STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
on this 23rd day of March, 1999 by and among ▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
(each a "Seller" and collectively the "Sellers") and THERMOVIEW INDUSTRIES,
INC., a Delaware corporation (the "Buyer").
PRELIMINARY STATEMENTS
The Sellers own all of the issued and outstanding shares of Class A
Voting common stock, with no par value per share (the "Arizona Common Stock"),
of Thermo-Shield of America (Arizona), Inc., an Arizona corporation ("TSA
Arizona") and all of the issued and outstanding shares of common stock, with no
par value per share (the "Michigan Common Stock," which together with the
Arizona Common Stock is collectively referred to as the "Common Stock") of
Thermo-Shield of America (Michigan), Inc., a Michigan corporation ("TSA
Michigan," which together with the TSA Arizona is collectively referred to as
the "Companies").
The Companies are engaged in designing, selling and installing state of
the art custom vinyl new and replacement thermal paned windows; replacement
cabinet doors and cabinet refacing supplies; and vinyl siding for the existing
home market (the "Business").
▇▇▇▇ ▇. ▇▇▇▇ ("▇▇▇▇") is the sole shareholder of Thermo-Shield Company,
Inc., an Illinois corporation ("TSC"), and Thermo-Shield of American
(Wisconsin), Inc., a Wisconsin corporation ("TSA Wisconsin," which together with
TSC is collectively referred to as "Thermo-Shield"). Concurrently with the
transactions contemplated in this Agreement, Buyer and Thermo-Shield have
entered into an Asset Purchase Agreement (the "Asset Purchase Agreement"),
pursuant to which Buyer has agreed to purchase substantially all of the assets
of Thermo-Shield.
The Buyer desires to purchase and the Sellers desire to sell all of the
outstanding shares of Common Stock of the Companies, upon the terms and subject
to the conditions set forth in this Agreement.
In consideration of these preliminary statements and the mutual
covenants, representations, warranties and agreements hereinafter set forth, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:
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ARTICLE I. PURCHASE AND SALE OF STOCK
SECTION 1.1 PURCHASE OF COMMON STOCK. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date, the Sellers agree
to sell, assign, transfer and deliver to the Buyer, and the Buyer agrees to
purchase (i) 3,000 shares of Arizona Common Stock, which represents all of the
issued and outstanding shares of Arizona Common Stock and (ii) 1,000 shares of
the Michigan Common Stock, representing all of the issued and outstanding shares
of Michigan Common Stock. The certificates representing the Common Stock shall
be duly endorsed in blank, or accompanied by stock powers duly executed in
blank, by the respective Sellers.
SECTION 1.2 PURCHASE PRICE AND POST-CLOSING PAYMENTS. Upon the terms
and subject to satisfaction of the conditions set forth in this Agreement, in
consideration of the aforesaid sale, assignment, transfer and delivery of all of
the issued and outstanding shares of Common Stock, the Buyer will pay to the
Sellers consideration as follows:
(a) A closing payment of $350,000 (the "Cash Payment") shall be
made to the Sellers in cash on the Closing Date (defined below) by certified
check, wire transfer or other means of immediately available funds.
(b) A closing payment of $3,450,000 in the form of a
nonnegotiable promissory note (the "Note") substantially in the form of
EXHIBIT A, which is secured by a pledge of the Common Stock of the Companies
pursuant to a Stock Pledge Agreement in substantially the form attached hereto
as EXHIBIT B, a security interest in the assets of the Companies pursuant to a
Security Agreement in substantially the form attached hereto as Exhibit C, and a
Guaranty in substantially the form attached hereto as EXHIBIT D.
(c) A closing payment of 237,869 shares of Buyer Common Stock
(as defined in Section 3.4) (the "Closing Shares") shall be made to the Sellers
at closing.
(d) A closing payment of 317,148 shares of Buyer Common Stock
(as defined in Section 3.4) (the "Escrow Payment," which together with the Cash
Payment and the Note is collectively referred to as the "Purchase Price") shall
be made to Buyer, as Escrow Agent, under the terms of an Escrow Agreement, in
substantially the form attached hereto as EXHIBIT E (the "Escrow Agreement").
(e) Each Seller shall be entitled to receive a percentage of
the Purchase Price as set forth on SCHEDULE 1.2(e).
(f) The Sellers shall also be entitled to receive a
post-closing earn-out as set forth on SCHEDULE 1.2(f).
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ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
As an inducement to the Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, ▇▇▇▇ represents and warrants to
the Buyer as follows:
SECTION 2.1 OWNERSHIP OF STOCK. Each Seller owns the shares of Common
Stock listed opposite such Seller's name on Schedule 2.1 hereto, free and clear
of all pledges, security interests, liens, charges, encumbrances, equities,
claims, options or limitations of every kind ("Claims"), and that the delivery
to the Buyer of the Common Stock pursuant to the provisions of this Agreement
will transfer to the Buyer valid title thereto, free and clear of all Claims.
SECTION 2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each Seller has full
legal power, capacity and authority to execute, deliver and perform this
Agreement and the Exhibits and to deliver the Schedules hereto, and the other
documents and instruments contemplated hereby (collectively, this Agreement, the
Exhibits and Schedules hereto, and the other documents and instruments
contemplated hereby shall constitute the "Documents") and to consummate the
transactions contemplated hereby and thereby. This Agreement and the other
Documents have been duly and validly executed and delivered by such Seller and
constitute valid and binding obligations of such Seller, enforceable against
such Seller in accordance with their terms.
SECTION 2.3 FOREIGN PERSON. Neither Seller is a foreign person as that
term is defined in Section 1445(f)(3) of the Code and applicable regulations.
SECTION 2.4 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. TSA
Arizona is a corporation duly organized, validly existing and in good standing
under the laws of the State of Arizona. TSA Michigan is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan. Each of the Companies is qualified to do business as a foreign
corporation and is in good standing in the states set forth on SCHEDULE 2.4.
The nature of the Business does not require either of the Companies to be
licensed or qualified in any other jurisdiction. The Sellers have made
available to the Buyer complete and correct copies of the Articles of
Incorporation and Bylaws of each of the Companies as are currently in effect.
Except as set forth on SCHEDULE 2.4, each of the Companies has the corporate
power and authority to own, lease, operate and hold its properties and to carry
on its business as now conducted, including the right to use the name
"Thermo-Shield of America" or any derivative thereof.
SECTION 2.5 CAPITALIZATION. TSA Arizona has authorized capital
consisting of (i) 50,000 shares of Class A Voting common stock, with no par
value per share, of which 3,000 shares are issued and outstanding and no shares
are held as treasury stock and (ii) 50,000 shares of Class B Nonvoting Common
Stock, with no par value per share, none of which are outstanding or held as
treasury stock. TSA Michigan has authorized capital consisting of 60,000 shares
of common stock, with no par value per share, of which 1,000 shares are issued
and outstanding and no shares are held as treasury stock. All of the
outstanding shares of Common Stock of the Companies have been duly authorized
and validly issued and are fully paid and nonassessable. None of the
outstanding shares of Common Stock of the Companies have been
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issued in violation of any preemptive right. There are no outstanding
options, warrants, rights, calls, commitments, conversion rights, rights of
exchange, plans or other agreements of any character providing for the
purchase, issuance or sale of any shares of capital stock of either of the
Companies, other than as contemplated by this Agreement.
SECTION 2.6 SUBSIDIARIES AND INVESTMENTS. Neither of the Companies has
any subsidiaries nor do they own, directly or indirectly, any capital stock or
other equity or ownership or proprietary interest in any other corporation,
partnership, association, trust, joint venture or other entity.
SECTION 2.7 BOOKS AND RECORDS. The minute books of each of the
Companies, which have been and will be made available to the Buyer and its
representatives, contain accurate records of all meetings of and corporate
actions or written consents by the shareholders and Board of Directors of each
of the Companies set forth in such minute books. Except as set forth on SCHEDULE
2.7, the Companies do not have any of their records, systems, controls, data or
information recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of either of the Companies or Thermo-Shield.
SECTION 2.8 FINANCIAL STATEMENTS. The Sellers have previously
furnished to the Buyer, and attached hereto as SCHEDULE 2.8 are, the unaudited
balance sheets of TSA Arizona as of December 31, 1998 and 1997 and the related
statements of income for the calendar years then ended and the unaudited balance
sheet of TSA Arizona (the "Arizona Balance Sheet") as of January 31, 1999 (the
"Balance Sheet Date") and the related statement of income for the [two] months
then ended. All such financial statements (the "Arizona Financial Statements")
have been prepared on a cash basis consistently applied and were prepared from
the books and records of TSA Arizona. Such books and records are complete and
correct in all material respects, accurately reflect all transactions of TSA
Arizona, and have been made available to the Buyer for examination. The Arizona
Financial Statements fairly present the financial position of TSA Arizona as of
the dates thereof.
The Sellers have previously furnished to the Buyer, and attached hereto
as Schedule 2.8 are, the unaudited balance sheets of TSA Michigan as of December
31, 1998 and 1997 and the related statements of income for the calendar years
then ended and the unaudited balance sheet of TSA Michigan (the "Michigan
Balance Sheet," which together with the Arizona Balance Sheet is collectively
referred to as the "Balance Sheets") as of January 31, 1999 and the related
statement of income for the two months then ended. All such financial
statements (the "Michigan Financial Statements," which together with the Arizona
Financial Statements are collectively referred to as the "Financial Statements")
have been prepared on a cash basis consistently applied and were prepared from
the books and records of Michigan. Such books and records are complete and
correct in all material respects, accurately reflect all transactions of
Michigan, and have been made available to the Buyer for examination. The
Michigan Financial Statements fairly present the financial position of Michigan
as of the dates thereof.
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Since the Balance Sheet Date, (i) there has been no change in the assets,
liabilities or financial condition of either of the Companies from that
reflected in the Balance Sheets except for changes in the ordinary course of
business consistent with past practice and which have not been materially
adverse, and (ii) none of the business, prospects, financial condition,
operations, property or affairs of either of the Companies have been materially
adversely affected by any occurrence or development, individually or in the
aggregate, whether or not insured against. The Sellers have disclosed to the
Buyer all material facts relating to the preparation of the Financial
Statements.
