AGREEMENT AND PLAN OF REORGANIZATION
FOR THE ACQUISITION OF ALL OF THE OUTSTANDING SHARES OF
COMMON STOCK OF THERMOFLOW CORPORATION
BY VITRISEAL, INC.
TABLE OF CONTENTS
PAGE
RECITALS......................................................................................... 1
ARTICLE I - THE REORGANIZATION................................................................... 3
ARTICLE II - EXCHANGE OF SHARES.................................................................. 6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THERMOFLOW....................................... 7
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF VITRISEAL......................................... 16
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS....................................... 25
ARTICLE VI - MISCELLANEOUS....................................................................... 27
EXHIBITS:
Schedule of THERMOFLOW Stockholders......................................................... "A"
THERMOFLOW Resolutions Electing ▇▇▇▇▇....................................................... "B-1"
THERMOFLOW Resolutions Electing New Board................................................... "B-2"
THERMOFLOW Note............................................................................. "C-1"
THERMOFLOW Advances......................................................................... "C-2"
Wire Transfer Instructions.................................................................. "D"
Legal Opinion of VITRISEAL Counsel.......................................................... "E"
Power of Attorney to Stockholder Representative............................................. "F"
Schedule of Exceptions of THERMOFLOW........................................................ "G"
Resolutions of THERMOFLOW--Authorization.................................................... "H"
Financial Statements of THERMOFLOW.......................................................... "I"
Legal Descriptions of Real Property of THERMOFLOW .......................................... "J"
List of Personal Property of THERMOFLOW .................................................... "K"
Patents, Trademarks, Service Marks of THERMOFLOW ........................................... "L"
THERMOFLOW Insurance Policies............................................................... "M"
THERMOFLOW Bank Accounts and Signatories Therefor........................................... "N"
▇▇▇▇▇▇▇ Technology Agreement Amendment...................................................... "O"
Schedule of Exceptions of VITRISEAL......................................................... "P"
Resolutions of VITIRSEAL--Authorization..................................................... "Q"
Financial Statements of VITRISEAL........................................................... "R"
VITRISEAL Annual Report .................................................................... "S"
VITRISEAL Proxy Statement .................................................................. "T"
Patents, Trademarks, Service Marks of VITRISEAL ............................................ "U"
VITRISEAL Insurance Policies ............................................................... "V"
VITRISEAL Bank Accounts and Signatories Therefor............................................ "W"
AGREEMENT AND PLAN OF REORGANIZATION
FOR THE ACQUISITION OF ALL OF THE OUTSTANDING SHARES OF
COMMON STOCK OF THERMOFLOW CORPORATION
BY VITRISEAL, INC.
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated as of the 25th day of
May, 2000, by and among the common stockholders (the "Stockholders") and warrant
holders (the "Warrant Holders") of THERMOFLOW CORPORATION, whose names are
listed in Exhibit "A," a copy of which is attached hereto and incorporated
herein by this reference, THERMOFLOW CORPORATION ("THERMOFLOW"), a Nevada
corporation, and VITRISEAL, INC. ("VITRISEAL"), a Nevada corporation.
RECITALS:
A. WHEREAS, the transactions described in this Agreement are related to
the transactions set forth in that certain "Agreement and Plan of Reorganization
for the Acquisition of All of the Outstanding Shares of Common Stock of Liquitek
Corporation by VitriSeal, Inc." dated May 25, 2000 (the "Liquitek Agreement");
and
B. WHEREAS, the Stockholders together own, beneficially and of record,
all the issued and outstanding shares of the common stock of THERMOFLOW
(hereinafter the shares of common stock are referred to as the "Thermoflow
Shares") as set forth in the schedule attached hereto and incorporated herein by
this reference as Exhibit "A;" and
C. WHEREAS, VITRISEAL desires to acquire from the Stockholders all of
the 1,932,300 outstanding Thermoflow Shares owned by them solely in exchange for
an aggregate of 9,661,500 shares of the common stock of VITRISEAL (the
"VitriSeal Shares"); and
D. WHEREAS, VITRISEAL desires to acquire from the Warrant Holders all
of their warrants to purchase 79,700 shares of THERMFLOW (the "Thermoflow
Warrants") solely in exchange for warrants to purchase 398,500 shares of the
common stock of VITRISEAL (the "VitriSeal Warrants"); and
E. WHEREAS, the Stockholders desire to exchange their Thermoflow Shares
for the VitriSeal Shares, the number of the Thermoflow Shares being surrendered
and the number of VitriSeal Shares being received by the Stockholders are as set
forth in Exhibit "A" hereto; and
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F. WHEREAS, the Warrant Holders desire to exchange their Thermoflow
Warrants for the VitriSeal Warrants, the number of the Thermoflow Warrants being
surrendered and the number of VitriSeal Warrants being received by the Warrant
Holders are as set forth in Exhibit "A" hereto; and
G. WHEREAS, VITRISEAL, acting through ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇"), its
Chief Executive Officer, as authorized by the Board of Directors, and the
Stockholders, acting through ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇"), a member of the
Board of Directors of THERMOFLOW, (▇▇▇▇▇▇▇▇▇▇ is sometimes referred to as the
"Stockholder Representative"); and
H. WHEREAS, the parties hereto desire to set forth the definitive terms
and conditions upon which the Stockholders shall exchange with VITRISEAL, and
VITRISEAL shall exchange with the Stockholders, the stock owned by each of them;
and
I. WHEREAS, it is intended that THERMOFLOW, VITRISEAL, and their
respective stockholders will recognize no gain or loss for U.S. federal income
tax purposes under Section 368 (a)(1)(B) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations promulgated thereunder as a result
of the Reorganization; and
J. WHEREAS, the parties hereto have previously entered into letters of
intent dated December 30, 1999 and May 3, 2000 (the "LOI") and acknowledge that
the terms of this Agreement are intended to supersede the terms set forth in the
LOI; and
K. WHEREAS, VITRISEAL has previously loaned THERMOFLOW $300,000 in
accordance with the terms set forth in the LOI and subsequently made additional
advances as set forth in Section 1.4.2 herein; and
L. WHEREAS, VITRISEAL deposited $1,750,000 in escrow into the ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Money Market Account (the "Escrow Account") to fulfill its
obligations under the LOI and this Agreement; and
M. WHEREAS, the parties hereto have entered into or may enter into
other agreements simultaneously with the execution of this Agreement which are
not intended to influence the tax-free result of exchange of the Thermoflow
Shares for the VitriSeal Shares;
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NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements contained herein,
and in accordance with the applicable provisions of state law, the parties
hereto covenant and agree as follows:
ARTICLE I
THE REORGANIZATION
1.1 THE REORGANIZATION. On and as of the Closing (as defined in Section
1.3 below) of this Agreement, the Stockholders shall surrender all of the
Thermoflow Shares in exchange for the VitriSeal Shares in the amounts set forth
in Exhibit "A." On and as of the Closing (as defined in Section 1.3 below) of
this Agreement, the Warrant Holders shall surrender all of the Thermoflow
Warrants in exchange for the VitriSeal Warrants in the amounts set forth in
Exhibit "A." The transactions contemplated hereby are intended to qualify as a
tax-free reorganization under Section 368(a)(1)(B) of the Code and the
regulations promulgated thereunder and the parties hereto agree to report them
as such.
1.2 ESCROW. The parties shall establish an escrow (the "Escrow") with
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to VITRISEAL, at ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Escrow Holder") to facilitate the reorganization
as further set forth herein.
1.3 CLOSING. The closing of the Reorganization (the "Closing") shall
take place (i) at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to
VITRISEAL, at ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 2:00 p.m.,
local time, on May 25, 2000; or (ii) at such other time and place and on such
other date as the Stockholder Representative, THERMOFLOW, and VITRISEAL agree
(the "Closing Date"). The Closing Date shall be the "Effective Date" of the
Reorganization.
