AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of April 29, 1998, by and among THERMOVIEW INDUSTRIES, INC.
("Parent"), a Nevada corporation having its principal office located in
Owensboro, Kentucky; THERMOVIEW MERGER CORP. ("Sub"), a Kentucky corporation
having its principal office located in Louisville, Kentucky; PRIMAX WINDOW
CO. ("Company"), a Kentucky corporation having its principal office located
in Louisville, Kentucky; and the shareholders of Company identified on
SCHEDULE 6.1 hereto (each a "Shareholder" and collectively the
"Shareholders").
PREAMBLE
The Boards of Directors of Company, Sub and Parent are of the opinion
that the transactions described herein are in the best interests of the
parties to this Agreement and their respective shareholders. This Agreement
provides for the acquisition of Company by Parent pursuant to the merger of
Company with and into Sub. At the effective time of such merger, the
outstanding shares of the capital stock of Company shall be converted into
the right to receive shares of the common stock of Parent (except as provided
herein). As a result, shareholders of Company shall become shareholders of
Parent. Also at the Effective Time of the Merger, Company shall cease to
exist by operation of law and the business formerly conducted by Company
shall thereafter be conducted by and in the name of Sub. The transactions
described in this Agreement are subject to receipt of required regulatory
consents and approvals and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties to this
Agreement that the Merger shall qualify as a "reorganization" within the
meaning of Section 368(a), including Section 368(a)(1)(A) and (a)(2)(D), of
the Internal Revenue Code of 1986, as amended (the "Code") for federal income
tax purposes.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement
and the provisions of the Plan of Merger attached as EXHIBIT A, at the
Effective Time, Company shall be merged with and into Sub in accordance with
the applicable provisions of the Kentucky Business Corporation Act ("KBCA")
and with the effect provided in the KBCA (the "Merger"). Sub shall be the
surviving corporation resulting from the Merger and shall be a wholly-owned
subsidiary of Parent and shall continue to be governed by the laws of the
Commonwealth of Kentucky. The
Merger shall be consummated pursuant to the terms of this Agreement and the
Plan of Merger, which have been approved and adopted by the respective Boards
of Directors of Company, Sub and Parent, by the Shareholders as the only
shareholders of Company, and by Parent, as the sole shareholder of Sub.
1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
hereof. The Closing shall be held at such location as may be mutually agreed
upon by the parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated
by this Agreement shall become effective 11:59 p.m. EDT (the "Effective
Time") on April 30, 1998 (the "Effective Date").
ARTICLE 2
TERMS OF MERGER
2.1 CHARTER.
The Articles of Incorporation of Sub in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of the
surviving corporation resulting from the Merger until otherwise amended or
repealed.
2.2 BYLAWS.
The Bylaws of Sub in effect immediately prior to the Effective
Time shall be the Bylaws of the surviving corporation resulting from the
Merger until otherwise amended or repealed.
2.3 DIRECTORS AND OFFICERS.
The directors of Sub in office immediately prior to the
Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the directors of the surviving corporation resulting
from the Merger from and after the Effective Time in accordance with the
Bylaws of such corporation. The officers of Sub in office immediately prior
to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the officers of the surviving
corporation resulting from the Merger from and after the Effective Time in
accordance with the Bylaws of such corporation.
2.4 CERTAIN CLOSING DELIVERIES. In connection with the Closing,
each of Parent, Company and the Shareholders agrees to execute and deliver to
each other party the following:
(a) Company and Xxxxxxx X. Xxxxx shall have executed and
delivered to the other an Employment Agreement, which shall be in the form of
EXHIBIT B.
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(b) Parent and each of the Shareholders shall have executed and
delivered to the other a Noncompetition Agreement, which shall be in the
form of EXHIBIT C.
(c) Parent and each of the Shareholders shall have executed and
delivered to the other a Registration Rights Agreement, which shall be in
the form of EXHIBIT D.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Company, Sub or the shareholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of $.001 par value common stock of Parent
("Parent Common Stock") and any other class or series of capital stock of
Parent (collectively, "Parent Capital Stock") issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of the no par value common stock of Sub ("Sub
Common Stock") issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding from and after the Effective Time.
(c) Each share of Company Common Stock (excluding shares
held by Company or Parent or any of its subsidiaries) issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and
shall be converted into and exchanged for (i) the right to receive 4,860
shares of Parent Common Stock (the "Stock Exchange Ratio"), and (ii) the
right to receive $11,600 (the "Cash Exchange Ratio").
3.2 ANTI-DILUTION PROVISIONS. In the event Parent changes the
number of shares of Parent Common Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, or similar
recapitalization with respect to such stock and the record date therefor (in
the case of a stock dividend) or the effective date thereof (in the case of a
stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, the Stock Exchange Ratio
shall be proportionately adjusted.
3.3 SHARES HELD BY COMPANY OR PARENT. Each of the shares of
Company Common Stock held by Company or Parent or any of its subsidiaries
shall be canceled and retired at the Effective Time and no consideration
shall be issued in exchange therefor.
3.4 DISSENTING SHAREHOLDERS.
Each of the Shareholders agrees that he will not seek to assert
dissenters' rights to which such Shareholder otherwise would be entitled
under Subtitle 13 of the KBCA.
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3.5 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of Company Common Stock exchanged pursuant
to the Merger who would otherwise have been entitled to receive a fraction of
a share of Parent Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Parent
Common Stock multiplied by the market value of one share of Parent Common
Stock at the Effective Time. The market value of one share of Parent Common
Stock at the Effective Time shall be the highest bid price of such common
stock as quoted by the National Association of Securities Dealers (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by Parent) on the last trading day preceding
the Effective Time. No such holder will be entitled to dividends, voting
rights, or any other rights as a shareholder in respect of any fractional
shares.
3.6 POST-CLOSING EARN-OUT. The Shareholders shall be entitled to
receive post-closing earn-outs as set forth on SCHEDULE 3.6.
3.7 NET CURRENT ASSETS. As soon as practicable but within thirty
(30) days after the Closing Date, the Shareholders, at their expense, shall
cause Xxxxx & Associates, an independent accounting firm, to prepare a
balance sheet of the Company immediately prior to the Effective Time (the
"Effective Time Balance Sheet") setting forth the net current assets of the
Company using accrual accounting and in conformance with generally accepted
accounting principles (the "Net Current Assets"). A copy of the Effective
Time Balance Sheet shall be promptly furnished to Parent. If Parent
disagrees with the Net Current Assets, Parent shall engage Coopers & Xxxxxxx,
an independent public accounting firm, at its expense, to audit the Effective
Time Balance Sheet and deliver a certified written report to the Shareholders
confirming the Net Current Assets ("Audited Net Current Assets"). If the
Shareholders fail to notify Parent within fifteen (15) days after receiving
the Coopers & Xxxxxxx report, such report shall be deemed accepted for
purposes of calculating Net Current Assets. If the Shareholders should so
notify Parent of a dispute concerning Audited Net Current Assets, Parent
shall then engage another big-six independent accounting firm that is
mutually acceptable to Parent and the Shareholders to resolve such dispute
and such firm shall notify Parent and the Shareholders of its resolution of
such dispute within two weeks of its engagement by Parent. The cost of
services provided by such big-six accounting firm shall be borne equally by
Parent on one hand and the Shareholders on the other. Any such resolution
shall be final and binding on all parties hereto for the purposes of
calculating Net Current Assets. In the event the amount of Net Current
Assets is less than $670,000 the Shareholders shall pay such deficit amount
to Parent on a dollar-for-dollar basis within thirty (30) days following the
later of its determination of the Net Current Assets, Parent's audit or the
resolution of any dispute by such big-six accounting firm. In the event the
amount of the Net Current Assets is greater than $670,000 Parent shall pay
such excess amount on a dollar-for-dollar basis to the Shareholders within
thirty (30) days following the later of either Xxxxx & Associates'
determination of the Net Current Assets or the determination of Audited Net
Current Assets. For purposes of this Section 3.7, "Net Current Assets" shall
mean the current assets of the Company at the Effective Time determined in
accordance with generally accepted accounting principles applied on a
consistent basis. Net current assets shall be calculated by subtracting the
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book value of all of the current liabilities of the Company from the book
value of all current tangible assets of the Company.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. At the Closing (or as soon as reasonably
practicable thereafter), each holder of shares of Company Common Stock (other
than shares to be canceled pursuant to Section 3.3) issued and outstanding at
the Effective Time shall surrender the certificate or certificates
representing such shares to Parent and shall promptly upon surrender thereof
receive in exchange therefor the consideration provided in Section 3.1,
together with all undelivered dividends or distributions in respect of such
shares (without interest thereon) pursuant to Section 4.2. To the extent
required by Section 3.5, each holder of shares of Company Common Stock issued
and outstanding at the Effective Time also shall receive, upon surrender of
the certificate or certificates representing such shares, cash in lieu of any
fractional share of Parent Common Stock to which such holder may be otherwise
entitled (without interest). Parent shall not be obligated to deliver the
consideration to which any former holder of Company Common Stock is entitled
as a result of the Merger until such holder surrenders such holder's
certificate or certificates representing the shares of Company Common Stock
for exchange as provided in this Section 4.1. The certificate or
certificates of Company Common Stock so surrendered shall be duly endorsed as
Parent may require.
