AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of July 9, 1998, by and among THERMOVIEW INDUSTRIES, INC. ("Parent"), a
Delaware corporation having its principal office located in Louisville,
Kentucky; THERMOVIEW/FSB MERGER CORP. ("Sub"), a California corporation having
its principal office located in Louisville, Kentucky; FIVE STAR BUILDERS, INC.
("Company"), a California corporation having its principal office located in San
Diego, California; 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 the 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 Agreement 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 California General Corporation Law ("CGCL") and
with the effect provided in the CGCL (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 State of California.
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 at 11:59 p.m., P.D.T. (the "Effective
Time") on the date the Agreement of Merger and the officers' certificates of the
Company and Sub are filed with the office of the Secretary of State of the State
of California pursuant to Section 1103 of the CGCL. (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
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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 each of Xxxxxxx X. Xxxxx and Xxxxxxx X. Xxxxxx
shall have executed and delivered to the other an Employment Agreement, which
shall be in the form of EXHIBIT B.
(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, defined in Section 5.4
below, (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) 361.1111 shares of
Parent Common Stock (the "Stock Exchange Ratio"), and (ii) $1,666.66 (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
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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
the applicable provisions of the CGCL.
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.
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
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provided in this Section 4.1. The certificate or certificates of Company
Common Stock so surrendered shall be duly endorsed as Parent may reasonably
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 the 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 the 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.
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 State of
California. 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
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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 has been duly and validly executed and delivered by Company and the
other Documents have been delivered by Company and constitute valid and
binding obligations of Company, enforceable against Company in accordance
with their terms.
5.3 FOREIGN PERSON. Neither Company nor any of the Shareholders are 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
1,000 shares of common stock, with no par value per share, of which 900 shares
are issued and outstanding and no shares are held as treasury stock (the
"Company Common 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 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, the unaudited Statement of Assets,
Liabilities, and Equity - Income Tax Basis (the "Balance Sheet") of the Company
as of December 31, 1997 (the "Balance Sheet Date") and the related unaudited
Statement of Revenue and Expense - Income Tax Basis for year then ended. All
such financial statements (the "Financial Statements") 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 cash transactions of the business of Company, and have been made available
to Parent for examination. The Financial Statements 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
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anticipated losses as required by GAAP. Since the Balance Sheet Date and
except as set forth on Schedule 5.7, (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 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 and designates all employees,
independent contractors 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, independent contractor or officer for the most recent
fiscal year end and the year to date, and a full and complete description of any
commitments to such employees, independent contractors and officers with respect
to compensation payable thereafter. To the best knowledge of Company, no key
employee or independent contractor or group of employees or independent
contractors has any plans to terminate employment or service 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, 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.
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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 period beginning January 1,
1998 and ending May 31, 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 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, other than in the ordinary course of business,
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
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the ordinary course of business, (vii) made any material change in any method
of accounting, (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 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
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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 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.
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(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.
5.18 FIXED ASSETS. SCHEDULE 5.18 contains a true and complete list 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; SHAREHOLDER NOTES. 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, 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. As of the Closing Date, all notes payable to Shareholders by
Company have been paid in full.
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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.
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 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, to the best knowledge of Company, 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.
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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, 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%
13
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 or set forth on SCHEDULE 5.26.
(b) Company is not bound by any agreement, or subject to any
charter or other corporate restriction or any legal requirement, which has, or,
to the best knowledge of Company, in the future can reasonably be expected to
have, a material adverse effect on the business or prospects of Company.
5.27 TAXES. 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. 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 SCHEDULE 5.27. 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 30, 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
14
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. 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
15
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 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. Company has no inventory (whether raw materials,
work-in-process, or finished goods) other than those purchased or incurred
for jobs in process.
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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.
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)
17
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, himself or itself (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, himself or itself (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. To the best knowledge
of the Shareholders, 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
("Commission") pursuant to the requirements of Section 12 or 15(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act").