1.4 TAKING OF NECESSARY ACTIONS. The Stockholder Representative (acting
on behalf of the Stockholders), THERMOFLOW, and VITRISEAL shall each take all
such actions as may be reasonably necessary or appropriate in order to
effectuate the transactions contemplated hereby and to make the Reorganization
effective as of the Effective Date. If at any time after the Effective Date any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest VITRISEAL with full title to all of the Thermoflow Shares,
the Stockholder Representative, on behalf of the Stockholders, and the officers
and directors of THERMOFLOW and VITRISEAL, at the expense of the VITRISEAL,
shall take all such necessary or appropriate action. To effect the intents and
purposes of this Agreement, the following actions shall be taken at the Closing,
shall be deemed to occur simultaneously, and the accomplishment of which actions
by the parties whose duty it is to perform such actions is duly acknowledged by
the execution of this Agreement by the parties hereto:
Page 3
1.4.1 ELECTION OF NEW THERMOFLOW BOARD. The parties
acknowledge that on or about December 31, 1999, ▇▇▇▇▇ was elected a member of
the Board of Directors of THERMOFLOW. A copy of the THERMOFLOW resolutions
evidencing this election of ▇▇▇▇▇ to the THERMOFLOW Board of Directors is
attached hereto as Exhibit "B-1." As a condition to the Closing, the current
members of the Board of Directors of THERMOFLOW other than DAVIS, KIRSCHBAUM,
and ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall resign as members of the Board of Directors of
THERMOFLOW and DAVIS, KIRSCHBAUM, and ▇▇▇▇▇▇▇, in accordance with the Unanimous
Written Consent attached hereto as Exhibit "B-2" as the sole remaining
THERMOFLOW Board members, shall elect the following persons to fill the
vacancies on the THERMOFLOW Board of Directors: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
1.4.2 CAPITAL CONTRIBUTIONS TO THERMOFLOW BY VITRISEAL. The
parties acknowledge that on or about January 12, 2000, VITRISEAL advanced to
THERMOFLOW the sum of $300,000.00 and additional sums as set forth in Exhibit
"C-1" (the "Thermoflow Advances"). The Thermoflow Advances are evidenced by an
unsecured promissory note with interest at a rate of 10% per annum and with all
principal and interest due December 31, 2001 (the "Thermoflow Note"), a copy of
which is attached hereto as Exhibit "C-2." Upon the Closing, the Thermoflow Note
shall be canceled and accounted for as a contribution to capital. Upon the
Closing, VITRISEAL shall advance to THERMOFLOW an additional capital
contribution of $1,250,000 through a wire transfer from the Escrow Account to
the THERMOFLOW bank account. A copy of the wire transfer instructions for the
additional capital contribution of $1,250,000 is attached hereto as Exhibit "D."
1.4.4 DELIVERY OF EXECUTED AGREEMENT, THERMOFLOW SHARES, AND
THERMOFLOW WARRANTS. The Stockholders and Warrant Holders, on their own behalf
or through the Stockholder Representative, shall deliver their Thermoflow
Shares, Thermoflow Warrants, an executed copy of this Agreement, and an executed
copy of the Power of Attorney attached hereto as Exhibit "F" to the Escrow
Holder prior to the Closing. If the Closing does not occur on or before May 31,
2000, the Escrow Holder shall return the executed copy of this Agreement, the
Thermoflow Shares, and the Thermoflow Warrants to the Stockholder
Representative.
1.4.5 LOCK-UP OF VITRISEAL SHARES. The Stockholders and
Warrant Holders shall have the option to participate in a registration statement
to be filed under the Securities Act of 1933 within four months of the Closing
Date on Form S-3 (the "Registration Statement"). The Stockholders and Warrant
Holders who include their VitriSeal Shares in the Registration Statement shall
be subject to lock-up agreements between them and VitriSeal providing that they
will be permitted to sell no more than 25% of
Page 4
their VitriSeal Shares in the six months following the effective date of the
Registration Statement (the "Registration Date"), no more than 25% of their
VitriSeal Shares during the period beginning six months after the Registration
Date until 12 months after the Registration Date, and no more than 25% of their
VitriSeal Shares during the period beginning 18 months after the Registration
Date until 24 months after the Registration Date. No further restrictions shall
apply to the VitriSeal Shares held by Stockholders and Warrant Holders
participating in the Registration Statement 24 months after the Registration
Date. The Stockholders and Warrant Holders electing to participate in the
Registration Statement shall so indicate on the signature page of this Agreement
by initialing the space opposite their respective signatures. Any of the
Stockholders and Warrant Holders who elect not to be included in the
Registration Statement shall be eligible to sell their VitriSeal Shares in
accordance with the provisions of Rule 144 promulgated under the Securities Act
of 1933 one year from the Closing Date, in the case of the Stockholders, and one
year from the exercise date of their VitriSeal Warrants, in the case of the
Warrant Holders.
1.4.6 DUE DILIGENCE BY THE PARTIES. VITRISEAL and its agents,
attorneys, and representatives acknowledge that they have had full and free
access to the properties, books, and records of THERMOFLOW for purposes of
conducting investigations of the THERMOFLOW business. THERMOFLOW and its
respective agents, attorneys, and representatives acknowledge that they have had
full and free access to the properties, books, and records of VITRISEAL for
purposes of conducting investigations of the VITRISEAL business. VITRISEAL and
THERMOFLOW acknowledge by their execution of this Agreement the satisfactory
results of their respective due diligence reviews.
1.4.7 LEGAL OPINIONS. At the Closing, counsel to VITRISEAL
shall deliver an opinion of counsel pertaining to good standing, authorization
and valid issuance of the VitriSeal Shares, the capitalization, the due
authorization of the Reorganization, and such other matters as are customary in
transactions of this type, in the form of Exhibit "E," a copy of which is
attached hereto.
1.4.8 POWER OF ATTORNEY. The Stockholder Representative shall
deliver to VITRISEAL a power of attorney in the form attached hereto as Exhibit
"F," providing for the appointment of the Stockholder Representative as
attorney-in-fact for the individual Stockholders to effect the exchange of
certificates of the Thermoflow Shares for the VitriSeal Shares and to take such
other actions at the Closing as may be necessary to consummate this Agreement.
Each of the Stockholders shall execute and deliver to the Escrow Holder a copy
of Exhibit "F" together with their signature and delivery of this Agreement to
VITRISEAL.
ARTICLE II
Page 5
EXCHANGE OF SHARES AND WARRANTS
2.1 EXCHANGE OF SHARES. Subject to the terms and conditions of this
Agreement, and assuming that all actions have been taken as set forth in Section
1.4 above, and subject to the simultaneous closing of the Liquitek Agreement, on
the Closing Date, by virtue of the Reorganization and without any further action
on the part of the Stockholders and Warrant Holders, THERMOFLOW, or VITRISEAL,
all of the Thermoflow Shares shall be exchanged for the VitriSeal Shares and all
of the Thermoflow Warrants shall be exchanged for VitriSeal Warrants in the
amounts set forth in Exhibit "A." Each share of the VitriSeal Shares shall be
validly issued, duly authorized, fully paid, and nonassessable shares of the
Common Stock of VITRISEAL as of the Closing Date. The shares of stock issuable
on exercise of the VitriSeal Warrants, when issued, will be validly issued, duly
authorized, fully paid, and nonassessable shares of the Common Stock of
VitriSeal.
2.2 EXCHANGE OF CERTIFICATES. In advance of the Closing, VITRISEAL
shall present and deliver to the Escrow Holder the stock certificates
representing all of the VitriSeal Shares. Also in advance of the Closing, the
Stockholders or the Stockholder Representative shall present and deliver to the
Escrow Holder all of the certificates representing the Thermoflow Shares, or
lost certificate affidavits in a form acceptable to VITRISEAL. In advance of the
Closing, VITRISEAL shall present and deliver to the Escrow Holder the warrant
certificates representing all of the VitriSeal Warrants. Also in advance of the
Closing, the Warrant Holders or the Stockholder Representative shall present and
deliver to the Escrow Holder all of the certificates representing the Thermoflow
Warrants, or lost warrant certificate affidavits in a form acceptable to
VITRISEAL. At the Closing, the Escrow Holder shall present and deliver to the
Stockholder Representative the stock certificates representing all of the
VitriSeal Warrants. Also at the Closing, the Escrow Holder shall present and
deliver to VITRISEAL all of the certificates representing the Thermoflow
Warrants, or lost certificate affidavits.
2.3 NO FURTHER RIGHTS. From and after the Closing Date, holders of
certificates formerly evidencing the Thermoflow Shares and the Thermoflow
Warrants shall cease to have any rights as stockholders or warrant holders, as
the case may be, of THERMOFLOW, except as provided herein or by applicable law.