4.2 RIGHTS OF FORMER SHAREHOLDERS. At the Effective Time, the
stock transfer books of Company shall be closed as to holders of Company
Common Stock immediately prior to the Effective Time and no transfer of
Company Common Stock by any such holder shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions
of Section 4.1, each certificate theretofore representing shares of Company
Common Stock (other than shares to be canceled pursuant to Section 3.3) shall
from and after the Effective Time represent for all purposes only the right
to receive the consideration provided in Sections 3.1 and 3.5 in exchange
therefor, subject, however, to Company's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time
which have been declared or made by Company in respect of such shares of
Company Common Stock in accordance with the terms of this Agreement and which
remain unpaid at the Effective Time. Whenever a dividend or other
distribution is declared by Parent on Parent Common Stock, the record date
for which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of Parent Common Stock
issuable pursuant to this Agreement, but no dividend or other distribution
payable to the holders of record of Parent Common Stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of Company Common Stock issued and
outstanding at the Effective Time until such holder surrenders such
certificate for exchange as provided in Section 4.1. However, upon surrender
of such Company Common Stock certificate, both Parent Common Stock
certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered dividends and cash
payments payable hereunder (without interest) shall be delivered and paid
with respect to each share represented by such certificate.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent as follows:
5.1 ORGANIZATION AND QUALIFICATION. Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Kentucky. Company is qualified to do business as a foreign
corporation and is in good standing in the states set forth on SCHEDULE 5.1.
The nature of the business of Company does not require Company to be licensed
or qualified in any other jurisdiction. Company has made available to Parent
complete and correct copies of the Articles of Incorporation and By-laws of
Company as currently in effect.
5.2 CORPORATE POWER AND AUTHORITY. Company has the corporate power
and authority to own and hold its properties and to carry on its business as
now conducted. Company (a) has the corporate power and authority to execute,
deliver and perform this Agreement and the Exhibits and to deliver the
Schedules hereto and the other documents and instruments contemplated hereby
(collectively this Agreement, the Exhibits and Schedules hereto, and the
other documents and instruments contemplated hereby shall constitute the
"Documents") and to consummate the transactions contemplated hereby and
thereby and (b) has taken all necessary corporate and shareholder action to
authorize and approve the execution, delivery and performance of this
Agreement and the other Documents and the consummation of the transactions
contemplated hereby and thereby. This Agreement and the other Documents have
been duly and validly executed and delivered by Company and constitute valid
and binding obligations of Company, enforceable against Company in accordance
with their terms.
5.3 FOREIGN PERSON. Company is not a foreign person as that term
is defined in Section 1445(f)(3) of the Code and applicable regulations.
5.4 CAPITALIZATION. Company has authorized capital consisting of
100 shares of common stock, with a par value of $100 per share, all of which
are issued and outstanding and no shares are held as treasury stock. All of
the outstanding shares of Company have been duly authorized and validly
issued and are fully paid and nonassessable. None of the outstanding shares
of Company has been issued in violation of any preemptive right. There are
no outstanding options, warrants, rights, calls, commitments, conversion
rights, rights of exchange, plans or other agreements of any character
providing for the purchase, issuance or sale of any shares of capital stock
of Company, other than as contemplated by this Agreement.
5.5 SUBSIDIARIES AND INVESTMENTS. Company has no subsidiaries and
does not own, directly or indirectly, any capital stock or other equity or
ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity.
5.6 BOOKS AND RECORDS. The minute books of Company, which have
been and will be made available to Parent and its representatives, contain
accurate records of all meetings of and corporate actions or written consents
by the shareholders and Board of Directors of
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Company set forth in such minute books. Company does not have any of its
records, systems, controls, data or information recorded, stored, maintained,
operated or otherwise wholly or partly dependent upon or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and
therefrom) are not under the exclusive ownership and direct control of
Company.
5.7 FINANCIAL STATEMENTS. Company has previously furnished to
Parent, and attached hereto as SCHEDULE 5.7 are, (i) the unaudited balance
sheet of Company as at December 31, 1997 and the related unaudited statement
of operations for the fiscal year ended December 31, 1997, (ii) the reviewed
balance sheets of Company as at March 31, 1997 and 1996 and the related
statements of income, retained earnings and cash flows for the years then
ended, (iii) the reviewed balance sheet of Company as at March 31, 1996 and
the related statements of income, retained earnings and cash flows for the
year then ended, (iv) the reviewed balance sheets of Company as at March 31,
1995 and 1994 and the related statements of income, retained earnings and
cash flows for the years then ended, and (v) the unaudited balance sheet (the
"Balance Sheet") of Company as at January 31, 1998 (the "Balance Sheet Date")
and the related unaudited income statement for the one (1) month then ended.
All such financial statements (the "Financial Statements"), except as set
forth on SCHEDULE 5.7, have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied and were
prepared from the books and records of Company. Such books and records are
complete and correct in all material respects, accurately reflect all
transactions of the business of Company, and have been made available to
Parent for examination. The Financial Statements fairly present the
financial position of Company as of the dates thereof and the results of its
operations and cash flows for the periods ended on the dates thereof. The
Financial Statements reflect reserves appropriate and adequate for all known
material liabilities and reasonably anticipated losses as required by GAAP.
Since the Balance Sheet Date, (i) there has been no change in the assets,
liabilities or financial condition of Company from that reflected in the
Balance Sheet except for changes in the ordinary course of business
consistent with past practice and which have not been materially adverse, and
(ii) none of the business, prospects, financial condition, operations,
property or affairs of Company has been materially adversely affected by any
occurrence or development, individually or in the aggregate, whether or not
insured against. Company has disclosed to Parent all material facts relating
to the preparation of the Financial Statements.
5.8 EMPLOYMENT AND LABOR MATTERS.
(a) SCHEDULE 5.8 lists all employees and officers of Company
on the date hereof, along with the amount of the current annual salaries and
total compensation paid or due for services to each employee or officer for
the most recent fiscal year end and the year to date, and a full and complete
description of any commitments to such employees and officers with respect to
compensation payable thereafter. To the best knowledge of Company, no key
employee or group of employees has any plans to terminate employment with
Company.
(b) Company is not a party to or bound by any collective
bargaining agreement with any labor organization, group or association
covering any of its employees, and Company has no knowledge of any attempt to
organize Company's employees by any Person,
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unit or group seeking to act as their bargaining agent. There are no pending
or threatened charges (by employees, their representatives or governmental
authorities) of unfair labor practices or of employment discrimination or of
any other wrongful action with respect to any aspect of employment of any
person employed or formerly employed by Company. No union representation
election relating to employees of Company has been scheduled by any
governmental agency or authority, no organizational effort is being made with
respect to any of such employees, and there is no investigation of Company's
employment policies or practices by any governmental agency or authority
pending or threatened. Company is not currently, nor has it been, involved
in labor negotiations with any unit or group seeking to become the bargaining
unit for any employees of Company. Company has not experienced any material
work stoppages, and to the best knowledge of Company, no work stoppage is
planned.
5.9 REAL PROPERTY. Company owns no real property.
5.10 POWERS OF ATTORNEY; ABSENCE OF LIMITATIONS ON COMPETITION;
GUARANTEES.
Except as set forth in SCHEDULE 5.10, (i) no power of attorney or
similar authorization given by Company presently is in effect or outstanding;
(ii) no contract or agreement to which Company is a party or is bound or to
which Company's properties or assets are subject limits the freedom of
Company to compete in any line of business or with any Person; and (iii)
Company is not a party to or bound by any guarantee of any debt or obligation
of any other Person.
5.11 SIGNIFICANT SUPPLIERS. Set forth on SCHEDULE 5.11 is a true
and correct list of Company's ten largest suppliers for the most recent
twelve (12) month period ending December 31, 1997 and for the three (3) month
period ending March 27, 1998, together with the amount attributable to such
suppliers expressed in dollars and as a percentage of total supplies
purchased. None of the suppliers identified on SCHEDULE 5.11 has terminated,
materially reduced or threatened to terminate or materially reduce its
supplies to Company during the period covered by such schedule.
5.12 GOVERNMENTAL APPROVALS. Except as set forth on SCHEDULE 5.12,
no registration or filing with, or consent or approval of or other action by,
any Federal, state or other governmental agency or instrumentality is or will
be necessary for the valid execution, delivery and performance by Company of
this Agreement.
5.13 VALIDITY, ETC. Except as set forth on SCHEDULE 5.13, neither
the execution and delivery of this Agreement or the other Documents, the
consummation of the transactions contemplated hereby or thereby, nor the
performance of this Agreement or the other Documents in compliance with the
terms and conditions hereof and thereof by Company will (i) violate, conflict
with or result in any breach of any trust agreement, Articles of
Incorporation, bylaw, judgment, decree, order, statute or regulation
applicable to Company, (ii) violate, conflict with or result in a breach,
default or termination or give rise to any right of termination, cancellation
or acceleration of the maturity of any payment date of any of the obligations
of Company or increase or otherwise affect the obligations of Company under
any law, rule, regulation or any judgment, decree, order, governmental
permit, license or order or any of the terms, conditions or provisions of any
mortgage, indenture, note, license, agreement or other instrument or
obligation
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related to Company or to Company's ability to consummate the transactions
contemplated hereby or thereby, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained in writing and provided to Parent, or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Company.
