STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into on this 14th day of August, 1998 by and among XXXXX X. XXXXXXXX AND
XXXXXX X. XXXX (each hereafter a "Seller" and collectively the "Sellers") and
THERMOVIEW INDUSTRIES, INC., a Delaware corporation (the "Buyer").
PRELIMINARY STATEMENTS
Collectively, the Sellers own all of the issued and outstanding shares
of the voting common stock, with par value of $1.00 per share and the
non-voting common stock, with par value of $1.00 per share ("Ice Common
Stock"), of Ice, Inc., a North Dakota corporation (the "Ice"), and all of the
issued and outstanding shares of the no par value voting common stock and no
par value non-voting common stock (the "Blizzard Common Stock," which
together with the Ice Common Stock is collectively referred to as the "Common
Stock") of Blizzard Enterprises, Inc., a Minnesota corporation ("Blizzard")
(Ice and Blizzard are sometimes collectively referred to as the "Companies"
and individually as a "Company").
Together, the Companies own all of the general partnership interests of
Thermal Line Windows, L.L.P., a Minnesota registered limited liability
partnership (the "Partnership") which is engaged in designing, manufacturing,
selling and installing state of the art custom vinyl new and replacement
thermal paned windows for residential and commercial applications (the
"Business").
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:
ARTICLE I. PURCHASE AND SALE OF STOCK
SECTION 1.1 SALE OF 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 the number of shares of Common Stock of the Companies set forth
opposite each Seller's name on SCHEDULE 1.1 hereto, such shares representing
all of the issued and outstanding shares of Common Stock of the Companies.
The certificates representing the Common Stock shall be duly endorsed in
blank, or accompanied by a stock power duly executed in blank, by each Seller.
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SECTION 1.2 CONSIDERATION. 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 $3,959,430 (the "Closing 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) The Sellers shall also be entitled to receive post-closing
earn-out payments (the "Earn Out Payments", which together with the Closing
Payment is collectively referred to as the "Purchase Price") as set forth on
SCHEDULE 1.2, partially represented by a contingent promissory note in
substantially the form of EXHIBIT A (the "Contingent Promissory Note") hereto
as described in SCHEDULE 1.2.
(c) Each Seller shall be entitled to receive a percentage of the
Purchase Price equal to the percentages set forth on SCHEDULE 1.1.
SECTION 1.3 PURCHASE PRICE ADJUSTMENT. As soon as practicable but
within thirty (30) days after the Closing Date, the Sellers, at their own
expense, shall cause Xxxxxx X. Xxxxx, an independent certified public
accountant, to prepare combined balance sheets of the Companies immediately
prior to the Effective Time (the "Effective Time Balance Sheet") setting
forth the tangible net worth of the Companies using accrual accounting and in
conformance with generally accepted accounting principles (the "Tangible Net
Worth"). A copy of the Effective Time Balance Sheet shall be promptly
furnished to the Buyer. If the Buyer disagrees with the Tangible Net Worth,
the Buyer shall engage an independent public accounting firm, at its expense,
to audit the Effective Time Balance Sheet and deliver a certified written
report to the Seller confirming the Tangible Net Worth ("Audited Tangible Net
Worth"). If the Seller fails to notify the Buyer within fifteen (15) days
after receiving the report from the accounting firm selected by the Buyer,
such report shall be deemed accepted for purposes of calculating Tangible Net
Worth. If the Seller should so notify the Buyer of a dispute concerning
Audited Tangible Net Worth, the Buyer shall then engage another big-five
independent accounting firm that is mutually acceptable to the Buyer and the
Seller to resolve such dispute and such firm shall notify the Buyer and the
Seller of its resolution of such dispute within two weeks of its engagement
by the Buyer. The cost of services provided by such big-five accounting firm
shall be borne equally by the Buyer and the Seller. Any such resolution
shall be final and binding on all parties hereto for the purposes of
calculating Tangible Net Worth. In the event the Tangible Net Worth is less
than $1,705,000, the Sellers shall pay such deficit portion to the Buyer
within thirty (30) days following the later of its determination of the
Tangible Net Worth, the Buyer's audit or the resolution of any dispute by
such big-five accounting firm on a dollar-for-dollar basis. In the event the
Tangible Net Worth is greater than $1,705,000, the Buyer shall pay the excess
amount, on a dollar-for-dollar basis, to the Sellers within thirty (30) days
following the later of either Xxxxxx X. Xxxxx'x determination of the Tangible
Net Worth or the determination
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of Audited Tangible Net Worth. For purposes of this Section 1.3, "Tangible
Net Worth" shall mean the net book value of the Companies at the Effective
Time determined in accordance with generally accepted accounting principles
applied on a consistent basis. Net book value shall be calculated by
subtracting the book value of all of the liabilities of the Companies from
the book value of all tangible assets of the Companies.
