EXHIBIT 2.1
STOCK PURCHASE AGREEMENT, DATED AS OF APRIL 20, 1999, AMONG HEAT, INC., ITS
SHAREHOLDERS AND OPTIONHOLDERS, H.I.G. VINYL, INC., A CAYMAN ISLAND
CORPORATION, H.I.G. INVESTMENT FUND, L.P., A CAYMAN ISLAND LIMITED
PARTNERSHIP AND H.I.G. CAPITAL MANAGEMENT, INC., A DELAWARE CORPORATION
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STOCK PURCHASE AGREEMENT
among
HEAT, INC.,
its SHAREHOLDERS and OPTIONHOLDERS,
H.I.G. VINYL, INC., a Cayman Island corporation,
H.I.G. INVESTMENT FUND, L.P., a Cayman Island limited partnership,
H.I.G. CAPITAL MANAGEMENT, INC., a Delaware corporation
and
ATRIUM COMPANIES, INC.
April 20, 1999
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of
April 20, 1999, among Heat, Inc., a Delaware corporation (the "COMPANY"), the
Persons listed on the attached SHAREHOLDERS SCHEDULE (the "SHAREHOLDERS"),
the Persons listed on the attached OPTIONHOLDERS SCHEDULE (the
"OPTIONHOLDERS"), H.I.G. Vinyl, Inc., a Cayman Island corporation ("H.I.G.
CAYMAN"), H.I.G. Investment Fund, L.P., a Cayman Island limited partnership
("H.I.G. FUND"), H.I.G. Capital Management, Inc., a Delaware corporation
("H.I.G. MANAGEMENT"), and Atrium Companies, Inc., a Delaware corporation
(the "BUYER"). Capitalized terms used and not otherwise defined herein have
the meanings set forth in Article XII below.
WHEREAS, the total authorized capital stock of the Company
consists of 5,000,000 shares of Class A Common Stock, par value $.01 per
share (the "CLASS A STOCK"), of which 1,312,500 shares are issued and
outstanding and 1,000,000 shares of Class B Common Stock, par value $.01 per
share (the "CLASS B STOCK" and, together with the Class A Stock, the
"SHARES"), of which no shares are issued and outstanding.
WHEREAS, options to acquire 108,805 shares of Class A Stock
and warrants to purchase 98,790 shares of Class B Stock (collectively, the
"OPTIONS") are issued and outstanding.
WHEREAS, the Shareholders own all of the issued and
outstanding Shares in the individual amounts set forth on the attached
SHAREHOLDERS SCHEDULE. The Optionholders own all of the issued and
outstanding Options in the individual amounts set forth on the attached
OPTIONHOLDERS SCHEDULE.
WHEREAS, as of the Closing Date, 1,312,500 Shares and Options
to acquire 108,805 shares of Class A Common Stock and 98,790 shares of Class
B Stock will be issued and outstanding.
WHEREAS, the total authorized capital stock of H.I.G. Vinyl,
Inc. ("VINYL"), a Delaware corporation and a Shareholder, consists of 1,000
shares of common stock, par value $.01 per share, of which 1,000 shares are
issued and outstanding (the "VINYL SHARES").
WHEREAS, H.I.G. Cayman owns all of the Vinyl Shares.
WHEREAS, as of the Closing Date, H.I.G. Cayman will own all of
the issued and outstanding capital stock of Vinyl.
WHEREAS, subject to the terms and conditions set forth herein,
the parties hereto desire to consummate the transactions as described below
in Section 1.03 with respect
to the outstanding Shares and the transactions as described below in Section
1.04 with respect to the outstanding Options.
NOW, THEREFORE, in consideration of the mutual promises,
agreements and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending legally to be bound, agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND OPTIONS
I.1 AGGREGATE EQUITY PRICE. The aggregate consideration to
be delivered by Buyer (the "AGGREGATE EQUITY PRICE") shall be an amount equal
to (a) $85,000,000 plus (b) the aggregate amount of cash and cash equivalents
held by the Company as of the Closing Date (the "CLOSING CASH") MINUS (c) the
outstanding amount of the Indebtedness as of the Closing to be paid by Buyer
pursuant to Section 1.07(b)(v) (the "CLOSING DEBT") MINUS (d) the Escrow
Amount minus (e) $32,500, which represents the cash amount of the Special
Bonus Awards granted pursuant to the letters dated February 12, 1999 to
Xxxxxx Xxxxxx, Xxxxxxx Xxxx and Xxxxxx Xxxxx (collectively, the "Bonuses")
MINUS (f) the outstanding amount of capitalized lease obligations as of the
Closing Date (the "CAPITALIZED LEASE OBLIGATIONS") MINUS (g) any outstanding
amounts owed in connection with any agreements with Computer Associates
International, Inc., to the extent such obligations are not paid in full, as
of the Closing Date (the "OUTSTANDING COMPUTER ASSOCIATES DEBT"). The
Aggregate Equity Price shall be adjusted as set forth in Section 1.06.
I.2 DEPOSIT. Contemporaneous with the execution of this
Agreement, Buyer shall deposit for the benefit of the Shareholders (other
than Vinyl), the Optionholders and H.I.G. Cayman, $2,500,000 (the "DEPOSIT")
into escrow pursuant to the terms of the Escrow Agreement. Subject to the
terms and conditions of this Agreement, the Deposit will, at Closing, be paid
by the Company to the Shareholders (other than Vinyl), the Optionholders and
H.I.G. Cayman and credited to the Aggregate Equity Price.
I.3 SHARE TRANSACTIONS.
(a) The purchase price for each of the outstanding Shares
to be acquired from the Shareholders (other than Vinyl) shall be an amount,
in cash, equal to the quotient of (i) the Aggregate Equity Price PLUS the
aggregate exercise price for the Options, divided by (ii) the number of
Shares outstanding as of the Closing on a fully-diluted basis (the "PER SHARE
PURCHASE PRICE"). The purchase price for all of the outstanding Vinyl Shares
shall be an amount in cash equal to the Per Share Purchase Price multiplied
by the aggregate number of Shares held by Vinyl.
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(b) On the basis of the representations, warranties,
covenants and agreements and subject to the satisfaction or waiver of the
terms and conditions set forth herein, each of the Shareholders (other than
Vinyl) and H.I.G. Cayman agrees to and will consummate, at the Closing, the
following transactions: (i) each Shareholder (other than Vinyl) shall sell,
assign, transfer and convey to Buyer, and Buyer shall purchase and acquire
from each Shareholder (other than Vinyl), all of the Shares held by such
Shareholder set forth opposite such Shareholder's name on the attached
SHAREHOLDERS SCHEDULE against payment at the Closing of the Closing Per Share
Purchase Price (as defined in Section 1.06(a) below) for each Share and (ii)
H.I.G. Cayman shall sell, assign, transfer and convey to Buyer, and Buyer
shall purchase and acquire from H.I.G. Cayman, all of the Vinyl Shares held
by H.I.G. Cayman against payment at the Closing of an amount equal to the
Closing Per Share Purchase Price multiplied by the aggregate number of Shares
held by Vinyl, it being understood that Buyer's payment obligations are as
set forth in Sections 1.02, 1.05, 1.06 and 1.07(b)(i) and (ii).
I.4 OPTION TRANSACTIONS.
(a) The purchase price for each of the issued and
outstanding Options from the Optionholders shall be an amount, in cash, equal
to the Per Share Purchase Price minus the exercise price for such Option (the
"PER OPTION PURCHASE PRICE").
(b) On the basis of the representations, warranties,
covenants and agreements and subject to satisfaction or waiver of the terms
and conditions set forth herein, each of the Optionholders agrees to and will
consummate, at the Closing, the following transactions (the "OPTION PURCHASE
TRANSACTIONS"): each Optionholder shall sell, assign, transfer and convey to
Buyer, and Buyer shall purchase and acquire from each Optionholder, all of
the Options held by each Optionholder set forth opposite such Optionholder's
name on the attached OPTIONHOLDERS SCHEDULE against payment at the Closing of
the Closing Per Option Purchase Price (as defined in Section 1.06(a) below)
for each Option, it being understood that Buyer's payment obligations are as
set forth in Sections 1.02, 1.05, 1.06 and 1.07(b)(i) and (ii).
I.5 ESCROW. On the Closing Date, Buyer shall deposit, for
the benefit of the Shareholders (other than Vinyl), the Optionholders and
H.I.G. Cayman, $5,000,000 (the "ESCROW AMOUNT") in an escrow account
established pursuant to the terms and conditions of an escrow agreement (the
"ESCROW AGREEMENT"), by and among the Escrow Agent, Buyer and the Shareholder
Representative (on behalf of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman), which will be substantially in the form of
Exhibit A attached hereto, as modified before execution thereof in accordance
with the reasonable requests of the Escrow Agent.
I.6 AGGREGATE EQUITY PRICE ADJUSTMENT.
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(a) At least three days prior to the Closing Date, the
Shareholder Representative (on behalf of the Shareholders, the Optionholders
and H.I.G. Cayman) shall deliver to Buyer an estimated pro forma balance
sheet of the Company as of the close of business on the Closing Date based on
the Company's books and records and other information then available (the
"ESTIMATED BALANCE SHEET") setting forth its good faith calculation of its
estimate of the Net Working Capital as of the Closing Date (the "ESTIMATED
NET WORKING CAPITAL"). If the Estimated Net Working Capital is less than
$5,175,000 (the "WORKING CAPITAL TARGET"), then the Aggregate Equity Price to
be paid at Closing shall be reduced by the amount of such deficiency. If the
Estimated Net Working Capital is greater than the Working Capital Target,
then the Aggregate Equity Price shall be increased by the amount of such
difference. The Per Share Purchase Price and Per Option Purchase Price
determined using the estimated Aggregate Equity Price determined pursuant to
this Section 1.06(a) shall be defined herein respectively as the "CLOSING PER
SHARE PURCHASE PRICE" and the "CLOSING PER SHARE OPTION PURCHASE PRICE."
(b) As promptly as possible, but in any event within sixty
(60) days after the Closing Date, Buyer will deliver to the Shareholder
Representative (on behalf of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman) its calculation of the Net Working Capital
as of the Closing Date (the "CLOSING NET WORKING CAPITAL STATEMENT"). If the
Shareholder Representative has any objections to the Closing Net Working
Capital Statement, the Shareholder Representative shall deliver to Buyer a
statement setting forth its objections thereto (an "OBJECTIONS STATEMENT")
within thirty (30) days of the Shareholder Representative's receipt of the
Closing Net Working Capital Statement. If an Objections Statement is not
delivered to Buyer within such thirty (30) days, the Closing Net Working
Capital Statement shall be final, binding and non-appealable by the parties
hereto. If the Shareholder Representative delivers an Objections Statement
within such thirty (30) days, the Shareholder Representative and Buyer shall
negotiate in good faith to resolve any such objections, but if they do not
reach a final resolution within thirty (30) days after the delivery of the
Objections Statement, the Shareholder Representative and Buyer shall submit
such dispute to KPMG LLP (the "INDEPENDENT AUDITOR"). The Shareholder
Representative and Buyer shall use their commercially reasonable efforts to
cause the Independent Auditor to resolve all disagreements as soon as
practicable, but in any event within fifteen (15) days after the submission
of the dispute to the Independent Auditor. The resolution of the dispute by
the Independent Auditor shall be final, binding and non-appealable on the
parties hereto. The costs and expenses of the Independent Auditor shall be
paid equally by Buyer, on the one hand, and the Shareholders (other than
Vinyl), the Optionholders and H.I.G. Cayman, on the other hand.
(c) (i) If the Net Working Capital as of the Closing
Date as finally determined pursuant to clause (b) above is greater than the
Estimated Net Working Capital, Buyer shall pay to the Shareholder
Representative (on behalf of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman) the difference between the Net Working
Capital as of the Closing Date as finally determined pursuant to clause (b)
above and the
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Estimated Net Working Capital by wire transfer of immediately available funds
to an account designated by the Shareholder Representative to Buyer.
(ii) If the Net Working Capital as of the Closing
Date as finally determined pursuant to clause (b) above is less than the
Estimated Net Working Capital, the Shareholder Representative (on behalf of
the Shareholders (other than Vinyl), the Optionholders and H.I.G. Cayman)
shall pay to Buyer the difference between the Net Working Capital as of the
Closing Date as finally determined pursuant to clause (b) above and the
Estimated Net Working Capital by directing the Escrow Agent under the Escrow
Agreement to promptly pay to Buyer such difference from the account
established pursuant to the terms of the Escrow Agreement. The Shareholders
(other than Vinyl), the Optionholders and H.I.G. Cayman shall be required to
deposit into such account an amount equal to such difference within thirty
(30) days of such payment to Buyer.
(d) The Closing Cash will be determined based upon bank
verification of cash and cash equivalent balances as of the Closing and the
Closing Debt will be determined based upon payoff letters from the respective
creditor. The Capitalized Lease Obligations will be determined based upon
letters from the lessors. If the parties determine during the determination
of the Closing Net Working Capital Statement that either the Closing Cash,
the Closing Debt or the Capitalized Lease Obligations used to determine the
Closing Per Share Purchase Price and the Closing Per Option Purchase Price
was incorrect, the Per Share Purchase Price and Per Option Purchase Price
will be adjusted accordingly.
I.7 THE CLOSING.
(a) The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Paul, Hastings,
Xxxxxxxx & Xxxxxx LLP located at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00
a.m. on May 14, 1999, or if any of the conditions to the Closing set forth in
Article II below have not been satisfied or waived by the party entitled to
the benefit thereof, then on or prior to the second business day following
satisfaction or waiver of all of the closing conditions set forth in Article
II hereof (other than those to be satisfied at the Closing) or on such other
date as is mutually agreed upon by Buyer and the Shareholder Representative
(on behalf of the Shareholders, the Optionholders and H.I.G. Cayman). The
date and time of the Closing are herein referred to as the "CLOSING DATE."
(b) In reliance on the representations, warranties and
covenants contained herein and subject to the terms and conditions set forth
in this Agreement, the parties hereto shall consummate the following
transactions (the "CLOSING TRANSACTIONS") on the Closing Date:
(i) Buyer shall deliver to the Shareholder Representative (on
behalf of the Shareholders (other than Vinyl), the Optionholders and
H.I.G. Cayman) the
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estimated Aggregate Equity Price determined pursuant to Section 1.06(a),
minus the Deposit and the Deposit Interest, in cash by wire transfer of
immediately available funds to the account designated by the Shareholder
Representative to Buyer prior to the Closing;
(ii) In order to secure the Shareholders' (other than
Vinyl's), the Optionholders' and H.I.G. Cayman's obligations to
indemnify Buyer pursuant to Article IX, Buyer shall deposit the Escrow
Amount in the escrow account which will be subject to the terms and
conditions of the Escrow Agreement;
(iii) the Shareholder Representative (on behalf of the
Shareholders (other than Vinyl) and H.I.G. Cayman) shall deliver to
Buyer, free and clear of all claims, pledges, security interests, liens,
charges and all other encumbrances of any kind, stock certificates
representing the Shares and the Vinyl Shares duly endorsed for transfer
or accompanied by duly executed stock powers;
(iv) the Shareholder Representative (on behalf of the
Optionholders) shall deliver to Buyer satisfactory evidence of the
valid transfer of the Options to the Buyer, free and clear of all
claims, pledges, security interests, liens, charges and all other
encumbrances of any kind;
(v) Buyer shall repay, or cause to be repaid, on behalf
of the Company and its Subsidiaries, all amounts necessary to
discharge fully all indebtedness for borrowed money of the Company and
its Subsidiaries, including, without limitation, the then outstanding
bank debt, real estate debt, contracts for deed, notes payable to
stockholders, mortgages, deferred financing arrangements, deferred
license fees, deferred purchase obligations, earn-out payments and all
prepayment penalties, accrued interest and other obligations related
thereto (but excluding the Capitalized Lease Obligations and excluding
the Outstanding Computer Associates Debt, to the extent such
obligations are not paid in full by the Company, as of the Closing
Date) listed on the attached INDEBTEDNESS SCHEDULE (collectively, the
"INDEBTEDNESS"), by wire transfer of immediately available funds as
directed by the holders of the Indebtedness at or prior to the
Closing, and the Shareholder Representative (on behalf of the
Shareholders, the Optionholders and H.I.G. Cayman) shall deliver to
Buyer all appropriate payoff letters and shall make arrangements
reasonably satisfactory to Buyer for such holders of the Indebtedness
to deliver lien releases and canceled notes at the Closing; and
(vi) Buyer, the Company, Vinyl and the Shareholder
Representative (on behalf of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman) shall make such other deliveries and
take all further actions on or after the Closing Date as may be
necessary and appropriate to effect the transactions contemplated by
this Agreement and as are required by and in accordance with Article II
hereof.
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(c) Subject to the terms and conditions herein, if the
Shareholders (other than Vinyl) or the Optionholders shall fail or refuse to
deliver at least ninety-nine percent (99%) of the outstanding capital stock
of the Company on a fully diluted basis, or if H.I.G. Cayman shall fail or
refuse to deliver any of the Vinyl Shares as provided in this Section 1.07,
or if any of the Shareholders, the Optionholders or H.I.G. Cayman shall fail
or refuse to consummate the transactions described in this Agreement prior to
the Closing Date, such failure or refusal shall not relieve the Shareholders,
the Optionholders or H.I.G. Cayman of any obligations under this Agreement,
and Buyer at its option and without prejudice to its rights against any such
defaulting Shareholder, Optionholder or H.I.G. Cayman, may either (a) acquire
the remaining Shares, Vinyl Shares and/or Options which it is entitled to
acquire hereunder after reducing the Aggregate Equity Price accordingly, or
(b) terminate this Agreement in accordance with the provisions of Article
VIII.