SECTION 2.9 EMPLOYMENT AND LABOR MATTERS.
(a) SCHEDULE 2.9 lists all employees, independent contractors
and officers of each of the Companies on the date hereof, along with the amount
of the current annual salaries and total compensation paid or due for services
to each employee, independent contractor or officer for the most recent fiscal
year end and the year to date, and a full and complete description of any
commitments to such employees, independent contractors and officers with respect
to compensation payable thereafter. To the best knowledge of the Sellers, (i)
except for ▇▇▇▇▇▇▇▇ ▇▇▇▇, no key employee or group of employees has any plans to
terminate employment with either of the Companies, and (ii) no independent
contractor has any plans to terminate its services to either of the Companies
and the Companies have no plans to terminate their relationship with any of
their employees or independent contractors.
(b) Neither of the Companies is a party to or bound by any
collective bargaining agreement with any labor organization, group or
association covering any of their employees, and the Sellers have no knowledge
of any attempt to organize any of the Companies' employees by any Person, unit
or group seeking to act as their bargaining agent. There are no pending or, to
the best of Sellers' knowledge, threatened charges (by employees, their
representatives or governmental authorities) of unfair labor practices or of
employment discrimination or of any other wrongful action with respect to any
aspect of employment of any person employed or formerly employed by either of
the Companies. No union representation election relating to employees of either
of the Companies has been scheduled by any governmental agency or authority, no
organizational effort is being made with respect to any of such employees, and
there is no investigation of either of the Companies' employment policies or
practices by any governmental agency or authority pending or, to the Sellers'
knowledge, threatened. Neither of the Companies is currently, nor have either
of the Companies been, involved in labor negotiations with any unit or group
seeking to become the bargaining unit for any employees of either of the
Companies. Neither of the Companies has experienced any material work
stoppages, and to the best knowledge of the Sellers, no work stoppage is
planned. The Companies have complied with all material laws and regulations
relating to the employment of labor, including, without limitation, any
provisions thereof relating to wages, hours, employment practices, terms and
conditions of employment, collective bargaining, equal opportunity or similar
laws and the payment of social security and similar taxes, and is not liable for
any material arrears of wages or any material taxes or penalties for failure to
comply with any of the foregoing.
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SECTION 2.10 REAL PROPERTY. Neither of the Companies own real property.
SECTION 2.11 POWERS OF ATTORNEY; ABSENCE OF LIMITATIONS ON COMPETITION;
GUARANTEES. Except as set forth in SCHEDULE 2.11, (i) no power of attorney or
similar authorization given by either of the Companies presently is in effect or
outstanding; (ii) no contract or agreement to which either of the Companies is a
party or is bound or to which either of the Companies' properties or assets are
subject limits the freedom of either of the Companies to compete in any line of
business or with any Person; and (iii) neither of the Companies is a party to or
bound by any guarantee of any debt or obligation of any other Person.
SECTION 2.12 SIGNIFICANT SUPPLIERS AND LEAD SOURCES. Set forth on
SCHEDULE 2.12 is a true and correct list of the Companies five largest suppliers
for the twelve (12) month period ending December 31, 1998, and most recent one
(1) month period ending January 31, 1999 together with the amount attributable
to such suppliers expressed in dollars and as a percentage of total supplies
purchased. None of the suppliers identified on Schedule 2.12 has terminated,
materially reduced or threatened to terminate or materially reduce its supply of
products or services to either of the Companies during the period covered by
such schedule. Also, set forth on SCHEDULE 2.12 is a true and correct list of
the Companies' five largest lead sources for the twelve (12) month period ending
December 31, 1998, and one (1) month period ending January 31, 1999 together
with the amount attributable to such customers expressed in number of leads and
as a percentage of totalleads. None of the lead sources identified on Schedule
2.12 has terminated or threatened to terminate its relationship of either of the
Companies during the period covered by such schedule.
SECTION 2.13 GOVERNMENTAL APPROVALS. Except as set forth on SCHEDULE
2.13, no registration or filing with, or consent or approval of or other action
by, any Federal, state or other governmental agency or instrumentality is or
will be necessary for the valid execution, delivery and performance by the
Sellers of this Agreement.
SECTION 2.14 VALIDITY, ETC. Except as set forth on SCHEDULE 2.14,
neither the execution and delivery of this Agreement or the other Documents, the
consummation of the transactions contemplated hereby or thereby, nor the
performance of this Agreement or the other Documents in compliance with the
terms and conditions hereof and thereof by the Sellers will (i) violate,
conflict with or result in any breach of any trust agreement, Articles of
Incorporation, bylaw, judgment, decree, order, statute or regulation applicable
to either of the Companies, (ii) violate, conflict with or result in a breach,
default or termination or give rise to any right of termination, cancellation or
acceleration of the maturity of any payment date of any of the obligations of
either of the Companies or increase or otherwise affect the obligations of
either of the Companies under any law, rule, regulation or any judgment, decree,
order, governmental permit, license or order or any of the terms, conditions or
provisions of any mortgage, indenture, note, license, agreement or other
instrument or obligation related to either of the Companies or to the Sellers'
ability to consummate the transactions contemplated hereby or thereby, except
for such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers
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or consents have been obtained in writing and provided to the Buyer, or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to either of the Companies.
SECTION 2.15 ABSENCE OF ADVERSE CHANGE; CONDUCT OF BUSINESS. During the
period from the Balance Sheet Date to and including the date of this Agreement,
except as set forth on SCHEDULE 2.15, neither of the Companies have (i) borrowed
or agreed to borrow any material amount of funds or incurred any material
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise), or guaranteed or agreed to guarantee any obligations of others, (ii)
canceled any indebtedness owing to it or any claims that it might have
possessed, waived any material rights of substantial value or sold, leased,
encumbered, transferred or otherwise disposed of, or agreed to sell, lease,
encumber, or otherwise dispose of its assets or permitted any of its assets to
be subjected to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind, (iii) made any capital expenditure or
commitment therefor, (iv) declared or paid any dividend or made any distribution
on any shares of its capital stock, or redeemed, purchased or otherwise acquired
any shares of its capital stock or any option, warrant or other right to
purchase or acquire any such shares, (v) increased its indebtedness for borrowed
money, or made any loan to any Person, (vi) written off as uncollectible any
notes or accounts receivable, except write-offs in the ordinary course of
business charged to applicable reserves, (vii) made any material change in any
method of accounting or auditing practice, (viii) otherwise conducted its
business or entered into any transaction, except in the usual and ordinary
manner, or (ix) agreed, whether or not in writing, to do any of the foregoing.
SECTION 2.16 CERTAIN PRACTICES. None of the Sellers, the Companies, the
Companies' directors or officers, or to the best knowledge of the Sellers, the
Companies' employees has, directly or indirectly, used any corporate funds for
unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity; made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; made any false or
fictitious entry on the books or records of either of the Companies or any
subsidiary; made any bribe, rebate, payoff, influence payment, kickback, or
other unlawful payment; given any favor or gift which is not deductible for
federal income tax purposes; or made any bribe, kickback, or other payment of a
similar or comparable nature, whether lawful or not, to any person or entity,
private or public, regardless of form, whether in money, business or to obtain
special concessions, or to pay for favorable treatment for business secured or
for special concessions already obtained.
SECTION 2.17 COMPLIANCE WITH LAW; LICENSES AND PERMITS. Except as set
forth on SCHEDULE 2.17, the Companies have complied in all material respects
with all laws, ordinances, legal requirements, rules, regulations and orders
applicable to them, their operations, properties, assets, products and services.
Except as set forth on SCHEDULE 2.17, there is no existing law, rule, regulation
or order, and the Sellers are not aware of any proposed law, rule, regulation or
order, whether Federal, state or local, which would prohibit or materially
restrict the Buyer from, or otherwise materially adversely affect the Buyer in,
conducting the Business in the manner heretofore conducted by the Companies in
any jurisdiction in which the Business is now
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conducted. Each of the Companies possesses all franchises, permits,
licenses, certificates and consents required from any governmental or
regulatory authority in order for the Companies to carry on their respective
businesses as currently conducted and to own and operate their respective
properties and assets as now owned and operated and all of such licenses and
permits are set forth on SCHEDULE 2.17.
SECTION 2.18 EMPLOYEE BENEFITS.
(a) Set forth on SCHEDULE 2.18 is a list of all pension, profit
sharing, retirement, deferred compensation, stock purchase, stock option,
incentive, bonus, vacation, severance, disability, hospitalization, medical
insurance, life insurance, fringe benefit, welfare and other employee benefit
plans, programs or arrangements pursuant to which either of the Companies or
their respective ERISA Affiliates provide (directly or indirectly, individually
or jointly through others) benefits or compensation to or on behalf of employees
or independent contractors or former employees or former independent contractors
of the Companies or their respective ERISA Affiliates, whether formal or
informal, whether or not written ("Employee Plan"). On request by the Buyer,
the Sellers shall furnish a copy of each Employee Plan and a copy of any related
materials. The Companies will maintain the benefits listed on SCHEDULE 2.18 in
full force and effect through the Effective Date. Except as set forth on
SCHEDULE 2.18, the Buyer shall not have any obligation or liability of any kind
or nature for any compensation or benefits of any kind or nature to the
employees or consultants of the Companies for services rendered prior to the
Effective Date.
(b) Each Employee Plan covering any present or former employee
of the Companies which is subject to the continuation health coverage
requirements of Section 4980B of the Code or Section 601 of ERISA or any
applicable state law has complied with all such requirements for continuation
coverage.
(c) There are no actions, suits or claims pending (other than
routine claims for benefits) or threatened against or with respect to any
Employee Plan or the assets of any Employee Plan.
