================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
------ -------
Commission File Number 001-15469
THERMOVIEW INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 61-1325129
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1101 Herr Lane 40222
Louisville, Kentucky (Zip Code)
(Address of principal executive offices)
502-412-5600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of April 30, 2000, 7,324,550 shares of the Registrant's
common stock, $.001 par value, were issued and outstanding.
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THERMOVIEW INDUSTRIES, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements .............................. 1
Condensed Consolidated Balance Sheets .................. 1
Condensed Consolidated Statements of Operations ........ 2
Condensed Consolidated Statements of Cash Flows ........ 3
Notes to Condensed Consolidated Financial Statements ... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk ......................................17
PART II OTHER INFORMATION
Item 1. Legal Proceedings .................................18
Item 2. Changes in Securities and Use of Proceeds .........18
Item 3. Defaults Upon Senior Securities ...................18
Item 4. Submission of Matters to a Vote
of Security Holders ....................................18
Item 5. Other Information .................................18
Item 6. Exhibits and Reports on Form 8-K ..................18
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ITEM 1. FINANCIAL STATEMENTS
THERMOVIEW INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, 2000
1999 (UNAUDITED)
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 3,331,721 $ 1,028,614
Receivables:
Trade 5,062,127 3,440,575
Finance 60,000 50,674
Related party 55,554 40,228
Other 337,482 358,119
Costs in excess of billings on
uncompleted contracts 1,274,073 1,715,232
Inventories 2,300,643 2,497,802
Prepaid expenses and other current assets 342,978 575,042
Deferred income taxes 322,000 322,000
----------- -----------
Total current assets 13,086,578 10,028,286
Property and equipment, net 3,679,179 3,767,633
Other assets:
Goodwill, net 74,162,341 72,117,524
Deferred income taxes 1,406,000 2,661,000
Finance receivables 932,411 978,804
Other assets 704,675 579,271
----------- -----------
77,205,427 76,336,599
----------- -----------
Total assets $93,971,184 $90,132,518
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,444,402 $ 3,163,714
Due to seller of acquired business 1,000,000 -
Accrued expenses 3,278,924 3,827,478
Billings in excess of costs on
uncompleted contracts 930,732 1,779,229
Income taxes payable 116,784 108,984
Current portion of long-term debt 358,920 322,033
----------- -----------
Total current liabilities 9,129,762 9,201,438
Long-term debt 21,399,874 21,786,671
Due to sellers of acquired businesses 7,085,000 7,085,000
Other long-term liabilities 32,542 29,791
Mandatorily redeemable Series C convertible
preferred stock, $.001 par value (aggregate
redemption amount and liquidation preference
of $6,000,000); 25,000 shares authorized;
6,000 shares issued and outstanding 4,648,550 5,074,985
Stockholders' equity:
Preferred stock, 50,000,000 shares authorized:
Series A, $.001 par value; none issued - -
Series B, $.001 par value; none issued - -
Common stock, $.001 par value; 100,000,000
shares authorized 7,389,592 shares issued
and outstanding at December 31, 1999 and
7,324,550 shares issued and outstanding at
March 31, 2000 7,390 7,325
Paid-in capital 59,794,361 57,968,722
Accumulated deficit (8,126,295) (11,021,414)
----------- -----------
Total stockholders' equity 51,675,456 46,954,633
----------- -----------
Total liabilities and stockholders' equity $93,971,184 $90,132,518
=========== ===========
</TABLE>
See accompanying notes.
1
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THERMOVIEW INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 2000
---- ----
<S> <C> <C>
Revenues $21,749,817 $21,476,416
Cost of revenues earned 9,764,255 10,382,077
----------- -----------
Gross profit 11,985,562 11,094,339
Selling, general and administrative expenses 11,542,197 13,088,053
Depreciation expense 203,205 262,566
Amortization expense 859,907 868,641
----------- -----------
Loss from operations (619,747) (3,124,921)
Interest expense (411,624) (1,093,320)
Interest income 62,331 68,122
----------- -----------
Loss before income taxes (969,040) (4,150,119)
Income tax benefit 133,000 1,255,000
----------- -----------
Net loss (836,040) (2,895,119)
Less preferred stock dividends:
Cash 424,730 100,800
Non-cash - 469,635
----------- -----------
Net loss attributable to common stockholders $(1,260,770) $(3,465,554)
=========== ===========
Basic and diluted loss per common share $ (0.27) $ (0.44)
=========== ===========
Weighted average shares outstanding 4,686,829 7,918,955
=========== ===========
</TABLE>
See accompanying notes.
2
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THERMOVIEW INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 2000
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (836,040) $(2,895,119)
Adjustments to reconcile net loss to
net cash provided by (used in) operations:
Depreciation and amortization 1,063,112 1,131,207
Deferred income taxes (204,000) (1,255,000)
Accretion of debt discount - 399,999
Changes in operating assets and liabilities 1,173,137 1,854,422
----------- -----------
Net cash provided by (used in)
operating activities 1,196,209 (764,491)
INVESTING ACTIVITIES
Acquisitions of businesses, net of
cash acquired (12,930,033) (1,027,351)
Payments for purchase of property and equipment (973,392) (351,020)
Other 58,293 (9,356)
----------- -----------
Net cash used in investing activities (13,845,132) (1,387,727)
FINANCING ACTIVITIES
Increase in long-term debt 13,820,000 -
Payments of long-term debt (40,989) (50,089)
Preferred stock dividends paid in cash - (100,800)
Other (15,000) -
----------- -----------
Net cash provided by (used in)
financing activities 13,764,011 (150,889)
----------- -----------
Net increase (decrease) in cash
and equivalents 1,115,088 (2,303,107)
Cash and equivalents at beginning of period 1,302,797 3,331,721
----------- -----------
Cash and equivalents at end of period $ 2,417,885 $ 1,028,614
=========== ===========
</TABLE>
See accompanying notes.
3
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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements of ThermoView Industries, Inc. ("ThermoView" or "the
Company"), have been prepared in accordance with accounting
principles generally accepted in the United States for interim
financial information and with the instructions in Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals), considered necessary
for a fair presentation have been included. ThermoView's
business is subject to seasonal variations. The demand for
replacement windows and related home improvement products is
generally lower during the winter months due to inclement
weather. Demand for replacement windows is generally higher in
the second and third quarters. Operating results for the three
month period ended March 31, 2000, are not necessarily indicative
of the results that may be expected for the year ended December
31, 2000.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
Results of operations for the three month period ended March
31, 1999, include the operating results of the Thermo-Shield
Companies for March only since they were acquired effective March
1, 1999. Assuming Thermo-Shield Companies had been acquired as
of January 1, 1999, the Company's consolidated net revenues and
net loss would have been $24,251,633 and $808,080, respectively,
for the three months ended March 31, 1999 on a pro forma basis.
2. INVENTORIES
Inventories consist principally of components for the
manufacturing of windows such as glass, vinyl and other
composites.
3. LOSS PER COMMON SHARE
Loss per common share is calculated in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share." The Company calculates basic earnings per
common share using the weighted average number of shares
outstanding for the period. The weighted average number of
shares outstanding for the three month period ended March 31,
2000, includes shares related to a stock purchase warrant that
can be exercised for nominal cash consideration. Diluted
earnings per common share include both the weighted average
number of shares and any common share equivalents such as options
or warrants in the calculation. As the Company recorded losses
for the three month periods ended March 31, 1999 and 2000, common
share equivalents outstanding would be anti-dilutive, and as
such, have not been included in weighted average shares
outstanding.
4
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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
4. INCOME TAXES
The benefit for income taxes for the three month periods
ended March 31, 1999 and 2000 differs from the amount computed by
applying the statutory U.S. Federal income tax rate to loss
before income taxes primarily as a result of state taxes and non-
deductible goodwill amortization.
5. SEGMENT INFORMATION
For the three month periods ended March 31, 1999 and 2000,
the Company's business units had separate management teams and
infrastructures that operate primarily in the vinyl replacement
windows, doors and related home improvement products industry in
various states in the Midwest and in Southern California. The
business units have been aggregated into three reportable
operating segments: manufacturing, retail and financial
services.
MANUFACTURING
The manufacturing segment includes the businesses that
manufacture and sell vinyl replacement windows to the Company's
retail segment and to unaffiliated customers.
RETAIL
The retail segment includes the businesses that design, sell
and install vinyl replacement windows, doors and related home
improvement products to commercial and retail customers.
FINANCIAL SERVICES
The financial services segment finances credit sales of the
retail segment.
Segment information for the three months ended March 31, was
as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS MANU- FINANCIAL
ENDED MARCH 31, 1999 FACTURING RETAIL SERVICES CORPORATE CONSOLIDATED
-------------------- --------- ------ -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Revenues from external customers $ 1,258,886 $20,472,916 $ 18,015 $ - $21,749,817
Intersegment revenues 1,855,789 - - - 1,855,789
Income (loss) from operations (46,290) 676,376 (80,946) (1,168,887) (619,747)
Total assets 11,176,926 67,891,270 1,003,675 2,497,166 82,569,037
</TABLE>
5
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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
MARCH 31, 2000
(UNAUDITED)
5. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS MANU- FINANCIAL
ENDED MARCH 31, 2000 FACTURING RETAIL SERVICES CORPORATE CONSOLIDATED
-------------------- --------- ------ -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Revenues from external customers $ 1,050,047 $20,413,441 $ 12,928 $ - $21,476,416
Intersegment revenues 1,693,030 - - - 1,693,030
Income (loss) from operations (651,729) (1,100,699) (77,396) (1,295,096) (3,124,921)
Total assets 11,462,480 73,931,787 1,141,486 3,596,765 90,132,518
</TABLE>
6. FINANCING ARRANGEMENTS
The Company is required to maintain certain financial ratios
and to comply with various other covenants and restrictions under
the terms of its financing agreements, including restriction as
to the payment of dividends, other than certain preferred stock
dividends, and the incurrence of additional indebtedness. The
Company violated covenants at December 31, 1999 and through March
30, 2000. The Company's principal lenders, PNC Bank, N.A., and
GE Capital Equity Investments, Inc. ("GE"), have waived these
covenant violations and have reset financial covenants to
accommodate compliance at March 31, 2000, and in the future.
On April 14, 2000, PNC Bank, N.A., extended the maturity
date of ThermoView's $15 million credit facility from January 1,
2001 to May 1, 2001. Four stockholders of the Company (two of
whom are also officers and directors of the Company) also agreed
to guarantee a total of $3 million of the credit facility for
fees equal to an annual rate of 5% from April 2000 through June
2000 and 10% thereafter subject to Board of Director approval.
7. CONTINGENCIES
The Company entered into a 90-day listing agreement in
October 1999 with IPO.COM, Inc. under which the Company
authorized IPO.COM to include its prospectus on the IPO.COM web
site. In addition to hosting the Company's prospectus, IPO.COM
provided summary material relating to the Company and its initial
public offering on its web site. The IPO.COM web site also
provided a direct link to the Company's web site. Although the
Company did not intend to create an agency relationship with
IPO.COM, and while the Company believes that IPO.COM is not and
has not acted as its agent, the listing agreement may have
created an agency relationship. If IPO.COM is deemed the
Company's agent pursuant to the listing agreement, the summarized
material contained in the IPO.COM web site relating to the
Company and its initial public offering and the information
contained in the Company's web site could constitute a prospectus
that does not meet the requirements of the Securities Act of
1933. If the summarized materials relating to the Company in the
IPO.COM web site or the materials contained in the Company's web
site did constitute a violation of the Securities Act of 1933,
investors in the initial public offering would have the right,
for a period of one year from the date of their purchase of
common stock, to obtain recovery of the consideration they paid
for their common stock or, if these persons had already sold the
common stock, to sue the Company for damages resulting from their
purchase of common
6
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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
7. CONTINGENCIES (CONTINUED)
stock. These damages could total up to approximately $6.9
million, plus interest, if these investors seek recovery or
damages after an entire loss of their investment. Any recovery or
damages could adversely impact the Company's liquidity during the
period in which a refund is paid. Although the Company cannot be
certain as to the ultimate disposition of this matter, it is the
opinion of the Company's management, based upon the information
available to it, that the expected outcome of this matter will
not significantly affect the results of operations and financial
condition of the Company.
On March 3, 2000, Pro Futures Bridge Capital Fund, L.P. and
Bridge Capital Partners, Inc. Defined Benefit Pension Plan filed
an action titled Pro Futures Bridge Capital Fund, L.P. V.
ThermoView Industries, Inc., et al., Civil Action No. 00CV0559
(Colo. Dist. Ct., March 3, 2000) against ThermoView, its
directors, certain officers, an employee and a stockholder
alleging breach of contract, common law fraud, fraudulent
misstatements and omissions in connection with the sale of
securities, negligent misrepresentations and breach of fiduciary
duty. These claims are in connection with the mandatory
conversion of the Company's 10% Series A convertible preferred
stock, held by the two funds, into common stock upon completion
of the initial public offering in December 1999, and purchases by
the two funds of Company common stock from ThermoView
stockholders. The funds are seeking rescission of their purchases
of the Series A preferred stock in the amount of $3,250,000, plus
interest and unspecified damages in connection with their
purchases of the common stock. ThermoView has filed a notice to
dismiss certain claims and an answer denying liability in the
remainder of the claims. The parties have not conducted discovery
in connection with the allegations, and no hearing or trial is
scheduled. While ThermoView believes that the claims are without
merit and intends to vigorously defend the suit, it is too early
in the process to predict the likely outcome of the matter.
The Company is subject to other legal proceedings and claims
which have arisen in the ordinary course of its business and have
not been finally adjudicated. Although there can be no assurance
as to the ultimate disposition of these matters, it is the
opinion of the Company's management, based upon the information
available at this time, that the expected outcome of these
matters, individually or in the aggregate, will not have a
material adverse effect on the results of operations and
financial condition of the Company.
8. SUBSEQUENT EVENTS
In April 2000, the Company completed negotiations to satisfy
its obligations under certain earn-out provisions with previous
owners of the Company's subsidiaries. As a result of the
negotiations, the Board of Directors authorized 1,500,000 shares
of 12% Series D cumulative preferred stock ($.001 par value and
$5.00 stated value), and the Company then issued 1,417,000 shares
to the previous owners in lieu of cash to satisfy $7,085,000 of
obligations to them. This amount has been classified as a
noncurrent amount due to sellers of acquired businesses in the
accompanying condensed consolidated balance sheets, since it has
been refinanced with preferred stock. An additional 22,316
shares of Series D preferred stock will be issued to compensate
the previous owners for interest earned amounting to
7
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THERMOVIEW INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2000
(UNAUDITED)
8. SUBSEQUENT EVENTS (CONTINUED)
$111,580 prior to settlement of the obligations. The Series D
preferred stock is senior to the common stock of the Company and
is on parity with the Series C preferred stock. The Series D
preferred stock will pay cumulative dividends at the rate of $.60
per share annually, or an annual rate of 12%, subject to the
availability of such funds and the consent of the senior lender
of the Company. The Series D preferred stock has an aggregate
liquidation preference of $7,196,580 plus accumulated and unpaid
dividends. The shares of Series D preferred stock are redeemable
by the Company at its option, in whole or in part, for cash or
common stock that equals the liquidation value of the shares
redeemed. The shares of Series D preferred stock are not
convertible into common stock, have no voting rights and contain
no registration rights. A venture capital firm loaned one of the
previous owners $1,500,000 at 12% interest, and collateralized
the loan with the previous owner's 1,113,500 shares of 12% Series
D cumulative preferred stock. A stockholder, who also is an
officer and director of the Company, and a stockholder and former
director of the Company have an ownership interest in the venture
capital firm.
The Company's mandatorily redeemable Series C preferred
stock agreement contains terms that require increases in the
number of common shares exercisable under stock purchase warrants
and adjustments to the exercise price of such warrants, as well as
increases in the number of common shares issuable upon conversion of
the preferred shares, in certain circumstances. Also, the GE
subordinated debt agreement contains terms that require increases
in the number of common shares exercisable under a stock purchase
warrant in certain circumstances. In May 2000, one of the
stipulated circumstances occurred causing increases.
Accordingly, the two funds holding the mandatorily redeemable
preferred stock now have warrants to purchase 600,000 shares
(increased from 400,000 shares) of common stock at $12.00 per
share (reduced from $18.00 per share) and are entitled to convert
their preferred shares into 500,000 shares (increased from
400,000 shares) of common stock. Also, GE now has warrants to
purchase 561,343 shares (increased from 555,343 shares) of common
stock at $.03 per share. An additional 306,000 shares of common
stock have been reserved for future issuance to accommodate the
foregoing reset provisions.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THIS REPORT ON FORM 10-Q CONTAINS STATEMENTS WHICH
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "BELIEVES," "EXPECTS," "MAY," "ESTIMATES,"
"WILL," "SHOULD," "PLANS" OR "ANTICIPATES" OR THE NEGATIVE
THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR
BY DISCUSSIONS OF STRATEGY. READERS ARE CAUTIONED THAT ANY SUCH
FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND INVOLVE SIGNIFICANT RISKS AND UNCERTAINTIES, AND
THAT ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE IN THE FORWARD-
LOOKING STATEMENTS AS A RESULT OF ANY NUMBER OF FACTORS, MOST OF
WHICH ARE BEYOND THE CONTROL OF MANAGEMENT. THESE FACTORS
INCLUDE OPERATING LOSSES, CONTINUED AND INCREASED EXPENSES, NON-
CASH DIVIDENDS AND INTEREST RELATED TO OUR FINANCINGS,
RESTRICTIONS IMPOSED BY OUR LINE OF CREDIT AND SUBORDINATED DEBT,
CONSUMER FINANCE DIVISION LOSSES, QUALITY CONTROL OF THE
MANUFACTURING OF OUR PRODUCTS AND DELAYS IN THEIR DELIVERY, AND
OUR INABILITY TO MEET OBLIGATIONS TO THE FORMER OWNERS OF
ACQUIRED BUSINESSES FOR SATISFYING FUTURE PERIOD FINANCIAL
TARGETS.
ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS AND ASSUMPTIONS
REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE
CANNOT GUARANTEE FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE
OR ACHIEVEMENTS.
The following should be read in conjunction with the
response to Part I, Item 1. of this Report and the Company's
audited consolidated financial statements contained in the
Company's Annual Report on Form 10-K. Any capitalized terms used
but not defined in this Item have the same meaning given to them
in the Form 10-K.
OVERVIEW
We design, manufacture, sell and install custom vinyl
replacement windows for residential and retail commercial
customers. We also sell and install replacement doors, home
textured coatings, vinyl siding, patio decks, patio enclosures,
cabinet refacings and kitchen and bathroom remodeling products.
We have financed a portion of our customers' purchases through
Key Home Credit, our consumer finance subsidiary. We anticipate a
greater reliance on strategic relationships with unaffiliated
companies to improve our operations in the manufacturing and
financial services business segments.
BUSINESS SEGMENTS
Our subsidiaries have separate management teams and
infrastructures and operate in three reportable operating
segments: retail, manufacturing and financial services.
RETAIL. Our retail segment consists of our subsidiaries that
design, sell and install custom vinyl replacement windows, doors
and related home improvement products to commercial and retail
customers. Our retail segment derives its revenues from the sale
and installation of thermal replacement windows, storm windows
and doors, patio decks, patio enclosures, vinyl siding and other
home improvement products. Our retail segment recognizes revenues
on the completed contract method. A contract is considered
complete when the home improvement product has been installed.
Gross profit in the retail
9
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segment represents revenues after deducting product and
installation labor costs.