5.14 ABSENCE OF ADVERSE CHANGE; CONDUCT OF BUSINESS.
During the period from the Balance Sheet Date to and including the
date of this Agreement, except as set forth on SCHEDULE 5.14, Company has not
(i) borrowed or agreed to borrow any material amount of funds or incurred any
liability or obligation of any nature (whether accrued, absolute, contingent
or otherwise), or guaranteed or agreed to guarantee any obligations of
others, (ii) canceled any indebtedness owing to it or any claims that it
might have possessed, waived any material rights of substantial value or
sold, leased, encumbered, transferred or otherwise disposed of, or agreed to
sell, lease, encumber, or otherwise dispose of its assets or permitted any of
its assets to be subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind, (iii) made any capital
expenditure or commitment therefor, (iv) declared or paid any dividend or
made any distribution on any shares of its capital stock, or redeemed,
purchased or otherwise acquired any shares of its capital stock or any
option, warrant or other right to purchase or acquire any such shares, (v)
increased its indebtedness for borrowed money, or made any loan to any
Person, (vi) written off as uncollectible any notes or accounts receivable,
except write-offs in the ordinary course of business charged to applicable
reserves, (vii) made any material change in any method of accounting or
auditing practice, (viii) otherwise conducted its business or entered into
any transaction, except in the usual and ordinary manner, or (ix) agreed,
whether or not in writing, to do any of the foregoing.
5.15 CERTAIN PRACTICES. None of Company, any of Company's directors
or officers, or to the best knowledge of Company, Company's employees has,
directly or indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment, or other unlawful expenses relating to political
activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; made any false or
fictitious entry on the books or records of Company or any subsidiary; made
any bribe, rebate, payoff, influence payment, kickback, or other unlawful
payment; given any favor or gift which is not deductible for federal income
tax purposes; or made any bribe, kickback, or other payment of a similar or
comparable nature, whether lawful or not, to any person or entity, private or
public, regardless of form, whether in money, business or to obtain special
concessions, or to pay for favorable treatment for business secured or for
special concessions already obtained.
5.16 COMPLIANCE WITH LAW; LICENSES AND PERMITS.
Except as set forth on SCHEDULE 5.16, Company has complied in all
material respects with all laws, ordinances, legal requirements, rules,
regulations and orders applicable to it, its
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operations, properties, assets, products and services. Except as set forth
on SCHEDULE 5.16, there is no existing law, rule, regulation or order, and
Company is not aware of any proposed law, rule, regulation or order, whether
Federal, state or local, which would prohibit or materially restrict Sub
from, or otherwise materially adversely affect Sub in, conducting the
business of Company in the manner heretofore conducted by Company in any
jurisdiction in which such business is now conducted. Company possesses all
franchises, permits, licenses, certificates and consents required from any
governmental or regulatory authority in order for Company to carry on its
business as currently conducted and to own and operate its properties and
assets as now owned and operated and all of such licenses and permits are set
forth on SCHEDULE 5.16.
5.17 EMPLOYEE BENEFITS.
(a) Set forth on SCHEDULE 5.17 is a list of all pension,
profit sharing, retirement, deferred compensation, stock purchase, stock
option, incentive, bonus, vacation, severance, disability, hospitalization,
medical insurance, life insurance, fringe benefit, welfare and other employee
benefit plans, programs or arrangements pursuant to which Company or its
ERISA Affiliates provides (directly or indirectly, individually or jointly
through others) benefits or compensation to or on behalf of employees or
independent contractors or former employees or former independent contractors
of Company or its ERISA Affiliates, whether formal or informal, whether or
not written ("Employee Plan"). On request by Parent, Company shall furnish a
copy of each Employee Plan and a copy of any related materials. Company will
maintain the benefits listed on SCHEDULE 5.17 in full force and effect
through the Effective Date. Except as set forth on SCHEDULE 5.17, Parent
shall not have any obligation or liability of any kind or nature for any
compensation or benefits of any kind or nature to the employees or
consultants of Company for services rendered prior to the Effective Date.
(b) Each Employee Plan covering any present or former
employee of Company which is subject to the continuation health coverage
requirements of Section 4980B of the Code or Section 601 of ERISA or any
applicable state law has complied with all such requirements for continuation
coverage.
(c) There are no actions, suits or claims pending (other
than routine claims for benefits) or threatened against or with respect to
any Employee Plan or the assets of any Employee Plan.
(d) Each Employee Plan (and the related trust or funding
vehicle, if any) has been administered and maintained in accordance with its
terms and with applicable law. Except as set forth on SCHEDULE 5.17(d), each
Employee Plan which is intended to be qualified under Section 401 of the Code
and each amendment to such plan is subject to a favorable determination
letter from the Internal Revenue Service ("IRS") and each such plan has at
all times been maintained, by its terms and in operation, in accordance with
Section 401 of the Code. The assets of each Employee Plan which is not
funded through the general assets of Company are at least equal to the
liabilities under such Employee Plan, and all assets of each Employee Plan
are shown on the books and records of such Employee Plan at fair market
value. No Employee Plan
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has unfunded liabilities that as of the Effective Time are not accurately and
fully reflected on Company's Balance Sheet.
(e) Neither Company nor any of its ERISA Affiliates is or
has been a participant in, or is or has been obligated to maintain or to make
contributions to, a multi-employer plan (within the meaning of ERISA Section
3(37) and ERISA Section 4001(a)(3)) or an Employee Plan which is subject to
Title IV of ERISA. Neither Company nor any ERISA Affiliate has sponsored,
contributed to or been obligated under Title I or IV of ERISA to contribute
to a "defined benefit plan" (as defined in ERISA Section 3(35)). Company is
not obligated to provide post-retirement medical benefits or any other
unfunded post-retirement welfare benefits to or on behalf of any persons
whatsoever (except the benefits pursuant to the continuation health coverage
requirements under Section 4980B of the Code, ERISA Section 601, or
applicable state law).
(f) Neither Company nor its ERISA Affiliates is subject to
and, to the best knowledge of Company, no facts exist which could subject
Company or any of its ERISA Affiliates to, any liability whatsoever which is
directly or indirectly related to any Employee Plan, including, but not
limited to, liability for benefit payments or related claims, any liability
for any tax or related penalty under the Code, or liability for any damages
or penalties arising under Title I or Title IV of ERISA. No reportable event
under Section 4043 of ERISA has occurred or, to the best knowledge of
Company, will occur with respect to such Employee Plan.
(g) Termination of or withdrawal from any Employee Plan
immediately after the Effective Time would not subject Parent to any
liability, tax or penalty whatsoever.
(h) The execution or performance of the transactions
contemplated by this Agreement will not create, accelerate or increase any
obligations under the Employee Plans, including any obligation to make any
payment which would not be deductible as an excess golden parachute payment
under Section 280G of the Code.
(i) All contributions to or under each Employee Plan and all
expenses of each Employee Plan are fully deductible for income tax purposes
for the taxable year for which such contributions are made or such expenses
are paid. All contributions to or under each Employee Plan have been made
when due under the terms of such Employee Plan in accordance with applicable
law.
(j) For purposes of this Section 5.17, the term "ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as amended,
and the term "ERISA Affiliate" shall mean each trade or business (whether or
not incorporated) which together with Company is treated as a single employer
under Section 414(b), (c), (m), (o) or (t) of the Code.
(k) Immediately before the Effective Date, the sum of the
account balances maintained for all participants under the Primax Window
Company, Inc. 401(k) Plan equals the fair market value of the assets of such
plan.
11
5.18 FIXED ASSETS. SCHEDULE 5.18 contains a true and complete list
of all of Company's fixed assets with a net book value of greater than
$1,000.00, whether owned or leased. Except as shown on SCHEDULE 5.18,
Company has good and marketable title to all of its fixed assets, free and
clear of all claims, liens, mortgages, charges and encumbrances except as
disclosed in the Balance Sheet. All of Company's fixed assets, whether owned
or leased, are adequate and usable for the purposes for which they are
currently used, are in good operating condition and repair and have been
properly maintained.
5.19 INSURANCE. Company is, and will be through the Closing,
insured with insurers in respect of its properties, assets and businesses as
set forth on the attached SCHEDULE 5.19. SCHEDULE 5.19 lists the insurance
coverage carried by Company, which insurance will remain in full force and
effect with respect to all events occurring prior to the Effective Date.
Except as set forth on SCHEDULE 5.19, Company (i) has not failed to give any
notice or present any claim under any such policy or binder in due and timely
fashion, (ii) has not received notice of cancellation or non-renewal of any
such policy or binder, (iii) is not aware of any threatened or proposed
cancellation or non-renewal of any such policy or binder, (iv) has not
received notice of any insurance premium which will be materially increased
in the future, and (v) is not aware of any insurance premium which will be
materially increased in the future. There are no outstanding claims under
any such policy which have gone unpaid for more than 45 days, or as to which
the insurer has disclaimed liability.
5.20 ACCOUNTS RECEIVABLE. The accounts receivable and other debts
due or recorded in the respective records and books of account of Company as
being due to Company as of the Effective Date, all of which are set forth on
SCHEDULE 5.20, arose in the ordinary course of business of Company, are not
subject to any counterclaim or set-off and are fully collectible within 120
days after the Effective Date without resort to litigation and without offset
or counterclaim.
5.21 OUTSTANDING CONTRACTS. SCHEDULE 5.21 sets forth a description
of all existing contracts, agreements, leases, commitments, licenses and
franchises, which involve obligations or commitments by Company of $10,000 or
more and are not cancelable by Company without penalty within 30 days
(collectively "Contracts"), whether written or oral, relating to Company,
except for customer contracts which arose in the ordinary course of business.
Company has delivered or made available to Parent true, correct and complete
copies of all of the Contracts specified on SCHEDULE 5.21 which are in
writing, and such schedule sets forth a complete description of all Contracts
which are not in writing. All of the Contracts are in full force and effect
and enforceable in accordance with their terms, except to the extent that the
enforceability thereof may be subject to or affected by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or
other laws relating to or affecting the rights of creditors generally.
