Exhibit 2.6
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STOCK PURCHASE AGREEMENT
among
HEAT, INC.,
its SHAREHOLDERS and OPTIONHOLDERS,
H.I.G. VINYL, INC., a Cayman Island corporation,
H.I.G. INVESTMENT FUND, L.P., a Cayman Island limited partnership,
H.I.G. CAPITAL MANAGEMENT, INC., a Delaware corporation
and
ATRIUM COMPANIES, INC.
April 20, 1999
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of
April 20, 1999, among Heat, Inc., a Delaware corporation (the "COMPANY"), the
Persons listed on the attached SHAREHOLDERS SCHEDULE (the "SHAREHOLDERS"), the
Persons listed on the attached OPTIONHOLDERS SCHEDULE (the "OPTIONHOLDERS"),
H.I.G. Vinyl, Inc., a Cayman Island corporation ("H.I.G. CAYMAN"), H.I.G.
Investment Fund, L.P., a Cayman Island limited partnership ("H.I.G. FUND"),
H.I.G. Capital Management, Inc., a Delaware corporation ("H.I.G. MANAGEMENT"),
and Atrium Companies, Inc., a Delaware corporation (the "BUYER"). Capitalized
terms used and not otherwise defined herein have the meanings set forth in
Article XII below.
WHEREAS, the total authorized capital stock of the Company
consists of 5,000,000 shares of Class A Common Stock, par value $.01 per share
(the "CLASS A STOCK"), of which 1,312,500 shares are issued and outstanding and
1,000,000 shares of Class B Common Stock, par value $.01 per share (the "CLASS B
STOCK" and, together with the Class A Stock, the "SHARES"), of which no shares
are issued and outstanding.
WHEREAS, options to acquire 108,805 shares of Class A Stock and
warrants to purchase 98,790 shares of Class B Stock (collectively, the
"OPTIONS") are issued and outstanding.
WHEREAS, the Shareholders own all of the issued and outstanding
Shares in the individual amounts set forth on the attached SHAREHOLDERS
SCHEDULE. The Optionholders own all of the issued and outstanding Options in the
individual amounts set forth on the attached OPTIONHOLDERS SCHEDULE.
WHEREAS, as of the Closing Date, 1,312,500 Shares and Options to
acquire 108,805 shares of Class A Common Stock and 98,790 shares of Class B
Stock will be issued and outstanding.
WHEREAS, the total authorized capital stock of H.I.G. Vinyl, Inc.
("VINYL"), a Delaware corporation and a Shareholder, consists of 1,000 shares of
common stock, par value $.01 per share, of which 1,000 shares are issued and
outstanding (the "VINYL SHARES").
WHEREAS, H.I.G. Cayman owns all of the Vinyl Shares.
WHEREAS, as of the Closing Date, H.I.G. Cayman will own all of the
issued and outstanding capital stock of Vinyl.
WHEREAS, subject to the terms and conditions set forth herein, the
parties hereto desire to consummate the transactions as described below in
Section 1.03 with respect to the outstanding Shares and the transactions as
described below in Section 1.04 with respect to the outstanding Options.
NOW, THEREFORE, in consideration of the mutual promises,
agreements and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending legally to be bound, agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND OPTIONS
1.01 AGGREGATE EQUITY PRICE. The aggregate consideration to be
delivered by Buyer (the "AGGREGATE EQUITY PRICE") shall be an amount equal to
(a) $85,000,000 PLUS (b) the aggregate amount of cash and cash equivalents held
by the Company as of the Closing Date (the "CLOSING CASH") MINUS (c) the
outstanding amount of the Indebtedness as of the Closing to be paid by Buyer
pursuant to Section 1.07(b)(v) (the "CLOSING DEBT") MINUS (d) the Escrow Amount
MINUS (e) $32,500, which represents the cash amount of the Special Bonus Awards
granted pursuant to the letters dated February 12, 1999 to ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ (collectively, the "Bonuses") MINUS (f) the
outstanding amount of capitalized lease obligations as of the Closing Date (the
"CAPITALIZED LEASE OBLIGATIONS") MINUS (g) any outstanding amounts owed in
connection with any agreements with Computer Associates International, Inc., to
the extent such obligations are not paid in full, as of the Closing Date (the
"OUTSTANDING COMPUTER ASSOCIATES DEBT"). The Aggregate Equity Price shall be
adjusted as set forth in Section 1.06.
1.02 DEPOSIT. Contemporaneous with the execution of this
Agreement, Buyer shall deposit for the benefit of the Shareholders (other than
Vinyl), the Optionholders and H.I.G. Cayman, $2,500,000 (the "DEPOSIT") into
escrow pursuant to the terms of the Escrow Agreement. Subject to the terms and
conditions of this Agreement, the Deposit will, at Closing, be paid by the
Company to the Shareholders (other than Vinyl), the Optionholders and H.I.G.
Cayman and credited to the Aggregate Equity Price.
1.03 SHARE TRANSACTIONS.
(a) The purchase price for each of the outstanding Shares to be
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acquired from the Shareholders (other than Vinyl) shall be an amount, in
cash, equal to the quotient of (i) the Aggregate Equity Price PLUS the
aggregate exercise price for the Options, DIVIDED by (ii) the number of
Shares outstanding as of the Closing on a fully-diluted basis (the "PER SHARE
PURCHASE PRICE"). The purchase price for all of the outstanding Vinyl Shares
shall be an amount in cash equal to the Per Share Purchase Price multiplied
by the aggregate number of Shares held by Vinyl.
(b) On the basis of the representations, warranties, covenants and
agreements and subject to the satisfaction or waiver of the terms and conditions
set forth herein, each of the Shareholders (other than Vinyl) and H.I.G. Cayman
agrees to and will consummate, at the Closing, the following transactions: (i)
each Shareholder (other than Vinyl) shall sell, assign, transfer and convey to
Buyer, and Buyer shall purchase and acquire from each Shareholder (other than
Vinyl), all of the Shares held by such Shareholder set forth opposite such
Shareholder's name on the attached SHAREHOLDERS SCHEDULE against payment at the
Closing of the Closing Per Share Purchase Price (as defined in Section 1.06(a)
below) for each Share and (ii) H.I.G. Cayman shall sell, assign, transfer and
convey to Buyer, and Buyer shall purchase and acquire from H.I.G. Cayman, all of
the Vinyl Shares held by H.I.G. Cayman against payment at the Closing of an
amount equal to the Closing Per Share Purchase Price multiplied by the aggregate
number of Shares held by Vinyl, it being understood that Buyer's payment
obligations are as set forth in Sections 1.02, 1.05, 1.06 and 1.07(b)(i) and
(ii).
1.04 OPTION TRANSACTIONS.
(a) The purchase price for each of the issued and outstanding
Options from the Optionholders shall be an amount, in cash, equal to the Per
Share Purchase Price MINUS the exercise price for such Option (the "PER OPTION
PURCHASE PRICE").
(b) On the basis of the representations, warranties, covenants and
agreements and subject to satisfaction or waiver of the terms and conditions set
forth herein, each of the Optionholders agrees to and will consummate, at the
Closing, the following transactions (the "OPTION PURCHASE TRANSACTIONS"): each
Optionholder shall sell, assign, transfer and convey to Buyer, and Buyer shall
purchase and acquire from each Optionholder, all of the Options held by each
Optionholder set forth opposite such Optionholder's name on the attached
OPTIONHOLDERS SCHEDULE against payment at the Closing of the Closing Per Option
Purchase Price (as defined in Section 1.06(a) below) for each Option, it being
understood that Buyer's payment obligations are as set forth in Sections 1.02,
1.05, 1.06 and 1.07(b)(i) and (ii).
1.05 ESCROW. On the Closing Date, Buyer shall deposit, for the
benefit
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of the Shareholders (other than Vinyl), the Optionholders and H.I.G. Cayman,
$5,000,000 (the "ESCROW AMOUNT") in an escrow account established pursuant to
the terms and conditions of an escrow agreement (the "ESCROW AGREEMENT"), by and
among the Escrow Agent, Buyer and the Shareholder Representative (on behalf of
the Shareholders (other than Vinyl), the Optionholders and H.I.G. Cayman), which
will be substantially in the form of EXHIBIT A attached hereto, as modified
before execution thereof in accordance with the reasonable requests of the
Escrow Agent.
1.06 AGGREGATE EQUITY PRICE ADJUSTMENT.
(a) At least three days prior to the Closing Date, the Shareholder
Representative (on behalf of the Shareholders, the Optionholders and H.I.G.
Cayman) shall deliver to Buyer an estimated pro forma balance sheet of the
Company as of the close of business on the Closing Date based on the Company's
books and records and other information then available (the "ESTIMATED BALANCE
SHEET") setting forth its good faith calculation of its estimate of the Net
Working Capital as of the Closing Date (the "ESTIMATED NET WORKING CAPITAL"). If
the Estimated Net Working Capital is less than $5,175,000 (the "WORKING CAPITAL
TARGET"), then the Aggregate Equity Price to be paid at Closing shall be reduced
by the amount of such deficiency. If the Estimated Net Working Capital is
greater than the Working Capital Target, then the Aggregate Equity Price shall
be increased by the amount of such difference. The Per Share Purchase Price and
Per Option Purchase Price determined using the estimated Aggregate Equity Price
determined pursuant to this Section 1.06(a) shall be defined herein respectively
as the "CLOSING PER SHARE PURCHASE PRICE" and the "CLOSING PER SHARE OPTION
PURCHASE PRICE."
(b) As promptly as possible, but in any event within sixty (60)
days after the Closing Date, Buyer will deliver to the Shareholder
Representative (on behalf of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman) its calculation of the Net Working Capital as
of the Closing Date (the "CLOSING NET WORKING CAPITAL STATEMENT"). If the
Shareholder Representative has any objections to the Closing Net Working Capital
Statement, the Shareholder Representative shall deliver to Buyer a statement
setting forth its objections thereto (an "OBJECTIONS STATEMENT") within thirty
(30) days of the Shareholder Representative's receipt of the Closing Net Working
Capital Statement. If an Objections Statement is not delivered to Buyer within
such thirty (30) days, the Closing Net Working Capital Statement shall be final,
binding and non-appealable by the parties hereto. If the Shareholder
Representative delivers an Objections Statement within such thirty (30) days,
the Shareholder Representative and Buyer shall negotiate in good faith to
resolve any such objections, but if they do not reach a final resolution within
thirty (30) days after the delivery of the Objections Statement, the Shareholder
Representative and Buyer shall submit such dispute to KPMG LLP (the "INDEPENDENT
AUDITOR"). The Shareholder Representative and Buyer shall use their
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commercially reasonable efforts to cause the Independent Auditor to resolve all
disagreements as soon as practicable, but in any event within fifteen (15) days
after the submission of the dispute to the Independent Auditor. The resolution
of the dispute by the Independent Auditor shall be final, binding and
non-appealable on the parties hereto. The costs and expenses of the Independent
Auditor shall be paid equally by Buyer, on the one hand, and the Shareholders
(other than Vinyl), the Optionholders and H.I.G. Cayman, on the other hand.
(c) (i) If the Net Working Capital as of the Closing Date as
finally determined pursuant to clause (b) above is greater than the Estimated
Net Working Capital, Buyer shall pay to the Shareholder Representative (on
behalf of the Shareholders (other than Vinyl), the Optionholders and H.I.G.
Cayman) the difference between the Net Working Capital as of the Closing Date as
finally determined pursuant to clause (b) above and the Estimated Net Working
Capital by wire transfer of immediately available funds to an account designated
by the Shareholder Representative to Buyer.
(ii) If the Net Working Capital as of the Closing Date as finally
determined pursuant to clause (b) above is less than the Estimated Net Working
Capital, the Shareholder Representative (on behalf of the Shareholders (other
than Vinyl), the Optionholders and H.I.G. Cayman) shall pay to Buyer the
difference between the Net Working Capital as of the Closing Date as finally
determined pursuant to clause (b) above and the Estimated Net Working Capital by
directing the Escrow Agent under the Escrow Agreement to promptly pay to Buyer
such difference from the account established pursuant to the terms of the Escrow
Agreement. The Shareholders (other than Vinyl), the Optionholders and H.I.G.
Cayman shall be required to deposit into such account an amount equal to such
difference within thirty (30) days of such payment to Buyer.
(d) The Closing Cash will be determined based upon bank
verification of cash and cash equivalent balances as of the Closing and the
Closing Debt will be determined based upon payoff letters from the respective
creditor. The Capitalized Lease Obligations will be determined based upon
letters from the lessors. If the parties determine during the determination of
the Closing Net Working Capital Statement that either the Closing Cash, the
Closing Debt or the Capitalized Lease Obligations used to determine the Closing
Per Share Purchase Price and the Closing Per Option Purchase Price was
incorrect, the Per Share Purchase Price and Per Option Purchase Price will be
adjusted accordingly.
1.07 THE CLOSING.
(a) The closing of the transactions contemplated by this Agreement
(the "CLOSING") shall take place at the offices of Paul, Hastings, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 a.m. on May
14, 1999, or if
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any of the conditions to the Closing set forth in Article II below have not been
satisfied or waived by the party entitled to the benefit thereof, then on or
prior to the second business day following satisfaction or waiver of all of the
closing conditions set forth in Article II hereof (other than those to be
satisfied at the Closing) or on such other date as is mutually agreed upon by
Buyer and the Shareholder Representative (on behalf of the Shareholders, the
Optionholders and H.I.G. Cayman). The date and time of the Closing are herein
referred to as the "CLOSING DATE."
(b) In reliance on the representations, warranties and covenants
contained herein and subject to the terms and conditions set forth in this
Agreement, the parties hereto shall consummate the following transactions (the
"CLOSING TRANSACTIONS") on the Closing Date:
(i) Buyer shall deliver to the Shareholder Representative (on
behalf of the Shareholders (other than Vinyl), the Optionholders and
H.I.G. Cayman) the estimated Aggregate Equity Price determined pursuant
to Section 1.06(a), MINUS the Deposit and the Deposit Interest, in cash
by wire transfer of immediately available funds to the account
designated by the Shareholder Representative to Buyer prior to the
Closing;
(ii) In order to secure the Shareholders' (other than Vinyl's),
the Optionholders' and H.I.G. Cayman's obligations to indemnify Buyer
pursuant to Article IX, Buyer shall deposit the Escrow Amount in the
escrow account which will be subject to the terms and conditions of the
Escrow Agreement;
(iii) the Shareholder Representative (on behalf of the
Shareholders (other than Vinyl) and H.I.G. Cayman) shall deliver to
Buyer, free and clear of all claims, pledges, security interests,
liens, charges and all other encumbrances of any kind, stock
certificates representing the Shares and the Vinyl Shares duly endorsed
for transfer or accompanied by duly executed stock powers;
(iv) the Shareholder Representative (on behalf of the
Optionholders) shall deliver to Buyer satisfactory evidence of the
valid transfer of the Options to the Buyer, free and clear of all
claims, pledges, security interests, liens, charges and all other
encumbrances of any kind;
(v) Buyer shall repay, or cause to be repaid, on behalf of the
Company and its Subsidiaries, all amounts necessary to discharge fully
all indebtedness for borrowed money of the Company and its
Subsidiaries, including, without limitation, the then outstanding bank
debt, real estate debt, contracts for deed, notes payable to
stockholders, mortgages, deferred financing arrangements, deferred
license fees, deferred purchase obligations, earn-out payments and all
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prepayment penalties, accrued interest and other obligations related
thereto (but excluding the Capitalized Lease Obligations and excluding
the Outstanding Computer Associates Debt, to the extent such
obligations are not paid in full by the Company, as of the Closing
Date) listed on the attached INDEBTEDNESS SCHEDULE (collectively, the
"INDEBTEDNESS"), by wire transfer of immediately available funds as
directed by the holders of the Indebtedness at or prior to the Closing,
and the Shareholder Representative (on behalf of the Shareholders, the
Optionholders and H.I.G. Cayman) shall deliver to Buyer all appropriate
payoff letters and shall make arrangements reasonably satisfactory to
Buyer for such holders of the Indebtedness to deliver lien releases and
canceled notes at the Closing; and
(vi) Buyer, the Company, Vinyl and the Shareholder Representative
(on behalf of the Shareholders (other than Vinyl), the Optionholders
and H.I.G. Cayman) shall make such other deliveries and take all
further actions on or after the Closing Date as may be necessary and
appropriate to effect the transactions contemplated by this Agreement
and as are required by and in accordance with Article II hereof.
(c) Subject to the terms and conditions herein, if the
Shareholders (other than Vinyl) or the Optionholders shall fail or refuse to
deliver at least ninety-nine percent (99%) of the outstanding capital stock of
the Company on a fully diluted basis, or if H.I.G. Cayman shall fail or refuse
to deliver any of the Vinyl Shares as provided in this Section 1.07, or if any
of the Shareholders, the Optionholders or H.I.G. Cayman shall fail or refuse to
consummate the transactions described in this Agreement prior to the Closing
Date, such failure or refusal shall not relieve the Shareholders, the
Optionholders or H.I.G. Cayman of any obligations under this Agreement, and
Buyer at its option and without prejudice to its rights against any such
defaulting Shareholder, Optionholder or H.I.G. Cayman, may either (a) acquire
the remaining Shares, Vinyl Shares and/or Options which it is entitled to
acquire hereunder after reducing the Aggregate Equity Price accordingly, or (b)
terminate this Agreement in accordance with the provisions of Article VIII.
ARTICLE II
CONDITIONS TO CLOSING
2.01 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of or prior to the Closing Date:
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(a) Buyer shall have obtained the debt financing described in the
Highly Confident letter addressed to Buyer, dated February 26, 1999, and
attached hereto as EXHIBIT B (the "Financing Letter");
(b) The representations and warranties of the Company, the
Shareholders, the Optionholders and H.I.G. Cayman set forth in this Agreement or
in any Exhibit or Schedule hereto, if specifically qualified by materiality,
shall be true and correct in all respects, and if not so qualified, shall be
true and correct in all material respects at and as of the Closing Date as
though then made and as though the Closing Date was substituted for the date of
this Agreement throughout such representations and warranties;
(c) The Company, the Shareholders, the Optionholders and H.I.G.