ARTICLE II
CONDITIONS TO CLOSING
II.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of
Buyer to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following conditions as of or prior to the
Closing Date:
(a) Buyer shall have obtained the debt financing described
in the Highly Confident letter addressed to Buyer, dated February 26, 1999,
and attached hereto as EXHIBIT B (the "Financing Letter");
(b) The representations and warranties of the Company, the
Shareholders, the Optionholders and H.I.G. Cayman set forth in this Agreement
or in any Exhibit or Schedule hereto, if specifically qualified by
materiality, shall be true and correct in all respects, and if not so
qualified, shall be true and correct in all material respects at and as of
the Closing Date as though then made and as though the Closing Date was
substituted for the date of this Agreement throughout such representations
and warranties;
(c) The Company, the Shareholders, the Optionholders and
H.I.G. Cayman shall have performed or complied with in all material respects
all of the covenants, conditions and agreements required to be performed or
complied with by them under this Agreement at or prior to the Closing;
(d) All of the consents from and notices to third parties
which are set forth on the attached SELLER CONSENTS SCHEDULE, shall have been
obtained in writings executed by such third parties in form and substance
reasonably satisfactory to Buyer;
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(e) The applicable waiting periods (including any extension
thereof by reason of a request for additional information), if any, under the
HSR Act shall have expired or been terminated, and all of the governmental
filings, consents, authorizations, approvals and waivers which are set forth
on the attached SELLER CONSENTS SCHEDULE, shall have been made and obtained
and shall be in full force and effect;
(f) No action or proceeding before any court or government
body shall be pending or, to the best knowledge of the Company, threatened
with a reasonable likelihood of success, as determined by Buyer in its
reasonable discretion, on the Closing Date wherein an unfavorable judgment,
decree or order would restrain, prohibit or prevent the performance of this
Agreement or the consummation of any of the transactions contemplated by this
Agreement, declare unlawful the transactions contemplated by this Agreement
or cause such transactions to be rescinded;
(g) The Shareholder Representative shall have executed and
delivered the Escrow Agreement on behalf of the Shareholders (other than
Vinyl), the Optionholders and H.I.G. Cayman;
(h) From December 31, 1998, there shall not have occurred
or became known any material adverse change, or any condition or event
(including any change in law) that could reasonably be expected to result in
a material adverse change, in the business, property, assets, liabilities
(contingent or otherwise), operations or condition (financial or otherwise)
of Vinyl or the Company and its Subsidiaries, as the case may be;
(i) Vinyl, the Company and the Shareholder Representative
(on behalf of the Shareholders, the Optionholders and H.I.G. Cayman) shall
have delivered to Buyer each of the following:
(A) a certificate of each of Vinyl, the
Company and the Shareholder Representative in the form set forth in
EXHIBIT C attached hereto, dated the Closing Date, stating that the
preconditions specified in subsections (b) through (h) hereof,
inclusive, have been satisfied;
(B) copies of the third party and governmental
consents required by subsections (d) and (e) above;
(C) all minute books, stock books, ledgers and
registers, corporate seals and other corporate records relating to the
organization, ownership and maintenance of Vinyl, the Company and the
Subsidiaries;
(D) a certificate of the Secretary of each of Vinyl,
the Company and H.I.G. Cayman relating to the incumbency and corporate
proceedings in connection with the execution, delivery and performance
of this Agreement and the
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consummation of the transactions contemplated by this Agreement, and
the absence of changes in Vinyl's, the Company's and its
Subsidiaries', and H.I.G. Cayman's Certificate of Incorporation and
By-laws, together with copies of the resolutions duly adopted by
Vinyl's, the Company's and H.I.G. Cayman's board of directors and
shareholders authorizing the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
by this Agreement;
(E) resignations effective as of the Closing Date from
such officers and directors of Vinyl, the Company or the Subsidiaries as
Buyer shall have requested in writing not less than ten (10) days prior
to the Closing Date in form and substance satisfactory to Buyer;
(F) (i) a copy of the Certificate of Incorporation and
all amendments thereto, of each of Vinyl, the Company and the
Subsidiaries, certified by the Secretary of State of the state of its
incorporation, as of a date not more than thirty (30) days prior to the
Closing Date, (ii) copies, certified by the Secretary of each of Vinyl,
the Company and the Subsidiaries, as of the Closing Date, of the By-laws
of Vinyl, the Company and the Subsidiaries, (iii) Certificates of Good
Standing from the Secretary of the state of its incorporation as of a
date not more than ten (10) days prior to the Closing Date, accompanied
by bring-down certificates dated as of the Closing Date, evidencing
Vinyl's, the Company's and the Subsidiaries' good standing in such
jurisdiction, and (iv) Certificates of Good Standing from the Secretary
of State of each state wherein Vinyl, the Company and the Subsidiaries
are duly qualified, as of a date not more than ten (10) days prior to
the Closing Date, accompanied by bring-down certificates dated as of the
Closing Date, evidencing Vinyl's, the Company's and the Subsidiaries'
good standing therein;
(G) an opinion from Xxxxxxxx & Xxxxx, legal counsel
for Vinyl and the Company, and an opinion from Xxxxxx and Calder, legal
counsel for H.I.G. Cayman, addressed to Buyer, dated the Closing Date,
and in the form of EXHIBIT D attached hereto;
(H) evidence that the release of all claims, pledges,
security interests, liens, charges and all other encumbrances of any
kind on the assets of Vinyl, the Company and the Subsidiaries will occur
immediately upon repayment of the Indebtedness set forth on the attached
INDEBTEDNESS SCHEDULE and all appropriate payoff letters setting forth
amounts to be paid to discharge fully the outstanding balance of the
Indebtedness set forth on the attached INDEBTEDNESS SCHEDULE;
(I) evidence reasonably satisfactory to Buyer of (i)
the elimination of any rights of first refusal to purchase the Company's
capital stock from the Shareholders and the Optionholders, or Vinyl's
capital stock from H.I.G. Cayman, and (ii) the termination of any
shareholders agreements, stock purchase
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agreements, option agreements, warrant agreements, registration rights
agreements, voting agreements or any other agreements relating to the
capital stock of Vinyl or the Company, and any amendments thereto, to
which Vinyl, the Company, any Shareholder, any Optionholder and/or
H.I.G. Cayman are a party, including, without limitation, those
agreements set forth on the attached TERMINATING AGREEMENTS SCHEDULE;
(J) a duly and properly executed certificate
from each Shareholder, each Optionholder and H.I.G. Cayman in the forms
attached as Exhibit E hereto establishing an exemption from withholding
under Treasury Regulation Section 1.1445-2 on the basis of the
transferor not being a foreign person or the Shares or the Options not
constituting a U.S. real property interest;
(K) all other instruments which are necessary or
desirable to effect the transactions contemplated by this Agreement; and
(L) upon the request of Buyer, estoppel
certificates with respect to the Leased Real Property set forth on the
SELLER CONSENTS SCHEDULE in form and substance reasonably satisfactory
to Buyer.
(j) The Closing Transactions set forth in Section 1.07(b)
shall have been completed;
(k) Buyer shall have obtained Form ALTA-B owner's policies
of title insurance issued to the Company and its Subsidiaries directly, or by
endorsement, effective on the date of the Closing, in respect of any real
property, whether owned or leased, acceptable to Buyer in its reasonable
discretion; provided that Buyer shall pay the premiums and costs relating
thereto; and
(l) Thermal's gross profit percentage for the four months
ended April 30, 1999, as determined in accordance with Thermal's past
practice and as determined from the financial statements to be delivered to
Buyer pursuant to the last sentence of Section 6.09, shall not be less than
37.5%; provided that the condition set forth in this Section 2.01(1) shall
not be a condition to Buyer's obligation to consummate the transactions
contemplated by this Agreement in the event that Buyer receives the financial
statements required to be delivered pursuant to the last sentence of Section
6.09 and does not terminate this Agreement pursuant to Section 8.01(c)(ii) on
or prior to the third business day following the delivery to Buyer of such
financial statements.
II.2 CONDITIONS TO THE SHAREHOLDERS', THE OPTIONHOLDERS' AND
H.I.G. CAYMAN'S OBLIGATIONS. The obligations of the Shareholders, the
Optionholders and H.I.G. Cayman to consummate the transactions contemplated
by this Agreement are subject to the satisfaction of the following conditions
as of or prior to the Closing Date:
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(a) The representations and warranties of Buyer set forth
in this Agreement, if specifically qualified by materiality, shall be true
and correct in all respects, and if not so qualified, shall be true and
correct in all material respects at and as of the Closing as though then made
and as though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties;
(b) Buyer shall have performed or complied with in all
material respects all the covenants, conditions and agreements required to be
performed or complied with by it under this Agreement at or prior to the
Closing;
(c) All of the consents from third parties which are set
forth on the attached BUYER CONSENTS SCHEDULE shall have been obtained in
writings executed by such third parties;
(d) The applicable waiting periods (including any extension
thereof by reason of a request for additional information), if any, under the
HSR Act shall have expired or been terminated, and all governmental filings,
consents, authorizations, approvals and waivers which items are set forth on
the attached BUYER CONSENTS SCHEDULE, shall have been made and obtained and
shall be in full force and effect;
(e) No action or proceeding before any court or government
body shall be pending or, to the best knowledge of Buyer, threatened with a
reasonable likelihood of success, as determined by the Shareholder
Representative in its reasonable discretion, on the Closing Date wherein an
unfavorable judgment, decree or order would prevent the performance of this
Agreement or the consummation of any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement or cause
such transactions to be rescinded;
(f) Buyer shall have executed and delivered the Escrow
Agreement;
(g) Buyer shall have delivered to the Shareholder
Representative (on behalf of the Shareholders, the Optionholders and H.I.G.
Cayman) certified copies of the resolutions duly adopted by Buyer's board of
directors authorizing the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement;
(h) Buyer shall have delivered to the Shareholder
Representative (on behalf of the Shareholders, the Optionholders and H.I.G.
Cayman) a certificate in the form set forth as EXHIBIT F attached hereto,
dated the Closing Date, stating that the preconditions specified in
subsections (a) through (f) hereof, inclusive, have been satisfied; and
(i) The Closing Transactions set forth in Section 1.07(b)
shall have been completed.
11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH
SHAREHOLDER, EACH OPTIONHOLDER AND H.I.G. CAYMAN
Each Shareholder and each Optionholder, with respect to
Sections 3.01, 3.02, 3.03 and 3.06 (on a several, and not joint and several
basis, subject to Section 9.02(d)), and H.I.G. Cayman, with respect to
Sections 3.04, 3.05, 3.06, 3.07 and 3.08, represents and warrants to Buyer as
follows:
III.1 AUTHORITY. Such Shareholder, such Optionholder or
H.I.G. Cayman, as the case may be, has all requisite power and authority and
full legal capacity to execute and deliver this Agreement and to consummate
and perform his or its obligations hereunder.
III.2 EXECUTION AND DELIVERY; VALID AND BINDING AGREEMENT;
OTHER MATTERS. This Agreement has been duly executed and delivered by such
Shareholder, such Optionholder or H.I.G. Cayman, as the case may be, and
constitutes the legal, valid and binding obligation of such Shareholder, such
Optionholder or H.I.G. Cayman, as the case may be, enforceable in accordance
with its terms. No permit, authorization, consent or approval of, or filing
with or notification to, any governmental, regulatory or administrative body
or any other third party is required in connection with the execution and
delivery of this Agreement by such Shareholder, such Optionholder or H.I.G.
Cayman.
III.3 OWNERSHIP OF CAPITAL STOCK OF THE COMPANY. Such
Shareholder or such Optionholder, as the case may be, is the lawful record
owner of the number of Shares or the Options, as applicable, set forth
opposite his or its name on the attached SHAREHOLDERS SCHEDULE or
OPTIONHOLDERS SCHEDULE, as the case may be, free and clear of all claims,
pledges, security interests, liens, charges, encumbrances, options, proxies,
voting trusts or agreements and other restrictions and limitations of any
kind, and such Shareholder or such Optionholder, as the case may be, has full
legal power and all authorization required by law to transfer and deliver the
Shares or the Options, as applicable, set forth on the attached SHAREHOLDERS
SCHEDULE or the OPTIONHOLDERS SCHEDULE, as the case may be, owned by such
Person in accordance with this Agreement. On the Closing Date, such
Shareholder will be the lawful record owner of the number of Shares set forth
opposite such Person's name on the attached SHAREHOLDERS SCHEDULE and such
Shareholder (other than Vinyl) shall validly convey and transfer to Buyer
good title to such Shares, and such Optionholder will be the lawful record
owner of the Options set forth opposite such Person's name on the attached
OPTIONHOLDERS SCHEDULE and shall validly convey and transfer to Buyer such
Options, in either case free and clear of all claims, pledges, security
interests, liens, charges, encumbrances, options, proxies, voting trusts or
agreements and other restrictions and limitations of any kind, other than
applicable federal and state securities law restrictions.
12
Such Shareholder or such Optionholder, as the case may be, does not and, on
the Closing Date, will not, own any capital stock or any options to acquire
capital stock of the Company except as set forth on the attached SHAREHOLDERS
SCHEDULE or OPTIONHOLDERS SCHEDULE. Except as set forth on the attached
CAPITAL STOCK SCHEDULE, such Shareholder and such Optionholder, as the case
may be, is not, and on the Closing Date, will not be, a party to or bound by
any contract which grants to any Person an option or right of first refusal
or other right of any character to acquire at any time, or upon the happening
of any stated events, shares of capital stock or other securities of the
Company whether or not presently issued and outstanding. Such Shareholder
and such Optionholder is not a "foreign person" within the meaning of Section
1445(f)(3) of the Code and Treasury Regulation Section 1.445-2(b)(2)(i).
There is no pending action or proceeding that has been commenced against such
Shareholder or such Optionholder that may have the effect of preventing,
delaying or making illegal the Closing Transactions and, to the best
knowledge of such Shareholder and such Optionholder, no such action or
proceeding has been threatened. Except as set forth on the attached
GOVERNMENTAL CONSENTS SCHEDULE and THIRD-PARTY CONSENTS SCHEDULE hereto,
neither the execution and delivery of this Agreement or any related
agreements by such Shareholder or such Optionholder nor the consummation by
such Shareholder or such Optionholder of the transactions provided for herein
or therein will conflict with, violate, or result in a breach of, default
under or the creation of any claims, pledges, security interests, liens,
charges, encumbrances, options, proxies, voting trusts or agreements and
other restrictions and limitations of any kind pursuant to any agreement to
which such Shareholder or such Optionholder, as the case may be, is a party
or by which he or it is bound or any law, order, judgment or decree or any
provision of the Certificate of Incorporation or By-Laws of the Company, or
any contract to which the Company, or such Shareholder or such Optionholder,
as the case may be, is a party.
III.4 OWNERSHIP OF VINYL SHARES. H.I.G. Cayman is the lawful
record owner of the Vinyl Shares, free and clear of all claims, pledges,
security interests, liens, charges, encumbrances, options, proxies, voting
trusts or agreements and other restrictions and limitations of any kind, and
H.I.G. Cayman has full legal power and all authorization required by law to
transfer and deliver the Vinyl Shares in accordance with this Agreement. On
the Closing Date, H.I.G. Cayman will be the lawful record owner of the Vinyl
Shares and shall validly convey and transfer to Buyer good title to the Vinyl
Shares, free and clear of all claims, pledges, security interests, liens,
charges, encumbrances, options, proxies, voting trusts or agreements and
other restrictions and limitations of any kind, other than applicable federal
and state securities law restrictions. There is no pending action or
proceeding that has been commenced against H.I.G. Cayman that may have the
effect of preventing, delaying or making illegal the Closing Transactions
and, to the best knowledge of H.I.G. Cayman, no such action or proceeding has
been threatened. Except as set forth on the attached GOVERNMENTAL CONSENTS
SCHEDULE and THIRD-PARTY CONSENTS SCHEDULE, neither the execution and
delivery of this Agreement or any related agreements by H.I.G. Cayman nor the
consummation by H.I.G. Cayman of the transactions provided for herein or
therein will conflict with, violate, or result in a breach of, default under
or the creation of any claims,
13
pledges, security interests, liens, charges, encumbrances, options, proxies,
voting trusts or agreements and other restrictions and limitations of any
kind pursuant to, any agreement to which Vinyl or H.I.G. Cayman is a party or
by which they are bound or any law, order, judgment or decree or any
provision of the Certificate of Incorporation or By-Laws of Vinyl or H.I.G.
Cayman, or any contract to which Vinyl or H.I.G. Cayman is a party.
III.5 CAPITALIZATION OF VINYL. The Vinyl Shares represent
one hundred percent (100%) of the issued and outstanding capital stock of
Vinyl. Neither H.I.G. Cayman nor Vinyl is, or on the Closing Date will be, a
party to or bound by any contract which grants to any Person an option or
right of first refusal or other right of any character to acquire at any
time, or upon the happening of any stated events, shares of capital stock or
other securities of Vinyl whether or not presently issued and outstanding.
III.6 BROKERAGE. Except for the fees and expenses of Xxxxxx
Xxxxxxxxx Xxxxxx & Co., which shall be paid directly by the Shareholders, the
Optionholders and H.I.G. Cayman, there are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of any Shareholder, any Optionholder or H.I.G.
Cayman.
III.7 VINYL. H.I.G. Cayman hereby represents and warrants to
Buyer that (i) Vinyl is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with full corporate
power and authority to enter into this Agreement and perform its obligations
hereunder; (ii) the execution, delivery and performance of this Agreement by
Vinyl and the consummation of the transactions contemplated by this Agreement
have been duly and validly authorized by all requisite corporate action, and
no other corporate proceedings on its part are necessary to authorize the
execution, delivery or performance of this Agreement; (iii) Vinyl is not
subject to or obligated under its Certificate of Incorporation, its By-laws,
any applicable law, or rule or regulation of any governmental authority, or
any material agreement or instrument, or any license, franchise or permit, or
subject to any order, writ, injunction or decree, which would be breached or
violated in any material respect by Vinyl's execution, delivery or
performance of this Agreement; (iv) its sole asset is and ever was the Shares
set forth opposite its name on the attached SHAREHOLDERS SCHEDULE; (v) since
its formation, the only activities Vinyl has conducted are to hold the Shares
and to enter into this Agreement and the transactions contemplated by this
Agreement; and (vi) Vinyl has no, and has never had, any obligations or
liabilities, whether arising in contract, tort or otherwise, of any type or
nature, whether xxxxxx, inchoate, accrued, contingent or fixed.
III.8 H.I.G. CAYMAN. H.I.G. Cayman hereby represents and
warrants as to itself to Buyer that (i) it is a corporation duly organized,
validly existing and in good standing under the laws of the Cayman Islands,
with full corporate power and authority to enter into this Agreement and
perform its obligations hereunder; (ii) the execution, delivery and
14
performance of this Agreement by H.I.G. Cayman and the consummation of the
transactions contemplated by this Agreement have been duly and validly
authorized by all requisite corporate action, and no other corporate
proceedings on its part are necessary to authorize the execution, delivery or
performance of this Agreement; (iii) it is not subject to or obligated under
its Certificate of Incorporation, its By-laws, any applicable law, or rule or
regulation of any governmental authority, or any material agreement or
instrument, or any license, franchise or permit, or subject to any order,
writ, injunction or decree, which would be breached or violated in any
material respect by H.I.G. Cayman's execution, delivery or performance of
this Agreement; (iv) its sole asset is and ever was the Vinyl Shares; and (v)
since its formation, the only activities H.I.G. Cayman has conducted are to
hold the Vinyl Shares and to enter into this Agreement and the transactions
contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer that:
IV.1 ORGANIZATION, STANDING AND CORPORATE POWER. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and the Company has all
requisite corporate power and authority and all authorizations, licenses and
permits necessary to own, lease and operate its properties and assets and to
carry on its businesses as now conducted, except where the failure to hold
such authorizations, licenses and permits would not have, individually or in
the aggregate, a material adverse effect upon the business, properties,
assets, liabilities, financial condition or operating results of the Company
and its Subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT"). The
Company is duly qualified to do business as a foreign corporation and is in
good standing in every jurisdiction in which its ownership of property or the
conduct of business as now conducted requires it to qualify, except where the
failure to be so qualified would not have a Material Adverse Effect, as set
forth on the attached ORGANIZATION SCHEDULE.
IV.2 SUBSIDIARIES. Except as set forth on the attached
SUBSIDIARY SCHEDULE, neither the Company nor any of its Subsidiaries owns, or
holds the right to acquire, any stock, partnership interest, joint venture
interest or other equity ownership interest in any other Person. Except as
set forth on the attached SUBSIDIARY SCHEDULE, each of the Subsidiaries
identified on the SUBSIDIARY SCHEDULE is validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority and all authorizations, licenses and
permits necessary to own, lease and operate its properties and assets and to
carry on its businesses as now conducted and is duly qualified to do business
as a foreign corporation and is in good standing in every jurisdiction in
which
15
its ownership of property or the conduct of businesses as now conducted
requires it to qualify, except in each such case where the failure to hold
such authorizations, licenses and permits or to be so qualified would not
have a Material Adverse Effect, as set forth on the attached ORGANIZATION
SCHEDULE. For purposes of this Agreement, the term "SUBSIDIARY" shall mean
each business entity in which the Company or one of the Company's
Subsidiaries has a 50% or greater equity interest.
IV.3 AUTHORIZATION; NO BREACH; VALID AND BINDING AGREEMENT.
Except as set forth on the attached AUTHORIZATION SCHEDULE, the execution,
delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action and no other corporate
proceedings are necessary to authorize the execution, delivery or performance
of this Agreement. Except as set forth on the attached AUTHORIZATION
SCHEDULE, the execution, delivery and performance of this Agreement by the
Company, the Shareholders and the Optionholders do not conflict with, violate
or result in any material breach of, constitute a material default under,
result in a material violation of, result in the creation of any material
lien, security interest, charge or encumbrance upon any material assets of
the Company or any of its Subsidiaries, or require any material
authorization, consent, approval, exemption or other action by or notice to
any court or other governmental body, or employee representative or union or
labor organization, or accelerate or otherwise alter the rights of any other
party, under the provisions of the Company's or any of its Subsidiary's
Certificate of Incorporation or By-laws or any material indenture, mortgage,
lease, loan agreement, collective bargaining agreement or other agreement or
instrument to which the Company or any of its Subsidiaries is bound, or any
law, statute, rule or regulation or order, judgment or decree to which the
Company or any of its Subsidiaries is subject. None of the foregoing items
shall be deemed to be "material" unless the failure to meet the requirements
thereof would, individually or in the aggregate, have a Material Adverse
Effect. This Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company,
enforceable against it in accordance with its terms.
