim or demand by a third party that the Indemnified Party has determined has given or could reasonably give rise to a right of indemnification under this Agreement (such claim or demand being a “Third-Party Claim” and including a pending or threatened claim or demand asserted by a third party against the Indemnified Party), the Indemnifying Party may, by notice to the Indemnified Party delivered within twenty (20) Business Days of the receipt of notice of such Third-Party Claim, assume the defense and control of such Third-Party Claim, with its own counsel and at its own expense and the Indemnified Party shall, at its sole cost and expense, cooperate with the Indemnifying Party in connection therewith; provided that the Indemnifying Party shall allow the Indemnified Party a reasonable opportunity to participate in the defense of such Third-Party Claim with its own counsel and at its own expense. So long as the Indemnifying Party is reasonably contesting any such Third-Party Claim in good faith, the Indemnified Party shall not pay or settle any such Third-Party Claim. If the Indemnifying Party elects to conduct the defense and settlement of a Third-Party Claim, then the Indemnified Party shall have the right to pay or settle such Third-Party Claim; provided that in such event it shall waive any right to indemnity by the Indemnifying Party for all Losses related to such Third-Party Claim unless the Indemnifying Party shall have consented to such payment or settlement. If the Indemnifying Party does not notify the Indemnified Party within twenty (20) Business Days after the receipt of the Indemnified Party’s notice of a claim hereunder that it elects to undertake the defense thereof, the Indemnified Party shall have the right to contest, settle or compromise the claim but shall not thereby waive any right to indemnity therefor pursuant to this Agreement. The Indemnifying Party shall not, except with the consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed), enter into any settlement that does not include as a term thereof the giving by the Person(s) asserting such claim to all Indemnified Parties of a release from all Liability with respect to such claim or consent to entry of any judgment.
(c)The parties hereto shall cooperate in the defense or prosecution of any Third-Party Claim in respect of which indemnity may be sought hereunder and each of Buyer and Seller (or a duly authorized representative of such party) shall (and shall cause the Company to) furnish such records, information, access to relevant personnel and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith.
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(d)In the event any Indemnifying Party receives notice of a claim for indemnity from an Indemnified Party pursuant to this Section 8.5 that does not involve a Third-Party Claim, the Indemnifying Party shall notify the Indemnified Party within thirty (30) days following its receipt of such notice whether the Indemnifying Party disputes its Liability to the Indemnified Party under this Article 8. The Indemnified Party shall reasonably cooperate with and assist the Indemnifying Party in determining the validity of any such claim for indemnity by the Indemnified Party.
Section 8.6    Exclusive Remedy. Notwithstanding anything to the contrary in this Agreement or the Ancillary Agreements (other than the Transitional Services Agreement and the Supply Agreements) and except (x) with respect to Fraud and the matters covered by Section 1.2 and (y) in the case where a party seeks to obtain specific performance pursuant to Section 10.9, Seller and Buyer hereby agree that following the Closing, the sole and exclusive remedy of a party for any breach or inaccuracy of any representation, warranty, covenant or agreement contained in this Agreement or the Ancillary Agreements (other than the Transitional Services Agreement and the Supply Agreements) shall be the applicable indemnification rights set forth in this Article 8, Section 4.6 and Section 4.11. In furtherance of the foregoing and subject to Section 1.2, Section 10.9 and the indemnification provisions set forth in this Article 8, Section 4.6, and Section 4.11, and not including the express terms of any covenant hereunder which as applicable to a party survives the Closing in accordance with its terms, (a) Buyer hereby waives, from and after the Closing Date, any and all rights, claims and causes of action any Buyer Indemnitee may have against Seller or any of its respective Affiliates, or their respective directors, officers, employees, controlling Persons, agents or representatives, successors or assigns and (b) Seller hereby waives, from and after the Closing Date, any and all rights, claims and causes of action any Seller Indemnitee may have against Buyer or any of its Affiliates, or their respective directors, officers, employees, agents or representatives, successors or assigns, in either case to the extent such rights, claims and causes of action arise under or are based upon any federal, state, provincial, local or foreign statute, law, ordinance, rule or regulation or otherwise in connection with this Agreement or the Ancillary Agreements (other than the Transitional Services Agreement and the Supply Agreements).
Article 9
Definitions
Section 9.1    Certain Terms. The following terms have the respective meanings given to them below:
“Accounting Firm” has the meaning set forth in Section 1.2(c)(iii).
“Accounting Principles” means the accounting principles, practices, methodologies and procedures set forth in Exhibit A.
“Affiliate” means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether
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through the ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.
“Affiliate Contract” has the meaning set forth in Section 2.20.
“Agreement” has the meaning set forth in the Preamble.
“Ancillary Agreements” means (a) the Transitional Services Agreement and (b) the Supply Agreements.
“Anticorruption Laws” has the meaning set forth in Section 2.13(c).
“Antitrust Notice” has the meaning set forth in Section 4.3(c).
“Antitrust Proceeding” has the meaning set forth in Section 4.3(c).
“Antitrust Termination Fee” has the meaning set forth in Section 7.3(a).
“Assumed Liabilities” has the meaning given to such term in Exhibit B.
“Assumed Transferred Employee Liabilities” has the meaning given to such term in Exhibit B.
“Benefit Plan” means each employee benefit plan, scheme, program, policy, arrangement and contract (including any “employee benefit plan,” as defined in Section 3(3) of ERISA, whether or not subject to ERISA, and any bonus, deferred compensation, stock bonus, stock purchase, restricted stock, stock option or other equity-based arrangement, and any pension, retirement, health, welfare, medical, dental, disability, life insurance, employment, termination, retention, bonus, change in control or severance plan, program, policy, arrangement or contract) for the benefit of any employee of Seller or any of its Affiliates, but shall exclude any such plan, program, policy, agreement or other arrangement required by applicable Law, sponsored by a Governmental Authority.
“Business” has the meaning set forth in the Recitals.
“Business Confidential Information” means all confidential, proprietary and non-public information (whether or not specifically labeled or identified as “confidential” and whether written or oral) that exclusively relates to the Business; provided that “Business Confidential Information” shall not include information (a) that is or becomes generally available to the public other than as a result of a breach of Section 4.2(c) by Seller or any of its Affiliates (other than the Company) or its or their representatives, (b) that Seller or any of its Affiliates (other than the Company) or its or their representatives receive or have received on a non-confidential basis from a source other than Buyer or the Company, provided that such source is not known to Seller or the applicable Affiliate or representative to be subject to a contractual, legal or fiduciary obligation of confidentiality to Buyer or the Company with respect to such information, or (c) that Seller or any of its Affiliates (other than the Company) or its or their representatives can demonstrate has been or is subsequently independently conceived or developed by Seller or any
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of its Affiliates (other than the Company) or its or their representatives without use or reference to the information.
“Business Day” means any day that is not (a) a Saturday, (b) a Sunday or (c) any other day on which commercial banks are authorized or required by law to be closed in the City of New York or the City of Houston.
“Business Employee” means each individual set forth in Section 2.15(c) of the Seller Disclosure Letter as it may be updated from time to time to reflect actions permitted under the terms of this Agreement or to correct inadvertent or unintended omissions.
“Business Employee Liability” has the meaning set forth in Section 4.4(a)(ii).
“Buyer” has the meaning set forth in the Preamble.
“Buyer Indemnitees” has the meaning set forth in Section 8.2.
“Buyer’s Savings Plan” has the meaning set forth in Section 4.4(f).
“CAD2 Spec Equity Interests” means the membership interest in CAD2Spec, LLC, a Pennsylvania limited liability company, owned by CENTRIA Services Group, LLC, an Affiliate of Seller.
“Calculation Time” means 11:59 p.m. local time on the day prior to the Closing Date.
“Canada Assumed Liabilities” means the Assumed Liabilities located in Canada or in respect of any Canadian Business Employee.
“Canada Benefit Plans” means any Seller Plan provided for the benefit of Canadian Business Employees.
“Canadian Business Employee” means each Business Employee who is employed at a work location in Canada.
“Canada Buyer” means Vulcraft Canada Inc.
“Canada Replacement Plans” has the meaning set forth in Section 4.4(a)(iv).