MANUFACTURING. Our manufacturing segment consists of our
subsidiaries that manufacture and sell vinyl replacement windows
to our retail segment and to unaffiliated customers. Sales from
the manufacturing segment to our retail segment have been a
larger percentage of our manufacturing revenues in recent years,
however, we do not expect this trend to continue as we anticipate
more of our retail subsidiaries will obtain windows manufactured
from unaffiliated vendors. We believe that with our present
retail volume, we can achieve lower product cost and more
consistent product quality by outsourcing to high volume window
manufacturers rather than to expand our internal manufacturing.
Our manufacturing segment recognizes revenues when products are
shipped. Gross profit in the manufacturing segment represents
revenues after deducting product costs (primarily glass, vinyl
and hardware), window fabrication labor and other manufacturing
expenses.
Consistent with our shift to outsourced manufacturing, our
Board of Directors in January 2000 authorized us to seek buyers
for our two manufacturing subsidiaries. We do not intend to
dispose of these subsidiaries if the transaction would result in
a loss to ThermoView.
FINANCIAL SERVICES. Our financial services segment
facilitates the credit sales of our retail segment. We are
currently focusing the business of this segment on making
consumer credit providers available to our customers in exchange
for broker fees from third-party consumer finance companies.
10
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HISTORICAL RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS
ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 2000
---- ----
(IN THOUSANDS)
<S> <C> <C>
Revenues ...................................... $21,750 $21,476
Cost of revenues earned ....................... 9,764 10,382
------- -------
Gross profit .................................. 11,986 11,094
Selling, general and administrative expenses .. 11,543 13,088
Depreciation expense .......................... 203 262
Amortization expense .......................... 860 869
------- -------
Loss from operations .......................... (620) (3,125)
Interest expense .............................. (411) (1,093)
Interest income ............................... 62 68
------- -------
Loss before income taxes ...................... (969) (4,150)
Income tax benefit ............................ 133 1,255
------- -------
Net loss ...................................... (836) (2,895)
Less preferred stock dividends:
Cash ......................................... 425 101
Non-cash ..................................... - 470
------- -------
Net loss attributable to common stockholders .. $(1,261) $(3,466)
======= =======
</TABLE>
REVENUES. Revenues decreased from $21.8 million in the
first quarter of 1999 to $21.5 million in the first quarter of
2000. Although revenues decreased only $300,000, there were
significant fluctuations in quarterly revenues for certain
subsidiaries. Precision Window Mfg., Inc., one of our
manufacturers, and four of the retailers to which it provides
windows, The Rolox Companies, Primax Window Co., ThermoView of
Missouri and ThermoView of California, collectively reported $1.4
million less revenues in the first quarter of 2000 than in the
similar period in 1999. This was due to a significant decline in
production during the first quarter 2000 relocation of our
Precision manufacturing plant in St. Louis, Missouri. Precision's
production decline not only reduced revenues of Precision, but
also caused revenue reductions at the four retail operations due
to Precision's inability to produce and deliver windows during
the plant relocation. We restored production at Precision to
more normal levels early in the second quarter of 2000.
The revenue reduction discussed above was offset by $1.6
million more revenue reported in the first quarter of 2000 by
Thermo-Shield, our Illinois subsidiary. We purchased Thermo-
Shield on March 1, 1999. Accordingly, the first quarter of 1999
included only one month of revenue for Thermo-Shield compared to
three months of revenue in 2000.
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GROSS PROFIT. Gross profit, which represents revenues less
cost of revenues earned, decreased from $12.0 million in the
first quarter of 1999 to $11.1 million in the first quarter of
2000. The decline in manufacturing output and corresponding
revenue reduction experienced by Precision and the four retail
subsidiaries negatively impacted gross profit. Thermo-Shield's
two additional months of operating results in the first quarter
of 2000 partially offset this reduction in gross profit.
Cost of revenues earned includes the cost of glass, vinyl,
hardware, fabrication labor and manufacturing overhead for the
manufacturing segment. For the retail segment, cost of revenues
earned includes the cost of vinyl windows, doors, textured
coating, vinyl siding, and other home improvement products
purchased plus installation costs and other indirect materials
and labor.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling,
general and administrative expenses increased from $11.5 million
in the first quarter of 1999 to $13.1 million in the first
quarter of 2000. The $1.6 million increase in selling, general
and administrative expenses is largely due to two more months of
Thermo-Shield's operations in the first quarter of 2000 causing
an increase over the first quarter of 1999 of $1.2 million, and
additional corporate office expenses in the first quarter of 2000
over the first quarter of 1999 amounting to approximately
$300,000. The higher corporate expenses in the first quarter of
2000 are principally due to consulting fees and other professional
services.
Selling, general and administrative expenses include sales
commissions, advertising expenses, rent expense, corporate
operating costs and other general and administrative expense.
DEPRECIATION EXPENSE. Depreciation expense increased from
$203,000 in the first quarter of 1999 to $262,000 in the first
quarter of 2000 as a result of recent capital expenditures,
particularly related to our Precision manufacturing plant.
AMORTIZATION EXPENSE. Amortization expense increased from
$860,000 in the first quarter of 1999 to $869,000 in the first
quarter of 2000. Although there were increases in amortization
expense in the first quarter of 2000 at several of the
subsidiaries as the former owners secured an increase to our
purchase price of their entities by achieving post-acquisition
earnings targets, amortization at the corporate level decreased
in the first quarter of 2000 as a result of lower amortization of
deferred loan costs.
INTEREST EXPENSE. Interest expense increased from $411,000
in the first quarter of 1999 to $1.1 million in the first quarter
of 2000 primarily as a result of interest on the $10.0 million
senior subordinated promissory note with GE Capital, which began
accruing in mid-1999.
INCOME TAX BENEFIT. The benefit for income taxes in the
first quarter of 1999 and the first quarter of 2000 differs from
the amount computed by applying the statutory U.S. Federal income
tax rate to loss before income taxes primarily as a result of
state taxes and non-deductible goodwill amortization.
As of March 31, 2000, we had deferred income tax assets of
$3 million. Because of cost reductions, lower product costs
expected because of outsourcing manufacturing, the introduction
of new products and various other
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performance improvements, we believe it is more likely than not
that our future taxable income will be sufficient to enable us to
realize these deferred income tax assets.
CASH DIVIDENDS. The cash dividends of $425,000 in the first
quarter of 1999 represent dividends paid on our Series A and
Series B preferred stock, which converted into shares of our
common stock effective December 31, 1999. The cash dividends of
$101,000 in the first quarter of 2000 represent dividends paid on
our mandatorily redeemable Series C convertible preferred stock.
NON-CASH DIVIDENDS. Non-cash dividends of $470,000 in the
first quarter of 2000 represent accretion of the discount on the
mandatorily redeemable Series C preferred stock related to the
value of the detachable stock purchase warrants issued to the
Series C preferred stockholders.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, we had cash and equivalents of $1.0
million, working capital of $841,000, $21.8 million of long-term
debt, net of current maturities, $7.1 million of non-current
amounts due to sellers of acquired businesses, and $5.1 million
of mandatorily redeemable preferred stock. Our operating
activities for the three months ended March 31, 2000, used
$764,000 of cash. Our operating activities for the three months
ended March 31, 1999, provided $1.2 million of cash.
The use of cash for investing activities for the three
months ended March 31, 2000, relates primarily to additional
consideration paid under terms of a 1999 acquisition agreement
which accounts for the use of $1.0 million of cash. Investing
activities also included investments in property and equipment of
$351,000 in the three months ended March 31, 2000. During the
three months ended March 31, 1999, we used $12.9 million for
acquisitions and invested $1.0 million in property and equipment.
We used $151,000 in cash to finance activities in the three
months ended March 31, 2000, comprised of $101,000 for preferred
stock dividends and $50,000 for repayment of debt. The major
sources of cash provided by financing activities for the three
months ended March 31, 1999, were borrowings from our PNC Bank
credit facility of $8.7 million and related party borrowings of
$5.1 million.
On April 14, 2000, PNC Bank extended the maturity date of
our $15 million credit facility from January 1, 2001, to May 1,
2001. On or before May 1, 2001, we anticipate either extending
the term of the credit facility or refinancing it. Pursuant to
the terms of the line of credit, at any one time, the aggregate
unpaid principal amount of advances under the line of credit
shall not exceed the lesser of $15.0 million, or our earnings
before interest, income taxes, depreciation and amortization, as
defined in the loan documents, for the immediately preceding four
fiscal quarters from our most recent financial statements
multiplied by 4.6 as of March 31, 2000, 4.5 as of June 30, 2000
and 3.5 as of September 30, 2000 and thereafter.
We have secured the line of credit by substantially all of
our personal property and by a pledge to PNC Bank of all of our
ownership interests in our subsidiaries. The line of credit
requires that any company acquired by us must become a borrower
under the line of credit. Additionally, the line of credit
obligates us to pay a quarterly unused loan fee and other fees
and
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expenses. Four of our stockholders, two of whom are also our
executive officers and directors, also agreed to guarantee $3
million of the credit facility for fees equal to an annual rate
of 5% from April 2000 through June 2000 and 10% thereafter
subject to Board of Director approval.
As of the date of this Form 10-Q, we have borrowed the
entire amount available to us under the line of credit.
Our line of credit with PNC Bank and subordinated debt owed
to GE Capital require us to comply with affirmative and negative
covenants. We must maintain various financial ratios and these
lenders may restrict us from incurring other debt. We may not pay
dividends on our common stock while the line of credit and the
subordinated debt are outstanding. We are also subject to other
restrictions, including restrictions pertaining to significant
corporate transactions and management changes.
If we default under the line of credit, PNC Bank could,
among other items, cease all advances, accelerate all amounts
owed to PNC Bank and increase the interest rate on the line of
credit. If we default under the subordinated debt documents, GE
Capital could, among other items, accelerate all amounts owed to
GE Capital, subject to the rights of PNC Bank as our senior
lender under the line of credit. Under either the PNC Bank line
of credit or the GE Capital subordinated debt, an event of
default could result in the loss of our subsidiaries because of
the pledge of our ownership in all of our subsidiaries to PNC
Bank and on a subordinated basis to GE Capital.
We violated PNC Bank and GE Capital covenants at December
31, 1999, and through March 30, 2000. The covenant violations
resulted largely from losses during the twelve-month period prior
to covenant measurement dates. Because of losses, we currently
have no excess cash available for unanticipated working capital
purposes. PNC Bank and GE Capital have waived these covenant
violations as of December 31, 1999 and through March 30, 2000,
and have reset financial covenants to accommodate compliance at
March 31, 2000, and in the future.
As of December 31, 1999, we owed $8,085,000 to previous
owners of our subsidiaries for additional consideration under
terms of our acquisition agreements. In February 2000, we paid $1
million cash towards these obligations. In April 2000, we
negotiated agreements with the previous owners for the issuance
of 1,417,000 shares of our 12% Series D cumulative preferred
stock with a liquidation value of $5.00 per share in lieu of the
remaining $7,085,000 obligation due to them. We also agreed to
issue an additional 22,316 shares of our Series D preferred stock
to compensate the previous owners for interest earned in an
amount equal to $111,580 prior to settlement of the obligations.
Our Series D preferred stock will pay cumulative dividends at the
rate of $.60 per share annually, subject to the availability of
such funds and the consent of PNC Bank.
We incurred significant operating losses in the first
quarter of 2000 resulting largely from a significant decline in
production during the relocation of our Precision manufacturing
plant in St. Louis, Missouri. The production decline at Precision
also caused losses at a number of our retail operations due to
Precision's inability to deliver windows. We restored production
to normal levels early in the second quarter of 2000. The reduced
pace of installing windows by our retail operations in the first
quarter did contribute to a higher revenue backlog for our second
quarter.
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In spite of these losses, we believe that our cash flow from
operations will allow us to meet our anticipated needs during at
least the next 12 months for:
* payment of the interest on our line of credit and
subordinated debt;
* payment of dividends due on our Series C and Series D
preferred stock;
* working capital requirements; and
* planned property and equipment capital expenditures.
Originally, we intended to continue our acquisition program
with a combination of cash, common stock and seller debt used to
finance the primary portion of consideration and we anticipated
the cash needed for acquisitions to come principally from an
expanded bank line and future common stock offerings. Currently,
we do not have an expanded bank line nor do we anticipate a
common stock offering in the near term to fund acquisitions or
unanticipated operating needs. For the near term, we have decided
to focus on improving the profitability of our existing
operations, opening new locations and expanding the market areas
of our existing retail subsidiaries while pursuing high quality
acquisition targets.
We will need additional sources of financing to open new
locations and expand the market areas of our existing retail
subsidiaries. Any required additional financing may not be
available on terms favorable to us, or at all. If adequate funds
are not available on acceptable terms, we may be unable to fund
additional acquisitions, successfully promote our products, open
new locations, or develop new or enhanced products, any of which
could lower our revenues and net income, if we achieve
profitability in the future. If we raise additional funds by
issuing equity securities, stockholders may experience dilution
of their ownership interest and the newly issued securities may
have rights superior to those of our common stock. If we issue or
incur debt to raise funds, we may be subject to limitations on
our operations.
We will pay dividends on the Series C and Series D preferred
stock, subject to the consent of PNC Bank in connection with the
Series D preferred stock, until the shares are redeemed or
converted.
PENDING LITIGATION
ThermoView does not anticipate any significant adverse
effect on our results of operations or cash flow through December
2000 because of the Pro Futures litigation described in Part II -
Other Information, Item 1. Legal Proceedings. Although ThermoView
believes the claims in this litigation are without merit and
intends to vigorously defend the suit, an adverse outcome,
thereafter, in this action could have a material adverse effect
on our results of operations and cash flow.
THE SHARES IN THE INITIAL PUBLIC OFFERING MAY HAVE BEEN
OFFERED OR SOLD IN VIOLATION OF THE SECURITIES ACT OF 1933
ThermoView entered into a 90-day listing agreement in
October 1999 with IPO.COM, Inc. under which ThermoView authorized
IPO.COM to include its
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prospectus on the IPO.COM web site. In addition to hosting
ThermoView's prospectus, IPO.COM provided summary material
relating to ThermoView and its initial public offering on its web
site. The IPO.COM web site also provided a direct link to the
ThermoView web site. Although ThermoView did not intend to create
an agency relationship with IPO.COM, and while ThermoView
believes that IPO.COM is not and has not acted as its agent, the
listing agreement may have created an agency relationship. If
IPO.COM is deemed ThermoView's agent pursuant to the listing
agreement, the summarized material contained in the IPO.COM web
site relating to ThermoView and the initial public offering and
the information contained in the ThermoView web site could
constitute a prospectus that does not meet the requirements of
the Securities Act of 1933. If the summarized materials relating
to ThermoView in the IPO.COM web site or the materials contained
in the ThermoView web site did constitute a violation of the
Securities Act of 1933, investors in the initial public offering
would have the right, for a period of one year from the date of
their purchase of common stock, to obtain recovery of the
consideration they paid for their common stock or, if these
persons had already sold the common stock, to sue ThermoView for
damages resulting from their purchase of common stock. These
damages could total up to approximately $6.9 million, plus
interest, based on the initial public offering price of $5.50 per
share for 1,255,000 shares, if these investors seek recovery or
damages after an entire loss of their investment. Any recovery or
damages could adversely impact ThermoView's liquidity during the
period in which a refund is paid. Although ThermoView cannot be
certain as to the ultimate disposition of this matter, it is the
opinion of ThermoView's management, based upon the information
available to it, that the expected outcome of this matter will
not significantly affect the results of operations and financial
condition of ThermoView.
YEAR 2000
During 1999, management completed the process of preparing
for the Year 2000 date change. This process involved identifying
and remediating date recognition problems in computer systems,
software and other operating equipment, working with third
parties to address their Year 2000 issues, and developing
contingency plans to address potential risks in the event of Year
2000 failures. To date, ThermoView has successfully managed the
transition.
Although considered unlikely, unanticipated problems in
ThermoView's core business processes, including problems
associated with non-compliant third parties and disruptions to
the economy in general, could still occur despite efforts to date
to remediate affected systems and develop contingency plans.
Management will continue to monitor all business processes,
including interaction with ThermoView's customers, vendors and
other third parties, throughout 2000 to address any issues and
ensure all processes continue to function properly.
The costs to us for compliance with year 2000 issues
consisted of our fee to our outside consultant for the
development and management of the assessment program, and the
costs associated with the purchase of software upgrades and
replacement equipment. To date, we have paid $101,500 to our
outside consultant and $158,800 for the upgrade and replacement
of software and equipment. We anticipate minimal future costs for
the upgrade and replacement of software and equipment. These
costs do not include wages and benefits paid to our personnel
that utilize their time for the assessment program. We are
funding costs of remediation from operations. We are charging the
costs associated with remediation as current expenses with the
exception of the costs of replacing software and equipment which
are capitalized.
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SEASONALITY
Historically, our results of operations have fluctuated on a
seasonal basis. We have experienced lower levels of sales and
profitability during the period from mid-November to mid-March,
impacting the first and fourth quarters of each year. Inclement
weather conditions in the winter and spring months in our markets
located in the north central United States, which limit our
ability to install exterior home improvement products, reduces
demand for windows, doors, vinyl siding and related products. Our
intention is to expand our southern California markets and to
enter other markets in the Southwest and southern United States
to reduce the impact of seasonality if we have the available
capital.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Changes in interest rates expose us to market risk. As of
March 31, 2000, approximately 60% of our debt portfolio consisted
of variable-rate debt and approximately 40% consisted of fixed-
rate debt. With respect to the variable-rate debt, a hypothetical
100 basis point increase in interest rates would increase our
annual interest expense by approximately $150,000 as of March 31,
2000.
Interest rate changes would result in gains or losses in the
market value of our fixed-rate debt due to the differences
between the current market interest rates and the rates governing
these instruments. With respect to our fixed-rate debt
outstanding at March 31, 2000, a 10% change in interest rates
would not have resulted in a significant change in the fair value
of our fixed-rate debt.
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Part II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 3, 2000, Pro Futures Bridge Capital Fund, L.P. and
Bridge Capital Partners, Inc. Defined Benefit Pension Plan filed
an action titled PRO FUTURES BRIDGE CAPITAL FUND, L.P. V.
THERMOVIEW INDUSTRIES, INC., ET AL., Civil Action No. 00CV0559
(Colo. Dist. Ct., March 3, 2000) against ThermoView, its
directors, certain officers, an employee and a stockholder
alleging breach of contract, common law fraud, fraudulent
misstatements and omissions in connection with the sale of
securities, negligent misrepresentations and breach of fiduciary
duty. These claims are in connection with the mandatory
conversion of ThermoView's 10% Series A convertible preferred
stock, held by the two funds, into common stock upon completion
of the initial public offering in December 1999, and purchases by
the two funds of ThermoView's common stock from ThermoView
stockholders. The funds are seeking rescission of their purchases
of the Series A preferred stock in the amount of $3,250,000, plus
interest and unspecified damages in connection with their
purchases of the common stock. ThermoView has filed a notice to
dismiss certain claims and an answer denying liability in the
remainder of the claims. The parties have not conducted discovery
in connection with the allegations, and no hearing or trial is
scheduled. While ThermoView believes that the claims are without
merit and intends to vigorously defend the suit, it is too early
in the process to predict the likely outcome of the matter.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Effective May 1, 2000, Delores P. Kesler resigned as a
member of the Board of Directors of ThermoView for health
reasons, subject to acceptance by the ThermoView Board of
Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Reference is made to the Index of Exhibits immediately
preceding the exhibits hereto (beginning on page 20),
which index is incorporated herein by reference.
(b) Reports on Form 8-K.
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ThermoView Industries, Inc.
Date: May 12, 2000 By: /s/ Stephen A. Hoffmann
-------------------------------
Stephen A. Hoffmann,
Chief Executive Officer
(principal executive officer)
Date: May 12, 2000 By: /s/ John H. Cole
-------------------------------
John H. Cole,
Chief Financial Officer
(principal financial and
accounting officer)
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
10.1 -- Agreement regarding earn out, dated as of
April 14, 2000, by and among registrant and
Michael S. Haines.