2.4 STOCKHOLDER AND WARRANT HOLDER APPROVAL. The Closing shall be
contingent upon the agreement of Stockholders and Warrant Holders holding a
minimum of 80% of the outstanding Thermoflow Shares and 80% of the outstanding
Thermoflow Warrants. At such time as Stockholders and Warrant Holders holding a
minimum of 80% of the Thermoflow Shares have entered into this Agreement, the
parties shall proceed with the Closing.
Page 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THERMOFLOW
Except as set forth in the Schedule of Exceptions attached hereto and
incorporated herein by reference as Exhibit "G," THERMOFLOW represents and
warrants to, and covenants with, VITRISEAL, as of the date hereof and as of the
Closing Date, as follows:
3.1 ORGANIZATION AND CORPORATE POWER. THERMOFLOW is a corporation duly
organized, in good standing, and validly existing under the laws of Nevada.
THERMOFLOW has all requisite corporate power and authority to conduct its
business as now being conducted and to own and lease the properties which it now
owns and leases. The charter documents of THERMOFLOW as amended to date, the
Bylaws of THERMOFLOW as amended to date, and the resolutions of THERMOFLOW's
stockholders (if necessary) and directors authorizing the execution, delivery,
and performance of this Agreement, all certified by the President and the
Secretary, which have previously been provided to VITRISEAL by THERMOFLOW, are
true and complete copies thereof as currently in effect.
3.2 AUTHORIZATION. THERMOFLOW has full corporate power, legal capacity,
and authority to enter into this Agreement, to execute all attendant documents
and instruments contemplated hereby, and to perform all of its obligations
hereunder. This Agreement, and each and every other agreement, document and
instrument to be executed by THERMOFLOW in connection herewith, has been
effectively authorized by all necessary action on the part of THERMOFLOW,
including without limitation the approval of THERMOFLOW's Board of Directors
(and stockholders, if necessary), which authorizations remain in full force and
effect, have been duly executed and delivered by THERMOFLOW. A copy of the
resolutions of the THERMOFLOW Board of Directors and (stockholders, if
necessary) authorizing the execution, delivery, and performance of this
Agreement, all certified by the Secretary of THERMOFLOW, are attached hereto as
Exhibit "H." No other authorizations or proceedings on the part of THERMOFLOW,
the Stockholders, the Warrant Holders, or otherwise, are required to authorize
this Agreement and/or the transactions contemplated hereby. This Agreement
constitutes the legal, valid and binding obligation of THERMOFLOW, the
Stockholders, and the Warrant Holders, and is enforceable against each of them
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, priority or other laws or court
decisions relating to or affecting generally the enforcement of creditors'
rights or affecting generally the availability of equitable remedies.
Page 7
3.3. NO CONFLICTS; NO CONSENTS. Other than that set forth in the
Schedule of Exceptions, neither the execution and delivery of this Agreement,
nor the consummation by THERMOFLOW, the Stockholders, or the Warrant Holders of
any of the transactions contemplated hereby, or compliance with any of the
provisions hereof, will (i) conflict with or result in a material breach of,
violation of, or default under, any of the terms, conditions or provisions of
any material note, bond, mortgage, indenture, license, lease, credit agreement
or other agreement, document, instrument, permit, authorization, or obligation
(including, without limitation, any of its charter documents) to which
THERMOFLOW is a party or by which it or any of its assets or properties may be
bound, or (ii) violate any judgment, order, injunction, decree, statute, rule or
regulation applicable to THERMOFLOW or its assets or properties, the violation
of which would have a material adverse effect upon the business, properties, or
assets, or in the condition (financial or otherwise) of THERMOFLOW. No
authorization, consent or approval of any public body or authority was or is
necessary for the consummation by THERMOFLOW, the Stockholders, or the Warrant
Holders of the transactions contemplated by this Agreement.
3.4 CAPITALIZATION. The authorized capital stock of THERMOFLOW consists
of 30,000,000 shares of common stock, par value $.001 per share. As of the
Effective Date, there are 1,932,300 shares of common stock issued and
outstanding. Except as set forth in Exhibit "A," no options or warrants to
purchase common stock of THERMOFLOW have been granted or are outstanding other
than the 79,700 Thermoflow Warrants outstanding as set forth in Exhibit "A."
THERMOFLOW does not have any contracts or obligations to issue, redeem,
repurchase, or otherwise reacquire any equity security of THERMOFLOW. All of the
Thermoflow Shares are duly authorized, validly issued and outstanding, fully
paid, and nonassessable and have been issued in conformity with all applicable
laws.
3.5 NO PENDING MATERIAL LITIGATION OR PROCEEDINGS. There are no
actions, suits or proceedings pending or, to the best knowledge of THERMOFLOW,
threatened against or affecting THERMOFLOW affecting the Stockholders' or
Warrant Holders' rights in the Thermoflow Shares or the Thermoflow Warrants
(including actions, suits or proceedings where liabilities may be adequately
covered by insurance) at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, court, board, bureau,
agency or instrumentality, domestic or foreign, or affecting any of the
officers, directors of THERMOFLOW, the Stockholders, or the Warrant Holders in
connection with the business, operations or affairs of either of them, which
might reasonably be expected to result in any material adverse change in the
business, properties or assets, or in the condition (financial or otherwise) of
THERMOFLOW, or which question or challenge the Reorganization. THERMOFLOW is not
subject to any voluntary or involuntary proceeding under federal bankruptcy laws
and has not made an assignment for the benefit of creditors.
Page 8
3.6 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES AND
CERTAIN DEVELOPMENTS. Attached hereto as Exhibit "I" are the unaudited and
internally prepared financial statements of THERMOFLOW, for the year ended
December 31, 1999 and the quarter ended March 31, 2000, consisting of
THERMOFLOW's balance sheets as of such dates (the "Thermoflow Balance Sheets"),
the related statements of profit or loss for the periods then ended, and the
respective notes thereto. Such financial statements (and the notes related
thereto) are herein sometimes collectively referred to as the "Thermoflow
Financial Statements." The Thermoflow Financial Statements (i) are derived from
the books and records of THERMOFLOW, which books and records have been
consistently maintained in a manner which reflects, and such books and records
do fairly and accurately reflect, the assets and liabilities of THERMOFLOW, and
(ii) fairly present in all material respects the financial condition of
THERMOFLOW on the date of such statements and the results of its operations for
the periods indicated, except as may be disclosed in the notes thereto. Except
as and to the extent reflected or reserved against in the Thermoflow Balance
Sheets, and as to matters arising in the ordinary course of its business since
the respective date of the Thermoflow Balance Sheets, THERMOFLOW has no
liability or obligation of a type required by generally accepted accounting
principles to be reflected in the Thermoflow Balance Sheets (whether accrued, to
become due, contingent or otherwise) which individually or in the aggregate
could have a materially adverse effect on the business, assets, condition
(financial or otherwise) or prospects of THERMOFLOW. Except as set forth in
Exhibit "I," since March 31, 2000, there has been (a) no declaration, setting
aside or payment of any dividend or other distribution with respect to the
Thermoflow Shares or redemption, purchase or other acquisition of any of the
Thermoflow Shares or any split-up or other recapitalization relative to any of
the Thermoflow Shares or any action authorizing or obligating THERMOFLOW to do
any of the foregoing, (b) no material loss, destruction or damage to any
material property or asset of THERMOFLOW whether or not insured, (c) no
acquisition or disposition of assets (or any contract or arrangement therefor),
or any other transaction by THERMOFLOW otherwise than for fair value and in the
ordinary course of business, (d) no discharge or satisfaction by THERMOFLOW of
any lien or encumbrance or payment of any obligation or liability (absolute or
contingent) other than current liabilities shown on the Thermoflow Balance
Sheets, or current liabilities incurred since the date thereof in the ordinary
course of business, (e) no sale, assignment or transfer by THERMOFLOW of any of
its tangible or intangible assets except in the ordinary course of business,
cancellation by THERMOFLOW of any debts, claims or obligations, or mortgage,
pledge, subjection of any assets to any lien, charge, security interest or other
encumbrance, or waiver by THERMOFLOW of any rights of value which, in any such
case, is material to the business of THERMOFLOW, (f) no payment of any bonus to
or change in the compensation of any director, officer or employee, whether
directly or by means of any bonus, pension plan, contract or commitment, (g) no
write-off or material reduction in the carrying value of any asset which is
material to the business of THERMOFLOW, (h) no disposition or lapse of rights as
to any intangible property which is material to the business of THERMOFLOW, (i)
except for ordinary travel advances, no
Page 9
loans or extensions of credit to stockholders, officers, directors or employees
of THERMOFLOW, (j) no agreement to do any of the things described in this
Section 3.6, and (k) no material adverse change in the condition (financial or
otherwise) of THERMOFLOW or in its assets, liabilities, properties, business, or
prospects. Except as set forth in the Thermoflow Financial Statements or in
Exhibit "I," there are no payments, liabilities, or obligations of any kind due
any of the Stockholders.