Cayman shall have performed or complied with in all material respects all of the
covenants, conditions and agreements required to be performed or complied with
by them under this Agreement at or prior to the Closing;
(d) All of the consents from and notices to third parties which
are set forth on the attached SELLER CONSENTS SCHEDULE, shall have been obtained
in writings executed by such third parties in form and substance reasonably
satisfactory to Buyer;
(e) The applicable waiting periods (including any extension
thereof by reason of a request for additional information), if any, under the
HSR Act shall have expired or been terminated, and all of the governmental
filings, consents, authorizations, approvals and waivers which are set forth on
the attached SELLER CONSENTS SCHEDULE, shall have been made and obtained and
shall be in full force and effect;
(f) No action or proceeding before any court or government body
shall be pending or, to the best knowledge of the Company, threatened with a
reasonable likelihood of success, as determined by Buyer in its reasonable
discretion, on the Closing Date wherein an unfavorable judgment, decree or order
would restrain, prohibit or prevent the performance of this Agreement or the
consummation of any of the transactions contemplated by this Agreement, declare
unlawful the transactions contemplated by this Agreement or cause such
transactions to be rescinded;
(g) The Shareholder Representative shall have executed and
delivered the Escrow Agreement on behalf of the Shareholders (other than Vinyl),
the Optionholders and H.I.G. Cayman;
(h) From December 31, 1998, there shall not have occurred or
became known any material adverse change, or any condition or event (including
any change in
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law) that could reasonably be expected to result in a material adverse change,
in the business, property, assets, liabilities (contingent or otherwise),
operations or condition (financial or otherwise) of Vinyl or the Company and its
Subsidiaries, as the case may be;
(i) Vinyl, the Company and the Shareholder Representative (on
behalf of the Shareholders, the Optionholders and H.I.G. Cayman) shall have
delivered to Buyer each of the following:
(A) a certificate of each of Vinyl, the Company and the
Shareholder Representative in the form set forth in EXHIBIT C attached
hereto, dated the Closing Date, stating that the preconditions
specified in subsections (b) through (h) hereof, inclusive, have been
satisfied;
(B) copies of the third party and governmental consents
required by subsections (d) and (e) above;
(C) all minute books, stock books, ledgers and registers,
corporate seals and other corporate records relating to the
organization, ownership and maintenance of Vinyl, the Company and the
Subsidiaries;
(D) a certificate of the Secretary of each of Vinyl, the
Company and H.I.G. Cayman relating to the incumbency and corporate
proceedings in connection with the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
by this Agreement, and the absence of changes in Vinyl's, the Company's
and its Subsidiaries', and H.I.G. Cayman's Certificate of Incorporation
and By-laws, together with copies of the resolutions duly adopted by
Vinyl's, the Company's and H.I.G. Cayman's board of directors and
shareholders authorizing the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated by
this Agreement;
(E) resignations effective as of the Closing Date from such
officers and directors of Vinyl, the Company or the Subsidiaries as
Buyer shall have requested in writing not less than ten (10) days prior
to the Closing Date in form and substance satisfactory to Buyer;
(F) (i) a copy of the Certificate of Incorporation and all
amendments thereto, of each of Vinyl, the Company and the Subsidiaries,
certified by the Secretary of State of the state of its incorporation,
as of a date not more than thirty (30) days prior to the Closing Date,
(ii) copies, certified by the Secretary of each of Vinyl, the Company
and the Subsidiaries, as of the Closing Date, of the Bylaws of Vinyl,
the Company and the Subsidiaries, (iii) Certificates
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of Good Standing from the Secretary of the state of its incorporation
as of a date not more than ten (10) days prior to the Closing Date,
accompanied by bring-down certificates dated as of the Closing Date,
evidencing Vinyl's, the Company's and the Subsidiaries' good standing
in such jurisdiction, and (iv) Certificates of Good Standing from the
Secretary of State of each state wherein Vinyl, the Company and the
Subsidiaries are duly qualified, as of a date not more than ten (10)
days prior to the Closing Date, accompanied by bring-down certificates
dated as of the Closing Date, evidencing Vinyl's, the Company's and the
Subsidiaries' good standing therein;
(G) an opinion from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, legal counsel for Vinyl
and the Company, and an opinion from ▇▇▇▇▇▇ and Calder, legal counsel
for H.I.G. Cayman, addressed to Buyer, dated the Closing Date, and in
the form of EXHIBIT D attached hereto;
(H) evidence that the release of all claims, pledges, security
interests, liens, charges and all other encumbrances of any kind on the
assets of Vinyl, the Company and the Subsidiaries will occur
immediately upon repayment of the Indebtedness set forth on the
attached INDEBTEDNESS SCHEDULE and all appropriate payoff letters
setting forth amounts to be paid to discharge fully the outstanding
balance of the Indebtedness set forth on the attached INDEBTEDNESS
SCHEDULE;
(I) evidence reasonably satisfactory to Buyer of (i) the
elimination of any rights of first refusal to purchase the Company's
capital stock from the Shareholders and the Optionholders, or Vinyl's
capital stock from H.I.G. Cayman, and (ii) the termination of any
shareholders agreements, stock purchase agreements, option agreements,
warrant agreements, registration rights agreements, voting agreements
or any other agreements relating to the capital stock of Vinyl or the
Company, and any amendments thereto, to which Vinyl, the Company, any
Shareholder, any Optionholder and/or H.I.G. Cayman are a party,
including, without limitation, those agreements set forth on the
attached TERMINATING AGREEMENTS SCHEDULE;
(J) a duly and properly executed certificate from each
Shareholder, each Optionholder and H.I.G. Cayman in the forms attached
as Exhibit E hereto establishing an exemption from withholding under
Treasury Regulation ss. 1.1445-2 on the basis of the transferor not
being a foreign person or the Shares or the Options not constituting a
U.S. real property interest;
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(K) all other instruments which are necessary or desirable to
effect the transactions contemplated by this Agreement; and
(L) upon the request of Buyer, estoppel certificates with
respect to the Leased Real Property set forth on the SELLER CONSENTS
SCHEDULE in form and substance reasonably satisfactory to Buyer.
(j) The Closing Transactions set forth in Section 1.07(b) shall
have been completed;
(k) Buyer shall have obtained Form ALTA-B owner's policies of
title insurance issued to the Company and its Subsidiaries directly, or by
endorsement, effective on the date of the Closing, in respect of any real
property, whether owned or leased, acceptable to Buyer in its reasonable
discretion; provided that Buyer shall pay the premiums and costs relating
thereto; and
(l) Thermal's gross profit percentage for the four months ended
April 30, 1999, as determined in accordance with Thermal's past practice and as
determined from the financial statements to be delivered to Buyer pursuant to
the last sentence of Section 6.09, shall not be less than 37.5%; provided that
the condition set forth in this Section 2.01(1) shall not be a condition to
Buyer's obligation to consummate the transactions contemplated by this Agreement
in the event that Buyer receives the financial statements required to be
delivered pursuant to the last sentence of Section 6.09 and does not terminate
this Agreement pursuant to Section 8.01(c)(ii) on or prior to the third business
day following the delivery to Buyer of such financial statements.
2.02 CONDITIONS TO THE SHAREHOLDERS', THE OPTIONHOLDERS' AND
H.I.G. CAYMAN'S OBLIGATIONS. The obligations of the Shareholders, the
Optionholders and H.I.G. Cayman to consummate the transactions contemplated by
this Agreement are subject to the satisfaction of the following conditions as of
or prior to the Closing Date:
(a) The representations and warranties of Buyer set forth in this
Agreement, if specifically qualified by materiality, shall be true and correct
in all respects, and if not so qualified, shall be true and correct in all
material respects at and as of the Closing as though then made and as though the
Closing Date was substituted for the date of this Agreement throughout such
representations and warranties;
(b) Buyer shall have performed or complied with in all material
respects all the covenants, conditions and agreements required to be performed
or complied with by it under this Agreement at or prior to the Closing;
(c) All of the consents from third parties which are set forth on
the
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attached BUYER CONSENTS SCHEDULE shall have been obtained in writings executed
by such third parties;
(d) The applicable waiting periods (including any extension
thereof by reason of a request for additional information), if any, under the
HSR Act shall have expired or been terminated, and all governmental filings,
consents, authorizations, approvals and waivers which items are set forth on the
attached BUYER CONSENTS SCHEDULE, shall have been made and obtained and shall be
in full force and effect;
(e) No action or proceeding before any court or government body
shall be pending or, to the best knowledge of Buyer, threatened with a
reasonable likelihood of success, as determined by the Shareholder
Representative in its reasonable discretion, on the Closing Date wherein an
unfavorable judgment, decree or order would prevent the performance of this
Agreement or the consummation of any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement or cause such
transactions to be rescinded;
(f) Buyer shall have executed and delivered the Escrow Agreement;
(g) Buyer shall have delivered to the Shareholder Representative
(on behalf of the Shareholders, the Optionholders and H.I.G. Cayman) certified
copies of the resolutions duly adopted by Buyer's board of directors authorizing
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated by this Agreement;
(h) Buyer shall have delivered to the Shareholder Representative
(on behalf of the Shareholders, the Optionholders and H.I.G. Cayman) a
certificate in the form set forth as EXHIBIT F attached hereto, dated the
Closing Date, stating that the preconditions specified in subsections (a)
through (f) hereof, inclusive, have been satisfied; and
(i) The Closing Transactions set forth in Section 1.07(b) shall
have been completed.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH
SHAREHOLDER, EACH OPTIONHOLDER AND H.I.G. CAYMAN
Each Shareholder and each Optionholder, with respect to Sections
3.01, 3.02, 3.03 and 3.06 (on a several, and not joint and several basis,
subject to Section
13
9.02(d)), and H.I.G. Cayman, with respect to Sections 3.04, 3.05, 3.06, 3.07 and
3.08, represents and warrants to Buyer as follows:
3.01 AUTHORITY. Such Shareholder, such Optionholder or H.I.G.
Cayman, as the case may be, has all requisite power and authority and full legal
capacity to execute and deliver this Agreement and to consummate and perform his
or its obligations hereunder.
3.02 EXECUTION AND DELIVERY; VALID AND BINDING AGREEMENT; OTHER
MATTERS. This Agreement has been duly executed and delivered by such
Shareholder, such Optionholder or H.I.G. Cayman, as the case may be, and
constitutes the legal, valid and binding obligation of such Shareholder, such
Optionholder or H.I.G. Cayman, as the case may be, enforceable in accordance
with its terms. No permit, authorization, consent or approval of, or filing with
or notification to, any governmental, regulatory or administrative body or any
other third party is required in connection with the execution and delivery of
this Agreement by such Shareholder, such Optionholder or H.I.G. Cayman.
3.03 OWNERSHIP OF CAPITAL STOCK OF THE COMPANY. Such Shareholder
or such Optionholder, as the case may be, is the lawful record owner of the
number of Shares or the Options, as applicable, set forth opposite his or its
name on the attached SHAREHOLDERS SCHEDULE or OPTIONHOLDERS SCHEDULE, as the
case may be, free and clear of all claims, pledges, security interests, liens,
charges, encumbrances, options, proxies, voting trusts or agreements and other
restrictions and limitations of any kind, and such Shareholder or such
Optionholder, as the case may be, has full legal power and all authorization
required by law to transfer and deliver the Shares or the Options, as
applicable, set forth on the attached SHAREHOLDERS SCHEDULE or the OPTIONHOLDERS
SCHEDULE, as the case may be, owned by such Person in accordance with this
Agreement. On the Closing Date, such Shareholder will be the lawful record owner
of the number of Shares set forth opposite such Person's name on the attached
SHAREHOLDERS SCHEDULE and such Shareholder (other than Vinyl) shall validly
convey and transfer to Buyer good title to such Shares, and such Optionholder
will be the lawful record owner of the Options set forth opposite such Person's
name on the attached OPTIONHOLDERS SCHEDULE and shall validly convey and
transfer to Buyer such Options, in either case free and clear of all claims,
pledges, security interests, liens, charges, encumbrances, options, proxies,
voting trusts or agreements and other restrictions and limitations of any kind,
other than applicable federal and state securities law restrictions. Such
Shareholder or such Optionholder, as the case may be, does not and, on the
Closing Date, will not, own any capital stock or any options to acquire capital
stock of the Company except as set forth on the attached SHAREHOLDERS SCHEDULE
or OPTIONHOLDERS SCHEDULE. Except as set forth on the attached CAPITAL STOCK
SCHEDULE, such Shareholder and such Optionholder, as the case may be, is not,
and on the Closing Date, will not be, a party to or bound by any contract
14
which grants to any Person an option or right of first refusal or other right of
any character to acquire at any time, or upon the happening of any stated
events, shares of capital stock or other securities of the Company whether or
not presently issued and outstanding. Such Shareholder and such Optionholder is
not a "foreign person" within the meaning of Section 1445(f)(3) of the Code and
Treasury Regulation Section 1.445-2(b)(2)(i). There is no pending action or
proceeding that has been commenced against such Shareholder or such Optionholder
that may have the effect of preventing, delaying or making illegal the Closing
Transactions and, to the best knowledge of such Shareholder and such
Optionholder, no such action or proceeding has been threatened. Except as set
forth on the attached GOVERNMENTAL CONSENTS SCHEDULE and THIRD-PARTY CONSENTS
SCHEDULE hereto, neither the execution and delivery of this Agreement or any
related agreements by such Shareholder or such Optionholder nor the consummation
by such Shareholder or such Optionholder of the transactions provided for herein
or therein will conflict with, violate, or result in a breach of, default under
or the creation of any claims, pledges, security interests, liens, charges,
encumbrances, options, proxies, voting trusts or agreements and other
restrictions and limitations of any kind pursuant to any agreement to which such
Shareholder or such Optionholder, as the case may be, is a party or by which he
or it is bound or any law, order, judgment or decree or any provision of the
Certificate of Incorporation or By-Laws of the Company, or any contract to which
the Company, or such Shareholder or such Optionholder, as the case may be, is a
party.
3.04 OWNERSHIP OF VINYL SHARES. H.I.G. Cayman is the lawful record
owner of the Vinyl Shares, free and clear of all claims, pledges, security
interests, liens, charges, encumbrances, options, proxies, voting trusts or
agreements and other restrictions and limitations of any kind, and H.I.G. Cayman
has full legal power and all authorization required by law to transfer and
deliver the Vinyl Shares in accordance with this Agreement. On the Closing Date,
H.I.G. Cayman will be the lawful record owner of the Vinyl Shares and shall
validly convey and transfer to Buyer good title to the Vinyl Shares, free and
clear of all claims, pledges, security interests, liens, charges, encumbrances,
options, proxies, voting trusts or agreements and other restrictions and
limitations of any kind, other than applicable federal and state securities law
restrictions. There is no pending action or proceeding that has been commenced
against H.I.G. Cayman that may have the effect of preventing, delaying or making
illegal the Closing Transactions and, to the best knowledge of H.I.G. Cayman, no
such action or proceeding has been threatened. Except as set forth on the
attached GOVERNMENTAL CONSENTS SCHEDULE and THIRD-PARTY CONSENTS SCHEDULE,
neither the execution and delivery of this Agreement or any related agreements
by H.I.G. Cayman nor the consummation by H.I.G. Cayman of the transactions
provided for herein or therein will conflict with, violate, or result in a
breach of, default under or the creation of any claims, pledges, security
interests, liens, charges, encumbrances, options, proxies, voting trusts or
agreements and other restrictions and limitations of any kind pursuant to, any
agreement to which Vinyl
15
or H.I.G. Cayman is a party or by which they are bound or any law, order,
judgment or decree or any provision of the Certificate of Incorporation or
By-Laws of Vinyl or H.I.G. Cayman, or any contract to which Vinyl or H.I.G.
Cayman is a party.
3.05 CAPITALIZATION OF VINYL. The Vinyl Shares represent one
hundred percent (100%) of the issued and outstanding capital stock of Vinyl.
Neither H.I.G. Cayman nor Vinyl is, or on the Closing Date will be, a party to
or bound by any contract which grants to any Person an option or right of first
refusal or other right of any character to acquire at any time, or upon the
happening of any stated events, shares of capital stock or other securities of
Vinyl whether or not presently issued and outstanding.
3.06 BROKERAGE. Except for the fees and expenses of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., which shall be paid directly by the Shareholders, the
Optionholders and H.I.G. Cayman, there are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of any Shareholder, any Optionholder or H.I.G. Cayman.
3.07 VINYL. H.I.G. Cayman hereby represents and warrants to Buyer
that (i) Vinyl is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to enter into this Agreement and perform its obligations hereunder;
(ii) the execution, delivery and performance of this Agreement by Vinyl and the
consummation of the transactions contemplated by this Agreement have been duly
and validly authorized by all requisite corporate action, and no other corporate
proceedings on its part are necessary to authorize the execution, delivery or
performance of this Agreement; (iii) Vinyl is not subject to or obligated under
its Certificate of Incorporation, its By-laws, any applicable law, or rule or
regulation of any governmental authority, or any material agreement or
instrument, or any license, franchise or permit, or subject to any order, writ,
injunction or decree, which would be breached or violated in any material
respect by Vinyl's execution, delivery or performance of this Agreement; (iv)
its sole asset is and ever was the Shares set forth opposite its name on the
attached SHAREHOLDERS SCHEDULE; (v) since its formation, the only activities
Vinyl has conducted are to hold the Shares and to enter into this Agreement and
the transactions contemplated by this Agreement; and (vi) Vinyl has no, and has
never had, any obligations or liabilities, whether arising in contract, tort or
otherwise, of any type or nature, whether ▇▇▇▇▇▇, inchoate, accrued, contingent
or fixed.
3.08 H.I.G. CAYMAN. H.I.G. Cayman hereby represents and warrants
as to itself to Buyer that (i) it is a corporation duly organized, validly
existing and in good standing under the laws of the Cayman Islands, with full
corporate power and authority to enter into this Agreement and perform its
obligations hereunder; (ii) the execution, delivery and performance of this
Agreement by H.I.G. Cayman and the consummation of
16
the transactions contemplated by this Agreement have been duly and validly
authorized by all requisite corporate action, and no other corporate proceedings
on its part are necessary to authorize the execution, delivery or performance of
this Agreement; (iii) it is not subject to or obligated under its Certificate of
Incorporation, its By-laws, any applicable law, or rule or regulation of any
governmental authority, or any material agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction or decree, which
would be breached or violated in any material respect by H.I.G. Cayman's
execution, delivery or performance of this Agreement; (iv) its sole asset is and
ever was the Vinyl Shares; and (v) since its formation, the only activities
H.I.G. Cayman has conducted are to hold the Vinyl Shares and to enter into this
Agreement and the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer that:
4.01 ORGANIZATION, STANDING AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and the Company has all requisite corporate power and
authority and all authorizations, licenses and permits necessary to own, lease
and operate its properties and assets and to carry on its businesses as now
conducted, except where the failure to hold such authorizations, licenses and
permits would not have, individually or in the aggregate, a material adverse
effect upon the business, properties, assets, liabilities, financial condition
or operating results of the Company and its Subsidiaries, taken as a whole (a
"MATERIAL ADVERSE EFFECT"). The Company is duly qualified to do business as a
foreign corporation and is in good standing in every jurisdiction in which its
ownership of property or the conduct of business as now conducted requires it to
qualify, except where the failure to be so qualified would not have a Material
Adverse Effect, as set forth on the attached ORGANIZATION SCHEDULE.
4.02 SUBSIDIARIES. Except as set forth on the attached
SUBSIDIARY SCHEDULE, neither the Company nor any of its Subsidiaries owns, or
holds the right to acquire, any stock, partnership interest, joint venture
interest or other equity ownership interest in any other Person. Except as
set forth on the attached SUBSIDIARY SCHEDULE, each of the Subsidiaries
identified on the SUBSIDIARY SCHEDULE is validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority and all authorizations, licenses and
permits necessary to own, lease and operate its properties and assets and to
carry on its businesses as now conducted and is duly qualified to do business
as a foreign corporation and is in good
17
standing in every jurisdiction in which its ownership of property or the
conduct of businesses as now conducted requires it to qualify, except in each
such case where the failure to hold such authorizations, licenses and permits
or to be so qualified would not have a Material Adverse Effect, as set forth
on the attached ORGANIZATION SCHEDULE. For purposes of this Agreement, the
term "SUBSIDIARY" shall mean each business entity in which the Company or one
of the Company's Subsidiaries has a 50% or greater equity interest.
4.03 AUTHORIZATION; NO BREACH; VALID AND BINDING AGREEMENT. Except
as set forth on the attached AUTHORIZATION SCHEDULE, the execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action and no other corporate proceedings are necessary to
authorize the execution, delivery or performance of this Agreement. Except as
set forth on the attached AUTHORIZATION SCHEDULE, the execution, delivery and
performance of this Agreement by the Company, the Shareholders and the
Optionholders do not conflict with, violate or result in any material breach of,
constitute a material default under, result in a material violation of, result
in the creation of any material lien, security interest, charge or encumbrance
upon any material assets of the Company or any of its Subsidiaries, or require
any material authorization, consent, approval, exemption or other action by or
notice to any court or other governmental body, or employee representative or
union or labor organization, or accelerate or otherwise alter the rights of any
other party, under the provisions of the Company's or any of its Subsidiary's
Certificate of Incorporation or By-laws or any material indenture, mortgage,
lease, loan agreement, collective bargaining agreement or other agreement or
instrument to which the Company or any of its Subsidiaries is bound, or any law,
statute, rule or regulation or order, judgment or decree to which the Company or
any of its Subsidiaries is subject. None of the foregoing items shall be deemed
to be "material" unless the failure to meet the requirements thereof would,
individually or in the aggregate, have a Material Adverse Effect. This Agreement
has been duly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable against it in
accordance with its terms.