10.2 -- Agreement regarding earn out, dated as of
April 14, 2000, by and among registrant and
Bradley A. Smith.
10.3 -- Agreement regarding earn out, dated as of
April 14, 2000, by and among registrant and Steven
B. Hoyt.
10.4 -- Agreement regarding earn out, dated as of
April 14, 2000, by and among registrant and Alvin
W. Leingang.
10.5 -- Agreement regarding earn out, dated as of
April 14, 2000, by and among registrant and Rodney
H. Thomas.
10.6 -- Fifth Amendment to Loan Agreement and
Amendment to Note, dated as of April 14, 2000, by
and among Borrowers and PNC Bank, N.A.
10.7 -- Amendment No. 2 and Waiver, dated as of April
14, 2000, by and between the registrant and GE
Capital Equity Investments, Inc.
10.8 -- Amendment to Triple Net Lease Agreement,
dated April 14, 2000, by and between Thomas
Construction, Inc., and 13397 Lakefront Drive,
LLC.
10.9 -- Amendment to Furniture and Fixture Lease,
dated April 14, 2000, by and between Thomas
Construction, Inc., and Investors Property Holding
I, LLC.
10.10 -- Window License Agreement, dated as of March
21, 2000, as amended on April 14, 2000, by and
between the registrant and Research Frontiers
Incorporated
27.1 -- Financial Data Schedule
20
EXHIBIT 10.1
AGREEMENT
---------
THIS AGREEMENT is made and entered into as of the 14th day
of April, 2000, by and between THERMOVIEW INDUSTRIES, INC., a
Delaware corporation ("ThermoView") and MICHAEL S. HAINES
("Haines").
PRELIMINARY STATEMENTS
----------------------
As of July 9, 1998, ThermoView caused Fire Star Builders,
Inc. ("Five Star"), a California corporation, to be merger with
and into Five Star Builders, Inc. f/k/a ThermoView/FSB Merger
Corp. (the Sub"), a California corporation and wholly-owned
subsidiary of ThermoView, pursuant to a certain Agreement and
Plan of Merger (the "Merger Agreement") among ThermoView, the
Sub, Five Star and the shareholders of Five Star.
Under the terms of the Merger Agreement, Haines is entitled
to receive post-closing earn-out payments (the "Earn-out
Payments"), if earned, on December 31, 1999, 2000, 2001, 2002 and
2003. As of December 31, 1999, ThermoView owed Haines payments
of cash and ThermoView common stock, par value $.001 (the "Common
Stock"), equal to approximately $557,500.00 (the "Year One Earn-
out Payment") under the terms of the Merger Agreement pursuant to
the earn-out provision.
ThermoView desires to settle any and all claims to the Year
One Earn-out Payment by issuing ThermoView 12% Cumulative Series
D Preferred Stock with a stated value of $5.00 (the "Preferred
Stock") in lieu of cash and Common Stock and Haines desires to
accept the Preferred Stock in full settlement of the Year One
Earn-out Payment. The terms and conditions of the Preferred
Stock are further described in the Certificate of Designation,
attached hereto as EXHIBIT A and incorporated herein by reference
(the "Certificate").
NOW, THEREFORE, in consideration of these preliminary
statements and the mutual promises contained herein, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. STOCK ISSUANCE. In exchange for any and all amounts
due to Haines by ThermoView pursuant to the Year One Earn-out
Payment under the Merger Agreement, and in full settlement of any
claim to such Year One Earn-out Payment, ThermoView hereby
transfers to Haines and Haines hereby agrees to accept 113,173
shares of Preferred Stock. The delivery of the Preferred Stock
to Haines shall occur with fifteen (15) business days of the
execution of this Agreement.
2. FULL SATISFACTION. Haines hereby acknowledges that his
receipt of the 113,173 shares of Preferred Stock is in full and
complete satisfaction of any obligation owed to Haines by
ThermoView for the Year One Earn-out Payment.
3. NO AMENDMENT OR TERMINATION. Nothing contained in this
Agreement shall amend or terminate any obligations of ThermoView
to make any and all other Earn-out Payments, if earned, under the
terms of the Merger Agreement.
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4. HAINES' REPRESENTATIONS AND WARRANTIES. Haines hereby
represents and warrants to ThermoView as follows:
(a) INVESTMENT INTENT. Haines is acquiring the
Preferred Stock for his own account and not with a present
view to or for distributing or reselling the Preferred Stock
in violation of the Securities Act of 1933, as amended (the
"Securities Act"). Haines agrees that such shares of
Preferred Stock may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act, except pursuant to an
exemption available under the Securities Act. Haines will
not sell, offer to sell or solicit offers to buy any of the
shares of Preferred Stock in violation of the Securities Act
or any securities act of any state. Haines understands that
the shares of Preferred Stock have not been registered under
federal or any state securities laws.
(b) HAINES' STATUS. Haines is (i) an "accredited
investor" as defined in Rule 501 of the Securities Act and
(ii) has such knowledge, sophistication and experience in
business and financial matters so as to be capable of
evaluating the merits and risks of the prospective
investment in the Preferred Stock.
(c) RELIANCE. Haines understands and acknowledges
that (i) the Preferred Stock is being offered and sold to
Haines without registration under the Securities Act in a
private placement that is exempt from the registration
provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder or
other applicable federal and state securities laws and (ii)
the availability of such exemptions depends in part on, and
ThermoView will rely upon the accuracy and truthfulness of,
the representations set forth in this Section 4 and Haines
consents to such reliance.
(d) INFORMATION. Haines and his advisors, if any,
have been furnished with all materials relating to the
business, finances and operations of ThermoView and
materials relating to the offer and sale of the Preferred
Stock, including the Certificate, which have been requested
by Haines or his advisors. Haines and his advisors, if any,
have been afforded the opportunity to ask questions of
ThermoView. Haines acknowledges receipt of the ThermoView
prospectus dated December 2, 1999 (the "Prospectus") and
that ThermoView will deliver a copy of its most recent Form
10-K filing with the Securities and Exchange Commission as
soon as it becomes publicly available. Haines understands
that his investment in the Preferred Stock involves a
significant degree of risk, some of which risks associated
with the investment in the Preferred Stock are set forth in
EXHIBIT B, attached hereto and incorporated herein by
reference, and in the Prospectus.
5. Miscellaneous.
(a) NOTICES. All notices, requests, consents and
other communications hereunder shall be in writing, shall be
addressed to the receiving party's address set forth below
or to such other address as a party may designate by notice
hereunder, and shall be either (i) delivered by hand,
(ii) made by telex, telecopy or facsimile transmission,
(iii) sent by overnight courier, or (iv) sent by certified
mail, return receipt requested, postage prepaid.
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If to ThermoView:
ThermoView Industries, Inc.
1101 Herr Lane
Louisville, Kentucky 40222
Attn: Nelson E. Clemmens, President
Fax No. (502) 412-0301
With a copy to:
Stites & Harbison
400 West Market Street, Suite 1800
Louisville, Kentucky 40202
Attn: Alex P. Herrington, Jr., Esq.
Fax No. (502) 587-6391
If to Haines:
Michael S. Haines
5225 Quakertown Avenue
Woodland Hills, California 91364
Fax No. (818) 340-7901
All notices, requests, consents and other communications
hereunder shall be deemed to have been received either
(i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth
above, (ii) if made by telecopy or facsimile transmission,
at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, (iii) if sent by
overnight courier, on the next business day following the
day such notice is delivered to the courier service, or
(iv) if sent by certified mail, on the fifth business day
following the day such mailing is made.
(b) ENTIRE AGREEMENT. This Agreement embodies the
entire agreement and understanding between the parties
hereto with respect to the Year One Earn-out Payment and
supersedes all prior oral or written agreements and
understandings relating to the Year One Earn-out Payment.
No statement, representation, warranty, covenant or
agreement of any kind not expressly set forth in this
Agreement shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this
Agreement.
(c) MODIFICATIONS AND AMENDMENTS. The terms and
provisions of this Agreement may be modified or amended only
by written agreement executed by all parties hereto.
(d) BENEFIT. This Agreement shall be binding on the
parties hereto and shall inure to the benefit of the parties
hereto and the respective successors and permitted assigns
of each party hereto. Nothing in this Agreement shall be
construed to create any rights or obligations except among
the parties hereto, and no person or entity shall be
regarded as a third-party beneficiary of this Agreement.
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(e) GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be construed in
accordance with and governed by the law of the Commonwealth
of Kentucky, without giving effect to the conflict of law
principles thereof.
(f) SEVERABILITY. In the event that any court of
competent jurisdiction shall determine that any provision,
or any portion thereof, contained in this Agreement shall be
unreasonable or unenforceable in any respect, then such
provision shall be deemed limited to the extent that such
court deems it reasonable and enforceable, and as so limited
shall remain in full force and effect. In the event that
such court shall deem any such provision, or portion
thereof, wholly unenforceable, the remaining provisions of
this Agreement shall nevertheless remain in full force and
effect.
(g) HEADINGS AND CAPTIONS. The headings and captions
of the various subdivisions of this Agreement are for
convenience of reference only and shall in no way modify, or
affect the meaning or construction of any of the terms or
provisions hereof.
(h) COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by different parties hereto on
separate counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, ThermoView has caused this Agreement to
be executed by its duly authorized officer and Haines has
executed this Agreement all as of the date first above written.
THERMOVIEW INDUSTRIES, INC.
By: /s/ Nelson E. Clemmens
--------------------------------
Title: President
/s/ Michael S. Haines
-----------------------------------
MICHAEL S. HAINES
4
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EXHIBIT A
CERTIFICATE OF DESIGNATION
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS, AND QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF 12% SERIES D CUMULATIVE
PREFERRED STOCK
OF
THERMOVIEW INDUSTRIES, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Pursuant to Section 141(f) of the General Corporation Law of
the State of Delaware (the "DGCL"), the Board of Directors of
ThermoView Industries, Inc., a Delaware corporation (the
"Company"), hereby unanimously consents to, adopts and ratifies
the following resolution:
RESOLVED, that pursuant to the authority expressly
granted to and vested in the Board of Directors of the
Company by the provisions of Section 4.2 of Article IV
of the Restated Certificate of Incorporation of the
Company (the "Restated Certificate of Incorporation"),
and Section 151(g) of the DGCL, such Board of Directors
hereby creates, from the 50,000,000 authorized shares
of Preferred Stock, par value $.001 per share (the
"Preferred Stock"), of the Company authorized to be
issued pursuant to the Restated Certificate of
Incorporation, a series of Preferred Stock, and hereby
fixes by this certificate of designation (this
"Certificate of Designation") the voting powers,
designations, preferences and relative, participating,
optional or other special rights, and qualifications,
limitations or restrictions thereof, of the shares of
such series as follows:
The series of Preferred Stock hereby
established shall consist of 1,500,000 shares
designated as "12% Cumulative Series D
Preferred Stock" (hereinafter called the
"Series D Preferred Stock"), which shall have
a stated value of $5.00 per share. The
relative rights, preferences and limitations
of such series shall be as follows:
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12% CUMULATIVE SERIES D PREFERRED STOCK
(1) RANKING. The Series D Preferred Stock will, with
respect to payment of dividends and amounts upon liquidation,
dissolution or winding up, rank (i) senior to the Common Stock of
the Company, $.001 par value (the "Common Stock") and to shares
of all other series of Preferred Stock issued by the Company the
terms of which specifically provide that the capital stock of
such series rank junior to such Series D Preferred Stock with
respect to dividend rights or distributions upon dissolution of
the Company ("Junior Stock"); (ii) on a parity with (a) all
shares of the Company's 6.6% Cumulative Convertible Series C
Preferred Stock and (b) the shares of all capital stock issued by
the Company whether or not the dividend rates, dividend payment
dates, or redemption or liquidation prices per share thereof
shall be different from those of the Series D Preferred Stock, if
the holders of stock of such class or series shall be entitled by
the terms thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the
case may be, in proportion to their respective dividend rates or
liquidation prices, without preference or priority of one over
the other as between the holders of such stock and the holders of
shares of Series D Preferred Stock (collectively (a) and (b)
being "Parity Stock"); and (iii) junior to all capital stock
issued by the Company the terms of which specifically provide
that the shares rank senior to the Series D Preferred Stock with
respect to dividends and distributions upon dissolution of the
Company ("Senior Stock").
(2) DIVIDENDS.
(a) Holders of shares of Series D Preferred Stock will
be entitled to receive, when, as and if declared by the Board of
Directors of the Company and only with the consent of PNC Bank,
N.A. or any successor lender thereto, out of funds of the Company
legally available for payment, subject to the prior and superior
rights of Senior Stock, but pari passu with Parity Stock, and in
preference to Junior Stock, cumulative cash dividends at the rate
per annum of $0.60 per share of Series D Preferred Stock.
Dividends on the Series D Preferred Stock will be payable
quarterly in arrears on the last calendar day of April, July,
October and January of each year, commencing July 31, 2000 (and
in the case of any accumulated and unpaid dividends not paid on
the corresponding dividend payment date, at such additional times
and for such interim periods, if any, as determined by the Board
of Directors). Each such dividend will be payable to holders of
record as they appear on the stock records of the Company at the
close of business on such record dates, not more than 60 days nor
less than 10 days preceding the payment dates thereof, as shall
be fixed by the Board of Directors of the Company. Dividends
will accrue from the date of the original issuance of the Series
D Preferred Stock. Dividends will be cumulative from such date,
whether or not in any dividend period or periods there shall be
funds of the Company legally available for the payment of such
dividends. Accumulations of dividends on shares of Series D
Preferred Stock will not bear interest. Dividends payable on the
Series D Preferred Stock for any period greater or less than a
full dividend period will be computed on the basis of actual
days. Dividends payable on the Series D Preferred Stock for each
full dividend period will be computed by dividing the annual
dividend rate by four.
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(b) Except as provided in the next sentence, no
dividend will be declared or paid on any Parity Stock unless full
cumulative dividends have been declared and paid or are
contemporaneously declared and funds sufficient for payment set
aside on the Series D Preferred Stock for all prior dividend
periods. If accrued dividends on the Series D Preferred Stock
for all prior periods have not been paid in full, then any
dividends declared on the Series D Preferred Stock for any
dividend period and on any Parity Stock will be declared ratably
in proportion to accumulated and unpaid dividends on the Series D
Preferred Stock and such Parity Stock.
(c) So long as the shares of the Series D Preferred
Stock shall be outstanding, unless (i) full cumulative dividends
shall have been paid or declared and set apart for payment on all
outstanding shares of the Series D Preferred Stock and any Parity
Stock, (ii) sufficient funds have been paid or set apart for the
payment of the dividend for the current dividend period with
respect to the Series D Preferred Stock and any Parity Stock and
(iii) the Company is not in default or in arrears with respect to
the mandatory or optional redemption or mandatory repurchase or
other mandatory retirement of, or with respect to any sinking or
other analogous fund for, the Series D Preferred Stock or any
Parity Stock, the Company may not declare any dividends on any
Junior Stock, or make any payment on account of, or set apart
money for, the purchase, redemption or other retirement of, or
for a sinking or other analogous fund for, any shares of Junior
Stock or make any distribution in respect thereof, whether in
cash or property or in obligations or stock of the Company, other
than (x) Junior Stock which is neither convertible into, nor
exchangeable or exercisable for, any securities of the Company
other than Junior Stock, or (y) Common Stock acquired in
connection with the cashless exercise of options under employee
incentive or benefit plans of the Company or any subsidiary or
any other redemption or purchase or other acquisition of Common
Stock made in the ordinary course of business, which has been
approved by the Board of Directors of the Company, for the
purpose of any employee incentive or benefit plan of the Company.
The limitations in this paragraph do not restrict the Company's
ability to take the actions in this paragraph with respect to any
Parity Stock. As used in this subparagraph (c), the term
"dividend" with respect to Junior Stock does not include
dividends payable solely in shares of Junior Stock on Junior
Stock, or in options, warrants on rights to holders of Junior
Stock to subscribe for or purchase any Junior Stock.
(3) REDEMPTION.
(a) The shares of Series D Preferred Stock will be
redeemable at the option of the Company in whole or in part, for
cash or for such number of shares of Common Stock as equals the
Liquidation Preference (defined hereinafter in paragraph (4)) of
the Series D Preferred Stock to be redeemed (without regard to
accumulated and unpaid dividends) as of the opening of business
on the date set for such redemption. In order to exercise its
redemption option, the Company must notify the holders of record
of its Series D Preferred Stock in writing (the "Conditions
Satisfaction Notice") prior to the opening of business on the
second trading day after the conditions in the preceding
sentences have, from time to time, been satisfied.
(b) Notice of redemption (the "Redemption Notice")
will be given by mail to the holders of the Series D Preferred
Stock not less than 30 nor more than 60 days prior to the date
selected by the Company to redeem the Series D Preferred Stock.
The Redemption Notice shall be deemed to have been given when
deposited in the United States mail, first-class mail, postage
prepaid, whether or not such notice is actually received. The
Company's right to exercise its redemption option will not be
affected by changes in the closing price of the
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Common Stock following such 30-day period. If fewer than all of
the shares of Series D Preferred Stock are to be redeemed, the
shares to be redeemed shall be selected by lot or pro rata or in
some other equitable manner determined by the Board of Directors
of the Company; provided, however, that the Company shall not be
required to effect the redemption in any manner that results in
additional fractional shares being outstanding. If full
cumulative dividends on the outstanding shares of Series D
Preferred Stock shall not have been paid or declared and set
apart for payment for all regular dividend payment dates to and
including the last dividend payment date prior to the date fixed
for redemption, the Corporation shall not call for redemption any
shares of Series D Preferred Stock unless all such shares then
outstanding are called for simultaneous redemption.
(c) On the redemption date, the Company must pay, in
cash, on each share of Series D Preferred Stock to be redeemed
any accumulated and unpaid dividends through the redemption date.
In the case of a redemption date falling after a dividend payment
record date and prior to the related payment date, the holders of
the Series D Preferred Stock at the close of business on such
record date will be entitled to receive the dividend payable on
such shares on the corresponding dividend payment date,
notwithstanding the redemption of such shares following such
dividend payment record date. Except as provided for in the
preceding sentence, no payment or allowance will be made for
accumulated and unpaid dividends on any shares of Series D
Preferred Stock called for redemption or on the shares of Common
Stock issuable upon such redemption.
(d) On and after the date fixed for redemption,
provided that the Company has made available at the office of its
registrar and transfer agent a sufficient number of shares of
Common Stock and an amount of cash to effect the redemption,
dividends will cease to accrue on the Series D Preferred Stock
called for redemption (except that, in the case of a redemption
date after a dividend payment record date and prior to the
related dividend payment date, holders of Series D Preferred
Stock on the dividend payment record date will be entitled on
such dividend payment date to receive the dividend payable on
such shares), such shares shall be cancelled and shall no longer
be deemed to be outstanding and all rights of the holders of such
shares of Series D Preferred Stock shall cease except the right
to receive the shares of Common Stock upon such redemption and
any cash payable upon such redemption, without interest from the
date of such redemption. Such cancelled shares shall be restored
to the status of authorized but unissued shares of Preferred
Stock, without designation as to series, and may thereafter be
issued but not as shares of Series D Preferred Stock. At the
close of business on the redemption date upon surrender in
accordance with such notice of the certificates representing any
such shares (properly endorsed or assigned for transfer, if the
Board of Directors of the Company shall so require and the notice
shall so state), each holder of Series D Preferred Stock (unless
the Company defaults in the delivery of the shares of Common
Stock or cash) will be, without any further action, deemed a
holder of the number of shares of Common Stock for which such
Series D Preferred Stock is redeemable.