3.7 APPLICABLE PERMITS; COMPLIANCE WITH LAWS. THERMOFLOW (i) holds all
licenses, franchises, permits, and authorizations necessary for the lawful
conduct of its business as presently conducted and which the failure to so hold
would have a material adverse effect upon the business, properties, or assets,
or the condition (financial or otherwise) of THERMOFLOW, and (ii) has complied
with all applicable statutes, laws, ordinances, rules, and regulations of all
governmental bodies, agencies and subdivisions having, asserting or claiming
jurisdiction over it, which the failure to comply with would have a material
adverse effect upon the business, properties, or assets, or the condition
(financial or otherwise) of THERMOFLOW.
3.8 DISCLOSURE. Neither this Agreement, nor any material certificate,
exhibit, or other written document or statement, furnished to VITRISEAL by or on
behalf of THERMOFLOW or, to its knowledge, the Stockholders and the Warrant
Holders in connection with the transactions contemplated by this Agreement
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary to be stated in order to make the
statements contained herein or therein, when taken as a whole, not misleading.
Neither THERMOFLOW nor, to its knowledge, any of the Stockholders or Warrant
Holders has any knowledge of any fact which has not been disclosed in writing to
VITRISEAL which may reasonably be expected to materially and adversely affect
the business, properties, or assets, or the condition (financial or otherwise)
of THERMOFLOW or title of the Stockholders and Warrant Holders to the Thermoflow
Shares and Thermoflow Warrants or their ability to perform all of the
obligations to be performed by them under this Agreement and/or any other
agreement between THERMOFLOW, the Stockholders, the Warrant Holders, and
VITRISEAL to be entered into pursuant to any provision of this Agreement.
3.9 OWNERSHIP OF THERMOFLOW. THERMOFLOW issued each Stockholder that
number of Shares set forth opposite the Stockholders' respective names on
Exhibit "A," which shares together constitute all of the issued and outstanding
shares of the capital stock, common and preferred, of THERMOFLOW. The Shares are
duly authorized, validly issued and outstanding, fully paid and nonassessable
and were issued by THERMOFLOW in conformity with all applicable laws. THERMOFLOW
issued each Warrant Holder that number of Warrants set forth opposite the
Warrant Holders' respective names on Exhibit "A," which warrants together
constitute all of the rights to acquire shares of the capital
Page 10
stock of THERMOFLOW. The Thermoflow Warrants are duly authorized, validly issued
and outstanding, and were issued by THERMOFLOW in conformity with all applicable
laws.
3.10 SUBSIDIARIES. THERMOFLOW has no subsidiaries and no investments,
directly or indirectly, or other financial interest in any other corporation or
business organization, joint venture or partnership of any kind whatsoever
except as reflected in the Thermoflow Financial Statements.
3.11 REAL PROPERTY. Exhibit "J," attached hereto and incorporated
herein by this reference, contains a complete and accurate legal description of
each parcel of real property owned by or leased to and occupied or subleased by
THERMOFLOW, and THERMOFLOW neither owns or leases, nor occupies, any other real
property. The building and all fixtures and improvements located on such real
property are in good operating condition, ordinary wear and tear excepted. To
the best of its knowledge, THERMOFLOW is not in violation of any material
zoning, building or safety ordinance, regulation or requirement, or other law or
regulation applicable to the operation of owned or leased properties, and
THERMOFLOW has not received any notice of violation with which its has not
complied. All leases of real property to which THERMOFLOW is a party and which
are material to the business of THERMOFLOW are fully effective in accordance
with their respective terms and afford THERMOFLOW peaceful and undisturbed
possession of the subject matter of the lease, and, to the best knowledge of
THERMOFLOW, there exists no default on the part of THERMOFLOW or termination
thereof.
3.12 TANGIBLE PERSONAL PROPERTY. Exhibit "K" attached hereto sets forth
a complete list of all items of tangible personal property owned or leased and
used by THERMOFLOW in the current conduct of its business, where the original
cost was in excess of $1,000. THERMOFLOW has good and marketable title to, or in
the case of leased equipment a valid leasehold interest in, and is in possession
of, all such items of personal property owned or leased by it, free and clear of
all title defects, mortgages, pledges, security interests conditional sales
agreements, liens, restrictions or encumbrances, the presence of which would
result in a material adverse change in the business, properties, or assets, or
the condition (financial or otherwise) of THERMOFLOW. Included in Exhibit "K" is
a list of all outstanding equipment leases and maintenance agreements to which
THERMOFLOW is a party as lessee and which individually provide for future lease
payments in excess of $1,000 per month, with the identities of the other parties
to all such leases and agreements shown thereon. All leases of tangible personal
property to which THERMOFLOW is a party and which are material to the business
of THERMOFLOW are fully effective in accordance with their respective terms,
and, to the best knowledge of THERMOFLOW, there exists no default on the part of
THERMOFLOW or termination thereof, the presence of which would result in a
material adverse change in the business, properties, or assets, or the condition
(financial or otherwise) of THERMOFLOW. Each item of capital equipment reflected
in the Thermoflow Balance Sheets which is used in the current conduct of
Page 11
THERMOFLOW's business is in good operating and usable condition and repair,
ordinary wear and tear excepted, and is and will be suitable for use in the
ordinary course of THERMOFLOW's business and fit for its intended purposes.
3.13 TAX MATTERS. THERMOFLOW has, since its inception, duly filed all
material federal, state, municipal, local, and other tax returns required to
have been filed by it in those jurisdictions where the nature or conduct of its
business requires such filing and where the failure to so file would be
materially adverse to THERMOFLOW. Copies of all such tax returns have been made
available for inspection by VITRISEAL prior to the execution hereof. All
federal, state, municipal, local, and other taxes shown to be due on such
returns have been paid or will be paid prior to the time they become delinquent.
The amounts reflected in the Thermoflow Balance Sheets as liabilities or
reserves for taxes which are due but not yet payable are sufficient for the
payment of all accrued and unpaid taxes of the types referred to hereinabove and
THERMOFLOW has no knowledge of any proposed liability for taxes to be imposed
upon its properties or assets for which there is not adequate reserve reflected
in the Thermoflow Financial Statements.
3.14 CONTRACTS AND COMMITMENTS. THERMOFLOW has no contract, agreement,
obligation or commitment, written or oral, expressed or implied, which involves
a commitment or liability of THERMOFLOW in excess of $1,000 (other than
obligations which are included in accounts payable), and no union contracts,
employee or consulting contracts, financing agreements, debtor or creditor
arrangements, licenses, franchise, manufacturing, distributorship or dealership
agreements, leases, or bonus, health or stock option plans, except as described
in Exhibits "G" and "I." True and complete copies of all such contracts and
other agreements listed in Exhibits "G" and "I" which involve a commitment or
liability of THERMOFLOW in excess of $1,000 have been made available to
VITRISEAL prior to the execution hereof. As of the date hereof, to the best of
their knowledge, there exist no circumstances that would affect the validity or
enforceability of any of such contracts and other agreements in accordance with
their respective terms. THERMOFLOW has performed and complied in all material
respects with all obligations required to be performed by it to date under, and
is not in default (without giving effect to any required notice or grace period)
under, or in breach of, the terms, conditions or provisions of any of such
contracts and other agreements. The validity and enforceability of any contract
or other agreement described herein has not been and shall not be materially and
adversely affected by the execution and delivery of this Agreement without any
further action. THERMOFLOW has no contract, agreement, obligation or commitment
which to the best knowledge of THERMOFLOW requires or will require future
expenditures (including internal costs and overhead) in excess of reasonably
anticipated receipts, nor which is likely to be materially adverse to
THERMOFLOW's business, assets, condition (financial and otherwise), or
prospects.