“Canada Seller” has the meaning set forth in Exhibit B.
“Canada Transferred Assets” means the Transferred Assets located in Canada.
“Canadian Purchase Price” has the meaning set forth in Section 1.2(a).
“CARES Act” means the Coronavirus Aid, Relief and Economic Security Act, as signed into law by the President of the United States on March 27, 2020.
“Cash” means, as of any specified time, all cash, cash equivalents (including checks, other wire transfers, deposits in transfer and drafts deposited or received but not yet cleared, but
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reduced for any bank overdrafts or outstanding checks or outbound wire transfers not yet cashed or received by the applicable counterparty) and marketable securities, in accordance with GAAP.
“Cash Option Value” has the meaning set forth in Section 4.4(g).
“Cash PSU Value” has the meaning set forth in Section 4.4(g).
“Cash RSU Value” has the meaning set forth in Section 4.4(g).
“Clayton Act” means the Clayton Antitrust Act of 1914, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
“Closing” has the meaning set forth in Section 1.1.
“Closing Date” has the meaning set forth in Section 1.1.
“Closing Date Cash” means the Cash constituting Transferred Assets as of the Calculation Time, which shall include, for the avoidance of doubt, any Cash constituting a Transferred Asset that is contemplated to be transferred to the Company pursuant to the Pre-Closing Steps but has not yet been transferred to the Company as of the Calculation Time.
“Closing Date Indebtedness” means the Indebtedness constituting Assumed Liabilities as of the Calculation Time, which shall include, for the avoidance of doubt, any Indebtedness constituting an Assumed Liability that is contemplated to be assumed by the Company pursuant to the Pre-Closing Steps but has not yet been assumed by the Company as of the Calculation Time.
“Closing Date Net Working Capital” means, an amount equal to, without duplication, (a) as of the Calculation Time, the current assets (other than Cash) constituting Transferred Assets (which shall include, for the avoidance of doubt, with respect to the Closing Date Net Working Capital any current assets (other than Cash) constituting Transferred Assets that are contemplated to be transferred to the Company pursuant to the Pre-Closing Steps but have not yet been transferred to the Company as of the Calculation Time) minus (b) as of the Calculation Time the current liabilities (other than Indebtedness and Transaction Expenses) constituting Assumed Liabilities (which shall include, for the avoidance of doubt, with respect to the Closing Date Net Working Capital any current liabilities (other than Indebtedness and Transaction Expenses) constituting Assumed Liabilities that are contemplated to be assumed by the Company pursuant to the Pre-Closing Steps but have not yet been assumed by the Company as of the Calculation Time), in each case (i) calculated in accordance with Section 1.2(d) and (ii) including only the line items set forth on the sample calculation in the Accounting Principles.
“Closing Statement” has the meaning set forth in Section 1.2(c)(i).
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” has the meaning set forth in the Recitals.
“Competing Activity” has the meaning set forth in Section 4.16(a).
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“Competition Laws” means the HSR Act (and any similar Law enforced by any Governmental Antitrust Authority regarding pre-acquisition notifications for the purpose of competition reviews), the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and all other Laws that are designed or intended to prohibit, restrict or regulate actions or transactions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition or effectuating foreign investment in the United States or Canada.
“Confidentiality Agreement” has the meaning set forth in Section 4.2(c).
“Continuation Period” has the meaning set forth in Section 4.4(b).
“Continuing Incentive Opportunities” has the meaning set forth in Section 4.4(b).
“Copyleft License” means any license of Software that requires, as a condition to the use, modification, or distribution of such licensed Software, that such licensed Software, or any other Software that incorporates, is incorporated into, derived from, based on, linked to, or used or distributed with such licensed Software, be licensed, distributed, or otherwise made available: (a) in a form other than binary or object code (e.g., in source code form); (b) under terms that permit redistribution, reverse engineering, or creation of derivative works or other modification; or (c) without a license fee. “Copyleft Licenses” include the GNU General Public License, the GNU Library General Public License, the GNU Lesser General Public License, the Affero General Public License, the Mozilla Public License, the Common Development and Distribution License, the Eclipse Public License, and all Creative Commons “sharealike” licenses.
“Covered Person” has the meaning set forth in Section 4.16(b).
“COVID-19” means SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), coronavirus disease, or COVID-19, and any evolutions or mutations thereof or related or associated epidemics, pandemic or disease outbreaks.
“COVID-19 Measures” means the impact of COVID-19 or any action or inaction by a Person or a third person in response to COVID-19, including any workforce reduction or the compliance with any quarantine, “shelter in place,” “stay at home,” social distancing, shut down, closure, sequester, safety or similar Law, directive, guidelines or recommendations promulgated by any industry group or any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with, related to or in response to COVID-19, including the CARES Act and Families First Act or any disaster plan of such Person or any change in applicable Laws related to, in connection with or in response to COVID-19.
“Credit Facilities” means (a) the Cash Flow Credit Agreement, dated as of April 12, 2018 (as amended, supplemented, waived or otherwise modified from time to time), among Seller, the several banks and other financial institutions from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, (b) the ABL Credit Agreement, dated as of April 12, 2018 (as amended, supplemented, waived or otherwise modified from time to time), among Seller, the subsidiary borrowers from time to time party thereto, the several banks and other financial institutions from time to time party thereto and UBS AG, Stamford
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Branch, as administrative agent and collateral agent, and (c) the Indenture, dated as of April 12, 2018 (as amended, supplemented, waived or otherwise modified from time to time), among Seller, the subsidiary guarantors from time to time party thereto and Wilmington Trust, National Association, as trustee.
“Debevoise” has the meaning set forth in Section 10.11.
“Divided Commingled Contracts” has the meaning set forth in Section 4.11.
“Emergency Measures” means the impact of any emergency condition, or any action or inaction that the Person taking such action reasonably determines is necessary or prudent for such Person to take in connection with any emergency condition (including any COVID-19 Measures), including any epidemic, pandemic or other public health emergency, such as actions (a) to suspend or resume operation of all or a portion of any facilities or (b) intended to mitigate the adverse effects of such condition on the business, customers, personnel or other stakeholders of such Person.
“End Date” has the meaning set forth in Section 7.1(b)(i).
“Enterprise Value” means One Billion U.S. Dollars ($1,000,000,000.) .
“Environmental Law” means all Laws in effect as of the Closing Date concerning pollution or protection of the environment or natural resources.
“Equity Interests” has the meaning set forth in the Recitals.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Estimated Closing Statement” has the meaning set forth in Section 1.2(b).
“Estimated Purchase Price” has the meaning set forth in Section 1.2(b).
“ETA” has the meaning set forth in Section 2.17(k).
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
“Excluded Assets” has the meaning given to such term in Exhibit B.
“Excluded Confidential Information” means all confidential, proprietary and non-public information (whether or not specifically labeled or identified as “confidential” and whether written or oral) of Seller or any of its Affiliates other than Business Confidential Information; provided that “Excluded Confidential Information” shall not include information (a) that is or becomes generally available to the public other than as a result of a breach of Section 4.2(c) by Buyer or any of its Affiliates (including the Company) or its or their representatives, (b) that Buyer or any of its Affiliates (including the Company) or its or their representatives receive or have received on a non-confidential basis from a source other than Seller or its Affiliates (excluding the Company); provided that such source is not known to Buyer or the applicable
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Affiliate or representative to be subject to a contractual, legal or fiduciary obligation of confidentiality to Seller or any of its Affiliates (other than the Company) with respect to such information, or (c) that Buyer or any of its Affiliates (including any of the Company) or its or their representatives can demonstrate has been or is subsequently independently conceived or developed by Buyer or any of its Affiliates (including any of the Company) or its or their representatives without use or reference to the information.
“Excluded Intellectual Property” means all Intellectual Property owned by Seller or its Affiliates that is not Transferred Owned Intellectual Property.
“Families First Act” means the Families First Coronavirus Response Act, as signed into law by the President of the United States on March 18, 2020.