4.04 CAPITAL STOCK. (a) The authorized number of shares of capital
stock of the Company consists of 5,000,000 shares of Class A Stock and 1,000,000
shares of Class B Stock. As of the date hereof, 1,312,500 shares of Class A
Stock are issued and outstanding and are owned of record by the Shareholders in
the amounts as set forth on the attached SHAREHOLDERS SCHEDULE and no shares of
Class B Stock are issued and outstanding. As of the date hereof, Options to
acquire 108,805 shares of Class A Stock and 98,790 shares of Class B Stock are
issued and outstanding and are owned of record by the Optionholders in the
amounts as set forth on the attached OPTIONHOLDERS SCHEDULE. As of the Closing
Date, 1,312,500 shares of Class A Stock and Options to acquire
18
108,805 shares of Class A Stock and 98,790 shares of Class B Stock will be
issued and outstanding and no shares of Class A Stock and no shares of Class B
Stock will be issued but not outstanding. All of the outstanding shares of
capital stock of the Company have been duly authorized and are validly issued,
fully paid and non-assessable. None of such shares was issued in violation of
any preemptive or preferential right. As of the Closing Date, all of such shares
will be duly authorized and validly issued, fully paid and non-assessable and
will not have been issued in violation of any preemptive or preferential right.
Except as set forth on the attached CAPITAL STOCK SCHEDULE, the Company does not
have any other capital stock, equity securities or securities containing any
equity features authorized, issued or outstanding, and there are no outstanding
conversion or exchange rights, agreements, subscriptions, options, warrants or
other rights or arrangements existing or outstanding which provide for the sale
or issuance of any of the foregoing by the Company. Except as set forth on the
attached CAPITAL STOCK SCHEDULE, there are no rights, subscriptions, warrants,
options, conversion rights or agreements of any kind outstanding to purchase or
otherwise acquire any shares of capital stock or other equity securities of the
Company of any kind. Except as set forth on the attached CAPITAL STOCK SCHEDULE,
there are no agreements or other obligations (contingent or otherwise) which
require the Company to repurchase or otherwise acquire any shares of the
Company's capital stock or other equity securities. Except as set forth on the
attached CAPITAL STOCK SCHEDULE, the Company is not and, on the Closing Date,
will not be, nor does the Company nor any Shareholder or Optionholder have any
knowledge that any holder of capital stock or holder of any right to acquire
capital stock of the Company is a party to or bound by any contract which grants
to any Person an option or right of first refusal or other right of any
character to acquire at any time, or upon the happening of any stated events,
shares of capital stock or other securities of the Company whether or not
presently issued or outstanding.
(b) One hundred percent (100%) of the common stock of each of the
Subsidiaries is owned, beneficially and of record, by the Company, free and
clear of all claims, pledges, security interests, liens, charges, encumbrances,
options, proxies, voting trusts or agreements, and other restrictions and
limitations of any kind other than those set forth on the attached SUBSIDIARY
SCHEDULE. Such common stock constitutes all of the issued and outstanding
capital stock of the Subsidiaries. All of the outstanding shares of capital
stock of each of the Subsidiaries have been duly authorized and are validly
issued, fully paid and non-assessable. None of the Subsidiaries have any other
capital stock, equity securities or securities containing any equity features
authorized, issued or outstanding, and there are no outstanding conversion or
exchange rights, agreements, subscriptions, options, warrants or other rights or
arrangements existing or outstanding which provide for the sale or issuance of
any of the foregoing by any Subsidiary. There are no rights, subscriptions,
warrants, options, conversion rights or agreements of any kind outstanding to
purchase or otherwise acquire any shares of capital stock or other equity
securities of any kind of any Subsidiary. There are no agreements or other
19
obligations (contingent or otherwise) which require any Subsidiary to repurchase
or otherwise acquire any shares of its capital stock or other equity securities.
Each of the Subsidiaries is not, and at the Closing will not be, a party to or
bound by any Contract which grants to any Person an option or right of first
refusal or other right of any character to acquire at any time, or upon the
happening of any stated events, shares of capital stock or other securities of
such Subsidiary whether or not presently issued or outstanding. As of the
Closing Date, all of the outstanding shares of capital stock in each Subsidiary
will be duly authorized and validly issued, fully paid and nonassessable and
will not have been issued in violation of any preemptive or preferential right.
4.05 FINANCIAL STATEMENTS. (a) The Company has furnished Buyer
with copies of its unaudited (i) consolidated balance sheet as of February 28,
1999, and the related consolidated statement of income and cash flows for the
two-month period then ended (such consolidated balance sheet referred to herein
as the "LATEST BALANCE SHEET") and (ii) audited consolidated balance sheets and
related consolidated statements of income and cash flows for the fiscal years
ended December 31, 1997 (from the date of inception) and December 31, 1998.
Except as set forth on the attached FINANCIAL STATEMENTS SCHEDULE, such
financial statements have been based upon the information concerning the Company
and its Subsidiaries contained in the Company's books and records, and present
fairly in all material respects the financial condition and results of
operations and cash flow of the Company and its Subsidiaries as of the times and
for the periods referred to therein in accordance with GAAP applied on a
consistent basis (subject, in the case of the unaudited financial statements, to
normal year-end audit adjustments and absence of footnote disclosures). For
purposes of this Agreement, such Company's consolidated financial statements
(the "FINANCIAL STATEMENTS") shall be deemed to include any notes and schedules
thereto which are included as part of the attached FINANCIAL STATEMENTS
SCHEDULE.
(b) The inventory of the Company consists of raw materials and
supplies, manufactured and purchased parts, work in process, and finished goods,
all of which is merchantable by the Company and fit for the purpose for which it
was procured or manufactured, subject only to the reserve for inventory
writedown set forth on the Latest Balance Sheet, as adjusted for the passage of
time through the Closing, in accordance with GAAP applied on a consistent basis
with that of the preceding fiscal year.
(c) All accounts receivable of the Company are reflected properly
on its books and records, are valid receivables subject to no setoffs or
counterclaims, are current and collectible, and will be collected in accordance
with their terms at their recorded amounts, subject only to the reserve for bad
debts set forth on the Latest Balance Sheet, as adjusted for operations and
transactions through the Closing, in accordance with
20
GAAP applied on a consistent basis with that of the preceding fiscal year.
4.06 ABSENCE OF CERTAIN DEVELOPMENTS. Since December 31, 1998,
there has not been any material adverse change in the business, properties,
assets, liabilities, employee representation, financial condition or results of
operations of the Company or any of its Subsidiaries. Except as set forth on the
attached DEVELOPMENTS SCHEDULE and except as expressly contemplated by this
Agreement, since December 31, 1998, neither the Company nor any Subsidiary has:
(a) borrowed any amount or incurred or become subject to any
liabilities in excess of $100,000, except liabilities incurred in the ordinary
course of business, liabilities under contracts entered into in the ordinary
course of business and borrowings from banks (or similar financial institutions)
necessary to meet ordinary course working capital requirements;
(b) mortgaged, pledged or subjected to any material lien, charge
or other encumbrance, any portion of its assets, except Permitted Liens;
(c) sold, assigned or transferred any portion of its tangible
assets, except in the ordinary course of business;
(d) sold, assigned or transferred any patents, certificates of
plant variety protection, trademarks, trade names, copyrights, trade secrets or
other intangible assets, except in the ordinary course of business;
(e) suffered any damages or losses, whether covered by insurance
or not, having a Material Adverse Effect or waived any rights of material value;
(f) issued, sold or transferred any of its capital stock or other
equity securities, securities convertible into its capital stock or other equity
securities or warrants, options or other rights to acquire its capital stock or
other equity securities, or any bonds or debt securities;
(g) made any unfunded or committed to make any unfunded capital
expenditures in excess of $375,000 in the first quarter of 1999, $375,000 in the
second quarter of 1999, $375,000 in the third quarter of 1999 and $375,000 in
the fourth quarter of 1999, without the prior consent of Buyer;
(h) entered into any other material transaction, except in the
ordinary course of business;
(i) made any declaration, setting aside or payment of any
dividend, or
21
any distribution in respect of capital stock of the Company or any of its
Subsidiaries, or any redemption, purchase or other acquisition of any capital
stock of the Company or its Subsidiaries;
(j) made any increase in the compensation payable or to become
payable by the Company and its Subsidiaries to any of its respective officers,
directors, employees or agents, other than in the ordinary course of business;
(k) made any change in the terms of any bonus, insurance, pension
or other benefit plan for or with any of the Company's or its Subsidiaries'
officers, directors or employees which increases amounts paid, payable or to
become payable thereunder, other than in the ordinary course of business;
(l) entered into any employment or collective bargaining agreement
with any individual, representative, labor organization and/or union;
(m) received any written complaints or concerns which relate to
the Company's or any of its Subsidiaries' labor relations;
(n) entered into any transaction with any Affiliate;
(o) made any change in its accounting procedures and practices; or
(p) made any unreasonable changes from its past practice with
respect to its credit criteria or failed to make any appropriate changes to its
allowance for doubtful accounts in the event its credit criteria was reasonably
changed.
4.07 TITLE TO PROPERTIES.
(a) The attached PERSONAL PROPERTY SCHEDULE contains a correct and
complete list as of the date set forth therein of each item of tangible personal
property owned or used by each of the Company and its Subsidiaries, other than
inventory, office furniture and supplies and miscellaneous items of personal
property with an individual book value of less than $10,000. The Company and its
Subsidiaries own good and marketable title to all of the personal property and
assets shown on the Latest Balance Sheet, free and clear of all liens, security
interests and other encumbrances, except for Permitted Liens.
(b) The real property owned by the Company (the "OWNED REAL
PROPERTY") and the real property demised by the leases, subleases, licenses and
other
22
instruments (the "LEASED REAL PROPERTY" described on the attached REAL PROPERTY
SCHEDULE constitutes all of the real property owned or leased by the Company and
its Subsidiaries. The Company and its Subsidiaries are the sole and exclusive
owners of, and have good and marketable title to the Owned Real Property, free
and clear of any mortgages, security interests, liens, options, beneficial or
possessory rights of third parties or other encumbrances, except for Permitted
Liens or as set forth on the attached REAL PROPERTY SCHEDULE. The Leased Real
Property leases, subleases, licenses and other instruments are valid,
subsisting, in full force and effect and binding upon the parties thereto, and
the Company or a Subsidiary holds a valid and existing leasehold interest under
each of the leases, subleases, licenses and other agreements, except where the
failure to have such leases, subleases, licenses and other instruments valid,
subsisting, in full force and effect and binding, or to hold such a valid and
existing leasehold interest would not, individually or in the aggregate, have a
Material Adverse Effect. The Company has delivered to Buyer true, complete and
accurate copies of each of the leases, subleases, licenses and other
instruments, including, without limitation, surveys, title insurance policies
and title insurance reports and commitments described on the attached REAL
PROPERTY SCHEDULE, and none of the leases, subleases, licenses and other
instruments have been modified in any material respect, except to the extent
that such modifications are disclosed by the copies delivered to Buyer. Neither
the Company nor any Subsidiary is, and as of the Closing Date will be, in
default except as set forth on the attached REAL PROPERTY SCHEDULE under any of
such leases, subleases, licenses and other instruments nor, to the best
knowledge of the Company, is any other party in default thereunder, and no facts
or circumstances have occurred which, with the giving of notice or the passage
of time or both, would constitute a default under any such leases, subleases,
licenses or other instruments. To the knowledge of the Company, title to the
Owned Real Property is insurable at standard premiums by reputable title
insurance companies licensed in the state where such Owned Real Property is
located. The title and interest of the Company and its Subsidiaries in the Owned
Real Property and the Leased Real Property is sufficient to enable the Company
and its Subsidiaries to carry on their respective businesses as presently
conducted. All plants, facilities, structures and equipment owned or used by the
Company and its Subsidiaries in its operation of their businesses are suitable
for the purposes used, are adequate and sufficient for all current operations of
such businesses and are, subject to ordinary wear and tear, in good operating
condition and repair. The attached REAL PROPERTY SCHEDULE identifies each lease,
sublease, license or any other instrument under which the Company and its
Subsidiaries claims or holds such leasehold or other interest or right to the
use thereof and with respect to the leases, subleases, licenses and other
instruments on the attached REAL PROPERTY SCHEDULE, identifying which of those
leases, subleases, licenses or other instruments, if any, require that a consent
be obtained (from any lessors, guarantors or any other third parties) before the
transactions contemplated by this Agreement may be consummated and identifying
in each instance the party which is required to grant consent thereto, the
location of the
23
premises and the amount of the monthly rent. All of the facilities set forth on
the attached REAL PROPERTY SCHEDULE had, and have, all permits or other
authorizations required for their construction and operation, and are equipped
in conformity with all laws and governmental regulations and authorizations
applicable to the Company and its Subsidiaries and to their businesses, except
where the failure to have such permits or other authorizations or to be so
equipped in conformity with all laws and governmental regulations and
authorizations would not, individually or in the aggregate, have a Material
Adverse Effect. All such permits are validly issued, in good standing and in
full force and effect, and will continue with the Company or such Subsidiary as
part of the transactions contemplated by this Agreement with no further
authorization or consent, except where the failure of such permits to be validly
issued, in good standing and in full force and effect, or to continue with no
further authorization or consent would not, individually or in the aggregate,
have a Material Adverse Effect.
4.08 TAX MATTERS. (a)(i) The Company and its Subsidiaries have
timely filed all federal, foreign, state, county and local income, excise,
property and other Tax Returns which are required to be filed by or with respect
to them; (ii) all Taxes that are or were due (whether or not shown or required
to be shown as owing by the Company and its Subsidiaries on any Tax Return) have
been fully paid or, to the extent properly accruable as of the date thereof,
properly and adequately accrued on the Latest Balance Sheet; (iii) all such Tax
Returns were prepared in accordance with all applicable laws and are true,
correct and complete in all material respects; (iv) the provision for Taxes owed
or to be owed by the Company and any Subsidiary on the Latest Balance Sheet
without regard to deferred Tax assets and liabilities is sufficient for all
properly accruable and unpaid Taxes as of the date thereof; (v) all material
Taxes which the Company or any Subsidiary is obligated to withhold from amounts
owing to any employee, creditor or third party have been withheld and fully
paid; (vi) there are no open, pending or, to the best knowledge of the Company,
threatened tax-related proceedings, audits, examinations, investigations,
assessments, asserted deficiencies, requests for information, suits, actions or
claims for additional Taxes with respect to the Company or any Subsidiary; (vii)
there are no unresolved assertions of deficiencies or other liabilities for
Taxes (including any reports, statements, summaries and other communications or
assertions or claims of deficiencies) with respect to the Company or any
Subsidiary; (viii) there are no waivers or extensions of any applicable statute
of limitations for the assessment and collection of Taxes for which the Company
or any Subsidiary may be liable that are in effect and no requests for such
waivers are pending; (ix) neither the Company nor any Subsidiary is (A) a party
to any Federal or material non-Federal Tax ruling, request for ruling or closing
agreement (within the meaning of Section 7121 of the Internal Revenue Code of
1986, as amended (the "CODE")) with any Taxing authority or (B) required to make
any adjustments pursuant to Section 481(a) of the Code; (x) no adjustments
pursuant to Section 481(a) of the Code have been proposed by the Internal
Revenue Service (the "IRS") or requested by the Company or any Subsidiary; and
(xi)
24
neither the Company nor any Subsidiary is a party to any Tax sharing or
allocation agreement other than an agreement to which only the Company and any
Subsidiary is a party, nor are they potentially required to indemnify any person
with respect to Taxes.
(b) The attached TAXES SCHEDULE lists all states, territories and
jurisdictions (whether foreign or domestic) in which the Company and its
Subsidiaries file Tax Returns. (i) No claim or inquiry in writing addressed to
the Company or any Subsidiary has been made by any Taxing authority in a
jurisdiction where the Company or any Subsidiary does not file Tax Returns that
the Company or any of its Subsidiaries is subject to Tax in such jurisdiction;
(ii) there are no liens for Taxes upon the assets of the Company and any
Subsidiary, except for liens for current taxes not yet due and payable or for
liens being contested in good faith by appropriate proceedings and for which
adequate reserves have been taken; (iii) for each taxable period beginning on or
after June 1, 1992, the Company and its Subsidiaries (A) have not been members
of an "affiliated group" within the meaning of Section 1504(a)(1) of the Code,
either together or separately, other than the affiliated group of which the
Company is the common parent, nor (B) have they joined or been required to join
in filing any consolidated, combined, unitary or Federal, state or local Tax
filings other than filings including the Company and its Subsidiaries; and (iv)
no Tax Return of the Company or any Subsidiary for a taxable period since and
including 1992 has been examined or audited by the IRS or any state, local,
foreign or other taxing authority.
(c) With respect to the employees, including former employees, of
the Company and any Subsidiaries, the Company and such Subsidiaries have
complied with all applicable laws relating to the withholding of Taxes and have
timely collected or withheld and paid over (and up to but not including the
Closing Date, will have timely collected or withheld and paid over) to the
proper governmental authorities all amounts required to be so collected or
withheld and paid over for all periods up to (but not including) the Closing
Date under all applicable laws.
(d) Neither the Company nor any Subsidiary is a party to any
arrangement that is treated as a partnership for tax purposes.
(e) Since 1992, neither the Company nor any Subsidiary has
disposed of any property in a material transaction being accounted for under the
installment method pursuant to Section 453 or 453A of the Code. Neither the
Company nor any of its Subsidiaries has any deferred income reportable for a
period ending after the Closing Date but that is attributable to a transaction
(E.G., an installment sale) occurring in a period ending on or prior to the
Closing Date.
(f) No power of attorney has been granted by the Company or any
25
Subsidiary with respect to any matter relating to Taxes of the Company or any
Subsidiary which power of attorney is currently in force. Any such power of
attorney with respect to periods beginning on or after the Closing Date will be
revoked prior to the Closing.
(g) All Tax Returns that are filed or given after the date hereof
and before and including the Closing Date by the Company or any Subsidiary shall
be prepared, and all elections with respect to such Tax Returns shall be made,
to the extent permitted by law, in a manner consistent with prior practices of
the Company and its Subsidiaries.
(h) The Company and its Subsidiaries do not have pending any tax
certiorari proceeding or other proceeding seeking a material reduction in
assessment, abatement, credit or other adjustment to real property, ad valorem
taxes or assessments with respect to the Owned Real Property or the Leased Real
Property.
(i) No amount or other entitlement that could be received (whether
in cash or property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any person could give rise to,
nor would the consummation of the transactions contemplated hereby obligate the
Company or any Subsidiary or Buyer to make, the payment of any amount that would
not be fully deductible by the Company or any Subsidiary by reason of Section
280G of the Code.
(j) From the date hereof through the Closing Date, the Company
shall not, and shall not permit any of its Subsidiaries to (i) change any
practice with respect to Taxes or (ii) make, change or revoke any Tax election.
(k) The Shares and the Options do not constitute a United States
real property interest (as defined in Section 897 of the Code).
(l) All Tax Returns of the Company or any Subsidiary that have
been made available to Buyer are complete, true and accurate copies of the filed
Tax Returns of the Company or the Subsidiary. All material filed Tax Returns of
the Company and all of its Subsidiaries for the years 1997 and later have been
made available to Buyer.