Page 12
3.15 PROPRIETARY INFORMATION. Except as disclosed in Exhibit "L."
THERMOFLOW does not have any patents, applications for patents, trademarks,
applications for trademarks, trade names, licenses or service marks relating to
the business of THERMOFLOW, nor does any present or former stockholder, officer,
director or employee of THERMOFLOW own any patent rights relating to any
products manufactured, rented or sold by THERMOFLOW To the best knowledge of
THERMOFLOW, THERMOFLOW has the unrestricted right to use, free and clear of any
claims or rights of others, all trade secrets, customer lists, and manufacturing
and secret processes reasonably necessary to the manufacture and marketing of
all products made or proposed to be made by THERMOFLOW, except for any rights
the presence of which would not result in a material adverse change in the
business, properties, or assets, or the condition (financial or otherwise) of
THERMOFLOW, and, to the best knowledge of THERMOFLOW, the continued use thereof
by VITRISEAL following the Closing will not conflict with, infringe upon, or
otherwise violate any rights of others. THERMOFLOW has not used and is not
making use of any confidential information or trade secrets of any present or
past employee of THERMOFLOW.
3.16 INSURANCE. THERMOFLOW maintains insurance with reputable insurance
companies on such of its equipment, tools, machinery, inventory, and properties
as are usually insured by companies similarly situated and to the extent
customarily insured, and maintains products and personal liability insurance,
and such other insurance against hazards, risks and liability to persons and
property as is customary for companies similarly situated. A true and complete
listing and general description of each of THERMOFLOW's insurance policies as
currently in force is set forth in Exhibit "M" attached hereto. All such
insurance policies currently are in full force and effect.
3.17 ARRANGEMENTS WITH EMPLOYEES; LABOR RELATIONS. No stockholder,
director, officer or employee of THERMOFLOW is presently a party to any
transaction with THERMOFLOW, including without limitation any contract, loan or
other agreement or arrangement providing for the furnishing of services by, the
rental of real or personal property from or to, or otherwise requiring loans or
payments to, any such stockholder, director, officer or employee, or to any
member of the family of any of the foregoing, or to any corporation,
partnership, trust or other entity in which any stockholder, director, officer
or employee or any member of the family of any of them has a substantial
interest or is an officer, director, trustee, partner or employee. There are no
bonus, pension, profit sharing, commission, deferred compensation or other plans
or arrangements in effect as of the date of this Agreement. THERMOFLOW has no
obligations under any collective bargaining agreement or other contract with a
labor union, under any employment contract or consulting agreement, or under any
executive's compensation plan, agreement or arrangement, nor is any union, labor
organization or group of employees of THERMOFLOW presently seeking the right to
enter into collective bargaining with THERMOFLOW on behalf of any of its
employees. THERMOFLOW has
Page 13
furnished VITRISEAL with a copy of all written personnel policies, including
without limitation vacation, severance, bonus, pension, profit sharing, and
commissions policies applicable to any of THERMOFLOW's employees.
3.18 BANK ACCOUNTS. All bank and savings accounts, and other accounts
at similar financial institutions, of THERMOFLOW existing at date of Closing are
listed on Exhibit "N." Exhibit "N" sets forth the balance(s) of such bank
account(s) as of March 31, 2000 and contains a list of the name of each person
or entity authorized to sign on the bank accounts, borrow money, or incur or
guarantee indebtedness on behalf of THERMOFLOW. All expenditures from such bank
accounts after March 31, 2000 to the date of this Agreement are set forth in
Exhibit "N."
3.19 POWERS OF ATTORNEY. Other than that set forth in the Schedule of
Exceptions of THERMOFLOW, no valid powers of attorney from THERMOFLOW to any
person or entity exist as of the date of this Agreement.
3.20 ABSENCE OF QUESTIONABLE PAYMENTS. To the best of its knowledge,
neither THERMOFLOW nor any stockholder, director, officer, agent, employee,
consultant or other person associated with or acting on behalf of any of them,
has (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any direct or indirect unlawful payments to governmental officials or
others from corporate funds, engaged in any payments or activity which would be
deemed a violation of the Foreign Corrupt Practices Act or rules or regulations
promulgated thereunder, or (iii) established or maintained any unlawful or
unrecorded accounts.
3.21 RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS. No present substantial
customer or substantial supplier to THERMOFLOW has indicated an intention to
terminate or materially and adversely alter its existing business relationship
therewith, and, to the best knowledge of THERMOFLOW, none of the present
customers of or substantial suppliers to THERMOFLOW intends to do so.
3.22 ▇▇▇▇▇▇▇ LICENSING AGREEMENT. On April 23, 1999, THERMOFLOW and
▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual ("▇▇▇▇▇▇▇"), entered into an Exclusive World-Wide
Technology And Know-How Licensing Agreement (the "Technology Agreement") whereby
▇▇▇▇▇▇▇ agreed to license to THERMOFLOW certain liquid and solid waste
treatment, recycling and disposal technology and know-how he had developed.
▇▇▇▇▇▇▇ was paid $125,000 as an advance payment of on-going royalties and a
monthly minimum ($15,000.00 per quarter) on-going royalty thereafter. The term
of the Technology Agreement extends through December 31, 2020. THERMOFLOW
represents and warrants that ▇▇▇▇▇▇▇
Page 14
has approved the reorganization described in this Agreement (and the Liquitek
Agreement) and has agreed to amend the Technology Agreement, which amendment is
set forth in Exhibit "O."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VITRISEAL
Except as set forth in the Schedule of Exceptions attached hereto and
incorporated herein by this reference as Exhibit "P," VITRISEAL hereby
represents and warrants to, and covenants with, the Stockholder and THERMOFLOW
as follows:
4.1 ORGANIZATION AND CORPORATE POWER. VITRISEAL is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, and is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which such qualification is required and
where the failure to be so qualified would have a materially adverse effect upon
VITRISEAL. VITRISEAL has all requisite corporate power and authority to conduct
its business as now being conducted and to own and lease the properties which it
now owns and leases. The Articles of Incorporation as amended to date, certified
by the Secretary of State of Nevada, the Bylaws of VITRISEAL as amended to date,
and the resolutions of VITRISEAL's stockholders and directors authorizing the
execution, delivery, and performance of this Agreement, all certified by the
President and the Secretary of VITRISEAL, which have previously been provided to
THERMOFLOW by VITRISEAL, are true and complete copies thereof as currently in
effect.
4.2 AUTHORIZATION. VITRISEAL has full corporate power, legal capacity
and corporate authority to enter into this Agreement, to execute all attendant
documents and instruments contemplated hereby, to enter into this
Reorganization, and to perform all of its obligations hereunder. This Agreement,
and each and every other agreement, document and instrument to be executed by
VITRISEAL in connection herewith, has been effectively authorized by all
necessary action on the part of VITRISEAL, including without limitation the
approvals of VITRISEAL's Board of Directors (and stockholders, if necessary)
which authorizations remain in full force and effect, have been duly executed
and delivered by VITRISEAL. A copy of the resolutions of the THERMOFLOW board of
directors and stockholders authorizing the execution, delivery, and performance
of this Agreement, all certified by the Secretary of THERMOFLOW, are attached
hereto as Exhibit "Q." No other authorizations or proceedings on the part of
VITRISEAL, or otherwise, are required to authorize this Agreement and/or the
transactions contemplated hereby. This Agreement constitutes the legal, valid,
and binding obligation of VITRISEAL and is enforceable against VITRISEAL in
accordance with its terms, except as enforcement may be limited by
Page 15
bankruptcy, insolvency, reorganization, priority or other laws or court
decisions relating to or affecting generally the enforcement of creditors'
rights or affecting generally the availability of equitable remedies.
4.3. NO CONFLICTS; NO CONSENTS. Neither the execution and delivery of
this Agreement, nor the consummation by VITRISEAL of any of the transactions
contemplated hereby, or compliance with any of the provisions hereof, will (i)
conflict with or result in a material breach of, violation of, or default under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, license, lease, credit agreement or other agreement, document,
instrument or obligation (including, without limitation, any of its charter
documents) to which VITRISEAL is a party or by which it or any of its assets or
properties may be bound, or (ii) violate any judgment, order, injunction,
decree, statute, rule or regulation applicable to VITRISEAL or its assets or
properties, the violation of which would have a material adverse effect upon the
business, properties, or assets, or in the condition (financial or otherwise) of
VITRISEAL. No authorization, consent or approval of any public body or authority
was or is necessary for the consummation by VITRISEAL of the transactions
contemplated by this Agreement.