Except as set forth on SCHEDULE 5.21, Company and, to the best knowledge of
Company, each other party thereto has materially performed all the
obligations required to be performed by it, has received no notice of default
and is not in default (with due notice or lapse of time or both) under any of
the Contracts. Company has no present expectation or intention of not fully
performing all its obligations under each of the Contracts, and Company has
no knowledge of any breach or anticipated breach by the other party to any of
the Contracts to
12
which Company is a party. Except as set forth on SCHEDULE 5.21, none of the
Contracts has been terminated; no notice has been given by any party thereto
of any alleged default by any party thereunder; and Company is not aware of
any intention or right of any party to declare another party to any of the
Contracts to be in default. Except as set forth on SCHEDULE 5.21, there
exists no actual or, to the best knowledge of Company, threatened
termination, cancellation or limitation of the business relationship of
Company by any party to any of the Contracts.
5.22 OUTSTANDING LEASES. SCHEDULE 5.22 sets forth a description of
each agreement by which Company leases each parcel of real property (the
"Leased Parcels") used in connection with the business (collectively, the
"Leases"). Company has delivered or made available to Parent true, correct
and complete copies of all of the Leases specified on SCHEDULE 5.22. All
rents due under the Leases have been paid. All of the Leases are in full
force and effect and enforceable in accordance with their terms, except to
the extent that the enforceability thereof may be subject to or affected by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, or other laws relating to or affecting the rights of creditors
generally. Except as set forth on SCHEDULE 5.22, Company and, to the best
knowledge of Company, each other party thereto has performed all the
obligations required to be performed by it, has received no notice of default
and is not in default (with due notice or lapse of time or both) under any of
the Leases. Company has no present expectation or intention of not fully
performing all its obligations under each of the Leases, and Company has no
knowledge of any breach or anticipated breach by the other party to any of
the Leases. Except as set forth on SCHEDULE 5.22, none of the Leases has
been terminated; no notice has been given by any party thereto of any alleged
default by any party thereunder; and Company is not aware of any intention or
right of any party to declare another party to any of the Leases to be in
default. There exists no actual or, to the best knowledge of Company,
threatened termination, cancellation or limitation of the business
relationship of Company with any party to any of the Leases.
5.23 INTELLECTUAL PROPERTIES. SCHEDULE 5.23 contains an accurate
and complete list of all domestic and foreign letters patent, patents, patent
applications, patent licenses, software licenses and know-how licenses, trade
names, trademarks, copyrights, unpatented inventions, service marks,
trademark registrations and applications, service xxxx registrations and
applications and copyright registrations and applications, trade secrets or
other confidential proprietary information owned or used by Company in the
operation of the business (collectively the "Intellectual Property"). Except
as set forth on SCHEDULE 5.23 and except for commercial software licensed for
use on personal computers, Company owns the entire right, title and interest
in and to the Intellectual Property, trade secrets and technology used in the
operation of its business and each item constituting part of the Intellectual
Property and trade secrets and technology which is owned by Company has been,
to the extent indicated in SCHEDULE 5.23, duly registered with, filed in or
issued by, as the case may be, the United States Patent and Trademark office
or such other government entities, domestic or foreign, as are indicated in
SCHEDULE 5.23 and such registrations, filings and issuances remain in full
force and effect. There have been and are no pending or, to the best
knowledge of Company, threatened proceedings or litigation or other adverse
claims affecting or with respect to the Intellectual Property. There is, to
the best knowledge of Company, no reasonable basis upon which a claim may be
asserted against Company for infringement of any domestic or foreign letters
patent, patents, patent applications,
13
patent licenses and know-how licenses, trade names, trademark registrations
and applications, common law trademarks, service marks, service xxxx
registrations or applications, copyrights, copyright registrations or
applications, trade secrets or other confidential proprietary information.
To the best knowledge of Company, no Person is infringing the Intellectual
Property.
5.24 PROPRIETARY INFORMATION OF THIRD PARTIES.
Except as disclosed on SCHEDULE 5.24, no third party has claimed or,
to the best knowledge of Company, has reason to claim that any Person
employed by or consulting with Company ("Related Person") has (i) violated or
may be violating any of the terms or conditions of such person's employment,
non-competition or non-disclosure agreement with such third party, (ii)
disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such third party, or
(iii) interfered or may be interfering in the employment relationship between
such third party and any of its present or former employees. No third party
has requested information from Company which suggests that such a claim might
be contemplated. Except as disclosed on SCHEDULE 5.24, to the best knowledge
of Company, no Related Person has employed or proposes to employ any trade
secret or any information or documentation proprietary to any former employer
and no Related Person has violated any confidential relationship which such
person may have had with any third party, in connection with the development
or sale of any service of Company, and Company has no reason to believe there
will be any such employment or violation.
5.25 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE
5.25, to the best knowledge of Company, no director, officer or shareholder
of Company, or member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person, or any member of
the family of any such person, has a beneficial interest greater than 5% or
is an officer, director, trustee, partner or holder of any equity interest
greater than 5% (an "Affiliate"), is a party to any transaction with Company,
including any contract, agreement or other arrangement providing for the
employment of, furnishing of services by, rental of real or personal property
from or otherwise requiring payments or involving other obligations to any
such person or firm.
5.26 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Except as and to the extent of the amounts specifically reflected
or reserved against in the Balance Sheet, or except as set forth
on SCHEDULE 5.26, Company has no liabilities or obligations of any
nature whatsoever due or to become due, accrued, absolute,
contingent or otherwise, except for liabilities and obligations
incurred since the date thereof in the ordinary course of business
and consistent with past practice. Company does not know of, and
has no reason to know of, any basis for the assertion against
Company of any liability or obligation not fully reflected or
reserved against in the Balance Sheet.
14
(b) Company is not bound by any agreement, or subject to any
charter or other corporate restriction or any legal requirement,
which has, or in the future can reasonably be expected to have, a
material adverse effect on the business or prospects of Company.
5.27 TAXES. Company has timely filed a valid election to be treated
as an S corporation in accordance with the provisions of Section 1361 of the
Code, effective for its tax year ended December 31, 1997 and has qualified
and shall continue to qualify as an S corporation for all years and periods
thereafter until the Effective Time. SCHEDULE 5.27 lists all the states and
localities with respect to which Company is required to file any corporate,
income and/or franchise tax returns and sets forth whether Company is treated
as the equivalent of an S corporation by or with respect to each such state
and/or locality. Company has not engaged in any activity which would
disqualify its treatment as an S corporation for those tax purposes. Except
as set forth on SCHEDULE 5.27, all federal, state, local and foreign tax
returns and tax reports required to be filed by Company on or before the date
hereof have been timely filed with the appropriate governmental agencies in
all jurisdictions in which such returns and reports are required to be filed
and all amounts shown as owing thereon have been paid. All taxes (including,
without limitation, income, accumulated earnings, property, sales, use,
franchise, excise, license, value added, fuel, employees' income withholding
and social security taxes) which have become due or payable or are required
to be collected by Company or are otherwise attributable to any periods
ending on or before the Effective Date and all interest and penalties
thereon, whether disputed or not, have been paid or will be paid in full or
adequately reflected on the Balance Sheet or Company's books and records in
accordance with generally accepted accounting principles on or prior to the
Effective Time. Except as set forth on SCHEDULE 5.27, all deposits required
by law to be made by Company with respect to employees' withholding taxes
have been duly made, and as of the Effective Time all such deposits due will
have been made. Company has delivered to Parent true and complete copies of
all of Company's federal and state income tax returns for the fiscal periods
ended December 31, 1997 and March 31, 1997, 1996 and 1995 and all reports and
results of income tax audits, if any, related thereto. Except as set forth
on SCHEDULE 5.27, no examination of any tax return of Company is currently in
progress. There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any such tax return.
5.28 LITIGATION. Except as set forth on SCHEDULE 5.28, there is no
(i) action, suit, claim, proceeding or investigation pending or, to the best
knowledge of Company, threatened against or affecting Company (whether or not
such Company is a party or prospective party thereto), at law or in equity,
or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration proceeding pending relating to Company or (iii)
governmental inquiry pending or threatened against or involving Company, and
there is no basis for any of the foregoing. Company has not received any
opinion or memorandum or legal advice from legal counsel to the effect that
it is exposed, from a legal standpoint, to any liability or disadvantage
which may be material to the business, prospects, financial condition,
operations, property or affairs of Company. There are no outstanding orders,
writs, judgments, injunctions or decrees served upon Company by any court,
governmental agency or arbitration tribunal against Company. To the
15
best knowledge of Company, there are no facts or circumstances which may
result in institution of any action, suit, claim or legal, administrative or
arbitration proceeding or investigation against, involving or affecting
Company or the transactions contemplated hereby. Company is not in default
with respect to any order, writ, injunction or decree known to or served upon
it from any court or of any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign. Except as disclosed on SCHEDULE 5.28, there is no action or suit by
Company pending or threatened against others.