4.09 CONTRACTS AND COMMITMENTS.
(a) Except as set forth on the attached CONTRACTS SCHEDULE,
neither the Company nor any Subsidiary is party to any: (i) collective
bargaining agreement or contract with any labor union; (ii) bonus, pension,
profit sharing, retirement or other form of deferred compensation plan, other
than as described in Section 4.13 or on the attached EMPLOYEE BENEFITS SCHEDULE;
(iii) stock purchase, stock option or similar plan; (iv)
26
contract for the employment or any contract relating to wages, hours or other
conditions of employment of any officer, individual employee or other person on
a full-time, part-time or consulting basis; (v) agreement or indenture relating
to the borrowing of money or a line of credit or to mortgaging, pledging or
otherwise placing a lien on any material portion of the Company's or any
Subsidiary's assets; (vi) guaranty of any obligation for borrowed money or other
material guaranty; (vii) lease or agreement under which it is a lessee or lessor
of, or holds or operates, or permits any third party to hold or operate, any
personal or real property for which the annual rental exceeds $50,000; (viii)
license or other contract with respect to Intellectual Property, including,
without limitation, the Intellectual Property rights and franchise agreements to
which the Company or any of its Subsidiaries is a party; (ix) contracts not
entered into in the ordinary course of business that involve expenditures or
receipts in excess of $50,000 to which the Company or any Subsidiary is a party;
(x) contracts for capital expenditures in excess of $50,000 to which the Company
or any of its Subsidiaries is a party; (xi) contracts relating to the
acquisition by the Company or any Subsidiary of the capital stock of any other
Person or granting the Company or any Subsidiary an option to purchase any
asset, tangible or intangible, or real or personal property of any other Person;
(xii) representative or sales agency contracts or commitments to which the
Company or any of its Subsidiaries is a party; (xiii) contract or group of
related contracts with the same party for the purchase by the Company or any of
its Subsidiaries of products or services under which the undelivered balance of
such products and services has a selling price in excess of $50,000; (xiv)
contract or group of related contracts with the same party for the sale by the
Company or any of its Subsidiaries of products or services under which the
undelivered balance of such products or services has a sales price in excess of
$50,000; (xv) contract or agreement with any Affiliate; (xvi) contracts
restricting a Person from competing with the Company or any of its Subsidiaries;
(xvii) contracts which prohibit or restrict in any manner the Company or any
Subsidiary from freely engaging in any line of business anywhere in the world;
or (xviii) other material contracts.
(b) Buyer either has been supplied with, or has been given access
to, a true and correct copy of all written contracts which are referred to on
the attached CONTRACTS SCHEDULE, together with all amendments, waivers or other
changes thereto.
(c) All contracts listed on the attached CONTRACTS SCHEDULE are in
full force and effect and constitute legal, valid and binding obligations of the
Company and/or its Subsidiaries, except where the failure of such contracts to
be in full force and effect and to constitute legal, valid and binding
obligations would not, individually or in the aggregate, have a Material Adverse
Effect. Neither the Company nor any Subsidiary nor, to the Company's knowledge,
any other party, is in default under any contract listed on the attached
CONTRACTS SCHEDULE, except where such default would not have a Material Adverse
Effect, and no event has occurred which, but for the passage of time or the
27
giving of notice, would constitute such a default.
4.10 INTELLECTUAL PROPERTY. A true, complete and accurate list and
description of all of the patents, certificates of plant variety protection,
registered trademarks, registered service marks, registered copyrights, Internet
domain names, material unregistered trademarks, service marks, trade names,
corporate names, and applications for any of the foregoing, owned by, or
licensed to or from, the Company or its Subsidiaries, or in or to which the
Company or its Subsidiaries are claiming or have rights (collectively, the
"INTELLECTUAL PROPERTY") are set forth on the attached INTELLECTUAL PROPERTY
SCHEDULE. Except as set forth on the attached INTELLECTUAL PROPERTY SCHEDULE:
(i) each of the Company and its Subsidiaries, as the case may be, owns and
possesses exclusively all right, title and interest in and to, or, if it does
not own it, possesses the valid and enforceable right to use, free and clear of
all claims, charges, security interests, liens or other encumbrances, except
Permitted Liens, all of its intellectual property, including, without
limitation, the Intellectual Property; (ii) neither the Company nor any of its
Subsidiaries has infringed or is currently infringing on the intellectual
property, including, without limitation, patents, trademarks, service marks,
trade names, copyrights, trade secrets or other proprietary rights, of any other
Person, and neither the Company nor any of its Subsidiaries has received any
written notice alleging such infringement; (iii) the Company and its
Subsidiaries have taken all reasonable security measures to protect the secrecy,
confidentiality and value of all of their trade secrets; (iv) no other patent,
trademark, service ▇▇▇▇, trade name, copyright or other intellectual property
right, or license under any thereof, is necessary to permit the businesses of
the Company and its Subsidiaries to be conducted as now conducted or as
heretofore or proposed to be conducted; (v) to the knowledge of the Company, no
Person has infringed or violated, or is currently infringing or violating, any
of the Company's or the Subsidiaries' intellectual property, including, without
limitation, the Intellectual Property; (vi) other than licenses set forth on the
INTELLECTUAL PROPERTY SCHEDULE, neither the Company nor its Subsidiaries are
obligated or under any liability whatsoever, under any contract, agreement,
arrangement or understanding (whether written or oral), to make any payments in
the aggregate in excess of $10,000 by way of royalties, fees or otherwise to any
owner or licensee of, or other claimant to, any patent, trademark, service ▇▇▇▇,
trade name, copyright or other intellectual property, with respect to the use of
any intellectual property, including, without limitation, the Intellectual
Property, in connection with the ownership of their respective assets, the
conduct of their respective businesses or otherwise; and (vii) all of the
applications listed on the attached INTELLECTUAL PROPERTY SCHEDULE have been
filed and, to the best of the Company's knowledge, have not been abandoned, and
all of the patents and registrations listed on the attached INTELLECTUAL
PROPERTY SCHEDULE have not expired or lapsed and, to the best of the Company's
knowledge, have not been cancelled or abandoned.
28
4.11 LITIGATION AND LABOR MATTERS. (a) Except as set forth on the
attached LITIGATION SCHEDULE, there are no actions, suits or proceedings pending
or, to the best knowledge of the Company, threatened against the Company or any
Subsidiary, or any of their respective properties or business, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, and neither the Company nor any Subsidiary is subject to any
outstanding judgment, order or decree of any court or governmental body.
(b) Neither the Company nor any Subsidiary has committed any
unfair labor practice under applicable Federal or state law, nor has the Company
or any Subsidiary received any notice of or claim that they have committed any
unfair labor practice under applicable Federal or state law. There are no
collective bargaining agreements to which the Company or any of its Subsidiaries
are bound. No collective bargaining unit has filed a petition for representation
of any of the employees of the Company or any Subsidiary and, to the knowledge
of the Company, no union organizing activity is occurring with respect to any of
the employees of the Company or any Subsidiary.
4.12 GOVERNMENTAL CONSENTS, ETC. Except for the applicable
requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇
"▇▇▇ ▇▇▇"), and except as set forth on the attached GOVERNMENTAL CONSENTS
SCHEDULE, the Company, the Shareholders and the Optionholders are not required
to submit any notice, report or other filing with any governmental authority and
no permit, consent, approval or authorization of, or declaration to or filing
with, any governmental, regulatory or administrative authority or Person is
required in connection with any of the execution, delivery or performance of
this Agreement by the Company, the Shareholders and the Optionholders, or the
consummation by the Company, the Shareholders and the Optionholders of the
transactions contemplated by this Agreement.
4.13 EMPLOYEES.
(a) Except as listed on the attached EMPLOYEE BENEFITS SCHEDULE,
with respect to employees of the Company or any of its Subsidiaries, neither the
Company nor any Subsidiary maintains or is obligated to contribute to (i) any
"employee pension benefit plans" (the "PENSION PLANS"), as such term is defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974
("ERISA"), and (ii) any "employee welfare benefit plans" (the "WELFARE PLANS"),
as such term is defined in Section 3(1) of ERISA. The Pension Plans, the
non-ERISA covered plans, and the Welfare Plans are
29
collectively referred to as the "Plans." Except as set forth on the attached
EMPLOYEE BENEFITS SCHEDULE, each of the Pension Plans on the attached EMPLOYEE
BENEFITS SCHEDULE which the Company and its Subsidiaries maintain or are
obligated to contribute to that are intended to be "qualified plans" has
received a favorable determination letter from the IRS that such Plan is a
"qualified plan" under Section 401(a) of the Code, the related trusts are exempt
from tax under Section 501(a) of the Code, and the Company is not aware of any
facts or circumstances that would jeopardize the qualification of such Pension
Plans. The Plans comply in form and in operation in all material respects with
the requirements of the Code and ERISA and any other applicable laws. The
attached EMPLOYEE BENEFITS SCHEDULE contains a list of each bonus, deferred
compensation, incentive compensation, stock purchase, stock option, severance or
termination pay, profit-sharing plan, program, agreement or arrangement, and
each other employee benefit plan, program, agreement or arrangement (other than
arrangements involving the payment of wages), sponsored, maintained or
contributed to or required to be contributed to by the Company or any of its
Subsidiaries for the benefit of any current or former employee, director or
independent contractor of the Company or any Subsidiary. Other than the Company
and its Subsidiaries, there is no trade or business, whether or not
incorporated, that together with the Company would be deemed a "single employer"
within the meaning of Section 414(b), (c), or (m) of the Code. Except as set
forth on the attached EMPLOYEE BENEFITS SCHEDULE, neither the Company nor any
Subsidiary has any formal plan or commitment to create any additional Plan or
modify or change any existing Plan that would result in a significant increase
in the cost of such Plan to the Company or any Subsidiary. Neither the Company
nor any other trade or business that, together with the Company, would be deemed
a single employer within the meaning of Section 414(b), (c) or (m) of the Code
sponsors, contributes to, or is obligated to contribute to (or has sponsored,
contributed to, or been obligated to contribute to) any plan subject to Section
302 of ERISA, Section 412 of the Code, or Title IV of ERISA, or any plan that is
a "multiemployer pension plan" as defined in Section 3(37) of ERISA. Except for
any Pension Plan, none of the benefits under any of the Plans is funded through
a trust.
(b) With respect to the Plans (other than any multiemployer
Pension Plans), (i) all required contributions have been made or properly
accrued, (ii) there are no actions, suits or claims pending or, to the knowledge
of the Company, threatened, other than routine claims for benefits, and (iii)
there have been no "prohibited transactions"(as that term is defined in Section
406 of ERISA or Section 4975 of the Code).
(c) With respect to each Plan, the Company has furnished or made
available to Buyer true and complete copies of (i) the most recent determination
letter received from the IRS regarding the Plans; (ii) the latest Forms 5500 and
the latest
30
financial statements for the Plans; (iii) a copy of each Plan (including all
amendments thereto); (iv) a copy of the most recent Summary Plan Description,
together with each Summary of Material Modifications, required under ERISA with
respect to such Plan or as otherwise provided to Plan participants or
beneficiaries, and all material employee communications relating to each Plan;
(v) if the Plan is funded through a trust or any third party funding vehicle,
such as an insurance contract, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements thereof;
(vi) all contracts relating to the Plans with respect to which the Company or
any Subsidiary may have any liability, including, without limitation, insurance
contracts, investment management agreements, subscription and participation
agreements and record keeping agreements; and (vil) a copy of all material
documents and correspondence relating to the Plans received from or provided to
the Department of Labor ("DOL") and the IRS during the past year.
(d) Neither the Company, its Subsidiaries nor, to the knowledge of
the Company, any of their respective directors, officers, employees or any other
"fiduciary," as such term is defined in Section 3 of ERISA, has committed any
breach of fiduciary responsibility imposed by ERISA or any other applicable law
with respect to the Plans which would subject Buyer, its subsidiaries or any of
their respective directors, officers or employees to any material liability
under ERISA or any applicable law.
(e) Neither the Company nor its Subsidiaries has incurred any
liability for any tax or civil penalty imposed by Section 4975 of the Code or
Section 502 of ERISA.
(f) Except as described on the attached EMPLOYEE BENEFITS
SCHEDULE, no employee of the Company or any Subsidiary will be entitled to any
additional benefits or any acceleration of the time of payment or vesting of any
benefits under any Plan as a result of the transactions contemplated by this
Agreement.
(g) The Company and each Subsidiary has properly classified
individuals providing services to the Company or any Subsidiary as employees or
non-employees, except to the extent that a misclassification would not have a
Material Adverse Effect.
(h) No Plan provides benefits, including, without limitation,
death or medical benefits (whether or not insured), with respect to current or
former employees upon retirement or other termination of service (other than (i)
coverage mandated by applicable law, (ii) death benefits or retirement benefits
under a Pension Plan, (iii) deferred compensation benefits accrued as
liabilities on the books of the Company or any Subsidiary, or (iv) benefits the
full cost of which is borne by the current or former
31
employee (or his beneficiary)). The list of Plans on the attached EMPLOYEE
BENEFITS SCHEDULE discloses whether each Plan that is a Welfare Plan is insured.
No Plan is subject to laws of a country or jurisdiction other than the United
States.
(i) All contributions or payments required to be made under the
terms of the Plans on or before Closing, or attributable to any period prior to
Closing, have been made or accrued for in the Financial Statements.
4.14 INSURANCE. The attached INSURANCE SCHEDULE lists each
material insurance policy, including, without limitation, fire, liability,
environmental, workers' compensation, health, director and officer liability and
other forms of insurance maintained by the Company and its Subsidiaries. All of
such insurance policies are valid and in full force and effect, and neither the
Company nor any Subsidiary is in material default with respect to its
obligations under any of such insurance policies and all premiums with respect
to such insurance policies are currently paid. At no time was there a period in
which the Company and its Subsidiaries lacked such insurance coverage. Each of
the Company and its Subsidiaries shall continue to carry all such policies or
similar policies during the pendency of this Agreement, and all outstanding
claims under such policies are described in the attached INSURANCE SCHEDULE.
There is no recorded liability for retrospective insurance premium adjustments
for any period prior to the date hereof. The attached INSURANCE SCHEDULE sets
forth a complete and accurate list of the following:
(a) all comprehensive general liability and other policies of
insurance under which each of the Company and its Subsidiaries is or has been
insured at any time since July 1, 1997;
(b) all property and casualty policies of insurance under which
each of the Company and its Subsidiaries is presently insured;
(c) all obligations of each of the Company and its Subsidiaries to
provide insurance coverage to third parties (for example under leases or other
contracts) that will survive after the Closing; and
(d) the expiration date of each insurance policy under which each
of the Company and its Subsidiaries is currently insured.
4.15 COMPLIANCE WITH LAWS. The Company and each Subsidiary is in
compliance with all applicable laws and regulations of foreign, federal, state
and local governments and all agencies thereof, except where the failure to
comply would not have a Material Adverse Effect. Neither the Company nor any
Subsidiary has received any notice of any violation or delinquency with respect
to any applicable law or regulation of
32
any foreign, federal, state, or local government or agency thereof, except where
such notice would not, individually or in the aggregate, have a Material Adverse
Effect. Notwithstanding anything in this Section 4.15 to the contrary,
compliance with Environmental Laws is covered by Section 4.16. All approvals,
authorizations, consents, licenses, permits or orders with respect to the
business, operations and properties of each of the Company and its Subsidiaries
have been obtained and are in full force and effect as of the date hereof,
except where the failure to obtain such approvals, authorizations, consents,
licenses, permits or orders or of such approvals, authorizations, consents,
licenses, permits or orders to be in full force and effect would not,
individually or in the aggregate, have a Material Adverse Effect. Neither the
ownership or use of the Company's or any Subsidiary's properties, nor the
conduct of their respective businesses, conflicts with the rights of any other
Person or violates, or with or without the giving of notice or the passage of
time, or both, will violate, conflict with or result in a breach, default, right
to accelerate or loss of rights under, or result in the creation of any
mortgages, liens, security interests or other encumbrance pursuant to, any term
or provision of the Certificate of Incorporation or ByLaws of the Company or any
Subsidiary, lease, permit, license, consent, approval, insurance policy or any
order, judgment, award or decree to which the Company or its Subsidiaries is a
party or by which the Company or its Subsidiaries, their respective businesses
or their respective properties and assets may be bound or affected, except where
such violation, conflict, breach, default, right to accelerate, loss of rights
or creation of a mortgage, lien, security interest or other encumbrance would
not, individually or in the aggregate, have a Material Adverse Effect.
4.16 ENVIRONMENTAL COMPLIANCE AND CONDITIONS. Except as set forth
on the attached ENVIRONMENTAL COMPLIANCE SCHEDULE or as is not likely to give
rise to a Material Adverse Effect:
(a) The Company and each of its Subsidiaries is not, and has not
been, in violation of nor has it received any notice of any violation with
respect to, any applicable Environmental Laws. The Company and each of its
Subsidiaries has obtained all permits, licenses or other authorizations required
under applicable Environmental Laws, and all such permits, licenses or other
authorizations are valid and in good standing.
(b) There is no Environmental Claim pending or, to the best
knowledge of the Company, threatened against the Company or any of its
Subsidiaries or relating to the business, the assets, the Owned Real Properties
or the Leased Real Properties of the Company and its Subsidiaries.
(c) There are no past or present actions, activities,
circumstances,
33
conditions, events or incidents, including, without limitation, the Release,
transportation, treatment, storage, recycling or reclamation of any Hazardous
Material, at any location (including, without limitation, any former or
discontinued facilities or operations), that could reasonably be expected to
form the basis of any colorable Environmental Claim against the Company or any
Subsidiary.
(d) The Company has not, and no other Person has, caused a Release
of any Hazardous Material at, on, under, from or otherwise affecting the soil,
surface water or groundwater at any Owned Real Property or Leased Real Property
so as to give rise to any remedial or corrective obligation arising under
Environmental Laws.
(e) There are no underground or above ground storage tanks located
at any Owned Real Property or Leased Real Property, and the Company has not
installed, owned or operated any underground or above ground storage tanks. To
the best knowledge of the Company, the Company and each Subsidiary has provided
Buyer a copy of all material reports, closure reports, closure letters,
correspondence or other material documents in its possession related to the
removal of any tanks from any Owned Real Property or Leased Real Property.
(f) The Company and each Subsidiary has provided Buyer with copies
of all reports, assessments, audits, evaluations, or sampling results relating
to compliance with or violation or suspected violation by the Company or any
Subsidiary of Environmental Laws, or to liabilities of the Company or any
Subsidiary arising from the handling, storage, transportation or Release of any
Hazardous Material prepared by, for, or at the request of the Company or any
Subsidiary (i) since June 1, 1997 or (ii) to the best of the Company's
knowledge, prior to June 1, 1997, and in its possession.
(g) This Section 4.16 constitutes the sole and exclusive
representations and warranties of the Company or any Subsidiary with respect to
environmental matters.
4.17 AFFILIATED TRANSACTIONS. Except as set forth on the attached
AFFILIATED TRANSACTIONS SCHEDULE, no officer, director, Shareholder or Affiliate
of the Company or, to the best knowledge of the Company, no individual in such
officer's, director's, shareholder's or Affiliate's immediate family is a party
to any agreement, contract, commitment or transaction with the Company or its
Subsidiaries or has any interest in any property used by the Company or its
Subsidiaries. Except as set forth on the attached AFFILIATED TRANSACTIONS
SCHEDULE, to the Company's knowledge, no employee of the Company or any
individual in such employee's immediate family is a party to any material
agreement, contract, commitment or transaction with the Company or its
Subsidiaries or has any material interest in any material property used by the
Company or its Subsidiaries.
34
4.18 BROKERAGE. Except for the fees and expenses of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. (which shall be paid by the Shareholders, the
Optionholders and H.I.G. Cayman), there are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Company.