IV.4 CAPITAL STOCK. (a) The authorized number of shares of
capital stock of the Company consists of 5,000,000 shares of Class A Stock
and 1,000,000 shares of Class B Stock. As of the date hereof, 1,312,500
shares of Class A Stock are issued and outstanding and are owned of record by
the Shareholders in the amounts as set forth on the attached SHAREHOLDERS
SCHEDULE and no shares of Class B Stock are issued and outstanding. As of
the date hereof, Options to acquire 108,805 shares of Class A Stock and
98,790 shares of Class B Stock are issued and outstanding and are owned of
record by the Optionholders in the amounts as set forth on the attached
OPTIONHOLDERS SCHEDULE. As of the Closing Date, 1,312,500 shares of Class A
Stock and Options to acquire 108,805 shares of Class A Stock and 98,790
shares of Class B Stock will be issued and outstanding and no shares of Class
A Stock and no shares of Class B Stock will be issued but not outstanding.
All of the outstanding shares of capital stock of the Company have been duly
authorized and are validly issued, fully paid and non-assessable. None of
such shares was issued in violation of any
16
preemptive or preferential right. As of the Closing Date, all of such shares
will be duly authorized and validly issued, fully paid and non-assessable and
will not have been issued in violation of any preemptive or preferential
right. Except as set forth on the attached CAPITAL STOCK SCHEDULE, the
Company does not have any other capital stock, equity securities or
securities containing any equity features authorized, issued or outstanding,
and there are no outstanding conversion or exchange rights, agreements,
subscriptions, options, warrants or other rights or arrangements existing or
outstanding which provide for the sale or issuance of any of the foregoing by
the Company. Except as set forth on the attached CAPITAL STOCK SCHEDULE,
there are no rights, subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise acquire any
shares of capital stock or other equity securities of the Company of any
kind. Except as set forth on the attached CAPITAL STOCK SCHEDULE, there are
no agreements or other obligations (contingent or otherwise) which require
the Company to repurchase or otherwise acquire any shares of the Company's
capital stock or other equity securities. Except as set forth on the
attached CAPITAL STOCK SCHEDULE, the Company is not and, on the Closing Date,
will not be, nor does the Company nor any Shareholder or Optionholder have
any knowledge that any holder of capital stock or holder of any right to
acquire capital stock of the Company is a party to or bound by any contract
which grants to any Person an option or right of first refusal or other right
of any character to acquire at any time, or upon the happening of any stated
events, shares of capital stock or other securities of the Company whether or
not presently issued or outstanding.
(b) One hundred percent (100%) of the common stock of each
of the Subsidiaries is owned, beneficially and of record, by the Company,
free and clear of all claims, pledges, security interests, liens, charges,
encumbrances, options, proxies, voting trusts or agreements, and other
restrictions and limitations of any kind other than those set forth on the
attached SUBSIDIARY SCHEDULE. Such common stock constitutes all of the
issued and outstanding capital stock of the Subsidiaries. All of the
outstanding shares of capital stock of each of the Subsidiaries have been
duly authorized and are validly issued, fully paid and non-assessable. None
of the Subsidiaries have any other capital stock, equity securities or
securities containing any equity features authorized, issued or outstanding,
and there are no outstanding conversion or exchange rights, agreements,
subscriptions, options, warrants or other rights or arrangements existing or
outstanding which provide for the sale or issuance of any of the foregoing by
any Subsidiary. There are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or
otherwise acquire any shares of capital stock or other equity securities of
any kind of any Subsidiary. There are no agreements or other obligations
(contingent or otherwise) which require any Subsidiary to repurchase or
otherwise acquire any shares of its capital stock or other equity securities.
Each of the Subsidiaries is not, and at the Closing will not be, a party to
or bound by any Contract which grants to any Person an option or right of
first refusal or other right of any character to acquire at any time, or upon
the happening of any stated events, shares of capital stock or other
securities of such Subsidiary whether or not presently issued or outstanding.
As of the Closing Date, all of the outstanding shares of capital stock in
each
17
Subsidiary will be duly authorized and validly issued, fully paid and
nonassessable and will not have been issued in violation of any preemptive or
preferential right.
IV.5 FINANCIAL STATEMENTS. (a) The Company has furnished
Buyer with copies of its unaudited (i) consolidated balance sheet as of
February 28, 1999, and the related consolidated statement of income and cash
flows for the two-month period then ended (such consolidated balance sheet
referred to herein as the "LATEST BALANCE SHEET") and (ii) audited
consolidated balance sheets and related consolidated statements of income and
cash flows for the fiscal years ended December 31, 1997 (from the date of
inception) and December 31, 1998. Except as set forth on the attached
FINANCIAL STATEMENTS SCHEDULE, such financial statements have been based upon
the information concerning the Company and its Subsidiaries contained in the
Company's books and records, and present fairly in all material respects the
financial condition and results of operations and cash flow of the Company
and its Subsidiaries as of the times and for the periods referred to therein
in accordance with GAAP applied on a consistent basis (subject, in the case
of the unaudited financial statements, to normal year-end audit adjustments
and absence of footnote disclosures). For purposes of this Agreement, such
Company's consolidated financial statements (the "FINANCIAL STATEMENTS")
shall be deemed to include any notes and schedules thereto which are included
as part of the attached FINANCIAL STATEMENTS SCHEDULE.
(b) The inventory of the Company consists of raw materials
and supplies, manufactured and purchased parts, work in process, and finished
goods, all of which is merchantable by the Company and fit for the purpose
for which it was procured or manufactured, subject only to the reserve for
inventory writedown set forth on the Latest Balance Sheet, as adjusted for
the passage of time through the Closing, in accordance with GAAP applied on a
consistent basis with that of the preceding fiscal year.
(c) All accounts receivable of the Company are reflected
properly on its books and records, are valid receivables subject to no
setoffs or counterclaims, are current and collectible, and will be collected
in accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the Latest Balance Sheet, as adjusted for
operations and transactions through the Closing, in accordance with GAAP
applied on a consistent basis with that of the preceding fiscal year.
IV.6 ABSENCE OF CERTAIN DEVELOPMENTS. Since December 31,
1998, there has not been any material adverse change in the business,
properties, assets, liabilities, employee representation, financial condition
or results of operations of the Company or any of its Subsidiaries. Except
as set forth on the attached DEVELOPMENTS SCHEDULE and except as expressly
contemplated by this Agreement, since December 31, 1998, neither the Company
nor any Subsidiary has:
(a) borrowed any amount or incurred or become subject to
any liabilities in excess of $100,000, except liabilities incurred in the
ordinary course of business, liabilities
18
under contracts entered into in the ordinary course of business and
borrowings from banks (or similar financial institutions) necessary to meet
ordinary course working capital requirements;
(b) mortgaged, pledged or subjected to any material lien,
charge or other encumbrance, any portion of its assets, except Permitted
Liens;
(c) sold, assigned or transferred any portion of its
tangible assets, except in the ordinary course of business;
(d) sold, assigned or transferred any patents, certificates
of plant variety protection, trademarks, trade names, copyrights, trade
secrets or other intangible assets, except in the ordinary course of business;
(e) suffered any damages or losses, whether covered by
insurance or not, having a Material Adverse Effect or waived any rights of
material value;
(f) issued, sold or transferred any of its capital stock or
other equity securities, securities convertible into its capital stock or
other equity securities or warrants, options or other rights to acquire its
capital stock or other equity securities, or any bonds or debt securities;
(g) made any unfunded or committed to make any unfunded
capital expenditures in excess of $375,000 in the first quarter of 1999,
$375,000 in the second quarter of 1999, $375,000 in the third quarter of 1999
and $375,000 in the fourth quarter of 1999, without the prior consent of
Buyer;
(h) entered into any other material transaction, except in
the ordinary course of business;
(i) made any declaration, setting aside or payment of any
dividend, or any distribution in respect of capital stock of the Company or
any of its Subsidiaries, or any redemption, purchase or other acquisition of
any capital stock of the Company or its Subsidiaries;
(j) made any increase in the compensation payable or to
become payable by the Company and its Subsidiaries to any of its respective
officers, directors, employees or agents, other than in the ordinary course
of business;
(k) made any change in the terms of any bonus, insurance,
pension or other benefit plan for or with any of the Company's or its
Subsidiaries' officers, directors or employees which increases amounts paid,
payable or to become payable thereunder, other than in the ordinary course of
business;
19
(l) entered into any employment or collective bargaining
agreement with any individual, representative, labor organization and/or
union;
(m) received any written complaints or concerns which
relate to the Company's or any of its Subsidiaries' labor relations;
(n) entered into any transaction with any Affiliate;
(o) made any change in its accounting procedures and
practices; or
(p) made any unreasonable changes from its past practice
with respect to its credit criteria or failed to make any appropriate changes
to its allowance for doubtful accounts in the event its credit criteria was
reasonably changed.
IV.7 TITLE TO PROPERTIES.
(a) The attached PERSONAL PROPERTY SCHEDULE contains a
correct and complete list as of the date set forth therein of each item of
tangible personal property owned or used by each of the Company and its
Subsidiaries, other than inventory, office furniture and supplies and
miscellaneous items of personal property with an individual book value of
less than $10,000. The Company and its Subsidiaries own good and marketable
title to all of the personal property and assets shown on the Latest Balance
Sheet, free and clear of all liens, security interests and other
encumbrances, except for Permitted Liens.
(b) The real property owned by the Company (the "OWNED REAL
PROPERTY") and the real property demised by the leases, subleases, licenses
and other instruments (the "LEASED REAL PROPERTY" described on the attached
REAL PROPERTY SCHEDULE constitutes all of the real property owned or leased
by the Company and its Subsidiaries. The Company and its Subsidiaries are
the sole and exclusive owners of, and have good and marketable title to the
Owned Real Property, free and clear of any mortgages, security interests,
liens, options, beneficial or possessory rights of third parties or other
encumbrances, except for Permitted Liens or as set forth on the attached REAL
PROPERTY SCHEDULE. The Leased Real Property leases, subleases, licenses and
other instruments are valid, subsisting, in full force and effect and binding
upon the parties thereto, and the Company or a Subsidiary holds a valid and
existing leasehold interest under each of the leases, subleases, licenses and
other agreements, except where the failure to have such leases, subleases,
licenses and other instruments valid, subsisting, in full force and effect
and binding, or to hold such a valid and existing leasehold interest would
not, individually or in the aggregate, have a Material Adverse Effect. The
Company has delivered to Buyer true, complete and accurate copies of each of
the leases, subleases, licenses and other instruments, including, without
limitation, surveys, title insurance policies and title insurance reports and
commitments described on the attached REAL PROPERTY SCHEDULE, and none of the
leases,
20
subleases, licenses and other instruments have been modified in any material
respect, except to the extent that such modifications are disclosed by the
copies delivered to Buyer. Neither the Company nor any Subsidiary is, and as
of the Closing Date will be, in default except as set forth on the attached
REAL PROPERTY SCHEDULE under any of such leases, subleases, licenses and
other instruments nor, to the best knowledge of the Company, is any other
party in default thereunder, and no facts or circumstances have occurred
which, with the giving of notice or the passage of time or both, would
constitute a default under any such leases, subleases, licenses or other
instruments. To the knowledge of the Company, title to the Owned Real
Property is insurable at standard premiums by reputable title insurance
companies licensed in the state where such Owned Real Property is located.
The title and interest of the Company and its Subsidiaries in the Owned Real
Property and the Leased Real Property is sufficient to enable the Company and
its Subsidiaries to carry on their respective businesses as presently
conducted. All plants, facilities, structures and equipment owned or used by
the Company and its Subsidiaries in its operation of their businesses are
suitable for the purposes used, are adequate and sufficient for all current
operations of such businesses and are, subject to ordinary wear and tear, in
good operating condition and repair. The attached REAL PROPERTY SCHEDULE
identifies each lease, sublease, license or any other instrument under which
the Company and its Subsidiaries claims or holds such leasehold or other
interest or right to the use thereof and with respect to the leases,
subleases, licenses and other instruments on the attached REAL PROPERTY
SCHEDULE, identifying which of those leases, subleases, licenses or other
instruments, if any, require that a consent be obtained (from any lessors,
guarantors or any other third parties) before the transactions contemplated
by this Agreement may be consummated and identifying in each instance the
party which is required to grant consent thereto, the location of the
premises and the amount of the monthly rent. All of the facilities set forth
on the attached REAL PROPERTY SCHEDULE had, and have, all permits or other
authorizations required for their construction and operation, and are
equipped in conformity with all laws and governmental regulations and
authorizations applicable to the Company and its Subsidiaries and to their
businesses, except where the failure to have such permits or other
authorizations or to be so equipped in conformity with all laws and
governmental regulations and authorizations would not, individually or in the
aggregate, have a Material Adverse Effect. All such permits are validly
issued, in good standing and in full force and effect, and will continue with
the Company or such Subsidiary as part of the transactions contemplated by
this Agreement with no further authorization or consent, except where the
failure of such permits to be validly issued, in good standing and in full
force and effect, or to continue with no further authorization or consent
would not, individually or in the aggregate, have a Material Adverse Effect.
IV.8 TAX MATTERS. (a)(i) The Company and its Subsidiaries
have timely filed all federal, foreign, state, county and local income,
excise, property and other Tax Returns which are required to be filed by or
with respect to them; (ii) all Taxes that are or were due (whether or not
shown or required to be shown as owing by the Company and its Subsidiaries on
any Tax Return) have been fully paid or, to the extent properly accruable as
of the date thereof, properly and adequately accrued on the Latest Balance
Sheet; (iii) all such
21
Tax Returns were prepared in accordance with all applicable laws and are
true, correct and complete in all material respects; (iv) the provision for
Taxes owed or to be owed by the Company and any Subsidiary on the Latest
Balance Sheet without regard to deferred Tax assets and liabilities is
sufficient for all properly accruable and unpaid Taxes as of the date
thereof; (v) all material Taxes which the Company or any Subsidiary is
obligated to withhold from amounts owing to any employee, creditor or third
party have been withheld and fully paid; (vi) there are no open, pending or,
to the best knowledge of the Company, threatened tax-related proceedings,
audits, examinations, investigations, assessments, asserted deficiencies,
requests for information, suits, actions or claims for additional Taxes with
respect to the Company or any Subsidiary; (vii) there are no unresolved
assertions of deficiencies or other liabilities for Taxes (including any
reports, statements, summaries and other communications or assertions or
claims of deficiencies) with respect to the Company or any Subsidiary; (viii)
there are no waivers or extensions of any applicable statute of limitations
for the assessment and collection of Taxes for which the Company or any
Subsidiary may be liable that are in effect and no requests for such waivers
are pending; (ix) neither the Company nor any Subsidiary is (A) a party to
any Federal or material non-Federal Tax ruling, request for ruling or closing
agreement (within the meaning of Section 7121 of the Internal Revenue Code of
1986, as amended (the "CODE")) with any Taxing authority or (B) required to
make any adjustments pursuant to Section 481(a) of the Code; (x) no
adjustments pursuant to Section 481(a) of the Code have been proposed by the
Internal Revenue Service (the "IRS") or requested by the Company or any
Subsidiary; and (xi) neither the Company nor any Subsidiary is a party to any
Tax sharing or allocation agreement other than an agreement to which only the
Company and any Subsidiary is a party, nor are they potentially required to
indemnify any person with respect to Taxes.
(b) The attached TAXES SCHEDULE lists all states,
territories and jurisdictions (whether foreign or domestic) in which the
Company and its Subsidiaries file Tax Returns. (i) No claim or inquiry in
writing addressed to the Company or any Subsidiary has been made by any
Taxing authority in a jurisdiction where the Company or any Subsidiary does
not file Tax Returns that the Company or any of its Subsidiaries is subject
to Tax in such jurisdiction; (ii) there are no liens for Taxes upon the
assets of the Company and any Subsidiary, except for liens for current taxes
not yet due and payable or for liens being contested in good faith by
appropriate proceedings and for which adequate reserves have been taken;
(iii) for each taxable period beginning on or after June 1, 1992, the Company
and its Subsidiaries (A) have not been members of an "affiliated group"
within the meaning of Section 1504(a)(1) of the Code, either together or
separately, other than the affiliated group of which the Company is the
common parent, nor (B) have they joined or been required to join in filing
any consolidated, combined, unitary or Federal, state or local Tax filings
other than filings including the Company and its Subsidiaries; and (iv) no
Tax Return of the Company or any Subsidiary for a taxable period since and
including 1992 has been examined or audited by the IRS or any state, local,
foreign or other taxing authority.
22
(c) With respect to the employees, including former
employees, of the Company and any Subsidiaries, the Company and such
Subsidiaries have complied with all applicable laws relating to the
withholding of Taxes and have timely collected or withheld and paid over (and
up to but not including the Closing Date, will have timely collected or
withheld and paid over) to the proper governmental authorities all amounts
required to be so collected or withheld and paid over for all periods up to
(but not including) the Closing Date under all applicable laws.
(d) Neither the Company nor any Subsidiary is a party to
any arrangement that is treated as a partnership for tax purposes.
(e) Since 1992, neither the Company nor any Subsidiary has
disposed of any property in a material transaction being accounted for under
the installment method pursuant to Section 453 or 453A of the Code. Neither
the Company nor any of its Subsidiaries has any deferred income reportable
for a period ending after the Closing Date but that is attributable to a
transaction (E.G., an installment sale) occurring in a period ending on or
prior to the Closing Date.
(f) No power of attorney has been granted by the Company or
any Subsidiary with respect to any matter relating to Taxes of the Company or
any Subsidiary which power of attorney is currently in force. Any such power
of attorney with respect to periods beginning on or after the Closing Date
will be revoked prior to the Closing.
(g) All Tax Returns that are filed or given after the date
hereof and before and including the Closing Date by the Company or any
Subsidiary shall be prepared, and all elections with respect to such Tax
Returns shall be made, to the extent permitted by law, in a manner consistent
with prior practices of the Company and its Subsidiaries.
(h) The Company and its Subsidiaries do not have pending
any tax certiorari proceeding or other proceeding seeking a material
reduction in assessment, abatement, credit or other adjustment to real
property, ad valorem taxes or assessments with respect to the Owned Real
Property or the Leased Real Property.
(i) No amount or other entitlement that could be received
(whether in cash or property or the vesting of property) as a result of any
of the transactions contemplated by this Agreement by any person could give
rise to, nor would the consummation of the transactions contemplated hereby
obligate the Company or any Subsidiary or Buyer to make, the payment of any
amount that would not be fully deductible by the Company or any Subsidiary by
reason of Section 280G of the Code.
(j) From the date hereof through the Closing Date, the
Company shall not, and shall not permit any of its Subsidiaries to (i) change
any practice with respect to Taxes or (ii) make, change or revoke any Tax
election.
23
(k) The Shares and the Options do not constitute a United
States real property interest (as defined in Section 897 of the Code).
(l) All Tax Returns of the Company or any Subsidiary that
have been made available to Buyer are complete, true and accurate copies of the
filed Tax Returns of the Company or the Subsidiary. All material filed Tax
Returns of the Company and all of its Subsidiaries for the years 1997 and later
have been made available to Buyer.
IV.9 CONTRACTS AND COMMITMENTS.