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, the Sellers represent and
warrant to the Buyer as follows:
SECTION 2.1 OWNERSHIP OF STOCK. Each Seller individually represents and
warrants as to himself (a) that he owns the shares of Common Stock listed
opposite his name on SCHEDULE 1.1 hereto, free and clear of all pledges,
security interests, liens, charges, encumbrances, equities, claims, options or
limitations of every kind ("Claims"), and (b) that the delivery to the Buyer of
the Common Stock by such Seller 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
individually represents and warrants as to himself that he 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. Each Seller individually represents and
warrants that he is not 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.
Ice is a corporation duly organized, validly existing and in good standing
under the laws of the State of North Dakota. Blizzard is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota. Each Company is qualified to do business as a foreign corporation in
the states set forth on SCHEDULE 2.4. The Partnership is a registered limited
liability partnership duly organized, validly existing and in good standing
under the laws of the State of Minnesota. The Partnership is qualified to do
business as a foreign limited liability partnership 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 or the Partnership to be licensed or qualified
in any other jurisdiction. The Sellers have
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made available to the Buyer complete and correct copies of the Articles of
Incorporation and Bylaws of each Company as currently in effect and the
partnership agreement of the Partnership as amended and currently in effect.
Each Company has the corporate power and authority to own, lease, operate and
hold its properties and to carry on its business as now conducted. The
Partnership has the necessary 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 "Thermal Line Windows" or any derivative thereof.
Collectively, the Companies own all of the partnership interests of the
Partnership free and clear of all Claims and the transfer of the Common Stock
to the Buyer pursuant to the provisions of this Agreement will transfer to
the Buyer through its ownership of the Companies all partnership interests of
the Partnership free and clear of all Claims.
SECTION 2.5 CAPITALIZATION. Ice has authorized capital consisting of
2,500 shares of voting common stock, with par value of $1.00 per share, of
which 1,000 shares are issued and outstanding and no shares are held as
treasury stock and 47,500 shares of non-voting common stock with par value of
$1.00 per share, of which no shares are issued and outstanding and no shares
are held as treasury stock. Blizzard has authorized capital consisting of
5,000 shares of no par value voting common stock of which 500 shares are
issued and outstanding and no shares are held as treasury stock and 95,000
shares of no par value, non-voting common stock, of which 9,500 shares are
issued and outstanding and no shares are held as treasury stock. All of the
outstanding shares of each Company have been duly authorized and validly
issued and are fully paid and nonassessable. None of the outstanding shares
of either Company has 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 Company, other than as contemplated by this Agreement.
SECTION 2.6 SUBSIDIARIES AND INVESTMENTS. Other than the
Partnership, neither Company has any subsidiaries nor owns, 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 Company,
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 Company set forth in such minute books. None of the Companies or the
Partnership has any of its 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 Company or the Partnership.
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SECTION 2.8 FINANCIAL STATEMENTS. The Sellers have previously furnished
to the Buyer, and attached hereto as SCHEDULE 2.8 are, the audited balance
sheets of the Partnership as of December 31, 1997 and 1996, and the related
audited statements of income, partnership equity, and cash flows for the years
then ended and the unaudited balance sheet of the Partnership (the "Partnership
Balance Sheet") as at June 30, 1998 (the "Balance Sheet Date") and the related
statement of income for the six (6) months then ended. All such financial
statements (the "Partnership Financial Statements") have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied and were prepared from the books and records of the Partnership. Such
books and records are complete and correct in all material respects, accurately
reflect all transactions of the Business, and have been made available to the
Buyer for examination. The Partnership Financial Statements fairly present the
financial position of the Partnership as of the dates thereof. The Partnership
Financial Statements reflect reserves appropriate and adequate for all known
material liabilities and reasonably anticipated losses as required by GAAP.
The Sellers have previously furnished to the Buyer, and attached hereto as
SCHEDULE 2.8 are, the unaudited balance sheets of Ice as at December 31, 1997
and 1996 and the related statements of income for the calendar years then ended
and the unaudited balance sheet of Ice (the "Ice Balance Sheet") as at June 30,
1998 and the related statement of income for the six months then ended. All
such financial statements (the "Ice Financial Statements") have been prepared in
accordance with GAAP consistently applied and were prepared from the books and
records of Ice. Such books and records are complete and correct in all material
respects, accurately reflect all transactions of Ice, and have been made
available to the Buyer for examination. The Ice Financial Statements fairly
present the financial position of Ice as of the dates thereof. The Ice
Financial Statements reflect reserves appropriate and adequate for all known
material liabilities and reasonably anticipated losses as required by GAAP.