(e) Fractional shares of Common Stock are not to be
issued upon redemption of the Series D Preferred Stock, but, in
lieu thereof, the Company will pay a cash adjustment based on the
current market price of the Common Stock on the day prior to the
redemption date. If fewer than all the shares represented by any
such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares of Series D Preferred Stock
without cost to the holder thereof.
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(f) Any shares or cash set aside by the Company
pursuant to subparagraph (e) and unclaimed at the end of three
years from the date fixed for redemption shall revert to the
Company.
(g) Subject to applicable law and the limitation on
purchases when dividends on the Series D Preferred Stock are in
arrears, the Company may, at any time and from time to time,
purchase any shares of the Series D Preferred Stock by tender or
by private agreement.
(4) LIQUIDATION PREFERENCE.
(a) The holders of shares of Series D Preferred Stock
will be entitled to receive in the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary, $5.00 per share of Series D Preferred Stock (the
"Liquidation Preference"), plus an amount per share of Series D
Preferred Stock equal to all dividends (whether or not earned or
declared) accumulated and unpaid thereon to the date of final
distribution to such holders, and no more. If, upon any
liquidation, dissolution or winding up of the Company, the assets
of the Company, or proceeds thereof, distributable among the
holders of the Series D Preferred Stock are insufficient to pay
in full the liquidation preference with respect to the Series D
Preferred Stock and any other Parity Stock, then such assets, or
the proceeds thereof, will be distributed among the holders of
Series D Preferred Stock and any such Parity Stock ratably in
accordance with the respective amounts which would be payable on
such Series D Preferred Stock and any such Parity Stock if all
amounts payable thereon were paid in full.
(b) Neither a consolidation or merger of the Company
with or into another corporation, nor a sale, lease or transfer
of all or substantially all of the Company's assets will be
considered a liquidation, dissolution or winding up, voluntary or
involuntary, of the Company.
(5) VOTING RIGHTS. Except as may be required by applicable
law from time to time, the holders of shares of Series D
Preferred Stock will have no voting rights.
(6) SINKING FUND. The Series D Preferred Stock shall not
be entitled to any mandatory redemption or prepayment (except on
liquidation, dissolution or winding up of the affairs of the
Company) or to the benefit of any sinking fund.
WITNESS THE SIGNATURE of the undersigned who is the Chairman
of the Board and Chief Executive Officer of ThermoView
Industries, Inc. as of this day of April, 2000.
----
-----------------------------------
Stephen A. Hoffmann
<PAGE>
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EXHIBIT B
RISK FACTORS
PRIOR TO MAKING AN INVESTMENT DECISION, A PROSPECTIVE
PURCHASER OF THE 12% CUMULATIVE SERIES D PREFERRED STOCK OFFERED
HEREBY SHOULD EVALUATE THE FOLLOWING RISK FACTORS INCLUDING THOSE
IN THE THERMOVIEW PROSPECTUS, DATED DECEMBER 2, 1999.
SERIES D PREFERRED STOCK
There can be no assurance that ThermoView's continuing
losses or consolidated earnings, if ever, in the future will be
sufficient to cover its combined fixed charges and dividends on
(i) the 12% Series D Cumulative Preferred Stock alone, or (ii)
its 9.6% Series C Convertible Preferred Stock and the Series D
Preferred Stock.
ABSENCE OF TRADING MARKET FOR SERIES D PREFERRED STOCK
There is no public market for the Series C Preferred Stock
and Series D Preferred Stock and ThermoView does not anticipate
that any public market will develop in the future. However, the
Series C Preferred Stock is convertible into Common Stock at a
conversion price, subject to adjustment in certain circumstances
of $15.00 per share of Common Stock (initially equivalent to a
conversion rate of 66 2/3 shares of stock per share of Series C
Preferred Stock). The Series D Preferred Stock has no such
conversion feature. The ThermoView Common Stock trades on the
American Stock Exchange, so a public market does exist for the
Common Stock. Without the ability to convert the Series D
Preferred Stock into Common Stock or have a market available to
sell the Series D Preferred Stock, the holders of the Series D
Preferred Stock may not be able to liquidate their investment at
any time.
RESTRICTION OF PAYMENT OF CASH DIVIDENDS ON SERIES D PREFERRED
STOCK
Pursuant to ThermoView's current line of credit with its
principal secured lender and documentation related to financings
with other parties, it may not pay dividends on its Common Stock
until all obligations thereunder have been paid in full and on
the Series D Preferred Stock until satisfaction of all covenants
under the line of credit and other financings. ThermoView cannot
provide any assurance that it will be able to satisfy these
covenants so as to pay quarterly the dividends due on the Series
D Preferred Stock. Considering that ThermoView has in the past
received waivers from its lenders for non-compliance with its
covenants, a history exists that non-compliance with its loan or
other covenants may occur in the future. Accordingly, it is
possible that ThermoView may not be able to pay any dividends due
on its Series D Preferred Stock.
LITIGATION
On March 3, 2000, Pro Futures Bridge Capital Fund, L.P. and
Pro Futures Bridge Capital Fund, L.P. filed an action titled PRO
FUTURES BRIDGE CAPITAL FUND, L.P. V. THERMOVIEW INDUSTRIES, INC.,
ET AL., Civil Action No. 00CV0559 (Colo. Dist. Ct., March 3,
2000) alleging breach of
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contract, common law fraud, fraudulent misstatements and
omissions in connection with the sale of securities, negligent
misrepresentations and breach of fiduciary duty. These claims
are in connection with (i) the mandatory conversion of the
ThermoView 10% Series A Convertible Preferred Stock, held by the
two funds, into ThermoView Common Stock upon completion of the
ThermoView public offering in December 1999, and (ii) purchases
by the two funds of ThermoView Common Stock from ThermoView
stockholders. The funds are seeking (a) rescission of their
purchases of the Series A Preferred Stock in the amount of
$3,250,000 plus interest and (b) unspecified damages in
connection with their purchases of the ThermoView Common Stock.
Although ThermoView believes that the claims are without merit
and intends to vigorously defend the suit, an adverse outcome in
this action could have a material adverse effect on the financial
position or results of operations of ThermoView.
EXHIBIT 10.2
AGREEMENT
---------
THIS AGREEMENT is made and entered into as of the 14th day
of April, 2000, by and between THERMOVIEW INDUSTRIES, INC., a
Delaware corporation ("ThermoView") and BRADLEY A. SMITH
("Smith").
PRELIMINARY STATEMENTS
----------------------
As of July 9, 1998, ThermoView caused Five Star Builders,
Inc. ("Five Star"), a California corporation, to be merger with
and into Five Star Builders, Inc. f/k/a ThermoView/FSB Merger
Corp. (the Sub"), a California corporation and wholly-owned
subsidiary of ThermoView, pursuant to a certain Agreement and
Plan of Merger (the "Merger Agreement") among ThermoView, the
Sub, Five Star and the shareholders of Five Star.
Under the terms of the Merger Agreement, Smith is entitled
to receive post-closing earn-out payments (the "Earn-out
Payments"), if earned, on December 31, 1999, 2000, 2001, 2002 and
2003. As of December 31, 1999, ThermoView owed Smith payments of
cash and ThermoView common stock, par value $.001 (the "Common
Stock"), equal to approximately $557,500.00 (the "Year One Earn-
out Payment") under the terms of the Merger Agreement pursuant to
the earn-out provision.
ThermoView desires to settle any and all claims to the Year
One Earn-out Payment by issuing ThermoView 12% Cumulative Series
D Preferred Stock with a stated value of $5.00 (the "Preferred
Stock") in lieu of cash and Common Stock and Smith desires to
accept the Preferred Stock in full settlement of the Year One
Earn-out Payment. The terms and conditions of the Preferred
Stock are further described in the Certificate of Designation,
attached hereto as EXHIBIT A and incorporated herein by reference
(the "Certificate").
NOW, THEREFORE, in consideration of these preliminary
statements and the mutual promises contained herein, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. STOCK ISSUANCE. In exchange for any and all amounts
due to Smith by ThermoView pursuant to the Year One Earn-out
Payment under the Merger Agreement, and in full settlement of any
claim to such Year One Earn-out payment, ThermoView hereby
transfers to Smith and Smith hereby agrees to accept 113,173
shares of Preferred Stock. The delivery of the Preferred Stock
to Smith shall occur with fifteen (15) business days of the
execution of this Agreement.
2. FULL SATISFACTION. Smith hereby acknowledges that his
receipt of the 113,173 shares of Preferred Stock is in full and
complete satisfaction of any obligation owed to Smith by
ThermoView for the Year One Earn-out Payment.
3. NO AMENDMENT OR TERMINATION. Nothing contained in this
Agreement shall amend or terminate any obligations of ThermoView
to make any and all other Earn-out Payments, if earned, under the
terms of the Merger Agreement.
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4. SMITH'S REPRESENTATIONS AND WARRANTIES. Smith hereby
represents and warrants to ThermoView as follows:
(a) INVESTMENT INTENT. Smith is acquiring the
Preferred Stock for his own account and not with a present
view to or for distributing or reselling the Preferred Stock
in violation of the Securities Act of 1933, as amended (the
"Securities Act"). Smith agrees that such shares of
Preferred Stock may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act, except pursuant to an
exemption available under the Securities Act. Smith will
not sell, offer to sell or solicit offers to buy any of the
shares of Preferred Stock in violation of the Securities Act
or any securities act of any state. Smith understands that
the shares of Preferred Stock have not been registered under
federal or any state securities laws.
(b) SMITH'S STATUS. Smith is (i) an "accredited
investor" as defined in Rule 501 of the Securities Act and
(ii) has such knowledge, sophistication and experience in
business and financial matters so as to be capable of
evaluating the merits and risks of the prospective
investment in the Preferred Stock.
(c) RELIANCE. Smith understands and acknowledges that
(i) the Preferred Stock is being offered and sold to Smith
without registration under the Securities Act in a private
placement that is exempt from the registration provisions of
the Securities Act under Section 4(2) of the Securities Act
or Regulation D promulgated thereunder or other applicable
federal and state securities laws and (ii) the availability
of such exemptions depends in part on, and ThermoView will
rely upon the accuracy and truthfulness of, the
representations set forth in this Section 4 and Smith
consents to such reliance.
(d) INFORMATION. Smith and his advisors, if any, have
been furnished with all materials relating to the business,
finances and operations of ThermoView and materials relating
to the offer and sale of the Preferred Stock, including the
Certificate, which have been requested by Smith or his
advisors. Smith and his advisors, if any, have been
afforded the opportunity to ask questions of ThermoView.
Smith acknowledges receipt of the ThermoView prospectus
dated December 2, 1999 (the "Prospectus") and that
ThermoView will deliver a copy of its most recent Form 10-K
filing with the Securities and Exchange Commission as soon
as it becomes publicly available. Smith understands that
his investment in the Preferred Stock involves a significant
degree of risk, some of which risks associated with the
investment in the Preferred Stock are set forth in EXHIBIT
B, attached hereto and incorporated herein by reference, and
in the Prospectus.
5. MISCELLANEOUS.
(a) Notices. All notices, requests, consents and
other communications hereunder shall be in writing, shall be
addressed to the receiving party's address set forth below
or to such other address as a party may designate by notice
hereunder, and shall be either (i) delivered by hand,
(ii) made by telex, telecopy or facsimile transmission,
(iii) sent by overnight courier, or (iv) sent by certified
mail, return receipt requested, postage prepaid.
2
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If to ThermoView:
ThermoView Industries, Inc.
1101 Herr Lane
Louisville, Kentucky 40222
Attn: Nelson E. Clemmens, President
Fax No. (502) 412-0301
With a copy to:
Stites & Harbison
400 West Market Street, Suite 1800
Louisville, Kentucky 40202
Attn: Alex P. Herrington, Jr., Esq.
Fax No. (502) 587-6391
If to Smith:
Bradley A. Smith
948 Olive Crest Drive
Encinitas, California 92024
Fax No.
------------------------
All notices, requests, consents and other communications
hereunder shall be deemed to have been received either
(i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth
above, (ii) if made by telecopy or facsimile transmission,
at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, (iii) if sent by
overnight courier, on the next business day following the
day such notice is delivered to the courier service, or
(iv) if sent by certified mail, on the fifth business day
following the day such mailing is made.
(b) ENTIRE AGREEMENT. This Agreement embodies the
entire agreement and understanding between the parties
hereto with respect to the Year One Earn-out Payment and
supersedes all prior oral or written agreements and
understandings relating to the Year One Earn-out Payment.
No statement, representation, warranty, covenant or
agreement of any kind not expressly set forth in this
Agreement shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this
Agreement.
(c) MODIFICATIONS AND AMENDMENTS. The terms and
provisions of this Agreement may be modified or amended only
by written agreement executed by all parties hereto.
(d) BENEFIT. This Agreement shall be binding on the
parties hereto and shall inure to the benefit of the parties
hereto and the respective successors and permitted assigns
of each party hereto. Nothing in this Agreement shall be
construed to create any rights or obligations except among
the parties hereto, and no person or entity shall be
regarded as a third-party beneficiary of this Agreement.
3
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(e) GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be construed in
accordance with and governed by the law of the Commonwealth
of Kentucky, without giving effect to the conflict of law
principles thereof.
(f) SEVERABILITY. In the event that any court of
competent jurisdiction shall determine that any provision,
or any portion thereof, contained in this Agreement shall be
unreasonable or unenforceable in any respect, then such
provision shall be deemed limited to the extent that such
court deems it reasonable and enforceable, and as so limited
shall remain in full force and effect. In the event that
such court shall deem any such provision, or portion
thereof, wholly unenforceable, the remaining provisions of
this Agreement shall nevertheless remain in full force and
effect.
(g) HEADINGS AND CAPTIONS. The headings and captions
of the various subdivisions of this Agreement are for
convenience of reference only and shall in no way modify, or
affect the meaning or construction of any of the terms or
provisions hereof.
(h) COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by different parties hereto on
separate counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, ThermoView has caused this Agreement to
be executed by its duly authorized officer and Smith has executed
this Agreement all as of the date first above written.
THERMOVIEW INDUSTRIES, INC.
By: /s/ Nelson E. Clemmens
--------------------------------
Title: President
/s/ Bradley A. Smith
-----------------------------------
BRADLEY A. SMITH
<PAGE>
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EXHIBIT A
CERTIFICATE OF DESIGNATION
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS, AND QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF 12% SERIES D CUMULATIVE
PREFERRED STOCK
OF
THERMOVIEW INDUSTRIES, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Pursuant to Section 141(f) of the General Corporation Law of
the State of Delaware (the "DGCL"), the Board of Directors of
ThermoView Industries, Inc., a Delaware corporation (the
"Company"), hereby unanimously consents to, adopts and ratifies
the following resolution:
RESOLVED, that pursuant to the authority expressly
granted to and vested in the Board of Directors of the
Company by the provisions of Section 4.2 of Article IV
of the Restated Certificate of Incorporation of the
Company (the "Restated Certificate of Incorporation"),
and Section 151(g) of the DGCL, such Board of Directors
hereby creates, from the 50,000,000 authorized shares
of Preferred Stock, par value $.001 per share (the
"Preferred Stock"), of the Company authorized to be
issued pursuant to the Restated Certificate of
Incorporation, a series of Preferred Stock, and hereby
fixes by this certificate of designation (this
"Certificate of Designation") the voting powers,
designations, preferences and relative, participating,
optional or other special rights, and qualifications,
limitations or restrictions thereof, of the shares of
such series as follows:
The series of Preferred Stock hereby
established shall consist of 1,500,000 shares
designated as "12% Cumulative Series D
Preferred Stock" (hereinafter called the
"Series D Preferred Stock"), which shall have
a stated value of $5.00 per share. The
relative rights, preferences and limitations
of such series shall be as follows:
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12% CUMULATIVE SERIES D PREFERRED STOCK
(1) RANKING. The Series D Preferred Stock will, with
respect to payment of dividends and amounts upon liquidation,
dissolution or winding up, rank (i) senior to the Common Stock of
the Company, $.001 par value (the "Common Stock") and to shares
of all other series of Preferred Stock issued by the Company the
terms of which specifically provide that the capital stock of
such series rank junior to such Series D Preferred Stock with
respect to dividend rights or distributions upon dissolution of
the Company ("Junior Stock"); (ii) on a parity with (a) all
shares of the Company's 6.6% Cumulative Convertible Series C
Preferred Stock and (b) the shares of all capital stock issued by
the Company whether or not the dividend rates, dividend payment
dates, or redemption or liquidation prices per share thereof
shall be different from those of the Series D Preferred Stock, if
the holders of stock of such class or series shall be entitled by
the terms thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the
case may be, in proportion to their respective dividend rates or
liquidation prices, without preference or priority of one over
the other as between the holders of such stock and the holders of
shares of Series D Preferred Stock (collectively (a) and (b)
being "Parity Stock"); and (iii) junior to all capital stock
issued by the Company the terms of which specifically provide
that the shares rank senior to the Series D Preferred Stock with
respect to dividends and distributions upon dissolution of the
Company ("Senior Stock").
(2) DIVIDENDS.
(a) Holders of shares of Series D Preferred Stock will
be entitled to receive, when, as and if declared by the Board of
Directors of the Company and only with the consent of PNC Bank,
N.A. or any successor lender thereto, out of funds of the Company
legally available for payment, subject to the prior and superior
rights of Senior Stock, but pari passu with Parity Stock, and in
preference to Junior Stock, cumulative cash dividends at the rate
per annum of $0.60 per share of Series D Preferred Stock.
Dividends on the Series D Preferred Stock will be payable
quarterly in arrears on the last calendar day of April, July,
October and January of each year, commencing July 31, 2000 (and
in the case of any accumulated and unpaid dividends not paid on
the corresponding dividend payment date, at such additional times
and for such interim periods, if any, as determined by the Board
of Directors). Each such dividend will be payable to holders of
record as they appear on the stock records of the Company at the
close of business on such record dates, not more than 60 days nor
less than 10 days preceding the payment dates thereof, as shall
be fixed by the Board of Directors of the Company. Dividends
will accrue from the date of the original issuance of the Series
D Preferred Stock. Dividends will be cumulative from such date,
whether or not in any dividend period or periods there shall be
funds of the Company legally available for the payment of such
dividends. Accumulations of dividends on shares of Series D
Preferred Stock will not bear interest. Dividends payable on the
Series D Preferred Stock for any period greater or less than a
full dividend period will be computed on the basis of actual
days. Dividends payable on the Series D Preferred Stock for each
full dividend period will be computed by dividing the annual
dividend rate by four.
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(b) Except as provided in the next sentence, no
dividend will be declared or paid on any Parity Stock unless full
cumulative dividends have been declared and paid or are
contemporaneously declared and funds sufficient for payment set
aside on the Series D Preferred Stock for all prior dividend
periods. If accrued dividends on the Series D Preferred Stock
for all prior periods have not been paid in full, then any
dividends declared on the Series D Preferred Stock for any
dividend period and on any Parity Stock will be declared ratably
in proportion to accumulated and unpaid dividends on the Series D
Preferred Stock and such Parity Stock.
(c) So long as the shares of the Series D Preferred
Stock shall be outstanding, unless (i) full cumulative dividends
shall have been paid or declared and set apart for payment on all
outstanding shares of the Series D Preferred Stock and any Parity
Stock, (ii) sufficient funds have been paid or set apart for the
payment of the dividend for the current dividend period with
respect to the Series D Preferred Stock and any Parity Stock and
(iii) the Company is not in default or in arrears with respect to
the mandatory or optional redemption or mandatory repurchase or
other mandatory retirement of, or with respect to any sinking or
other analogous fund for, the Series D Preferred Stock or any
Parity Stock, the Company may not declare any dividends on any
Junior Stock, or make any payment on account of, or set apart
money for, the purchase, redemption or other retirement of, or
for a sinking or other analogous fund for, any shares of Junior
Stock or make any distribution in respect thereof, whether in
cash or property or in obligations or stock of the Company, other
than (x) Junior Stock which is neither convertible into, nor
exchangeable or exercisable for, any securities of the Company
other than Junior Stock, or (y) Common Stock acquired in
connection with the cashless exercise of options under employee
incentive or benefit plans of the Company or any subsidiary or
any other redemption or purchase or other acquisition of Common
Stock made in the ordinary course of business, which has been
approved by the Board of Directors of the Company, for the
purpose of any employee incentive or benefit plan of the Company.