4.4 CAPITALIZATION. The authorized capital stock of VITRISEAL consists
of 100,000,000 shares of common stock, par value $.001. As of the date hereof,
there are 25,501,603 shares of common stock issued and outstanding. All of the
shares of common stock issued and outstanding are validly issued, fully paid,
and nonassessable. Except as disclosed in Exhibit "R," there are no outstanding
contracts or other rights to subscribe for or purchase, or contracts or
obligations to issue or grant any rights to acquire any equity security of
VITRISEAL. VITRISEAL does not have any contracts or obligations to redeem,
repurchase or otherwise reacquire any equity security of VITRISEAL. All of the
VitriSeal Shares, when issued to the Stockholders, will be duly authorized,
validly issued and outstanding, fully paid and nonassessable and were issued in
conformity with all applicable laws. All of the VitriSeal Warrants, when issued
to the Warrant Holders, will be duly authorized, validly issued and outstanding,
and were issued in conformity with all applicable laws.
4.5 FINANCIAL STATEMENTS OF VITRISEAL; ABSENCE OF UNDISCLOSED
LIABILITIES; NO ADVERSE CHANGES. Attached hereto as Exhibit "R" are the audited
financial statements of VITRISEAL for the years ended December 31, 1999 and
1998, consisting of VITRISEAL's balance sheet as of such dates (the "VitriSeal
Balance Sheets"), the related statements of profit or loss for the periods then
ended, and the respective notes thereto. Such financial statements (and the
notes related thereto) are herein sometimes collectively referred to as the
"VITRISEAL Financial Statements." The VITRISEAL Financial Statements (i) are
derived from the books and records of VITRISEAL, which books and records have
been consistently maintained in a manner which reflects, and such books and
records do fairly and accurately reflect, the assets and liabilities of
VITRISEAL, (ii) fairly and accurately present the financial condition of
VITRISEAL
Page 16
on the date of such statements and the results of its operations for the periods
indicated, except as may be disclosed in the notes thereto, and (iii) have been
prepared in all material respects in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
(except as otherwise disclosed in the notes thereto). Except as and to the
extent reflected or reserved against in the VitriSeal Balance Sheets, and as to
matters arising in the ordinary course of its business since the respective
dates of the VitriSeal Balance Sheets, VITRISEAL has no liability or obligation
(whether accrued, to become due, contingent or otherwise) which individually or
in the aggregate could have a materially adverse effect on the business, assets,
condition (financial or otherwise) or prospects of VITRISEAL. Except as set
forth in Exhibit "R," since the dates of the respective VitriSeal Balance
Sheets, there has been (a) no declaration, setting aside or payment of any
dividend or other distribution with respect to the common stock of VITRISEAL or
redemption, purchase or other acquisition of any of the common stock of
VITRISEAL or any split-up or other recapitalization relative to any of the
common stock of VITRISEAL or any action authorizing or obligating VITRISEAL to
do any of the foregoing, (b) no loss, destruction or damage to any material
property or asset of VITRISEAL, whether or not insured, (c) no acquisition or
disposition of assets (or any contract or arrangement therefor), or any other
transaction by VITRISEAL otherwise than for fair value and in the ordinary
course of business, (d) no discharge or satisfaction by VITRISEAL of any lien or
encumbrance or payment of any obligation or liability (absolute or contingent)
other than current liabilities shown on the VitriSeal Balance Sheets, or current
liabilities incurred since the date thereof in the ordinary course of business,
(e) no sale, assignment or transfer by VITRISEAL of any of its tangible or
intangible assets except in the ordinary course of business, cancellation by
VITRISEAL of any debts, claims or obligations, or mortgage, pledge, subjection
of any assets to any lien, charge, security interest or other encumbrance, or
waiver by VITRISEAL of any rights of value which, in any such case, is material
to the business of VITRISEAL, (f) no payment of any material bonus to or
material change in the compensation of any director, officer or employee,
whether directly or by means of any bonus, pension plan, contract or commitment,
(g) no write-off or material reduction in the carrying value of any asset which
is material to the business of VITRISEAL, (h) no disposition or lapse of rights
as to any intangible property which is material to the business of VITRISEAL,
(i) except for ordinary travel advances, no loans or extensions of credit to
stockholders, officers, directors or employees of VITRISEAL, (j) no agreement to
do any of the things described in this Section 4.5, and (k) no material adverse
change in the condition (financial or otherwise) of VITRISEAL or in its assets,
liabilities, properties, business, or prospects.
4.6 TAX MATTERS. VITRISEAL has, since its inception, accurately
prepared and duly filed all federal, state, county and local tax returns
required to have been filed by it in those jurisdictions where the nature or
conduct of its business requires such filing and where the failure to so file
would be materially adverse to VITRISEAL. Copies of all such tax returns have
been made available for inspection by
Page 17
THERMOFLOW and the Stockholders prior to the execution hereof. All federal,
state, county and local taxes, including but not limited to those taxes due with
respect to VITRISEAL's properties, income, gross receipts, excise, occupation,
franchise, permit, licenses, sales, payroll, and inventory due and payable as of
the date of the Closing by VITRISEAL have been paid or will be paid prior to the
time they become delinquent. The amount reflected in the VitriSeal Balance
Sheets of VITRISEAL as liabilities or reserves for taxes which are due but not
yet payable is sufficient for the payment of all accrued and unpaid taxes of the
types referred to hereinabove.
4.7 NO PENDING MATERIAL LITIGATION OR PROCEEDINGS. There are no
actions, suits or proceedings pending or, to the best knowledge of VITRISEAL,
threatened against or affecting VITRISEAL (including actions, suits or
proceedings where liabilities may be adequately covered by insurance) at law or
in equity or before or by any federal, state, municipal or other governmental
department, commission, court, board, bureau, agency or instrumentality,
domestic or foreign, or affecting any of the Stockholders, officers or directors
of VITRISEAL in connection with the business, operations or affairs of
VITRISEAL, which might result in any material adverse change in the business,
properties or assets, or in the condition (financial or otherwise) of VITRISEAL,
or which question or challenge the Reorganization. VITRISEAL is not subject to
any voluntary or involuntary proceeding under applicable bankruptcy laws and has
not made an assignment for the benefit of creditors.
4.8 COMPLIANCE WITH LAWS. VITRISEAL (i) holds all licenses, franchises,
permits and authorizations necessary for the lawful conduct of its business as
presently conducted and which the failure to so hold would have a material
adverse effect upon the business, properties, or assets, or the condition
(financial or otherwise) of VITRISEAL, and (ii) has complied with all applicable
statutes, laws, ordinances, rules and regulations of all governmental bodies,
agencies and subdivisions having, asserting or claiming jurisdiction over it,
which the failure to comply with would have a material adverse effect upon the
business, properties, or assets, or the condition (financial or otherwise) of
VITRISEAL.
4.9 DISCLOSURE. Neither this Agreement, nor any certificate, exhibit,
or other written document or statement, furnished to THERMOFLOW or the
Stockholders by or on behalf of VITRISEAL in connection with the transactions
contemplated by this Agreement contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to be
stated in order to make the statements contained herein or therein, when taken
as a whole, not misleading. VITRISEAL has no knowledge of any fact which has not
been disclosed in writing to THERMOFLOW or the Stockholders which may reasonably
be expected to materially and adversely affect the business, properties,
operations, and/or prospects of VITRISEAL or the ability of VITRISEAL to perform
all of the obligations to be performed by VITRISEAL under this Agreement and/or
any other agreement between THERMOFLOW and
Page 18
VITRISEAL to be entered into pursuant to any provision of this Agreement. A copy
of VITRISEAL's Annual Report on Form 10-KSB for the year ended December 31, 1999
(the "Annual Report") and Proxy Statement for its annual stockholders meeting on
March 18, 2000 are attached hereto as Exhibits "S" and "T."
4.10 SUBSIDIARIES. VITRISEAL has no subsidiaries other than Dancor,
Inc. and no investments, directly or indirectly, or other financial interest in
any other corporation or business organization, joint venture or partnership of
any kind whatsoever except as reflected in the VITRISEAL Financial Statements.