The Sellers have previously furnished to the Buyer, and attached hereto as
SCHEDULE 2.8 are, the unaudited balance sheets of Blizzard as at December 31,
1997 and 1996 and the related statements of income for the calendar years then
ended and the audited balance sheet of Blizzard (the "Blizzard Balance Sheet,"
which together with the Partnership Balance Sheet and the Ice Balance Sheet is
collectively referred to as the "Balance Sheets") as at June 30, 1998 and the
related statement of income for the six months then ended. All such financial
statements (the "Blizzard Financial Statements," which together with the
Partnership Financial Statements and the Ice Financial Statements are
collectively referred to as the "Financial Statements") have been prepared in
accordance with GAAP consistently applied and were prepared from the books and
records of Blizzard. Such books and records are complete and correct in all
material respects, accurately reflect all transactions of Blizzard, and have
been made available to the Buyer for examination. The Blizzard Financial
Statements fairly present the financial position of Blizzard as of the dates
thereof. The Blizzard Financial Statements reflect reserves appropriate and
adequate for all known material liabilities and reasonably anticipated looses as
required by GAAP. Since the Balance Sheet Date, (i) there has been no change in
the assets, liabilities or financial
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condition of either Company or the Partnership 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 the Partnership has 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, leased employees, independent
contractors and officers of the Companies and the Partnership on the date
hereof, along with the amount of the current annual salaries and total
compensation paid or due for services to each employee, leased 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, leased employees, independent contractors and officers with respect
to compensation payable thereafter. To the best knowledge of the Sellers, (1)
no key employee or group of employees has any plans to terminate employment with
either Company or the Partnership and (2) no independent contractor has any
plans to terminate its services to either Company or the Partnership and none of
the Companies or the Partnership have plans to terminate its relationship with
any of its independent contractors.
(b) Except as set forth on SCHEDULE 2.9, none of the Companies or
the Partnership is a party to or bound by any collective bargaining agreement
with any labor organization, group or association covering any of its employees,
and the Sellers have no knowledge of any attempt to organize the Partnership's
or either Company's employees by any Person, unit or group seeking to act as
their bargaining agent. There are no pending or 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 Company or the Partnership. No union representation election relating
to employees of either Company or the Partnership 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
Company's or the Partnership's employment policies or practices by any
governmental agency or authority pending or threatened. Except as set forth on
SCHEDULE 2.9, none of the Companies or the Partnership is currently, nor have
they been, involved in labor negotiations with any unit or group seeking to
become the bargaining unit for any employees of the Partnership or either
Company. None of the Companies or the Partnership has experienced any material
work stoppages, and to the best knowledge of the Sellers, no work stoppage is
planned.
SECTION 2.10 REAL PROPERTY. None of the Companies or the Partnership owns
real property.
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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 Company or the Partnership presently is in effect
or outstanding; (ii) no contract or agreement to which either Company or the
Partnership is a party or is bound or to which either Company's or the
Partnership's properties or assets are subject limits the freedom of either
Company or the Partnership to compete in any line of business or with any
Person; and (iii) none of the Companies or the Partnership is a party to or
bound by any guarantee of any debt or obligation of any other Person.
SECTION 2.12 SIGNIFICANT SUPPLIERS. Set forth on SCHEDULE 2.12 is a true
and correct list of the Partnership's ten largest suppliers for the most recent
twelve (12) month period ending December 31, 1997, and most recent six and
three-quarter (63/4) month period ending July 23, 1998 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 the Partnership 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, partnership agreement, judgment, decree, order, statute or
regulation applicable to either Company or the Partnership, (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 Company or the Partnership or
increase or otherwise affect the obligations of either Company or the
Partnership 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 Company or the Partnership 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 to the Buyer, or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to either Company or the
Partnership.
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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, none of the Companies or
the Partnership has (i) borrowed or agreed to borrow any material amount of
funds or incurred any 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
Partnership, the Companies' directors or officers, the Partnership's managers,
or to the best knowledge of the Sellers, the Companies' or the Partnership's
employees has, directly or indirectly, used any funds of either Company or the
Partnership 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 Company, the Partnership
or any subsidiary of either Company or the Partnership; 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 and the Partnership
have complied in all material respects with all laws, ordinances, legal
requirements, rules, regulations and orders applicable to it, its operations,
properties, assets, products and
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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 and the Partnership in any jurisdiction
in which the Business is now conducted. The Companies and the Partnership
possess all franchises, permits, licenses, certificates and consents required
from any governmental or regulatory authority in order for the Companies and
the Partnership to carry on their businesses as currently conducted and to
own and operate their 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 any of the Companies, the
Partnership or their 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, the Partnership or their 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 and the
Partnership 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 either Company or the Partnership for services rendered prior to the
Effective Date.