5.29 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. Company and all Leased Parcels are in
compliance with all applicable laws, rules, regulations, orders, ordinances,
judgments and decrees of all governmental authorities with respect to all
environmental statutes, rules and regulations. Except as set forth on
SCHEDULE 5.29, Company has not received notice of, nor does Company have
knowledge of, any past, present or future events, conditions, circumstances,
activities, practices, incidents, actions or plans of Company or Company's
predecessors, either collectively, individually or severally, which may
interfere with or prevent continued compliance with, or which may give rise
to any common law or legal liability or otherwise form the basis of any
claim, action, suit, proceeding, hearing, or investigation, based on or
related to the disposal, storage, handling, manufacture, processing,
distribution, use, treatment or transport, or the emission, discharge,
release or threatened release into the environment, of any Substance. As
used in this Section 5.29, the term "Substance" or "Substances" shall mean
any pollutant, contaminant, hazardous substance, hazardous material,
hazardous waste or toxic waste, as defined in any presently enacted federal,
state or local statute or any regulation that has been promulgated pursuant
thereto. No part of any of the Leased Parcels has been listed or proposed
for listing on the National Priorities List established by the United States
Environmental Protection Agency, or any corresponding list by any state or
local authorities.
(b) ENVIRONMENTAL SUBSTANCE LIABILITY. No event has
occurred or condition exists or operating practice is being employed that
could give rise to liability on the part of Company, either at the present
time or in the future, for any losses, liabilities, damages (whether
consequential or otherwise), settlements, penalties, interest, expenses and
costs of responses, including any such liability on account of the right of
any governmental or private entity or person, and including closure expenses,
costs of assessment, containment, removal, or response (other than monitoring
or transportation or disposal of materials required to be transported or
disposed of in the ordinary course of business consistent with past practice)
arising under any rule or federal, state, or local statute, or any regulation
that has been promulgated pursuant thereto, or common law, as a result of or
in connection with, or alleged to be as a result of or in connection with,
the following (collectively the "Hazardous Activities"):
(i) the handling, storage, use, transportation or
disposal of any Substances in or near or from the
Leased Parcels;
(ii) the handling, storage, use, transportation or
disposal of any Substances by Company or its
predecessors which Substances were a product,
by-product or otherwise resulted from the
16
operations conducted by or on behalf of Company or
its predecessors;
(iii) any intentional or unintentional emission, discharge
or release of any Substances in or near or from
facilities into or upon the air, surface water,
ground water or land or any disposal, handling,
manufacturing, processing, distribution, use,
treatment, or transport of such substances in or
near or from facilities by or on behalf of Company
or its predecessors; or
(iv) the presence of any toxic or hazardous building
materials (including but not limited to friable
asbestos or similar substances) in any facilities of
Company, including but not limited to the inclusion
of such materials in the exterior and interior
walls, floors, ceilings, tile, insulation or any
other portion of building structures.
(c) ENVIRONMENTAL PERMITS. Company has obtained and holds
all registrations, permits, licenses, and approvals issued by or on behalf of
any federal, state or local governmental body or agency if any
("Environmental Permits") that are required in connection with the operation
by Company of the Leased Parcels, the discharge or emission of Substances by
Company from the Leased Parcels or the generation, treatment, storage,
transportation, or disposal of any such Substances by Company. Such
Environmental Permits, which are described on SCHEDULE 5.29, are currently
effective and sufficient for the operation of the Leased Parcels and the
business of Company as currently conducted and intended to be conducted.
Company is in compliance with all terms and conditions of the Environmental
Permits, and is also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables contained in those laws or provisions or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder and applicable to Company
(d) DELIVERIES. Company has delivered to Parent true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Company pertaining to Substances or
Hazardous Activities in, on, or under the Leased Parcels or concerning
compliance by Company or any other Person for whose conduct they are or may
be held responsible, with environmental statutes, rules and regulations.
5.30 INVENTORY. All inventory of the Company, whether or not
reflected in the Financial Statements or Balance Sheet, consists of a quality
and quantity usable and salable in the ordinary course of business, except
for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Financial
Statements or the Balance Sheet, as the case may be. All inventories not
written off have been priced at the lower of cost or market on a first in,
first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Company.
17
5.31 YEAR-2000 COMPLIANCE.
(a) SCHEDULE 5.31 contains a true and complete list of all Systems (as
hereinafter defined), and each System is Year-2000 Compliant (as
hereinafter defined) to the extent indicated on SCHEDULE 5.31.
(b) As used throughout this Agreement, the following definitions
shall have the following meanings:
(1) "External Systems" shall mean all services which are
provided to Company by third parties and which are
dependent on information technology, including, but not
limited to, any external payroll, accounting, or tax
filing services or any checking, savings, or other
financial services.
(2) "Internal Systems" shall mean all technology products and
systems generally operated or controlled in-house by
Company, or its employees, agents, or independent
contractors including, but not limited to, computers,
computer networks, telephone systems, voicemail systems,
intercom systems, pager systems, and software applications.
(3) "Licensed Systems" shall mean all products and systems
developed by or for Company which are licensed, sold,
distributed, or otherwise transferred by Company to third
parties.
(4) "System" or "Systems" shall mean any, all, or any
combination of any Internal System, External System, or
Licensed System.
(5) "Year-2000 Compliant" shall mean, with respect to each
System, that such System is designed to be used before,
during, and after the calendar year 2000 A.D. and will
accurately accept date input and process, store, and output
date data and date-related data, including, without
limitation, calculating, comparing, sorting, and
sequencing such data and calculating leap years before,
during, and after the calendar year 2000 A.D. without any
manual intervention.
5.32 DISCLOSURE. All Documents delivered or to be delivered by or
on behalf of Company in connection with this Agreement and the transactions
contemplated hereby are true, complete and correct. Neither this Agreement,
nor any of the other Documents contains any untrue statement of a material
fact or omits a material fact necessary to make the statements made by
Company herein or therein, in light of the circumstances in which made, not
misleading. There is no fact known to Company which materially and adversely
affects the business, prospects or financial condition of Company or its
properties or assets, which has not been set forth in the Documents.
18
5.33 TAX AND REGULATORY MATTERS. Neither Company nor any Affiliate
thereof has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code, or (ii) materially impede or delay
receipt of any consents of any federal, state, county, local or other
governmental or regulatory agencies having jurisdiction over the parties or
result in the imposition of a condition or restriction of the type referred
to in the last sentence of Section 9.1(a).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each of the Shareholders represents and warrants to Parent as follows:
6.1 OWNERSHIP OF SHARES. Each Shareholder individually represents
and warrants as to herself or himself (a) that such Shareholder owns the
shares of Company Common Stock listed opposite such Shareholder's name on
SCHEDULE 6.1 hereto, free and clear of all pledges, security interests,
liens, charges, encumbrances, equities, claims, options or limitations of
every kind ("Claims"), and (b) that the delivery to Parent of the Common
Stock pursuant to the provisions of this Agreement will transfer to Parent
valid title thereto, free and clear of all Claims.
6.2 AUTHORITY AND APPROVAL; NO BREACH BY AGREEMENT. Each
Shareholder individually represents and warrants as to herself or himself (a)
that such Shareholder has full legal power, capacity and authority to
execute, deliver and perform this Agreement and the other Documents and to
consummate the transactions contemplated hereby and thereby. This Agreement
and the other Documents have been duly and validly executed and delivered by
such Shareholder and constitute valid and binding obligations of such
Shareholder, enforceable against such Shareholder in accordance with their
terms. No notice to, filing with, or consent of, any public body or
authority or other Person is necessary for the consummation by such
Shareholder of the transactions contemplated in this Agreement. Execution of
this Agreement by such Shareholder shall constitute such Shareholder's
written consent to approval of this Agreement and Plan of Merger in such
Shareholder's capacity as a holder of shares of Company Common Stock, and
such Shareholder hereby waives receipt of any further notice of the Merger,
including notice of the availability of dissenters' rights.
6.3 PURCHASE FOR INVESTMENT; RESTRICTED SECURITIES. Each
Shareholder individually represents and warrants as to himself (a) that such
Shareholder is acquiring shares of Parent Common Stock for investment and not
with a present view toward, or for sale in connection with, any distribution
thereof, nor with any present intention of distributing or selling the shares
of Parent Common Stock so acquired; (b) that such Shareholder has no present
plan or intention to sell, exchange or otherwise dispose of any of the shares
of Parent Common Stock received in the Merger; and (c) such Shareholder
acknowledges that (i) the shares of Parent Common Stock are not and will not
be registered under the Securities Act of 1933, as amended (the "1933 Act"),
and (ii) that Parent does not file periodic reports with the Securities and
Exchange Commission
19
pursuant to the requirements of Section 12 or 15(d) of the Securities
Exchange Act of 1934, as amended.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Company and the Shareholders
as follows:
7.1 ORGANIZATION. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada duly
qualified to transact business as a foreign corporation in each jurisdiction
in which the failure to so qualify would have a material adverse impact on
Parent's ability to merge with Company pursuant to this Agreement and perform
its obligations under this Agreement.
7.2 CORPORATE POWER AND AUTHORITY. Parent has the corporate power
and authority to execute, deliver and perform this Agreement and the other
Documents. The execution, delivery and performance of the Documents
contemplated hereby and the consummation of the transactions contemplated
hereby and thereby have been duly authorized and approved by all necessary
corporate action of Parent. The Documents to be executed and delivered by
Parent have been duly executed and delivered by, and constitute the legal,
valid and binding obligation of Parent enforceable against Parent in
accordance with their terms.
7.3 VALIDITY, ETC. Neither the execution and delivery by Parent of
this Agreement and the other Documents, the consummation by Parent of the
transactions contemplated hereby or thereby, nor the performance by Parent of
this Agreement and such other agreements in compliance with the terms and
conditions hereof and thereof will (i) violate, conflict with or result in
any breach of any trust agreement, articles of incorporation, bylaw,
judgment, decree, order, statute or regulation applicable to Parent, (ii)
violate, conflict with or result in a breach of or default (or give rise to
any right of termination, cancellation or acceleration) under any law, rule
or regulation or any judgment, decree, order, governmental permit, license or
order or any of the terms, conditions or provisions of any mortgage,
indenture, note, license, agreement or other instrument to which Parent is a
party, or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent.