(a) Except as set forth on the attached CONTRACTS SCHEDULE,
neither the Company nor any Subsidiary is party to any: (i) collective
bargaining agreement or contract with any labor union; (ii) bonus, pension,
profit sharing, retirement or other form of deferred compensation plan, other
than as described in Section 4.13 or on the attached EMPLOYEE BENEFITS SCHEDULE;
(iii) stock purchase, stock option or similar plan; (iv) contract for the
employment or any contract relating to wages, hours or other conditions of
employment of any officer, individual employee or other person on a full-time,
part-time or consulting basis; (v) agreement or indenture relating to the
borrowing of money or a line of credit or to mortgaging, pledging or otherwise
placing a lien on any material portion of the Company's or any Subsidiary's
assets; (vi) guaranty of any obligation for borrowed money or other material
guaranty; (vii) lease or agreement under which it is a lessee or lessor of, or
holds or operates, or permits any third party to hold or operate, any personal
or real property for which the annual rental exceeds $50,000; (viii) license or
other contract with respect to Intellectual Property, including, without
limitation, the Intellectual Property rights and franchise agreements to which
the Company or any of its Subsidiaries is a party; (ix) contracts not entered
into in the ordinary course of business that involve expenditures or receipts in
excess of $50,000 to which the Company or any Subsidiary is a party; (x)
contracts for capital expenditures in excess of $50,000 to which the Company or
any of its Subsidiaries is a party; (xi) contracts relating to the acquisition
by the Company or any Subsidiary of the capital stock of any other Person or
granting the Company or any Subsidiary an option to purchase any asset, tangible
or intangible, or real or personal property of any other Person; (xii)
representative or sales agency contracts or commitments to which the Company or
any of its Subsidiaries is a party; (xiii) contract or group of related
contracts with the same party for the purchase by the Company or any of its
Subsidiaries of products or services under which the undelivered balance of such
products and services has a selling price in excess of $50,000; (xiv) contract
or group of related contracts with the same party for the sale by the Company or
any of its Subsidiaries of products or services under which the undelivered
balance of such products or services has a sales price in excess of $50,000;
(xv) contract or agreement with any Affiliate; (xvi) contracts restricting a
Person from competing with the Company or any of its Subsidiaries; (xvii)
contracts which prohibit or restrict in any manner the Company or any Subsidiary
from freely engaging in any line of business anywhere in the world; or (xviii)
other material contracts.
24
(b) Buyer either has been supplied with, or has been given
access to, a true and correct copy of all written contracts which are referred
to on the attached CONTRACTS SCHEDULE, together with all amendments, waivers or
other changes thereto.
(c) All contracts listed on the attached CONTRACTS SCHEDULE
are in full force and effect and constitute legal, valid and binding obligations
of the Company and/or its Subsidiaries, except where the failure of such
contracts to be in full force and effect and to constitute legal, valid and
binding obligations would not, individually or in the aggregate, have a Material
Adverse Effect. Neither the Company nor any Subsidiary nor, to the Company's
knowledge, any other party, is in default under any contract listed on the
attached CONTRACTS SCHEDULE, except where such default would not have a Material
Adverse Effect, and no event has occurred which, but for the passage of time or
the giving of notice, would constitute such a default.
IV.10 INTELLECTUAL PROPERTY. A true, complete and accurate list
and description of all of the patents, certificates of plant variety protection,
registered trademarks, registered service marks, registered copyrights, Internet
domain names, material unregistered trademarks, service marks, trade names,
corporate names, and applications for any of the foregoing, owned by, or
licensed to or from, the Company or its Subsidiaries, or in or to which the
Company or its Subsidiaries are claiming or have rights (collectively, the
"INTELLECTUAL PROPERTY") are set forth on the attached INTELLECTUAL PROPERTY
SCHEDULE. Except as set forth on the attached INTELLECTUAL PROPERTY SCHEDULE:
(i) each of the Company and its Subsidiaries, as the case may be, owns and
possesses exclusively all right, title and interest in and to, or, if it does
not own it, possesses the valid and enforceable right to use, free and clear of
all claims, charges, security interests, liens or other encumbrances, except
Permitted Liens, all of its intellectual property, including, without
limitation, the Intellectual Property; (ii) neither the Company nor any of its
Subsidiaries has infringed or is currently infringing on the intellectual
property, including, without limitation, patents, trademarks, service marks,
trade names, copyrights, trade secrets or other proprietary rights, of any other
Person, and neither the Company nor any of its Subsidiaries has received any
written notice alleging such infringement; (iii) the Company and its
Subsidiaries have taken all reasonable security measures to protect the secrecy,
confidentiality and value of all of their trade secrets; (iv) no other patent,
trademark, service xxxx, trade name, copyright or other intellectual property
right, or license under any thereof, is necessary to permit the businesses of
the Company and its Subsidiaries to be conducted as now conducted or as
heretofore or proposed to be conducted; (v) to the knowledge of the Company, no
Person has infringed or violated, or is currently infringing or violating, any
of the Company's or the Subsidiaries' intellectual property, including, without
limitation, the Intellectual Property; (vi) other than licenses set forth on the
INTELLECTUAL PROPERTY SCHEDULE, neither the Company nor its Subsidiaries are
obligated or under any liability whatsoever, under any contract, agreement,
arrangement or understanding (whether written or oral), to make any payments in
the aggregate in excess of $10,000 by way of royalties, fees or otherwise to any
owner or licensee of, or other claimant
25
to, any patent, trademark, service xxxx, trade name, copyright or other
intellectual property, with respect to the use of any intellectual property,
including, without limitation, the Intellectual Property, in connection with
the ownership of their respective assets, the conduct of their respective
businesses or otherwise; and (vii) all of the applications listed on the
attached INTELLECTUAL PROPERTY SCHEDULE have been filed and, to the best of
the Company's knowledge, have not been abandoned, and all of the patents and
registrations listed on the attached INTELLECTUAL PROPERTY SCHEDULE have not
expired or lapsed and, to the best of the Company's knowledge, have not been
cancelled or abandoned.
IV.11 LITIGATION AND LABOR MATTERS. (a) Except as set forth
on the attached LITIGATION SCHEDULE, there are no actions, suits or proceedings
pending or, to the best knowledge of the Company, threatened against the Company
or any Subsidiary, or any of their respective properties or business, 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, and neither the Company nor any Subsidiary is subject to any
outstanding judgment, order or decree of any court or governmental body.
(b) Neither the Company nor any Subsidiary has committed any
unfair labor practice under applicable Federal or state law, nor has the Company
or any Subsidiary received any notice of or claim that they have committed any
unfair labor practice under applicable Federal or state law. There are no
collective bargaining agreements to which the Company or any of its Subsidiaries
are bound. No collective bargaining unit has filed a petition for
representation of any of the employees of the Company or any Subsidiary and, to
the knowledge of the Company, no union organizing activity is occurring with
respect to any of the employees of the Company or any Subsidiary.
IV.12 GOVERNMENTAL CONSENTS, ETC. Except for the applicable
requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx
"XXX XXX"), and except as set forth on the attached GOVERNMENTAL CONSENTS
SCHEDULE, the Company, the Shareholders and the Optionholders are not required
to submit any notice, report or other filing with any governmental authority and
no permit, consent, approval or authorization of, or declaration to or filing
with, any governmental, regulatory or administrative authority or Person is
required in connection with any of the execution, delivery or performance of
this Agreement by the Company, the Shareholders and the Optionholders, or the
consummation by the Company, the Shareholders and the Optionholders of the
transactions contemplated by this Agreement.
IV.13 EMPLOYEES.
(a) Except as listed on the attached EMPLOYEE BENEFITS
SCHEDULE, with respect to employees of the Company or any of its Subsidiaries,
neither the Company nor any Subsidiary maintains or is obligated to contribute
to (i) any "employee pension benefit plans" (the "PENSION PLANS"), as such term
is defined in Section 3(2) of the Employee Retirement
26
Income Security Act of 1974 ("ERISA"), and (ii) any "employee welfare benefit
plans" (the "WELFARE PLANS"), as such term is defined in Section 3(1) of
ERISA. The Pension Plans, the non-ERISA covered plans, and the Welfare Plans
are collectively referred to as the "Plans." Except as set forth on the
attached EMPLOYEE BENEFITS SCHEDULE, each of the Pension Plans on the
attached EMPLOYEE BENEFITS SCHEDULE which the Company and its Subsidiaries
maintain or are obligated to contribute to that are intended to be "qualified
plans" has received a favorable determination letter from the IRS that such
Plan is a "qualified plan" under Section 401(a) of the Code, the related
trusts are exempt from tax under Section 501(a) of the Code, and the Company
is not aware of any facts or circumstances that would jeopardize the
qualification of such Pension Plans. The Plans comply in form and in
operation in all material respects with the requirements of the Code and
ERISA and any other applicable laws. The attached EMPLOYEE BENEFITS SCHEDULE
contains a list of each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance or termination pay, profit-sharing
plan, program, agreement or arrangement, and each other employee benefit
plan, program, agreement or arrangement (other than arrangements involving
the payment of wages), sponsored, maintained or contributed to or required to
be contributed to by the Company or any of its Subsidiaries for the benefit
of any current or former employee, director or independent contractor of the
Company or any Subsidiary. Other than the Company and its Subsidiaries,
there is no trade or business, whether or not incorporated, that together
with the Company would be deemed a "single employer" within the meaning of
Section 414(b), (c), or (m) of the Code. Except as set forth on the attached
EMPLOYEE BENEFITS SCHEDULE, neither the Company nor any Subsidiary has any
formal plan or commitment to create any additional Plan or modify or change
any existing Plan that would result in a significant increase in the cost of
such Plan to the Company or any Subsidiary. Neither the Company nor any
other trade or business that, together with the Company, would be deemed a
single employer within the meaning of Section 414(b), (c) or (m) of the Code
sponsors, contributes to, or is obligated to contribute to (or has sponsored,
contributed to, or been obligated to contribute to) any plan subject to
Section 302 of ERISA, Section 412 of the Code, or Title IV of ERISA, or any
plan that is a "multiemployer pension plan" as defined in Section 3(37) of
ERISA. Except for any Pension Plan, none of the benefits under any of the
Plans is funded through a trust.
(b) With respect to the Plans (other than any multiemployer
Pension Plans), (i) all required contributions have been made or properly
accrued, (ii) there are no actions, suits or claims pending or, to the knowledge
of the Company, threatened, other than routine claims for benefits, and (iii)
there have been no "prohibited transactions"(as that term is defined in Section
406 of ERISA or Section 4975 of the Code).
(c) With respect to each Plan, the Company has furnished or
made available to Buyer true and complete copies of (i) the most recent
determination letter received from the IRS regarding the Plans; (ii) the latest
Forms 5500 and the latest financial statements for the Plans; (iii) a copy of
each Plan (including all amendments thereto); (iv) a copy of the most recent
Summary Plan Description, together with each Summary of
27
Material Modifications, required under ERISA with respect to such Plan or as
otherwise provided to Plan participants or beneficiaries, and all material
employee communications relating to each Plan; (v) if the Plan is funded
through a trust or any third party funding vehicle, such as an insurance
contract, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof; (vi) all
contracts relating to the Plans with respect to which the Company or any
Subsidiary may have any liability, including, without limitation, insurance
contracts, investment management agreements, subscription and participation
agreements and record keeping agreements; and (vil) a copy of all material
documents and correspondence relating to the Plans received from or provided
to the Department of Labor ("DOL") and the IRS during the past year.
(d) Neither the Company, its Subsidiaries nor, to the
knowledge of the Company, any of their respective directors, officers, employees
or any other "fiduciary," as such term is defined in Section 3 of ERISA, has
committed any breach of fiduciary responsibility imposed by ERISA or any other
applicable law with respect to the Plans which would subject Buyer, its
subsidiaries or any of their respective directors, officers or employees to any
material liability under ERISA or any applicable law.
(e) Neither the Company nor its Subsidiaries has incurred any
liability for any tax or civil penalty imposed by Section 4975 of the Code or
Section 502 of ERISA.
(f) Except as described on the attached EMPLOYEE BENEFITS
SCHEDULE, no employee of the Company or any Subsidiary will be entitled to any
additional benefits or any acceleration of the time of payment or vesting of any
benefits under any Plan as a result of the transactions contemplated by this
Agreement.
(g) The Company and each Subsidiary has properly classified
individuals providing services to the Company or any Subsidiary as employees or
non-employees, except to the extent that a misclassification would not have a
Material Adverse Effect.
(h) No Plan provides benefits, including, without limitation,
death or medical benefits (whether or not insured), with respect to current or
former employees upon retirement or other termination of service (other than (i)
coverage mandated by applicable law, (ii) death benefits or retirement benefits
under a Pension Plan, (iii) deferred compensation benefits accrued as
liabilities on the books of the Company or any Subsidiary, or (iv) benefits the
full cost of which is borne by the current or former employee (or his
beneficiary)). The list of Plans on the attached EMPLOYEE BENEFITS SCHEDULE
discloses whether each Plan that is a Welfare Plan is insured. No Plan is
subject to laws of a country or jurisdiction other than the United States.
(i) All contributions or payments required to be made under
the terms of the Plans on or before Closing, or attributable to any period prior
to Closing, have been made or accrued for in the Financial Statements.
28
IV.14 INSURANCE. The attached INSURANCE SCHEDULE lists each
material insurance policy, including, without limitation, fire, liability,
environmental, workers' compensation, health, director and officer liability and
other forms of insurance maintained by the Company and its Subsidiaries. All of
such insurance policies are valid and in full force and effect, and neither the
Company nor any Subsidiary is in material default with respect to its
obligations under any of such insurance policies and all premiums with respect
to such insurance policies are currently paid. At no time was there a period in
which the Company and its Subsidiaries lacked such insurance coverage. Each of
the Company and its Subsidiaries shall continue to carry all such policies or
similar policies during the pendency of this Agreement, and all outstanding
claims under such policies are described in the attached INSURANCE SCHEDULE.
There is no recorded liability for retrospective insurance premium adjustments
for any period prior to the date hereof. The attached INSURANCE SCHEDULE sets
forth a complete and accurate list of the following:
(a) all comprehensive general liability and other policies of
insurance under which each of the Company and its Subsidiaries is or has been
insured at any time since July 1, 1997;
(b) all property and casualty policies of insurance under
which each of the Company and its Subsidiaries is presently insured;
(c) all obligations of each of the Company and its
Subsidiaries to provide insurance coverage to third parties (for example under
leases or other contracts) that will survive after the Closing; and
(d) the expiration date of each insurance policy under which
each of the Company and its Subsidiaries is currently insured.
IV.15 COMPLIANCE WITH LAWS. The Company and each Subsidiary is
in compliance with all applicable laws and regulations of foreign, federal,
state and local governments and all agencies thereof, except where the failure
to comply would not have a Material Adverse Effect. Neither the Company nor
any Subsidiary has received any notice of any violation or delinquency with
respect to any applicable law or regulation of any foreign, federal, state, or
local government or agency thereof, except where such notice would not,
individually or in the aggregate, have a Material Adverse Effect.
Notwithstanding anything in this Section 4.15 to the contrary, compliance with
Environmental Laws is covered by Section 4.16. All approvals, authorizations,
consents, licenses, permits or orders with respect to the business, operations
and properties of each of the Company and its Subsidiaries have been obtained
and are in full force and effect as of the date hereof, except where the failure
to obtain such approvals, authorizations, consents, licenses, permits or orders
or of such approvals, authorizations, consents, licenses, permits or orders to
be in full force and effect would not, individually or in the aggregate, have a
Material Adverse Effect.
29
Neither the ownership or use of the Company's or any Subsidiary's properties,
nor the conduct of their respective businesses, conflicts with the rights of
any other Person or violates, or with or without the giving of notice or the
passage of time, or both, will violate, conflict with or result in a breach,
default, right to accelerate or loss of rights under, or result in the
creation of any mortgages, liens, security interests or other encumbrance
pursuant to, any term or provision of the Certificate of Incorporation or
By-Laws of the Company or any Subsidiary, lease, permit, license, consent,
approval, insurance policy or any order, judgment, award or decree to which
the Company or its Subsidiaries is a party or by which the Company or its
Subsidiaries, their respective businesses or their respective properties and
assets may be bound or affected, except where such violation, conflict,
breach, default, right to accelerate, loss of rights or creation of a
mortgage, lien, security interest or other encumbrance would not,
individually or in the aggregate, have a Material Adverse Effect.
IV.16 ENVIRONMENTAL COMPLIANCE AND CONDITIONS. Except as set
forth on the attached ENVIRONMENTAL COMPLIANCE SCHEDULE or as is not likely to
give rise to a Material Adverse Effect:
(a) The Company and each of its Subsidiaries is not, and has
not been, in violation of nor has it received any notice of any violation with
respect to, any applicable Environmental Laws. The Company and each of its
Subsidiaries has obtained all permits, licenses or other authorizations required
under applicable Environmental Laws, and all such permits, licenses or other
authorizations are valid and in good standing.
(b) There is no Environmental Claim pending or, to the best
knowledge of the Company, threatened against the Company or any of its
Subsidiaries or relating to the business, the assets, the Owned Real Properties
or the Leased Real Properties of the Company and its Subsidiaries.
(c) There are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the Release, transportation, treatment, storage, recycling or reclamation of any
Hazardous Material, at any location (including, without limitation, any former
or discontinued facilities or operations), that could reasonably be expected to
form the basis of any colorable Environmental Claim against the Company or any
Subsidiary.
(d) The Company has not, and no other Person has, caused a
Release of any Hazardous Material at, on, under, from or otherwise affecting the
soil, surface water or groundwater at any Owned Real Property or Leased Real
Property so as to give rise to any remedial or corrective obligation arising
under Environmental Laws.
(e) There are no underground or above ground storage tanks
located at any Owned Real Property or Leased Real Property, and the Company has
not installed, owned or operated any underground or above ground storage tanks.
To the best knowledge
30
of the Company, the Company and each Subsidiary has provided Buyer a copy of
all material reports, closure reports, closure letters, correspondence or
other material documents in its possession related to the removal of any
tanks from any Owned Real Property or Leased Real Property.
(f) The Company and each Subsidiary has provided Buyer with
copies of all reports, assessments, audits, evaluations, or sampling results
relating to compliance with or violation or suspected violation by the Company
or any Subsidiary of Environmental Laws, or to liabilities of the Company or any
Subsidiary arising from the handling, storage, transportation or Release of any
Hazardous Material prepared by, for, or at the request of the Company or any
Subsidiary (i) since June 1, 1997 or (ii) to the best of the Company's
knowledge, prior to June 1, 1997, and in its possession.
(g) This Section 4.16 constitutes the sole and exclusive
representations and warranties of the Company or any Subsidiary with respect to
environmental matters.
IV.17 AFFILIATED TRANSACTIONS. Except as set forth on the
attached AFFILIATED TRANSACTIONS SCHEDULE, no officer, director, Shareholder or
Affiliate of the Company or, to the best knowledge of the Company, no individual
in such officer's, director's, shareholder's or Affiliate's immediate family is
a party to any agreement, contract, commitment or transaction with the Company
or its Subsidiaries or has any interest in any property used by the Company or
its Subsidiaries. Except as set forth on the attached AFFILIATED TRANSACTIONS
SCHEDULE, to the Company's knowledge, no employee of the Company or any
individual in such employee's immediate family is a party to any material
agreement, contract, commitment or transaction with the Company or its
Subsidiaries or has any material interest in any material property used by the
Company or its Subsidiaries.
IV.18 BROKERAGE. Except for the fees and expenses of Xxxxxx
Xxxxxxxxx Xxxxxx & Co. (which shall be paid by the Shareholders, the
Optionholders and H.I.G. Cayman), there are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Company.
IV.19 BANK ACCOUNTS. The attached BANK ACCOUNTS SCHEDULE lists
the name and location of all of the bank accounts, safe deposit boxes, custody
agreements and lock boxes used by the Company and its Subsidiaries (and the
names of the Persons authorized to draw thereon or to withdraw therefrom).
Neither the Company nor any Subsidiary has granted a power of attorney to any
person or entity which has not been terminated.
IV.20 UNDISCLOSED LIABILITIES. The Company and its
Subsidiaries do not have any obligations or liabilities, whether accrued,
absolute, contingent or otherwise, including, without limitation, any obligation
or liability with respect to any Taxes due or to become due arising out of
transactions entered into at or prior to the Closing, or any action
31
or inaction at or prior to the Closing, or any state of facts existing at or
prior to the Closing which would be required by GAAP to be set forth on the
Company's balance sheet other than: (i) liabilities set forth on the Latest
Balance Sheet, (ii) liabilities and obligations which have arisen after the
date of the Latest Balance Sheet consistently with past business practice in
the ordinary course of business, and (iii) other liabilities and obligations
expressly disclosed on the attached LIABILITIES SCHEDULE.
IV.21 CHANGE OF CONTROL PROVISIONS. Except as set forth on the
attached AUTHORIZATION SCHEDULE, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated by this
Agreement will require the Company or any of the Subsidiaries to make any
payment to any Person.