4.19 BANK ACCOUNTS. The attached BANK ACCOUNTS SCHEDULE lists the
name and location of all of the bank accounts, safe deposit boxes, custody
agreements and lock boxes used by the Company and its Subsidiaries (and the
names of the Persons authorized to draw thereon or to withdraw therefrom).
Neither the Company nor any Subsidiary has granted a power of attorney to any
person or entity which has not been terminated.
4.20 UNDISCLOSED LIABILITIES. The Company and its Subsidiaries do
not have any obligations or liabilities, whether accrued, absolute, contingent
or otherwise, including, without limitation, any obligation or liability with
respect to any Taxes due or to become due arising out of transactions entered
into at or prior to the Closing, or any action or inaction at or prior to the
Closing, or any state of facts existing at or prior to the Closing which would
be required by GAAP to be set forth on the Company's balance sheet other than:
(i) liabilities set forth on the Latest Balance Sheet, (ii) liabilities and
obligations which have arisen after the date of the Latest Balance Sheet
consistently with past business practice in the ordinary course of business, and
(iii) other liabilities and obligations expressly disclosed on the attached
LIABILITIES SCHEDULE.
4.21 CHANGE OF CONTROL PROVISIONS. Except as set forth on the
attached AUTHORIZATION SCHEDULE, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated by this
Agreement will require the Company or any of the Subsidiaries to make any
payment to any Person.
4.22 DISCLOSURE. The Company has made available for inspection by
Buyer and its representatives complete and correct copies of the corporate
minute books of the Company and its Subsidiaries. Such minute books contain the
minutes of all meetings of stockholders, the board of directors and any
committees thereof of the Company and its Subsidiaries that have been held prior
to the date hereof and all written consents to action executed in lieu thereof.
4.23 YEAR 2000. The Company and its Subsidiaries have formulated a
plan in order to address the ability of their information systems to process
date and time data from, into and beyond the year 2000 ("Year 2000 Data"), and
the ability of such systems to interact with third parties' systems and with and
through electrical power, telecommunications and other utilities and services.
The Company and its Subsidiaries are not aware of any facts or circumstances
which are specific to the Company or its
35
Subsidiaries that would indicate that if the scheduled replacements, updates or
upgrades are made in accordance with such plans, the information systems
material to the operations of the Company and its Subsidiaries will be unable to
accurately process Year 2000 Data as of and after December 31, 1999, but the
Company is aware of general publications which indicate that any plans to
conform systems to adequately process Year 2000 Data may not work.
4.24 CUSTOMERS. The Company and its Subsidiaries maintain and have
good relationships with the top three (3) customers of Best Built, Inc. and
neither the Company nor any of its Subsidiaries has received written notice of a
material deterioration of any such relationships. Neither the Company nor any of
its Subsidiaries has received written notice that it is in breach of any
representation, warranty, covenant, obligation or other provision of any
outstanding agreement with any such customer.
4.25 RELATIONSHIP WITH GENERAL ELECTRIC COMPANY. Neither the
Company, nor any Shareholder or Optionholder holding at least five percent (5%)
of the equity of the Company has any equity, creditor or similar relationship,
including, without limitation, any investment in, or any debtor, revolving
credit, leasing or creditor relationship, but excluding any vendor or vendee
relationship, with General Electric Company or any entity known by the Company,
such Shareholders or such Optionholders to be a Subsidiary of General Electric
Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company, the Shareholders,
the Optionholders and H.I.G. Cayman that:
5.01 ORGANIZATION AND CORPORATE POWER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to enter into this Agreement
and perform its obligations hereunder.
5.02 AUTHORIZATION; VALID AND BINDING AGREEMENT. The execution,
delivery and performance of this Agreement by Buyer and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action, and no other corporate proceedings on its part are
necessary to authorize the execution, delivery or performance of this Agreement.
This Agreement constitutes a valid and binding obligation of Buyer, enforceable
in accordance with its terms.
36
5.03 NO BREACH. Except as set forth on the attached BUYER CONSENTS
SCHEDULE, Buyer is not subject to or obligated under its Certificate of
Incorporation, its Bylaws, any applicable law, or rule or regulation of any
governmental authority, or any material agreement or instrument, or any license,
franchise or permit, or subject to any order, writ, injunction or decree, which
would be breached or violated in any material respect by Buyer's execution,
delivery or performance of this Agreement.
5.04 GOVERNMENTAL CONSENTS, ETC. Except for the applicable
requirements of the HSR Act, Buyer is not required to submit any notice, report
or other filing with any governmental authority in connection with any of the
execution, delivery or performance of this Agreement by Buyer, or the
consummation by Buyer, of the transactions contemplated by this Agreement.
Except as set forth on the attached BUYER CONSENTS SCHEDULE, no consent,
approval or authorization of any governmental or regulatory authority or any
other party or Person is required to be obtained by Buyer in connection with its
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
5.05 LITIGATION. There are no actions, suits or proceedings
pending or, to Buyer's knowledge, threatened against Buyer, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
would adversely affect Buyer's performance under this Agreement or the
consummation of the transactions contemplated by this Agreement.
5.06 BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Buyer.
5.07 INVESTMENT REPRESENTATION. Buyer is purchasing the Shares and
the Vinyl Shares for its own account for investment purposes and not with a view
to or for sale in connection with any public distribution of such securities,
except in compliance with applicable federal or state securities laws.
5.08 FINANCING. To the extent Buyer has obtained the debt
financing described in the Financing Letter, Buyer has, and shall have at the
Closing, sufficient cash and available credit facilities (and has provided
evidence thereof satisfactory to the Shareholder Representative), to pay the
full consideration payable to the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman hereunder, to make all other necessary payments
by it in connection with the purchase of the Shares, the Vinyl Shares and the
Options and to pay all of its related fees and expenses.
ARTICLE VI
37
COVENANTS OF THE COMPANY,
THE SHAREHOLDERS, THE OPTIONHOLDERS AND H.I.G. CAYMAN
6.01 CONDUCT OF THE BUSINESS. The Company, Vinyl and H.I.G. Cayman
covenant and agree with respect to Vinyl and the Company and its Subsidiaries,
pending the Closing and except as otherwise approved in writing by the Buyer,
that, from the date hereof until the Closing Date:
(a) Each of the Company and its Subsidiaries shall carry on its
business according to its ordinary and usual course of business and
substantially in the same manner as heretofore conducted, and to maintain its
records and books of account in a manner consistent with prior periods; PROVIDED
that, the foregoing notwithstanding, the Company may use all available cash to
repay any Indebtedness prior to the Closing. The Company and its Subsidiaries
shall refrain from making unfunded or committing to make unfunded capital
expenditures in excess of $375,000 in the first quarter of 1999, $375,000 in the
second quarter of 1999, $375,000 in the third quarter of 1999 and $375,000 in
the fourth quarter of 1999. The Company and its Subsidiaries shall make the
capital expenditures in accordance with the 1999 annual budget that was
presented in the Company's Confidential Information Memorandum, dated November
1998. The Company and its Subsidiaries shall refrain from entering into any
transactions involving the disposal of any properties or assets (other than
inventory in the ordinary course), with a value of more than $25,000,
individually, or $75,000, in the aggregate.
(b) Except as otherwise provided for by this Agreement or
consented to in writing by Buyer, neither Vinyl nor the Company shall, and the
Company shall not permit any Subsidiary to, (i) issue, sell or deliver any
shares of its or any Subsidiary's capital stock or other securities, or issue or
sell any securities convertible into, or options with respect to, or warrants to
purchase or rights to subscribe for, any shares of its or any Subsidiary's
capital stock or other securities; (ii) effect any recapitalization,
reclassification, stock dividend, stock split or like change in its or any
Subsidiary's capitalization; (iii) amend its or any Subsidiary's Certificate of
Incorporation (or other charter documents) or By-laws; or (iv) make any
redemption or purchase of any shares of its or any Subsidiary's capital stock or
declare, pay, set aside or make, or cause any Subsidiary to declare, pay, set
aside or make, any dividends or distribution or payment in respect of its or any
Subsidiary's capital stock or other securities.
(c) Neither the Company nor any Subsidiary shall make any change
in its accounting procedures or any unreasonable changes from its past practice
with respect to its credit criteria from those in existence at December 31,
1998, except as required due to changes
38
in GAAP. The Company shall promptly notify Buyer of any such changes required
due to changes in GAAP. The Company and its Subsidiaries shall make any
appropriate changes to their respective allowances for doubtful accounts in the
event its credit criteria is reasonably changed.
(d) No claims, pledges, security interests, liens, charges or any
other encumbrance on any of the properties or assets of the Company or its
Subsidiaries shall be made other than in the ordinary course of business
consistent with past practice.
(e) Each of the Company and its Subsidiaries shall refrain from
acquiring or agreeing to acquire, or disposing or agreeing to dispose of, real
estate, from entering into, or agreeing to enter into, leases of real estate or
equipment, and from creating any modification, amendment or termination of the
leases for the Leased Real Properties.
(f) Vinyl and the Company shall promptly advise Buyer in writing
of the commencement or threat against Vinyl or the Company or its Subsidiaries
of (i) any written claim, litigation or proceeding when the amount claimed is,
in any individual claim, litigation or proceeding, in excess of $20,000 or, in
the aggregate, $75,000 and (ii) any Tax audit.
(g) The Company shall use its reasonable best efforts to preserve
its, and to preserve its Subsidiaries' business, organization, intellectual
property and relationships with their respective vendors, customers and
suppliers and others having business relations with it.
(h) Neither the Company nor any Subsidiary shall (a) make any
loans or advances to, or assume, guarantee or otherwise become liable for any
indebtedness or other obligations of any stockholder, director, officer,
employee or agent of the Company or its Subsidiaries, except that the Company
shall be permitted to make loans and advance expenses to employees in an amount
less than $2,500 per employee and, in the aggregate, less than $50,000; or (b)
incur any indebtedness other than in the ordinary course of business consistent
with past practice.
(i) Neither the Company nor any Subsidiary shall make, amend or
enter into any employment contract or arrangement, adopt any new Plan or amend
any existing Plan (except as required by applicable law) or materially increase
salaries or other compensation.
(j) Neither the Company nor any Subsidiary shall enter into any
transaction with any Affiliate, except the transactions that are set forth on
the attached AFFILIATED TRANSACTIONS SCHEDULE.
39
(k) Vinyl shall not acquire or hold any other asset other than the
Shares set forth opposite its name on the attached SHAREHOLDERS SCHEDULE, nor
shall it conduct any activities other than the holding of such Shares and the
entering into of this Agreement and the transactions contemplated by this
Agreement, nor shall it incur any obligations or liabilities, whether arising in
contract, tort or otherwise, of any type or nature, whether ▇▇▇▇▇▇, inchoate,
accrued contingent or fixed.
6.02 ACCESS TO BOOKS AND RECORDS. From the date hereof until the
Closing Date, Vinyl and the Company shall provide Buyer and its authorized
representatives ("BUYER'S REPRESENTATIVES") with full access at all reasonable
times, and upon reasonable advance notice, to the offices, properties,
personnel, books and records, and evidence of title to any real property, of
Vinyl and the Company and its Subsidiaries in order for Buyer to have the
opportunity to make such investigation as it shall reasonably desire to make of
the affairs of Vinyl and the Company and its Subsidiaries, provided that such
access does not unreasonably interfere with the normal operations of Vinyl or
the Company or the Subsidiaries. The Company, the Shareholders, the
Optionholders and H.I.G. Cayman will, upon request, furnish Buyer with any
information reasonably required with respect to Vinyl's and the Company's and
its Subsidiaries' respective properties, assets and businesses and will provide
Buyer with copies of any contract, document or instrument listed on any Schedule
hereto. Buyer acknowledges that it remains bound by the Confidentiality
Agreement, dated November 23, 1998, with the Company (the "CONFIDENTIALITY
AGREEMENT"); provided, however, that upon the consummation of the transactions
contemplated hereby, the Confidentiality Agreement shall terminate.
6.03 REGULATORY FILINGS. The Company shall make or cause to be
made all filings, which filing fees shall be paid by Buyer, and submissions
under the HSR Act and any other material laws or regulations applicable to Vinyl
and the Company and its Subsidiaries for the consummation of the transactions
contemplated by this Agreement. The initial filing under the HSR Act shall be
made by the Company within five (5) business days of the signing of this
Agreement and the Company shall make an early termination request at such time.
Vinyl and the Company shall coordinate and cooperate with Buyer in exchanging
such information and assistance as Buyer may reasonably request in connection
with all of the foregoing.
6.04 CONDITIONS. The Company, the Shareholders, the Optionholders
and H.I.G. Cayman shall use reasonable best efforts to cause the conditions set
forth in Section 2.01 to be satisfied and to consummate the transactions
contemplated by this Agreement; provided that neither the Company, any
Subsidiary, any Shareholder, any Optionholder nor H.I.G. Cayman shall be
required to expend any funds to obtain any third-party or governmental consents
required under Section 2.01(d) or (e).
40
6.05 EXCLUSIVE DEALING. During the period from the date of this
Agreement through the Closing or the earlier termination of this Agreement
pursuant to Section 8.01, each Shareholder, each Optionholder and H.I.G. Cayman
shall not take, or permit any other Person on its behalf to take, and neither
Vinyl nor the Company shall take, any action to solicit, encourage, initiate or
engage in discussions or negotiations with, or provide any information to, any
Person (other than Buyer and its representatives) concerning any purchase, sale,
liquidation, recapitalization, restructuring, merger or other disposition of
Vinyl or the Company or any of its Subsidiaries, or of any securities of Vinyl,
the Company or any Subsidiary, including, without limitation, the Shares, the
Vinyl Shares, and the Options, or all or any substantial portion of the assets
of Vinyl or the Company or any of its Subsidiaries or similar transaction
involving Vinyl or the Company. If Vinyl, the Company, any of the Shareholders,
any of the Optionholders or H.I.G. Cayman, or any of their respective
representatives, receives any offers or receives any communications from any new
or existing offerees, it or they will (a) remain silent or advise the offeror
that neither Vinyl, the Company, the Shareholders, the Optionholders nor H.I.G.
Cayman are in a position to negotiate or accept any offers at that time, and (b)
notify Buyer of any such communication.
6.06 NOTIFICATION. From the date hereof until the Closing Date,
the Company, the Shareholders, the Optionholders and H.I.G. Cayman shall
promptly disclose to Buyer in writing any material variances from the
representations and warranties contained in this Agreement, including the
Schedules hereto, or any other material development concerning Vinyl or the
Company or any of its Subsidiaries. The Shareholders, the Optionholders and
H.I.G. Cayman shall promptly inform Buyer in writing if they obtain knowledge
that the representations and warranties of the Company, the Shareholders, the
Optionholders or H.I.G. Cayman in this Agreement, including the Schedules
hereto, are not true and correct in all respects or if there are any material
errors in, or omissions therefrom, or that there are material developments
concerning Vinyl or the Company or any of its Subsidiaries. No disclosure or
notice given pursuant to this Section 6.06 shall affect Buyer's right to
terminate this Agreement pursuant to Article VIII. To the extent necessary, and
only due to events (other than the discovery of an error) occurring after the
date hereof, such disclosures shall amend and supplement the appropriate
Schedules attached hereto in the form of "UPDATED SCHEDULES" delivered to Buyer,
except for purposes of Section 2.01(b) hereof.
6.07 CONSENTS. Vinyl and the Company shall use their reasonable
best efforts to obtain any third-party consents, authorizations, approvals and
waivers which are necessary to permit the consummation of the transactions
contemplated by this Agreement and the operation of the businesses of Vinyl and
the Company and its Subsidiaries that are not set forth on the attached
THIRD-PARTY CONSENTS SCHEDULE.
41
6.08 BROKERAGE. The Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman shall severally, and not jointly (subject to
Section 9.02(d)), indemnify and hold Buyer harmless against any and all claims,
losses, liabilities or expenses which may be asserted against them as a result
of their dealings, arrangements or agreements with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co.
6.09 INTERIM FINANCIAL STATEMENTS. Within thirty (30) days after
the end of each calendar month until the Closing, the Company shall deliver to
Buyer copies of unaudited consolidated balance sheets of the Company and its
Subsidiaries as of the end of each month subsequent to the date hereof and prior
to the Closing Date and the related statements of income and cash flows for each
month then ended, which will present fairly in all material respects the
financial condition and results of operations and cash flow of the Company and
its Subsidiaries. For the purposes of this Agreement, the term "FINANCIAL
STATEMENTS" shall be deemed to include any such balance sheets and statements
delivered by the Company pursuant to this Section 6.09. Thermal shall deliver to
Buyer, on or prior to May 15, 1999, copies of Thermal's consolidated statement
of income for the four-month period ended April 30, 1999, which will present
fairly in all material respects the results of operations of Thermal prepared in
accordance with GAAP consistent with past practice.
6.10 INTELLECTUAL PROPERTY MATTERS. Within twenty (20) days after
the execution of this Agreement, the Company shall file or cause to be filed
with the PTO all documentation necessary to completely and validly correct the
PTO records to reflect that (i) with respect to trademarks, the grant from Heat
Acquisition II, Inc. to Nationscredit Commercial Corporation (which was recorded
with the PTO) is a grant of a security interest and not "an assignment of part
of assignor interest," (ii) the applicant, Thermal, in Serial No. 75/328,843
("DECK-IN-A-DAY"), Serial No. 75/328,371 ("SNAP-TRACK") and all other
applications previously filed or to be filed prior to the Closing Date by
Thermal, is a Delaware corporation and not a Pennsylvania corporation, and (iii)
with respect to patents, the merger that was recorded with the PTO was of
Thermal with and into Heat Acquisition II, Inc. and not Heat Acquisitino II,
Inc.
6.11 NO TRANSFERS. The Shareholders, the Optionholders and H.I.G.
Cayman shall not sell or transfer any of their respective Shares, Vinyl Shares
or Options.
ARTICLE VII
COVENANTS OF BUYER
42
7.01 ACCESS TO BOOKS AND RECORDS. From and after the Closing,
Buyer shall, and shall cause Vinyl and the Company to, provide the Shareholder
Representative (on behalf of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman), and its agents with reasonable access (for the
purpose of examining and copying), during normal business hours, and upon
reasonable advance notice, to the books and records of Vinyl and the Company and
its Subsidiaries with respect to periods prior to the Closing Date in connection
with any matter relating to Taxes, governmental inquiries or litigation, whether
or not relating to or arising out of this Agreement or the transactions
contemplated by this Agreement, provided that such access does not unreasonably
interfere with the normal operations of Buyer, Vinyl, the Company or its
Subsidiaries. Unless otherwise consented to in writing by the Shareholder
Representative, neither Vinyl nor the Company shall, for a period of five (5)
years following the Closing Date, destroy, alter or otherwise dispose of any of
the books and records of Vinyl or the Company for the period prior to the
Closing Date without first offering to surrender to the Shareholder
Representative such books and records or any portion thereof which Buyer, Vinyl
or the Company may intend to destroy, alter or dispose of.
7.02 NOTIFICATION. Prior to the Closing, upon discovery, Buyer
shall promptly inform the Company and the Shareholder Representative (on behalf
of the Shareholders, the Optionholders and H.I.G. Cayman) in writing of any
material variances from Buyer's representations and warranties contained in
Article V.
7.03 DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION. For a
period of five (5) years after the Closing, Buyer shall not, and shall not
permit the Company or any of its Subsidiaries to, amend, repeal or modify any
provision in the Company's or any of its Subsidiaries' Certificate of
Incorporation or By-laws relating to the exculpation or indemnification of any
officers and directors (unless required by law), it being the intent of the
parties that the officers and directors of the Company and its Subsidiaries who
existed as officers and directors of the Company or its Subsidiaries prior to
the Closing shall continue to be entitled to such exculpation and
indemnification to the full extent as they receive under those documents prior
to the Closing.