(b) Each Employee Plan covering any present or former employee of
either Company or the Partnership 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
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the Code. The assets of each Employee Plan which is not funded through the
general assets of either Company or the Partnership 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 Partnership Balance Sheet.
(e) Except as set forth on SCHEDULE 2.18(e), none of the
Companies, the Partnership, or 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, the Partnership, or any ERISA
Affiliate 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)). None of the Companies or the Partnership 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, the Partnership, or their ERISA
Affiliates is subject to and, to the best knowledge of the Sellers, no facts
exist which could subject either Company, the Partnership 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 Closing Date would not subject 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
the Employee Plans, 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
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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' and the Partnership's 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 and the Partnership 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' and the Partnership's fixed assets, 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. Each Company and the Partnership are, and will
be through the Effective Date, 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 each Company and the
Partnership, 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, none of the Companies or the Partnership (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 each Company and the Partnership as being due to either Company or the
Partnership as of the Effective Date, all of which are set forth on SCHEDULE
2.21, arose in the ordinary course of business of either Company of the
Partnership, are not subject to any counterclaim or set-off and are fully
collectible within 90 days after the Effective Date without resort to litigation
and without offset or counterclaim. All notes payable to the Sellers by either
Company or the Partnership and all notes receivable to the Company or the
Partnership from any 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, commitments,
licenses and franchises, which involve obligations or commitments by either
Company or the Partnership of $10,000 or more and are not cancelable by
either Company or the Partnership without penalty within 30 days
(collectively "Contracts"), whether written or oral, relating to either
Company or the Partnership. 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
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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, each Company and the Partnership 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. None of the Companies or the Partnership has any present
expectation or intention of not fully performing all its obligations under each
of the 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 Company or the
Partnership 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 Company or the
Partnership by any party to any of the Contracts.
SECTION 2.23 OUTSTANDING LEASES. Neither Company owns or leases any
real property. SCHEDULE 2.23 sets forth a description of each agreement by
which the Partnership leases each parcel of 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 Partnership and, to the best
knowledge of the Sellers, each other party thereto has 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 Leases. The Partnership has no 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 the Partnership 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
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licenses, software licenses and know-how licenses, trade names, trademarks,
copyrights, unpatented inventions, service marks, trademark registrations and
applications, service xxxx registrations and applications and copyright
registrations and applications, trade secrets or other confidential
proprietary information owned or used by either Company or the Partnership 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 Partnership owns the entire
right, title and interest in and to the Intellectual Property, trade secrets
and technology used in the operation of the Business and each item
constituting part of the Intellectual Property and trade secrets and
technology which is owned by the Partnership 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. There have been and are no 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 Company or the Partnership 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 xxxx
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 Company or the Partnership ("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 Company or
the Partnership 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 Company or the Partnership, and the
Sellers have no 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 each Seller, no (i) director, officer or
shareholder of either
13
Company (ii) partner or manager of the Partnership, or (iii) 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 Company or the Partnership, 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.
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, none of the Companies or the Partnership has any 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 Company or the Partnership of any liability or
obligation not fully reflected or reserved against in the Balance Sheet.
(b) None of the Companies or the Partnership 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 Company or the
Partnership.
SECTION 2.28 TAXES. Each Company has timely filed a valid election to be
treated as an S corporation in accordance with the provisions of Section 1361 of
the Code, effective for its tax year beginning January 2, 1996 and ending
December 31, 1996, and has qualified and shall continue to qualify as an S
corporation for all years and periods thereafter until the Effective Time.
SCHEDULE 2.28 lists all the states and localities with respect to which either
Company is required to file any corporate income and/or franchise tax return and
sets forth whether each Company is treated as the equivalent of an S corporation
by or with respect to each such state or locality. Neither Company has 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 each
Company 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. 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 Company 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 Sheet of
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such Company or such Company's books and records prepared in accordance with
GAAP. Except as set forth on SCHEDULE 2.28, all deposits required by law to be
made by either Company with respect to employees' withholding taxes have been
duly made, and as of the Effective Time all such deposits due will have been
made. Except as set forth on SCHEDULE 2.28, each Company has delivered to the
Buyer true and complete copies of such Company's federal and state income tax
returns for the fiscal periods ended December 31, 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 Company is
currently in progress. There are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any such tax return.