“Final Closing Date Cash” means (a) if a notice of disagreement with respect thereto is not delivered pursuant to a Purchase Price Dispute Notice, the Closing Date Cash set forth in the Closing Statement; or (b) if a notice of disagreement with respect thereto is delivered pursuant to a Purchase Price Dispute Notice, the Closing Date Cash, as agreed by Seller and Buyer pursuant to Section 1.2(c)(ii) or, in the absence of such agreement, as shown in the Accounting Firm’s calculation delivered pursuant to Section 1.2(c)(iii).
“Final Closing Date Indebtedness” means (a) if a notice of disagreement with respect thereto is not delivered pursuant to a Purchase Price Dispute Notice, the Closing Date Indebtedness set forth in the Closing Statement or (b) if a notice of disagreement with respect thereto is delivered pursuant to a Purchase Price Dispute Notice, the Closing Date Indebtedness, as agreed by Seller and Buyer pursuant to Section 1.2(c)(ii) or, in the absence of such agreement, as shown in the Accounting Firm’s calculation delivered pursuant to Section 1.2(c)(iii).
“Final Net Working Capital Adjustment Amount” means (a) if a notice of disagreement with respect thereto is not delivered pursuant to a Purchase Price Dispute Notice, the Net Working Capital Adjustment Amount set forth in the Closing Statement or (b) if a notice of disagreement with respect thereto is delivered pursuant to a Purchase Price Dispute Notice, the Net Working Capital Adjustment Amount, as agreed by Seller and Buyer pursuant to Section 1.2(c)(ii) or, in the absence of such agreement, as shown in the Accounting Firm’s calculation delivered pursuant to Section 1.2(c)(iii).
“Final Purchase Price” has the meaning set forth in Section 1.2(a).
“Final Transaction Expenses” means (a) if a notice of disagreement with respect thereto is not delivered pursuant to a Purchase Price Dispute Notice, the Transaction Expenses set forth in the Closing Statement or (b) if a notice of disagreement with respect thereto is delivered pursuant to a Purchase Price Dispute Notice, the Transaction Expenses, as agreed by Seller and Buyer pursuant to Section 1.2(c)(ii) or, in the absence of such agreement, as shown in the Accounting Firm’s calculation delivered pursuant to Section 1.2(c)(iii).
“Fraud” means an actual and intentional misrepresentation of a material fact with respect to the making of the representations and warranties (and, for the avoidance of doubt, not constructive fraud, equitable fraud or negligent misrepresentation or omission) (a) in the case of Seller, in Article 2 above, and (b) in the case of Buyer, in Article 3 above.
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“GAAP” means United States generally accepted accounting principles.
“Governmental Antitrust Authority” means any Governmental Authority with regulatory jurisdiction over enforcement of any applicable Competition Law.
“Governmental Authority” means any United States or foreign (a) federal, state, local, provincial, municipal or other government, (b) governmental or quasi-governmental entity of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal) or (c) body exercising, or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature, including any arbitral tribunal.
“Harmful Code” means any mechanism, device or computer code designed or intended to have, or intended to be capable of performing, any of the following functions: (a) disrupting, disabling, harming or otherwise impeding in any manner the operation of, or providing unauthorized access to, a computer system or network or other device on which such mechanism, device or computer code is stored or installed; or (b) collecting, damaging or destroying any information, data or file, in each case, without the user’s consent.
“Hazardous Substances” means any substance or material that is listed, classified or regulated as a “toxic substance,” “hazardous substance,” “hazardous waste”, “contaminant” or words of similar meaning or effect under any Environmental Law, including asbestos, asbestos-containing materials, polychlorinated biphenyls, petroleum and petroleum by-products.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
“Inactive Business Employee” has the meaning set forth in Section 4.4(a)(i).
“Indebtedness” means, with respect to any Person, as of any specified time, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (c) all reimbursement obligations of such Person under letters of credit, bank guarantees or similar facilities, but only to the extent drawn upon at such time, (d) the balance of the outstanding payments owing in respect of leases required to be classified as capital leases by GAAP, (e) all Indebtedness of others referred to in clauses (a) through (d) above guaranteed directly or indirectly in any manner by such Person and (f) all accrued interest, prepayment penalties, make-whole payments and termination or breakage costs or penalties with respect to any Indebtedness referred to in clauses (a) through (d) above; provided that Indebtedness shall not include (i) any amounts outstanding under arrangements settled or terminated pursuant to Section 4.9 or (ii) any Liabilities in respect of leases other than those referred to in clause (d) above.
“Indemnified Party” has the meaning set forth in Section 8.5(a).
“Indemnifying Party” has the meaning set forth in Section 8.5(a).
“Initial End Date” has the meaning set forth in Section 7.1(b)(i).
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“Intellectual Property” means all intellectual property, and all worldwide rights therein, including all rights in patents and patent applications (and all reissues, divisionals, re-examinations, renewals, extensions, revisions, continuations and continuations-in-part thereof); Trademarks; copyrights (and all registrations and applications therefor) and rights in all original works of authorship, and all moral rights therein; trade secrets and rights in proprietary information, including in confidential or proprietary know‑how, processes, techniques, technologies, methods, algorithms, industrial models, research and development information, drawings, specifications, designs, molds, plans, proposals, technical data, financial and marketing plans, pricing and cost information and customer and supplier lists and information; rights in Software; and rights in data and databases.
“Inventory” has the meaning set forth in Section 1.2(b).
“Inventory Count” has the meaning set forth in Section 1.2(b).
“Inventory Valuation” has the meaning set forth in Section 1.2(b).
“IRS” means the Internal Revenue Service.
“IT Systems” means the hardware, software, data, databases, data communication lines, network and telecommunications equipment, Internet-related information technology infrastructure, wide area network and other information technology equipment, owned or leased by or licensed to Seller or its Affiliates in the operation of the Business.
“Knowledge of Seller” means, the actual knowledge, or such knowledge which such individuals should have after due inquiry in the ordinary course of their business consistent with their duties, of the individuals set forth on Section 9.1(a) of the Seller Disclosure Letter
“Law” means a law, statute, order, ordinance, rule, regulation, judgment, injunction, order or decree.
“Leased Real Property” has the meaning set forth in Section 2.10(b).
“Leases” has the meaning set forth in Section 2.10(b).
“Liability” means any direct or indirect liability, indebtedness, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, known or unknown, contingent or otherwise.
“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, lease or encumbrance.
“Litigation” means any action, cease and desist letter, demand, suit, arbitration proceeding, administrative or regulatory proceeding, order, investigation, complaint, citation, summons or subpoena of any nature, civil, criminal, regulatory or otherwise, in law or in equity.
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“Losses” means any and all Liabilities of any kind, interest and expenses (including reasonable fees and expenses of attorneys).
“LTIP Replacement Bonus” has the meaning set forth in Section 4.4(g).
“LTIP Summary” means the document described in Section 4.4(g) of the Seller Disclosure Letter.
“Material Adverse Effect” means any change, effect, event or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on, the assets, financial condition or results of operations of the Business, taken as a whole; provided that any such change, effect, event or occurrence resulting from any of the following shall not be considered when determining whether a Material Adverse Effect has occurred: (a) conditions affecting the economy or credit, capital and financial markets in the United States or elsewhere in the world, including changes in interest or exchange rates, (b) any change in or effect on the industry, or businesses in the geographies, in which the Business operates, (c) any change in Laws or GAAP, or the enforcement or interpretation thereof, (d) political conditions, including hostilities, acts of war (whether declared or undeclared), cyber-attacks, sabotage, terrorism or military actions, or any escalation or worsening of any of the foregoing, (e) any change resulting from the negotiation, execution, announcement or consummation of the transactions contemplated by this Agreement or the Ancillary Agreements, including any actions taken by any customers, suppliers or personnel of the Business resulting from the negotiation, execution, announcement or consummation of the transactions contemplated by this Agreement or the Ancillary Agreements or relating to the identity of, or facts and circumstances relating to, Buyer, (f) any action taken by Buyer and any of its Affiliates, agents or representatives, (g) any hurricane, flood, tornado, earthquake or other natural disaster or any other force majeure event, (h) any actions required to be taken or omitted pursuant to this Agreement (other than the obligation to operate in the Ordinary Course of Business) or the Ancillary Agreements or taken with Buyer’s consent or not taken because Buyer withheld, delayed or conditioned its consent, (i) the failure of the Business to achieve any financial projections or forecasts or revenue or earnings predictions (it being understood that for purposes of this clause (i), the changes or effects giving rise to such failure that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect), (j) COVID-19, any other epidemic or pandemic or any Emergency Measures, (j) items disclosed in the Seller Disclosure Letter (provided that any change or worsening of any item so disclosed in the Seller Disclosure Letter may constitute a Material Adverse Effect) or (l) any adverse change in or effect on the Business that is cured prior to the Closing; provided, however, that any change or effect referred to in clause (a), (b), (c), (d) or (g) immediately above may be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such change, effect, event or occurrence has a disproportionate effect (but then only to the extent of such disproportionate effect) on the Business relative to other companies in the industries or markets in which the Business operates.