7.04 REGULATORY FILINGS. Buyer shall make or cause to be made all
filings and submissions under the HSR Act and any other laws or regulations
applicable to Buyer as may be required of Buyer for the consummation of the
transactions contemplated by this Agreement. The initial filing under the HSR
Act shall be made by Buyer within five (5) business days of the signing of this
Agreement and Buyer shall make an early termination request at such time. Buyer
shall coordinate and cooperate with Vinyl and the Company in exchanging such
information and assistance as Vinyl and the Company may reasonably request in
connection with all of the foregoing.
43
7.05 CONDITIONS. Buyer shall use reasonable efforts to cause the
conditions set forth in Section 2.02 to be satisfied and to consummate the
transactions contemplated by this Agreement; provided that Buyer shall not be
required to expend any funds to obtain any third-party or governmental consents
required under Section 2.02(c) and Section 2.02(d).
7.06 CONTACT WITH CUSTOMERS AND SUPPLIERS. Prior to the Closing,
Buyer and Buyer's Representatives shall contact and communicate with the
employees (subject to Section 6.02 of this Agreement), customers and suppliers
of the Company and its Subsidiaries in connection with the transactions
contemplated by this Agreement only with the prior written consent of the
Company or the Shareholder Representative (on behalf of the Shareholders and the
Optionholders). Notwithstanding the foregoing, Buyer and Buyer's Representatives
may contact and communicate with ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇
without prior written consent of the Company or the Shareholder Representative.
7.07 BONUSES. After the one (1) year anniversary of the Closing
Date, to the extent that the actual aggregate cash amount of the Bonuses awarded
is less than $32,500, Buyer shall refund the difference to the Shareholder
Representative (on behalf of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman).
ARTICLE VIII
TERMINATION
8.01 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of Buyer, and the Shareholder
Representative (on behalf of the Shareholders, the Optionholders and H.I.G.
Cayman);
(b) by Buyer, if ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated refuses or is not able to provide or arrange for financing to Buyer
or any of its affiliates based on any of the circumstances described in clause
(ii) of the fifth paragraph (the "MARKET DISRUPTION CONDITION") of the Financing
Letter;
(c) by Buyer, if (i) the condition set forth in Section 2.01(h) is
not satisfied, or (ii) the condition set forth in Section 2.01(1) is not
satisfied; provided that, in the case of this clause (ii) only, Buyer exercises
its rights under this clause (ii) on or prior
44
to the third business day following the delivery to Buyer of the financial
statements required to be delivered pursuant to the last sentence of Section
6.09;
(d) by Buyer, if (i) the Shareholders and the Optionholders fail
to deliver at least ninety-nine percent (99%) of the capital stock of the
Company on a fully diluted basis, or (ii) H.I.G. Cayman fails to deliver one
hundred percent (100%) of the Vinyl Shares;
(e) by Buyer, if there has been a material violation or breach by
the Company, the Shareholders, the Optionholders or H.I.G. Cayman of any
covenant, representation or warranty contained in this Agreement and such
violation or breach has not been waived by Buyer or, in the case of a covenant
breach, cured by the Company, the Shareholders, the Optionholders or H.I.G.
Cayman within ten (10) days after written notice thereof from Buyer.
(f) by the Shareholder Representative (on behalf of the
Shareholders, the Optionholders and H.I.G. Cayman), if there has been a material
violation or breach by Buyer of any covenant, representation or warranty
contained in this Agreement and such violation or breach has not been waived by
the Shareholder Representative or, with respect to a covenant breach, cured by
Buyer within ten (10) days after written notice thereof by the Shareholder
Representative (provided that the failure by Buyer to comply with Section
1.07(b)(i) shall not be subject to cure hereunder unless otherwise agreed to in
writing by the Shareholder Representative); or
(g) by either Buyer or the Shareholder Representative (on behalf
of the Shareholders, the Optionholders and H.I.G. Cayman) if the transactions
contemplated by this Agreement have not been consummated (other than through the
failure of any party seeking to terminate this Agreement to comply in all
material respects with its obligations under this Agreement) by June 15, 1999
(the "TRANSACTION DEADLINE DATE"), or such later date as the parties may agree
in writing; provided that neither Buyer nor the Shareholder Representative shall
be entitled to terminate this Agreement pursuant to this Section 8.01(g) if such
Person's (or the Company's, any Shareholder's, any Optionholder's or H.I.G.
Cayman's, in the case of the Shareholder Representative) knowing or willful
breach of this Agreement has prevented the consummation of the transactions
contemplated by this Agreement; provided further that Buyer shall for any reason
or no reason, and without the consent of any other party, be entitled to extend
the Transaction Deadline Date to June 30, 1999 by providing written notice to
the Shareholder Representative to that effect, whereupon the Transaction
Deadline Date shall automatically be so extended.
8.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Buyer or the Shareholder Representative (on behalf of the
Shareholders, the Optionholders and H.I.G. Cayman) as provided above, the
provisions of
45
this Agreement shall immediately become void and of no further force and effect
(other than this Section 8.02 and Article XIII hereof which shall survive the
termination of this Agreement); provided, however, that the following shall
apply:
(a) If this Agreement is terminated because (i) Buyer terminates
this Agreement pursuant to Section 8.01(b), Section 8.01(c)(i), Section
8.01(c)(ii), Section 8.01(d) or Section 8.01(e), or (ii) the Shareholder
Representative terminates this Agreement or otherwise declines to close the
transactions contemplated by this Agreement when, in the case of this clause
(ii), all conditions set forth in Section 2.02 within Buyer's control shall have
been satisfied on or prior to the last date under this Agreement when such
conditions could have been satisfied, Buyer shall, in any such case, be entitled
to a refund of the Deposit along with the Deposit Interest, without prejudice to
the right of Buyer to pursue any equitable remedy.
(b) If this Agreement is terminated because (i) the Shareholder
Representative terminates this Agreement pursuant to Section 8.01(f) or Section
8.01(g) (other than when Section 8.02(a)(ii) applies) hereof, or (ii) Buyer
terminates this Agreement pursuant to Section 8.01(g) or otherwise declines to
close the transactions contemplated by this Agreement when, all the conditions
set forth in Sections 2.01 (b) through (g), (i) and (k), shall have been
satisfied on or prior to the last date under this Agreement when such conditions
could have been satisfied, the Shareholders, the Optionholders and H.I.G. Cayman
shall, in any such case, be entitled to retain the Deposit as their sole and
exclusive remedy under this Agreement or applicable law.
(c) In the event of termination of this Agreement due to (i) the
failure to obtain any necessary HSR approvals, or (ii) an action or proceeding
before a court or governmental body wherein an unfavorable judgment, decree or
order seeks to restrain, prohibit or prevent the performance of this Agreement
or the consummation of any of the transactions contemplated by this Agreement,
to declare unlawful the transactions contemplated by this Agreement, or to cause
such transactions to be rescinded, Buyer shall, in any such case, be entitled to
a full refund of the Deposit along with the Deposit Interest.
(d) In the event Buyer terminates this Agreement pursuant to
Section 8.01(d) or Section 8.01(e), Buyer shall also be entitled to receive from
the Company, the Shareholders, the Optionholders and H.I.G. Cayman an amount
equal to all reasonable out-of-pocket fees and expenses (including reasonable
fees and expenses of counsel) incurred by Buyer and its affiliates in connection
with this Agreement or the transactions contemplated hereby after the date
hereof.
(e) If Buyer has extended the Transaction Deadline Date to June
30,
46
1999, then Buyer shall only be entitled to a refund of the Deposit along with
the Deposit Interest, if Buyer terminates this Agreement pursuant to Section
8.01(d) or Section 8.01(e).
ARTICLE IX
INDEMNIFICATION
9.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in this Agreement shall survive the Closing as
follows:
(a) the representations and warranties set forth in Sections 3.03,
3.04, 3.05, 3.07, 4.04(b) and 4.08 will survive for the applicable statute of
limitations; and
(b) all other representations and warranties in this Agreement and
in any certificates shall terminate on May 15, 2000.
No claim for indemnification hereunder for breach of any such
representations or warranties may be made after the expiration of the survival
period applicable to such claims; provided that any representation or warranty
in respect of which indemnity may be sought under Section 9.02 and the indemnity
with respect thereto, shall survive the time at which it would otherwise
terminate pursuant to this Section 9.01 if notice of the inaccuracy or breach,
or potential inaccuracy or breach thereof giving rise to such right or potential
right of indemnity shall have been given to the Person against whom such
indemnity may be sought prior to such time.
9.02 INDEMNIFICATION.
(a) Each Shareholder (other than Vinyl), each Optionholder and
H.I.G. Cayman, severally and not jointly (subject to the provisions of Section
9.02(d)), shall indemnify and hold harmless Buyer and its officers, directors,
employees, stockholders, agents, representatives, successors and permitted
assigns (collectively, the "BUYER INDEMNIFIED PARTIES"), from and against any
claims, damages, losses, liabilities, Taxes, regulatory actions, injuries to
Persons, property or natural resources, fines, penalties, costs and expenses
(including, without limitation, settlement costs, any reasonable legal,
accounting or other expenses incurred in connection with investigating or
defending any actions or threatened actions and court costs) ("BUYER LOSSES")
sustained or required to be paid by reason of, arising out of or caused by (i)
any misrepresentation or breach of any representation or warranty made by the
Company, such Shareholder, such Optionholder or H.I.G. Cayman in this Agreement,
(ii) any breach of or failure to perform any
47
covenant, agreement or obligation of the Company, such Shareholder, such
Optionholder or H.I.G. Cayman contained in this Agreement, (iii) any fees or
expenses of the Shareholders, the Optionholders or H.I.G. Cayman relating to
this Agreement and the transactions contemplated by this Agreement regardless of
when accrued or incurred and any fees or expenses of the Company or any of its
Subsidiaries relating to this Agreement and the transactions contemplated by
this Agreement accrued or incurred in connection with Closing, (iv) Taxes
reflected on any Post-Closing Return attributable to periods ending on or before
the Closing Date, not otherwise accounted for in the calculation of the tax
benefit amount as provided for in Section 11.03(c), (v) the Company's or any
Subsidiary's failure to timely file any Form 5500 for any Plan for any plan
year, (vi) the litigation matter of GENEVA NATIONAL CONDOMINIUM MASTER
ASSOCIATION V. THERMAL INDUSTRIES, INC., ET AL., Case No. 96-CV-81, Circuit
Court, Walworth County, Elkhorn, Wisconsin, in the event that Thermal, Geneva
National Condominium Master Association and General Accident Insurance Company
do not execute and deliver the Settlement Agreement (the "Settlement Agreement")
in substantially the form of EXHIBIT G hereto in settlement of such litigation,
but only, in the case of this clause (vi), to the extent the Buyer Losses under
this clause (vi) exceed the amount of the liability attributable to Thermal that
would have otherwise existed under the Settlement Agreement, and then only with
respect to the amount of such excess, and (vii) the litigation matter of ▇▇▇▇▇▇
▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ V. DURA-PLEX, INC., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, THERMAL
INDUSTRIES, INC., ET. AL., Docket No. OCN-L-892-99, Superior Court of New
Jersey, Ocean County, New Jersey, to the extent such Buyer Losses exceed
$25,000. Notwithstanding the foregoing, the Shareholders (other than Vinyl) the
Optionholders and H.I.G. Cayman shall not have an obligation to indemnify buyer
for a Buyer Loss arising in connection with Section 9.02(a)(iii) or the
Company's breach of the representations and warranties set forth in Section 4.05
to the extent Buyer has been compensated for such Buyer Loss pursuant to Section
1.06. In the event that any funds are paid out of the Escrow Fund to a Buyer
Indemnified Party in connection with a breach by any Shareholder (other than
Vinyl), any Optionholder or H.I.G. Cayman, such breaching party shall be
required to contribute to each other Shareholder (other than Vinyl),
Optionholder and H.I.G. Cayman an amount equal to each such party's pro rata
portion of the amount paid out of the Escrow Fund with respect to such breach.
(b) Buyer shall indemnify and hold harmless each Shareholder
(other than Vinyl), each Optionholder and H.I.G. Cayman from and against any
claims, damages, losses, liabilities, Taxes, regulatory actions, injuries to
Persons, property or natural resources, fines, penalties, costs and expenses
(including, without limitation, settlement costs, any reasonable legal,
accounting or other expenses incurred in connection with investigating or
defending any actions or threatened actions and court costs) ("SELLER LOSSES"
and, together with Buyer Losses, "LOSSES") sustained or required to be paid by
reason of, arising out of or caused by (i) any misrepresentation or breach of
any representation or warranty made by Buyer in this Agreement, and (ii) any
breach of
48
any covenant, agreement or obligation of Buyer contained in this Agreement.
(c) (i) In the event that any indemnified party is made a
defendant in or party to any claim, action, suit or proceeding, judicial or
administrative, instituted by any third-party for Losses, or otherwise receives
any demand from any third party for Losses (any such third party claim, action,
suit or proceeding being referred to as a "CLAIM"), the indemnified party
(referred to as the "INDEMNITEE") shall give the indemnifying party (referred to
as the "INDEMNITOR") prompt notice thereof. The failure to give such notice
shall not affect whether an Indemnitor is liable for reimbursement unless such
failure has resulted in the loss of substantive rights with respect to the
Indemnitor's ability to defend such Claim, and then only to the extent of such
loss. The Indemnitor shall be entitled to contest and defend such Claim;
provided that the Indemnitor diligently contests and defends such Claim. Notice
of the intention so to contest and defend shall be given by the Indemnitor to
the Indemnitee within twenty (20) business days after receipt of the
Indemnitee's notice of such Claim (but, in all events, at least five (5)
business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the Indemnitor. The Indemnitee shall be entitled at any time, at its
own cost and expense (which expense shall not constitute a Loss unless the
Indemnitee reasonably determines that the Indemnitor is not adequately
representing or, because of a conflict of interest determined to exist by
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ in its sole discretion, may not adequately represent, the
interests of any Indemnitee and only to the extent that such expenses are
reasonable), to participate in such contest and defense and to be represented by
attorneys of its or their own choosing. If the Indemnitee elects to participate
in such defense, the Indemnitee will cooperate with the Indemnitor in the
conduct of such defense. Neither the notifying party nor the Indemnitor may
concede, settle or compromise any Claim without the consent of the other party,
which consent will not be unreasonably withheld. Notwithstanding the foregoing,
if the Indemnitor fails to acknowledge in writing its obligation to provide
indemnification in respect of such Claim, then the Indemnitee alone shall be
entitled to contest, defend and settle such Claim in the first instance (in
which case, expenses incurred in connection therewith shall constitute a Loss)
and, only if the Indemnitee chooses not to contest, defend or settle such Claim,
the Indemnitor shall then have the right to contest and defend (but not settle)
such Claim.
(ii) In the event any Indemnitee should have a claim against
any Indemnitor that does not involve a Claim, the Indemnitee shall deliver a
notice of such claim with reasonable promptness to the Indemnitor. The failure
to give such notice shall not affect whether an Indemnitor is liable for
reimbursement unless such failure has resulted in the loss of substantive rights
with respect to the Indemnitor's ability to defend such Claim, and then only to
the extent of such loss. If the Indemnitor notifies the
49
Indemnitee that it does not dispute the claim described in such notice or fails
to notify the Indemnitee within fifteen (15) days after delivery of such notice
by the Indemnitee whether the Indemnitor disputes the claim described in such
notice, and such failure to notify materially prejudices any defense or claim of
the Indemnitee, the Loss in the amount specified in the Indemnitee's notice will
be conclusively deemed a liability of the Indemnitor and the Indemnitor shall
pay the amount of such Loss to the Indemnitee on demand.
(iii) After the Closing, the rights set forth in this Section
9.02 shall be the indemnified parties' sole and exclusive remedies against the
other for misrepresentations or breaches of covenants contained in this
Agreement. Without limitation, Buyer specifically waives any and all claims
against Vinyl and the Company, including rights of contribution under CERCLA or
analogous state law. Notwithstanding the foregoing, nothing herein shall prevent
any of the indemnified parties from bringing an action based upon allegations of
fraud, bad faith or willful misconduct in connection with this Agreement. In the
event action is brought in accordance with the preceding sentence of this clause
(iii), the prevailing party's attorneys' fees and costs shall be paid by the
nonprevailing party.
(d) In connection with any indemnification claim by Buyer under
this Agreement, Buyer (except as set forth in the next sentence) may only seek
recovery for Buyer Losses out of the funds held in the Escrow Fund (as defined
in the Escrow Agreement) pursuant to the Escrow Agreement and is entitled to
seek such recovery regardless of whether such Losses are attributable to the
actions or breaches of the Company, any particular Shareholder, any particular
Optionholder or H.I.G. Cayman. Buyer shall not be entitled to pursue any
indemnification claim or recovery against the Company, any Shareholder, any
Optionholder or H.I.G. Cayman beyond the foregoing limit, except to the extent
any such claim or recovery is based upon the Company's, such Shareholder's, such
Optionholder's or H.I.G. Cayman's (i) breach of a representation or warranty
made in Section 3.03, 3.04, 3.05, 3.07 or 4.04(b), or (ii) fraud, bad faith or
willful misconduct in connection with this Agreement. No Shareholder,
Optionholder or H.I.G. Cayman may claim or assert that any portion of the Escrow
Fund is not available to pay for Buyer Losses by virtue of the indemnification
provisions, covenants, or representations and warranties under this Agreement
being several and not joint, rather than being joint and several. By executing
this Agreement, each such Person waives any such right. Notwithstanding the
foregoing, Buyer may seek recovery for Buyer Losses beyond the funds held in the
Escrow Fund from H.I.G. Fund and/or H.I.G. Management for any such Buyer Losses
attributable to H.I.G. Cayman's (a) breach of a representation or warranty made
in Section 3.04 or Section 3.05, or (b) fraud, bad faith or willful misconduct
in connection with this Agreement.
(e) The amount of any Loss subject to indemnification under this
50
Section 9.02 shall be calculated net of (i) the effects of a reduction for any
Tax Benefit inuring to the Indemnitee on account of such Loss and an increase
for any Tax Detriment suffered by the Indemnitee on account of the receipt of
any indemnification payments and (ii) any insurance proceeds received by the
Indemnitee on account of such Loss. If the Indemnitee receives a Tax Benefit
with respect to a Loss after an indemnification payment is made to it, the
Indemnitee shall promptly pay to the Person or Persons that made such
indemnification payment the amount of such Tax Benefit at such time or times as
and to the extent that such Tax Benefit is realized by the Indemnitee. For
purposes hereof, "TAX BENEFIT" shall mean any refund of Taxes paid or reduction
in the amount of Taxes which otherwise would have been paid, in each case
computed at the actual marginal tax rates applicable to the recipient of such
benefit, and "TAX DETRIMENT" shall mean any increase in the amount of Taxes
which would otherwise have been paid or any reduction in a Tax Benefit. The
Indemnitee shall seek full recovery under all insurance policies covering any
Loss to the same extent as they would if such Loss were not subject to
indemnification hereunder. In the event that an insurance or other recovery is
made by any Indemnitee with respect to any Loss for which any such Person has
been indemnified hereunder, then a refund equal to the aggregate amount of the
recovery shall be made promptly to the Person or Persons that provided such
indemnity payments to such Indemnitee.