(d) Each Employee Plan (and the related trust or funding
vehicle, if any) has been administered and maintained in accordance with its
terms and with applicable law. Except as set forth on SCHEDULE 2.18(d), each
Employee Plan which is intended to be qualified under Section 401 of the Code
and each amendment to such plan is subject to a favorable determination letter
from the Internal Revenue Service and each such plan has at all times been
maintained, by its terms and in operation, in accordance with Section 401 of the
Code. The assets of each Employee Plan which is not funded through the general
assets of either of the Companies are at least equal to the liabilities under
such Employee Plan, and all assets of each Employee Plan are shown on the books
and records of such Employee Plan at fair market value. No Employee Plan has
unfunded liabilities that as of the Closing Date are not accurately and fully
reflected on the Company's Balance Sheets.
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(e) None of the Companies nor any of their ERISA Affiliates is
or has been a participant in, or is or has been obligated to maintain or to make
contributions to, a multi-employer plan (within the meaning of ERISA Section
3(37) and ERISA Section 4001(a)(3)) or an Employee Plan which is subject to
Title IV of ERISA. None of the Companies nor any of their ERISA Affiliates has
sponsored, contributed to or been obligated under Title I or IV of ERISA to
contribute to a "defined benefit plan" (as defined in ERISA Section 3(35)).
Neither of the Companies is obligated to provide post-retirement medical
benefits or any other unfunded post-retirement welfare benefits to or on behalf
of any persons whatsoever (except the benefits pursuant to the continuation
health coverage requirements under Section 4980B of the Code, ERISA Section 601,
or applicable state law).
(f) None of the Companies nor their ERISA Affiliates is subject
to and, to the best knowledge of the Sellers, no facts exist which could subject
either of the Companies or any of their ERISA Affiliates to, any liability
whatsoever which is directly or indirectly related to any Employee Plan,
including, but not limited to, liability for benefit payments or related claims,
any liability for any tax or related penalty under the Code, or liability for
any damages or penalties arising under Title I or Title IV of ERISA. No
reportable event under Section 4043 of ERISA has occurred or, to the best
knowledge of the Sellers, will occur with respect to such Employee Plan.
(g) Termination of or withdrawal from any Employee Plan
immediately after the Effective Time would not subject either of the Companies
or the Buyer to any liability, tax or penalty whatsoever.
(h) The execution or performance of the transactions
contemplated by this Agreement will not create, accelerate or increase any
obligations under any Employee Plan, including any obligation to make any
payment which would not be deductible as an excess golden parachute payment
under Section 280G of the Code.
(i) All contributions to or under each Employee Plan and all
expenses of each Employee Plan are fully deductible for income tax purposes for
the taxable year for which such contributions are made or such expenses are
paid. All contributions to or under each Employee Plan have been made when due
under the terms of such Employee Plan in accordance with applicable law.
(j) For purposes of this Section 2.18, the term "ERISA" shall
mean the Employee Retirement Income Security Act of 1974, as amended, and the
term "ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Company is treated as a single employer
under Section 414(b), (c), (m), (o) or (t) of the Code.
SECTION 2.19 FIXED ASSETS. SCHEDULE 2.19 contains a true and complete
list of all of the Companies' fixed assets with a net book value of greater than
$1,000.00, whether owned or leased. Except as shown on SCHEDULE 2.19, the
Companies have good and marketable title to all of their respective fixed
assets, free and clear of all claims, liens, mortgages, charges and encumbrances
except as disclosed in the Balance Sheets. All of the Companies' fixed assets,
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whether owned or leased, are adequate and usable for the purposes for which they
are currently used, are in good operating condition and repair and have been
properly maintained.
SECTION 2.20 INSURANCE. The Companies are, and will be through the
Closing, insured with insurers in respect of its properties, assets and
businesses as set forth on the attached SCHEDULE 2.20. SCHEDULE 2.20 lists the
insurance coverage carried by the Companies, which insurance will remain in full
force and effect with respect to all events occurring prior to the Effective
Date. Except as set forth on SCHEDULE 2.20, neither of the Companies (i) has
failed to give any notice or present any claim under any such policy or binder
in due and timely fashion, (ii) has received notice of cancellation or
non-renewal of any such policy or binder, (iii) is aware of any threatened or
proposed cancellation or non-renewal of any such policy or binder, (iv) has
received notice of any insurance premium which will be materially increased in
the future, or (v) is aware of any insurance premium which will be materially
increased in the future. There are no outstanding claims under any such policy
which have gone unpaid for more than 45 days, or as to which the insurer has
disclaimed liability.
SECTION 2.21 ACCOUNTS RECEIVABLE; SELLER NOTES. The accounts receivable
and other debts due or recorded in the respective records and books of account
of the Companies as being due to either of the Companies as of the Effective
Date, all of which are set forth on SCHEDULE 2.21, arose in the ordinary course
of business of the Companies, are not subject to any counterclaim or set-off
and, except for $31,000 in notes receivables from sales representatives which
are not reflected on the Balance Sheets, are fully collectible within 90 days
after the Effective Date without resort to litigation and without offset or
counterclaim. All notes payable to any of the Sellers, or any past shareholder
of either of the Companies or any corporation, partnership or other entity owned
or otherwise controlled by either of the Sellers, by either of the Companies and
all notes receivable to the Company from any of the Sellers, or any past
shareholder of either of the Companies or any corporation, partnership or other
entity owned or otherwise controlled by either of the Sellers, have been paid in
full.
SECTION 2.22 OUTSTANDING CONTRACTS. SCHEDULE 2.22 sets forth a
description of all existing contracts, agreements, leases (other than leases of
real property), commitments, licenses and franchises, which involve obligations
or commitments by either of the Companies of $10,000 or more and are not
cancelable by the Companies without penalty within 30 days (collectively
"Contracts"), whether written or oral, relating to the Companies. The Sellers
have delivered or made available to the Buyer true, correct and complete copies
of all of the Contracts specified on SCHEDULE 2.22 which are in writing, and
such schedule sets forth a complete description of all Contracts which are not
in writing. All of the Contracts are in full force and effect and enforceable
in accordance with their terms, except to the extent that the enforceability
thereof may be subject to or affected by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, or other laws relating to or
affecting the rights of creditors generally. Except as set forth on SCHEDULE
2.22, the Companies and, to the best knowledge of the Sellers, each other party
thereto has materially performed all the obligations required to be performed by
it, has received no notice of default and is not in default (with due notice or
lapse of time or both) under any of the Contracts. Neither of the Companies has
any present expectation or intention of not fully performing all its obligations
under each of the
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Contracts, and the Sellers have no knowledge of any breach or anticipated
breach by the other party to any of the Contracts to which either of the
Companies is a party. Except as set forth on SCHEDULE 2.22, none of the
Contracts has been terminated; no notice has been given by any party thereto
of any alleged default by any party thereunder; and the Sellers are not aware
of any intention or right of any party to declare another party to any of the
Contracts to be in default. Except as set forth on SCHEDULE 2.22, there
exists no actual or, to the best knowledge of the Sellers, threatened
termination, cancellation or limitation of the business relationship of
either of the Companies by any party to any of the Contracts.
SECTION 2.23 OUTSTANDING LEASES. SCHEDULE 2.23 sets forth a description
of each agreement by which either of the Companies leases real property (the
"Leased Parcels") used in connection with the Business (collectively, the
"Leases"). The Sellers have delivered or made available to the Buyer true,
correct and complete copies of all of the Leases specified on SCHEDULE 2.23.
All rents due under the Leases have been paid. All of the Leases are in full
force and effect and enforceable in accordance with their terms, except to the
extent that the enforceability thereof may be subject to or affected by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, or other laws relating to or affecting the rights of creditors
generally. Except as set forth on SCHEDULE 2.23, the Companies and to the best
knowledge of the Sellers, each other party thereto has performed all the
obligations required to be performed by them, has received no notice of default
and is not in default (with due notice or lapse of time or both) under any of
the Leases. Neither of the Companies has any present expectation or intention
of not fully performing all its obligations under each of the Leases, and the
Sellers have no knowledge of any breach or anticipated breach by the other party
to any of the Leases. Except as set forth on SCHEDULE 2.23, none of the Leases
has been terminated; no notice has been given by any party thereto of any
alleged default by any party thereunder; and the Sellers are not aware of any
intention or right of any party to declare another party to any of the Leases to
be in default. There exists no actual or, to the best knowledge of the Sellers,
threatened termination, cancellation or limitation of the business relationship
of either of the Companies with any party to any of the Leases.
SECTION 2.24 INTELLECTUAL PROPERTIES. SCHEDULE 2.24 contains an
accurate and complete list of all domestic and foreign letters patent, patents,
patent applications, patent licenses, software licenses and know-how licenses,
trade names, trademarks, copyrights, unpatented inventions, service marks,
trademark registrations and applications, service ▇▇▇▇ registrations and
applications and copyright registrations and applications, trade secrets or
other confidential proprietary information owned or used by either of the
Companies in the operation of the Business (collectively the "Intellectual
Property"). Except as set forth on SCHEDULE 2.24 and except for commercial
software licensed for use on personal computers, the Companies own the entire
right, title and interest in and to the Intellectual Property, trade secrets and
technology used in the operation of its business and each item constituting part
of the Intellectual Property and trade secrets and technology which is owned by
either of the Companies has been, to the extent indicated in SCHEDULE 2.24, duly
registered with, filed in or issued by, as the case may be, the United States
Patent and Trademark office or such other government entities, domestic or
foreign, as are indicated in SCHEDULE 2.24 and such registrations, filings and
issuances remain in full force and effect. Except as set forth on SCHEDULE
2.24, there have not been and are no
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>
pending or, to the best knowledge of the Sellers, threatened proceedings or
litigation or other adverse claims affecting or with respect to the
Intellectual Property. There is, to the best knowledge of the Sellers, no
reasonable basis upon which a claim may be asserted against either of the
Companies for infringement of any domestic or foreign letters patent,
patents, patent applications, patent licenses and know-how licenses, trade
names, trademark registrations and applications, common law trademarks,
service marks, service ▇▇▇▇ registrations or applications, copyrights,
copyright registrations or applications, trade secrets or other confidential
proprietary information. To the best knowledge of the Sellers, no Person is
infringing upon the Intellectual Property.