“Material Assets” means, collectively, the following:
1.The Material Equipment at each of the Business’ seven manufacturing facilities;
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2.The Transferred Real Property;
3.The Transferred Material Permits; and
4.The Transferred Owned Intellectual Property.
“Material Contracts” has the meaning set forth in Section 2.9(a).
“Material Equipment” has the meaning set forth in Exhibit B.
“Multiemployer Plan” means a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA.
“Net Working Capital Adjustment Amount” means an amount (which may be a positive or negative number) equal to (a) the Closing Date Net Working Capital minus (b) the Target Net Working Capital.
“Nucor” has the meaning set forth in the Recitals.
“OFAC Laws” has the meaning set forth in Section 2.13(d).
“Open Source Software” means software that satisfies the definition of free software by the Free Software Foundation and of open source software by the Open Source Initiative or that is offered under similar types of software licenses.
“Ordinary Course of Business” means, with respect to any Person, in the ordinary course of business of such Person, subject to any Emergency Measures impacting or taken by the relevant Person.
“Organizational Documents” means the articles of incorporation, certificate of incorporation, charter, by-laws, articles of formation, certificate of formation, regulations, operating agreement, certificate of limited partnership, partnership agreement and all other similar documents, instruments or certificates executed, adopted or filed in connection with the creation, formation or organization of a Person, including any amendments thereto.
“Owned Real Property” has the meaning set forth in Section 2.10(a).
“Owned Registered Intellectual Property” has the meaning set forth in Section 2.11(a).
“Permits” has the meaning set forth in Section 2.13(b).
“Permitted Liens” means (a) Liens for Taxes, assessments or other governmental charges not yet due and payable or due and payable but not delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings, (b) mechanics’, materialmen’s, carriers’, workers’, repairers’ and other Liens arising or incurred in the Ordinary Course of Business or in connection with construction contracts for amounts that are not yet delinquent or are being contested in good faith and are not material to the operation of the Business, (c) statutory Liens in favor of lessors arising in connection with any leased property that constitute a
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Transferred Asset that do not materially affect the operation of the Business with respect to such leased property, (d) non-exclusive licenses granted in the Ordinary Course of Business, (e) Liens that do not, and would not reasonably be expected to, materially detract from the value of any of the property, rights or assets of the Business or materially interfere with the use thereof as currently used by the Business and (f) all matters disclosed in the Seller Disclosure Letter.
“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization (whether or not a legal entity), including a government or political subdivision or an agency or instrumentality thereof.
“Personal Information” means all information relating to an identified or identifiable natural Person to the extent constituting personal information (or analogous term) under applicable privacy Laws or other written obligations of Seller with respect to Personal Information.
“Per Share Value” has the meaning set forth in Section 4.4(g).
“Post-Close Costs” means (a) any severance, termination or similar payments required by Law or pursuant to this Agreement to be payable to any Transferred Business Employee whose employment or engagement is terminated for any reason by Buyer or the Company, acting at the direction of Buyer, at, or from and after the Closing, (b) any retention bonus payments that become payable to any Transferred Business Employee after the Closing arising out of or relating to the Retention Letters (including, for the avoidance of doubt, under any Transferred Plan), and (c) for the avoidance of doubt, any payments to any Transferred Business Employee pursuant to any arrangement by or at the written request of Buyer.
“Pre-Closing Employment Liabilities” means (a) all Liabilities for salary, wages, bonuses, commissions, vacation pay and other compensation relating to employment of all Business Employees prior to the Closing Date; (b) all severance payments, damages for wrongful dismissal and all related costs in respect of the termination by the Seller or its Affiliates of the employment of any Business Employee who does not become a Transferred Business Employee; (c) all costs for timely submitted (under the terms of applicable Seller Plans and applicable Law) outstanding and unpaid health claims arising prior to the Closing Date for Business Employees and their dependents and beneficiaries under any self-insured Seller Plan providing group health benefits; and (d) all employment-related Litigation, claims, penalties and assessments in respect of the Business arising out of matters which occurred prior to the Closing Date, in each case except for the Seller Retained Litigation.
“Pre-Closing Steps” has the meaning set forth in Section 4.10(a).
“Proposed Purchase Price Calculations” has the meaning set forth in Section 1.2(c)(i).
“Proprietary Software” means all Software owned by or purported to be owned by the Company or its Subsidiaries.
“PSUs” has the meaning set forth in Section 4.4(g).
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“Purchase Price Allocation” has the meaning set forth in Section 1.2(e)(i).
“Purchase Price Dispute Notice” has the meaning set forth in Section 1.2(c)(ii).
“R&W Insurance Policy” has the meaning set forth in Section 4.7.
“Real Property” has the meaning set forth in Section 2.10(c).
“Retained Information” has the meaning set forth in Section 4.2(d).
“Retained Liabilities” has the meaning given to such term in Exhibit B.
“RSUs” has the meaning set forth in Section 4.4(g).
“Second End Date” has the meaning set forth in Section 7.1(b)(i).
“Sell-Side Party” has meaning set forth in Section 10.11.
“Seller” has the meaning set forth in the Preamble.
“Seller Designated Accounts” has the meaning set forth in Section 1.1(b).
“Seller Disclosure Letter” means the letter, dated as of the date hereof, delivered by Seller to Buyer prior to the execution of this Agreement and identified as the Seller Disclosure Letter.
“Seller Fundamental Representations” means those representations set forth in Section 2.1, Section 2.2(a), Section 2.4, Section 2.5 and Section 2.19.
“Seller Indemnitees” has the meaning set forth in Section 8.3.
“Seller Marks” means all Trademarks owned by Seller or its Affiliates (excluding the Company).
“Seller Plan” means each Benefit Plan that a Seller or any of its Subsidiaries (other than the Company) sponsors, maintains or contributes to, or is required to sponsor, maintain or contribute to, for the benefit of any Business Employee.
“Seller Retained Litigation” has the meaning given to such term in Exhibit B.
“Seller’s Savings Plans” has the meaning set forth in Section 4.4(a).
“Services Intellectual Property” means all Intellectual Property owned by Seller or its Affiliates (excluding the Company) and used to provide services to the Company or other Affiliates of Buyer pursuant to the Ancillary Agreements.
“Sherman Act” means the Sherman Antitrust Act of 1890, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.
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“Software” means any (a) computer programs, including any software implementations of algorithms, models and methodologies, whether in source code or object code; (b) computer databases and compilations; (c) all documentation, including user manuals, training documentation, code notes, and other documentation necessary to maintain, modify, update or otherwise make of the foregoing.
“Solvent” has the meaning set forth in Section 3.5.
“Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests (a) having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions or (b) representing more than fifty percent (50%) of such securities or ownership interests are at the time directly or indirectly owned by such Person. The term “Subsidiary” shall include all Subsidiaries of a Subsidiary.
“Supply Agreements” means the supply agreements substantially in the form attached as Exhibit D to be entered into on or prior to the Closing Date.
“Target Net Working Capital” means $64,624,000.