18
6.4 BROKER'S OR FINDER'S FEES. Except as set forth on SCHEDULE 6.4,
no agent, broker, person or firm acting on behalf of the Shareholders or Company
is, or will be, entitled to any commission or broker's or finder's fees from the
Shareholders or Company, or from any person controlling, controlled by or under
common control with the Shareholders or Company, in connection with any of the
transactions contemplated herein.
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 Delaware, 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 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
obligations 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 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.
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7.5 CAPITAL STOCK. The authorized capital stock of Parent consists of
(a) 100,000,000 shares of Parent Common Stock, of which 12,762,957 shares were
issued and outstanding as of May 30, 1998 and (b) 50,000,000 shares of $.001 par
value preferred stock, of which no shares were issued and outstanding as of May
30, 1998. 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.
7.6 AUTHORITY OF SUB. Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of California as a
wholly owned subsidiary of Parent. The authorized capital stock of Sub consists
of 1,000 shares of Sub Common Stock, of which 100 shares are 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.
7.7 DISCLOSURE STATEMENT. Parent's Disclosure Statement, dated June
25, 1998, which has been previously delivered to the Shareholders is true,
complete and correct in all material respects.
7.8 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).
7.9 BROKER'S OR FINDER'S FEES. Except as set forth on SCHEDULE 7.9,
no agent, broker, person or firm acting on behalf of Parent is, or will be,
entitled to any commission or broker's or finder's fees from Parent, or from any
person controlling, controlled by or under common control with Parent, in
connection with any of the transactions contemplated herein.
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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 Agreement of Merger with the California 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 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.
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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, until the Effective
Date, (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.
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)(A) 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
22
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. The Shareholders shall cause to
be prepared and filed all income tax returns and the payment of all income taxes
of Company for the tax year ending on the Effective Date. Parent and Company
(and not the Shareholders) shall be responsible for the preparation and filing
of all income tax returns and the payment of all income taxes of Company for its
tax year beginning on the day after the Effective Date and all subsequent
periods.
8.10 LANDLORD CONSENTS. The Shareholders shall, on or before the
expiration of thirty (30) days after the Effective Date, use their best efforts
to cause Company to obtain from its landlords (to the extent required under the
pertinent premises lease) written consent to the assignment of said leases to
Sub which assignment is deemed to have resulted from the transactions
contemplated by this Agreement. Parent shall use its best efforts to cause the
Company's landlords to release the Shareholders' personal guaranties in
connection with the Company's performance under such leases.
8.11 Securities Act Compliance.
(a) As long as Parent is not subject to the reporting
requirements of the Exchange Act, Parent will comply with the "Current Public
Information" provisions of Rule 144(c)(2) and such other provisions as may be
reasonably necessary and appropriate to permit Shareholders to sell Parent
Common Stock under Rule 144 and other applicable rules and regulations
promulgated by the Commission.
(b) Parent covenants that, if it becomes subject to the
periodic reporting requirements of Section 13 or 15(d) of the Exchange Act, it
will file on a timely basis the reports required to be filed by Parent under the
1933 Act and the Exchange Act, and the rules and regulations adopted by the
Commission thereunder; and it will take such further action as any Shareholder
or any Shareholder's successors or assigns (each a "Holder") may reasonably
request, all to the extent required from time to time to enable such Holder to
sell the Parent Common Stock without registration under the 1933 Act within the
limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as
such Rule may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the Commission. Upon the reasonable request of
any Holder, Parent will deliver to such Holder a written statement as to the
status of the filings made by Parent with the Commission with copies of such
filings.
8.12 AUDITED FINANCIAL STATEMENTS. The Shareholders shall furnish to
Parent, as soon as practical and at Shareholders' expense, audited financial
statements of Company for the two (2) fiscal years ending December, 1997 and
1996 and the stub period ending on the Effective Date, as prepared by an
accounting firm selected by Parent; provided, however, that the Shareholders'
expenses associated with the performance of this audit shall be no more than
$22,000.
23
8.13 TANGIBLE NET WORTH As soon as practicable, but within one hundred
and twenty days (120) days after the Effective Date, the Shareholders, at their
expense, shall cause Xxxxxxx Xxxxxxxx, an independent accounting firm, to
prepare a balance sheet of Company as of the Effective Date (the "Effective Time
Balance Sheet") setting forth the Tangible Net Worth (defined below) of Company.