SECTION 2.25 PROPRIETARY INFORMATION OF THIRD PARTIES. Except as
disclosed on SCHEDULE 2.25, no third party has claimed or, to the best
knowledge of the Sellers, has reason to claim that any Person employed by or
consulting with either of the Companies ("Related Person") has (i) violated
or may be violating any of the terms or conditions of such person's
employment, non-competition or non-disclosure agreement with such third
party, (ii) disclosed or may be disclosing or utilized or may be utilizing
any trade secret or proprietary information or documentation of such third
party, or (iii) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from either of the
Companies which suggests that such a claim might be contemplated. Except as
disclosed on SCHEDULE 2.25, to the best knowledge of the Sellers, no Related
Person has employed or proposes to employ any trade secret or any information
or documentation proprietary to any former employer and no Related Person has
violated any confidential relationship which such person may have had with
any third party, in connection with the development or sale of any product or
service of either of the Companies, and none of the Sellers have any reason
to believe there will be any such employment or violation.
SECTION 2.26 TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 2.26, to the best knowledge of Sellers, no director, officer or
shareholder of the Companies, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a beneficial interest greater than
5% or is an officer, director, trustee, partner or holder of any equity interest
greater than 5%, is a party to any transaction with either of the Companies,
including any contract, agreement or other arrangement providing for the
employment of, furnishing of services by, rental of real or personal property
from or otherwise requiring payments or involving other obligations to any such
person or firm.
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SECTION 2.27 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Except as and to the extent of the amounts specifically
reflected or reserved against in the Balance Sheets, or except as set forth on
SCHEDULE 2.27, the Companies have no liabilities or obligations of any nature
whatsoever due or to become due, accrued, absolute, contingent or otherwise,
except for liabilities and obligations incurred since the date thereof in the
ordinary course of business and consistent with past practice. The Sellers do
not know of, and have no reason to know of, any basis for the assertion against
either of the Companies of any liability or obligation not fully reflected or
reserved against in the Balance Sheet.
(b) Neither of the Companies is bound by any agreement, or
subject to any charter or other corporate restriction or any legal requirement,
which has, or in the future can reasonably be expected to have, a material
adverse effect on the business or prospects of either of the Companies.
SECTION 2.28 TAXES. The Companies have timely filed a valid election to
be treated as S corporations in accordance with the provisions of Section 1361
of the Code, effective for TSA Arizona's tax year ending December 31, 1997 and
for TSA Michigan's tax year ending December 31, 1997, and have qualified and
continue to qualify as S corporations for all years and periods thereafter until
the Effective Time. SCHEDULE 2.28 lists all the states and localities with
respect to which either of the Companies are required to file any corporate,
income and/or franchise tax returns and sets forth whether the Companies are
treated as the equivalent of an S corporation by or with respect to each such
state or locality. Neither of the Companies have engaged in any activity which
would disqualify its treatment as an S corporation for those tax purposes.
Except as set forth on SCHEDULE 2.28, all federal, state, local and foreign tax
returns and tax reports required to be filed by either of the Companies on or
before the date hereof have been timely filed with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are required to
be filed and all amounts shown as owing thereon have been paid. Except as set
forth on SCHEDULE 2.28, all taxes (including, without limitation, income,
accumulated earnings, property, sales, use, franchise, excise, license, value
added, fuel, employees' income withholding and social security taxes) which have
become due or payable or are required to be collected by either of the Companies
or are otherwise attributable to any periods ending on or before the Effective
Time and all interest and penalties thereon, whether disputed or not, have been
paid or will be paid in full on or prior to the Closing Date or are adequately
reflected on the Balance Sheets or the Companies' books and records. Except as
set forth on SCHEDULE 2.28, all deposits required by law to be made by either of
the Companies with respect to employees' withholding taxes have been duly made,
and as of the Effective Time all such deposits due will have been made. The
Companies have delivered to the Buyer true and complete copies of all of the
Companies' federal and state income tax returns for the fiscal periods ended
December 31, 1998, 1997 and 1996 and all reports and results of income tax
audits, if any, related thereto. Except as set forth on SCHEDULE 2.28, no
examination of any tax return of either of the Companies is currently in
progress. There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any such tax return.
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SECTION 2.29 LITIGATION. Except as set forth on SCHEDULE 2.29, there is
no (i) action, suit, claim, proceeding or investigation pending or, to the best
knowledge of the Sellers, threatened against or affecting either of the
Companies (whether or not either of the Companies is a party or prospective
party thereto), at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) arbitration proceeding pending
relating to either of the Companies or (iii) governmental inquiry pending or, to
the best of Sellers' knowledge, threatened against or involving either of the
Companies, and there is no basis for any of the foregoing. Neither of the
Companies have received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to the business, prospects,
financial condition, operations, property or affairs of either of the Companies.
There are no outstanding orders, writs, judgments, injunctions or decrees served
upon either of the Companies by any court, governmental agency or arbitration
tribunal against either of the Companies. To the best of Sellers' knowledge,
there are no facts or circumstances which may result in institution of any
action, suit, claim or legal, administrative or arbitration proceeding or
investigation against, involving or affecting either of the Companies or the
transactions contemplated hereby. Neither of the Companies is in default with
respect to any order, writ, injunction or decree known to or served upon it from
any court or of any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
Except as disclosed on SCHEDULE 2.29, there is no action or suit by either of
the Companies pending or threatened against others.
SECTION 2.30 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. The Companies and all Leased Parcels are in
compliance with all applicable laws, rules, regulations, orders, ordinances,
judgments and decrees of all governmental authorities with respect to all
environmental statutes, rules and regulations. Except as set forth on SCHEDULE
2.30, neither of the Companies has received notice of, nor does the Sellers have
knowledge of, any past, present or future events, conditions, circumstances,
activities, practices, incidents, actions or plans of the Companies or the
Companies' predecessors, either collectively, individually or severally, which
may interfere with or prevent continued compliance with, or which may give rise
to any common law or legal liability or otherwise form the basis of any claim,
action, suit, proceeding, hearing, or investigation, based on or related to the
disposal, storage, handling, manufacture, processing, distribution, use,
treatment or transport, or the emission, discharge, release or threatened
release into the environment, of any Substance. As used in this Section 2.30,
the term "Substance" or "Substances" shall mean any pollutant, contaminant,
hazardous substance, hazardous material, hazardous waste or toxic waste, as
defined in any presently enacted federal, state or local statute or any
regulation that has been promulgated pursuant thereto. No part of any of the
Leased Parcels has been listed or proposed for listing on the National
Priorities List established by the United States Environmental Protection
Agency, or any other corresponding list by any state or local authorities.
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(b) ENVIRONMENTAL SUBSTANCE LIABILITY. No event has occurred
or condition exists or operating practice is being employed that could give rise
to liability on the part of either of the Companies, either at the present time
or in the future, for any losses, liabilities, damages (whether consequential or
otherwise), settlements, penalties, interest, expenses and costs of responses,
including any such liability on account of the right of any governmental or
private entity or person, and including closure expenses, costs of assessment,
containment, removal, or response (other than monitoring or transportation or
disposal of materials required to be transported or disposed of in the ordinary
course of business consistent with past practice) arising under any rule or
federal, state, or local statute, or any regulation that has been promulgated
pursuant thereto, or common law, as a result of or in connection with, or
alleged to be as a result of or in connection with, the following (collectively
the "Hazardous Activities"):
(A) the handling, storage, use, transportation or
disposal of any Substances in or near or from the
Leased Parcels;
(B) the handling, storage, use, transportation or
disposal of any Substances by either of the
Companies, Thermo-Shield or their predecessors which
Substances were a product, by-product or otherwise
resulted from the operations conducted by or on
behalf of the Companies or their predecessors;
(C) any intentional or unintentional emission, discharge
or release of any Substances in or near or from
facilities into or upon the air, surface water,
ground water or land or any disposal, handling,
manufacturing, processing, distribution, use,
treatment, or transport of such Substances in or
near or from facilities by or on behalf of the
Companies or their predecessors; or
(D) the presence of any toxic or hazardous building
materials (including but not limited to friable
asbestos or similar substances) in any facilities of
the Companies, including but not limited to the
inclusion of such materials in the exterior and
interior walls, floors, ceilings, tile, insulation
or any other portion of building structures.
(c) ENVIRONMENTAL PERMITS. The Companies have obtained and
hold all registrations, permits, licenses, and approvals issued by or on behalf
of any federal, state or local governmental body or agency if any
("Environmental Permits") that are required in connection with the operation by
either of the Companies of the Leased Parcels, the discharge or emission of
Substances by either of the Companies from the Leased Parcels or the generation,
treatment, storage, transportation, or disposal of any such Substances by the
Companies. Such Environmental Permits, which are described on SCHEDULE 2.30,
are currently effective and sufficient for the operation of the Leased Parcels
and the business of the Companies as currently conducted and intended to be
conducted. The Companies are in compliance with all terms and conditions of the
Environmental Permits, and are also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and
15
timetables contained in those laws or provisions or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder and applicable to either
of the Companies.
(d) DELIVERIES. The Sellers have delivered to the Buyer true
and complete copies of results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by the Sellers pertaining to Substances or
Hazardous Activities in, on, or under the Leased Parcels or concerning
compliance by the Sellers or any other Person for whose conduct they are or may
be held responsible, with environmental statutes, rules and regulations.
SECTION 2.31 BROKER'S OR FINDER'S FEES. No agent, broker, person or
firm acting on behalf of the Sellers or the Companies is, or will be, entitled
to any commission or broker's or finder's fees from the Sellers or the
Companies, or from any person controlling, controlled by or under common control
with the Sellers or either of the Companies, in connection with any of the
transactions contemplated herein.
SECTION 2.32 INVENTORY. All inventory of the Companies, whether or
not reflected in the Financial Statements or Balance Sheets, consists of a
quality and quantity usable and salable in the ordinary course of business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Financial
Statements or the Balance Sheets, as the case may be. All inventories not
written off have been priced at the lower of cost or market on a first in, first
out basis. The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable in the
present circumstances of the Companies.
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SECTION 2.33 YEAR-2000 COMPLIANCE.
(a) SCHEDULE 2.33 contains a true and complete list of all
Systems (as hereinafter defined), and each System is Year-2000 Compliant (as
hereinafter defined) to the extent indicated on SCHEDULE 2.33.