(f) The obligations set forth in this Section 9.02 shall be
unconditional and absolute. In the event of a conflict between the provisions of
this Section 9.02 and any other provisions of this Agreement, the provisions of
Section 9.02 shall control. The Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman shall not have any indemnification obligations
under this Section 9.02 for Losses until such time as total Losses for which
Buyer is otherwise entitled to indemnification hereunder equal $687,500 in the
aggregate (the "DEDUCTIBLE"), whereafter the Shareholders (other than Vinyl),
the Optionholders and H.I.G. Cayman shall be liable for all such Losses in
excess thereof, provided, that the Shareholders' (other than Vinyl's), the
Optionholders' and H.I.G. Cayman's aggregate liability to Buyer hereunder shall
in no event exceed $5,000,000 (the "CAP"). Notwithstanding the foregoing, (i)
any indemnification obligations of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman to Buyer arising in connection with Section
9.02(d)(i) and Section 9.02(d)(ii) hereof shall not be subject to the
Deductible, the Cap or the De Minimis Losses limitations, (ii) any
indemnification obligations of the Shareholders (other than Vinyl), the
Optionholders and H.I.G. Cayman to Buyer arising under Section 9.02(a)(iii),
Section 9.02(a)(v) or Section 9.02(a)(vii) shall, in any case, not be subject to
the Deductible or the De Minimis Losses limitations, (iii) any indemnification
obligations of the Shareholders (other than Vinyl), the Optionholders and H.I.G.
Cayman to Buyer arising in connection with any breach by the Shareholders, the
Optionholders or H.I.G. Cayman of any covenant to Buyer set forth
51
in Section 11.03(c) shall not be subject to the Deductible or the De Minimis
Losses limitations and (iv) any indemnification obligations of the Shareholders
(other than Vinyl), the Optionholders and H.I.G. Cayman to Buyer arising in
connection with any breach by the Company of the representation set forth in
Section 4.26 shall not be subject to the Deductible or the De Minimis Losses
limitations.
(g) Notwithstanding Section 9.02(f), excluding the last sentence
of Section 9.02(f), the Shareholders (other than Vinyl), the Optionholders and
H.I.G. Cayman shall not have any indemnification obligations under this Section
9.02 for any Losses with respect to any single claim or series of related claims
if the aggregate amount of such Losses with respect to such claim or series of
related claims does not exceed $25,000 ("DE MINIMIS LOSSES").
(h) For purposes of determining (i) whether an Indemnitor shall be
required to indemnify an Indemnitee under this Article IX, (ii) the aggregate
amount of Losses suffered by an Indemnitee, (iii) the Deductible or (iv) the
aggregate amount of De Minimis Losses suffered by an Indemnitee, each
representation and warranty (whether made as of the date of this Agreement or
made on and as of the Closing Date) contained in this Agreement for which
indemnification is sought hereunder shall be read (including for purposes of
determining whether a breach of such representation or warranty has occurred)
without regard to, and as if such representation or warranty did not contain,
materiality qualifications that may be contained therein, including, without
limitation, Material Adverse Effect.
(i) The indemnification obligations of an Indemnitor set forth in
this Section 9.02 shall survive any permitted assignment or other transfer by
such Indemnitor.
ARTICLE X
SHAREHOLDER REPRESENTATIVE
10.01 DESIGNATION. H.I.G. Cayman (the "SHAREHOLDER
REPRESENTATIVE") is hereby designated by each of the Shareholders, each of the
Optionholders and H.I.G. Cayman (in its capacity as the owner of the Vinyl
Shares) to serve as the representative of the Shareholders, the Optionholders
and H.I.G. Cayman with respect to the matters expressly set forth in this
Agreement to be performed by the Shareholder Representative.
10.02 AUTHORITY. Each of the Shareholders, the Optionholders, and
H.I.G. Cayman, by the execution of this Agreement, hereby irrevocably appoints
the Shareholder Representative as the true and lawful agent, proxy and
attorney-in-fact to act
52
on behalf of such Shareholders, such Optionholders and H.I.G. Cayman, in any
manner deemed appropriate by the Shareholder Representative, in its sole
discretion, for all purposes of this Agreement, including the full power and
authority on such Shareholder's, such Optionholder's and H.I.G. Cayman's behalf
(i) to take any action or execute any instrument deemed necessary or appropriate
to consummate the transactions contemplated by this Agreement; (ii) to pay such
Shareholder's, such Optionholder's and H.I.G. Cayman's expenses incurred in
connection with the negotiation and performance of this Agreement (whether
incurred on or after the date hereof); (iii) to disburse any funds received
hereunder to each such Shareholder, such Optionholder or H.I.G. Cayman;
provided, that Shareholder Representative shall be entitled to hold back $1
million of such proceeds for the payment of expenses incurred in connection with
the transactions contemplated hereby; provided further that the Shareholder
Representative shall disperse all such funds, except for such holdback, within
72 hours of the Shareholder Representative's receipt of such funds from time to
time; (iv) to execute and deliver any certificates representing the Shares or
the Vinyl Shares, or the cancellation of the Options, and execution of such
further instruments of assignment as Buyer shall reasonably request; (v) to
execute and deliver on behalf of such Shareholder, such Optionholder and H.I.G.
Cayman any amendment or waiver hereto subject to Section 13.10; (vi) to take all
other actions to be taken by or on behalf of such Shareholder, such Optionholder
or H.I.G. Cayman in connection herewith; and (vii) to do each and every act and
exercise any and all rights which each such Shareholder, such Optionholder or
H.I.G. Cayman collectively are permitted or required to do or exercise under
this Agreement; provided that the Shareholder Representative will update each of
the Shareholders, the Optionholders and H.I.G. Cayman from time to time. Each of
the Shareholders, the Optionholders and H.I.G. Cayman agrees that such agency
and proxy are coupled with an interest, are therefore irrevocable without the
consent of the Shareholder Representative and shall survive the death,
incapacity, bankruptcy, dissolution or liquidation of any Shareholder, any
Optionholder or H.I.G. Cayman. Any demands, notices or other communications
directed to the Shareholders, the Optionholders and H.I.G. Cayman hereunder
shall be deemed effective if given to the Shareholder Representative. As between
Buyer, on the one hand, and the Shareholders, the Optionholders and H.I.G.
Cayman, on the other hand, payment of funds by Buyer to the Shareholder
Representative in its capacity as such shall, for all purposes hereunder, be
deemed payment of such funds to the Shareholders, the Optionholders and H.I.G.
Cayman. Buyer shall be entitled to rely on all actions of the Shareholder
Representative as if such actions were taken by the Shareholders, the
Optionholders or H.I.G. Cayman. Upon the dissolution or resignation of the
Shareholder Representative, a successor shall be appointed by the remaining
Shareholders, Optionholders and H.I.G. Cayman within the thirty (30) day period
immediately following the date of such dissolution or resignation, and such
successor shall either be a Shareholder or an Optionholder or any other Person
reasonably acceptable to Buyer who shall agree in writing to accept such
appointment in accordance with the terms hereof. The resignation of any
Shareholder
53
Representative shall not be effective until a successor Shareholder
Representative has been appointed and has accepted such appointment in
accordance with the provisions of this Article X. The selection of a successor
Shareholder Representative appointed in any manner permitted in this Section
10.02 shall be final and binding upon all of the Shareholders, the Optionholders
and H.I.G. Cayman and written notice of such selection and appointment shall be
provided to Buyer promptly.
10.03 EXCULPATION. Neither the Shareholder Representative nor any
agent employed by it shall incur any liability to any Shareholder, any
Optionholder or H.I.G. Cayman by virtue of the failure or refusal of the
Shareholder Representative for any reason to consummate the transactions
contemplated by this Agreement or relating to the performance of its other
duties hereunder, except for actions or omissions constituting fraud, gross
negligence or bad faith.
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS
11.01 DISCLOSURE GENERALLY. If and to the extent any information
required to be furnished in any Schedule is contained in this Agreement or in
any other Schedule (or Updated Schedule) attached hereto, such information shall
be deemed to be included in all Schedules (or, except for purposes of Section
2.01(b), Updated Schedules) in which the information is required to be included,
but only to the extent a reasonable person would be on notice from the face of
the disclosure that such disclosure was applicable to such other Schedule (or
Updated Schedule). The inclusion of any information in any Schedule (or Updated
Schedule) attached hereto shall not be deemed to be an admission or
acknowledgment by the Company, the Shareholders, the Optionholders or H.I.G.
Cayman, in and of itself, that such information is material to or outside the
ordinary course of the business of Vinyl or the Company.
11.02 ACKNOWLEDGMENT BY BUYER. Buyer acknowledges that it has
conducted to its satisfaction an independent investigation and verification of
the financial condition, results of operations, assets, liabilities, properties
and projected operations of the Company and, before making its determination to
proceed with the transactions contemplated by this Agreement, Buyer shall be
satisfied with the results of such independent investigation and verification as
well as the representations and warranties of the Company, the Shareholders, the
Optionholders, and H.I.G. Cayman set forth in this Agreement and any other
agreements or certificates executed in connection herewith, including the
Schedules (and Updated Schedules) attached hereto. SUCH REPRESENTATIONS AND
WARRANTIES BY THE COMPANY, THE SHAREHOLDERS, THE OPTIONHOLDERS AND H.I.G. CAYMAN
CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND
54
WARRANTIES OF THE COMPANY, THE SHAREHOLDERS, THE OPTIONHOLDERS AND H.I.G. CAYMAN
TO BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND
BUYER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND
WARRANTIES OF ANY KIND OR NATURE EXPRESSED OR IMPLIED (INCLUDING, BUT NOT
LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION,
RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE COMPANY) ARE SPECIFICALLY
DISCLAIMED BY THE COMPANY, THE SHAREHOLDERS, THE OPTIONHOLDERS AND H.I.G.
CAYMAN.
11.03 TAX MATTERS.
(a) RESPONSIBILITY FOR FILING TAX RETURNS AND PRE-CLOSING TAXES.
Buyer shall, at its cost, prepare or cause to be prepared and file or cause to
be filed all Tax Returns for Vinyl and the Company for all periods ending prior
to or including the Closing Date which are due after the Closing Date, but which
specifically does not include the Tax Returns for the 1998 taxable year (the
"1998 TAX RETURNS"), which 1998 Tax Returns are to be filed by the Company in
proper form, and all Taxes shown to be due on such 1998 Tax Returns fully paid
by the Company, prior to the Closing Date (those Tax Returns other than the 1998
Tax Returns are collectively referred to as the "POST-CLOSING RETURNS"). In the
case of the Federal and State income tax Post-Closing Returns, Buyer or the
Company shall prepare such returns of the Company in a manner suitable for
filing and shall present such draft returns to the Shareholder Representative
for purposes of any applicable rights of review hereunder no later than one
hundred eighty (180) days after the Closing Date. Upon notification from the
Shareholder Representative that the Shareholder Representative approves of the
filing of such returns (such approval not to be unreasonably withheld and any
withholding of such approval to be based on applicable law and supported by
substantial authority within the meaning of Section 6662(d) of the Code), Buyer
shall cause the Company to file such Federal and State income tax returns
promptly. At least fifteen (15) days prior to the date on which each
Post-Closing Return, other than the Federal and State income tax Post-Closing
Returns, is filed, Buyer shall submit such Post-Closing Return to the
Shareholder Representative (on behalf of the Shareholders (other than Vinyl),
the Optionholders and H.I.G. Cayman) for the Shareholder Representative's review
and approval, which approval may be withheld if the filing of such Post-Closing
Return, as prepared by Buyer, is reasonably expected by the Shareholder
Representative to improperly affect the Tax liability of any Shareholder (other
than Vinyl), any Optionholder or H.I.G. Cayman in an adverse manner.
(b) TRANSFER TAXES. Buyer will pay, and will indemnify and hold
the
55
Shareholders (other than Vinyl), the Optionholders and H.I.G. Cayman harmless
against, any real property transfer or gains tax, stamp tax, stock transfer tax,
or other similar Tax imposed on the Company or one or more Shareholders (other
than Vinyl), one or more Optionholders or H.I.G. Cayman as a result of the
transactions contemplated by this Agreement (collectively, "TRANSFER TAXES"),
and any penalties or interest with respect to the Transfer Taxes. The
Shareholders (other than Vinyl), the Optionholders and H.I.G. Cayman agree to
cooperate with Buyer in the filing of any returns with respect to the Transfer
Taxes, including supplying promptly any information in the possession of the
Shareholders (other than Vinyl), the Optionholders and H.I.G. Cayman that is
reasonably necessary to complete such returns.
(c) TAX BENEFITS ASSOCIATED WITH OPTION PURCHASE TRANSACTIONS. The
parties hereto agree that in preparing the Company's Tax Returns for the taxable
year that includes or, if applicable, ends on the Closing Date, Buyer shall
cause the Company to claim allowable deductions attributable to the Option
Purchase Transactions in such Tax Returns and, upon the filing of such Tax
Returns, if such Tax Returns show a net operating loss, within the meaning of
Section 172 of the Code, such net operating loss shall be carried back to prior
taxable years to the extent permitted by applicable Tax law, and Buyer shall
cause the Company to file as soon as is practicable any claims for Tax refunds
to which the Company is entitled for taxable periods prior to the Closing Date
as a result of such deductions, and shall permit the Shareholder Representative
(on behalf of the Shareholders and the Optionholders) to review the portion of
any such Tax Return which relates to such Tax benefits prior to the filing of
such Tax Return. The approval of Tax Returns pursuant to Section 11.03(a) by the
Shareholder Representative shall, upon the actual filing of any such Tax Return,
constitute a release by the Shareholders, the Optionholders and H.I.G. Cayman of
Buyer from any liability for failure to comply with this Section 11.03(c). Buyer
shall pay over to the Shareholder Representative (on behalf of the Shareholders
and the Optionholders) the amount of any Tax benefits with respect to the
carry-back periods within thirty (30) days after receipt thereof. The parties
hereto also agree that any such refund shall be net of any reasonable increased
costs, liabilities or Taxes incurred by Buyer or the Company or any Subsidiary
with respect to or attributable to the Option Purchase Transactions, including,
but not limited to, employment Taxes attributable to the Option Purchase
Transactions. If subsequent to the Buyer's payment of any such amount, there is
a determination under applicable law to the effect that all or part of the tax
benefit giving rise to such tax benefit payment was not allowable or available
in any applicable carry-back period (a "SUBSEQUENT BENEFIT DECREASE EVENT"), the
Shareholder Representative shall repay to the Buyer within thirty (30) days any
amount that would have not been payable to the Shareholder Representative
pursuant to this Section 11.03(c) had the amount of the tax benefit been
initially determined in light of the Subsequent Benefit Decrease Event, together
with the amount of any interest and penalties payable to any Tax authority with
respect to those
56
amounts and all reasonable expenses of Buyer and the Company and any of the
Subsidiaries directly attributable thereto.
11.04 FURTHER ASSURANCES. From time to time, as and when requested
by any party hereto and at such party's expense, either before or after Closing,
any other party shall execute and deliver, or cause to be executed and
delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions as such other party may reasonably deem
necessary or desirable to evidence and effectuate the transactions contemplated
by this Agreement.
11.05 OTHER MATTERS RELATING TO OPTIONS. Each of the Company, the
Shareholders, the Optionholders, H.I.G. Cayman and Buyer hereby acknowledge and
agree that Buyer and certain members of management of the Company and its
Subsidiaries ("MANAGEMENT") may wish to reach an agreement pursuant to which
this Agreement shall be amended to provide that all or any portion of Options
held by Management shall not be purchased and acquired by Buyer in exchange for
the Per Option Purchase Price but may be converted into the right to receive
other consideration to be agreed upon between Buyer and such members of
Management. Each of the Company, the Shareholders, the Optionholders, H.I.G.
Cayman and Buyer hereby covenant and agree that if any such amendments are
entered into, provided that such amendments meet the requirements set forth in
the proviso of Section 13.10 hereof, each of the Company, the Shareholders, the
Optionholders, H.I.G. Cayman and Buyer will not assert any claim against the
other as a result of the execution and delivery of such amendment.
ARTICLE XII
DEFINITIONS
12.01 DEFINITIONS. For purposes hereof the following terms, when
used herein with initial capital letters, shall have the respective meanings set
forth herein:
"AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"DEPOSIT INTEREST" means an amount equal to the interest that is
earned on the Deposit pursuant to the terms of the Escrow Agreement.
57
"ENVIRONMENTAL CLAIM" means any claim, demand, complaint, action,
suit, proceeding, investigation or notice by any Person alleging potential
liability arising out of, based on, or relating to Environmental Laws or the
presence of any Hazardous Material at any location.
"ENVIRONMENTAL LAW" means any and all federal, state and local
laws (including but not limited to common law), statutes, ordinances, judgments,
decrees, licenses, permits, rules and regulations, or other binding requirement
relating to pollution or protection of human health and the environment or
worker health and safety, including without limitation, laws (including but not
limited to common law), statutes, ordinances, judgements, decrees, licenses,
permits, rules and regulations or other binding requirements relating to
emissions, discharges, releases or threatened releases of any Hazardous
Material, or otherwise relating to the use, treatment, storage, disposal,
transport or handling of any Hazardous Material.
"ESCROW AGENT" means an Escrow Agent as defined in the Escrow
Agreement.
"GAAP" means United States generally accepted accounting
principles applied on a consistent basis.
"HAZARDOUS MATERIAL" means any material, substance or compound
regulated under Environmental Laws, whether constituting a useful product or
otherwise, including without limitation any pollutant, contaminant, waste,
hazardous waste, hazardous substance, toxic substance, hazardous material,
extremely hazardous material, asbestos, polychlorinated biphenyl, petroleum, or
any refined product, fraction, byproduct or constituent thereof.
"NET WORKING CAPITAL" means (i) the sum of all of the Company's
consolidated accounts receivable, inventories, prepaids and current portion of
notes receivable, less (b) the sum of all of the Company's consolidated accounts
payable and current accrued liabilities (excluding accrued Taxes) in respect of
all periods beginning prior to and ending prior to or on the Closing Date,
whether or not a payment with respect to such debt, obligation or liability with
respect to such period is yet due, but excluding Indebtedness, recorded in
accordance with GAAP.
"PERMITTED LIENS" shall mean (i) statutory liens for current Taxes
or other governmental charges not yet due and payable or the amount or validity
of which is being contested in good faith by appropriate proceedings by the
Company and for which appropriate reserves have been established in accordance
with GAAP; (ii) mechanics',
58
carriers', workers', repairers' and similar statutory liens arising or incurred
in the ordinary course of business for amounts which are not delinquent and
which are not, individually or in the aggregate, significant; (iii) zoning,
entitlement, building and other land use regulations imposed by governmental
agencies having jurisdiction over the Owned Real Property or the Leased Real
Property which are not violated by the current use and operation of the Owned
Real Property or the Leased Real Property; and (iv) covenants, conditions,
restrictions, easements and other similar matters of record affecting title to
the Owned Real Property or the Leased Real Property which do not materially
impair the occupancy or use of the Owned Real Property or the Leased Real
Property for the purposes for which it is currently used or proposed to be used
in connection with the Company's business.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"RELEASE" means any release, threatened release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching,
migrating or presence of any Hazardous Material in the environment.
"TAX" or "TAXES" means any federal, state, local or foreign taxes,
charges, fees, customs, duties, imposts and levies, including, but not limited
to those imposed on income, gross receipts, capital stock, inventory, franchise,
profits, withholding, social security payroll, transaction, employment, workers'
compensation, unemployment, disability, real property, ad valorem/personal
property, assets, stamp, excise, occupation, sales, use, license, transfer,
value added, alternative minimum, estimated or other tax, including any
interest, penalty or addition thereto, or additional amounts imposed by any
Taxing authority (domestic or foreign). For purposes of this Agreement, "Taxes"
also includes any obligation under any agreements or arrangements with any
Person with respect to the liability for, or sharing of, Taxes (including,
without limitation, pursuant to Treasury Regulation Section 1.1502-6 or
comparable provisions of state, local or foreign Tax law) and including without
limitation, any liability for Taxes as a transferee or successor by contract or
otherwise.