The Partnership has been treated as a partnership for federal, state and
local tax purposes throughout the term of its existence. SCHEDULE 2.28 lists
all the states and localities with respect to which the Partnership is required
to file any tax return or tax report. Except as set forth on SCHEDULE 2.28, all
federal, state, local and foreign tax returns and tax reports required to be
filed by the Partnership on or before the date hereof have been timely filed
with the appropriate governmental agencies and all amounts shown as owing
thereon have been paid. All taxes that have become due or payable or are
required to be collected by the Partnership or are otherwise attributable to any
period 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 Sheet of
the Partnership or on the Partnership's books and records prepared in accordance
with generally accepted accounting principles. Except as set forth on SCHEDULE
2.28, all deposits required by law to be made by the Partnership 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 Partnership has delivered to the
Buyer true and complete copies of the Partnership's federal and state income tax
returns for the fiscal periods ended December 31, 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 the Partnership is
currently in progress. There are no outstanding agreements or waivers extending
the statutory period of limitations applicable to any such tax return.
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 Company or the
Partnership (whether or not any of the Companies or the Partnership 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 Company or the Partnership or (iii) governmental
inquiry pending or threatened against or involving either Company or the
Partnership, and there is no basis for any of the foregoing. None of the
Companies or the Partnership has 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 Company
15
or the Partnership. There are no outstanding orders, writs, judgments,
injunctions or decrees served upon either Company or the Partnership by any
court, governmental agency or arbitration tribunal against either Company or
the Partnership. 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 Company or the Partnership or the transactions contemplated hereby.
None of the Companies or the Partnership 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
Company or the Partnership pending or threatened against others.
SECTION 2.30 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. Each Company, the Partnership 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, none of the Companies or the Partnership has
received notice of, nor do the Sellers have knowledge of, any past, present
or future events, conditions, circumstances, activities, practices,
incidents, actions or plans of either Company, the Partnership or their
respective 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.
(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 Company or the Partnership, 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
16
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 Company, the Partnership or
their respective predecessors which Substances were a
product, by-product or otherwise resulted from the
operations conducted by or on behalf of either Company,
the Partnership or their respective 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 either Company, the Partnership or their respective
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 either Company or the
Partnership, 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. Each Company and the Partnership 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 Company or the Partnership of the Leased Parcels, the discharge or
emission of Substances by either Company or the Partnership from the Leased
Parcels or the generation, treatment, storage, transportation, or disposal of
any such Substances by either Company or the Partnership. 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 each
Company and the Partnership as currently conducted and intended to be conducted.
Each Company and the Partnership 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 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 Company or the Partnership.
17
(d) DELIVERIES. The Sellers have delivered to the Buyer true and
complete copies and 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, either Company or the Partnership is, or
will be, entitled to any commission or broker's or finder's fees from the
Sellers, either Company or the Partnership, or from any person controlling,
controlled by or under common control with the Sellers, either Company or the
Partnership, in connection with any of the transactions contemplated herein.
SECTION 2.32 INVENTORY. Neither Company has any inventory. All
inventory of the Partnership, 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 Partnership.
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 either Company or the Partnership 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 either
Company or the Partnership, or their respective employees,
agents, or independent contractors including, but not limited
to, computers, computer networks, telephone systems, voicemail
systems, intercom systems, pager systems, and software
applications.
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(3) "Licensed Systems" shall mean all products and systems
developed by or for either Company or the Partnership which are
licensed, sold, distributed, or otherwise transferred by either
Company or the Partnership 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 SIGNIFICANT CUSTOMERS. Set forth on SCHEDULE 2.34 is a
true and correct list of the Partnership's ten largest customers for the
calendar year 1997 and most recent six (6) month period ending June 30, 1998,
together with the amount attributable to such customers expressed in dollars and
as a percentage of total sales. Except as set forth on SCHEDULE 2.34, none of
the customers identified on SCHEDULE 2.34 has terminated, materially reduced or
threatened to terminate or materially reduce its purchases from the Partnership
during the period covered by such schedule.
SECTION 2.35 PURCHASE FOR INVESTMENT; RESTRICTED SECURITIES. Each
Seller individually represents and warrants as to himself (a) that such Seller
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 such Seller 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 the
Earn Out Payments; and (c) such Seller 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 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 2.36 DISCLOSURE. All Documents delivered or to be delivered
by or on behalf of the Sellers, either Company or the Partnership 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 Sellers, either Company or the Partnership
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
19
the business, prospects or financial condition of either Company, the
Partnership 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 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 13,464,918 shares were issued and outstanding as of
August 4, 1998 and (b) 50,000,000 shares of $.001 par value preferred stock
("Buyer Preferred Stock"), of which 1,701,000 shares were issued and outstanding
as of August 6, 1998 (collectively, Buyer Common Stock and Buyer Preferred Stock
are referred to as "Buyer Capital Stock").