A copy of the Effective Time Balance Sheet shall be promptly furnished to
Parent. If Parent disagrees with the Tangible Net Worth, Parent shall engage an
independent public accounting firm, at its expense, to audit the Effective Time
Balance Sheet and deliver a certified written report to the Shareholders
confirming the Tangible Net Worth ("Audited Tangible Net Worth"). If the
Shareholders fail to notify Parent within fifteen (15) days after receiving the
report from the accounting firm selected by Parent, such report shall be deemed
accepted for purposes of calculating Tangible Net Worth. If the Shareholders
should so notify Parent of a dispute concerning Audited Tangible Net Worth,
Parent shall then engage a 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 and the
Shareholders. Any such resolution shall be final and binding on all parties
hereto for the purposes of calculating Tangible Net Worth. In the event the
Tangible Net Worth is less than $750,000, the Shareholders shall pay Parent, on
a dollar-for-dollar basis, the amount of any such deficit within thirty (30)
days following the later of its determination of the Tangible Net Worth,
Parent's audit or the resolution of any dispute by such big-six accounting firm.
In the event the Tangible Net Worth is greater than $750,000, the Parent shall
pay the Shareholders, on a dollar-for-dollar basis, the amount of any such
excess within thirty (30) days following the later of either Xxxxxxx Xxxxxxxx'x
determination of the Tangible Net Worth or the determination of Audited Tangible
Net Worth. For purposes of this Section, "Tangible Net Worth" shall mean the
net book value of Company on the Effective Date determined using accrual
accounting and in accordance with generally accepted accounting principles
applied on a consistent basis. Net book value shall be calculated by
subtracting the book value of all of the liabilities of Company from the book
value of all tangible assets of Company; provided, however, solely for the
purpose of computing the Tangible Net Worth of the Company under this Paragraph
8.13, that: (i) no depreciation shall be taken on the fixed assets for the year
1998; (ii) all contracts which are entered into prior to the Effective Date and
for which financing has been approved within thirty (30) days after the
Effective Date shall be included on the Effective Time Balance Sheet as an asset
of the Company and all costs associated with the performance of such contracts
shall be included on the Effective Time Balance Sheet as a liability of the
Company; (iii) any tax refunds owing to and payable to the Company after the
Effective Date, which are accruable within one hundred and twenty (120) days
after the Effective Date, shall be included on the Effective Time Balance Sheet
as an asset of the Company; and (iv) the full amount due and owing to Xxxxxx
Xxxx (the "Settlement Amount") under that certain Settlement Agreement and
General Release dated June 3, 1998 among Xxxxxx Xxxx, the Company and the
Shareholders, less any sum agreed to by the parties which reduces the Settlement
Amount, shall be accrued and reflected on the Effective Time Balance Sheet as a
liability of the Company. All payments made by either the Parent or the
Shareholder to the other, as provided hereunder, may be made in Parent Common
Stock. For purposes of this payment, Parent Common Stock shall have a value
equl to $9.83 per share.
24
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 or of the Shareholders would so materially
adversely impact the economic or business benefits of the transactions
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
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. 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.
25
(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/Secretary/Chief Financial Officer and Vice
President 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
contemplated hereby, all in such reasonable detail as Parent and its counsel
shall request.
(c) TAX CLEARANCE. Company shall have delivered to Parent a
certificate of satisfaction from the California Franchise Tax Board stating that
all taxes imposed by the California Bank and Corporation Tax Law have been paid
or secured in a form acceptable to Parent and the California Secretary of State
in accordance with Section 1103 of the CGCL.
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 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,
Shareholders and their 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
26
satisfied in full; and (b) 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.
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 otherwise 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 5.26 and 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, 5.29, 6.1, or 6.2, respectively. The
Shareholders' maximum liability under this Section 10.2 is set forth on SCHEDULE
3.6 hereto.