“Tax” means any federal, state, provincial, local or foreign income, alternative, minimum, accumulated earnings, personal holding company, franchise, capital stock, profits, windfall profits, gross receipts, sales, use, value added, transfer, registration, stamp, premium, excise, customs duties, severance, environmental (including taxes under Section 59A of the Code), real property, personal property, ad valorem, occupancy, license, occupation, employment, payroll, social security, disability, unclaimed property, unemployment, workers’ compensation, withholding, estimated or other similar tax, duty, fee, assessment or other governmental charge or deficiencies thereof (including all interest and penalties thereon and additions thereto).
“Tax Act” has the meaning set forth in Section 2.17(j).
“Tax Return” means any federal, state, local or foreign tax return, declaration, statement, report, schedule, form or information return or any amendment to any of the foregoing relating to Taxes.
“Third End Date” has the meaning set forth in Section 7.1(b)(i).
“Third-Party Claim” has the meaning set forth in Section 8.5(b).
“Trademarks” means trademarks and service marks, domain names and all other identifiers of source or origin (including all goodwill associated therewith and all registrations and applications for registration, and renewals thereof).
“Transaction Expenses” means (a) the aggregate amount of fees and expenses of legal counsel, investment bankers, accountants and other advisors, incurred by the Company prior to the Closing in connection with this Agreement, the sale of the Business, and the consummation of the transactions contemplated hereby that remain unpaid as of the Calculation Time and are payable by the Company at or after the Closing, (b) any obligations of the Company in respect of
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change of control arrangements, transaction bonuses and similar obligations that will be payable to Business Employees, either solely as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement or in conjunction with the occurrence of post-Closing actions (e.g., double-trigger bonuses (other than the Retention Letters set forth on Section 2.16(a)(i) of the Seller Disclosure Letter)), and in each case, excluding any Post-Close Costs (it being understood that any amount included in the definition of Indebtedness shall not be included in Transaction Expenses) and (c) 50% of the cost of the premium for the R&W Insurance Policy contemplated to be paid by Seller pursuant to Section 4.7.
“Transferred Assets” has the meaning given to such term in Exhibit B.
“Transferred Business Contracts” has the meaning given to such term in Exhibit B.
“Transferred Business Employee” has the meaning set forth in Section 4.4(a).
“Transferred Business Employees Paid Time Off Liability” has the meaning set forth in Section 4.4(d).
“Transferred Material Permits” has the meaning given to such term in Exhibit B.
“Transferred Owned Intellectual Property” has the meaning given to such term in Exhibit B.
“Transferred Plan” has the meaning set forth in Section 2.16(a).
“Transferred Real Property” has the meaning given to such term in Exhibit B.
“Transition Plan” has the meaning set forth in Section 4.15.
“Transitional Services Agreement” means the transitional services agreement relating to the transitional support services for the Company substantially in the form attached as Exhibit C to be entered into on or prior to the Closing Date.
“Treasury Regulations” means the regulations prescribed under the Code.
“Trial Balances” has the meaning set forth in Section 2.6(a).
“U.S. Purchase Price” has the meaning set forth in Section 1.2(a).
“WARN” has the meaning set forth in Section 4.4(e).
“Willful Breach” means, with respect to any agreement or covenant, a material breach that is the consequence of an action or omission by the breaching party with actual knowledge (which shall be deemed to include knowledge of facts that a Person acting reasonably should have, based on reasonable due inquiry) that such action or omission is, or would reasonably be expected to be or result in, a breach of such agreement or covenant.
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Section 9.2    Construction. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “party” or “parties” shall refer to parties to this Agreement. References to “Affiliate” or “Affiliates” of a party shall, except as otherwise expressly provided in this Agreement, only be deemed to include any Person so long as such Person remains an Affiliate of such party. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections and Exhibits are to Articles, Section and Exhibits of this Agreement unless otherwise specified. Any capitalized term used in any Exhibit or the Seller Disclosure Letter but not otherwise defined therein shall have the meaning given to such term in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. The word “or” shall not be exclusive. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including that date, respectively. Any reference to “days” means calendar days unless Business Days are expressly specified. If any action under this Agreement is required to be done or taken on a day that is not a Business Day, then such action shall be required to be done or taken not on such day but on the first succeeding Business Day thereafter. If the Closing shall occur, notwithstanding anything in this Agreement to the contrary, any payment obligation of Buyer hereunder shall be a joint and several obligation of Buyer and the Company and Buyer shall cause the Company to comply with this obligation.
Article 10
Miscellaneous
Section 10.1    Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given by delivery in person, electronic mail, or by certified mail to the other party hereto as follows:
if to Buyer,
Nucor Corporation
1915 Rexford Road
Charlotte, North Carolina 28211
Attention: Alex Hoffman
Email: alex.hoffman@nucor.com
with a copy (which shall not constitute notice) to:
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Nucor Corporation
1915 Rexford Road
Charlotte, North Carolina 28211
Attention: Greg Murphy
Email: greg.murphy@nucor.com
if to Seller,
Cornerstone Building Brands, Inc.
5020 Weston Parkway, Suite 400
Cary, North Carolina 27513
Attn: Alan M. Strassner; Alena S. Brenner
Email: Alan.Strassner@cornerstone-bb.com; Alena.Brenner@cornerstone-bb.com
with a copy (which shall not constitute notice) to:
Debevoise & Plimpton LLP
919 Third Avenue
New York, New York 10022
Attention: Paul Bird; Christopher Anthony
Email: psbird@debevoise.com; canthony@debevoise.com
or such other address or Email as such party may hereafter specify for the purpose by notice to the other party hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.
Section 10.2    Amendment; Waivers, etc. No amendment, modification or discharge of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in writing and duly executed by the party against whom enforcement of the amendment, modification, discharge or waiver is sought. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party granting such waiver in any other respect or at any other time. Neither the waiver by any of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure by any of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights or privileges hereunder. The rights and remedies herein provided are cumulative and none is exclusive of any other, or of any rights or remedies that any party may otherwise have at law or in equity.
Section 10.3    Expenses. Except as otherwise set forth in this Agreement, whether or not the transactions contemplated by this Agreement are consummated, all fees and expenses incurred in connection with this Agreement and the transactions contemplated by this
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Agreement, including the fees and disbursements of counsel, financial advisors and accountants, shall be paid by the party hereto incurring such fees or expenses; provided that in the event that the transactions contemplated by this Agreement are consummated, Buyer shall pay, or shall cause to be paid, on behalf of Seller, all Transaction Expenses that are unpaid prior to the Closing in accordance with Section 1.1(d).
Section 10.4    Governing Law, etc.
(a)This Agreement shall be governed in all respects, including as to validity, interpretation and effect, by the Laws of the State of Delaware, without giving effect to its principles or rules of conflict of laws, to the extent such principles or rules are not mandatorily applicable by statute and would permit or require the application of the Laws of another jurisdiction. Each of the parties hereto (i) submits to the jurisdiction of the federal and state courts sitting in the State of Delaware, in any action or proceeding arising out of or relating to this Agreement, and (ii) other than pursuant to Section 1.2(c)(iii) above, (A) agrees to bring all claims under any theory of liability in respect of such action or proceeding exclusively in any such court and (B) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each of the parties hereto waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. Each party hereto agrees that service of summons and complaint or any other process that might be served in any action or proceeding may be made on such party by sending or delivering a copy of the process to the party to be served at the address of the party and in the manner provided for the giving of notices in Section 10.1. Nothing in this Section 10.4, however, shall affect the right of any party to serve legal process in any other manner permitted by Law. Each party hereto agrees that a final, non-appealable judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by Law.
(b)Each party to this Agreement hereby waives, to the fullest extent permitted by Law, any right to trial by jury of any claim, demand, action, or cause of action (i) arising under this Agreement or (ii) in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the transactions related hereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise. Each party to this Agreement hereby agrees and consents that, other than pursuant to Section 1.2(c)(iii) above, any such claim, demand, action, or cause of action shall be decided by court trial without a jury and that the parties to this Agreement may file an original counterpart of a copy of this Agreement with any court as written evidence of the consent of the parties hereto to the waiver of their right to trial by jury.