20
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 June 25, 1998, which has been previously delivered to the Seller 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.
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.
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ARTICLE IV. COVENANTS AND AGREEMENTS
SECTION 4.1 BEST EFFORTS. The Sellers and the Buyer shall each 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 Partnership's Business after the Closing
Date. Prior to the Closing Date, the Sellers will use their best efforts to
preserve the Partnership's and each Company's relationships with its employees,
customers and others having business relationships with the Companies or the
Partnership.
SECTION 4.2 TAX RETURNS. The Sellers shall cause each Company and
the Partnership to prepare and timely file, at the Sellers' sole expense, each
Company's and the Partnership's required tax returns for all periods ending on
or prior to the Effective Date. The Seller 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 each Company and the Partnership
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 each Company's and the
Partnership's 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 cause each
Company and the Partnership to use their best efforts to preserve the possession
and control of all of their assets and the Business, to preserve the goodwill of
their customers and others with whom they have business relations, and to do
nothing to impair their ability to keep and preserve the 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 Company on Internal Revenue Service Form 8023 in
accordance with the instructions to the form and any similar state law
provisions in all applicable states, with respect to the sale and purchase of
each Company's shares of 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
22
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; provided, however, that the Buyer shall pay each Seller on or
before April 15, 1999 the amount that such Seller's Federal income tax due in
connection with the sale of the Common Stock and the Election is greater than
the amount of Federal Income tax that would have been due in connection with
the sale of the Common Stock if the Election had not been made. 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
Company 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
and the Partnership 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 and at Sellers' expense, audited financial
statements of each Company and the Partnership for the two (2) fiscal years
ending December 31, 1997 and 1996.
SECTION 4.8 POST-CLOSING MATTERS. The Buyer agrees to use its best
efforts to cause Norwest Bank, North Dakota, N.A. to release the personal
guarantees of the Sellers in connection with certain of the Company's debt
obligations on or before the expiration of sixty (60) days after the Closing
Date. The Sellers agree to cause employees ("North Country Participants") of
North Country Thermal Line, Inc.("North Country") to cease to be participants in
the Xxxxxxxx Siding and Window, Inc. 401(k) Profit Sharing Plan (the "Xxxxxxxx
Plan") on or before December 31, 1998. The Sellers agree to cause North Country
to take all steps necessary and appropriate to establish a successor 401(k)
retirement plan for the North Country Participants and to transfer the account
balances of the North Country Participants from the Xxxxxxxx Plan to such
successor plan.
ARTICLE V. CONDITIONS TO THE BUYER'S 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 the Sellers and
all other directors, officers, partners, managers and employees of either
Company or the
23
Partnership to the Company or the Partnership 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.
SECTION 5.3 EMPLOYMENT AGREEMENT. Xxxxx X. Xxxxxxxx shall have
entered into an Employment Agreement with the Partnership, in substantially the
form attached hereto as EXHIBIT B (the "Employment Agreement").
SECTION 5.4 NON-COMPETITION AGREEMENT. The Sellers shall have
entered into Noncompetition Agreements with the Buyer in substantially the form
attached hereto as EXHIBIT C (the "Noncompetition Agreement").
SECTION 5.5 OPINION OF COUNSEL TO THE SELLERS. The Buyer shall have
received from Xxxxxx Xxxxxx Xxxx & Xxxxxx, P.L.L.P., 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) Ice is a corporation duly organized, validly existing and in
good standing under the laws of the State of North Dakota. Blizzard is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Minnesota. The Partnership is a registered limited liability
partnership duly organized, validly existing and in good standing under the laws
of the State of Minnesota. Each of the Companies and the Partnership is
qualified to do business as a foreign corporation or foreign limited liability
partnership, as the case may be, and is in good standing in the states set forth
on SCHEDULE 2.4. The nature of the Business does not require either Company or
the Partnership to be licensed or qualified in any other jurisdiction. The
Companies have the corporate power and authority to own, lease, operate and hold
their respective properties and to carry on their respective businesses as now
conducted. The Partnership has the necessary power and authority to own, lease,
operate and hold its properties and to carry on its business as now conducted.
Collectively, the Companies own all of the partnership interests of the
Partnership free and clear of all Claims and the transfer of the Common Stock to
the Buyer pursuant to the provisions of this Agreement will transfer to the
Buyer through its ownership of the Companies all partnership interests of the
Partnership free and clear of all Claims;
(b) Each Seller 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 such Seller and
constitute the legal, valid and
24
binding obligation of such Seller, enforceable against such Seller in
accordance with their terms;
(c) Ice has authorized capital consisting of 2,500 shares of voting
common stock, with par value of $1.00 per share, of which 1,000 shares are
issued and outstanding and no shares are held as treasury stock and 47,500
shares of non-voting common stock with par value of $1.00 per share, of which no
shares are issued and outstanding and no shares are held as treasury stock.