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 shall be given prompt
27
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, Parent, at its expense,
shall cooperate with and assist Shareholders, 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 shall have final
authority to determine all matters in connection with such claim or
litigation; PROVIDED, HOWEVER, that Shareholders shall not 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
otherwise materially 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. Parent's maximum
liability under this Section 10.4 is set forth on SCHEDULE 3.6 hereto.
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 of
its election to do so. To the extent requested by Parent, Shareholders, at the
expense of the Shareholders, shall cooperate with and assist Parent, in
connection with such claim or litigation. Shareholders 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, which shall not be unreasonably denied or delayed.
28
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; and (b) 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.
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. Neither the exercise of nor
the failure to give a notice of a Claim shall constitute an election of remedies
nor limit an 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 and other officers 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 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.
29
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:
Five Star Builders, Inc.
0000 Xxxxxx Xxxxx Xx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
Fax No: (000) 000-0000
If to Shareholders:
Xxxxxxx X. Xxxxx
000 Xxxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
And
Xxxxxxx X. Xxxxxx
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
With a copy to:
Xxxxx Xxxxxxx Xxxxxx & Xxxxxx LLP
00000 Xxxxx Xxxxxx Xxxx., Xxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Fax No: (000) 000-0000
30
All notices, requests, consents and other communications hereunder shall be
deemed to have been given (i) if by hand, at the time of the delivery thereof
to the receiving party at the address of such party set forth above, (ii) if
sent by overnight courier, on the next business day following the day such
notice is delivered to the courier service, (iii) if made by telecopy or
facsimile transmission, at the time that receipt thereof has been
acknowledged by electronic confirmation or otherwise, or (iv) if sent by
registered or certified mail, on the fifth business day following the day
such mailing is sent. The address of any party herein may be changed at any
time by written notice to the parties.
11.5 ENTIRE AGREEMENT. This Agreement and the other Documents embody
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersede all prior oral or written agreements
and understandings relating to the subject matter hereof. No statement,
representation, warranty, covenant or agreement of any kind not expressly set
forth in the other Documents shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this Agreement.
11.6 MODIFICATIONS AND AMENDMENTS. The terms and provisions of this
Agreement may be modified or amended only by written agreement executed by all
parties hereto.
11.7 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.
11.8 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.
11.9 GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereunder shall be construed in accordance with and governed by the
internal laws of the State of California without giving effect to the conflict
of law principles thereof.
11.10 ARBITRATION. The parties hereto agree that any and all disputes,
claims or controversies arising out of or relating to this Agreement that are
not resolved by mutual agreement shall be submitted to final and binding
arbitration before JAMS/ENDISPUTE, or its successor, pursuant to the United
States Arbitration Act, 9 U.S.C. Sec. 1 et seq. Either party may commence the
arbitration process called for in this Agreement by filing a written demand for
arbitration with JAMS/ENDISPUTE, with a copy to the other party. The
arbitration will be conducted in accordance with the provisions of
JAMS/ENDISPUTE's COMPREHENSIVE ARBITRATION RULES AND PROCEDURES in effect at the
time of filing of the demand for arbitration. The parties will cooperate with
JAMS/ENDISPUTE and with one another in selecting an arbitrator from
JAMS/ENDISPUTE's panel of neutrals, and in scheduling the arbitration
proceedings. The parties covenant that they shall participate in the
arbitration in good faith, and that they shall
31
share equally in its costs. The provisions of this Section may be enforced
by any Court of competent jurisdiction, and the party seeking enforcement
shall be entitled to an award of all costs, fees and expenses, including
attorneys fees, to be paid by the party against whom enforcement is ordered.
All arbitration proceedings shall be held in Los Angeles, California.
11.11 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.
11.12 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.
11.13 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.
11.14 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.
11.15 EXPENSES. Each of Parent, Sub and the Shareholders 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. The Shareholders and not
Company, Parent or Sub shall pay the fees and expenses of Company (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.
11.16 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.
11.17 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.
32
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
FIVE STAR BUILDERS, INC.
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxx X. Xxxxx, President
SHAREHOLDERS:
/s/ Xxxxxxx X. Xxxxx
-----------------------------------
XXXXXXX X. XXXXX
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------
XXXXXXX X. XXXXXX
33