7.4 CAPITAL STOCK. The authorized capital stock of Parent consists
of 50,000,000 shares of Parent Common Stock, of which 990,000 shares were
issued and outstanding as of December 31, 1997. All of the issued and
outstanding shares of Parent Capital Stock are, and all of the shares of
Parent Common Stock to be issued in exchange for shares of Company Common
Stock upon consummation of the Merger, when issued in accordance with the
terms of this Agreement, will be, duly and validly issued and outstanding and
fully paid and nonassessable. None of the outstanding shares of Parent
Capital Stock has been, and none of the shares of Parent Common Stock to be
issued in exchange for shares of Company Common Stock upon consummation of
the Merger will be, issued in violation of any preemptive rights of the
current or past shareholders of Parent.
20
7.5 AUTHORITY OF SUB. Sub is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Kentucky
as a wholly owned subsidiary of Parent. The authorized capital stock of Sub
shall consist of 1,000 shares of Sub Common Stock, all of which is validly
issued and outstanding, fully paid and nonassessable and is owned by Parent
free and clear of any Claims. Sub (a) has the corporate power and authority
to execute, deliver and perform this Agreement and the other Documents and to
consummate the transactions contemplated hereby and thereby and (b) has taken
all necessary corporate and shareholder action to authorize and approve the
execution, delivery and performance of this Agreement and the other Documents
and the consummation of the transactions contemplated hereby and thereby.
This Agreement and the other Documents have been duly and validly executed
and delivered by Sub and constitute valid and binding obligations of Sub,
enforceable against Sub in accordance with their terms.
7.6 TAX AND REGULATORY MATTERS. Neither Parent nor any Affiliate
thereof has any knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code, or (ii) materially impede or delay
receipt of any consents of any federal, state, county, local or other
governmental or regulatory agencies having jurisdiction over the parties or
result in the imposition of a condition or restriction of the type referred
to in the last sentence of Section 9.1(a).
7.7 DISCLOSURE STATEMENT. Parent's Disclosure Statement, dated
April 17, 1998 and as supplemented on April 21, 1998, which has been
previously delivered to the Shareholders is true, complete and correct in all
material respects.
7.8 DISCLOSURE. All Documents delivered or to be delivered by or
on behalf of Parent in connection with this Agreement and the transactions
contemplated hereby are true, complete and correct. Neither this Agreement,
nor any of the other Documents contains any untrue statement of a material
fact or omits a material fact necessary to make the statements made by Parent
herein or therein, in light of the circumstances in which made, not
misleading. There is no fact known to Parent which may have a material
adverse effect on Parent's ability to pay its obligations under this
Agreement, which has not been set forth in the Documents.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, Company shall and Parent shall cause Sub to
execute and file the Articles of Merger with the Kentucky Secretary of State
in connection with the Closing.
8.2 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms
and conditions of this Agreement, each party hereto agrees to use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things reasonably necessary, proper, or advisable under
applicable laws to consummate and make effective, as soon as reasonably
practicable after the date of this Agreement, the transactions contemplated
by this Agreement, including using its reasonable efforts to lift or rescind
any order adversely affecting its ability to
21
consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9; provided, that nothing herein shall
preclude either party hereto from exercising its rights under this Agreement.
Each party hereto shall use its reasonable efforts to obtain all consents
necessary or desirable for the consummation of the transactions contemplated
by this Agreement.
8.3 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each party hereto shall keep the
other party advised of all material developments relevant to its
business and to consummation of the Merger and shall permit the
other party to make or cause to be made such investigation of the
business and properties of it and of its financial and legal
conditions as the other party reasonably requests, provided that
such investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere unnecessarily with
normal operations. No investigation by a party shall affect the
representations and warranties of the other party.
(b) Each party hereto shall, and shall cause its advisers and agents
to, maintain the confidentiality of all confidential information
furnished to it by the other party concerning its and its
subsidiaries' businesses, operations, and financial positions and
shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement.
For purposes hereof, the term "confidential information" does not
include any information which at the time of disclosure to the
receiving party was or thereafter became publicly available or a
matter of public knowledge, without a breach of this Agreement by
the receiving party, or was disclosed by the receiving party
pursuant to a requirement of law, or in response to a court order,
subpoena or governmental authority.
8.4 PRESS RELEASES. Prior to the Effective Time, Company and
Parent shall consult with each other as to the form and substance of any
press release or other public disclosure materially related to this Agreement
or any other transaction contemplated hereby; provided, that nothing in this
Section 8.4 shall be deemed to prohibit any party from making any disclosure
which its counsel deems necessary or advisable in order to satisfy such
party's disclosure obligations imposed by law.
8.5 NO SOLICITATION. Except with respect to this Agreement and the
transactions contemplated hereby, neither Company, nor any Shareholder, shall
solicit or enter into discussions with any third party (a) to purchase any
shares of capital stock of Company or an option or warrant to purchase shares
of such capital stock or any securities convertible into such capital stock,
(b) to make an offer of any kind for any shares of such capital stock, (c)
purchase all or a substantial portion of the assets of Company or (d) to
merge, consolidate, engage in a share exchange or otherwise combine with
Company.
22
8.6 SHAREHOLDER RELEASES. Each Shareholder hereby releases and
forever discharges Company and its officers, directors, employees and
insurers, and their respective successors and assigns, and each of them
(hereinafter individually and collectively, the "Releasees") of and from any
and all claims, demands, debts, accounts, covenants, agreements, obligations,
costs, expenses, actions or causes of action of every nature, character or
description, now accrued or which may hereafter accrue, without limitation of
law, equity or otherwise, based in whole or in part on any facts, conduct,
activities, transactions, events or occurrences known or unknown, which have
or allegedly have existed, occurred, happened, arisen or transpired from the
beginning of time to the Effective Time; excluding, however, (i) claims
arising under this Agreement and the transactions contemplated hereby, and
(ii) compensation and other employee benefits accrued but not yet payable as
reflected on the books and records of Company (the "Released Claims"). Each
Shareholder represents and warrants that no Released Claim released herein
has been assigned, expressly, impliedly, or by operation of law, and that all
Released Claims of such Shareholder released herein are owned by such
Shareholder, who has the sole authority to release them. Each Shareholder
agrees that such holder shall forever refrain and forebear from commencing,
instituting or prosecuting any lawsuit action or proceeding, judicial,
administrative, or otherwise, or otherwise attempting to collect or enforce
any Released Claims which are released and discharged herein.
8.7 ACCOUNTING AND TAX TREATMENT. Each party undertakes and agrees
to use its reasonable efforts to cause the Merger to qualify for treatment as
a "reorganization" within the meaning of Section 368(a), including Section
368(a)(1)(D) and (a)(2)(D), of the Code for federal income tax purposes, and
each party covenants and agrees that each representation made by such party
in the certificates executed by or on behalf of such party and attached to
the tax opinion of Xxxxxx & Xxxxxxxx referred to in Section 9.1(c) is true
and correct. Notwithstanding the foregoing, no party shall have any liability
to any other party in the event the Merger ultimately is determined not to
qualify as a "reorganization" within the meaning of Section 368(a) of the
Code as a result of a breach of any covenant or representation in such
certificates by the Shareholders.
8.8 CHARTER PROVISIONS. Company shall take all necessary action to
ensure that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby do not and will not
result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws or other governing instruments of Company or restrict
or impair the ability of Parent or any of its subsidiaries to vote, or
otherwise to exercise the rights of a shareholder with respect to, shares of
Company that may be directly or indirectly acquired or controlled by them.
8.9 CERTAIN TAX RETURNS OF COMPANY. For income tax purposes, (i)
the status of Company as an "S Corporation" shall continue until the
Effective Time of the Merger, (ii) Company's final S corporation tax year
will end at the Effective Time. The Shareholders shall cause to be prepared
and filed all income tax returns of Company (including IRS Form 1120S and
Schedule K-1(1120S) and similar state tax returns) for the tax year ending at
the Effective Time, as well as for the tax year ended December 31, 1997 (if
not filed before the Effective Time). Parent and Company (and not the
Shareholders) shall be responsible for the preparation
23
and filing of all income tax returns and the payment of all income taxes of
Company for its tax year beginning on the day on which the Effective Time
occurs and all subsequent periods.
8.10 LANDLORD CONSENTS. The Shareholders shall, on or before the
expiration of thirty (30) days after the Effective Time, cause the Company to
obtain from its landlords (to the extent required under the pertinent
premises lease) written consent to the assignment of said leases to Parent
which assignment is deemed to have resulted from the transactions
contemplated by this Agreement.
8.11 AUDITED FINANCIAL STATEMENTS. The Shareholders shall furnish
to the Parent, as soon as practical and at Parent's expense, audited
financial statements of the Company for the three (3) fiscal periods ending
December 31, 1997, March 31, 1997, March 31, 1996 as prepared by an
accounting firm selected by Parent.
8.12 LEASES. The Shareholders shall cause Company to terminate its
current lease for its facility located at 0000 Xxxx Xxxxxx Xxxx, Xxxxxxxxxx,
Xxxxxxxx and Sub shall enter into a new lease for such facility, the form of
which shall be reasonably acceptable to Sub.