IV.22 DISCLOSURE. The Company has made available for
inspection by Buyer and its representatives complete and correct copies of the
corporate minute books of the Company and its Subsidiaries. Such minute books
contain the minutes of all meetings of stockholders, the board of directors and
any committees thereof of the Company and its Subsidiaries that have been held
prior to the date hereof and all written consents to action executed in lieu
thereof.
IV.23 YEAR 2000. The Company and its Subsidiaries have
formulated a plan in order to address the ability of their information systems
to process date and time data from, into and beyond the year 2000 ("Year 2000
Data"), and the ability of such systems to interact with third parties' systems
and with and through electrical power, telecommunications and other utilities
and services. The Company and its Subsidiaries are not aware of any facts or
circumstances which are specific to the Company or its Subsidiaries that would
indicate that if the scheduled replacements, updates or upgrades are made in
accordance with such plans, the information systems material to the operations
of the Company and its Subsidiaries will be unable to accurately process Year
2000 Data as of and after December 31, 1999, but the Company is aware of general
publications which indicate that any plans to conform systems to adequately
process Year 2000 Data may not work.
IV.24 CUSTOMERS. The Company and its Subsidiaries maintain and
have good relationships with the top three (3) customers of Best Built, Inc. and
neither the Company nor any of its Subsidiaries has received written notice of a
material deterioration of any such relationships. Neither the Company nor any
of its Subsidiaries has received written notice that it is in breach of any
representation, warranty, covenant, obligation or other provision of any
outstanding agreement with any such customer.
IV.25 RELATIONSHIP WITH GENERAL ELECTRIC COMPANY. Neither the
Company, nor any Shareholder or Optionholder holding at least five percent (5%)
of the equity of the Company has any equity, creditor or similar relationship,
including, without limitation, any investment in, or any debtor, revolving
credit, leasing or creditor relationship, but excluding any vendor or vendee
relationship, with General Electric Company or any entity known by
32
the Company, such Shareholders or such Optionholders to be a Subsidiary of
General Electric Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company, the Shareholders,
the Optionholders and H.I.G. Cayman that:
V.1 ORGANIZATION AND CORPORATE POWER. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and authority to enter into this
Agreement and perform its obligations hereunder.
V.2 AUTHORIZATION; VALID AND BINDING AGREEMENT. The
execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action, and no other corporate proceedings
on its part are necessary to authorize the execution, delivery or performance of
this Agreement. This Agreement constitutes a valid and binding obligation of
Buyer, enforceable in accordance with its terms.
V.3 NO BREACH. Except as set forth on the attached BUYER
CONSENTS SCHEDULE, Buyer is not subject to or obligated under its Certificate of
Incorporation, its By-laws, any applicable law, or rule or regulation of any
governmental authority, or any material agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction or decree, which
would be breached or violated in any material respect by Buyer's execution,
delivery or performance of this Agreement.
V.4 GOVERNMENTAL CONSENTS, ETC. Except for the applicable
requirements of the HSR Act, Buyer is not required to submit any notice, report
or other filing with any governmental authority in connection with any of the
execution, delivery or performance of this Agreement by Buyer, or the
consummation by Buyer, of the transactions contemplated by this Agreement.
Except as set forth on the attached BUYER CONSENTS SCHEDULE, no consent,
approval or authorization of any governmental or regulatory authority or any
other party or Person is required to be obtained by Buyer in connection with its
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
V.5 LITIGATION. There are no actions, suits or proceedings
pending or, to Buyer's knowledge, threatened against Buyer, 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, which
would adversely affect Buyer's performance
33
under this Agreement or the consummation of the transactions contemplated by
this Agreement.
V.6 BROKERAGE. There are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Buyer.
V.7 INVESTMENT REPRESENTATION. Buyer is purchasing the
Shares and the Vinyl Shares for its own account for investment purposes and not
with a view to or for sale in connection with any public distribution of such
securities, except in compliance with applicable federal or state securities
laws.
V.8 FINANCING. To the extent Buyer has obtained the debt
financing described in the Financing Letter, Buyer has, and shall have at the
Closing, sufficient cash and available credit facilities (and has provided
evidence thereof satisfactory to the Shareholder Representative), to pay the
full consideration payable to the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman hereunder, to make all other necessary payments
by it in connection with the purchase of the Shares, the Vinyl Shares and the
Options and to pay all of its related fees and expenses.
ARTICLE VI
COVENANTS OF THE COMPANY,
THE SHAREHOLDERS, THE OPTIONHOLDERS AND H.I.G. CAYMAN
VI.1 CONDUCT OF THE BUSINESS. The Company, Vinyl and H.I.G.
Cayman covenant and agree with respect to Vinyl and the Company and its
Subsidiaries, pending the Closing and except as otherwise approved in writing by
the Buyer, that, from the date hereof until the Closing Date:
(a Each of the Company and its Subsidiaries shall carry on
its business according to its ordinary and usual course of business and
substantially in the same manner as heretofore conducted, and to maintain its
records and books of account in a manner consistent with prior periods; PROVIDED
that, the foregoing notwithstanding, the Company may use all available cash to
repay any Indebtedness prior to the Closing. The Company and its Subsidiaries
shall refrain from making unfunded or committing to make unfunded capital
expenditures in excess of $375,000 in the first quarter of 1999, $375,000 in the
second quarter of 1999, $375,000 in the third quarter of 1999 and $375,000 in
the fourth quarter of 1999. The Company and its Subsidiaries shall make the
capital expenditures in accordance with the 1999 annual budget that was
presented in the Company's Confidential Information Memorandum, dated November
1998. The Company and its Subsidiaries shall refrain from entering into any
transactions involving the disposal of any properties or assets (other than
inventory in the ordinary course), with a value of more than $25,000,
individually, or $75,000, in the aggregate.
34
(b Except as otherwise provided for by this Agreement or
consented to in writing by Buyer, neither Vinyl nor the Company shall, and the
Company shall not permit any Subsidiary to, (i) issue, sell or deliver any
shares of its or any Subsidiary's capital stock or other securities, or issue or
sell any securities convertible into, or options with respect to, or warrants to
purchase or rights to subscribe for, any shares of its or any Subsidiary's
capital stock or other securities; (ii) effect any recapitalization,
reclassification, stock dividend, stock split or like change in its or any
Subsidiary's capitalization; (iii) amend its or any Subsidiary's Certificate of
Incorporation (or other charter documents) or By-laws; or (iv) make any
redemption or purchase of any shares of its or any Subsidiary's capital stock or
declare, pay, set aside or make, or cause any Subsidiary to declare, pay, set
aside or make, any dividends or distribution or payment in respect of its or any
Subsidiary's capital stock or other securities.
(c Neither the Company nor any Subsidiary shall make any
change in its accounting procedures or any unreasonable changes from its past
practice with respect to its credit criteria from those in existence at December
31, 1998, except as required due to changes in GAAP. The Company shall promptly
notify Buyer of any such changes required due to changes in GAAP. The Company
and its Subsidiaries shall make any appropriate changes to their respective
allowances for doubtful accounts in the event its credit criteria is reasonably
changed.
(d No claims, pledges, security interests, liens, charges or
any other encumbrance on any of the properties or assets of the Company or its
Subsidiaries shall be made other than in the ordinary course of business
consistent with past practice.
(e Each of the Company and its Subsidiaries shall refrain
from acquiring or agreeing to acquire, or disposing or agreeing to dispose of,
real estate, from entering into, or agreeing to enter into, leases of real
estate or equipment, and from creating any modification, amendment or
termination of the leases for the Leased Real Properties.
(f Vinyl and the Company shall promptly advise Buyer in
writing of the commencement or threat against Vinyl or the Company or its
Subsidiaries of (i) any written claim, litigation or proceeding when the amount
claimed is, in any individual claim, litigation or proceeding, in excess of
$20,000 or, in the aggregate, $75,000 and (ii) any Tax audit.
(g The Company shall use its reasonable best efforts to
preserve its, and to preserve its Subsidiaries' business, organization,
intellectual property and relationships with their respective vendors, customers
and suppliers and others having business relations with it.
(h Neither the Company nor any Subsidiary shall (a) make any
loans or advances to, or assume, guarantee or otherwise become liable for any
indebtedness or other
35
obligations of any stockholder, director, officer, employee or agent of the
Company or its Subsidiaries, except that the Company shall be permitted to
make loans and advance expenses to employees in an amount less than $2,500
per employee and, in the aggregate, less than $50,000; or (b) incur any
indebtedness other than in the ordinary course of business consistent with
past practice.
(i Neither the Company nor any Subsidiary shall make, amend
or enter into any employment contract or arrangement, adopt any new Plan or
amend any existing Plan (except as required by applicable law) or materially
increase salaries or other compensation.
(j Neither the Company nor any Subsidiary shall enter into
any transaction with any Affiliate, except the transactions that are set forth
on the attached AFFILIATED TRANSACTIONS SCHEDULE.
(k Vinyl shall not acquire or hold any other asset other
than the Shares set forth opposite its name on the attached SHAREHOLDERS
SCHEDULE, nor shall it conduct any activities other than the holding of such
Shares and the entering into of this Agreement and the transactions contemplated
by this Agreement, nor shall it incur any obligations or liabilities, whether
arising in contract, tort or otherwise, of any type or nature, whether xxxxxx,
inchoate, accrued contingent or fixed.
VI.2 ACCESS TO BOOKS AND RECORDS. From the date hereof until
the Closing Date, Vinyl and the Company shall provide Buyer and its authorized
representatives ("BUYER'S REPRESENTATIVES") with full access at all reasonable
times, and upon reasonable advance notice, to the offices, properties,
personnel, books and records, and evidence of title to any real property, of
Vinyl and the Company and its Subsidiaries in order for Buyer to have the
opportunity to make such investigation as it shall reasonably desire to make of
the affairs of Vinyl and the Company and its Subsidiaries, provided that such
access does not unreasonably interfere with the normal operations of Vinyl or
the Company or the Subsidiaries. The Company, the Shareholders, the
Optionholders and H.I.G. Cayman will, upon request, furnish Buyer with any
information reasonably required with respect to Vinyl's and the Company's and
its Subsidiaries' respective properties, assets and businesses and will provide
Buyer with copies of any contract, document or instrument listed on any Schedule
hereto. Buyer acknowledges that it remains bound by the Confidentiality
Agreement, dated November 23, 1998, with the Company (the "CONFIDENTIALITY
AGREEMENT"); provided, however, that upon the consummation of the transactions
contemplated hereby, the Confidentiality Agreement shall terminate.
VI.3 REGULATORY FILINGS. The Company shall make or cause to
be made all filings, which filing fees shall be paid by Buyer, and submissions
under the HSR Act and any other material laws or regulations applicable to Vinyl
and the Company and its Subsidiaries for the consummation of the transactions
contemplated by this Agreement. The initial filing
36
under the HSR Act shall be made by the Company within five (5) business days
of the signing of this Agreement and the Company shall make an early
termination request at such time. Vinyl and the Company shall coordinate and
cooperate with Buyer in exchanging such information and assistance as Buyer
may reasonably request in connection with all of the foregoing.
VI.4 Conditions. The Company, the Shareholders, the
Optionholders and H.I.G. Cayman shall use reasonable best efforts to cause the
conditions set forth in Section 2.01 to be satisfied and to consummate the
transactions contemplated by this Agreement; provided that neither the Company,
any Subsidiary, any Shareholder, any Optionholder nor H.I.G. Cayman shall be
required to expend any funds to obtain any third-party or governmental consents
required under Section 2.01(d) or (e).
VI.5 EXCLUSIVE DEALING. During the period from the date of
this Agreement through the Closing or the earlier termination of this Agreement
pursuant to Section 8.01, each Shareholder, each Optionholder and H.I.G. Cayman
shall not take, or permit any other Person on its behalf to take, and neither
Vinyl nor the Company shall take, any action to solicit, encourage, initiate or
engage in discussions or negotiations with, or provide any information to, any
Person (other than Buyer and its representatives) concerning any purchase, sale,
liquidation, recapitalization, restructuring, merger or other disposition of
Vinyl or the Company or any of its Subsidiaries, or of any securities of Vinyl,
the Company or any Subsidiary, including, without limitation, the Shares, the
Vinyl Shares, and the Options, or all or any substantial portion of the assets
of Vinyl or the Company or any of its Subsidiaries or similar transaction
involving Vinyl or the Company. If Vinyl, the Company, any of the Shareholders,
any of the Optionholders or H.I.G. Cayman, or any of their respective
representatives, receives any offers or receives any communications from any new
or existing offerees, it or they will (a) remain silent or advise the offeror
that neither Vinyl, the Company, the Shareholders, the Optionholders nor H.I.G.
Cayman are in a position to negotiate or accept any offers at that time, and (b)
notify Buyer of any such communication.
VI.6 NOTIFICATION. From the date hereof until the Closing
Date, the Company, the Shareholders, the Optionholders and H.I.G. Cayman shall
promptly disclose to Buyer in writing any material variances from the
representations and warranties contained in this Agreement, including the
Schedules hereto, or any other material development concerning Vinyl or the
Company or any of its Subsidiaries. The Shareholders, the Optionholders and
H.I.G. Cayman shall promptly inform Buyer in writing if they obtain knowledge
that the representations and warranties of the Company, the Shareholders, the
Optionholders or H.I.G. Cayman in this Agreement, including the Schedules
hereto, are not true and correct in all respects or if there are any material
errors in, or omissions therefrom, or that there are material developments
concerning Vinyl or the Company or any of its Subsidiaries. No disclosure or
notice given pursuant to this Section 6.06 shall affect Buyer's right to
terminate this Agreement pursuant to Article VIII. To the extent necessary, and
only due to events (other than the discovery of an error) occurring after the
date hereof, such
37
disclosures shall amend and supplement the appropriate Schedules attached
hereto in the form of "UPDATED SCHEDULES" delivered to Buyer, except for
purposes of Section 2.01(b) hereof.
VI.7 CONSENTS. Vinyl and the Company shall use their
reasonable best efforts to obtain any third-party consents, authorizations,
approvals and waivers which are necessary to permit the consummation of the
transactions contemplated by this Agreement and the operation of the businesses
of Vinyl and the Company and its Subsidiaries that are not set forth on the
attached THIRD-PARTY CONSENTS SCHEDULE.
VI.8 BROKERAGE. The Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman shall severally, and not jointly (subject to
Section 9.02(d)), indemnify and hold Buyer harmless against any and all claims,
losses, liabilities or expenses which may be asserted against them as a result
of their dealings, arrangements or agreements with Xxxxxx Xxxxxxxxx Xxxxxx & Co.
VI.9 INTERIM FINANCIAL STATEMENTS. Within thirty (30) days
after the end of each calendar month until the Closing, the Company shall
deliver to Buyer copies of unaudited consolidated balance sheets of the Company
and its Subsidiaries as of the end of each month subsequent to the date hereof
and prior to the Closing Date and the related statements of income and cash
flows for each month then ended, which will present fairly in all material
respects the financial condition and results of operations and cash flow of the
Company and its Subsidiaries. For the purposes of this Agreement, the term
"FINANCIAL STATEMENTS" shall be deemed to include any such balance sheets and
statements delivered by the Company pursuant to this Section 6.09. Thermal
shall deliver to Buyer, on or prior to May 15, 1999, copies of Thermal's
consolidated statement of income for the four-month period ended April 30, 1999,
which will present fairly in all material respects the results of operations of
Thermal prepared in accordance with GAAP consistent with past practice.
VI.10 INTELLECTUAL PROPERTY MATTERS. Within twenty (20) days
after the execution of this Agreement, the Company shall file or cause to be
filed with the PTO all documentation necessary to completely and validly correct
the PTO records to reflect that (i) with respect to trademarks, the grant from
Heat Acquisition II, Inc. to Nationscredit Commercial Corporation (which was
recorded with the PTO) is a grant of a security interest and not "an assignment
of part of assignor interest," (ii) the applicant, Thermal, in Serial No.
75/328,843 ("DECK-IN-A-DAY"), Serial No. 75/328,371 ("SNAP-TRACK") and all other
applications previously filed or to be filed prior to the Closing Date by
Thermal, is a Delaware corporation and not a Pennsylvania corporation, and (iii)
with respect to patents, the merger that was recorded with the PTO was of
Thermal with and into Heat Acquisition II, Inc. and not Heat Acquisitino II,
Inc.
VI.11 NO TRANSFERS. The Shareholders, the Optionholders and
H.I.G. Cayman shall not sell or transfer any of their respective Shares, Vinyl
Shares or Options.
38
ARTICLE VII
COVENANTS OF BUYER
VII.1 ACCESS TO BOOKS AND RECORDS. From and after the Closing,
Buyer shall, and shall cause Vinyl and the Company to, provide the Shareholder
Representative (on behalf of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman), and its agents with reasonable access (for the
purpose of examining and copying), during normal business hours, and upon
reasonable advance notice, to the books and records of Vinyl and the Company and
its Subsidiaries with respect to periods prior to the Closing Date in connection
with any matter relating to Taxes, governmental inquiries or litigation, whether
or not relating to or arising out of this Agreement or the transactions
contemplated by this Agreement, provided that such access does not unreasonably
interfere with the normal operations of Buyer, Vinyl, the Company or its
Subsidiaries. Unless otherwise consented to in writing by the Shareholder
Representative, neither Vinyl nor the Company shall, for a period of five (5)
years following the Closing Date, destroy, alter or otherwise dispose of any of
the books and records of Vinyl or the Company for the period prior to the
Closing Date without first offering to surrender to the Shareholder
Representative such books and records or any portion thereof which Buyer, Vinyl
or the Company may intend to destroy, alter or dispose of.
VII.2 NOTIFICATION. Prior to the Closing, upon discovery,
Buyer shall promptly inform the Company and the Shareholder Representative (on
behalf of the Shareholders, the Optionholders and H.I.G. Cayman) in writing of
any material variances from Buyer's representations and warranties contained in
Article V.
VII.3 DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION. For
a period of five (5) years after the Closing, Buyer shall not, and shall not
permit the Company or any of its Subsidiaries to, amend, repeal or modify any
provision in the Company's or any of its Subsidiaries' Certificate of
Incorporation or By-laws relating to the exculpation or indemnification of any
officers and directors (unless required by law), it being the intent of the
parties that the officers and directors of the Company and its Subsidiaries who
existed as officers and directors of the Company or its Subsidiaries prior to
the Closing shall continue to be entitled to such exculpation and
indemnification to the full extent as they receive under those documents prior
to the Closing.
VII.4 REGULATORY FILINGS. Buyer shall make or cause to be made
all filings and submissions under the HSR Act and any other laws or regulations
applicable to Buyer as may be required of Buyer for the consummation of the
transactions contemplated by this Agreement. The initial filing under the HSR
Act shall be made by Buyer within five (5) business days of the signing of this
Agreement and Buyer shall make an early termination
39
request at such time. Buyer shall coordinate and cooperate with Vinyl and
the Company in exchanging such information and assistance as Vinyl and the
Company may reasonably request in connection with all of the foregoing.
VII.5 CONDITIONS. Buyer shall use reasonable efforts to cause
the conditions set forth in Section 2.02 to be satisfied and to consummate the
transactions contemplated by this Agreement; provided that Buyer shall not be
required to expend any funds to obtain any third-party or governmental consents
required under Section 2.02(c) and Section 2.02(d).
VII.6 CONTACT WITH CUSTOMERS AND SUPPLIERS. Prior to the
Closing, Buyer and Buyer's Representatives shall contact and communicate with
the employees (subject to Section 6.02 of this Agreement), customers and
suppliers of the Company and its Subsidiaries in connection with the
transactions contemplated by this Agreement only with the prior written consent
of the Company or the Shareholder Representative (on behalf of the Shareholders
and the Optionholders). Notwithstanding the foregoing, Buyer and Buyer's
Representatives may contact and communicate with Xxxxx Xxxxxx, Xxxx Xxxxxxxxxx
and Xxxx Xxxxxxxx without prior written consent of the Company or the
Shareholder Representative.
VII.7 BONUSES. After the one (1) year anniversary of the
Closing Date, to the extent that the actual aggregate cash amount of the Bonuses
awarded is less than $32,500, Buyer shall refund the difference to the
Shareholder Representative (on behalf of the Shareholders (other than Vinyl),
the Optionholders and H.I.G. Cayman).