(b) As used throughout this Agreement, the following
definitions shall have the following meanings:
(1) "External Systems" shall mean all services which are
provided to the Company by third parties and which are
dependent on information technology, including, but not
limited to, any external payroll, accounting, or tax filing
services or any checking, savings, or other financial
services.
(2) "Internal Systems" shall mean all technology
products and systems generally operated or controlled
in-house by the Company, or its employees, agents, or
independent contractors including, but not
limited to, computers, computer networks, telephone
systems, voicemail systems, intercom systems, pager
systems, and software applications.
(3) "Licensed Systems" shall mean all products and
systems developed by or for the Company which are licensed,
sold, distributed, or otherwise transferred by the Company
to third parties.
(4) "System" or "Systems" shall mean any, all, or any
combination of any Internal System, External System, or
Licensed System.
(5) "Year-2000 Compliant" shall mean, with respect to
each System, that such System is designed to be used
before, during, and after the calendar year 2000 A.D. and
will accurately accept date input and process, store, and
output date data and date-related data, including, without
limitation, calculating, comparing, sorting, and sequencing
such data and calculating leap years before, during, and
after the calendar year 2000 A.D. without any manual
intervention.
SECTION 2.34 PURCHASE FOR INVESTMENT; RESTRICTED SECURITIES. ▇▇▇▇
represents and warrants (a) that he is acquiring shares of Buyer Common Stock,
as hereinafter defined, for investment and not with a present view toward, or
for sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling the shares of Buyer Common Stock so
acquired; (b) that he has no present plan or intention to sell, exchange or
otherwise dispose of any of the shares of Buyer Common Stock that may be
received in connection with this Agreement; and (c) he acknowledges that (i) the
shares of Buyer Common Stock are not and will not be registered under the
Securities Act of 1933, as amended (the "1933 Act"), and (ii) that
17
the Buyer does not file periodic reports with the Securities and Exchange
Commission pursuant to the requirements of Section 12 or 15(d) of the
Securities Exchange Act of 1934, as amended.
SECTION 2.35 WORKING CAPITAL OF THE THERMO-SHIELD GROUP. As of the
Closing Date, the Companies and Thermo-Shield have sufficient net current assets
to operate their respective businesses for one operating cycle without the need
for any additional working capital from Buyer or any other source.
SECTION 2.36 DISCLOSURE. All Documents delivered or to be delivered by
or on behalf of the Sellers or the Companies in connection with this Agreement
and the transactions contemplated hereby are true, complete and correct in all
material respects. Neither this Agreement, nor any of the other Documents
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements made by any of the Sellers herein or therein,
in light of the circumstances in which made, not misleading. There is no fact
known to the Sellers which materially and adversely affects the business,
prospects or financial condition of the Companies or their properties or assets,
which has not been set forth in the Documents.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE BUYER
As an inducement to the Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, the Buyer represents and
warrants to the Sellers as follows:
SECTION 3.1 ORGANIZATION. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to transact business as a foreign corporation in each
jurisdiction in which the failure to so qualify would have a material adverse
impact on the Buyer's ability to purchase the Common Stock pursuant to this
Agreement and perform its obligations under this Agreement.
SECTION 3.2 CORPORATE POWER AND AUTHORITY. The Buyer has the corporate
power and authority to execute, deliver and perform this Agreement and the other
Documents. The execution, delivery and performance of the Documents
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby have been duly authorized and approved by all necessary corporate
action of the Buyer. The Documents to be executed and delivered by the Buyer
have been duly executed and delivered by, and constitute the legal, valid and
binding obligation of the Buyer enforceable against the Buyer in accordance with
their terms.
SECTION 3.3 VALIDITY, ETC. Neither the execution and delivery by the
Buyer of this Agreement and the other Documents, the consummation by the Buyer
of the transactions contemplated hereby or thereby, nor the performance by the
Buyer of this Agreement and such other agreements in compliance with the terms
and conditions hereof and thereof will (i) violate, conflict with or result in
any breach of any trust agreement, articles of incorporation, bylaw, judgment,
decree, order, statute or regulation applicable to the Buyer, (ii) violate,
conflict with or
18
result in a breach of or default (or give rise to any right of termination,
cancellation or acceleration) under any law, rule or regulation or any
judgment, decree, order, governmental permit, license or order or any of the
terms, conditions or provisions of any mortgage, indenture, note, license,
agreement or other instrument to which the Buyer is a party, or (iii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to the Buyer.
SECTION 3.4 CAPITAL STOCK. The authorized capital stock of the Buyer
consists of (a) 100,000,000 shares of $.001 par value common stock ("Buyer
Common Stock"), of which 13,917,439 shares were issued and outstanding as of
February 1, 1999 and (b) 50,000,000 shares of $.001 par value preferred stock
("Buyer Preferred Stock"), of which (i) 2,980,000 shares of 10% Cumulative
Convertible Series A Preferred Stock and (ii) 400,000 shares of 10% Cumulative
Convertible Series B Preferred Stock were issued and outstanding as of February
1, 1999 (collectively, Buyer Common Stock and Buyer Preferred Stock are referred
to as "Buyer Capital Stock"). All of the issued and outstanding shares of Buyer
Capital Stock are, and all of the shares of Buyer Common Stock to be issued
pursuant to Schedule 1.2, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable. None of the outstanding shares of Buyer Capital Stock has been,
and none of the shares of Buyer Common Stock to be issued in connection with
this transaction will be, issued in violation of any preemptive rights of the
current or past shareholders of the Buyer.
SECTION 3.5 DISCLOSURE STATEMENT. The Buyer's Disclosure Statement,
dated February 25,1999 and supplemented on March 19, 1999, which has been
previously delivered to the Sellers is true, complete and correct in all
material respects.
SECTION 3.6 ACQUISITION OF STOCK FOR INVESTMENT. The Buyer is
acquiring the shares of Common Stock for investment and not with a view toward,
or for sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling such shares of Common Stock. The Buyer
agrees that such shares of Common Stock may not be sold, transferred, offered
for sale, pledged, hypothecated or otherwise disposed of without registration
under the Securities Act of 1933, as amended, except pursuant to an exemption
from registration available under such Act. The Buyer will not sell, offer to
sell or solicit offers to buy any of the shares of Common Stock in violation of
the Securities Act of 1933 or the securities law of any state. The Buyer
understands that the shares of Common Stock have not been registered under
federal or any state's securities laws.
SECTION 3.7 BROKER'S OR FINDER'S FEES. No agent, broker, person or
firm acting on behalf of the Buyer is, or will be, entitled to any commission or
broker's or finder's fees from the Buyer, or from any person controlling,
controlled by or under common control with the Buyer, in connection with any of
the transactions contemplated herein.
SECTION 3.8 GOVERNMENTAL APPROVALS. No registration or filing with, or
consent or approval of or other action by, any Federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by the Buyer of this Agreement.
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SECTION 3.9 DISCLOSURE All Documents delivered or to be delivered by
or on behalf of the Buyer in connection with this Agreement and the transactions
contemplated hereby are true, complete and correct. Neither this Agreement, nor
any of the other Documents contains any untrue statement of a material fact or
omits a material fact necessary to make the statements made by the Buyer herein
or therein, in light of the circumstances in which made, not misleading. There
is no fact known to the Buyer which may have a material adverse effect on the
Buyer's ability to pay its obligations under this Agreement, which has not been
set forth in the Documents.
ARTICLE IV. COVENANTS AND AGREEMENTS
SECTION 4.1 BEST EFFORTS. Each of the Sellers and the Buyer shall use
their best efforts to procure upon reasonable terms and conditions all consents
and approvals, completion of all filings, all registrations and certificates,
and satisfaction of all other requirements prescribed by law which are necessary
for the consummation of the transactions contemplated by this Agreement and the
Buyer's ownership and operation of the Companies' Business after the Closing
Date. Prior to the Closing Date, each of the Sellers will use his best efforts
to preserve each of the Companies' relationships with its employees, independent
contractors, customers and others having business relationships with either of
the Companies.
SECTION 4.2 TAX RETURNS. The Sellers shall cause each of the Companies
to prepare and timely file, at their sole expense, all of the Companies'
required tax returns for all periods ending on or prior to the Effective Date.
The Sellers shall be responsible for the payment of, and will indemnify, defend
and hold the Buyer harmless against all taxes due or assessed which relate to
the operations of the Business for all periods ending on or prior to the
Effective Date.
SECTION 4.3 INVESTIGATIONS. The Sellers shall give the Buyer and its
employees, accountants, attorneys and other authorized representatives full
access during all reasonable times to all the premises, properties, books and
records, and furnish the Buyer with such financial and operating data, analyses
and other information of any kind respecting the Companies' business and
properties as the Buyer shall from time to time request. Any investigation
shall be conducted in a manner which does not unreasonably interfere with
business operations.
SECTION 4.4 PRESERVATION OF BUSINESS. The Sellers shall, in all
material respects, cause the Companies to use their best efforts to preserve the
possession and control of all of their respective assets and Business, to
preserve the goodwill of their respective customers and others with whom it has
business relations, and to do nothing to impair its ability to keep and preserve
its Business as it exists on the date of this Agreement.
SECTION 4.5 SECTION 338(h)(10) ELECTION. The Buyer and the Sellers
shall make a simultaneous joint election (the "Election") under Section
338(h)(10) of the Code for each of the Companies on Internal Revenue Service
Form 8023 in accordance with the instructions to the
20
form and any similar state law provisions in all applicable states, with
respect to the sale and purchase of the Common Stock pursuant to this
Agreement, and each party shall provide to the others all necessary
information to permit such election to be made. Such election shall be made
not later than the 15th day of the ninth month beginning after the month in
which the Closing Date occurs. The Buyer and the Sellers shall, as promptly
as practicable following the Closing Date, take all actions necessary and
appropriate (including filing such forms, returns, schedules and other
documents as may be required) to effect and preserve a timely election. All
taxes attributable to the election made pursuant to this Section 4.5 shall be
the liability of the Sellers. In connection with such election, within sixty
(60) days following the Closing Date, the Buyer and the Sellers shall act
together in good faith to determine and agree upon the "deemed sale price" to
be allocated to each asset of the Companies in accordance with Treasury
Regulation Section 1.338(h)(10)-1(f) and the other regulations under Section
338 of the Code.