8.13 401(k) PLAN. Subject to compliance with all applicable law, by
the end of the "transition period" as defined in Section 410(b)(6)(C) of the
Code, Parent agrees to create a retirement plan designed to meet the
requirements of Section 401(k) of the Code available to the employees of
Company who meet the conditions under such plan.
8.14 CONTRIBUTIONS TO COMPANY BENEFIT PLANS. Company and the
Shareholders agree that after the Effective Date, only Sub and its eligible
employees may contribute to any Company sponsored 401(k) plan and participate
in the Company health insurance program and that no other employer nor any of
its employees may contribute to such plan or participate in such program.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by both parties:
(a) CONSENTS AND APPROVALS. Each party shall have obtained any and
all consents required for consummation of the Merger or for the
preventing of any default under any contract or permit of such
party which, if not obtained or made, is reasonably likely to
have, individually or in the aggregate, a material adverse effect
on such party. No consent so obtained which is necessary to
consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable
judgment of the Board of Directors of Parent would so materially
adversely impact the economic or business benefits of the
transactions
24
contemplated by this Agreement that, had such condition or
requirement been known, such party would not, in its reasonable
judgment, have entered into this Agreement.
(b) LEGAL PROCEEDINGS. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law or order (whether
temporary, preliminary or permanent) or taken any other action
which prohibits, restricts or makes illegal consummation of the
transactions contemplated by this Agreement.
(c) TAX MATTERS. Each party shall have received a written opinion of
counsel from Xxxxxx & Xxxxxxxx, in form reasonably satisfactory to
such parties (the "Tax Opinion"), to the effect that (i) the
Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, (ii) the exchange in the Merger of
Company Common Stock for Parent Common Stock will not give rise to
gain or loss to the shareholders of Company with respect to such
exchange (except with respect to any cash received), and (iii)
none of Company, Sub or Parent will recognize gain or loss as a
consequence of the Merger (except for amounts resulting from any
required change in accounting methods). In rendering such Tax
Opinion, such counsel shall be entitled to rely upon
representations of officers of Company, the Shareholders and
Parent reasonably satisfactory in form and substance to such
counsel.
9.2 CONDITIONS TO OBLIGATIONS OF PARENT. The obligations of Parent
to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Parent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Company and the Shareholders herein contained shall
be true in all material respects as stated herein, both when made
and with the same effect as though made again as of the Effective
Time except to the extent of changes permitted by this Agreement.
Company and the Shareholders shall have performed all obligations
and complied with all covenants required by this Agreement to be
performed or complied with by Company and the Shareholders prior
to the Effective Time.
(b) CERTIFICATES. Company and the Shareholders shall have delivered
to Parent (i) a certificate, dated as of the Effective Time and
signed on Company's behalf by its president and secretary and
signed by each Shareholder, to the effect that the conditions set
forth in Section 9.1 as relates to Company and the Shareholders
and in Section 9.2(a) have been satisfied, and (ii) certified
copies of resolutions duly adopted by Company's Board of Directors
and shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of
this Agreement, and the consummation of the transactions
25
contemplated hereby, all in such reasonable detail as Parent and
its counsel shall request.
9.3 CONDITIONS TO OBLIGATIONS OF COMPANY AND SHAREHOLDERS. The
obligations of Company and the Shareholders to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are
subject to the satisfaction of the following conditions, unless waived by
Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent herein contained shall be true in all
material respects as stated herein, both when made and with the
same effect as though made again as of the Effective Time except
to the extent of changes permitted by the terms of this Agreement.
Parent shall have performed all obligations and complied with all
covenants required by this Agreement to be performed or complied
with by Parent prior to the Effective Time.
(b) CERTIFICATES. Parent shall have delivered to Company and the
Shareholders (i) a certificate, dated as of the Effective Time
and signed on its behalf by its president and secretary, to the
effect that the conditions set forth in Section 9.1 as relates to
Parent and in Section 9.3(a) have been satisfied, and (ii)
certified copies of resolutions duly adopted by Parent's Board of
Directors and Sub's Board of Directors and sole shareholder
evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated
hereby, all in such reasonable detail as Company and its counsel
shall request.
ARTICLE 10
INDEMNIFICATION
10.1 SURVIVAL. Except as set forth on Schedule 3.6 hereto, all
representations and warranties in this Agreement and the other Documents
shall survive the Merger and any investigation at any time made by or on
behalf of any party for a period of three years and all such representations
and warranties shall expire on the third anniversary of the Effective Date,
except that (a) claims, if any, asserted in writing prior to such third
anniversary identified as a claim for indemnification pursuant to this
Article 10 shall survive until finally resolved and satisfied in full; (b)
any Year-2000 Indemnification Obligations (as hereinafter defined) shall
survive until February 1, 2003 and until finally resolved and satisfied in
full if asserted on or prior to February 1, 2003; and (c) tax or
environmental claims arising from a breach of Section 5.27 or Section 5.29,
respectively, shall survive for the full period of the applicable statute of
limitations, and until finally resolved and satisfied in full if asserted on
or prior to the expiration of any such period. The representations and
warranties shall not be affected or otherwise diminished by any investigation
at any time by or on behalf of the party for whose benefit such
representations and warranties were made.
26
10.2 INDEMNIFICATION BY COMPANY AND SHAREHOLDERS. Subject to the
terms herein, Company and the Shareholders shall jointly and severally
indemnify, defend, and hold Parent and the respective officers, directors,
and employees of Parent, and their successors and assigns (the "Shareholders'
Indemnitees") harmless from, against and with respect to any claim,
liability, obligation, loss, damage, assessment, judgment, cost or expense of
any kind or character, including reasonable attorneys' fees (the "Damages"),
arising out of or in any manner incident, relating or attributable to:
(a) Any inaccuracy in any representation or breach of any warranty of
Company or the Shareholders contained in this Agreement;
(b) Any failure by Company or the Shareholders to perform or observe,
or to have performed or observed, in full, any covenant, agreement
or condition to be performed or observed by it under this
Agreement;
(c) Reliance by Parent on any books or records of Company or written
information furnished to Parent pursuant to this Agreement by or
on behalf of Company or the Shareholders in the event that such
books and records or written information are false or materially
inaccurate; or
(d) Liabilities or obligations of, or claims against, Company or
Parent (whether absolute, accrued, contingent or otherwise)
relating to, or arising out of, the operation of the business
prior to the Effective Time or facts and circumstances relating
specifically to the business, the Leased Parcels, or Company
existing at or prior to the Effective Time, including but not
limited to matters set forth on SCHEDULE 5.28, whether or not such
liabilities, obligations or claims were known on such date,
excluding only liabilities set forth in the Balance Sheet and
liabilities and obligations incurred since the date thereof in the
ordinary course of business and consistent with past practice.
Provided, however, the Shareholders' Indemnitees shall not be entitled
to indemnification or offset hereunder until Damages in total exceed $25,000
and then only to the extent of aggregate Damages in excess of $25,000;
PROVIDED FURTHER, HOWEVER, such deductible shall not apply to any Damages
arising from a breach of Sections 5.27, 5.28, 6.1, or 6.2, respectively.
10.3 NOTICE TO SHAREHOLDERS, ETC. If any of the matters as to which
the Shareholders' Indemnitees are entitled to receive indemnification under
Section 10.2 should entail litigation with or claims asserted by parties
other than Company, Shareholders' Agent shall be given prompt notice thereof
and shall have the right, at the Shareholders' expense, to control such claim
or litigation upon prompt notice to Parent of his election to do so. To the
extent requested by Shareholders' Agent, Parent, at its expense, shall
cooperate with and assist Shareholders' Agent, in connection with such claim
or litigation. Parent shall have the right to appoint, at its expense,
single counsel to consult with and remain advised by the Shareholders in
connection with such claim or litigation. Shareholders' Agent shall have
final authority to determine all matters in connection with such claim or
litigation; PROVIDED, HOWEVER, that Shareholders' Agent shall not
27
settle any third party claim without the consent of Parent, which shall not
be unreasonably denied or delayed.
10.4 INDEMNIFICATION BY PARENT. Parent shall indemnify, defend, and
hold the Shareholders and their heirs, executors and legal representatives
("Parent's Indemnitees") harmless from, against and with respect to any
Damages, arising out of or in any manner incident, relating or attributable
to:
(a) Any inaccuracy in any representation or breach of warranty of
Parent contained in this Agreement;
(b) Any failure by Parent to perform or observe, or to have performed
or observed, in full, any covenant, agreement or condition to be
performed or observed by it under any of the Documents;
(c) Reliance by the Shareholders on any books or records of Parent or
reliance by the Shareholders on any written information furnished
to the Shareholders or Company pursuant to this Agreement by or on
behalf of Parent in the event that such books and records or
written information are false or inaccurate; and
(d) The operation of Company subsequent to the Effective Time.
Provided, however, Parent's Indemnitees shall not be entitled to
indemnification hereunder until Damages in total exceed $25,000 and then only
to the extent of aggregate damages in excess of $25,000.
10.5 NOTICE TO PARENT, ETC. If any of the matters as to which
Parent's Indemnitees are entitled to receive indemnification under Section
10.4 should entail litigation with or claims asserted by parties other than
Parent, Parent shall be given prompt notice thereof and shall have the right,
at its expense, to control such claim or litigation upon prompt notice to the
Shareholders' Agent of its election to do so. To the extent requested by
Parent, Shareholders' Agent, at the expense of the Shareholders, shall
cooperate with and assist Parent, in connection with such claim or
litigation. Shareholders' Agent shall have the right to appoint, at their
expense, single counsel to consult with and remain advised by Parent in
connection with such claim or litigation. Parent shall have final authority
to determine all matters in connection with such claim or litigation;
PROVIDED, HOWEVER, that Parent shall not settle any third party claim without
the consent of Shareholders' Agent, which shall not be unreasonably denied or
delayed.