Blizzard has authorized capital consisting of 5,000 shares of no par value
voting common stock of which 500 shares are issued and outstanding and no shares
are held as treasury stock and 95,000 shares of no par value, non-voting common
stock of which 9,500 shares are issued and outstanding and no shares are held as
treasury stock. All of the outstanding shares of each Company have been duly
authorized and validly issued and are fully paid and nonassessable. None of the
outstanding shares of either Company has 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 Company, other than as contemplated by this Agreement;
(d) Other than the Partnership, neither Company has any
subsidiaries or owns, 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;
(e) Except as set forth on SCHEDULE 2.12, 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;
(f) There is no (i) action, suit, claim, proceeding or
investigation pending or, to the best knowledge of the Seller's counsel,
threatened against or affecting either Company or the Partnership (whether or
not any of the Companies or the Partnership 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 Company or the Partnership or (iii) governmental inquiry
pending or threatened against or involving either Company or the Partnership,
and, to the best knowledge of the Seller's counsel, there is no basis for any of
the foregoing. None of the Companies or the Partnership has 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 Company or the Partnership. There are no
outstanding orders, writs, judgments, injunctions or decrees served upon either
Company or the Partnership by any court, governmental agency or arbitration
tribunal against either Company or Partnership. To the best knowledge of the
Seller's counsel, there are no facts or circumstances which may result in
institution of any action, suit, claim or legal, administrative or arbitration
25
proceeding or investigation against, involving or affecting either Company or
the Partnership or the transactions contemplated hereby. None of the
Companies or the Partnership 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 set
forth on SCHEDULE 2.29, there is no action or suit by either Company or the
Partnership pending or threatened against others;
(g) The Employment Agreement has been duly executed and delivered
by, and constitutes the legal, valid and binding obligation of Xxxxx X.
Xxxxxxxx, enforceable against him in accordance with its terms;
(h) The Noncompetition Agreements have been duly executed and
delivered by, and constitute the legal, valid and binding obligation of each
Seller, enforceable against him in accordance with its terms; and
(i) Except as set forth on SCHEDULE 2.14, neither the execution and
delivery of this Agreement and the other Documents, the consummation of the
transactions contemplated hereby and thereby, nor the performance of the
Agreement and such other agreements in compliance with the terms and conditions
hereof and thereof by the Sellers will, to the best knowledge of counsel, (i)
violate, conflict with or result in any breach of any trust agreement, articles
of incorporation, bylaw, partnership agreement, judgment, decree, order, statute
or regulation applicable to either Company or Partnership, (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 Company or the Partnership or
increase or otherwise affect the obligations of either Company or the
Partnership 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 Company or the Partnership 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 to the Buyer, or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to either Company or the
Partnership.
SECTION 5.6 REQUIREMENTS CONTRACT. The Partnership and North Country
Thermal Line, Inc., a North Dakota corporation d/b/a North Country Glass ("North
Country") shall have entered into a Requirements Contract acceptable to Buyer
wherein North Country has agreed to supply Thermal Line with its requirements
for "Heat Mirror" thermal glass units through December 31, 2001 on terms no less
favorable that those offered to any other customer of North Country.
26
SECTION 5.7 ROCKET SCREEN ROLLER PATENT. North Country shall have
assigned to Thermal Line all of its right, title and interest in and to the
U.S. Patent Nos. 5,052,093 and 5,127,143, issued on October 1, 1991 and July
7, 1992, respectively, for the device known as the Rocket Screen Roller (the
"Rocket Screen Roller Patent") in a form acceptable to Buyer.
SECTION 5.8 CLOSING DOCUMENTS. The Sellers shall have delivered all
of the resolutions, certificates, documents and instruments required by this
Agreement.
SECTION 5.9 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 SELLER'S 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. The Partnership shall have entered
into the Employment Agreement.
SECTION 6.2 OPINION OF XXXXXX & XXXXXXXX. The Sellers shall have
received from Xxxxxx & Xxxxxxxx, 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 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
27
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, articles 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 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 Xxxxxx Xxxxxx Xxxx & Xxxxxx, P.L.L.P., Xxxxxxx
Avenue and Main Street, Mandan, North Dakota 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 August 14, 1998 (the
"Effective Date").