ARTICLE VIII
TERMINATION
VIII.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(a by the mutual written consent of Buyer, and the
Shareholder Representative (on behalf of the Shareholders, the Optionholders and
H.I.G. Cayman);
(b by Buyer, if Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated refuses or is not able to provide or arrange for financing to Buyer
or any of its affiliates based on any of the circumstances described in clause
(ii) of the fifth paragraph (the "Market Disruption Condition") of the Financing
Letter;
(c by Buyer, if (i) the condition set forth in Section
2.01(h) is not satisfied, or (ii) the condition set forth in Section 2.01(1) is
not satisfied; provided that, in the case of this clause (ii) only, Buyer
exercises its rights under this clause (ii) on or prior to
40
the third business day following the delivery to Buyer of the financial
statements required to be delivered pursuant to the last sentence of Section
6.09;
(d by Buyer, if (i) the Shareholders and the Optionholders
fail to deliver at least ninety-nine percent (99%) of the capital stock of the
Company on a fully diluted basis, or (ii) H.I.G. Cayman fails to deliver one
hundred percent (100%) of the Vinyl Shares;
(e by Buyer, if there has been a material violation or
breach by the Company, the Shareholders, the Optionholders or H.I.G. Cayman of
any covenant, representation or warranty contained in this Agreement and such
violation or breach has not been waived by Buyer or, in the case of a covenant
breach, cured by the Company, the Shareholders, the Optionholders or H.I.G.
Cayman within ten (10) days after written notice thereof from Buyer.
(f by the Shareholder Representative (on behalf of the
Shareholders, the Optionholders and H.I.G. Cayman), if there has been a material
violation or breach by Buyer of any covenant, representation or warranty
contained in this Agreement and such violation or breach has not been waived by
the Shareholder Representative or, with respect to a covenant breach, cured by
Buyer within ten (10) days after written notice thereof by the Shareholder
Representative (provided that the failure by Buyer to comply with Section
1.07(b)(i) shall not be subject to cure hereunder unless otherwise agreed to in
writing by the Shareholder Representative); or
(g by either Buyer or the Shareholder Representative (on
behalf of the Shareholders, the Optionholders and H.I.G. Cayman) if the
transactions contemplated by this Agreement have not been consummated (other
than through the failure of any party seeking to terminate this Agreement to
comply in all material respects with its obligations under this Agreement) by
June 15, 1999 (the "TRANSACTION DEADLINE DATE"), or such later date as the
parties may agree in writing; provided that neither Buyer nor the Shareholder
Representative shall be entitled to terminate this Agreement pursuant to this
Section 8.01(g) if such Person's (or the Company's, any Shareholder's, any
Optionholder's or H.I.G. Cayman's, in the case of the Shareholder
Representative) knowing or willful breach of this Agreement has prevented the
consummation of the transactions contemplated by this Agreement; provided
further that Buyer shall for any reason or no reason, and without the consent of
any other party, be entitled to extend the Transaction Deadline Date to June 30,
1999 by providing written notice to the Shareholder Representative to that
effect, whereupon the Transaction Deadline Date shall automatically be so
extended.
VIII.2 EFFECT OF TERMINATION. In the event of termination of
this Agreement by either Buyer or the Shareholder Representative (on behalf of
the Shareholders, the Optionholders and H.I.G. Cayman) as provided above, the
provisions of this Agreement shall immediately become void and of no further
force and effect (other than this Section 8.02 and
41
Article XIII hereof which shall survive the termination of this Agreement);
provided, however, that the following shall apply:
(a If this Agreement is terminated because (i) Buyer
terminates this Agreement pursuant to Section 8.01(b), Section 8.01(c)(i),
Section 8.01(c)(ii), Section 8.01(d) or Section 8.01(e), or (ii) the Shareholder
Representative terminates this Agreement or otherwise declines to close the
transactions contemplated by this Agreement when, in the case of this clause
(ii), all conditions set forth in Section 2.02 within Buyer's control shall have
been satisfied on or prior to the last date under this Agreement when such
conditions could have been satisfied, Buyer shall, in any such case, be entitled
to a refund of the Deposit along with the Deposit Interest, without prejudice to
the right of Buyer to pursue any equitable remedy.
(b If this Agreement is terminated because (i) the
Shareholder Representative terminates this Agreement pursuant to Section 8.01(f)
or Section 8.01(g) (other than when Section 8.02(a)(ii) applies) hereof, or (ii)
Buyer terminates this Agreement pursuant to Section 8.01(g) or otherwise
declines to close the transactions contemplated by this Agreement when, all the
conditions set forth in Sections 2.01 (b) through (g), (i) and (k), shall have
been satisfied on or prior to the last date under this Agreement when such
conditions could have been satisfied, the Shareholders, the Optionholders and
H.I.G. Cayman shall, in any such case, be entitled to retain the Deposit as
their sole and exclusive remedy under this Agreement or applicable law.
(c In the event of termination of this Agreement due to (i)
the failure to obtain any necessary HSR approvals, or (ii) an action or
proceeding before a court or governmental body wherein an unfavorable judgment,
decree or order seeks to restrain, prohibit or prevent the performance of this
Agreement or the consummation of any of the transactions contemplated by this
Agreement, to declare unlawful the transactions contemplated by this Agreement,
or to cause such transactions to be rescinded, Buyer shall, in any such case, be
entitled to a full refund of the Deposit along with the Deposit Interest.
(d In the event Buyer terminates this Agreement pursuant to
Section 8.01(d) or Section 8.01(e), Buyer shall also be entitled to receive from
the Company, the Shareholders, the Optionholders and H.I.G. Cayman an amount
equal to all reasonable out-of-pocket fees and expenses (including reasonable
fees and expenses of counsel) incurred by Buyer and its affiliates in connection
with this Agreement or the transactions contemplated hereby after the date
hereof.
(e If Buyer has extended the Transaction Deadline Date to
June 30, 1999, then Buyer shall only be entitled to a refund of the Deposit
along with the Deposit Interest, if Buyer terminates this Agreement pursuant to
Section 8.01(d) or Section 8.01(e).
42
ARTICLE IX
INDEMNIFICATION
IX.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in this Agreement shall survive the Closing as
follows:
(a the representations and warranties set forth in Sections
3.03, 3.04, 3.05, 3.07, 4.04(b) and 4.08 will survive for the applicable statute
of limitations; and
(b all other representations and warranties in this
Agreement and in any certificates shall terminate on May 15, 2000.
No claim for indemnification hereunder for breach of any such
representations or warranties may be made after the expiration of the survival
period applicable to such claims; provided that any representation or warranty
in respect of which indemnity may be sought under Section 9.02 and the indemnity
with respect thereto, shall survive the time at which it would otherwise
terminate pursuant to this Section 9.01 if notice of the inaccuracy or breach,
or potential inaccuracy or breach thereof giving rise to such right or potential
right of indemnity shall have been given to the Person against whom such
indemnity may be sought prior to such time.
IX.2 INDEMNIFICATION.
(a Each Shareholder (other than Vinyl), each Optionholder
and H.I.G. Cayman, severally and not jointly (subject to the provisions of
Section 9.02(d)), shall indemnify and hold harmless Buyer and its officers,
directors, employees, stockholders, agents, representatives, successors and
permitted assigns (collectively, the "BUYER INDEMNIFIED PARTIES"), from and
against any claims, damages, losses, liabilities, Taxes, regulatory actions,
injuries to Persons, property or natural resources, fines, penalties, costs and
expenses (including, without limitation, settlement costs, any reasonable legal,
accounting or other expenses incurred in connection with investigating or
defending any actions or threatened actions and court costs) ("BUYER LOSSES")
sustained or required to be paid by reason of, arising out of or caused by (i)
any misrepresentation or breach of any representation or warranty made by the
Company, such Shareholder, such Optionholder or H.I.G. Cayman in this Agreement,
(ii) any breach of or failure to perform any covenant, agreement or obligation
of the Company, such Shareholder, such Optionholder or H.I.G. Cayman contained
in this Agreement, (iii) any fees or expenses of the Shareholders, the
Optionholders or H.I.G. Cayman relating to this Agreement and the transactions
contemplated by this Agreement regardless of when accrued or incurred and any
fees or expenses of the Company or any of its Subsidiaries relating to this
Agreement and the transactions contemplated by this Agreement accrued or
incurred in connection with Closing, (iv) Taxes reflected on any Post-Closing
Return attributable to periods ending on
43
or before the Closing Date, not otherwise accounted for in the calculation of
the tax benefit amount as provided for in Section 11.03(c), (v) the Company's
or any Subsidiary's failure to timely file any Form 5500 for any Plan for any
plan year, (vi) the litigation matter of GENEVA NATIONAL CONDOMINIUM MASTER
ASSOCIATION V. THERMAL INDUSTRIES, INC., ET AL., Case No. 96-CV-81, Circuit
Court, Walworth County, Elkhorn, Wisconsin, in the event that Thermal, Geneva
National Condominium Master Association and General Accident Insurance
Company do not execute and deliver the Settlement Agreement (the "Settlement
Agreement") in substantially the form of Exhibit G hereto in settlement of
such litigation, but only, in the case of this clause (vi), to the extent the
Buyer Losses under this clause (vi) exceed the amount of the liability
attributable to Thermal that would have otherwise existed under the
Settlement Agreement, and then only with respect to the amount of such
excess, and (vii) the litigation matter of XXXXXX XXXXXX AND XXXXXXXX X.
XXXXXXX V. DURA-PLEX, INC., XXXXX XXXXXXXXXXX, THERMAL INDUSTRIES, INC., ET.
AL., Docket No. OCN-L-892-99, Superior Court of New Jersey, Ocean County, New
Jersey, to the extent such Buyer Losses exceed $25,000. Notwithstanding the
foregoing, the Shareholders (other than Vinyl) the Optionholders and H.I.G.
Cayman shall not have an obligation to indemnify buyer for a Buyer Loss
arising in connection with Section 9.02(a)(iii) or the Company's breach of
the representations and warranties set forth in Section 4.05 to the extent
Buyer has been compensated for such Buyer Loss pursuant to Section 1.06. In
the event that any funds are paid out of the Escrow Fund to a Buyer
Indemnified Party in connection with a breach by any Shareholder (other than
Vinyl), any Optionholder or H.I.G. Cayman, such breaching party shall be
required to contribute to each other Shareholder (other than Vinyl),
Optionholder and H.I.G. Cayman an amount equal to each such party's pro rata
portion of the amount paid out of the Escrow Fund with respect to such breach.
(b Buyer shall indemnify and hold harmless each Shareholder
(other than Vinyl), each Optionholder and H.I.G. Cayman from and against any
claims, damages, losses, liabilities, Taxes, regulatory actions, injuries to
Persons, property or natural resources, fines, penalties, costs and expenses
(including, without limitation, settlement costs, any reasonable legal,
accounting or other expenses incurred in connection with investigating or
defending any actions or threatened actions and court costs) ("SELLER LOSSES"
and, together with Buyer Losses, "LOSSES") sustained or required to be paid by
reason of, arising out of or caused by (i) any misrepresentation or breach of
any representation or warranty made by Buyer in this Agreement, and (ii) any
breach of any covenant, agreement or obligation of Buyer contained in this
Agreement.
(c (i In the event that any indemnified party is made a
defendant in or party to any claim, action, suit or proceeding, judicial or
administrative, instituted by any third-party for Losses, or otherwise receives
any demand from any third party for Losses (any such third party claim, action,
suit or proceeding being referred to as a "CLAIM"), the indemnified party
(referred to as the "INDEMNITEE") shall give the indemnifying party (referred to
as the "INDEMNITOR") prompt notice thereof. The failure to give such notice
shall not affect whether an Indemnitor is liable for reimbursement unless such
failure has resulted
44
in the loss of substantive rights with respect to the Indemnitor's ability to
defend such Claim, and then only to the extent of such loss. The Indemnitor
shall be entitled to contest and defend such Claim; provided that the
Indemnitor diligently contests and defends such Claim. Notice of the
intention so to contest and defend shall be given by the Indemnitor to the
Indemnitee within twenty (20) business days after receipt of the Indemnitee's
notice of such Claim (but, in all events, at least five (5) business days
prior to the date that an answer to such Claim is due to be filed). Such
contest and defense shall be conducted by reputable attorneys employed by the
Indemnitor. The Indemnitee shall be entitled at any time, at its own cost
and expense (which expense shall not constitute a Loss unless the Indemnitee
reasonably determines that the Indemnitor is not adequately representing or,
because of a conflict of interest determined to exist by Xxxxxxxx & Xxxxx in
its sole discretion, may not adequately represent, the interests of any
Indemnitee and only to the extent that such expenses are reasonable), to
participate in such contest and defense and to be represented by attorneys of
its or their own choosing. If the Indemnitee elects to participate in such
defense, the Indemnitee will cooperate with the Indemnitor in the conduct of
such defense. Neither the notifying party nor the Indemnitor may concede,
settle or compromise any Claim without the consent of the other party, which
consent will not be unreasonably withheld. Notwithstanding the foregoing, if
the Indemnitor fails to acknowledge in writing its obligation to provide
indemnification in respect of such Claim, then the Indemnitee alone shall be
entitled to contest, defend and settle such Claim in the first instance (in
which case, expenses incurred in connection therewith shall constitute a
Loss) and, only if the Indemnitee chooses not to contest, defend or settle
such Claim, the Indemnitor shall then have the right to contest and defend
(but not settle) such Claim.
(ii In the event any Indemnitee should have a claim
against any Indemnitor that does not involve a Claim, the Indemnitee shall
deliver a notice of such claim with reasonable promptness to the Indemnitor.
The failure to give such notice shall not affect whether an Indemnitor is liable
for reimbursement unless such failure has resulted in the loss of substantive
rights with respect to the Indemnitor's ability to defend such Claim, and then
only to the extent of such loss. If the Indemnitor notifies the Indemnitee that
it does not dispute the claim described in such notice or fails to notify the
Indemnitee within fifteen (15) days after delivery of such notice by the
Indemnitee whether the Indemnitor disputes the claim described in such notice,
and such failure to notify materially prejudices any defense or claim of the
Indemnitee, the Loss in the amount specified in the Indemnitee's notice will be
conclusively deemed a liability of the Indemnitor and the Indemnitor shall pay
the amount of such Loss to the Indemnitee on demand.
(iii After the Closing, the rights set forth in this
Section 9.02 shall be the indemnified parties' sole and exclusive remedies
against the other for misrepresentations or breaches of covenants contained in
this Agreement. Without limitation, Buyer specifically waives any and all
claims against Vinyl and the Company, including rights of contribution under
CERCLA or analogous state law. Notwithstanding the foregoing, nothing herein
shall prevent any of the indemnified parties from bringing an
45
action based upon allegations of fraud, bad faith or willful misconduct in
connection with this Agreement. In the event action is brought in accordance
with the preceding sentence of this clause (iii), the prevailing party's
attorneys' fees and costs shall be paid by the nonprevailing party.
(d In connection with any indemnification claim by Buyer
under this Agreement, Buyer (except as set forth in the next sentence) may only
seek recovery for Buyer Losses out of the funds held in the Escrow Fund (as
defined in the Escrow Agreement) pursuant to the Escrow Agreement and is
entitled to seek such recovery regardless of whether such Losses are
attributable to the actions or breaches of the Company, any particular
Shareholder, any particular Optionholder or H.I.G. Cayman. Buyer shall not be
entitled to pursue any indemnification claim or recovery against the Company,
any Shareholder, any Optionholder or H.I.G. Cayman beyond the foregoing limit,
except to the extent any such claim or recovery is based upon the Company's,
such Shareholder's, such Optionholder's or H.I.G. Cayman's (i) breach of a
representation or warranty made in Section 3.03, 3.04, 3.05, 3.07 or 4.04(b), or
(ii) fraud, bad faith or willful misconduct in connection with this Agreement.
No Shareholder, Optionholder or H.I.G. Cayman may claim or assert that any
portion of the Escrow Fund is not available to pay for Buyer Losses by virtue of
the indemnification provisions, covenants, or representations and warranties
under this Agreement being several and not joint, rather than being joint and
several. By executing this Agreement, each such Person waives any such right.
Notwithstanding the foregoing, Buyer may seek recovery for Buyer Losses beyond
the funds held in the Escrow Fund from H.I.G. Fund and/or H.I.G. Management for
any such Buyer Losses attributable to H.I.G. Cayman's (a) breach of a
representation or warranty made in Section 3.04 or Section 3.05, or (b) fraud,
bad faith or willful misconduct in connection with this Agreement.
(e The amount of any Loss subject to indemnification under
this Section 9.02 shall be calculated net of (i) the effects of a reduction for
any Tax Benefit inuring to the Indemnitee on account of such Loss and an
increase for any Tax Detriment suffered by the Indemnitee on account of the
receipt of any indemnification payments and (ii) any insurance proceeds received
by the Indemnitee on account of such Loss. If the Indemnitee receives a Tax
Benefit with respect to a Loss after an indemnification payment is made to it,
the Indemnitee shall promptly pay to the Person or Persons that made such
indemnification payment the amount of such Tax Benefit at such time or times as
and to the extent that such Tax Benefit is realized by the Indemnitee. For
purposes hereof, "TAX BENEFIT" shall mean any refund of Taxes paid or reduction
in the amount of Taxes which otherwise would have been paid, in each case
computed at the actual marginal tax rates applicable to the recipient of such
benefit, and "TAX DETRIMENT" shall mean any increase in the amount of Taxes
which would otherwise have been paid or any reduction in a Tax Benefit. The
Indemnitee shall seek full recovery under all insurance policies covering any
Loss to the same extent as they would if such Loss were not subject to
indemnification hereunder. In the event that an insurance or other recovery is
made by any Indemnitee with respect to any Loss for which any such Person has
been indemnified hereunder, then a refund equal to the aggregate
46
amount of the recovery shall be made promptly to the Person or Persons that
provided such indemnity payments to such Indemnitee.
(f The obligations set forth in this Section 9.02 shall be
unconditional and absolute. In the event of a conflict between the provisions
of this Section 9.02 and any other provisions of this Agreement, the provisions
of Section 9.02 shall control. The Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman shall not have any indemnification obligations
under this Section 9.02 for Losses until such time as total Losses for which
Buyer is otherwise entitled to indemnification hereunder equal $687,500 in the
aggregate (the "DEDUCTIBLE"), whereafter the Shareholders (other than Vinyl),
the Optionholders and H.I.G. Cayman shall be liable for all such Losses in
excess thereof, provided, that the Shareholders' (other than Vinyl's), the
Optionholders' and H.I.G. Cayman's aggregate liability to Buyer hereunder shall
in no event exceed $5,000,000 (the "CAP"). Notwithstanding the foregoing, (i)
any indemnification obligations of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman to Buyer arising in connection with Section
9.02(d)(i) and Section 9.02(d)(ii) hereof shall not be subject to the
Deductible, the Cap or the De Minimis Losses limitations, (ii) any
indemnification obligations of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman to Buyer arising under Section 9.02(a)(iii),
Section 9.02(a)(v) or Section 9.02(a)(vii) shall, in any case, not be subject to
the Deductible or the De Minimis Losses limitations, (iii) any indemnification
obligations of the Shareholders (other than Vinyl), the Optionholders and H.I.G.
Cayman to Buyer arising in connection with any breach by the Shareholders, the
Optionholders or H.I.G. Cayman of any covenant to Buyer set forth in Section
11.03(c) shall not be subject to the Deductible or the De Minimis Losses
limitations and (iv) any indemnification obligations of the Shareholders (other
than Vinyl), the Optionholders and H.I.G. Cayman to Buyer arising in connection
with any breach by the Company of the representation set forth in Section 4.26
shall not be subject to the Deductible or the De Minimis Losses limitations.
(g Notwithstanding Section 9.02(f), excluding the last
sentence of Section 9.02(f), the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman shall not have any indemnification obligations
under this Section 9.02 for any Losses with respect to any single claim or
series of related claims if the aggregate amount of such Losses with respect to
such claim or series of related claims does not exceed $25,000 ("DE MINIMIS
LOSSES").