10.6 SURVIVAL OF INDEMNIFICATION. Except as set forth on Schedule
3.6 hereto, the obligations to indemnify and hold harmless pursuant to this
Article 10 shall survive the Effective Time of the Merger, for a period of
three years, notwithstanding any investigation at any time made by or on
behalf of any party, except that (a) claims, if any, asserted in writing
prior to such third anniversary identified as a claim for indemnification
pursuant to this Article 10 shall survive until finally resolved and
satisfied in full; (b) any Year-2000 Indemnification Obligations (as
hereinafter defined) shall survive until February 1, 2003 and until finally
resolved and
28
satisfied in full if asserted on or prior to February 1, 2003; and (c) tax or
environmental claims arising from a breach of Section 5.27 or Section 5.29,
respectively, shall survive for the full period of the applicable statute of
limitations, and until finally resolved and satisfied in full if asserted on
or prior to the expiration of any such period. As used in this Article 10,
the term "Year-2000 Indemnification Obligations" shall mean Company's and
Shareholders' obligation to indemnify, defend, and hold the Shareholder's
Indemnitees harmless from, against and with respect to any Damages arising
out of or in any manner incident, relating or attributable to (i) any claim
or allegation that any Licensed System is not Year-2000 Compliant and (ii)
any claim arising from a breach of Section 5.31.
10.7 OFFSET. The Shareholders acknowledge and agree that Parent
shall be entitled to offset any indemnity claim under Section 10.2 against
any payment due to Shareholders under Section 3.6 hereunder. Parent shall
deliver to Shareholders' Agent written notice not less than fifteen (15) days
prior to exercising its right of offset pursuant to this Section 10.7, which
notice shall set forth in reasonable detail Parent's basis for exercising its
right of offset and the amount of the proposed offset. If within fifteen
(15) days of receiving Parent's notice of its intent to exercise its right of
offset Shareholders' Agent delivers to Parent written notice setting forth
Shareholders' Agent's objection to Parent's exercise of its right of offset,
then Parent shall place into an interest-bearing escrow account the amount of
the proposed offset, which amount, along with all accrued interest, shall be
distributed to the Parent or Shareholders or both, as appropriate, upon
resolution of such dispute or upon the written consent of Parent and
Shareholders' Agent. Neither the exercise of nor the failure to give a
notice of a Claim shall constitute an election of remedies nor limit
Indemnitee in any manner in the enforcement of any other remedies that may be
available to it.
ARTICLE 11
MISCELLANEOUS
11.1 KNOWLEDGE OF COMPANY. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to the best
knowledge of Company, Company confirms that it has made due and diligent
inquiry of its President and other officers as to the matters that are the
subject of such representation and warranty.
11.2 KNOWLEDGE OF PARENT. Where any representation or warranty
contained in this Agreement is expressly qualified by reference to the best
of knowledge of Parent, Parent confirms that it has made due and diligent
inquiry of its President as to the matters that are the subject of such
representations and warranties.
11.3 "PERSON" DEFINED. "Person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or other department or agency
thereof.
11.4 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by
29
hand, (ii) sent by recognized overnight courier, (iii) made by telecopy or
facsimile transmission, or (iv) sent by registered or certified mail, return
receipt requested, postage prepaid.
If to Parent:
ThermoView Industries, Inc.
0000 Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, President
Fax No: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxxx
000 X. Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Fax No: (000) 000-0000
If to Company:
Primax Window Co.
0000 Xxxx Xxxxxx Xxxx
P.O. Box 39219
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: President
Fax No: (000) 000-0000
If to the Shareholders:
c/o Shareholders' Agent
Xxxxxxx X. Xxxxx
0000 Xxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Fax No: (000) 000-0000
With a copy to:
Xxxxxxxxxx, Doll & XxXxxxxx
0000 Xxxxxxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxxx, Esq.
Fax No: (000) 000-0000
All notices, requests, consents and other communications hereunder shall be
deemed to have
30
been given (i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth above, (ii) if sent by
overnight courier, on the next business day following the day such notice is
delivered to the courier service, (iii) if made by telecopy or facsimile
transmission, at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, or (iv) if sent by registered or
certified mail, on the fifth business day following the day such mailing is
sent. The address of any party herein may be changed at any time by written
notice to the parties.
11.5 SHAREHOLDERS' AGENT. Each Shareholder hereby constitutes and
appoints Xxxxxxx X. Xxxxx ("Shareholders' Agent") as his or her
attorney-in-fact with full authority to act for such Shareholder for the
purposes of giving and receiving notices, requests, consents and other
communications pursuant to Section 11.4 and for purposes of Article 10. Each
Shareholder agrees to be conclusively bound by any action taken by the
Shareholders' Agent, in connection with the agency and power of attorney
conferred hereunder. The Shareholders' Agent shall have no liability to any
such Shareholder for any act, omission or judgment (except in the case of
willful misconduct or gross negligence). This agency and power of attorney
may be revoked at any time by any Shareholder. Parent shall be entitled, in
the absence of such notice of revocation, to rely upon any notice, request,
consent, or other communication from the Shareholders' Agent as a duly
authorized act on behalf of all the Shareholders.
11.6 ENTIRE AGREEMENT. This Agreement and the other Documents
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in the other Documents shall affect, or be used to
interpret, change or restrict, the express terms and provisions of this
Agreement.
11.7 MODIFICATIONS AND AMENDMENTS. The terms and provisions of this
Agreement may be modified or amended only by written agreement executed by
all parties hereto.
11.8 ASSIGNMENT/BINDING EFFECT. Neither this Agreement, nor any
right hereunder, may be assigned by any of the parties hereto without the
prior written consent of the other parties. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, personal representatives, successors and permitted assigns.
11.9 PARTIES IN INTEREST. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies
of any nature whatsoever under or by reason of this Agreement. Nothing in
this Agreement shall be construed to create any rights or obligations except
among the parties hereto, and no person or entity shall be regarded as a
third-party beneficiary of this Agreement.
11.10 GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be construed in accordance with and governed
by the internal laws of the Commonwealth of Kentucky without giving effect to
the conflict of law principles thereof.
31
11.11 ARBITRATION. Except as set forth in Section 3.7 of this
Agreement, any dispute or difference between the parties hereto arising out
of or relating to this Agreement shall be finally settled by arbitration in
accordance with the Commercial Rules of the American Arbitration Association
by a panel of three qualified arbitrators. Shareholders' Agent and Parent
shall each choose an arbitrator and the third shall be chosen by the two so
chosen. If either Shareholders' Agent or Parent fails to choose an arbitrator
within 30 days after notice of commencement of arbitration or if the two
arbitrators fail to choose a third arbitrator within 30 days after their
appointment, the American Arbitration Association shall, upon the request of
any party to the dispute or difference, appoint the arbitrator or arbitrators
to constitute or complete the panel as the case may be. Arbitration
proceedings hereunder may be initiated by either Shareholders' Agent or
Parent making a written request to the American Arbitration Association,
together with any appropriate filing fee, at the office of the American
Arbitration Association in Louisville, Kentucky. All arbitration proceedings
shall be held in Louisville, Kentucky. Any order or determination of the
arbitral tribunal shall be final and binding upon the parties to the
arbitration and may be entered in any court having jurisdiction.
11.12 SEVERABILITY. In the event that any arbitral tribunal of
competent jurisdiction shall finally determine that any provision, or any
portion thereof, contained in this Agreement shall be void or unenforceable
in any respect, then such provision shall be deemed limited to the extent
that such arbitral tribunal determines it enforceable, and as so limited
shall remain in full force and effect. In the event that such arbitral
tribunal shall determine any such provision, or portion thereof, wholly
unenforceable, the remaining provisions of this Agreement shall nevertheless
remain in full force and effect.
11.13 INTERPRETATION. The parties hereto acknowledge and agree that:
(i) the rule of construction to the effect that any ambiguities are resolved
against the drafting party shall not be employed in the interpretation of
this Agreement, and (ii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in favor of or against any
party, regardless of which party was generally responsible for the
preparation of this Agreement.
11.14 HEADINGS AND CAPTIONS. The headings and captions of the
various subdivisions of this Agreement are for convenience of reference only
and shall in no way modify, or affect, or be considered in construing or
interpreting the meaning or construction of any of the terms or provisions
hereof.
11.15 RELIANCE. The parties hereto agree that, notwithstanding any
right of any party to this Agreement to investigate the affairs of any other
party to this Agreement, the party having such right to investigate shall
have the right to rely fully upon the representations and warranties of the
other party expressly contained herein.
11.16 EXPENSES. Each party shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others
engaged by such party) incurred in connection with this Agreement and the
transactions contemplated hereby whether or not the transactions contemplated
hereby are consummated.
32
11.17 GENDER. All pronouns and any variation thereof shall be deemed
to refer to the masculine, feminine, neuter, singular, or plural as the
identity of the person or entity or the context may require.
11.18 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
33
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf as of the day and year first above written.
THERMOVIEW INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx, President
THERMOVIEW MERGER CORP.
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx, President
PRIMAX WINDOW CO.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Xxxxxxx X. Xxxxx, President
SHAREHOLDERS:
/s/ Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxx III
34