4.11 OFFERING. Subject to the accuracy of the Stockholders'
representations in Section 5.4 hereof, the offer, sale, and issuance of the
VitriSeal Shares to be issued in conformity with the terms of this Agreement and
the transactions contemplated hereby, constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, and from all applicable state registration or qualification
requirements.
4.12 REAL PROPERTY. The Annual Report attached hereto as Exhibit "S"
contains a description of the real property leased to and occupied by VITRISEAL,
and except as set forth in Exhibit "P," VITRISEAL neither owns or leases, nor
occupies, any other real property. The building and all fixtures and
improvements located on such real property are in good operating condition,
ordinary wear and tear excepted. To the best of its knowledge, VITRISEAL is not
in violation of any material zoning, building or safety ordinance, regulation or
requirement, or other law or regulation applicable to the operation of owned or
leased properties, and VITRISEAL has not received any notice of violation with
which its has not complied. All leases of real property to which VITRISEAL is a
party and which are material to the business of VITRISEAL are fully effective in
accordance with their respective terms and afford VITRISEAL peaceful and
undisturbed possession of the subject matter of the lease, and, to the best
knowledge of VITRISEAL, there exists no default on the part of VITRISEAL or
termination thereof.
4.13 TANGIBLE PERSONAL PROPERTY. VITRISEAL has good and marketable
title to, or in the case of leased equipment a valid leasehold interest in, and
is in possession of, all such items of personal property owned or leased by it,
free and clear of all title defects, mortgages, pledges, security interests
conditional sales agreements, liens, restrictions or encumbrances, the presence
of which would result in a material adverse change in the business, properties,
or assets, or the condition (financial or otherwise) of VITRISEAL. All leases of
tangible personal property to which VITRISEAL is a party and which are material
to the business of VITRISEAL are fully effective in accordance with their
respective terms, and, to the best knowledge of VITRISEAL, there exists no
default on the part of VITRISEAL or termination thereof, the
Page 19
presence of which would result in a material adverse change in the business,
properties, or assets, or the condition (financial or otherwise) of VITRISEAL.
Each item of capital equipment reflected in the VitriSeal Balance Sheets which
is used in the current conduct of VITRISEAL's business is in good operating and
usable condition and repair, ordinary wear and tear excepted, and is and will be
suitable for use in the ordinary course of VITRISEAL's business and fit for its
intended purposes.
4.14 CONTRACTS AND COMMITMENTS. VITRISEAL has no contract, agreement,
obligation or commitment, written or oral, expressed or implied, which involves
a commitment or liability of VITRISEAL in excess of $10,000, and no union
contracts, employee or consulting contracts, financing agreements, debtor or
creditor arrangements, licenses, franchise, manufacturing, distributorship or
dealership agreements, leases, or bonus, health or stock option plans, except as
described in Exhibit "P." True and complete copies of all such contracts and
other agreements listed in Exhibit "P" have been made available to THERMOFLOW
prior to the execution hereof. VITRISEAL has performed and complied in all
material respects with all obligations required to be performed by it to date
under, and is not in default (without giving effect to any required notice or
grace period) under, or in breach of, the terms, conditions or provisions of any
of such contracts and other agreements. The validity and enforceability of any
contract or other agreement described herein has not been and shall not be
materially and adversely affected by the execution and delivery of this
Agreement without any further action. VITRISEAL has no contract, agreement,
obligation or commitment which requires or will require future expenditures
(including internal costs and overhead) in excess of reasonably anticipated
receipts, nor which is likely to be materially adverse to VITRISEAL's business,
assets, condition (financial and otherwise), or prospects.
4.15 PROPRIETARY INFORMATION. VITRISEAL does not have any patents,
applications for patents, trademarks, applications for trademarks, trade names,
licenses or service marks relating to the business of VITRISEAL, nor does any
present or former stockholder, officer, director or employee of VITRISEAL own
any patent rights relating to any products manufactured, rented or sold by
VITRISEAL except as disclosed in Exhibit "U." To the best knowledge of
VITRISEAL, VITRISEAL has the unrestricted right to use, free and clear of any
claims or rights of others, all trade secrets, customer lists, and manufacturing
and secret processes reasonably necessary to the manufacture and marketing of
all products made or proposed to be made by VITRISEAL, except for any rights the
presence of which would not result in a material adverse change in the business,
properties, or assets, or the condition (financial or otherwise) of VITRISEAL,
and, to the best knowledge of VITRISEAL, the continued use thereof by VITRISEAL
following the Closing will not conflict with, infringe upon, or otherwise
violate any rights of others. VITRISEAL has not used and is not making use of
any confidential information or trade secrets of any present or past employee of
VITRISEAL.
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4.16 INSURANCE. VITRISEAL maintains workers' compensation, disability
and directors' and officers' insurance with reputable insurance companies as are
usually insured by companies similarly situated and to the extent customarily
insured. A true and complete listing and general description of each of
VITRISEAL's insurance policies as currently in force is set forth in Exhibit "V"
attached hereto. All such insurance policies currently are in full force and
effect.
4.17 ARRANGEMENTS WITH EMPLOYEES; LABOR RELATIONS. Except as set forth
in Exhibit "P," no stockholder, director, officer or employee of VITRISEAL is
presently a party to any transaction with VITRISEAL, including without
limitation any contract, loan or other agreement or arrangement providing for
the furnishing of services by, the rental of real or personal property from or
to, or otherwise requiring loans or payments to, any such stockholder, director,
officer or employee, or to any member of the family of any of the foregoing, or
to any corporation, partnership, trust or other entity in which any stockholder,
director, officer or employee or any member of the family of any of them has a
substantial interest or is an officer, director, trustee, partner or employee.
There are no bonus, pension, profit sharing, commission, deferred compensation
or other plans or arrangements in effect as of the date of this Agreement.
VITRISEAL has no obligations under any collective bargaining agreement or other
contract with a labor union, under any employment contract or consulting
agreement, or under any executive's compensation plan, agreement or arrangement,
nor is any union, labor organization or group of employees of VITRISEAL
presently seeking the right to enter into collective bargaining with VITRISEAL
on behalf of any of its employees. VITRISEAL has furnished VITRISEAL with a copy
of all written personnel policies, including without limitation vacation,
severance, bonus, pension, profit sharing, and commissions policies applicable
to any of VITRISEAL's employees.
4.18 BANK ACCOUNTS. All bank and savings accounts, and other accounts
at similar financial institutions, of VITRISEAL existing at date of Closing are
listed on Exhibit "W." Exhibit "W" contains a list of the name of each person or
entity authorized to sign on the bank accounts, borrow money, or incur or
guarantee indebtedness on behalf of VITRISEAL.
4.19 POWERS OF ATTORNEY. Other than that set forth in the Schedule of
Exceptions of VITRISEAL, no valid powers of attorney from VITRISEAL to any
person or entity exist as of the date of this Agreement.
4.20 ABSENCE OF QUESTIONABLE PAYMENTS. To the best of its knowledge,
neither VITRISEAL nor any stockholder, director, officer, agent, employee,
consultant or other person associated with or acting on behalf of any of them,
has (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any direct or indirect unlawful payments to
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governmental officials or others from corporate funds, engaged in any payments
or activity which would be deemed a violation of the Foreign Corrupt Practices
Act or rules or regulations promulgated thereunder, or (iii) established or
maintained any unlawful or unrecorded accounts.
4.21 REPORTING REQUIREMENTS. VITRISEAL has complied with and will
maintain its compliance with all of the reporting requirements under the Act and
the Securities Exchange Act of 1934, as amended, through the Closing Date.
4.22 RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS. No present substantial
customer or substantial supplier to VITRISEAL has indicated an intention to
terminate or materially and adversely alter its existing business relationship
therewith, and, to the best knowledge of VITRISEAL, none of the present
customers of or substantial suppliers to VITRISEAL intends to do so.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each of the Stockholders, severally and not jointly, represents and
warrants to and covenants with VITRISEAL, as of the date hereof, as follows:
5.1 AUTHORITY. Each Stockholder has full rights, power, and authority
to enter into this Agreement; the execution, delivery, and performance of this
Agreement by the Stockholder and the consummation by the Stockholder of the
transactions contemplated hereby will not conflict with or result in a breach of
any agreement to which the Stockholder is a party and which a conflict or breach
thereof would have a material adverse effect upon the Stockholder or the
Stockholder's properties or assets.