(h For purposes of determining (i) whether an Indemnitor
shall be required to indemnify an Indemnitee under this Article IX, (ii) the
aggregate amount of Losses suffered by an Indemnitee, (iii) the Deductible or
(iv) the aggregate amount of De Minimis Losses suffered by an Indemnitee, each
representation and warranty (whether made as of the date of this Agreement or
made on and as of the Closing Date) contained in this Agreement for which
indemnification is sought hereunder shall be read (including for purposes of
determining whether a breach of such representation or warranty has occurred)
47
without regard to, and as if such representation or warranty did not contain,
materiality qualifications that may be contained therein, including, without
limitation, Material Adverse Effect.
(i The indemnification obligations of an Indemnitor set
forth in this Section 9.02 shall survive any permitted assignment or other
transfer by such Indemnitor.
ARTICLE X
SHAREHOLDER REPRESENTATIVE
X.1 DESIGNATION. H.I.G. Cayman (the "SHAREHOLDER
REPRESENTATIVE") is hereby designated by each of the Shareholders, each of the
Optionholders and H.I.G. Cayman (in its capacity as the owner of the Vinyl
Shares) to serve as the representative of the Shareholders, the Optionholders
and H.I.G. Cayman with respect to the matters expressly set forth in this
Agreement to be performed by the Shareholder Representative.
X.2 AUTHORITY. Each of the Shareholders, the Optionholders,
and H.I.G. Cayman, by the execution of this Agreement, hereby irrevocably
appoints the Shareholder Representative as the true and lawful agent, proxy and
attorney-in-fact to act on behalf of such Shareholders, such Optionholders and
H.I.G. Cayman, in any manner deemed appropriate by the Shareholder
Representative, in its sole discretion, for all purposes of this Agreement,
including the full power and authority on such Shareholder's, such
Optionholder's and H.I.G. Cayman's behalf (i) to take any action or execute any
instrument deemed necessary or appropriate to consummate the transactions
contemplated by this Agreement; (ii) to pay such Shareholder's, such
Optionholder's and H.I.G. Cayman's expenses incurred in connection with the
negotiation and performance of this Agreement (whether incurred on or after the
date hereof); (iii) to disburse any funds received hereunder to each such
Shareholder, such Optionholder or H.I.G. Cayman; provided, that Shareholder
Representative shall be entitled to hold back $1 million of such proceeds for
the payment of expenses incurred in connection with the transactions
contemplated hereby; provided further that the Shareholder Representative shall
disperse all such funds, except for such holdback, within 72 hours of the
Shareholder Representative's receipt of such funds from time to time; (iv) to
execute and deliver any certificates representing the Shares or the Vinyl
Shares, or the cancellation of the Options, and execution of such further
instruments of assignment as Buyer shall reasonably request; (v) to execute and
deliver on behalf of such Shareholder, such Optionholder and H.I.G. Cayman any
amendment or waiver hereto subject to Section 13.10; (vi) to take all other
actions to be taken by or on behalf of such Shareholder, such Optionholder or
H.I.G. Cayman in connection herewith; and (vii) to do each and every act and
exercise any and all rights which each such Shareholder, such Optionholder or
H.I.G. Cayman collectively are permitted or required to do or exercise under
this Agreement; provided that the Shareholder Representative will update each of
the Shareholders, the
48
Optionholders and H.I.G. Cayman from time to time. Each of the Shareholders,
the Optionholders and H.I.G. Cayman agrees that such agency and proxy are
coupled with an interest, are therefore irrevocable without the consent of
the Shareholder Representative and shall survive the death, incapacity,
bankruptcy, dissolution or liquidation of any Shareholder, any Optionholder
or H.I.G. Cayman. Any demands, notices or other communications directed to
the Shareholders, the Optionholders and H.I.G. Cayman hereunder shall be
deemed effective if given to the Shareholder Representative. As between
Buyer, on the one hand, and the Shareholders, the Optionholders and H.I.G.
Cayman, on the other hand, payment of funds by Buyer to the Shareholder
Representative in its capacity as such shall, for all purposes hereunder, be
deemed payment of such funds to the Shareholders, the Optionholders and
H.I.G. Cayman. Buyer shall be entitled to rely on all actions of the
Shareholder Representative as if such actions were taken by the Shareholders,
the Optionholders or H.I.G. Cayman. Upon the dissolution or resignation of
the Shareholder Representative, a successor shall be appointed by the
remaining Shareholders, Optionholders and H.I.G. Cayman within the thirty
(30) day period immediately following the date of such dissolution or
resignation, and such successor shall either be a Shareholder or an
Optionholder or any other Person reasonably acceptable to Buyer who shall
agree in writing to accept such appointment in accordance with the terms
hereof. The resignation of any Shareholder Representative hall not be
effective until a successor Shareholder Representative has been appointed and
has accepted such appointment in accordance with the provisions of this
Article X. The selection of a successor Shareholder Representative appointed
in any manner permitted in this Section 10.02 shall be final and binding upon
all of the Shareholders, the Optionholders and H.I.G. Cayman and written
notice of such selection and appointment shall be provided to Buyer promptly.
X.3 EXCULPATION. Neither the Shareholder Representative nor
any agent employed by it shall incur any liability to any Shareholder, any
Optionholder or H.I.G. Cayman by virtue of the failure or refusal of the
Shareholder Representative for any reason to consummate the transactions
contemplated by this Agreement or relating to the performance of its other
duties hereunder, except for actions or omissions constituting fraud, gross
negligence or bad faith.
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS
XI.1 DISCLOSURE GENERALLY. If and to the extent any
information required to be furnished in any Schedule is contained in this
Agreement or in any other Schedule (or Updated Schedule) attached hereto, such
information shall be deemed to be included in all Schedules (or, except for
purposes of Section 2.01(b), Updated Schedules) in which the information is
required to be included, but only to the extent a reasonable person would be on
notice from the face of the disclosure that such disclosure was applicable to
such other Schedule (or Updated Schedule). The inclusion of any information in
any Schedule (or
49
Updated Schedule) attached hereto shall not be deemed to be an admission or
acknowledgment by the Company, the Shareholders, the Optionholders or H.I.G.
Cayman, in and of itself, that such information is material to or outside the
ordinary course of the business of Vinyl or the Company.
XI.2 ACKNOWLEDGMENT BY BUYER. Buyer acknowledges that it has
conducted to its satisfaction an independent investigation and verification of
the financial condition, results of operations, assets, liabilities, properties
and projected operations of the Company and, before making its determination to
proceed with the transactions contemplated by this Agreement, Buyer shall be
satisfied with the results of such independent investigation and verification as
well as the representations and warranties of the Company, the Shareholders, the
Optionholders, and H.I.G. Cayman set forth in this Agreement and any other
agreements or certificates executed in connection herewith, including the
Schedules (and Updated Schedules) attached hereto. SUCH REPRESENTATIONS AND
WARRANTIES BY THE COMPANY, THE SHAREHOLDERS, THE OPTIONHOLDERS AND H.I.G. CAYMAN
CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
THE SHAREHOLDERS, THE OPTIONHOLDERS AND H.I.G. CAYMAN TO BUYER IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND BUYER UNDERSTANDS,
ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY
KIND OR NATURE EXPRESSED OR IMPLIED (INCLUDING, BUT NOT LIMITED TO, ANY RELATING
TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS
OR LIABILITIES OF THE COMPANY) ARE SPECIFICALLY DISCLAIMED BY THE COMPANY, THE
SHAREHOLDERS, THE OPTIONHOLDERS AND H.I.G. CAYMAN.
XI.3 TAX MATTERS.
(a) RESPONSIBILITY FOR FILING TAX RETURNS AND PRE-CLOSING
TAXES. Buyer shall, at its cost, prepare or cause to be prepared and file or
cause to be filed all Tax Returns for Vinyl and the Company for all periods
ending prior to or including the Closing Date which are due after the Closing
Date, but which specifically does not include the Tax Returns for the 1998
taxable year (the "1998 TAX RETURNS"), which 1998 Tax Returns are to be filed by
the Company in proper form, and all Taxes shown to be due on such 1998 Tax
Returns fully paid by the Company, prior to the Closing Date (those Tax Returns
other than the 1998 Tax Returns are collectively referred to as the
"POST-CLOSING RETURNS"). In the case of the Federal and State income tax
Post-Closing Returns, Buyer or the Company shall prepare such returns of the
Company in a manner suitable for filing and shall present such draft returns
to the Shareholder Representative for purposes of any applicable rights of
review hereunder no later than one hundred eighty (180) days after the
Closing Date. Upon notification from the Shareholder Representative that the
Shareholder Representative approves of the filing of
50
such returns (such approval not to be unreasonably withheld and any
withholding of such approval to be based on applicable law and supported by
substantial authority within the meaning of Section 6662(d) of the Code),
Buyer shall cause the Company to file such Federal and State income tax
returns promptly. At least fifteen (15) days prior to the date on which each
Post-Closing Return, other than the Federal and State income tax Post-Closing
Returns, is filed, Buyer shall submit such Post-Closing Return to the
Shareholder Representative (on behalf of the Shareholders (other than Vinyl),
the Optionholders and H.I.G. Cayman) for the Shareholder Representative's
review and approval, which approval may be withheld if the filing of such
Post-Closing Return, as prepared by Buyer, is reasonably expected by the
Shareholder Representative to improperly affect the Tax liability of any
Shareholder (other than Vinyl), any Optionholder or H.I.G. Cayman in an
adverse manner.
(b) TRANSFER TAXES. Buyer will pay, and will indemnify and
hold the Shareholders (other than Vinyl), the Optionholders and H.I.G. Cayman
harmless against, any real property transfer or gains tax, stamp tax, stock
transfer tax, or other similar Tax imposed on the Company or one or more
Shareholders (other than Vinyl), one or more Optionholders or H.I.G. Cayman as a
result of the transactions contemplated by this Agreement (collectively,
"TRANSFER TAXES"), and any penalties or interest with respect to the Transfer
Taxes. The Shareholders (other than Vinyl), the Optionholders and H.I.G. Cayman
agree to cooperate with Buyer in the filing of any returns with respect to the
Transfer Taxes, including supplying promptly any information in the possession
of the Shareholders (other than Vinyl), the Optionholders and H.I.G. Cayman that
is reasonably necessary to complete such returns.
(c) TAX BENEFITS ASSOCIATED WITH OPTION PURCHASE
TRANSACTIONS. The parties hereto agree that in preparing the Company's Tax
Returns for the taxable year that includes or, if applicable, ends on the
Closing Date, Buyer shall cause the Company to claim allowable deductions
attributable to the Option Purchase Transactions in such Tax Returns and, upon
the filing of such Tax Returns, if such Tax Returns show a net operating loss,
within the meaning of Section 172 of the Code, such net operating loss shall be
carried back to prior taxable years to the extent permitted by applicable Tax
law, and Buyer shall cause the Company to file as soon as is practicable any
claims for Tax refunds to which the Company is entitled for taxable periods
prior to the Closing Date as a result of such deductions, and shall permit the
Shareholder Representative (on behalf of the Shareholders and the Optionholders)
to review the portion of any such Tax Return which relates to such Tax benefits
prior to the filing of such Tax Return. The approval of Tax Returns pursuant to
Section 11.03(a) by the Shareholder Representative shall, upon the actual filing
of any such Tax Return, constitute a release by the Shareholders, the
Optionholders and H.I.G. Cayman of Buyer from any liability for failure to
comply with this Section 11.03(c). Buyer shall pay over to the Shareholder
Representative (on behalf of the Shareholders and the Optionholders) the amount
of any Tax benefits with respect to the carry-back periods within thirty (30)
days after receipt thereof. The parties hereto also agree that any such refund
shall be net of any reasonable increased costs, liabilities or Taxes incurred by
Buyer or the Company or any Subsidiary with respect to or attributable to the
Option Purchase
51
Transactions, including, but not limited to, employment Taxes attributable to
the Option Purchase Transactions. If subsequent to the Buyer's payment of
any such amount, there is a determination under applicable law to the effect
that all or part of the tax benefit giving rise to such tax benefit payment
was not allowable or available in any applicable carry-back period (a
"SUBSEQUENT BENEFIT DECREASE EVENT"), the Shareholder Representative shall
repay to the Buyer within thirty (30) days any amount that would have not
been payable to the Shareholder Representative pursuant to this Section
11.03(c) had the amount of the tax benefit been initially determined in light
of the Subsequent Benefit Decrease Event, together with the amount of any
interest and penalties payable to any Tax authority with respect to those
amounts and all reasonable expenses of Buyer and the Company and any of the
Subsidiaries directly attributable thereto.
XI.4 FURTHER ASSURANCES. From time to time, as and when
requested by any party hereto and at such party's expense, either before or
after Closing, any other party shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions as such other party may
reasonably deem necessary or desirable to evidence and effectuate the
transactions contemplated by this Agreement.
XI.5 OTHER MATTERS RELATING TO OPTIONS. Each of the Company,
the Shareholders, the Optionholders, H.I.G. Cayman and Buyer hereby acknowledge
and agree that Buyer and certain members of management of the Company and its
Subsidiaries ("MANAGEMENT") may wish to reach an agreement pursuant to which
this Agreement shall be amended to provide that all or any portion of Options
held by Management shall not be purchased and acquired by Buyer in exchange for
the Per Option Purchase Price but may be converted into the right to receive
other consideration to be agreed upon between Buyer and such members of
Management. Each of the Company, the Shareholders, the Optionholders, H.I.G.
Cayman and Buyer hereby covenant and agree that if any such amendments are
entered into, provided that such amendments meet the requirements set forth in
the proviso of Section 13.10 hereof, each of the Company, the Shareholders, the
Optionholders, H.I.G. Cayman and Buyer will not assert any claim against the
other as a result of the execution and delivery of such amendment.
ARTICLE XII
DEFINITIONS
XII.1 DEFINITIONS. For purposes hereof the following terms,
when used herein with initial capital letters, shall have the respective
meanings set forth herein:
"AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means
52
the possession, directly or indirectly, of the power to direct the management
and policies of a Person whether through the ownership of voting securities,
contract or otherwise.
"DEPOSIT INTEREST" means an amount equal to the interest that is
earned on the Deposit pursuant to the terms of the Escrow Agreement.
"ENVIRONMENTAL CLAIM" means any claim, demand, complaint, action,
suit, proceeding, investigation or notice by any Person alleging potential
liability arising out of, based on, or relating to Environmental Laws or the
presence of any Hazardous Material at any location.
"ENVIRONMENTAL LAW" means any and all federal, state and local
laws (including but not limited to common law), statutes, ordinances, judgments,
decrees, licenses, permits, rules and regulations, or other binding requirement
relating to pollution or protection of human health and the environment or
worker health and safety, including without limitation, laws (including but not
limited to common law), statutes, ordinances, judgements, decrees, licenses,
permits, rules and regulations or other binding requirements relating to
emissions, discharges, releases or threatened releases of any Hazardous
Material, or otherwise relating to the use, treatment, storage, disposal,
transport or handling of any Hazardous Material.
"ESCROW AGENT" means an Escrow Agent as defined in the Escrow
Agreement.
"GAAP" means United States generally accepted accounting
principles applied on a consistent basis.
"HAZARDOUS MATERIAL" means any material, substance or compound
regulated under Environmental Laws, whether constituting a useful product or
otherwise, including without limitation any pollutant, contaminant, waste,
hazardous waste, hazardous substance, toxic substance, hazardous material,
extremely hazardous material, asbestos, polychlorinated biphenyl, petroleum, or
any refined product, fraction, byproduct or constituent thereof.
"NET WORKING CAPITAL" means (i) the sum of all of the Company's
consolidated accounts receivable, inventories, prepaids and current portion of
notes receivable, less (b) the sum of all of the Company's consolidated accounts
payable and current accrued liabilities (excluding accrued Taxes) in respect of
all periods beginning prior to and ending prior to or on the Closing Date,
whether or not a payment with respect to such debt, obligation or liability with
respect to such period is yet due, but excluding Indebtedness, recorded in
accordance with GAAP.
"PERMITTED LIENS" shall mean (i) statutory liens for current
Taxes or other governmental charges not yet due and payable or the amount or
validity of which is being
53
contested in good faith by appropriate proceedings by the Company and for
which appropriate reserves have been established in accordance with GAAP;
(ii) mechanics', carriers', workers', repairers' and similar statutory liens
arising or incurred in the ordinary course of business for amounts which are
not delinquent and which are not, individually or in the aggregate,
significant; (iii) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction over the
Owned Real Property or the Leased Real Property which are not violated by the
current use and operation of the Owned Real Property or the Leased Real
Property; and (iv) covenants, conditions, restrictions, easements and other
similar matters of record affecting title to the Owned Real Property or the
Leased Real Property which do not materially impair the occupancy or use of
the Owned Real Property or the Leased Real Property for the purposes for
which it is currently used or proposed to be used in connection with the
Company's business.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"RELEASE" means any release, threatened release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching,
migrating or presence of any Hazardous Material in the environment.
"TAX" or "TAXES" means any federal, state, local or foreign
taxes, charges, fees, customs, duties, imposts and levies, including, but not
limited to those imposed on income, gross receipts, capital stock, inventory,
franchise, profits, withholding, social security payroll, transaction,
employment, workers' compensation, unemployment, disability, real property, ad
valorem/personal property, assets, stamp, excise, occupation, sales, use,
license, transfer, value added, alternative minimum, estimated or other tax,
including any interest, penalty or addition thereto, or additional amounts
imposed by any Taxing authority (domestic or foreign). For purposes of this
Agreement, "Taxes" also includes any obligation under any agreements or
arrangements with any Person with respect to the liability for, or sharing of,
Taxes (including, without limitation, pursuant to Treasury Regulation Section
1.1502-6 or comparable provisions of state, local or foreign Tax law) and
including without limitation, any liability for Taxes as a transferee or
successor by contract or otherwise.
"TAX RETURNS" means any return, report, information return or
other document (including schedules or any related or supporting information)
filed or required to be filed with any governmental entity or other authority in
connection with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements relating
to any Tax.
XII.2 CROSS-REFERENCE OF OTHER DEFINITIONS. Each capitalized
term listed below is defined in the corresponding Section of this Agreement:
54
TERM SECTION NO.
---- -----------
Agreement Preamble
Aggregate Equity Price 1.01
Bonuses 1.01
Buyer Preamble
Buyer Indemnified Parties 9.02(a)
Buyer Losses 9.02(a)
Buyer's Representatives 6.02
Cap 9.02(f)
Capitalized Lease Obligations 1.01
Claim 9.02(c)(i)
Class A Stock Preamble
Class B Stock Preamble
Code 4.08
Closing 1.07(a)
Closing Cash 1.01
Closing Date 1.07(a)
Closing Debt 1.01
Closing Per Share Option Purchase Price 1.06(a)
Closing Per Share Purchase Price 1.06(a)
Closing Transactions 1.07(b)
Closing Net Working Capital Statement 1.06(b)
Company Preamble
Confidentiality Agreement 6.02
Deductible 9.02(f)
Deposit 1.02
DOL 4.13(c)
ERISA 4.13(a)
Escrow Agreement 1.05
Escrow Amount 1.05
Estimated Balance Sheet 1.06(a)
Estimated Net Working Capital 1.06(a)
Executive Stock Agreements 13.03
Financial Statements 4.05/6.09
Financing Letter 2.01(a)
H.I.G. Cayman Preamble
H.I.G. Fund Preamble
H.I.G. Management Preamble
HSR Act 4.12
Indebtedness 1.07(b)(v)
Indemnitee 9.02(c)(i)
55
Indemnitor 9.02(c)(i)
IRS 4.08(a)
Independent Auditor 1.06(b)
Insiders 3.05
Intellectual Property 4.10
Latest Balance Sheet 4.05
Leased Real Property 4.07(b)
Losses 9.02(b)
Market Disruption Condition 8.01(b)
Material Adverse Effect 4.01
Objections Statement 1.06(b)
Option Purchase Transactions 1.04(b)
Optionholders Preamble
Options Preamble
Outstanding Computer Associates Debt 1.01
Owned Real Property 4.07(b)
Pension Plans 4.13(a)
Per Option Purchase Price 1.04(a)
Per Share Purchase Price 1.03(a)
Plans 4.13(a)
Post-Closing Returns 11.03(a)
PTO 2.01(1)
Seller Losses 9.02(b)
Settlement Agreement 9.02(a)
Shareholder Representative 10.01
Shareholders Preamble
Shares Preamble
Subsequent Benefit Decrease Event 11.03
Subsidiary 4.02
Tax Benefit 9.02(e)/11.03(c)
Tax Detriment 9.02(e)
Terminating Agreements 13.03(b)
the Company's knowledge 13.04
Thermal 2.01(1)
Transaction Deadline Date 8.01(d)
Transfer Taxes 11.03(b)
Vinyl Preamble
Vinyl Shares 1.03(a)
Welfare Plans 4.13(a)
Working Capital Target 1.06(a)
Year 2000 Data 4.23
ARTICLE XIII
56
MISCELLANEOUS
XIII.1 PRESS RELEASES AND COMMUNICATIONS. No press release or
public announcement related to this Agreement or the transactions contemplated
herein or, prior to the Closing, any other announcement or communication to the
employees, customers or suppliers of Vinyl and the Company and its Subsidiaries
shall be issued or made without the joint approval of Buyer and the Shareholder
Representative (on behalf of the Shareholders, the Optionholders and H.I.G.