Section 10.5    Successors and Assigns. This Agreement and the Ancillary Agreements shall be binding upon and inure to the benefit of the parties and their respective heirs, successors and permitted assigns; provided that this Agreement shall not be assigned by any party hereto (whether by operation of Law or otherwise), without the prior written consent of the other party.
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Any attempted assignment of this Agreement not in accordance with the terms of this Section 10.5 shall be void.
Section 10.6    Entire Agreement. This Agreement, the Ancillary Agreements (when executed and delivered) and the Confidentiality Agreement constitute the entire agreement of the parties with respect to the matters covered hereby and thereby and supersede all prior agreements, understandings and representations, both written and oral, between the parties with respect to the subject matter hereof and thereof.
Section 10.7    Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, all other provisions of this Agreement shall remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon any such determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
Section 10.8    Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or scanned pages shall be effective as delivery of a manually executed counterpart to this Agreement.
Section 10.9    Specific Performance. Each party acknowledges and agrees that the other party would be damaged irreparably in the event that any provision of this Agreement is not performed in accordance with its specific terms or otherwise breached, so that, in addition to any other remedy that a party may have under law or equity, a party shall be entitled to injunctive relief to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof. Each party acknowledges and agrees that monetary damages would be inadequate in the event of any such failure to perform or breach, and waives any equitable defense to the granting of specific performance or other injunctive relief available to such party. Any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction. In the event that a court of competent jurisdiction fails to grant specific performance or other injunctive relief to a party as a remedy for such failure to perform or breach, the parties hereby acknowledge and agree that such party shall be entitled to receive benefit of the bargain and lost profits damages as redress for such failure to perform or breach. Notwithstanding anything to the contrary in this Agreement, the parties hereby irrevocably waive any right of rescission they may otherwise have or to which they may become entitled.
Section 10.10    Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party and its successors and permitted assigns and, except for Section 4.6 and Article 8 (each of which shall be for the benefit of the Persons set forth therein, and each such Person shall be an intended third party beneficiary thereof and shall have the rights, benefits and remedies provided for therein), nothing in this Agreement, express or implied, is intended to
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or shall confer upon any other Person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.
Section 10.11    Representation of the Company and Seller and its other Affiliates. Buyer on its own behalf and on behalf of its Affiliates (including, after the Closing, the Company) and its and its Affiliates’ directors, shareholders, members, partners, officers, employees and Affiliates, hereby agrees, that, in the event that a dispute arises after the Closing arising from the transactions contemplated by this Agreement between Buyer or any of its Affiliates, on the one hand, and Seller or any of its Affiliates (excluding, after the Closing, the Company) or its or its Affiliates’ respective directors, shareholders, members, partners, officers or employees (any of the foregoing, a “Sell-Side Party”), on the other hand, Debevoise & Plimpton LLP (“Debevoise”) may represent the Sell-Side Party in such dispute even though the interests of the Sell-Side Party may be directly adverse to Buyer or the Company, and even though Debevoise may have represented the Company in a matter substantially related to such dispute, or may be handling ongoing matters for the Company. Buyer further agrees that, as to all communications among Debevoise, the Company and the Sell-Side Parties that relate in any way to the transactions contemplated by this Agreement, the attorney-client privilege and the expectation of client confidence belongs to Seller (on behalf of the Sell-Side Parties) and may be controlled by Seller and shall not pass to or be claimed by Buyer, or the Company. Notwithstanding the foregoing, in the event that a dispute arises between Buyer or the Company and a third party other than a Sell-Side Party after the Closing, the Company may assert the attorney-client privilege to prevent disclosure of confidential communications by Debevoise to such third party; provided, however, that the Company may not waive such privilege without the prior written consent of Seller.
Section 10.12    Exhibits and Schedules. The Seller Disclosure Letter and all exhibits or other documents expressly incorporated into this Agreement, are hereby incorporated into this Agreement and are hereby made a part hereof as if set out in full in this Agreement. Without limiting the terms of the Seller Disclosure Letter, any fact or item disclosed in the Seller Disclosure Letter referenced by a particular section in this Agreement shall be deemed to have been disclosed with respect to any other section in this Agreement if the relevance of such disclosure to such other section is reasonably apparent. The specification of any dollar amount in the representations or warranties contained in this Agreement or the inclusion of any specific item in the Seller Disclosure Letter is not intended to imply that such amounts, or higher or lower amounts or the items so included or other items, are or are not material, and no party shall use the fact of the setting of such amounts or the inclusion of any such item in any dispute or controversy as to whether any obligation, items or matter not described herein or included in the Seller Disclosure Letter is or is not material for purposes of this Agreement. The Seller Disclosure Letter and the information and statements contained therein are not intended to constitute, and shall not be construed as constituting, representations or warranties of Seller or its Affiliates except as and to the extent expressly provided in this Agreement.
Section 10.13    Release. Effective as of the Closing, (a) Seller, on behalf of itself and its Affiliates (other than the Company) and each of their respective successors and assigns, hereby irrevocably release and forever discharge any and all rights, claims and causes of action they have had, now have or might now have against each of the Company and their respective successors and assigns arising out of, or relating to, the organization, management or operation of the businesses of Seller and its Affiliates (including the Company) relating to any matter,
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occurrence, action or activity on or prior to the Closing Date, and (b) Buyer, on behalf of the Company, and, with respect to the Canada Transferred Assets and Canada Assumed Liabilities, itself and its Affiliates and each of their respective successors and assigns, hereby irrevocably releases and forever discharges any and all rights, claims and causes of action the Company has had, now has or might now have against Seller and its Affiliates and each of their respective current and former employees, officers, directors, equityholders, partners, members, advisors, successors and assigns arising out of, or relating to, the organization, management or operation of the businesses of Seller and its Affiliates (including the Company, the Canada Transferred Assets and the Canada Assumed Liabilities) relating to any matter, occurrence, action or activity on or prior to the Closing Date, in each case of clauses (a) and (b) other than (i) any rights, claims or causes of action under this Agreement or any Ancillary Agreement, (ii) any accounts receivable and accounts payable related to Ordinary Course of Business trading activities to the extent included in the Closing Date Net Working Capital, (iii) any written agreement entered into after the Closing Date between Buyer and/or the Company, on the one hand, and Seller, on the other, (iv) under any contract of insurance, Organizational Documents, or other indemnification and/or exculpation obligations covering or otherwise in favor of the directors, managers and officers of Seller or its Subsidiaries (including the Company) prior to the Closing, (v) any employment, severance, bonus or similar agreement or arrangement between the Company and a current officer or director that continues to remain in effect following the Closing, or (vi) any other commercial or business transactions between Buyer and its Affiliates, on the one hand, and Seller and its Affiliates, on the other, unrelated to the Company, this Agreement or the transactions contemplated hereby.
Section 10.14    Bulk Sales Laws. Buyer and Seller each hereby waive compliance by Seller or any of its Affiliates with the provisions of the “bulk sales”, “bulk transfer” or similar Laws of any state or any jurisdiction that may otherwise be applicable with respect to the transfer of the Transferred Assets and the assumption of the Assumed Liabilities or the sale of the Equity Interests.
[Remainder of page left intentionally blank.]