The limitations in this paragraph do not restrict the Company's
ability to take the actions in this paragraph with respect to any
Parity Stock. As used in this subparagraph (c), the term
"dividend" with respect to Junior Stock does not include
dividends payable solely in shares of Junior Stock on Junior
Stock, or in options, warrants on rights to holders of Junior
Stock to subscribe for or purchase any Junior Stock.
(3) REDEMPTION.
(a) The shares of Series D Preferred Stock will be
redeemable at the option of the Company in whole or in part, for
cash or for such number of shares of Common Stock as equals the
Liquidation Preference (defined hereinafter in paragraph (4)) of
the Series D Preferred Stock to be redeemed (without regard to
accumulated and unpaid dividends) as of the opening of business
on the date set for such redemption. In order to exercise its
redemption option, the Company must notify the holders of record
of its Series D Preferred Stock in writing (the "Conditions
Satisfaction Notice") prior to the opening of business on the
second trading day after the conditions in the preceding
sentences have, from time to time, been satisfied.
(b) Notice of redemption (the "Redemption Notice")
will be given by mail to the holders of the Series D Preferred
Stock not less than 30 nor more than 60 days prior to the date
selected by the Company to redeem the Series D Preferred Stock.
The Redemption Notice shall be deemed to have been given when
deposited in the United States mail, first-class mail, postage
prepaid, whether or not such notice is actually received. The
Company's right to exercise its redemption option will not be
affected by changes in the closing price of the
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Common Stock following such 30-day period. If fewer than all of
the shares of Series D Preferred Stock are to be redeemed, the
shares to be redeemed shall be selected by lot or pro rata or in
some other equitable manner determined by the Board of Directors
of the Company; provided, however, that the Company shall not be
required to effect the redemption in any manner that results in
additional fractional shares being outstanding. If full
cumulative dividends on the outstanding shares of Series D
Preferred Stock shall not have been paid or declared and set
apart for payment for all regular dividend payment dates to and
including the last dividend payment date prior to the date fixed
for redemption, the Corporation shall not call for redemption any
shares of Series D Preferred Stock unless all such shares then
outstanding are called for simultaneous redemption.
(c) On the redemption date, the Company must pay, in
cash, on each share of Series D Preferred Stock to be redeemed
any accumulated and unpaid dividends through the redemption date.
In the case of a redemption date falling after a dividend payment
record date and prior to the related payment date, the holders of
the Series D Preferred Stock at the close of business on such
record date will be entitled to receive the dividend payable on
such shares on the corresponding dividend payment date,
notwithstanding the redemption of such shares following such
dividend payment record date. Except as provided for in the
preceding sentence, no payment or allowance will be made for
accumulated and unpaid dividends on any shares of Series D
Preferred Stock called for redemption or on the shares of Common
Stock issuable upon such redemption.
(d) On and after the date fixed for redemption,
provided that the Company has made available at the office of its
registrar and transfer agent a sufficient number of shares of
Common Stock and an amount of cash to effect the redemption,
dividends will cease to accrue on the Series D Preferred Stock
called for redemption (except that, in the case of a redemption
date after a dividend payment record date and prior to the
related dividend payment date, holders of Series D Preferred
Stock on the dividend payment record date will be entitled on
such dividend payment date to receive the dividend payable on
such shares), such shares shall be cancelled and shall no longer
be deemed to be outstanding and all rights of the holders of such
shares of Series D Preferred Stock shall cease except the right
to receive the shares of Common Stock upon such redemption and
any cash payable upon such redemption, without interest from the
date of such redemption. Such cancelled shares shall be restored
to the status of authorized but unissued shares of Preferred
Stock, without designation as to series, and may thereafter be
issued but not as shares of Series D Preferred Stock. At the
close of business on the redemption date upon surrender in
accordance with such notice of the certificates representing any
such shares (properly endorsed or assigned for transfer, if the
Board of Directors of the Company shall so require and the notice
shall so state), each holder of Series D Preferred Stock (unless
the Company defaults in the delivery of the shares of Common
Stock or cash) will be, without any further action, deemed a
holder of the number of shares of Common Stock for which such
Series D Preferred Stock is redeemable.
(e) Fractional shares of Common Stock are not to be
issued upon redemption of the Series D Preferred Stock, but, in
lieu thereof, the Company will pay a cash adjustment based on the
current market price of the Common Stock on the day prior to the
redemption date. If fewer than all the shares represented by any
such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares of Series D Preferred Stock
without cost to the holder thereof.
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(f) Any shares or cash set aside by the Company
pursuant to subparagraph (e) and unclaimed at the end of three
years from the date fixed for redemption shall revert to the
Company.
(g) Subject to applicable law and the limitation on
purchases when dividends on the Series D Preferred Stock are in
arrears, the Company may, at any time and from time to time,
purchase any shares of the Series D Preferred Stock by tender or
by private agreement.
(4) LIQUIDATION PREFERENCE.
(a) The holders of shares of Series D Preferred Stock
will be entitled to receive in the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary, $5.00 per share of Series D Preferred Stock (the
"Liquidation Preference"), plus an amount per share of Series D
Preferred Stock equal to all dividends (whether or not earned or
declared) accumulated and unpaid thereon to the date of final
distribution to such holders, and no more. If, upon any
liquidation, dissolution or winding up of the Company, the assets
of the Company, or proceeds thereof, distributable among the
holders of the Series D Preferred Stock are insufficient to pay
in full the liquidation preference with respect to the Series D
Preferred Stock and any other Parity Stock, then such assets, or
the proceeds thereof, will be distributed among the holders of
Series D Preferred Stock and any such Parity Stock ratably in
accordance with the respective amounts which would be payable on
such Series D Preferred Stock and any such Parity Stock if all
amounts payable thereon were paid in full.
(b) Neither a consolidation or merger of the Company
with or into another corporation, nor a sale, lease or transfer
of all or substantially all of the Company's assets will be
considered a liquidation, dissolution or winding up, voluntary or
involuntary, of the Company.
(5) VOTING RIGHTS. Except as may be required by applicable
law from time to time, the holders of shares of Series D
Preferred Stock will have no voting rights.
(6) SINKING FUND. The Series D Preferred Stock shall not
be entitled to any mandatory redemption or prepayment (except on
liquidation, dissolution or winding up of the affairs of the
Company) or to the benefit of any sinking fund.
WITNESS THE SIGNATURE of the undersigned who is the Chairman
of the Board and Chief Executive Officer of ThermoView
Industries, Inc. as of this day of April, 2000.
----
----------------------------------
Stephen A. Hoffmann
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EXHIBIT B
RISK FACTORS
PRIOR TO MAKING AN INVESTMENT DECISION, A PROSPECTIVE
PURCHASER OF THE 12% CUMULATIVE SERIES D PREFERRED STOCK OFFERED
HEREBY SHOULD EVALUATE THE FOLLOWING RISK FACTORS INCLUDING THOSE
IN THE THERMOVIEW PROSPECTUS, DATED DECEMBER 2, 1999.
SERIES D PREFERRED STOCK
There can be no assurance that ThermoView's continuing
losses or consolidated earnings, if ever, in the future will be
sufficient to cover its combined fixed charges and dividends on
(i) the 12% Series D Cumulative Preferred Stock alone, or (ii)
its 9.6% Series C Convertible Preferred Stock and the Series D
Preferred Stock.
ABSENCE OF TRADING MARKET FOR SERIES D PREFERRED STOCK
There is no public market for the Series C Preferred Stock
and Series D Preferred Stock and ThermoView does not anticipate
that any public market will develop in the future. However, the
Series C Preferred Stock is convertible into Common Stock at a
conversion price, subject to adjustment in certain circumstances
of $15.00 per share of Common Stock (initially equivalent to a
conversion rate of 66 2/3 shares of stock per share of Series C
Preferred Stock). The Series D Preferred Stock has no such
conversion feature. The ThermoView Common Stock trades on the
American Stock Exchange, so a public market does exist for the
Common Stock. Without the ability to convert the Series D
Preferred Stock into Common Stock or have a market available to
sell the Series D Preferred Stock, the holders of the Series D
Preferred Stock may not be able to liquidate their investment at
any time.
RESTRICTION OF PAYMENT OF CASH DIVIDENDS ON SERIES D PREFERRED
STOCK
Pursuant to ThermoView's current line of credit with its
principal secured lender and documentation related to financings
with other parties, it may not pay dividends on its Common Stock
until all obligations thereunder have been paid in full and on
the Series D Preferred Stock until satisfaction of all covenants
under the line of credit and other financings. ThermoView cannot
provide any assurance that it will be able to satisfy these
covenants so as to pay quarterly the dividends due on the Series
D Preferred Stock. Considering that ThermoView has in the past
received waivers from its lenders for non-compliance with its
covenants, a history exists that non-compliance with its loan or
other covenants may occur in the future. Accordingly, it is
possible that ThermoView may not be able to pay any dividends due
on its Series D Preferred Stock.
LITIGATION
On March 3, 2000, Pro Futures Bridge Capital Fund, L.P. and
Pro Futures Bridge Capital Fund, L.P. filed an action titled PRO
FUTURES BRIDGE CAPITAL FUND, L.P. V. THERMOVIEW INDUSTRIES, INC.,
ET AL., Civil Action No. 00CV0559 (Colo. Dist. Ct., March 3,
2000) alleging breach of
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contract, common law fraud, fraudulent misstatements and
omissions in connection with the sale of securities, negligent
misrepresentations and breach of fiduciary duty. These claims
are in connection with (i) the mandatory conversion of the
ThermoView 10% Series A Convertible Preferred Stock, held by the
two funds, into ThermoView Common Stock upon completion of the
ThermoView public offering in December 1999, and (ii) purchases
by the two funds of ThermoView Common Stock from ThermoView
stockholders. The funds are seeking (a) rescission of their
purchases of the Series A Preferred Stock in the amount of
$3,250,000 plus interest and (b) unspecified damages in
connection with their purchases of the ThermoView Common Stock.
Although ThermoView believes that the claims are without merit
and intends to vigorously defend the suit, an adverse outcome in
this action could have a material adverse effect on the financial
position or results of operations of ThermoView.
EXHIBIT 10.3
AGREEMENT
---------
THIS AGREEMENT is made and entered into as of the 14th day
of April, 2000, by and between THERMOVIEW INDUSTRIES, INC., a
Delaware corporation ("ThermoView") and STEVEN B. HOYT ("Hoyt").
PRELIMINARY STATEMENTS
----------------------
As of August 14, 1998, ThermoView acquired all of the
outstanding shares of capital stock of Ice, Inc., a North Dakota
corporation and Blizzard Enterprises, Inc., a Minnesota
corporation, pursuant to a certain Stock Purchase Agreement (the
"Stock Agreement")among ThermoView, Alvin W. Leingang and Hoyt.
Under the terms of the Stock Agreement, Hoyt is entitled to
receive post-closing earn-out payments (the "Earn-out Payments"),
if earned, on December 31, 1998, 1999 and 2000. As of December
31, 1999, ThermoView owed Hoyt payments of cash and ThermoView
common stock, par value $.001 (the "Common Stock"), equal to
approximately $484,588.00 (the "Year Two Earn-out Payment") under
the terms of the Stock Agreement pursuant to the earn-out
provision.
ThermoView has issued 60,574 shares of Common Stock to Hoyt
in full satisfaction of the Common Stock portion of the Year Two
Earn-out Payment.
ThermoView desires to make the remainder of the Year Two
Earn-out Payment in ThermoView 12% Cumulative Series D Preferred
Stock with a stated value of $5.00 (the "Preferred Stock") in
lieu of cash and Hoyt desires to accept the Preferred Stock in
consideration of the remainder of the Year Two Earn-out Payment.
The terms and conditions of the Preferred Stock are further
described in the Certificate of Designation, attached hereto as
EXHIBIT A and incorporated herein by reference (the
"Certificate").
NOW, THEREFORE, in consideration of these preliminary
statements and the mutual promises contained herein, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. STOCK ISSUANCE. In exchange for any and all amounts
due to Hoyt by ThermoView pursuant to the Year Two Earn-out
Payment under the Stock Agreement, ThermoView hereby transfers to
Hoyt and Hoyt hereby agrees to accept 49,735 shares of Preferred
Stock. The delivery of the Preferred Stock to Hoyt shall occur
with fifteen (15) business days of the execution of this
Agreement.
2. FULL SATISFACTION. Hoyt hereby acknowledges that his
receipt of the 60,574 shares of Common Stock and the 49,735
shares of Preferred Stock is in full and complete satisfaction of
the obligation owed to Hoyt by ThermoView for the Year Two Earn-
out Payment.
3. NO AMENDMENT OR TERMINATION. Nothing contained in this
Agreement shall amend or terminate any obligations of ThermoView
to make any and all other Earn-out Payments, if earned, under the
terms of the Stock Agreement.
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4. HOYT'S REPRESENTATIONS AND WARRANTIES. Hoyt hereby
represents and warrants to ThermoView as follows:
(a) INVESTMENT INTENT. Hoyt is acquiring the
Preferred Stock for his own account and not with a present
view to or for distributing or reselling the Preferred Stock
in violation of the Securities Act of 1933, as amended (the
"Securities Act"). Hoyt agrees that such shares of
Preferred Stock may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act, except pursuant to an
exemption available under the Securities Act. Hoyt will not
sell, offer to sell or solicit offers to buy any of the
shares of Preferred Stock in violation of the Securities Act
or any securities act of any state. Hoyt understands that
the shares of Preferred Stock have not been registered under
federal or any state securities laws.
(b) HOYT'S STATUS. Hoyt is (i) an "accredited
investor" as defined in Rule 501 of the Securities Act and
(ii) has such knowledge, sophistication and experience in
business and financial matters so as to be capable of
evaluating the merits and risks of the prospective
investment in the Preferred Stock.
(c) RELIANCE. Hoyt understands and acknowledges that
(i) the Preferred Stock is being offered and sold to Hoyt
without registration under the Securities Act in a private
placement that is exempt from the registration provisions of
the Securities Act under Section 4(2) of the Securities Act
or Regulation D promulgated thereunder or other applicable
federal and state securities laws and (ii) the availability
of such exemptions depends in part on, and ThermoView will
rely upon the accuracy and truthfulness of, the
representations set forth in this Section 4 and Hoyt
consents to such reliance.
(d) INFORMATION. Hoyt and his advisors, if any, have
been furnished with all materials relating to the business,
finances and operations of ThermoView and materials relating
to the offer and sale of the Preferred Stock, including the
Certificate, which have been requested by Hoyt or his
advisors. Hoyt and his advisors, if any, have been afforded
the opportunity to ask questions of ThermoView. Hoyt
acknowledges receipt of the ThermoView prospectus dated
December 2, 1999 (the "Prospectus") and that ThermoView will
deliver a copy of its most recent Form 10-K filing with the
Securities and Exchange Commission as soon as it becomes
publicly available. Hoyt understands that his investment in
the Preferred Stock involves a significant degree of risk,
some of which risks associated with the investment in the
Preferred Stock are set forth in EXHIBIT B, attached hereto
and incorporated herein by reference, and in the Prospectus.
5. MISCELLANEOUS.
(a) NOTICES. All notices, requests, consents and
other communications hereunder shall be in writing, shall be
addressed to the receiving party's address set forth below
or to such other address as a party may designate by notice
hereunder, and shall be either (i) delivered by hand,
(ii) made by telex, telecopy or facsimile transmission,
(iii) sent by overnight courier, or (iv) sent by certified
mail, return receipt requested, postage prepaid.
2
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If to ThermoView:
ThermoView Industries, Inc.
1101 Herr Lane
Louisville, Kentucky 40222
Attn: Nelson E. Clemmens, President
Fax No. (502) 412-0301
With a copy to:
Stites & Harbison
400 West Market Street, Suite 1800
Louisville, Kentucky 40202
Attn: Alex P. Herrington, Jr., Esq.
Fax No. (502) 587-6391
If to Hoyt:
Steven B. Hoyt
19090 Minnetonka Blvd.
Minneapolis, Minnesota 55391
Fax No. (612) 826-6997
All notices, requests, consents and other communications
hereunder shall be deemed to have been received either
(i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth
above, (ii) if made by telecopy or facsimile transmission,
at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, (iii) if sent by
overnight courier, on the next business day following the
day such notice is delivered to the courier service, or
(iv) if sent by certified mail, on the fifth business day
following the day such mailing is made.
(b) ENTIRE AGREEMENT. This Agreement embodies the
entire agreement and understanding between the parties
hereto with respect to the Year Two Earn-out Payment and
supersedes all prior oral or written agreements and
understandings relating to the Year Two Earn-out Payment.
No statement, representation, warranty, covenant or
agreement of any kind not expressly set forth in this
Agreement shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this
Agreement.
(c) MODIFICATIONS AND AMENDMENTS. The terms and
provisions of this Agreement may be modified or amended only
by written agreement executed by all parties hereto.
(d) BENEFIT. This Agreement shall be binding on the
parties hereto and shall inure to the benefit of the parties
hereto and the respective successors and permitted assigns
of each party hereto. Nothing in this Agreement shall be
construed to create any rights or obligations except among
the parties hereto, and no person or entity shall be
regarded as a third-party beneficiary of this Agreement.
3
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(e) GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be construed in
accordance with and governed by the law of the Commonwealth
of Kentucky, without giving effect to the conflict of law
principles thereof.
(f) SEVERABILITY. In the event that any court of
competent jurisdiction shall determine that any provision,
or any portion thereof, contained in this Agreement shall be
unreasonable or unenforceable in any respect, then such
provision shall be deemed limited to the extent that such
court deems it reasonable and enforceable, and as so limited
shall remain in full force and effect. In the event that
such court shall deem any such provision, or portion
thereof, wholly unenforceable, the remaining provisions of
this Agreement shall nevertheless remain in full force and
effect.
(g) HEADINGS AND CAPTIONS. The headings and captions
of the various subdivisions of this Agreement are for
convenience of reference only and shall in no way modify, or
affect the meaning or construction of any of the terms or
provisions hereof.
(h) COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by different parties hereto on
separate counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
4
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IN WITNESS WHEREOF, ThermoView has caused this Agreement to
be executed by its duly authorized officer and Hoyt has executed
this Agreement all as of the date first above written.
THERMOVIEW INDUSTRIES, INC.