"TAX RETURNS" means any return, report, information return or
other document (including schedules or any related or supporting information)
filed or required to be filed with any governmental entity or other authority in
connection with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements relating
to any Tax.
12.02 CROSS-REFERENCE OF OTHER DEFINITIONS. Each capitalized term
listed
59
below is defined in the corresponding Section of this Agreement:
TERM SECTION NO.
---- -----------
Agreement Preamble
Aggregate Equity Price 1.01
Bonuses 1.01
Buyer Preamble
Buyer Indemnified Parties 9.02(a)
Buyer Losses 9.02(a)
Buyer's Representatives 6.02
Cap 9.02(f)
Capitalized Lease Obligations 1.01
Claim 9.02(c)(i)
Class A Stock Preamble
Class B Stock Preamble
Code 4.08
Closing 1.07(a)
Closing Cash 1.01
Closing Date 1.07(a)
Closing Debt 1.01
Closing Per Share Option Purchase Price 1.06(a)
Closing Per Share Purchase Price 1.06(a)
Closing Transactions 1.07(b)
Closing Net Working Capital Statement 1.06(b)
Company Preamble
Confidentiality Agreement 6.02
Deductible 9.02(f)
Deposit 1.02
DOL 4.13(c)
ERISA 4.13(a)
Escrow Agreement 1.05
Escrow Amount 1.05
Estimated Balance Sheet 1.06(a)
Estimated Net Working Capital 1.06(a)
Executive Stock Agreements 13.03
Financial Statements 4.05/6.09
Financing Letter 2.01(a)
H.I.G. Cayman Preamble
H.I.G. Fund Preamble
H.I.G. Management Preamble
60
HSR Act 4.12
Indebtedness 1.07(b)(v)
Indemnitee 9.02(c)(i)
Indemnitor 9.02(c)(i)
IRS 4.08(a)
Independent Auditor 1.06(b)
Insiders 3.05
Intellectual Property 4.10
Latest Balance Sheet 4.05
Leased Real Property 4.07(b)
Losses 9.02(b)
Market Disruption Condition 8.01(b)
Material Adverse Effect 4.01
Objections Statement 1.06(b)
Option Purchase Transactions 1.04(b)
Optionholders Preamble
Options Preamble
Outstanding Computer Associates Debt 1.01
Owned Real Property 4.07(b)
Pension Plans 4.13(a)
Per Option Purchase Price 1.04(a)
Per Share Purchase Price 1.03(a)
Plans 4.13(a)
Post-Closing Returns 11.03(a)
PTO 2.01(1)
Seller Losses 9.02(b)
Settlement Agreement 9.02(a)
Shareholder Representative 10.01
Shareholders Preamble
Shares Preamble
Subsequent Benefit Decrease Event 11.03
Subsidiary 4.02
Tax Benefit 9.02(e)/11.03(c)
Tax Detriment 9.02(e)
Terminating Agreements 13.03(b)
the Company's knowledge 13.04
Thermal 2.01(1)
Transaction Deadline Date 8.01(d)
Transfer Taxes 11.03(b)
Vinyl Preamble
Vinyl Shares 1.03(a)
Welfare Plans 4.13(a)
61
Working Capital Target 1.06(a)
Year 2000 Data 4.23
ARTICLE XIII
MISCELLANEOUS
13.01 PRESS RELEASES AND COMMUNICATIONS. No press release or
public announcement related to this Agreement or the transactions contemplated
herein or, prior to the Closing, any other announcement or communication to the
employees, customers or suppliers of Vinyl and the Company and its Subsidiaries
shall be issued or made without the joint approval of Buyer and the Shareholder
Representative (on behalf of the Shareholders, the Optionholders and H.I.G.
Cayman) by the parties hereto or their respective officers, directors,
employees, advisors, agents or representatives, unless required by law (based on
the advice of counsel) in which case Buyer and the Shareholder Representative
shall have the right to review such press release or announcement prior to
publication.
13.02 EXPENSES. Except as otherwise expressly provided herein,
each of Buyer on the one hand and the Shareholders, the Optionholders and H.I.G.
Cayman on the other hand shall pay all of its own expenses (including attorneys'
and accountants' fees and expenses) in connection with the negotiation of this
Agreement, the performance of their respective obligations under this Agreement
and the consummation of the transactions contemplated by this Agreement (whether
consummated or not); provided, that such expenses of the Company, the
Subsidiaries, the Shareholders and the Optionholders may be paid by the Company
so long as such payments are reflected in the Estimated Balance Sheet and the
Closing Net Working Capital Statement. For the purposes hereof, the expenses of
the Company and the Subsidiaries in connection with the negotiation of this
Agreement, the performance of any obligations under this Agreement and the
consummation of the transactions contemplated by this Agreement (whether
consummated or not) shall be deemed expenses of the Shareholders, the
Optionholders and H.I.G. Cayman.
13.03 WAIVER OF CERTAIN TRANSFER RESTRICTIONS AND TERMINATION OF
AGREEMENTS. (a) Concurrently with the Closing, the Company, the Shareholders and
the Optionholders hereby expressly waive all of their rights to purchase Shares
in connection with the transactions contemplated in this Agreement under (i) the
Stock Purchase and Option Agreements, set forth on the attached TERMINATING
AGREEMENTS SCHEDULE, (ii) the Company's By-laws and (iii) any other documents to
which they might be a party or pursuant to which they may have any such right.
Such Stock Purchase and Option Agreements shall terminate and be of no further
force and effect as of the Closing.
(b) Concurrently with the Closing, the Company, the Shareholders
and
62
the Optionholders shall terminate all of the agreements (the "Terminating
Agreements") set forth on the attached TERMINATING AGREEMENTS SCHEDULE. Upon
termination, (i) such Terminating Agreements shall be of no further force and
effect, and (ii) each Shareholder and each Optionholder shall release and
discharge the Company and its stockholders, directors, officers, employees,
agents, representatives, Affiliates, successors and assigns, as the case may be,
from any and all claims arising as a result of, or in connection with, the
Terminating Agreements or the termination thereof, including any claims existing
under any Terminating Agreement prior to the date of its termination.
13.04 KNOWLEDGE DEFINED. For purposes of this Agreement, the term
"THE COMPANY'S KNOWLEDGE" as used herein shall mean the actual knowledge of
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇. With respect to any financial information relating to Best
Built, Inc., such term shall mean the actual knowledge of ▇▇▇▇ ▇▇▇▇▇▇▇▇ after
due inquiry of ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
13.05 ASSIGNMENT OF CERTAIN RIGHTS. Each of the Shareholders
(other than Vinyl) and H.I.G. Cayman hereby transfers, conveys and assigns to
Buyer and the Company all of its rights to receive any endorsements necessary in
order for such Shareholder to become a bona fide purchaser with respect to
capital stock of Vinyl or the Company purchased by such Shareholder (other than
Vinyl) or H.I.G. Cayman prior to the date of this Agreement, which rights shall
be specifically enforceable by Buyer, Vinyl and/or the Company.
13.06 NOTICES. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when (a) personally
delivered, (b) sent by facsimile (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, (c)
one (1) business day after deposit with Federal Express or similar overnight
courier service or (d) five (5) days after being mailed by first class mail,
return receipt requested. Notices, demands and communications to Buyer, the
Company, the Shareholders the Optionholders and H.I.G. Cayman shall, unless
another address is specified in writing, be sent to the addresses indicated
below:
NOTICES TO BUYER:
Atrium Companies, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
63
Attn: ▇▇▇▇ ▇. ▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
and
Atrium Companies, Inc.
c/o Ardshiel, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
NOTICES TO THE SHAREHOLDERS, THE OPTIONHOLDERS AND H.I.G. CAYMAN:
H.I.G. Vinyl, Inc.
c/o H.I.G. Capital Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. Tamer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. Learner, P.C.
E. ▇▇▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
64
▇▇▇▇▇ ▇▇▇▇▇▇
c/o Heat, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
One Oxford Centre
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
NOTICES TO THE COMPANY (PRIOR TO CLOSING):
Heat, Inc.
c/o H.I.G. Capital Management, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. Tamer
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. Learner, P.C.
E. ▇▇▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
NOTICES TO VINYL AND THE COMPANY (AFTER CLOSING):
Heat, Inc.
c/o Atrium Companies, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
65
with a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
13.07 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned or
delegated by either party without the prior written consent of all other
parties. Notwithstanding the foregoing, (a) Buyer may assign or delegate any or
all of its rights or obligations under this Agreement to any Affiliate of Buyer,
and (b) nothing in this Agreement shall limit Buyer's ability to make a
collateral assignment of its rights under this Agreement to any institutional
lender that provides funds to Buyer, without the consent of the Company, the
Shareholders, the Optionholders or H.I.G. Cayman; provided, however, that unless
written notice is given to the Company or to the Shareholder Representative (on
behalf of the Shareholders, the Optionholders and H.I.G. Cayman), that any such
collateral assignment has been foreclosed upon, the Company, the Shareholders,
the Optionholders and H.I.G. Cayman shall be entitled to deal exclusively with
Buyer as to any matters arising under this Agreement or the transactions
contemplated hereby. In the event of such an assignment the provisions of this
Agreement shall insure to the benefit of and be binding upon the assigns of
Buyer.
13.08 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
present or future applicable law, but if any provision of this Agreement is held
to be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
13.09 NO STRICT CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
Person. The section headings herein have been inserted for convenience of
reference only and shall in no way modify or restrict the terms and provisions
hereof.
13.10 AMENDMENT AND WAIVER. Any provision of this Agreement or the
66
Schedules or Exhibits hereto may be amended or waived only in writing signed by
Buyer, the Company and the Shareholder Representative (on behalf of the
Shareholders, the Optionholders and H.I.G. Cayman); PROVIDED, that any amendment
pursuant to which Buyer and certain members of Management agree that all or any
portion of Options held by Management shall not be purchased and acquired by
Buyer in exchange for the Per Option Purchase Price, may be entered into without
the consent of the Company, any Shareholder, any Optionholder or H.I.G. Cayman
(other than such members of Management) so long as such amendment does not
reduce the portion of the Aggregate Equity Price due to such Shareholder, such
Optionholder or H.I.G. Cayman at and after the Closing; PROVIDED FURTHER, that
if any amendment or waiver adversely affects any Shareholder or Optionholder in
any material respect that does not affect all other Shareholders or
Optionholders, such amendment or waiver shall require the consent of such
Shareholder or Optionholder. No waiver of any provision hereunder or any breach
or default thereof shall extend to or affect in any way any other provision or
prior or subsequent breach or default.
13.11 COMPLETE AGREEMENT. This Agreement and the documents
referred to herein (including the Confidentiality Agreement) contain the
complete agreement between the parties hereto and merge and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way,
including, without limitation, the Letter of Intent, dated March 1, 1999.
13.12 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same instrument.
13.13 GOVERNING LAW. This Agreement and all matters relating to
the interpretation, construction, validity and enforcement of this Agreement
shall be governed by and construed in accordance with the domestic laws of the
State of New York without giving effect to any choice or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of laws of any jurisdiction other than the
State of New York. The parties hereto agree to submit to the personal and
exclusive jurisdiction of the state and federal courts serving Pittsburgh,
Pennsylvania with respect to the enforcement or interpretation of this Agreement
or the parties' obligations hereunder. Each party hereto irrevocably consents to
the service of any and all process in any action or proceeding by the mailing of
copies of such process by registered or certified mail to such party hereto to
serve legal process in any other manner permitted by law. Each party hereto
irrevocably waives, to the full extent permitted by law, any objection which it
may now or hereafter have to the laying of the venue of any such
67
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
13.14 SCHEDULES AND EXHIBITS. All Schedules and Exhibits referred
to in this Agreement are intended to be and are hereby specifically made a part
of this Agreement.
13.15 SPECIFIC PERFORMANCE. The parties hereto recognize that in
the event the Company, the Shareholders, the Optionholders or H.I.G. Cayman
refuse to perform under the provisions of this Agreement, monetary damages will
not be adequate. Buyer shall therefore be entitled, in addition to any other
remedies which may be available, to obtain specific performance of the terms of
this Agreement. In the event of any action to enforce this Agreement
specifically, the Company, the Shareholders, the Optionholders and H.I.G. Cayman
hereby waive the defense that there is an adequate remedy at law.
* * * *
68
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
HEAT, INC. /s/
-------------------------
By
Its
H.I.G. INVESTMENT FUND, L.P., a Cayman
Island limited partnership (for purposes of
Article IX hereof)
By: H.I.G. PARTNERS, L.P., its general
partner
By: TAMINVEST CORPORATION, its /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
general partner -------------------------
By ▇▇▇▇▇▇▇ ▇▇▇▇▇
Its
H.I.G. CAPITAL MANAGEMENT, INC., a /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Delaware corporation (for purposes of -------------------------
Article IX hereof) By ▇▇▇▇▇▇▇ ▇▇▇▇▇
Its
69
H.I.G. VINYL, INC., a Cayman Island /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
corporation -------------------------
By ▇▇▇▇▇▇▇ ▇▇▇▇▇
Its
ATRIUM COMPANIES, INC. /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------
By ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Chairman of the Boards
Directors
SHAREHOLDERS:
H.I.G. VINYL, INC., a Delaware corporation /s/
-------------------------
By
Its Chairman of the Boards
Directors
▇▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------
▇▇▇▇ ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ /S/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------
70
OPTIONHOLDERS:
NATIONSCREDIT COMMERCIAL
CORPORATION
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Its Vice President
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▇▇▇▇▇▇ ▇. Poland /S/ ▇▇▇▇▇▇ ▇. POLAND
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71
TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE OF SHARES AND OPTIONS..................................................2
1.01 Aggregate Equity Price...................................................................2
1.02 Deposit..................................................................................2
1.03 Share Transactions.......................................................................2
1.04 Option Transactions......................................................................3
1.05 Escrow...................................................................................3
1.06 Aggregate Equity Price Adjustment........................................................4
1.07 The Closing..............................................................................5
ARTICLE II CONDITIONS TO CLOSING....................................................................7
2.01 Conditions to Buyer's Obligations........................................................7
2.02 Conditions to the Shareholders', the Optionholders' and H.I.G. Cayman's
Obligations.............................................................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EACH
SHAREHOLDER, EACH OPTIONHOLDER AND H.I.G. CAYMAN........................................12
3.01 Authority...............................................................................12
3.02 Execution and Delivery; Valid and Binding Agreement; Other Matters......................12
3.03 Ownership of Capital Stock of the Company...............................................12
3.04 Ownership of Vinyl Shares...............................................................13
3.05 Capitalization of Vinyl.................................................................14
3.06 Brokerage...............................................................................14
3.07 Vinyl...................................................................................14
3.08 H.I.G. Cayman...........................................................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................15
4.01 Organization, Standing and Corporate Power..............................................15
4.02 Subsidiaries............................................................................16
4.03 Authorization; No Breach; Valid and Binding Agreement...................................16
4.04 Capital Stock...........................................................................17
4.05 Financial Statements....................................................................18
4.06 Absence of Certain Developments.........................................................19
4.07 Title to Properties.....................................................................20
4.08 Tax Matters.............................................................................22
4.09 Contracts and Commitments...............................................................24
4.10 Intellectual Property...................................................................26
4.11 Litigation and Labor Matters............................................................26
4.12 Governmental Consents, etc..............................................................27
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4.13 Employees...............................................................................27
4.14 Insurance...............................................................................29
4.15 Compliance with Laws....................................................................30
4.16 Environmental Compliance and Conditions.................................................31
4.17 Affiliated Transactions.................................................................32
4.18 Brokerage...............................................................................32
4.19 Bank Accounts...........................................................................32
4.20 Undisclosed Liabilities.................................................................32
4.21 Change of Control Provisions............................................................33
4.22 Disclosure..............................................................................33
4.23 Year 2000...............................................................................33
4.24 Customers...............................................................................33
4.25 Relationship with General Electric Company..............................................33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER.................................................34
5.01 Organization and Corporate Power........................................................34
5.02 Authorization; Valid and Binding Agreement..............................................34
5.03 No Breach...............................................................................34
5.04 Governmental Consents, etc..............................................................34
5.05 Litigation..............................................................................34
5.06 Brokerage...............................................................................35
5.07 Investment Representation...............................................................35
5.08 Financing...............................................................................35
ARTICLE VI COVENANTS OF THE COMPANY,THE SHAREHOLDERS, THE
OPTIONHOLDERS AND H.I.G. CAYMAN.........................................................35
6.01 Conduct of the Business.................................................................35
6.02 Access to Books and Records.............................................................37
6.03 Regulatory Filings......................................................................38
6.04 Conditions..............................................................................38
6.05 Exclusive Dealing.......................................................................38
6.06 Notification............................................................................38
6.07 Consents................................................................................39
6.08 Brokerage...............................................................................39
6.09 Interim Financial Statements............................................................39
6.10 Intellectual Property Matters...........................................................39
6.11 No Transfers............................................................................40
ARTICLE VII COVENANTS OF BUYER......................................................................40
7.01 Access to Books and Records.............................................................40
7.02 Notification............................................................................40
7.03 Director and Officer Liability and Indemnification......................................40
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7.04 Regulatory Filings......................................................................41
7.05 Conditions..............................................................................41
7.06 Contact with Customers and Suppliers....................................................41
7.07 Bonuses.................................................................................41
ARTICLE VIII TERMINATION.............................................................................41
8.01 Termination.............................................................................41
8.02 Effect of Termination...................................................................43
ARTICLE IX INDEMNIFICATION.........................................................................44
9.01 Survival of Representations and Warranties..............................................44
9.02 Indemnification.........................................................................44
ARTICLE X SHAREHOLDER REPRESENTATIVE..............................................................49
10.01 Designation.............................................................................49
10.02 Authority...............................................................................49
10.03 Exculpation.............................................................................50
ARTICLE XI ADDITIONAL COVENANTS AND AGREEMENTS.....................................................51
11.01 Disclosure Generally....................................................................51
11.02 Acknowledgment by Buyer.................................................................51
11.03 Tax Matters.............................................................................52
11.04 Further Assurances......................................................................53
11.05 Other Matters Relating to Options.......................................................53
ARTICLE XII DEFINITIONS.............................................................................54
12.01 Definitions.............................................................................54
12.02 Cross-Reference of Other Definitions....................................................56
ARTICLE XIII MISCELLANEOUS...........................................................................58
13.01 Press Releases and Communications.......................................................58
13.02 Expenses................................................................................59
13.03 Waiver of Certain Transfer Restrictions and Termination of Agreements...................59
13.04 Knowledge Defined.......................................................................59
13.05 Assignment of Certain Rights............................................................59
13.06 Notices.................................................................................60
13.07 Assignment..............................................................................62
13.08 Severability............................................................................63
13.09 No Strict Construction..................................................................63
13.10 Amendment and Waiver....................................................................63
13.11 Complete Agreement......................................................................64
13.12 Counterparts............................................................................64
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13.13 Governing Law...........................................................................64
13.14 Schedules and Exhibits..................................................................64
13.15 Specific Performance....................................................................64
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EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Financing Letter
Exhibit C Certificates of Vinyl, the Company and the Shareholder Representative
Exhibit D Opinions of Counsel to the Company, Vinyl and H.I.G. Cayman
Exhibit E FIRPTA Certificates
Exhibit F Certificate of Buyer
Exhibit G Settlement Agreement
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SCHEDULES
Affiliated Transactions
Authorization
Bank Accounts
Buyer Consents
Capital Stock
Contracts
Developments
Employee Benefits
Environmental Compliance
Financial Statements
Governmental Consents
Indebtedness
Insurance
Intellectual Property
Liabilities
Liens
Litigation
Optionholders
Organization
Personal Property
Real Property
Seller Consents Schedule
Shareholders
Subsidiary
Taxes
Terminating Agreements
Third-Party Consents
Updated
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