SECTION 4.6 LANDLORDS' CONSENTS. The Sellers shall cause, on or before
the expiration of thirty (30) days after the Closing Date, the Companies to
obtain from their respective landlords (to the extent required under the
pertinent premises leases) written consent to the assignment of said leases to
the Buyer which assignment is deemed to have resulted from the transactions
contemplated by this Agreement.
SECTION 4.7 AUDITED FINANCIAL STATEMENTS. The Sellers shall furnish to
the Buyer, as soon as practical, audited financial statements of the Companies
for the three (3) fiscal years ending December 31, 1998, 1997 and 1996. The
Buyer and the Sellers shall each pay one-half of the expenses associated with
the foregoing audited financial statements.
ARTICLE V. CONDITIONS TO THE BUYERS OBLIGATIONS
The obligation of the Buyer to make deliveries to the Sellers pursuant to
Section 1.2 hereof and to consummate the other transactions contemplated hereby
is subject to the satisfaction, on or before the Closing Date, of the following
conditions each of which may be waived by the Buyer in its sole discretion:
SECTION 5.1 INTRA-COMPANY DEBT. All indebtedness of each of the
Sellers and all other shareholders, former shareholders, directors, officers and
employees of the Companies to either of the Companies and of either of the
Companies to either of the Sellers, Thermo-Shield or any other entity controlled
by either of the Sellers shall have been repaid in full and the Sellers shall
have delivered to the Buyer a certificate, dated the Closing Date, to such
effect.
SECTION 5.2 CONSENTS. Except for the consents of the landlords
provided for in Section 4.6 above and except as set forth on SCHEDULE 5.2, all
requisite governmental approvals and consents of third parties identified on
such schedule or otherwise identified by the Sellers as required to be received
to prevent any material license, permit or agreement relating to the Business
from terminating prior to its scheduled termination, as a result of the
consummation of the transactions contemplated hereby, shall have been obtained.
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SECTION 5.3 NON-COMPETITION AGREEMENT. Each of Sellers shall have
entered into a Non-Competition Agreement with the Buyer in substantially the
form attached hereto as EXHIBIT B (the "Non-Competition Agreement").
SECTION 5.4 EMPLOYMENT AGREEMENT. ▇▇▇▇ ▇. ▇▇▇▇ shall have entered into
an Employment Agreement with TShield Illinois, LLC ("New Thermo-Shield") in
substantially the form attached hereto as EXHIBIT C (the "Employment
Agreement").
SECTION 5.5 OPINION OF COUNSEL TO THE SELLERS. The Buyer shall have
received from ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ counsel to the Sellers, an opinion, dated as of
the Closing Date, in form and substance reasonably satisfactory to the Buyer,
and to the following effect:
(a) TSA Arizona is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona and TSA
Michigan is a corporation duly organized, validly existing and in good standing
under the laws of the State of Michigan. The Companies are qualified to do
business as a foreign corporation and are in good standing in the states set
forth on SCHEDULE 2.4. The nature of the Business does not require either of
the Companies to be licensed or qualified in any other jurisdiction. Each of
the Companies has the corporate power and authority to own, lease, operate and
hold its properties and to carry on its business as now conducted;
(b) Each of the Sellers has full legal power, capacity and
authority to execute and deliver this Agreement and the other Documents and to
consummate the transactions contemplated hereby and thereby, and this Agreement
and the other Documents have been duly and validly executed and delivered by
each of the Sellers and constitute the legal, valid and binding obligation of
the Sellers, enforceable against each of the Sellers in accordance with their
terms;
(c) TSA Arizona has authorized capital consisting of (i) 50,000
shares of Class A Voting common stock, with no par value per share, of which
3,000 shares are issued and outstanding and no shares are held as treasury
stock, (ii) and 50,000 shares of Class B Nonvoting common stock none of which
are issued or outstanding or held as treasury stock. TSA Michigan has
authorized capital consisting of 60,000 shares of common stock, with no par
value per share, of which 1,000 shares are issued and outstanding and no shares
are held as treasury stock. All of the outstanding shares of the Companies have
been duly authorized and validly issued and are fully paid and nonassessable.
None of the outstanding shares of Common Stock of either of the Companies have
been issued in violation of any preemptive right. There are no outstanding
options, warrants, rights, calls, commitments, conversion rights, rights of
exchange, plans or other agreements of any character providing for the purchase,
issuance or sale of any shares of capital stock of either of the Companies,
other than as contemplated by this Agreement;
(d) The Companies have no subsidiaries and do not own, directly
or indirectly, any capital stock or other equity or ownership or proprietary
interest in any other corporation, partnership, association, trust, joint
venture or other entity;
22
(e) No registration or filing with, or consent or approval of
or other action by, any Federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery and
performance by any of the Sellers of this Agreement;
(f) There is no (i) action, suit, claim, proceeding or
investigation pending or, to the best knowledge of the Sellers' counsel,
threatened against or affecting either of the Companies (whether or not either
of the Companies is a party or prospective party thereto), at law or in equity,
or before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
(ii) arbitration proceeding pending relating to either of the Companies or
(iii) governmental inquiry pending or threatened against or involving either of
the Companies, and, to the best knowledge of the Sellers' counsel, there is no
basis for any of the foregoing. Neither of the Companies have received any
opinion or memorandum or legal advice from legal counsel to the effect that they
are exposed, from a legal standpoint, to any liability or disadvantage which may
be material to the business, prospects, financial condition, operations,
property or affairs of either of the Companies. There are no outstanding
orders, writs, judgments, injunctions or decrees served upon either of the
Companies by any court, governmental agency or arbitration tribunal against
either of the Companies. To the best knowledge of the Sellers' counsel, there
are no facts or circumstances which may result in institution of any action,
suit, claim or legal, administrative or arbitration proceeding or investigation
against, involving or affecting either of the Companies or the transactions
contemplated hereby. Neither of the Companies are in default with respect to
any order, writ, injunction or decree known to or served upon it from any court
or of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
There is no action or suit by either of the Companies pending or threatened
against others;
(g) Each of the Non-Competition Agreements has been duly
executed and delivered by, and constitutes the legal, valid and binding
obligation of each of the Sellers, enforceable against him in accordance with
its terms. The Employment Agreement has been duly executed and delivered by,
and constitutes the legal, valid and binding obligations of ▇▇▇▇ ▇. ▇▇▇▇,
enforceable against him in accordance with its terms; and
(h) The execution and delivery of this Agreement and the other
Documents, the consummation of the transactions contemplated hereby and thereby,
and the performance of the Agreement and such other agreements in compliance
with the terms and conditions hereof and thereof by the Sellers will not, to the
best knowledge of counsel, (i) violate, conflict with or result in any breach of
any trust agreement, articles of incorporation, bylaw, judgment, decree, order,
statute or regulation applicable to either of the Companies, (ii) violate,
conflict with or result in a breach, default or termination or give rise to any
right of termination, cancellation or acceleration of the maturity of any
payment date of any of the obligations of either of the Companies or increase or
otherwise affect the obligations of either of the Companies under any law, rule,
regulation or any judgment, decree, order, governmental permit, license or order
or any of the terms, conditions or provisions of any mortgage, indenture, note,
license, agreement or other instrument or obligation related to either of the
Companies or to the Sellers' ability to consummate the transactions contemplated
hereby or thereby, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents have
been obtained in writing and provided
23
to the Buyer, or (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to either of the Companies.
SECTION 5.6 CLOSING DOCUMENTS. The Sellers shall have delivered all of
the resolutions, certificates, documents and instruments required by this
Agreement.
SECTION 5.7 TSA MICHIGAN SHAREHOLDER AGREEMENT. TSA Michigan and its
shareholders shall have terminated that certain Shareholders Agreement, dated
February 17, 1997 (the "Michigan Shareholders Agreement"), as of an effective
date prior to Closing.
SECTION 5.8 EMPLOYMENT MATTERS. Each of the Companies shall have
delivered new INS forms I-9 and IRS forms W-4 for each of their current
employees.
SECTION 5.9 THERMO-SHIELD TRANSACTIONS. The transactions contemplated
in the Asset Purchase Agreement shall have closed simultaneously with the
transactions contained herein.
SECTION 5.10 APPROVAL OF THE BUYER AND ITS COUNSEL. All actions,
proceedings, consents, instruments and documents required to be delivered by, or
at the behest or direction of, the Sellers hereunder or incident to their
performance hereunder, and all other related matters, shall be reasonably
satisfactory as to form and substance to the Buyer and its counsel.
ARTICLE VI. CONDITIONS TO THE SELLERS' OBLIGATIONS
The obligation of the Sellers to transfer the Common Stock to the Buyer
and to consummate the other transactions contemplated hereby is subject to the
satisfaction, on or before the Closing Date, of the following conditions, each
of which may be waived by the Sellers in their sole discretion:
SECTION 6.1 EMPLOYMENT AGREEMENT. New Thermo-Shield shall have entered
into the Employment Agreement.
SECTION 6.2 OPINION OF ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇. The Sellers shall have
received from ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the Buyer, an opinion dated as of
the Closing Date, in form and substance reasonably satisfactory to the Sellers,
and to the following effect:
(a) The Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified to transact business as a foreign corporation in each jurisdiction in
which the failure to so qualify would have a material adverse impact on the
Buyer's ability to pay its obligations under this Agreement;
(b) The Buyer has the corporate power and authority to execute,
deliver and perform the Agreement and the other Documents. The execution,
delivery and performance of the Agreement and the other Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly executed and delivered by the Buyer and
24
constitute the legal, valid and binding obligations of the Buyer enforceable
against the Buyer in accordance with their terms; and
(c) The execution and delivery of the Agreement and the other
Documents, the consummation of the transactions contemplated hereby and thereby,
and the performance of the Agreement and such other agreements in compliance
with the terms and conditions hereof and thereof by the Buyer will not (i)
violate, conflict with or result in any breach of any trust agreement,
certificate of incorporation, bylaw, judgment, decree, order, statute or
regulation applicable to the Buyer, (ii) violate, conflict with or result in a
breach of or default (or give rise to any right of termination, cancellation or
acceleration) under any law, rule or regulation or any judgment, decree, order,
governmental permit, license or order or any of the terms, conditions or
provisions of any mortgage, indenture, note, license, agreement or other
instrument to which the Buyer is a party, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Buyer.