By: /s/ Nelson E. Clemmens
--------------------------------
Title: President
/s/ Steven B. Hoyt
-----------------------------------
STEVEN B. HOYT
5
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EXHIBIT A
CERTIFICATE OF DESIGNATION
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS, AND QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF 12% SERIES D CUMULATIVE
PREFERRED STOCK
OF
THERMOVIEW INDUSTRIES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Pursuant to Section 141(f) of the General Corporation Law of
the State of Delaware (the "DGCL"), the Board of Directors of
ThermoView Industries, Inc., a Delaware corporation (the
"Company"), hereby unanimously consents to, adopts and ratifies
the following resolution:
RESOLVED, that pursuant to the authority expressly
granted to and vested in the Board of Directors of the
Company by the provisions of Section 4.2 of Article IV
of the Restated Certificate of Incorporation of the
Company (the "Restated Certificate of Incorporation"),
and Section 151(g) of the DGCL, such Board of Directors
hereby creates, from the 50,000,000 authorized shares
of Preferred Stock, par value $.001 per share (the
"Preferred Stock"), of the Company authorized to be
issued pursuant to the Restated Certificate of
Incorporation, a series of Preferred Stock, and hereby
fixes by this certificate of designation (this
"Certificate of Designation") the voting powers,
designations, preferences and relative, participating,
optional or other special rights, and qualifications,
limitations or restrictions thereof, of the shares of
such series as follows:
The series of Preferred Stock hereby
established shall consist of 1,500,000 shares
designated as "12% Cumulative Series D
Preferred Stock" (hereinafter called the
"Series D Preferred Stock"), which shall have
a stated value of $5.00 per share. The
relative rights, preferences and limitations
of such series shall be as follows:
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12% CUMULATIVE SERIES D PREFERRED STOCK
(1) RANKING. The Series D Preferred Stock will, with
respect to payment of dividends and amounts upon liquidation,
dissolution or winding up, rank (i) senior to the Common Stock of
the Company, $.001 par value (the "Common Stock") and to shares
of all other series of Preferred Stock issued by the Company the
terms of which specifically provide that the capital stock of
such series rank junior to such Series D Preferred Stock with
respect to dividend rights or distributions upon dissolution of
the Company ("Junior Stock"); (ii) on a parity with (a) all
shares of the Company's 6.6% Cumulative Convertible Series C
Preferred Stock and (b) the shares of all capital stock issued by
the Company whether or not the dividend rates, dividend payment
dates, or redemption or liquidation prices per share thereof
shall be different from those of the Series D Preferred Stock, if
the holders of stock of such class or series shall be entitled by
the terms thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the
case may be, in proportion to their respective dividend rates or
liquidation prices, without preference or priority of one over
the other as between the holders of such stock and the holders of
shares of Series D Preferred Stock (collectively (a) and (b)
being "Parity Stock"); and (iii) junior to all capital stock
issued by the Company the terms of which specifically provide
that the shares rank senior to the Series D Preferred Stock with
respect to dividends and distributions upon dissolution of the
Company ("Senior Stock").
(2) DIVIDENDS.
(a) Holders of shares of Series D Preferred Stock will
be entitled to receive, when, as and if declared by the Board of
Directors of the Company and only with the consent of PNC Bank,
N.A. or any successor lender thereto, out of funds of the Company
legally available for payment, subject to the prior and superior
rights of Senior Stock, but pari passu with Parity Stock, and in
preference to Junior Stock, cumulative cash dividends at the rate
per annum of $0.60 per share of Series D Preferred Stock.
Dividends on the Series D Preferred Stock will be payable
quarterly in arrears on the last calendar day of April, July,
October and January of each year, commencing July 31, 2000 (and
in the case of any accumulated and unpaid dividends not paid on
the corresponding dividend payment date, at such additional times
and for such interim periods, if any, as determined by the Board
of Directors). Each such dividend will be payable to holders of
record as they appear on the stock records of the Company at the
close of business on such record dates, not more than 60 days nor
less than 10 days preceding the payment dates thereof, as shall
be fixed by the Board of Directors of the Company. Dividends
will accrue from the date of the original issuance of the Series
D Preferred Stock. Dividends will be cumulative from such date,
whether or not in any dividend period or periods there shall be
funds of the Company legally available for the payment of such
dividends. Accumulations of dividends on shares of Series D
Preferred Stock will not bear interest. Dividends payable on the
Series D Preferred Stock for any period greater or less than a
full dividend period will be computed on the basis of actual
days. Dividends payable on the Series D Preferred Stock for each
full dividend period will be computed by dividing the annual
dividend rate by four.
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(b) Except as provided in the next sentence, no
dividend will be declared or paid on any Parity Stock unless full
cumulative dividends have been declared and paid or are
contemporaneously declared and funds sufficient for payment set
aside on the Series D Preferred Stock for all prior dividend
periods. If accrued dividends on the Series D Preferred Stock
for all prior periods have not been paid in full, then any
dividends declared on the Series D Preferred Stock for any
dividend period and on any Parity Stock will be declared ratably
in proportion to accumulated and unpaid dividends on the Series D
Preferred Stock and such Parity Stock.
(c) So long as the shares of the Series D Preferred
Stock shall be outstanding, unless (i) full cumulative dividends
shall have been paid or declared and set apart for payment on all
outstanding shares of the Series D Preferred Stock and any Parity
Stock, (ii) sufficient funds have been paid or set apart for the
payment of the dividend for the current dividend period with
respect to the Series D Preferred Stock and any Parity Stock and
(iii) the Company is not in default or in arrears with respect to
the mandatory or optional redemption or mandatory repurchase or
other mandatory retirement of, or with respect to any sinking or
other analogous fund for, the Series D Preferred Stock or any
Parity Stock, the Company may not declare any dividends on any
Junior Stock, or make any payment on account of, or set apart
money for, the purchase, redemption or other retirement of, or
for a sinking or other analogous fund for, any shares of Junior
Stock or make any distribution in respect thereof, whether in
cash or property or in obligations or stock of the Company, other
than (x) Junior Stock which is neither convertible into, nor
exchangeable or exercisable for, any securities of the Company
other than Junior Stock, or (y) Common Stock acquired in
connection with the cashless exercise of options under employee
incentive or benefit plans of the Company or any subsidiary or
any other redemption or purchase or other acquisition of Common
Stock made in the ordinary course of business, which has been
approved by the Board of Directors of the Company, for the
purpose of any employee incentive or benefit plan of the Company.
The limitations in this paragraph do not restrict the Company's
ability to take the actions in this paragraph with respect to any
Parity Stock. As used in this subparagraph (c), the term
"dividend" with respect to Junior Stock does not include
dividends payable solely in shares of Junior Stock on Junior
Stock, or in options, warrants on rights to holders of Junior
Stock to subscribe for or purchase any Junior Stock.
(3) REDEMPTION.
(a) The shares of Series D Preferred Stock will be
redeemable at the option of the Company in whole or in part, for
cash or for such number of shares of Common Stock as equals the
Liquidation Preference (defined hereinafter in paragraph (4)) of
the Series D Preferred Stock to be redeemed (without regard to
accumulated and unpaid dividends) as of the opening of business
on the date set for such redemption. In order to exercise its
redemption option, the Company must notify the holders of record
of its Series D Preferred Stock in writing (the "Conditions
Satisfaction Notice") prior to the opening of business on the
second trading day after the conditions in the preceding
sentences have, from time to time, been satisfied.
(b) Notice of redemption (the "Redemption Notice")
will be given by mail to the holders of the Series D Preferred
Stock not less than 30 nor more than 60 days prior to the date
selected by the Company to redeem the Series D Preferred Stock.
The Redemption Notice shall be deemed to have been given when
deposited in the United States mail, first-class mail, postage
prepaid, whether or not such notice is actually received. The
Company's right to exercise its redemption option will not be
affected by changes in the closing price of the
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Common Stock following such 30-day period. If fewer than all of
the shares of Series D Preferred Stock are to be redeemed, the
shares to be redeemed shall be selected by lot or pro rata or in
some other equitable manner determined by the Board of Directors
of the Company; provided, however, that the Company shall not be
required to effect the redemption in any manner that results in
additional fractional shares being outstanding. If full
cumulative dividends on the outstanding shares of Series D
Preferred Stock shall not have been paid or declared and set
apart for payment for all regular dividend payment dates to and
including the last dividend payment date prior to the date fixed
for redemption, the Corporation shall not call for redemption any
shares of Series D Preferred Stock unless all such shares then
outstanding are called for simultaneous redemption.
(c) On the redemption date, the Company must pay, in
cash, on each share of Series D Preferred Stock to be redeemed
any accumulated and unpaid dividends through the redemption date.
In the case of a redemption date falling after a dividend payment
record date and prior to the related payment date, the holders of
the Series D Preferred Stock at the close of business on such
record date will be entitled to receive the dividend payable on
such shares on the corresponding dividend payment date,
notwithstanding the redemption of such shares following such
dividend payment record date. Except as provided for in the
preceding sentence, no payment or allowance will be made for
accumulated and unpaid dividends on any shares of Series D
Preferred Stock called for redemption or on the shares of Common
Stock issuable upon such redemption.
(d) On and after the date fixed for redemption,
provided that the Company has made available at the office of its
registrar and transfer agent a sufficient number of shares of
Common Stock and an amount of cash to effect the redemption,
dividends will cease to accrue on the Series D Preferred Stock
called for redemption (except that, in the case of a redemption
date after a dividend payment record date and prior to the
related dividend payment date, holders of Series D Preferred
Stock on the dividend payment record date will be entitled on
such dividend payment date to receive the dividend payable on
such shares), such shares shall be cancelled and shall no longer
be deemed to be outstanding and all rights of the holders of such
shares of Series D Preferred Stock shall cease except the right
to receive the shares of Common Stock upon such redemption and
any cash payable upon such redemption, without interest from the
date of such redemption. Such cancelled shares shall be restored
to the status of authorized but unissued shares of Preferred
Stock, without designation as to series, and may thereafter be
issued but not as shares of Series D Preferred Stock. At the
close of business on the redemption date upon surrender in
accordance with such notice of the certificates representing any
such shares (properly endorsed or assigned for transfer, if the
Board of Directors of the Company shall so require and the notice
shall so state), each holder of Series D Preferred Stock (unless
the Company defaults in the delivery of the shares of Common
Stock or cash) will be, without any further action, deemed a
holder of the number of shares of Common Stock for which such
Series D Preferred Stock is redeemable.
(e) Fractional shares of Common Stock are not to be
issued upon redemption of the Series D Preferred Stock, but, in
lieu thereof, the Company will pay a cash adjustment based on the
current market price of the Common Stock on the day prior to the
redemption date. If fewer than all the shares represented by any
such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares of Series D Preferred Stock
without cost to the holder thereof.
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(f) Any shares or cash set aside by the Company
pursuant to subparagraph (e) and unclaimed at the end of three
years from the date fixed for redemption shall revert to the
Company.
(g) Subject to applicable law and the limitation on
purchases when dividends on the Series D Preferred Stock are in
arrears, the Company may, at any time and from time to time,
purchase any shares of the Series D Preferred Stock by tender or
by private agreement.
(4) LIQUIDATION PREFERENCE.
(a) The holders of shares of Series D Preferred Stock
will be entitled to receive in the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary, $5.00 per share of Series D Preferred Stock (the
"Liquidation Preference"), plus an amount per share of Series D
Preferred Stock equal to all dividends (whether or not earned or
declared) accumulated and unpaid thereon to the date of final
distribution to such holders, and no more. If, upon any
liquidation, dissolution or winding up of the Company, the assets
of the Company, or proceeds thereof, distributable among the
holders of the Series D Preferred Stock are insufficient to pay
in full the liquidation preference with respect to the Series D
Preferred Stock and any other Parity Stock, then such assets, or
the proceeds thereof, will be distributed among the holders of
Series D Preferred Stock and any such Parity Stock ratably in
accordance with the respective amounts which would be payable on
such Series D Preferred Stock and any such Parity Stock if all
amounts payable thereon were paid in full.
(b) Neither a consolidation or merger of the Company
with or into another corporation, nor a sale, lease or transfer
of all or substantially all of the Company's assets will be
considered a liquidation, dissolution or winding up, voluntary or
involuntary, of the Company.
(5) VOTING RIGHTS. Except as may be required by applicable
law from time to time, the holders of shares of Series D
Preferred Stock will have no voting rights.
(6) SINKING FUND. The Series D Preferred Stock shall not
be entitled to any mandatory redemption or prepayment (except on
liquidation, dissolution or winding up of the affairs of the
Company) or to the benefit of any sinking fund.
WITNESS THE SIGNATURE of the undersigned who is the Chairman
of the Board and Chief Executive Officer of ThermoView
Industries, Inc. as of this day of April, 2000.
----
----------------------------------
Stephen A. Hoffmann
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EXHIBIT B
RISK FACTORS
PRIOR TO MAKING AN INVESTMENT DECISION, A PROSPECTIVE
PURCHASER OF THE 12% CUMULATIVE SERIES D PREFERRED STOCK OFFERED
HEREBY SHOULD EVALUATE THE FOLLOWING RISK FACTORS INCLUDING THOSE
IN THE THERMOVIEW PROSPECTUS, DATED DECEMBER 2, 1999.
SERIES D PREFERRED STOCK
There can be no assurance that ThermoView's continuing
losses or consolidated earnings, if ever, in the future will be
sufficient to cover its combined fixed charges and dividends on
(i) the 12% Series D Cumulative Preferred Stock alone, or (ii)
its 9.6% Series C Convertible Preferred Stock and the Series D
Preferred Stock.
ABSENCE OF TRADING MARKET FOR SERIES D PREFERRED STOCK
There is no public market for the Series C Preferred Stock
and Series D Preferred Stock and ThermoView does not anticipate
that any public market will develop in the future. However, the
Series C Preferred Stock is convertible into Common Stock at a
conversion price, subject to adjustment in certain circumstances
of $15.00 per share of Common Stock (initially equivalent to a
conversion rate of 66 2/3 shares of stock per share of Series C
Preferred Stock). The Series D Preferred Stock has no such
conversion feature. The ThermoView Common Stock trades on the
American Stock Exchange, so a public market does exist for the
Common Stock. Without the ability to convert the Series D
Preferred Stock into Common Stock or have a market available to
sell the Series D Preferred Stock, the holders of the Series D
Preferred Stock may not be able to liquidate their investment at
any time.
RESTRICTION OF PAYMENT OF CASH DIVIDENDS ON SERIES D PREFERRED
STOCK
Pursuant to ThermoView's current line of credit with its
principal secured lender and documentation related to financings
with other parties, it may not pay dividends on its Common Stock
until all obligations thereunder have been paid in full and on
the Series D Preferred Stock until satisfaction of all covenants
under the line of credit and other financings. ThermoView cannot
provide any assurance that it will be able to satisfy these
covenants so as to pay quarterly the dividends due on the Series
D Preferred Stock. Considering that ThermoView has in the past
received waivers from its lenders for non-compliance with its
covenants, a history exists that non-compliance with its loan or
other covenants may occur in the future. Accordingly, it is
possible that ThermoView may not be able to pay any dividends due
on its Series D Preferred Stock.
LITIGATION
On March 3, 2000, Pro Futures Bridge Capital Fund, L.P. and
Pro Futures Bridge Capital Fund, L.P. filed an action titled PRO
FUTURES BRIDGE CAPITAL FUND, L.P. V. THERMOVIEW INDUSTRIES, INC.,
ET AL., Civil Action No. 00CV0559 (Colo. Dist. Ct., March 3,
2000) alleging breach of
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contract, common law fraud, fraudulent misstatements and
omissions in connection with the sale of securities, negligent
misrepresentations and breach of fiduciary duty. These claims
are in connection with (i) the mandatory conversion of the
ThermoView 10% Series A Convertible Preferred Stock, held by the
two funds, into ThermoView Common Stock upon completion of the
ThermoView public offering in December 1999, and (ii) purchases
by the two funds of ThermoView Common Stock from ThermoView
stockholders. The funds are seeking (a) rescission of their
purchases of the Series A Preferred Stock in the amount of
$3,250,000 plus interest and (b) unspecified damages in
connection with their purchases of the ThermoView Common Stock.
Although ThermoView believes that the claims are without merit
and intends to vigorously defend the suit, an adverse outcome in
this action could have a material adverse effect on the financial
position or results of operations of ThermoView.
EXHIBIT 10.4
AGREEMENT
---------
THIS AGREEMENT is made and entered into as of the 14th day
of April, 2000, by and between THERMOVIEW INDUSTRIES, INC., a
Delaware corporation ("ThermoView") and ALVIN W. LEINGANG
("Leingang").
PRELIMINARY STATEMENTS
----------------------
As of August 14, 1998, ThermoView acquired all of the
outstanding shares of capital stock of Ice, Inc., a North Dakota
corporation and Blizzard Enterprises, Inc., a Minnesota
corporation, pursuant to a certain Stock Purchase Agreement (the
"Stock Agreement") among ThermoView, Steven B. Hoyt and Leingang.
Under the terms of the Stock Agreement, Leingang is entitled
to receive post-closing earn-out payments (the "Earn-out
Payments"), if earned, on December 31, 1998, 1999 and 2000. As
of December 31, 1999, ThermoView owed Leingang payments of cash
and ThermoView common stock, par value $.001 (the "Common
Stock"), equal to approximately $484,588 (the "Year Two Earn-out
Payment") under the terms of the Stock Agreement pursuant to the
earn-out provision.
ThermoView has issued 60,574 shares of Common Stock to
Leingang in full satisfaction of the Common Stock portion of the
Year Two Earn-out Payment.
ThermoView desires to make the remainder of the Year Two
Earn-out Payment in ThermoView 12% Cumulative Series D Preferred
Stock with a stated value of $5.00 (the "Preferred Stock") in
lieu of cash and Leingang desires to accept the Preferred Stock
in consideration of the remainder of the Year Two Earn-out
Payment. The terms and conditions of the Preferred Stock are
further described in the Certificate of Designation, attached
hereto as EXHIBIT A and incorporated herein by reference (the
"Certificate").
NOW, THEREFORE, in consideration of these preliminary
statements and the mutual promises contained herein, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. STOCK ISSUANCE. In exchange for any and all amounts
due to Leingang by ThermoView pursuant to the Year Two Earn-out
Payment under the Stock Agreement, ThermoView hereby transfers to
Leingang and Leingang hereby agrees to accept 49,735 shares of
Preferred Stock. The delivery of the Preferred Stock to Leingang
shall occur with fifteen (15) business days of the execution of
this Agreement.
2. FULL SATISFACTION. Leingang hereby acknowledges that
his receipt of the 60,574 shares of Common Stock and the 49,735
shares of Preferred Stock is in full and complete satisfaction of
the obligation owed to Leingang by ThermoView for the Year Two
Earn-out Payment.
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3. NO AMENDMENT OR TERMINATION. Nothing contained in this
Agreement shall amend or terminate any obligations of ThermoView
to make any and all other Earn-out Payments, if earned, under the
terms of the Stock Agreement.
4. LEINGANG'S REPRESENTATIONS AND WARRANTIES. Leingang
hereby represents and warrants to ThermoView as follows:
(a) INVESTMENT INTENT. Leingang is acquiring the
Preferred Stock for his own account and not with a present
view to or for distributing or reselling the Preferred Stock
in violation of the Securities Act of 1933, as amended (the
"Securities Act"). Leingang agrees that such shares of
Preferred Stock may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act, except pursuant to an
exemption available under the Securities Act. Leingang will
not sell, offer to sell or solicit offers to buy any of the
shares of Preferred Stock in violation of the Securities Act
or any securities act of any state. Leingang understands
that the shares of Preferred Stock have not been registered
under federal or any state securities laws.
(b) LEINGANG'S STATUS. Leingang is (i) an "accredited
investor" as defined in Rule 501 of the Securities Act and
(ii) has such knowledge, sophistication and experience in
business and financial matters so as to be capable of
evaluating the merits and risks of the prospective
investment in the Preferred Stock.
(c) RELIANCE. Leingang understands and acknowledges
that (i) the Preferred Stock is being offered and sold to
Leingang without registration under the Securities Act in a
private placement that is exempt from the registration
provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder or
other applicable federal and state securities laws and (ii)
the availability of such exemptions depends in part on, and
ThermoView will rely upon the accuracy and truthfulness of,
the representations set forth in this Section 4 and Leingang
consents to such reliance.
(d) INFORMATION. Leingang and his advisors, if any,
have been furnished with all materials relating to the
business, finances and operations of ThermoView and
materials relating to the offer and sale of the Preferred
Stock, including the Certificate, which have been requested
by Leingang or his advisors. Leingang and his advisors, if
any, have been afforded the opportunity to ask questions of
ThermoView. Leingang acknowledges receipt of the ThermoView
prospectus dated December 2, 1999 (the "Prospectus") and
that ThermoView will deliver a copy of its most recent Form
10-K filing with the Securities and Exchange Commission as
soon as it becomes publicly available. Leingang understands
that his investment in the Preferred Stock involves a
significant degree of risk, some of which risks associated
with the investment in the Preferred Stock are set forth in
EXHIBIT B, attached hereto and incorporated herein by
reference, and in the Prospectus.