SECTION 7.2 DELIVERIES BY THE SELLER. 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 each of the Sellers, accompanied by
stock powers duly executed in favor of 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;
28
(c) Resignations dated the Closing Date of all of the directors and
officers of the Companies and Joint Management Committee members of the
Partnership 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 Secretary of each Company certifying as of
the Closing Date (i) a true, correct, and complete copy of the Articles of
Incorporation of the Company and all amendments thereto as in effect on the
Closing Date; (ii) a true, correct, and complete copy of the bylaws of the
Company and all amendments thereto as in effect on the Closing Date; and (iii) a
Certificate 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 Seller certifying as to his non-foreign
status in accordance with Section 1445(b)(2) of the Code;
(g) The Employment Agreement required by Section 5.3 above;
(h) The Noncompetition Agreements required by Section 5.4 above;
(i) The Opinion of the Sellers' Counsel required by Section 5.5
above;
(j) A General Release from each Seller which releases each Company
and the Partnership from any and all claims, known or unknown, contingent or
direct, which he may have against either Company or the Partnership as of the
Closing Date, other than claims arising under this Agreement and the other
Documents and the transactions contemplated hereby;
(k) The Requirements Contract required by Section 5.6 above;
(l) The Rocket Screen Roller Patent assignment required by Section
5.7 above; and
(m) 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;
29
(b) The Contingent Promissory Note required by Section 1.2 above;
(c) The Employment Agreement required by Section 6.1 above;
(d) The Opinion of the Buyer's Counsel required by Section 6.2
above;
(e) 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; and
(f) 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.
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, the Sellers shall indemnify, defend, and hold the Companies, the
Partnership and the Buyer and the respective officers, directors, managers and
employees of the foregoing, and their
30
successors and assigns (the "Sellers' Indemnitees") 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 the Sellers contained in this Agreement;
(b) Any failure by 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 any of them under this
Agreement;
(c) Reliance by the Buyer on any books or records of either Company
or the Partnership or written information furnished to the
Buyer pursuant to this Agreement by or on behalf of the
Sellers, the Companies or the Partnership in the event that
such books and records or written information are false or
materially inaccurate; or
(d) Liabilities or obligations of, or claims against, either
Company, the Partnership 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 Parcels, the Companies or the Partnership 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 Sheet and
liabilities and obligations incurred since the date thereof in
the ordinary course of business and consistent with past
practice.
(e) Damages relating to, or arising out of any and all corrections
of operational defects of the Xxxxxxxx Plan.
Provided, however, the Sellers' Indemnitees shall not be entitled to
indemnification or offset hereunder until Damages in total exceed $10,000 and
then only to the extent of aggregate Damages in excess of $10,000; 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 9.2(e) hereof, respectively.
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 shall be given prompt notice thereof and 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
31
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 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 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 Seller pursuant to this Agreement by or on behalf of the
Buyer in the event that such books and records or written
information are false or inaccurate; or
(d) The operation of the Business subsequent to the Closing Date.
Provided, however, the Buyer's Indemnitees shall not be entitled to
indemnification hereunder until Damages in total exceed $10,000 and then only to
the extent of aggregate damages in excess of $10,000.
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 their 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
32
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. Each Seller acknowledges and agrees that the
Buyer shall be entitled to offset any indemnity claim under Section 9.2 against
any payment due to such Seller 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, the Sellers confirm that they have made due and
diligent inquiry of each Company's President and other officers and the
Partnership's managers 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 President 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 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
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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.
0000 Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, President
Fax No: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxxx
000 X. Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Fax No: (000) 000-0000
If to the Sellers:
Xxxxx X. Xxxxxxxx, Sellers' Agent
0000 Xxxxx Xxxxx, Xxx 000
Xxxxxx, Xxxxx Xxxxxx 00000
With a copy to:
Xxxxxx Xxxxxx Xxxx & Kranda, P.L.L.P.
Xxxxxxx Avenue and Xxxx Xxxxxx
X.X. Xxx 000
Xxxxxx, Xxxxx Xxxxxx 00000-0000
Attn: Xxxxx X. Xxxx
Fax No: (000) 000-0000
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.
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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 Xxxxx X. Xxxxxxxx (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 wilful 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.
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 North Dakota 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 Seller
and the Buyer shall each choose an arbitrator and the
35
third shall be chosen by the two so chosen. If either the Seller or the
Buyer fails 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 Seller, jointly, or the Buyer making a written
request to the American Arbitration Association, together with any
appropriate filing fee, at the office of the American Arbitration Association
in Bismarck, North Dakota. All arbitration proceedings shall be held in
Bismarck, North Dakota. 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.
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.
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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
Seller 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.
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/ Xxxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxxx, President
SELLERS:
/s/ Xxxxx X. Xxxxxxxx
-------------------------------------------
XXXXX X. XXXXXXXX
/s/ Xxxxxx X. Xxxx
-------------------------------------------
XXXXXX X. XXXX
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