Cayman) by the parties hereto or their respective officers, directors,
employees, advisors, agents or representatives, unless required by law (based on
the advice of counsel) in which case Buyer and the Shareholder Representative
shall have the right to review such press release or announcement prior to
publication.
XIII.2 EXPENSES. Except as otherwise expressly provided herein,
each of Buyer on the one hand and the Shareholders, the Optionholders and H.I.G.
Cayman on the other hand shall pay all of its own expenses (including attorneys'
and accountants' fees and expenses) in connection with the negotiation of this
Agreement, the performance of their respective obligations under this Agreement
and the consummation of the transactions contemplated by this Agreement (whether
consummated or not); provided, that such expenses of the Company, the
Subsidiaries, the Shareholders and the Optionholders may be paid by the Company
so long as such payments are reflected in the Estimated Balance Sheet and the
Closing Net Working Capital Statement. For the purposes hereof, the expenses of
the Company and the Subsidiaries in connection with the negotiation of this
Agreement, the performance of any obligations under this Agreement and the
consummation of the transactions contemplated by this Agreement (whether
consummated or not) shall be deemed expenses of the Shareholders, the
Optionholders and H.I.G. Cayman.
XIII.3 WAIVER OF CERTAIN TRANSFER RESTRICTIONS AND TERMINATION
OF AGREEMENTS. (a) Concurrently with the Closing, the Company, the Shareholders
and the Optionholders hereby expressly waive all of their rights to purchase
Shares in connection with the transactions contemplated in this Agreement under
(i) the Stock Purchase and Option Agreements, set forth on the attached
TERMINATING AGREEMENTS SCHEDULE, (ii) the Company's By-laws and (iii) any other
documents to which they might be a party or pursuant to which they may have any
such right. Such Stock Purchase and Option Agreements shall terminate and be of
no further force and effect as of the Closing.
(b) Concurrently with the Closing, the Company, the
Shareholders and the Optionholders shall terminate all of the agreements (the
"Terminating Agreements") set forth on the attached TERMINATING AGREEMENTS
SCHEDULE. Upon termination, (i) such Terminating Agreements shall be of no
further force and effect, and (ii) each Shareholder and each Optionholder shall
release and discharge the Company and its stockholders, directors, officers,
employees, agents, representatives, Affiliates, successors and assigns, as the
case may be, from any and all claims arising as a result of, or in connection
with, the Terminating
57
Agreements or the termination thereof, including any claims existing under
any Terminating Agreement prior to the date of its termination.
XIII.4 KNOWLEDGE DEFINED. For purposes of this Agreement, the
term "the Company's knowledge" as used herein shall mean the actual knowledge of
Xxxxx Xxxxxx, Xxxx Xxxxxxxxxx, Xxxx Xxxxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxx and
Xxxxx Xxxxxxxx. With respect to any financial information relating to Best
Built, Inc., such term shall mean the actual knowledge of Xxxx Xxxxxxxx after
due inquiry of Xxxx Xxxxx, Xxxxx Xxxxxx and Xxxx Xxxxxxxxxx.
XIII.5 ASSIGNMENT OF CERTAIN RIGHTS. Each of the Shareholders
(other than Vinyl) and H.I.G. Cayman hereby transfers, conveys and assigns to
Buyer and the Company all of its rights to receive any endorsements necessary in
order for such Shareholder to become a bona fide purchaser with respect to
capital stock of Vinyl or the Company purchased by such Shareholder (other than
Vinyl) or H.I.G. Cayman prior to the date of this Agreement, which rights shall
be specifically enforceable by Buyer, Vinyl and/or the Company.
XIII.6 NOTICES. All notices, demands and other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when (a) personally
delivered, (b) sent by facsimile (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, (c)
one (1) business day after deposit with Federal Express or similar overnight
courier service or (d) five (5) days after being mailed by first class mail,
return receipt requested. Notices, demands and communications to Buyer, the
Company, the Shareholders the Optionholders and H.I.G. Cayman shall, unless
another address is specified in writing, be sent to the addresses indicated
below:
NOTICES TO BUYER:
Atrium Companies, Inc.
0000 X. Xxxxxxxxxxx Xxxx
Xxxxx 0000X
Xxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxx
Facsimile Number: (000) 000-0000
and
58
Atrium Companies, Inc.
c/o Ardshiel, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
Facsimile Number: (000) 000-0000
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxx
Xxxxx Xxxxxxxxxx
Facsimile Number: (000) 000-0000
NOTICES TO THE SHAREHOLDERS, THE OPTIONHOLDERS AND H.I.G. CAYMAN:
H.I.G. Vinyl, Inc.
c/o H.I.G. Capital Management, Inc.
0000 Xxxxxxxx Xxx Xxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Tamer
Xxxxx X. Xxxxxxxx
Facsimile Number: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Learner, P.C.
E. Xxxx Xxxxx
Facsimile Number: (000) 000-0000
Xxxxx Xxxxxx
c/o Heat, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile Number: (000) 000-0000
and
59
Xxxxxxxx Xxxxxxxxx
One Oxford Centre
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxx Xxxxx
Facsimile Number: (000) 000-0000
NOTICES TO THE COMPANY (PRIOR TO CLOSING):
Heat, Inc.
c/o H.I.G. Capital Management, Inc.
0000 Xxxxxxxx Xxx Xxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Tamer
Xxxxx X. Xxxxxxxx
Facsimile Number: (000) 000-0000
and
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Learner, P.C.
E. Xxxx Xxxxx
Facsimile Number: (000) 000-0000
NOTICES TO VINYL AND THE COMPANY (AFTER CLOSING):
Heat, Inc.
c/o Atrium Companies, Inc.
0000 X. Xxxxxxxxxxx Xxxx
Xxxxx 0000X
Xxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxx
Facsimile Number: (000) 000-0000
60
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxx
Xxxxx Xxxxxxxxxx
Facsimile Number: (000) 000-0000
XIII.7 ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, except that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned or delegated by either party without the prior written consent of all
other parties. Notwithstanding the foregoing, (a) Buyer may assign or delegate
any or all of its rights or obligations under this Agreement to any Affiliate of
Buyer, and (b) nothing in this Agreement shall limit Buyer's ability to make a
collateral assignment of its rights under this Agreement to any institutional
lender that provides funds to Buyer, without the consent of the Company, the
Shareholders, the Optionholders or H.I.G. Cayman; provided, however, that unless
written notice is given to the Company or to the Shareholder Representative (on
behalf of the Shareholders, the Optionholders and H.I.G. Cayman), that any such
collateral assignment has been foreclosed upon, the Company, the Shareholders,
the Optionholders and H.I.G. Cayman shall be entitled to deal exclusively with
Buyer as to any matters arising under this Agreement or the transactions
contemplated hereby. In the event of such an assignment the provisions of this
Agreement shall insure to the benefit of and be binding upon the assigns of
Buyer.
XIII.8 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
present or future applicable law, but if any provision of this Agreement is held
to be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
XIII.9 NO STRICT CONSTRUCTION. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be applied
against any Person. The section headings herein have been inserted for
convenience of reference only and shall in no way modify or restrict the terms
and provisions hereof.
XIII.10 AMENDMENT AND WAIVER. Any provision of this
Agreement or the Schedules or Exhibits hereto may be amended or waived only in
writing signed by Buyer, the Company and the Shareholder Representative (on
behalf of the Shareholders, the Optionholders and H.I.G. Cayman); PROVIDED, that
any amendment pursuant to which Buyer
61
and certain members of Management agree that all or any portion of Options
held by Management shall not be purchased and acquired by Buyer in exchange
for the Per Option Purchase Price, may be entered into without the consent of
the Company, any Shareholder, any Optionholder or H.I.G. Cayman (other than
such members of Management) so long as such amendment does not reduce the
portion of the Aggregate Equity Price due to such Shareholder, such
Optionholder or H.I.G. Cayman at and after the Closing; provided further,
that if any amendment or waiver adversely affects any Shareholder or
Optionholder in any material respect that does not affect all other
Shareholders or Optionholders, such amendment or waiver shall require the
consent of such Shareholder or Optionholder. No waiver of any provision
hereunder or any breach or default thereof shall extend to or affect in any
way any other provision or prior or subsequent breach or default.
XIII.11 COMPLETE AGREEMENT. This Agreement and the documents
referred to herein (including the Confidentiality Agreement) contain the
complete agreement between the parties hereto and merge and supersede any
prior understandings, agreements or representations by or between the
parties, written or oral, which may have related to the subject matter hereof
in any way, including, without limitation, the Letter of Intent, dated March
1, 1999.
XIII.12 COUNTERPARTS. This Agreement may be executed in
multiple counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall
constitute one and the same instrument.
XIII.13 GOVERNING LAW. This Agreement and all matters
relating to the interpretation, construction, validity and enforcement of
this Agreement shall be governed by and construed in accordance with the
domestic laws of the State of New York without giving effect to any choice or
conflict of law provision or rule (whether of the State of New York or any
other jurisdiction) that would cause the application of laws of any
jurisdiction other than the State of New York. The parties hereto agree to
submit to the personal and exclusive jurisdiction of the state and federal
courts serving Pittsburgh, Pennsylvania with respect to the enforcement or
interpretation of this Agreement or the parties' obligations hereunder. Each
party hereto irrevocably consents to the service of any and all process in
any action or proceeding by the mailing of copies of such process by
registered or certified mail to such party hereto to serve legal process in
any other manner permitted by law. Each party hereto irrevocably waives, to
the full extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a
court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.
XIII.14 SCHEDULES AND EXHIBITS. All Schedules and Exhibits
referred to in this Agreement are intended to be and are hereby specifically
made a part of this Agreement.
62
XIII.15 SPECIFIC PERFORMANCE. The parties hereto recognize
that in the event the Company, the Shareholders, the Optionholders or H.I.G.
Cayman refuse to perform under the provisions of this Agreement, monetary
damages will not be adequate. Buyer shall therefore be entitled, in addition
to any other remedies which may be available, to obtain specific performance
of the terms of this Agreement. In the event of any action to enforce this
Agreement specifically, the Company, the Shareholders, the Optionholders and
H.I.G. Cayman hereby waive the defense that there is an adequate remedy at
law.
* * * *
63
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
HEAT, INC.
By ____________________________________
Its ___________________________________
H.I.G. INVESTMENT FUND, L.P., a Cayman
Island limited partnership (for purposes
of Article IX hereof)
By: H.I.G. PARTNERS, L.P., its general
partner
By: TAMINVEST CORPORATION, its general
partner
By ____________________________________
Its ___________________________________
H.I.G. CAPITAL MANAGEMENT, INC., a
Delaware corporation (for purposes of
Article IX hereof)
By ____________________________________
Its ___________________________________
H.I.G. VINYL, INC., a Cayman Island
corporation
By ____________________________________
Its ___________________________________
64
ATRIUM COMPANIES, INC.
By ____________________________________
Its ___________________________________
SHAREHOLDERS:
H.I.G. VINYL, INC., a Delaware
corporation
By ____________________________________
Its ___________________________________
_______________________________________
Xxxxx Xxxxxx
_______________________________________
Xxxx Xxxxxx
_______________________________________
Xxxxx Xxxxxx
OPTIONHOLDERS:
NATIONSCREDIT COMMERCIAL CORPORATION
By ____________________________________
Its ___________________________________
65
_______________________________________
Xxxxxx Xxxxxx XX
_______________________________________
Xxxx X. Xxxxx
_______________________________________
Xxx X. Xxxxx
_______________________________________
Xxxx Xxxxxxxx
_______________________________________
Xxxxxx X. Xxxxx
_______________________________________
Xxxxx Xxxxxxxxxx
_______________________________________
Xxxx Xxxxxxxxxx
_______________________________________
Xxxxxx X. Poland
_______________________________________
Xxxxx Xxxxxx
_______________________________________
Xxxx Xxxxxx
_______________________________________
Xxxxxx Xxxxxx
_______________________________________
Xxxx Xxxxx
_______________________________________
Xxxxx Xxxxxx
_______________________________________
Xxxxxxx X. Xxxx
66
TABLE OF CONTENTS
Page
----
ARTICLE I PURCHASE AND SALE OF SHARES AND OPTIONS . . . . . . . . . . .2
1.01 Aggregate Equity Price. . . . . . . . . . . . . . . . . . . .2
1.02 Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.03 Share Transactions. . . . . . . . . . . . . . . . . . . . . .2
1.04 Option Transactions . . . . . . . . . . . . . . . . . . . . .3
1.05 Escrow. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.06 Aggregate Equity Price Adjustment . . . . . . . . . . . . . .4
1.07 The Closing . . . . . . . . . . . . . . . . . . . . . . . . .5
ARTICLE II CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . .7
2.01 Conditions to Buyer's Obligations . . . . . . . . . . . . . .7
2.02 Conditions to the Shareholders', the Optionholders'
and H.I.G. Cayman's Obligations . . . . . . . . . . . . . . 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH
SHAREHOLDER, EACH OPTIONHOLDER AND H.I.G. CAYMAN. . . . . . 12
3.01 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.02 Execution and Delivery; Valid and Binding Agreement; Other
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.03 Ownership of Capital Stock of the Company . . . . . . . . . 12
3.04 Ownership of Vinyl Shares . . . . . . . . . . . . . . . . . 13
3.05 Capitalization of Vinyl . . . . . . . . . . . . . . . . . . 14
3.06 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.07 Vinyl . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.08 H.I.G. Cayman . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . 15
4.01 Organization, Standing and Corporate Power. . . . . . . . . 15
4.02 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 16
4.03 Authorization; No Breach; Valid and Binding Agreement . . . 16
4.04 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 17
4.05 Financial Statements. . . . . . . . . . . . . . . . . . . . 18
4.06 Absence of Certain Developments . . . . . . . . . . . . . . 19
4.07 Title to Properties . . . . . . . . . . . . . . . . . . . . 20
4.08 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 22
4.09 Contracts and Commitments . . . . . . . . . . . . . . . . . 24
4.10 Intellectual Property . . . . . . . . . . . . . . . . . . . 26
4.11 Litigation and Labor Matters. . . . . . . . . . . . . . . . 26
4.12 Governmental Consents, etc. . . . . . . . . . . . . . . . . 27
4.13 Employees . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 29
ii
4.15 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 30
4.16 Environmental Compliance and Conditions . . . . . . . . . . 31
4.17 Affiliated Transactions . . . . . . . . . . . . . . . . . . 32
4.18 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.19 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . 32
4.20 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 32
4.21 Change of Control Provisions. . . . . . . . . . . . . . . . 33
4.22 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 33
4.23 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.24 Customers . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.25 Relationship with General Electric Company. . . . . . . . . 33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . 34
5.01 Organization and Corporate Power. . . . . . . . . . . . . . 34
5.02 Authorization; Valid and Binding Agreement. . . . . . . . . 34
5.03 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.04 Governmental Consents, etc. . . . . . . . . . . . . . . . . 34
5.05 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 34
5.06 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.07 Investment Representation . . . . . . . . . . . . . . . . . 35
5.08 Financing . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VI COVENANTS OF THE COMPANY,THE SHAREHOLDERS, THE OPTIONHOLDERS AND
H.I.G. CAYMAN . . . . . . . . . . . . . . . . . . . . . . . 35
6.01 Conduct of the Business . . . . . . . . . . . . . . . . . . 35
6.02 Access to Books and Records . . . . . . . . . . . . . . . . 37
6.03 Regulatory Filings. . . . . . . . . . . . . . . . . . . . . 38
6.04 Conditions. . . . . . . . . . . . . . . . . . . . . . . . . 38
6.05 Exclusive Dealing . . . . . . . . . . . . . . . . . . . . . 38
6.06 Notification. . . . . . . . . . . . . . . . . . . . . . . . 38
6.07 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.08 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.09 Interim Financial Statements. . . . . . . . . . . . . . . . 39
6.10 Intellectual Property Matters . . . . . . . . . . . . . . . 39
6.11 No Transfers. . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VII COVENANTS OF BUYER. . . . . . . . . . . . . . . . . . . . . 40
7.01 Access to Books and Records . . . . . . . . . . . . . . . . 40
7.02 Notification. . . . . . . . . . . . . . . . . . . . . . . . 40
7.03 Director and Officer Liability and Indemnification. . . . . 40
7.04 Regulatory Filings. . . . . . . . . . . . . . . . . . . . . 41
7.05 Conditions. . . . . . . . . . . . . . . . . . . . . . . . . 41
7.06 Contact with Customers and Suppliers. . . . . . . . . . . . 41
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7.07 Bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 41
8.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . 41
8.02 Effect of Termination . . . . . . . . . . . . . . . . . . . 43
ARTICLE IX INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 44
9.01 Survival of Representations and Warranties. . . . . . . . . 44
9.02 Indemnification . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE X SHAREHOLDER REPRESENTATIVE. . . . . . . . . . . . . . . . . 49
10.01 Designation . . . . . . . . . . . . . . . . . . . . . . . . 49
10.02 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.03 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XI ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . 51
11.01 Disclosure Generally. . . . . . . . . . . . . . . . . . . . 51
11.02 Acknowledgment by Buyer . . . . . . . . . . . . . . . . . . 51
11.03 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 52
11.04 Further Assurances. . . . . . . . . . . . . . . . . . . . . 53
11.05 Other Matters Relating to Options . . . . . . . . . . . . . 53
ARTICLE XII DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 54
12.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 54
12.02 Cross-Reference of Other Definitions. . . . . . . . . . . . 56
ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 58
13.01 Press Releases and Communications . . . . . . . . . . . . . 58
13.02 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 59
13.03 Waiver of Certain Transfer Restrictions and Termination
of Agreements . . . . . . . . . . . . . . . . . . . . . . . 59
13.04 Knowledge Defined . . . . . . . . . . . . . . . . . . . . . 59
13.05 Assignment of Certain Rights. . . . . . . . . . . . . . . . 59
13.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.07 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . 62
13.08 Severability. . . . . . . . . . . . . . . . . . . . . . . . 63
13.09 No Strict Construction. . . . . . . . . . . . . . . . . . . 63
13.10 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . 63
13.11 Complete Agreement. . . . . . . . . . . . . . . . . . . . . 64
13.12 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 64
13.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 64
13.14 Schedules and Exhibits. . . . . . . . . . . . . . . . . . . 64
13.15 Specific Performance. . . . . . . . . . . . . . . . . . . . 64
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EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Financing Letter
Exhibit C Certificates of Vinyl, the Company and the Shareholder Representative
Exhibit D Opinions of Counsel to the Company, Vinyl and H.I.G. Cayman
Exhibit E FIRPTA Certificates
Exhibit F Certificate of Buyer
Exhibit G Settlement Agreement
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SCHEDULES
Affiliated Transactions
Authorization
Bank Accounts
Buyer Consents
Capital Stock
Contracts
Developments
Employee Benefits
Environmental Compliance
Financial Statements
Governmental Consents
Indebtedness
Insurance
Intellectual Property
Liabilities
Liens
Litigation
Optionholders
Organization
Personal Property
Real Property
Seller Consents Schedule
Shareholders
Subsidiary
Taxes
Terminating Agreements
Third-Party Consents
Updated
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