2
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5. MISCELLANEOUS.
(a) NOTICES. All notices, requests, consents and
other communications hereunder shall be in writing, shall be
addressed to the receiving party's address set forth below
or to such other address as a party may designate by notice
hereunder, and shall be either (i) delivered by hand,
(ii) made by telex, telecopy or facsimile transmission,
(iii) sent by overnight courier, or (iv) sent by certified
mail, return receipt requested, postage prepaid.
If to ThermoView:
ThermoView Industries, Inc.
1101 Herr Lane
Louisville, Kentucky 40222
Attn: Nelson E. Clemmens, President
Fax No. (502) 412-0301
With a copy to:
Stites & Harbison
400 West Market Street, Suite 1800
Louisville, Kentucky 40202
Attn: Alex P. Herrington, Jr., Esq.
Fax No. (502) 587-6391
If to Leingang:
Alvin W. Leingang
3208 River Drive, Box 565
Mandan, North Dakota 58554
Fax No.
---------------------
All notices, requests, consents and other communications
hereunder shall be deemed to have been received either
(i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth
above, (ii) if made by telecopy or facsimile transmission,
at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, (iii) if sent by
overnight courier, on the next business day following the
day such notice is delivered to the courier service, or
(iv) if sent by certified mail, on the fifth business day
following the day such mailing is made.
(b) ENTIRE AGREEMENT. This Agreement embodies the
entire agreement and understanding between the parties
hereto with respect to the Year Two Earn-out Payment and
supersedes all prior oral or written agreements and
understandings relating to the Year Two Earn-out Payment.
No statement, representation, warranty, covenant or
agreement of any kind not expressly set forth in this
Agreement shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this
Agreement.
3
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(c) MODIFICATIONS AND AMENDMENTS. The terms and
provisions of this Agreement may be modified or amended only
by written agreement executed by all parties hereto.
(d) BENEFIT. This Agreement shall be binding on the
parties hereto and shall inure to the benefit of the parties
hereto and the respective successors and permitted assigns
of each party hereto. Nothing in this Agreement shall be
construed to create any rights or obligations except among
the parties hereto, and no person or entity shall be
regarded as a third-party beneficiary of this Agreement.
(e) GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be construed in
accordance with and governed by the law of the Commonwealth
of Kentucky, without giving effect to the conflict of law
principles thereof.
(f) SEVERABILITY. In the event that any court of
competent jurisdiction shall determine that any provision,
or any portion thereof, contained in this Agreement shall be
unreasonable or unenforceable in any respect, then such
provision shall be deemed limited to the extent that such
court deems it reasonable and enforceable, and as so limited
shall remain in full force and effect. In the event that
such court shall deem any such provision, or portion
thereof, wholly unenforceable, the remaining provisions of
this Agreement shall nevertheless remain in full force and
effect.
(g) HEADINGS AND CAPTIONS. The headings and captions
of the various subdivisions of this Agreement are for
convenience of reference only and shall in no way modify, or
affect the meaning or construction of any of the terms or
provisions hereof.
(h) COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by different parties hereto on
separate counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
4
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IN WITNESS WHEREOF, ThermoView has caused this Agreement to
be executed by its duly authorized officer and Leingang has
executed this Agreement all as of the date first above written.
THERMOVIEW INDUSTRIES, INC.
By: /s/ Nelson E. Clemmens
--------------------------------
Title: President
/s/ Alvin W. Leingang
-----------------------------------
ALVIN W. LEINGANG
5
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EXHIBIT A
CERTIFICATE OF DESIGNATION
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS, AND QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF 12% SERIES D CUMULATIVE
PREFERRED STOCK
OF
THERMOVIEW INDUSTRIES, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Pursuant to Section 141(f) of the General Corporation Law of
the State of Delaware (the "DGCL"), the Board of Directors of
ThermoView Industries, Inc., a Delaware corporation (the
"Company"), hereby unanimously consents to, adopts and ratifies
the following resolution:
RESOLVED, that pursuant to the authority expressly
granted to and vested in the Board of Directors of the
Company by the provisions of Section 4.2 of Article IV
of the Restated Certificate of Incorporation of the
Company (the "Restated Certificate of Incorporation"),
and Section 151(g) of the DGCL, such Board of Directors
hereby creates, from the 50,000,000 authorized shares
of Preferred Stock, par value $.001 per share (the
"Preferred Stock"), of the Company authorized to be
issued pursuant to the Restated Certificate of
Incorporation, a series of Preferred Stock, and hereby
fixes by this certificate of designation (this
"Certificate of Designation") the voting powers,
designations, preferences and relative, participating,
optional or other special rights, and qualifications,
limitations or restrictions thereof, of the shares of
such series as follows:
The series of Preferred Stock hereby
established shall consist of 1,500,000 shares
designated as "12% Cumulative Series D
Preferred Stock" (hereinafter called the
"Series D Preferred Stock"), which shall have
a stated value of $5.00 per share. The
relative rights, preferences and limitations
of such series shall be as follows:
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12% CUMULATIVE SERIES D PREFERRED STOCK
(1) RANKING. The Series D Preferred Stock will, with
respect to payment of dividends and amounts upon liquidation,
dissolution or winding up, rank (i) senior to the Common Stock of
the Company, $.001 par value (the "Common Stock") and to shares
of all other series of Preferred Stock issued by the Company the
terms of which specifically provide that the capital stock of
such series rank junior to such Series D Preferred Stock with
respect to dividend rights or distributions upon dissolution of
the Company ("Junior Stock"); (ii) on a parity with (a) all
shares of the Company's 6.6% Cumulative Convertible Series C
Preferred Stock and (b) the shares of all capital stock issued by
the Company whether or not the dividend rates, dividend payment
dates, or redemption or liquidation prices per share thereof
shall be different from those of the Series D Preferred Stock, if
the holders of stock of such class or series shall be entitled by
the terms thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the
case may be, in proportion to their respective dividend rates or
liquidation prices, without preference or priority of one over
the other as between the holders of such stock and the holders of
shares of Series D Preferred Stock (collectively (a) and (b)
being "Parity Stock"); and (iii) junior to all capital stock
issued by the Company the terms of which specifically provide
that the shares rank senior to the Series D Preferred Stock with
respect to dividends and distributions upon dissolution of the
Company ("Senior Stock").
(2) DIVIDENDS.
(a) Holders of shares of Series D Preferred Stock will
be entitled to receive, when, as and if declared by the Board of
Directors of the Company and only with the consent of PNC Bank,
N.A. or any successor lender thereto, out of funds of the Company
legally available for payment, subject to the prior and superior
rights of Senior Stock, but pari passu with Parity Stock, and in
preference to Junior Stock, cumulative cash dividends at the rate
per annum of $0.60 per share of Series D Preferred Stock.
Dividends on the Series D Preferred Stock will be payable
quarterly in arrears on the last calendar day of April, July,
October and January of each year, commencing July 31, 2000 (and
in the case of any accumulated and unpaid dividends not paid on
the corresponding dividend payment date, at such additional times
and for such interim periods, if any, as determined by the Board
of Directors). Each such dividend will be payable to holders of
record as they appear on the stock records of the Company at the
close of business on such record dates, not more than 60 days nor
less than 10 days preceding the payment dates thereof, as shall
be fixed by the Board of Directors of the Company. Dividends
will accrue from the date of the original issuance of the Series
D Preferred Stock. Dividends will be cumulative from such date,
whether or not in any dividend period or periods there shall be
funds of the Company legally available for the payment of such
dividends. Accumulations of dividends on shares of Series D
Preferred Stock will not bear interest. Dividends payable on the
Series D Preferred Stock for any period greater or less than a
full dividend period will be computed on the basis of actual
days. Dividends payable on the Series D Preferred Stock for each
full dividend period will be computed by dividing the annual
dividend rate by four.
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(b) Except as provided in the next sentence, no
dividend will be declared or paid on any Parity Stock unless full
cumulative dividends have been declared and paid or are
contemporaneously declared and funds sufficient for payment set
aside on the Series D Preferred Stock for all prior dividend
periods. If accrued dividends on the Series D Preferred Stock
for all prior periods have not been paid in full, then any
dividends declared on the Series D Preferred Stock for any
dividend period and on any Parity Stock will be declared ratably
in proportion to accumulated and unpaid dividends on the Series D
Preferred Stock and such Parity Stock.
(c) So long as the shares of the Series D Preferred
Stock shall be outstanding, unless (i) full cumulative dividends
shall have been paid or declared and set apart for payment on all
outstanding shares of the Series D Preferred Stock and any Parity
Stock, (ii) sufficient funds have been paid or set apart for the
payment of the dividend for the current dividend period with
respect to the Series D Preferred Stock and any Parity Stock and
(iii) the Company is not in default or in arrears with respect to
the mandatory or optional redemption or mandatory repurchase or
other mandatory retirement of, or with respect to any sinking or
other analogous fund for, the Series D Preferred Stock or any
Parity Stock, the Company may not declare any dividends on any
Junior Stock, or make any payment on account of, or set apart
money for, the purchase, redemption or other retirement of, or
for a sinking or other analogous fund for, any shares of Junior
Stock or make any distribution in respect thereof, whether in
cash or property or in obligations or stock of the Company, other
than (x) Junior Stock which is neither convertible into, nor
exchangeable or exercisable for, any securities of the Company
other than Junior Stock, or (y) Common Stock acquired in
connection with the cashless exercise of options under employee
incentive or benefit plans of the Company or any subsidiary or
any other redemption or purchase or other acquisition of Common
Stock made in the ordinary course of business, which has been
approved by the Board of Directors of the Company, for the
purpose of any employee incentive or benefit plan of the Company.
The limitations in this paragraph do not restrict the Company's
ability to take the actions in this paragraph with respect to any
Parity Stock. As used in this subparagraph (c), the term
"dividend" with respect to Junior Stock does not include
dividends payable solely in shares of Junior Stock on Junior
Stock, or in options, warrants on rights to holders of Junior
Stock to subscribe for or purchase any Junior Stock.
(3) REDEMPTION.
(a) The shares of Series D Preferred Stock will be
redeemable at the option of the Company in whole or in part, for
cash or for such number of shares of Common Stock as equals the
Liquidation Preference (defined hereinafter in paragraph (4)) of
the Series D Preferred Stock to be redeemed (without regard to
accumulated and unpaid dividends) as of the opening of business
on the date set for such redemption. In order to exercise its
redemption option, the Company must notify the holders of record
of its Series D Preferred Stock in writing (the "Conditions
Satisfaction Notice") prior to the opening of business on the
second trading day after the conditions in the preceding
sentences have, from time to time, been satisfied.
(b) Notice of redemption (the "Redemption Notice")
will be given by mail to the holders of the Series D Preferred
Stock not less than 30 nor more than 60 days prior to the date
selected by the Company to redeem the Series D Preferred Stock.
The Redemption Notice shall be deemed to have been given when
deposited in the United States mail, first-class mail, postage
prepaid, whether or not such notice is actually received. The
Company's right to exercise its redemption option will not be
affected by changes in the closing price of the
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Common Stock following such 30-day period. If fewer than all of
the shares of Series D Preferred Stock are to be redeemed, the
shares to be redeemed shall be selected by lot or pro rata or in
some other equitable manner determined by the Board of Directors
of the Company; provided, however, that the Company shall not be
required to effect the redemption in any manner that results in
additional fractional shares being outstanding. If full
cumulative dividends on the outstanding shares of Series D
Preferred Stock shall not have been paid or declared and set
apart for payment for all regular dividend payment dates to and
including the last dividend payment date prior to the date fixed
for redemption, the Corporation shall not call for redemption any
shares of Series D Preferred Stock unless all such shares then
outstanding are called for simultaneous redemption.
(c) On the redemption date, the Company must pay, in
cash, on each share of Series D Preferred Stock to be redeemed
any accumulated and unpaid dividends through the redemption date.
In the case of a redemption date falling after a dividend payment
record date and prior to the related payment date, the holders of
the Series D Preferred Stock at the close of business on such
record date will be entitled to receive the dividend payable on
such shares on the corresponding dividend payment date,
notwithstanding the redemption of such shares following such
dividend payment record date. Except as provided for in the
preceding sentence, no payment or allowance will be made for
accumulated and unpaid dividends on any shares of Series D
Preferred Stock called for redemption or on the shares of Common
Stock issuable upon such redemption.
(d) On and after the date fixed for redemption,
provided that the Company has made available at the office of its
registrar and transfer agent a sufficient number of shares of
Common Stock and an amount of cash to effect the redemption,
dividends will cease to accrue on the Series D Preferred Stock
called for redemption (except that, in the case of a redemption
date after a dividend payment record date and prior to the
related dividend payment date, holders of Series D Preferred
Stock on the dividend payment record date will be entitled on
such dividend payment date to receive the dividend payable on
such shares), such shares shall be cancelled and shall no longer
be deemed to be outstanding and all rights of the holders of such
shares of Series D Preferred Stock shall cease except the right
to receive the shares of Common Stock upon such redemption and
any cash payable upon such redemption, without interest from the
date of such redemption. Such cancelled shares shall be restored
to the status of authorized but unissued shares of Preferred
Stock, without designation as to series, and may thereafter be
issued but not as shares of Series D Preferred Stock. At the
close of business on the redemption date upon surrender in
accordance with such notice of the certificates representing any
such shares (properly endorsed or assigned for transfer, if the
Board of Directors of the Company shall so require and the notice
shall so state), each holder of Series D Preferred Stock (unless
the Company defaults in the delivery of the shares of Common
Stock or cash) will be, without any further action, deemed a
holder of the number of shares of Common Stock for which such
Series D Preferred Stock is redeemable.
(e) Fractional shares of Common Stock are not to be
issued upon redemption of the Series D Preferred Stock, but, in
lieu thereof, the Company will pay a cash adjustment based on the
current market price of the Common Stock on the day prior to the
redemption date. If fewer than all the shares represented by any
such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares of Series D Preferred Stock
without cost to the holder thereof.
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(f) Any shares or cash set aside by the Company
pursuant to subparagraph (e) and unclaimed at the end of three
years from the date fixed for redemption shall revert to the
Company.
(g) Subject to applicable law and the limitation on
purchases when dividends on the Series D Preferred Stock are in
arrears, the Company may, at any time and from time to time,
purchase any shares of the Series D Preferred Stock by tender or
by private agreement.
(4) LIQUIDATION PREFERENCE.
(a) The holders of shares of Series D Preferred Stock
will be entitled to receive in the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary, $5.00 per share of Series D Preferred Stock (the
"Liquidation Preference"), plus an amount per share of Series D
Preferred Stock equal to all dividends (whether or not earned or
declared) accumulated and unpaid thereon to the date of final
distribution to such holders, and no more. If, upon any
liquidation, dissolution or winding up of the Company, the assets
of the Company, or proceeds thereof, distributable among the
holders of the Series D Preferred Stock are insufficient to pay
in full the liquidation preference with respect to the Series D
Preferred Stock and any other Parity Stock, then such assets, or
the proceeds thereof, will be distributed among the holders of
Series D Preferred Stock and any such Parity Stock ratably in
accordance with the respective amounts which would be payable on
such Series D Preferred Stock and any such Parity Stock if all
amounts payable thereon were paid in full.
(b) Neither a consolidation or merger of the Company
with or into another corporation, nor a sale, lease or transfer
of all or substantially all of the Company's assets will be
considered a liquidation, dissolution or winding up, voluntary or
involuntary, of the Company.
(5) VOTING RIGHTS. Except as may be required by applicable
law from time to time, the holders of shares of Series D
Preferred Stock will have no voting rights.
(6) SINKING FUND. The Series D Preferred Stock shall not
be entitled to any mandatory redemption or prepayment (except on
liquidation, dissolution or winding up of the affairs of the
Company) or to the benefit of any sinking fund.
WITNESS THE SIGNATURE of the undersigned who is the Chairman
of the Board and Chief Executive Officer of ThermoView
Industries, Inc. as of this day of April, 2000.
----
----------------------------------
Stephen A. Hoffmann
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EXHIBIT B
RISK FACTORS
PRIOR TO MAKING AN INVESTMENT DECISION, A PROSPECTIVE
PURCHASER OF THE 12% CUMULATIVE SERIES D PREFERRED STOCK OFFERED
HEREBY SHOULD EVALUATE THE FOLLOWING RISK FACTORS INCLUDING THOSE
IN THE THERMOVIEW PROSPECTUS, DATED DECEMBER 2, 1999.
SERIES D PREFERRED STOCK
There can be no assurance that ThermoView's continuing
losses or consolidated earnings, if ever, in the future will be
sufficient to cover its combined fixed charges and dividends on
(i) the 12% Series D Cumulative Preferred Stock alone, or (ii)
its 9.6% Series C Convertible Preferred Stock and the Series D
Preferred Stock.
ABSENCE OF TRADING MARKET FOR SERIES D PREFERRED STOCK
There is no public market for the Series C Preferred Stock
and Series D Preferred Stock and ThermoView does not anticipate
that any public market will develop in the future. However, the
Series C Preferred Stock is convertible into Common Stock at a
conversion price, subject to adjustment in certain circumstances
of $15.00 per share of Common Stock (initially equivalent to a
conversion rate of 66 2/3 shares of stock per share of Series C
Preferred Stock). The Series D Preferred Stock has no such
conversion feature. The ThermoView Common Stock trades on the
American Stock Exchange, so a public market does exist for the
Common Stock. Without the ability to convert the Series D
Preferred Stock into Common Stock or have a market available to
sell the Series D Preferred Stock, the holders of the Series D
Preferred Stock may not be able to liquidate their investment at
any time.
RESTRICTION OF PAYMENT OF CASH DIVIDENDS ON SERIES D PREFERRED
STOCK
Pursuant to ThermoView's current line of credit with its
principal secured lender and documentation related to financings
with other parties, it may not pay dividends on its Common Stock
until all obligations thereunder have been paid in full and on
the Series D Preferred Stock until satisfaction of all covenants
under the line of credit and other financings. ThermoView cannot
provide any assurance that it will be able to satisfy these
covenants so as to pay quarterly the dividends due on the Series
D Preferred Stock. Considering that ThermoView has in the past
received waivers from its lenders for non-compliance with its
covenants, a history exists that non-compliance with its loan or
other covenants may occur in the future. Accordingly, it is
possible that ThermoView may not be able to pay any dividends due
on its Series D Preferred Stock.
LITIGATION
On March 3, 2000, Pro Futures Bridge Capital Fund, L.P. and
Pro Futures Bridge Capital Fund, L.P. filed an action titled PRO
FUTURES BRIDGE CAPITAL FUND, L.P. V. THERMOVIEW INDUSTRIES, INC.,
ET AL., Civil Action No. 00CV0559 (Colo. Dist. Ct., March 3,
2000) alleging breach of
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contract, common law fraud, fraudulent misstatements and
omissions in connection with the sale of securities, negligent
misrepresentations and breach of fiduciary duty. These claims
are in connection with (i) the mandatory conversion of the
ThermoView 10% Series A Convertible Preferred Stock, held by the
two funds, into ThermoView Common Stock upon completion of the
ThermoView public offering in December 1999, and (ii) purchases
by the two funds of ThermoView Common Stock from ThermoView
stockholders. The funds are seeking (a) rescission of their
purchases of the Series A Preferred Stock in the amount of
$3,250,000 plus interest and (b) unspecified damages in
connection with their purchases of the ThermoView Common Stock.
Although ThermoView believes that the claims are without merit
and intends to vigorously defend the suit, an adverse outcome in
this action could have a material adverse effect on the financial
position or results of operations of ThermoView.