5.2 TITLE. Each Stockholder has valid and marketable title to the
number of shares set forth opposite the Stockholder's name on Exhibit "A," free
and clear of any pledge, lien, security interest, or encumbrance other than
pursuant to this Agreement. As of the Closing Date there is no lien, charge,
mortgage, pledge, conditional sale agreement, or other encumbrance of any kind
or nature recorded in the book of registry of stockholders of THERMOFLOW with
respect to any of the Thermoflow Shares owned by the Stockholder and the
Thermoflow Shares set forth in Exhibit "A" are duly registered in the name of
the Stockholder as set forth in Exhibit "A."
5.3 RESTRICTED SECURITIES. Each Stockholder and Warrant Holder
acknowledges that the VitriSeal Shares being issued to the Stockholder and the
VitriSeal Warrants being issued to the Warrant Holder hereunder will be issued
by VITRISEAL without registration or qualification or other filings being made
under the Act, or the securities or "blue sky" laws of any state, in reliance
upon specific exemptions therefrom, and in furtherance thereof the Stockholder
and Warrant Holder represents that he or she is acquiring and will hold the
securities to be delivered hereunder for his or her own account, for investment
only, and not for distribution within the meaning of the U.S. federal securities
laws. The Stockholder and Warrant Holder acknowledges that a legend,
substantially in the following form, shall be placed upon the face of each
certificate representing any of VitriSeal Shares being delivered to the
Stockholder or the VitriSeal Warrants being delivered to the Warrant Holder
hereunder:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
ARE RESTRICTED SECURITIES, AND NO OFFER, SALE, TRANSFER OR OTHER
DISPOSITION OF THIS CERTIFICATE OR THE SECURITIES REPRESENTED HEREBY,
OR OF ANY INTEREST HEREIN, MAY BE MADE WITHOUT SUCH
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REGISTRATION UNLESS, IN THE OPINION OF COUNSEL ACCEPTABLE TO the
Company, AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
5.4 LOCK-UP AGREEMENT. The Stockholders and Warrant Holders electing to
participate in the Registration Statement, as evidenced by their having
initialed the space opposite their respective signatures on the signature page
of this Agreement, agree to be subject to a lock-up agreement between them and
VitriSeal providing that they will be permitted to sell no more than 25% of
their VitriSeal Shares (including the shares issuable by VitriSeal upon exercise
of the VitriSeal Warrants) in the six months following the effective date of the
Registration Statement (the "Registration Date"), no more than 25% of their
VitriSeal Shares during the period beginning six months after the Registration
Date until 12 months after the Registration Date, and no more than 25% of their
VitriSeal Shares during the period beginning 18 months after the Registration
Date until 24 months after the Registration Date. The certificates evidencing
the VitriSeal Shares owned by Stockholders who elect to be included in the
Registration Statement shall bear the following additional legend:
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
RESTRICTED IN ACCORDANCE WITH AN AGREEMENT BETWEEN THE STOCKHOLDER AND
the Company, AND NO OFFER, SALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE OR THE SECURITIES REPRESENTED HEREBY, OR OF ANY INTEREST
HEREIN, MAY BE MADE WITHOUT AN OPINION OF COUNSEL TO the Company
EVIDENCING COMPLIANCE WITH SUCH AGREEMENT.
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ARTICLE VI
MISCELLANEOUS
6.1 TAXES AND EXPENSES.
6.1.1 Except as otherwise expressly provided in 6.1.2
immediately below, each of VITRISEAL and THERMOFLOW shall pay all of their own
respective taxes due prior to the Closing, attorneys' fees and other costs and
expenses payable in connection with or as a result of the transactions
contemplated hereby and the performance and compliance with all agreements and
conditions contained in this Agreement respectively to be performed or observed
by each of them.
6.1.2 The representations and warranties of THERMOFLOW, the
Stockholders, the Warrant Holders, and VITRISEAL contained herein and in any
other document or instrument delivered by or on behalf of THERMOFLOW and/or the
Stockholders or on behalf of VITRISEAL pursuant hereto, as such may be qualified
in Exhibits "G" or "P," respectively, shall survive the Closing and any
investigations made by or on behalf of VITRISEAL made prior to the Closing, and
shall remain in full force and effect for a period of two full years from the
date of the Closing the ("Warranty Period"), and thereupon expire.
6.2 OTHER DOCUMENTS. Each of the parties hereto shall execute and
deliver such other and further documents and instruments, and take such other
and further actions, as may be reasonably requested of them for the
implementation and consummation of this Agreement and the transactions herein
contemplated.
6.3 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, the heirs, personal representatives,
successors and assigns of VITRISEAL, the Stockholder, the Warrant Holder, and
THERMOFLOW, but shall not confer, expressly or by implication, any rights or
remedies upon any other party.
6.4 GOVERNING LAW. This Agreement is made and shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Nevada.
6.5 NOTICES. Any notice or the delivery of any item to be delivered by
a party hereto shall be delivered personally, by U.S. mail, return receipt
requested, or by Federal Express, next-day delivery. Any personal delivery made
shall be deemed to have been made upon the execution of a receipt for the item
to be delivered by the party to whom delivery is made. Delivery by U.S. mail or
Federal Express shall be
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deemed to have been made when delivered by Federal Express to the party to whom
addressed. All such deliveries shall be made to the following addresses, or such
other addresses as the parties may have instructed the others in accordance with
the provisions of this Paragraph:
(a) If to VITRISEAL: VITRISEAL, INC.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
With copies to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) If to THERMOFLOW,
the Stockholders, or
the Warrant Holders: THERMOFLOW CORPORATION
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Any party hereto may change its address by written notice to the other party
given in accordance with this Section 6.5.
6.6 ENTIRE AGREEMENT. This Agreement and the exhibits attached hereto
contains the entire agreement between the parties and supersede all prior
agreements, understandings and writings between the parties with respect to the
subject matter hereof and thereof. Each party hereto acknowledges that no
representations, inducements, promises or agreements, oral or otherwise, have
been made by any party, or anyone acting with authority on behalf of any party,
which are not embodied herein or in an exhibit hereto, and that no other
agreement, statement or promise may be relied upon or shall be valid or binding.
Neither this Agreement nor any term hereof may be changed, waived, discharged or
terminated orally. This Agreement may be amended or any term hereof may be
changed, waived, discharged or terminated by an agreement in writing signed by
VITRISEAL, THERMOFLOW, the Stockholders, and the Warrant Holders.
6.7 SEVERABILITY. If any provision of this Agreement is determined to
be invalid, illegal or unenforceable by any court, department, official,
political subdivision, agency or other instrumentality of any government,
whether state, local or federal, the remaining provisions of this Agreement to
the extent permitted by law shall remain in full force and effect. To the extent
permitted by law, the parties hereto waive any provision of law that renders any
provision hereof invalid or unenforceable in any respect.
Page 26
6.8 HEADINGS. The captions and headings used herein are for convenience
only and shall not be construed as a part of this Agreement.
6.9 ATTORNEYS' FEES. In the event of any litigation between VITRISEAL
and THERMOFLOW, the non-prevailing party shall pay the reasonable expenses,
including the attorneys' fees, of the prevailing party in connection therewith.
6.10 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which taken together shall
constitute but one and the same document.
6.11 GENDER. Whenever the content of this Agreement requires, the
masculine gender shall include the feminine or neuter, and the singular number
shall include the plural.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK.)
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
VITRISEAL, INC. THERMOFLOW CORPORATION
a Nevada corporation a Nevada corporation
By: By:
---------------------------------------- ------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
Chief Executive Officer Director
STOCKHOLDERS AND
WARRANT HOLDERS: AGREEMENT TO PARTICIPATE IN
THE REGISTRATION STATEMENT
-------------------------------------------- AND LOCK-UP PROVISIONS OF
(Signature) SECTIONS 1.4.5 AND 5.4:
-------------------------------------------- -----------------
(Print Name) (Initials)
AGREEMENT TO PARTICIPATE IN
THE REGISTRATION STATEMENT
-------------------------------------------- AND LOCK-UP PROVISIONS OF
(Signature) SECTIONS 1.4.5 AND 5.4:
-------------------------------------------- -----------------
(Print Name) (Initials)
Page 28