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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.

SELLER:
  CORNERSTONE BUILDING BRANDS, INC.
   
By: /s/ Alena S. Brenner
  Name: Alena S. Brenner
Title: Executive Vice President, General Counsel and Corporate Secretary

(Signature Page to Securities Purchase Agreement)


BUYER:
  NUCOR INSULATED PANEL GROUP INC
   
By: /s/ Jeffrey B. Carmean
  Name: Jeffrey B. Carmean
Title: President

CANADA BUYER:
  VULCRAFT CANADA INC.
   
By: /s/ Chris D. Trunck
  Name: Chris D. Trunck
Title: Vice President

(Signature Page to Securities Purchase Agreement)

Exhibit A
Accounting Principles
[Attached]


Exhibit B
Pre-Closing Steps
1. Definitions. Capitalized terms used but not defined in this Exhibit B, have the meaning ascribed to such terms in this Agreement. The following terms have the meanings set forth below:
“Transferred Assets” means collectively, all of the following assets that are held by Seller or its Affiliates, other than any Excluded Assets, including without limitation the following:
(i) the goodwill of the Business;
(ii) all accounts receivable to receive payments from customers and any other third parties to the extent primarily relating to services rendered or products provided by the Business;
(iii) all prepaid expenses and deposits to the extent primarily relating to the Business, but only to the extent such prepaid expenses and deposits relate to any Transferred Asset or Assumed Liability (or Canada Transferred Assets or Canada Assumed Liability) from and after the Closing;
(iv) all tangible personal property, including Inventory and all assets included within the Closing Date Net Working Capital, equipment, furnishings, furniture, computer equipment, office equipment and supplies (other then any items disposed of after the date hereof in the Ordinary Course of Business), spare parts and other backup equipment primarily related to the Business, whether in storage or located at the Transferred Real Property, in each case primarily relating to or used or held for use primarily in connection with or necessary in the Ordinary Course of Business to the Business (the “Material Equipment”);
(v) all Intellectual Property owned by Seller or its Affiliates and used primarily in the Business (the “Transferred Owned Intellectual Property”);
(vi) all contracts primarily relating to the Business and the contracts set forth on Exhibit B-1 of the Seller Disclosure Letter (collectively, the “Transferred Business Contracts”);
(vii) all Permits primarily relating to, used or held for use primarily in connection with the Business, except those Permits the transfer of which is not permitted by applicable Law (the “Transferred Material Permits”);
(viii) to the extent transferable, all claims, causes of action, choses in action, rights of recovery and rights of setoff of any kind, including rights arising under warranties, representations, indemnities and guarantees made by suppliers of products, materials or equipment, or components thereof to the extent primarily relating to the Business (but excluding all such claims, causes of action, choses in action, rights of