SECTION 6.3 CLOSING DOCUMENTS. The Buyer shall have delivered all of
the resolutions, certificates, documents and instruments required by this
Agreement.
SECTION 6.4 THERMO-SHIELD TRANSACTIONS. The transactions contemplated
in the Asset Purchase Agreement, shall have closed simultaneously with the
transactions contained herein.
SECTION 6.5 REGISTRATION RIGHTS. The Buyer shall have executed and
delivered a Registration Rights Agreement with ▇▇▇▇ substantially in the form
attached hereto EXHIBIT H.
SECTION 6.6 APPROVAL OF THE SELLERS AND THEIR COUNSEL.
All actions, proceedings, consents, instruments and documents required to
be delivered by, or at the behest or direction of, the Buyer hereunder or
incident to its performance hereunder, and all other related matters, shall be
reasonably satisfactory as to form and substance to the Sellers and their
counsel.
ARTICLE VII. THE CLOSING AND CERTAIN CLOSING DELIVERIES
SECTION 7.1 TIME AND PLACE OF CLOSING. Upon the terms and subject to
the satisfaction or waiver of the conditions contained in this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on the date hereof (the "Closing Date"). The
transactions contemplated by this Agreement shall be effective as of the close
of business (the "Effective Time") on March 1, 1999 (the "Effective Date").
SECTION 7.2 DELIVERIES BY THE SELLERS. At the Closing, the Sellers
will deliver or cause the Company to deliver to the Buyer the following:
(a) Stock certificates representing all of the issued and
outstanding shares of Common Stock owned by the Sellers, accompanied by stock
powers duly executed in favor of
25
the Buyer or duly executed instruments of transfer and any other documents
that are necessary to transfer to the Buyer good and marketable title to all
issued and outstanding shares of Common Stock;
(b) The stock books, stock ledgers, minute books, and other
corporate records of the Companies;
(c) Resignations dated the Closing Date of all of the directors
and officers of the Companies as designated by the Buyer;
(d) All required consents of third parties to the sale
conveyance, transfer, assignment and delivery of the Common Stock or any assets
of the Companies hereunder;
(e) A certificate of the officer of each of the Companies
certifying as of the Closing Date (i) a true, correct, and complete copy of its
Articles of Incorporation and all amendments thereto as in effect on the Closing
Date; (ii) a true, correct, and complete copy of its bylaws and all amendments
thereto as in effect on the Closing Date; and (iii) Certificates of Good
Standing from the respective Secretary of State of the jurisdiction of its
incorporation and any state in which it is qualified to transact business as a
foreign corporation;
(f) The affidavit of each of the Sellers certifying as to his
non-foreign status in accordance with Section 1445(b)(2) of the Code;
(g) The Certificate of Sellers pursuant to Section 5.1,
including evidence that the $31,000 of debts of the Sellers to the Companies;
the $68,000 of debts of the Companies to Thermo-Shield; and the $80,000 of debts
of the Companies to former shareholders, all of which are reflected on the
Balance Sheets have been paid in full;
(h) The Non-Competition Agreements required by Section 5.3
above;
(i) The Employment Agreement required by Section 5.4 above;
(j) The Opinion of the Sellers' Counsel required by Section 5.5
above;
(k) A General Release from each of the Sellers which releases
the Companies from any and all claims, known or unknown, contingent or direct,
which he may have against either of the Companies or Thermo-Shield as of the
Closing Date, other than claims arising under this Agreement and the other
Documents and the transactions contemplated hereby;
(l) Evidence that the Michigan Shareholders Agreement has been
terminated pursuant to Section 5.8;
(m) The I-9's and W-4's required by Section 5.9;
(n) The Escrow Agreement required by Section 1.2; and
26
(o) All other documents, instruments and writings required to
be delivered by the Sellers at or prior to the Closing Date pursuant to this
Agreement or otherwise required in connection herewith.
SECTION 7.3 DELIVERIES BY THE BUYER. At the Closing, the Buyer will
deliver the following to or for the account of the Sellers:
(a) The consideration required by Section 1.2 above;
(b) The Stock Pledge Agreement required by Section 1.2(b);
(c) The Security Agreement required by Section 1.2(b);
(d) The Escrow Agreement required by Section 1.2(c);
(e) The Employment Agreement required by Section 6.1 above;
(f) The Opinion of the Buyer's Counsel required by Section 6.2
above;
(g) A certificate of an officer of the Buyer certifying as of
the Closing Date (i) a true, correct, and complete copy of the Certificate of
Incorporation of the Buyer and all amendments thereto as in effect on the
Closing Date; (ii) a true, correct, and complete copy of the bylaws of the Buyer
and all amendments thereto as in effect on the Closing Date; (iii) a true,
correct, and complete copy of the resolutions approved and adopted by the Board
of Directors of the Buyer authorizing the transactions contemplated herein; (iv)
Certificate of Good Standing from the Delaware Secretary of State; and (v) the
incumbency of the duly authorized officers of the Buyer;
(h) The Registration Rights Agreement required by Section 6.5;
and
(i) All other documents, instruments and writings required to
be delivered by the Buyer at or prior to the Closing Date pursuant to this
Agreement or otherwise required in connection herewith.
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ARTICLE VIII. [INTENTIONALLY OMITTED]
ARTICLE IX. SURVIVAL; INDEMNIFICATION AND OFFSET
SECTION 9.1 SURVIVAL. All representations and warranties in this
Agreement and the other Documents shall survive the Closing of the purchase of
the Common Stock contemplated hereby and any investigation at any time made by
or on behalf of any party for a period of three years and all such
representations and warranties shall expire on the third anniversary of the
Closing Date, except that (a) claims, if any, asserted in writing prior to such
third anniversary identified as a claim for indemnification pursuant to this
Article IX shall survive until finally resolved and satisfied in full; (b) any
Year-2000 Indemnification Obligations (as hereinafter defined) shall survive
until February 1, 2003 and until finally resolved and satisfied in full if
asserted on or prior to February 1, 2003; and (c) tax or environmental claims
arising from a breach of Section 2.28 or Section 2.30, respectively, shall
survive for the full period of the applicable statute of limitations, and until
finally resolved and satisfied in full if asserted on or prior to the expiration
of any such period. The representations and warranties shall not be affected or
otherwise diminished by any investigation at any time by or on behalf of the
party for whose benefit such representations and warranties were made.
SECTION 9.2 INDEMNIFICATION BY THE SELLERS. Subject to the terms
herein, ▇▇▇▇ shall indemnify, defend, and hold the Companies and the Buyer and
the respective officers, directors, and employees of the foregoing, and their
successors and assigns (the "Sellers' Indemnities") harmless from, against and
with respect to any claim, liability, obligation, loss, damage, assessment,
judgment, cost or expense of any kind or character, including reasonable
attorneys' fees (the "Damages"), arising out of or in any manner incident,
relating or attributable to:
(a) Any inaccuracy in any representation or breach of any
warranty of any of the Sellers contained in this Agreement;
(b) Any failure by any of the Sellers to perform or observe, or
to have performed or observed, in full, any covenant,
agreement or condition to be performed or observed by him
under this Agreement except to the extent such failure to
perform or observe is due to the Buyer's actions;
(c) Reliance by the Buyer on any books or records of the
Companies or written information furnished to the Buyer
pursuant to this Agreement by or on behalf of any of the
Sellers or the Companies in the event that such books and
records or written information are false or materially
inaccurate;
(d) Liabilities or obligations of, or claims against, either of
the Companies or the Buyer (whether absolute, accrued,
contingent or otherwise) relating to, or arising out of,
the operation of the Business prior to the Closing Date or
facts and circumstances relating specifically to the
Business, the Leased
28
Parcels, or the Companies existing at or prior to the
Closing Date, including but not limited to matters set
forth on SCHEDULE 2.29, whether or not such liabilities,
obligations or claims were known on such date, excluding
only liabilities set forth in the Balance Sheets and
liabilities and obligations incurred since the date thereof
in the ordinary course of business and consistent with past
practice; or
(e) Any amounts due Buyer in connection with Thermo-Shield's
obligations under the Asset Purchase Agreement, including
without limitation Section 9.2 thereto.
Provided, however, the Sellers' Indemnities shall not be entitled to
indemnification or offset hereunder until Damages under this Agreement and the
Asset Purchase Agreement in the aggregate exceed $50,000 and then only to the
extent of aggregate Damages in excess of $50,000; provided further, however,
this limitation or "basket" shall not apply to any Damages arising in connection
with the representations and warranties as set forth in Sections 2.1, 2.2, 2.28,
2.29, 2.30 and 2.35 hereof.
SECTION 9.3 NOTICE TO THE SELLERS, ETC. If any of the matters as to
which the Sellers' Indemnitees are entitled to receive indemnification under
Section 9.2 should entail litigation with or claims asserted by parties other
than the Sellers, the Sellers Agent shall be given prompt notice thereof and
Sellers shall have the right, at their expense, to control such claim or
litigation upon prompt notice to the Buyer of their election to do so. To the
extent requested by the Sellers, the Buyer, at its expense, shall cooperate with
and assist the Sellers, in connection with such claim or litigation. The Buyer
shall have the right to appoint, at its expense, single counsel to consult with
and remain advised by the Sellers in connection with such claim or litigation.
The Sellers shall have final authority to determine all matters in connection
with such claim or litigation; provided, however, that the Sellers shall not
settle any third party claim without the consent of the Buyer, which shall not
be unreasonably denied or delayed.
SECTION 9.4 INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify,
defend, and hold the Sellers and their heirs, executors, and legal
representatives (the "Buyer's Indemnitees") harmless from, against and with
respect to any Damages, arising out of or in any manner incident, relating or
attributable to:
(a) Any inaccuracy in any representation or breach of warranty
of the Buyer contained in this Agreement;
(b) Any failure by the Buyer to perform or observe, or to have
performed or observed, in full, any covenant, agreement or
condition to be performed or observed by it under any of
the Documents;
(c) Reliance by the Sellers on any books or records of the
Buyer or reliance by the Sellers on any written information
furnished to the Sellers pursuant to
29
this Agreement by or on behalf of the Buyer in the event
that such books and records or written information are
false or inaccurate;
(d) The operation of the Business subsequent to the Closing
Date; or
(e) Any amounts due Thermo-Shield in connection with Buyers
obligations under the Asset Purchase Agreement, including
without limitation Section 9.2 thereto.
Provided, however, the Buyer's Indemnitees shall not be entitled to
indemnification hereunder until the aggregate of Damages under this Agreement
and the Asset Purchase Agreement in total exceed $50,000 and then only to the
extent of aggregate Damages in excess of $50,000.
SECTION 9.5 NOTICE TO THE BUYER, ETC. If any of the matters as to which
the Buyer's Indemnitees are entitled to receive indemnification under Section
9.4 should entail litigation with or claims asserted by parties other than the
Buyer, the Buyer shall be given prompt notice thereof and shall have the right,
at its expense, to control such claim or litigation upon prompt notice to the
Sellers of its election to do so. To the extent requested by the Buyer, the
Sellers, at their expense, shall cooperate with and assist the Buyer, in
connection with such claim or litigation. The Sellers shall have the right to
appoint, at his expense, single counsel to consult with and remain advised by
the Buyer in connection with such claim or litigation. The Buyer shall have
final authority to determine all matters in connection with such claim or
litigation; provided, however, that the Buyer shall not settle any third party
claim without the consent of the Sellers, which shall not be unreasonably denied
or delayed.
SECTION 9.6 SURVIVAL OF INDEMNIFICATION. The obligations to indemnify
and hold harmless pursuant to this Article IX shall survive the Closing of the
purchase of the Common Stock contemplated hereby for a period of three years,
notwithstanding any investigation at any time made by or on behalf of any party,
except that (a) claims, if any, asserted in writing prior to such third
anniversary identified as a claim for indemnification pursuant to this Article
IX shall survive until finally resolved and satisfied in full; (b) any Year-2000
Indemnification Obligations (as hereinafter defined) shall survive until
February 1, 2003 and until finally resolved and satisfied in full if asserted on
or prior to February 1, 2003; and (c) tax or environmental claims arising from a
breach of Section 2.28 or Section 2.30, respectively, shall survive for the full
period of the applicable statute of limitations, and until finally resolved and
satisfied in full if asserted on or prior to the expiration of any such period.
As used in this Article 9, the term "Year-2000 Indemnification Obligations"
shall mean the Sellers' obligation to indemnify, defend, and hold the Sellers'
Indemnitees harmless from, against and with respect to any Damages arising out
of or in any manner incident, relating or attributable to (i) any claim or
allegation that any Licensed System is not Year-2000 Compliant and (ii) any
claim arising from a breach of Section 2.33.
SECTION 9.7 OFFSET. The Sellers acknowledge and agree that the Buyer
shall be entitled to offset any indemnity claim under Section 9.2, including
without limitation indemnity
30
claims arising under the Asset Purchase Agreement pursuant to Section 9.2(e),
against any payment due to such Sellers under Sections 1.2 and 1.3 hereof, at
the Buyer's sole option.
ARTICLE X. MISCELLANEOUS
SECTION 10.1 KNOWLEDGE OF THE SELLERS. Where any representation or
warranty contained in this Agreement is expressly qualified by reference to the
best knowledge of the Sellers, each Seller confirms that he has made due and
diligent inquiry of the Companies' President and other officers as to the
matters that are the subject of such representations and warranties.
SECTION 10.2 KNOWLEDGE OF THE BUYER. Where any representation or
warranty contained in this Agreement is expressly qualified by reference to the
best knowledge of the Buyer, the Buyer confirms that it has made due and
diligent inquiry of its Chief Executive Officer as to the matters that are the
subject of such representations and warranties.
SECTION 10.3 "PERSON" DEFINED. "Person" shall mean and include an
individual, a partnership, a joint venture, a limited liability company, a
corporation, a trust, an unincorporated organization and a government or other
department or agency thereof.
SECTION 10.4 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) sent by recognized overnight courier, (iii) made by telecopy or facsimile
transmission, or (iv) sent by registered or certified mail, return receipt
requested, postage prepaid.
If to the Buyer:
ThermoView Industries, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive Officer
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
31
If to the Sellers:
▇▇▇▇ ▇. ▇▇▇▇, Sellers' Agent
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
All notices, requests, consents and other communications hereunder shall be
deemed to have been given (i) if by hand, at the time of the delivery thereof to
the receiving party at the address of such party set forth above, (ii) if sent
by overnight courier, on the next business day following the day such notice is
delivered to the courier service, (iii) if made by telecopy or facsimile
transmission, at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, or (iv) if sent by registered or certified
mail, on the fifth business day following the day such mailing is sent. The
address of any party herein may be changed at any time by written notice to the
parties.
SECTION 10.5 ENTIRE AGREEMENT. This Agreement and the other Documents
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in the other Documents shall affect, or be used to
interpret, change or restrict, the express terms and provisions of this
Agreement.
SECTION 10.6 THE SELLERS' AGENT. Each Seller hereby constitutes and
appoints ▇▇▇▇ ▇. ▇▇▇▇ (the "Sellers' Agent") as his attorney-in-fact with full
authority to act for such Seller for the purposes of giving and receiving
notices, requests, consents and other communications pursuant to Section 10.4.
Each Seller agrees to be conclusively bound by any action taken by the Sellers'
Agent, in connection with the agency and power of attorney conferred hereunder.
The Sellers' Agent shall have no liability to any such Seller for any act,
omission or judgment (except in the case of willful misconduct or gross
negligence). This agency and power of attorney may be revoked at any time by
any Seller. The Buyer shall be entitled, in the absence of such notice of
revocation, to rely upon any notice, request, consent, or other communication
from the Sellers' Agent as a duly authorized act on behalf of all the Sellers.
SECTION 10.7 MODIFICATIONS AND AMENDMENTS. The terms and provisions of
this Agreement may be modified or amended only by written agreement executed by
all parties hereto.
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SECTION 10.8 ASSIGNMENT/BINDING EFFECT. Neither this Agreement, nor any
right hereunder, may be assigned by any of the parties hereto without the prior
written consent of the other parties. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns.
SECTION 10.9 PARTIES IN INTEREST. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. Nothing in this
Agreement shall be construed to create any rights or obligations except among
the parties hereto, and no person or entity shall be regarded as a third-party
beneficiary of this Agreement.
SECTION 10.10 GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
governed by the internal laws of the State of Illinois without giving effect to
the conflict of law principles thereof.
SECTION 10.11 ARBITRATION. Any dispute or difference between the parties
hereto arising out of or relating to this Agreement shall be finally settled by
arbitration in accordance with the Commercial Rules of the American Arbitration
Association by a panel of three qualified arbitrators. The Sellers, on one
hand, and the Buyer, on the other hand, shall each choose an arbitrator and the
third shall be chosen by the two so chosen. If either the Sellers or the Buyer
fail to choose an arbitrator within 30 days after notice of commencement of
arbitration or if the two arbitrators fail to choose a third arbitrator within
30 days after their appointment, the American Arbitration Association shall,
upon the request of any party to the dispute or difference, appoint the
arbitrator or arbitrators to constitute or complete the panel as the case may
be. Arbitration proceedings hereunder may be initiated by either the Sellers,
on one hand, or the Buyer, on the other hand, making a written request to the
American Arbitration Association, together with any appropriate filing fee, at
the office of the American Arbitration Association in Chicago, Illinois. All
arbitration proceedings shall be held in Chicago, Illinois. Any order or
determination of the arbitral tribunal shall be final and binding upon the
parties to the arbitration and may be entered in any court having jurisdiction.
SECTION 10.12 SEVERABILITY. In the event that any arbitral tribunal of
competent jurisdiction shall finally determine that any provision, or any
portion thereof, contained in this Agreement shall be void or unenforceable in
any respect, then such provision shall be deemed limited to the extent that such
arbitral tribunal determines it enforceable, and as so limited shall remain in
full force and effect. In the event that such arbitral tribunal shall determine
any such provision, or portion thereof, wholly unenforceable, the remaining
provisions of this Agreement shall nevertheless remain in full force and effect.
SECTION 10.13 INTERPRETATION. The parties hereto acknowledge and agree
that: (i) the rule of construction to the effect that any ambiguities are
resolved against the drafting party shall not be employed in the interpretation
of this Agreement, and (ii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in favor of or against any
party, regardless of which party was generally responsible for the preparation
of this Agreement.
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SECTION 10.14 HEADINGS AND CAPTIONS. The headings and captions of the
various subdivisions of this Agreement are for convenience of reference only and
shall in no way modify, or affect, or be considered in construing or
interpreting the meaning or construction of any of the terms or provisions
hereof.
SECTION 10.15 RELIANCE. The parties hereto agree that, notwithstanding
any right of any party to this Agreement to investigate the affairs of any other
party to this Agreement, the party having such right to investigate shall have
the right to rely fully upon the representations and warranties of the other
party expressly contained herein.
SECTION 10.16 EXPENSES. Each party shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) incurred in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.
SECTION 10.17 GENDER. All pronouns and any variation thereof shall be
deemed to refer to the masculine, feminine, neuter, singular, or plural as the
identity of the person or entity or the context may require.
SECTION 10.18 PUBLICITY. Except by the mutual agreement between the
Sellers and the Buyer, no party shall issue any press release or otherwise make
any public statement with respect to the execution of, or the transactions
contemplated by, this Agreement except as may be required by law.
SECTION 10.19 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by different parties hereto on separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the Buyer has caused this Agreement to be executed by
its duly authorized officer and the Sellers have executed this Agreement all as
of the day and year first above written.
"Buyer"
THERMOVIEW INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
"Sellers"
/s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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