recovery and rights of setoff to the extent related to the Excluded Assets, the Retained Liabilities or Losses for which Seller is liable to any Buyer Indemnitee);
(ix) any third-party rights to reimbursements, indemnification, hold-harmless or similar rights to the extent relating primarily to the Business;
(x) all (A) customer and vendor lists to the extent primarily relating to the Business and (B) files and documents to the extent primarily relating the Business, including all accounting records, cost and pricing information, business plans, transactional records, and any other such data and records, however stored, in each case to the extent primarily relating to the Business; provided that Seller and its Affiliates shall be entitled to retain and use copies of any of the foregoing that are necessary for such Person’s tax, accounting or legal purposes (to the extent and as set forth in this Agreement);
(xi) the Owned Real Property and the Leases (collectively, the “Transferred Real Property”);
(xii) the CAD2Spec Equity Interests; and
(xiii) all credits, refunds and other assets relating to non-income Taxes of the Company and of Seller and its Affiliates with respect to the Business, that are accrued as of the Closing to the extent reflected in the Final Net Working Capital Adjustment Amount.
For the avoidance of doubt, the “Transferred Assets” includes the “Canada Transferred Assets” which are not being transferred to the Company as part of the Pre-Closing Steps, but sold by an Affiliate of Seller directly to Canada Buyer pursuant to the terms hereof.
“Excluded Assets” means all assets that are not Transferred Assets and all of the following assets, whether or not the following assets otherwise would fall within the definition of “Transferred Assets”:
(i) all Cash of Seller or its Affiliates other than the Company;
(ii) all checkbooks, canceled checks and bank accounts of Seller or its Affiliates other than the Company;
(iii) all Excluded Intellectual Property, including the Seller Marks;
(iv) all owned real property and real property leases and subleases, other than the Transferred Real Property;
(v) all shares of capital stock of, or other equity interests in, any Affiliate of Seller or any other Person other than the Company (and other than the CAD2Spec Equity Interests);
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(vi) all corporate-level services of the type provided as of the date of this Agreement to the Business by Seller or any of its Affiliates (and other than to the extent expressly set forth in any Ancillary Agreement);
(vii) any Permit held by Seller or its Affiliates, other than to the extent primarily relating to the Company or used or held for use primarily in connection with the Business, and any other Permit held by Seller or its Affiliates the transfer of which is not permitted by applicable Law;
(viii) all claims, causes of action, choses in action, rights of recovery and rights of setoff of any kind, including rights arising under warranties, representations, indemnities and guarantees made by suppliers of products, materials or equipment, or components thereof to the extent primarily related to the Excluded Assets or the Retained Liabilities;
(ix) all rights of Seller and its Affiliates other than the Company to reimbursements, indemnification, hold-harmless or similar rights relating to any Excluded Assets or Retained Liabilities;
(x) all rights of Seller or its Affiliates other than the Company under this Agreement and the Ancillary Agreements and, other than to the extent primarily relating to the Company, each of Seller’s and its Affiliates’ Organizational Documents, minute and stock record books, corporate seal and tax records;
(xi) (A) all records and reports prepared or received by Seller and its Affiliates in connection with the sale of the Business or the transactions contemplated hereby, including all analyses relating to the Business or Buyer so prepared or received, (B) all confidentiality agreements with prospective purchasers of the Business or any portion thereof, and all bids and expressions of interest received from third parties with respect thereto and (C) all privileged communications described in Section 10.11 of this Agreement and all privileged materials, documents and records not primarily related to the Business;
(xii) all credits, refunds and other assets relating to income Taxes of Seller and its Affiliates, other than the Company;
(xiii) all credits, refunds and other assets relating to non-income Taxes of the Company and of Seller and its Affiliates with respect to the Business, to the extent not taken into account in the Final Net Working Capital Adjustment Amount;
(xiv) all assets used by Seller or its Affiliates to provide services or supplies to Buyer and its Affiliates (including, after the Closing, the Company) pursuant to the Transition Services Agreement;
(xv) all insurance policies and rights thereunder, including the benefit of any deposits or prepayments and any insurance proceeds;
(xvi) all assets of or relating to any Benefit Plan;
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(xvii) any employee data which relates to employees who are not Business Employees or which Seller and its Affiliates are prohibited by Law or contract from disclosing or delivering to Buyer; and
(xviii) the assets set forth on Exhibit B-2 of the Seller Disclosure Letter.
“Assumed Liabilities” means all of the following Liabilities of Seller or its Affiliates (whether arising or accruing before, on or after the Closing, and whether such Liabilities relate to conditions that existed before, on, or after the Closing), other than any portion thereof that constitutes a Retained Liability:
(i) all Liabilities to the extent arising under or relating to the Transferred Business Contracts (except to the extent otherwise set forth in this Agreement);
(ii) all Liabilities for allowances, credits or adjustments to which customers of the Business may be entitled;
(iii) (A) all Liabilities with respect to the Business Employees arising out of or relating to any Transferred Plan, (B) the Transferred Business Employees Paid Time Off Liabilities, (C) any Business Employee Liability and (D) the Pre-Closing Employment Liabilities (collectively, the “Assumed Transferred Employee Liabilities”);
(iv) all Liabilities relating to the Business or the Transferred Assets arising under Environmental Laws;
(v) all Liabilities to the extent arising out of or relating to any Transferred Intellectual Property;
(vi) all Liabilities for income Taxes of the Company for all post-Closing periods (or portions thereof), and any Transfer Taxes allocated to Buyer and Canada Buyer pursuant to Section 5.2;
(vii) all Liabilities for non-income Taxes of the Company and of Seller, Canada Seller and their respective Affiliates with respect to the Business for all pre-Closing periods (or portions thereof) that are accrued as of the Closing to the extent reflected in the Final Net Working Capital Adjustment Amount, and for non-income Taxes of the Company for all post-Closing periods (or portions thereof);
(viii) all accounts payable of Seller or its Affiliates owed to suppliers and any other third parties to the extent relating to or arising out of the Business;
(ix) all Liabilities reflected on the Trial Balances other than Liabilities discharged after the date hereof through the Closing Date;
(x) all Liabilities to the extent arising out of or relating to any Transferred Real Property;
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(xi) all Liabilities relating to workers compensation claims of Business Employees that arise prior to the Closing;
(xii) Liabilities to the extent relating to or arising out of the conduct of the Business or the ownership, use or operation of any Transferred Assets; and
(xiii) all Liabilities to the extent arising from or relating to claims or Litigation, pending or threatened and whether or not presently asserted, at any time arising out of or related to the Business or the Transferred Assets, except for the Litigation set forth on Section 2.12 of the Seller Disclosure Letter (the “Seller Retained Litigation”);
provided that, for the avoidance of doubt, the Liabilities relating to the portion of any Divided Commingled Contracts constituting a Transferred Business Contract apportioned to Seller and its Affiliates as provided in Section 4.11 of this Agreement shall not constitute Assumed Liabilities.
For the avoidance of doubt, the “Assumed Liabilities” includes the “Canada Assumed Liabilities” which are not being transferred to the Company as part of the Pre-Closing Steps but assigned separately by an Affiliate of Seller to Canada Buyer pursuant to the terms hereof.
“Retained Liabilities” means:
(i) all Liabilities to the extent related to the Excluded Assets, including all Liabilities to the extent relating to any business of Seller or its Affiliates other than the Business;
(ii) all Indebtedness of the Company, Seller or its Affiliates, that remain unpaid after the Closing and were not taken into account in determining the Final Purchase Price;
(iii) all Transaction Expenses of the Company, Seller or its Affiliates that remain unpaid after the Closing and were not taken into account in determining the Final Purchase Price;
(iv) the Seller Retained Litigation;
(v) all Liabilities to the extent related to any Benefit Plan (other than the Assumed Transferred Employee Liabilities), including, for the avoidance of doubt, any Liability in respect of a Benefit Plan subject to Title IV of ERISA, any Liability under any Multiemployer Plan;
(vi) any Liability of Seller to its Affiliates or its officers, directors, employees (other than any Assumed Transferred Employee Liabilities) or shareholders;
(vii) all Liabilities for income Taxes of Seller or Canada Seller or their respective Affiliates (other than the Company), whenever arising, all Liabilities for income Taxes of the Company for pre-Closing periods (or portions thereof) and any Transfer Taxes allocated to Seller pursuant to Section 5.2;
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(viii) all Liabilities for non-income Taxes of the Company and of Seller, Canada Seller and their respective Affiliates with respect to the Business for all pre-Closing periods (or portions thereof), to the extent not taken into account in the Final Net Working Capital Adjustment Amount; and
(ix) all Liabilities arising out of, related to, or under the Economic Development for a Growing Economy Tax Credit Agreement, between the Indiana Economic Development Corporation and NCI Group, Inc. (d/b/a Metl-Span).
provided that, for the avoidance of doubt, the Liabilities relating to the portion of any Divided Commingled Contracts apportioned to Buyer or its Affiliates as provided in Section 4.11 of this Agreement shall not constitute Retained Liabilities.
1.Pre-Closing Steps. Pursuant to Section 4.10 of this Agreement (i) Seller will, and will cause each of its applicable Affiliates to, transfer all Transferred Assets (other than the Canada Transferred Assets) to the Company and cause the Company to assume all of the Assumed Liabilities (other than the Canada Assumed Liabilities) and (ii) Seller will cause its Affiliate, Robertson Building Systems Limited, to amalgamate with its Affiliate, Gienow Canada Inc., the resulting entity of such amalgamation (together with its predecessor corporations, “Canada Seller”) will hold all of the Canada Transferred Assets and Canada Assumed Liabilities.
2.Material Assets. Notwithstanding anything in this Agreement to the contrary but subject to Section 4.10, the Pre-Closing Steps shall include, and Seller shall cause, the sale, transfer and assignment of the Material Assets to the Company, free and clear of any Liens other than Permitted Liens.
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Exhibit C
Form of Transitional Services Agreement
[Attached]


Exhibit D
Form of Supply Agreements
[Attached]


Exhibit 31.1
 
CERTIFICATION PURSUANT TO RULE 13a-14(b)/15d-14(a)
 
I, James S. Metcalf, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cornerstone Building Brands, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 3, 2021
 
/s/ James S. Metcalf
James S. Metcalf
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
  


Exhibit 31.2
 
CERTIFICATION PURSUANT TO RULE 13a-14(b)/15d-14(a)
 
I, Jeffrey S. Lee, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cornerstone Building Brands, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 3, 2021
 
/s/ Jeffrey S. Lee
Jeffrey S. Lee
Executive Vice President, Chief Financial Officer and Chief Accounting Officer
(Principal Financial Officer)



Exhibit 32.1
 
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
 
In connection with the quarterly report on Form 10-Q of Cornerstone Building Brands, Inc. (the “Company”) for the quarter ended July 3, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James S. Metcalf, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
1. I have reviewed this Report of the Company;
 
2. This Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
3. The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: August 3, 2021
 
/s/ James S. Metcalf
James S. Metcalf
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
 
A signed original of this written statement required by Section 906 has been provided to Cornerstone Building Brands, Inc. and will be retained by Cornerstone Building Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
 
This Certification shall not be deemed to be “filed” or part of the Report or incorporated by reference into any of the registrant’s filings with the Securities and Exchange Commission by implication or by any reference in any such filing to the Report.
 

 


Exhibit 32.2
 
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
 
In connection with the quarterly report on Form 10-Q of Cornerstone Building Brands, Inc. (the “Company”) for the quarter ended July 3, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey S. Lee, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
1. I have reviewed this Report of the Company;
 
2. This Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
3. The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: August 3, 2021
 
/s/ Jeffrey S. Lee
Jeffrey S. Lee
Executive Vice President, Chief Financial Officer and Chief Accounting Officer
(Principal Financial Officer)
 
A signed original of this written statement required by Section 906 has been provided to Cornerstone Building Brands, Inc. and will be retained by Cornerstone Building Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
 
This Certification shall not be deemed to be “filed” or part of the Report or incorporated by reference into any of the registrant’s filings with the Securities and Exchange Commission by implication or by any reference in any such filing to the Report.