EXHIBIT 10.5
AGREEMENT
---------
THIS AGREEMENT is made and entered into as of the 14th day
of April, 2000, by and between THERMOVIEW INDUSTRIES, INC., a
Delaware corporation ("ThermoView") and RODNEY H. THOMAS
("Thomas").
PRELIMINARY STATEMENTS
----------------------
As of January 1, 1999, ThermoView acquired all of the
outstanding shares of capital stock of Thomas Construction, Inc.,
a Missouri corporation, Castle Associates, Inc., a Missouri
corporation and Showplace Home Improvements, Inc., a Missouri
corporation, pursuant to a certain Stock Purchase Agreement (the
"Stock Agreement"), dated December 22, 1998, between ThermoView
and Thomas.
Under the terms of the Stock Agreement, Thomas is entitled
to receive post-closing earn-out payments (the "Earn-out
Payments"), if earned, on December 31, 1999, December 31, 2000
and December 31, 2001. As of December 31, 1999, ThermoView owed
Thomas cash payments of approximately $6,500,000.00 (the "Year
One Earn-out Payment") under the terms of the Stock Agreement
pursuant to the earn-out provision.
ThermoView has paid $1,000,000.00 of the Year One Earn-out
Payment in cash to Thomas.
ThermoView desires to make the remainder of the Year One
Earn-out Payment in ThermoView 12% Cumulative Series D Preferred
Stock with a stated value of $5.00 (the "Preferred Stock") in
lieu of cash and Thomas desires to accept the Preferred Stock in
consideration of the remainder of the Year One Earn-out Payment.
The terms and conditions of the Preferred Stock are further
described in the Certificate of Designation, attached hereto as
EXHIBIT A and incorporated herein by reference (the
"Certificate").
NOW, THEREFORE, in consideration of these preliminary
statements and the mutual promises contained herein, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. TRANSFERS AND EXCHANGES. ThermoView hereby agrees upon
execution hereof (i) to transfer to Thomas 1,113,500 shares of
Preferred Stock, (ii) to effect execution of and to deliver to
Thomas the amendment to Thomas' Noncompetition Agreement attached
hereto as Exhibit D, the amendment to the Lease for 13397
Lakefront Drive, Earth City, Missouri attached hereto as Exhibit
E and the amendment to Furniture and Fixture Lease attached
hereto as Exhibit F, (iii) to deliver to Thomas in exchange for
Thomas' delivery to ThermoView of the Promissory Note attached
hereto as Exhibit G and the Stock Pledge Agreement attached
hereto as Exhibit H the sum of $1,500,000 in cash (by cashier's
check or wire transfer per Thomas' directions), and Thomas hereby
agrees to accept all of the foregoing in exchange for any and all
amounts due to Thomas by ThermoView pursuant to the Year One Earn-
out Payment under the Stock Agreement. The delivery of the
certificate for the Preferred Stock to Thomas shall occur within
fifteen (15) business days.
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2. REPRESENTATIONS AND WARRANTIES OF THERMOVIEW. In order
to induce Thomas to enter into this Agreement and to accept the
Preferred Stock, the Company hereby represents and warrants to
Thomas that:
2.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS.
ThermoView is duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. ThermoView has
full corporate power and authority to own its properties and
carry on its business as it is currently being conducted by
ThermoView and as is currently proposed to be conducted by
ThermoView. ThermoView is duly licensed or qualified to transact
business as a foreign corporation and is in good standing in all
other jurisdictions in which the nature of the business
transacted by it or the character of the properties owned or
leased by it requires such licensing or qualification, except
where the failure to be so qualified will not have a material
adverse effect on ThermoView.
2.2 CORPORATE POWER AND AUTHORITY. ThermoView has
full corporate power and authority to enter into this Agreement,
the amendments to agreements referred to in Section 1 above and
the transactions contemplated hereby, issue the Preferred Stock
and carry out and perform its obligations under the terms of this
Agreement and the Exhibits attached hereto.
2.3 VALID ISSUANCE. The Preferred Stock upon receipt
by Thomas will be duly authorized and validly issued, fully paid
and nonassessable and owned of record and beneficially by Thomas
free of any liens or encumbrances, and will have been offered,
issued, sold and delivered by ThermoView in compliance with
applicable federal and state securities laws, assuming the truth
and accuracy of Thomas' representations and warranties set forth
in Section 5 hereof.
2.4 AUTHORIZATION; NO CONFLICTS. All corporate action
on the part of ThermoView, its directors and shareholders
necessary for the authorization, execution, delivery and
performance by ThermoView of this Agreement and the Exhibits
attached hereto, and the consummation of the transactions
contemplated herein and for the authorization, offer, issuance,
sale and delivery of the Preferred Stock has been taken. This
Agreement is the valid and binding obligation of ThermoView,
enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the
relief of debtors. The execution, delivery and performance by
ThermoView of this Agreement and compliance herewith and the
offer, issuance, sale and delivery of the Preferred Stock will
not, assuming the truth and accuracy of the Thomas'
representations and warranties set forth in Section 3 hereof,
result in any violation of and will not conflict with, or result
in any breach of any of the terms of, or constitute a default
under, any provision of federal or state law to which ThermoView
is subject, the Articles or the Bylaws, as amended as of the
Closing Date, or any mortgage, indenture, agreement, instrument,
judgment, decree, order, rule or regulation or other restriction
to which ThermoView is a party or by which it is bound. No
shareholder of ThermoView has any preemptive rights or rights of
first refusal by reason of the issuance of the Preferred Stock,
or such shareholder has waived any such rights in writing.
2.5 FINANCIAL INFORMATION. The audited financial
statements of ThermoView (including the notes thereto) as of
December 31, 1999 and for the year then ended, present fairly the
financial position and results of operations of ThermoView at the
date and for the period to
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which they relate, have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods indicated, and show all material
liabilities, absolute or contingent, of ThermoView required to be
recorded thereon in accordance with generally accepted accounting
principles.
2.6 CONSENTS. All consents, approvals, orders or
authorizations of, or registrations, qualifications,
designations, declarations or filings with, any federal or state
governmental authority (including under the "blue sky" laws of
any such state governmental authority), any party to a contract
to which ThermoView is bound or any other third party, required
on the part of ThermoView, in connection with the consummation of
the transactions contemplated by this Agreement, shall have been
obtained prior to, and will be effective as of, the issuance of
the Preferred Stock, other than any notice filing required to be
made after the Closing Date pursuant to Regulation D under the
Securities Act of 1933 (the "1933 Act") and any applicable "blue
sky" laws.
2.7 ISSUANCE TAXES. All taxes imposed upon ThermoView
by law as a result of the issuance, sale and delivery of the
shares of Preferred Stock shall have been fully paid, and all
laws imposing such taxes shall have been or will be fully
complied with, on or prior to the issuance of the Preferred
Stock.
2.8 OFFERING. Neither ThermoView nor anyone
authorized to act on its behalf has taken an action that will
cause the issuance, sale and delivery of the Preferred Stock as
contemplated by this Agreement (assuming the truth and accuracy
of the representations and warranties of Thomas set forth in
Section 5 hereof) to constitute a violation of the 1933 Act or
any applicable state securities laws.
2.9 COMPLIANCE. ThermoView is not in violation of any
term of its Articles or Bylaws as amended. ThermoView is not in
violation of any term of any law, judgment, decree, order, rule
or regulation to which ThermoView is subject and a violation of
which would have a material adverse effect on the condition,
financial or otherwise, or operations of ThermoView.
2.10 LOANS TO OTHER PERSONS. Neither ThermoView nor a
subsidiary of ThermoView is obligated or committed to make any
loan or advance to any person or entity, except for loans or
advances to employees or customers in the ordinary course of
business, consistent with past practice.
2.11 BOOKS AND RECORDS. The books of account, stock
record books, minute books, bank accounts and other corporate
records of ThermoView are true, correct and complete and have
been maintained in accordance with good business practices.
2.12 INSURANCE. ThermoView and each subsidiary of
ThermoView maintains insurance which is customary in its industry
and which ThermoView reasonably believes is commercially
reasonable given the risks involved in the business conducted by
ThermoView.
2.13 DISCLOSURE. Neither this Agreement, nor any
certificate or statement furnished to the Thomas by ThermoView
pursuant to this Agreement, contains any untrue
3
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statement of a material fact, and none of this Agreement, such
certificates or statements omits to state a material fact
necessary in order to make the statements contained herein or
therein not misleading in the light of the circumstances under
which they were made.
2.14 ENVIRONMENTAL AND SAFETY LAWS. Neither ThermoView
nor a subsidiary of ThermoView is in violation of any applicable
statute, law or regulation relating to the environment or
occupational health and safety, which violations, either singly
or in the aggregate, would have a material adverse effect on
ThermoView's or such subsidiary's business, and no material
expenditures are or will be required in order to comply with any
such statute, law or regulation.
3. FULL SATISFACTION. Subject to the validity of the
representations and warranties of ThermoView set forth in Section
2 above, Thomas hereby acknowledges that his receipt of the
$1,000,000 cash payment, the 1,113,500 shares of Preferred Stock
and the other items recited in Section 1 above, will be in full
and complete satisfaction of the obligation owed to Thomas by
ThermoView for the Year One Earn-out Payment.
4. NO AMENDMENT OR TERMINATION. Nothing contained in this
Agreement shall amend or terminate any obligations of ThermoView
to make any and all other Earn-out Payments, if earned, under the
terms of the Stock Agreement.
5. THOMAS' REPRESENTATIONS AND WARRANTIES. Thomas hereby
represents and warrants to ThermoView as follows:
(1) INVESTMENT INTENT. Thomas is acquiring the
Preferred Stock for his own account and not with a present
view to or for distributing or reselling the Preferred Stock
in violation of the Securities Act of 1933, as amended (the
"Securities Act"). Thomas agrees that such shares of
Preferred Stock may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act, except pursuant to an
exemption available under the Securities Act. Thomas will
not sell, offer to sell or solicit offers to buy any of the
shares of Preferred Stock in violation of the Securities Act
or any securities act of any state. Thomas understands that
the shares of Preferred Stock have not been registered under
federal or any state securities laws.
(2) THOMAS' STATUS. Thomas is (i) an "accredited
investor" as defined in Rule 501 of the Securities Act and
(ii) has such knowledge, sophistication and experience in
business and financial matters so as to be capable of
evaluating the merits and risks of the prospective
investment in the Preferred Stock.
(3) RELIANCE. Thomas understands and acknowledges
that (i) the Preferred Stock is being offered and sold to
Thomas without registration under the Securities Act in a
private placement that is exempt from the registration
provisions of the Securities Act under Section 4(2) of the
Securities Act or Regulation D promulgated thereunder or
other applicable federal and state securities laws and (ii)
the availability of such exemptions depends in part on, and
ThermoView will rely upon the accuracy and truthfulness of,
the representations set forth in this Section 4 and Thomas
consents to such reliance.
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(4) INFORMATION. Thomas and his advisors, if any,
have been furnished with all materials relating to the
business, finances and operations of ThermoView and
materials relating to the offer and sale of the Preferred
Stock, including the Certificate, which have been requested
by Thomas or his advisors. Thomas and his advisors, if any,
have been afforded the opportunity to ask questions of
ThermoView. Thomas acknowledges receipt of the ThermoView
prospectus dated December 2, 1999 (the "Prospectus") and
that ThermoView will deliver a copy of its most recent Form
10-K filing with the Securities and Exchange Commission as
soon as it becomes publicly available. Thomas understands
that his investment in the Preferred Stock involves a
significant degree of risk, some of which risks associated
with the investment in the Preferred Stock are set forth in
EXHIBIT B, attached hereto and incorporated herein by
reference, and in the Prospectus.
(5) PLEDGE EXCEPTION. Thomas shall only be permitted
to pledge the Preferred Stock to the extent contemplated in
Section 1 hereof.
6. MISCELLANEOUS.
(1) NOTICES. All notices, requests, consents and
other communications hereunder shall be in writing, shall be
addressed to the receiving party's address set forth below
or to such other address as a party may designate by notice
hereunder, and shall be either (i) delivered by hand,
(ii) made by telex, telecopy or facsimile transmission,
(iii) sent by overnight courier, or (iv) sent by certified
mail, return receipt requested, postage prepaid.
If to ThermoView:
ThermoView Industries, Inc.
1101 Herr Lane
Louisville, Kentucky 40222
Attn: Nelson E. Clemmens, President
Fax No. (502) 412-0301
With a copy to:
Stites & Harbison
400 West Market Street, Suite 1800
Louisville, Kentucky 40202
Attn: Alex P. Herrington, Jr., Esq.
Fax No. (502) 587-6391
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If to Thomas:
Rodney H. Thomas
13397 Lake Front Drive
Earth City, Missouri 63045
Fax No. (314) 739-6965
With a copy to:
Blitz, Bardgett & Deutsch, L.C.
120 South Central, Suite 750
St. Louis, Missouri 63105
Attn: Richard B. Rothman, Esq.
Fax No. (314) 863-1877
All notices, requests, consents and other
communications hereunder shall be deemed to have been
received either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party
set forth above, (ii) if made by telecopy or facsimile
transmission, at the time that receipt thereof has been
acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day
following the day such notice is delivered to the courier
service, or (iv) if sent by certified mail, on the fifth
business day following the day such mailing is made.
(2) ENTIRE AGREEMENT. This Agreement embodies the
entire agreement and understanding between the parties
hereto with respect to the Year One Earn-out Payment and
supersedes all prior oral or written agreements and
understandings relating to the Year One Earn-out Payment.
No statement, representation, warranty, covenant or
agreement of any kind not expressly set forth in this
Agreement shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this
Agreement.
(3) MODIFICATIONS AND AMENDMENTS. The terms and
provisions of this Agreement may be modified or amended only
by written agreement executed by all parties hereto.
(4) BENEFIT. This Agreement shall be binding on the
parties hereto and shall inure to the benefit of the parties
hereto and the respective successors and permitted assigns
of each party hereto. Nothing in this Agreement shall be
construed to create any rights or obligations except among
the parties hereto, and no person or entity shall be
regarded as a third-party beneficiary of this Agreement.
(5) GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be construed in
accordance with and governed by the law of the State of
Missouri, without giving effect to the conflict of law
principles thereof.
(6) SEVERABILITY. In the event that any court of
competent jurisdiction shall determine that any provision,
or any portion thereof, contained in this Agreement shall be
unreasonable or unenforceable in any respect, then such
provision shall be deemed limited to the extent that such
court deems it reasonable and enforceable, and as so limited
shall remain in full force and effect. In the event that
such court shall deem any
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such provision, or portion thereof, wholly unenforceable,
the remaining provisions of this Agreement shall
nevertheless remain in full force and effect.
(7) HEADINGS AND CAPTIONS. The headings and captions
of the various subdivisions of this Agreement are for
convenience of reference only and shall in no way modify, or
affect the meaning or construction of any of the terms or
provisions hereof.
(8) COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by different parties hereto on
separate counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, ThermoView has caused this Agreement to
be executed by its duly authorized officer and Thomas has
executed this Agreement all as of the date first above written.
THERMOVIEW INDUSTRIES, INC.
By: /s/ Nelson E. Clemmens
-------------------------------
Title: President
/s/ Rodney H. Thomas
----------------------------------
RODNEY H. THOMAS
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EXHIBIT A
CERTIFICATE OF DESIGNATION
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS, AND QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF 12% SERIES D CUMULATIVE
PREFERRED STOCK
OF
THERMOVIEW INDUSTRIES, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Pursuant to Section 141(f) of the General Corporation Law of
the State of Delaware (the "DGCL"), the Board of Directors of
ThermoView Industries, Inc., a Delaware corporation (the
"Company"), hereby unanimously consents to, adopts and ratifies
the following resolution:
RESOLVED, that pursuant to the authority expressly
granted to and vested in the Board of Directors of the
Company by the provisions of Section 4.2 of Article IV
of the Restated Certificate of Incorporation of the
Company (the "Restated Certificate of Incorporation"),
and Section 151(g) of the DGCL, such Board of Directors
hereby creates, from the 50,000,000 authorized shares
of Preferred Stock, par value $.001 per share (the
"Preferred Stock"), of the Company authorized to be
issued pursuant to the Restated Certificate of
Incorporation, a series of Preferred Stock, and hereby
fixes by this certificate of designation (this
"Certificate of Designation") the voting powers,
designations, preferences and relative, participating,
optional or other special rights, and qualifications,
limitations or restrictions thereof, of the shares of
such series as follows:
The series of Preferred Stock hereby
established shall consist of 1,500,000 shares
designated as "12% Cumulative Series D
Preferred Stock" (hereinafter called the
"Series D Preferred Stock"), which shall have
a stated value of $5.00 per share. The
relative rights, preferences and limitations
of such series shall be as follows:
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12% CUMULATIVE SERIES D PREFERRED STOCK
(1) RANKING. The Series D Preferred Stock will, with
respect to payment of dividends and amounts upon liquidation,
dissolution or winding up, rank (i) senior to the Common Stock of
the Company, $.001 par value (the "Common Stock") and to shares
of all other series of Preferred Stock issued by the Company the
terms of which specifically provide that the capital stock of
such series rank junior to such Series D Preferred Stock with
respect to dividend rights or distributions upon dissolution of
the Company ("Junior Stock"); (ii) on a parity with (a) all
shares of the Company's 6.6% Cumulative Convertible Series C
Preferred Stock and (b) the shares of all capital stock issued by
the Company whether or not the dividend rates, dividend payment
dates, or redemption or liquidation prices per share thereof
shall be different from those of the Series D Preferred Stock, if
the holders of stock of such class or series shall be entitled by
the terms thereof to the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the
case may be, in proportion to their respective dividend rates or
liquidation prices, without preference or priority of one over
the other as between the holders of such stock and the holders of
shares of Series D Preferred Stock (collectively (a) and (b)
being "Parity Stock"); and (iii) junior to all capital stock
issued by the Company the terms of which specifically provide
that the shares rank senior to the Series D Preferred Stock with
respect to dividends and distributions upon dissolution of the
Company ("Senior Stock").
(2) DIVIDENDS.
(a) Holders of shares of Series D Preferred Stock will
be entitled to receive, when, as and if declared by the Board of
Directors of the Company and only with the consent of PNC Bank,
N.A. or any successor lender thereto, out of funds of the Company
legally available for payment, subject to the prior and superior
rights of Senior Stock, but pari passu with Parity Stock, and in
preference to Junior Stock, cumulative cash dividends at the rate
per annum of $0.60 per share of Series D Preferred Stock.
Dividends on the Series D Preferred Stock will be payable
quarterly in arrears on the last calendar day of April, July,
October and January of each year, commencing July 31, 2000 (and
in the case of any accumulated and unpaid dividends not paid on
the corresponding dividend payment date, at such additional times
and for such interim periods, if any, as determined by the Board
of Directors). Each such dividend will be payable to holders of
record as they appear on the stock records of the Company at the
close of business on such record dates, not more than 60 days nor
less than 10 days preceding the payment dates thereof, as shall
be fixed by the Board of Directors of the Company. Dividends
will accrue from the date of the original issuance of the Series
D Preferred Stock. Dividends will be cumulative from such date,
whether or not in any dividend period or periods there shall be
funds of the Company legally available for the payment of such
dividends. Accumulations of dividends on shares of Series D
Preferred Stock will not bear interest. Dividends payable on the
Series D Preferred Stock for any period greater or less than a
full dividend period will be computed on the basis of actual
days. Dividends payable on the Series D Preferred Stock for each
full dividend period will be computed by dividing the annual
dividend rate by four.
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(b) Except as provided in the next sentence, no
dividend will be declared or paid on any Parity Stock unless full
cumulative dividends have been declared and paid or are
contemporaneously declared and funds sufficient for payment set
aside on the Series D Preferred Stock for all prior dividend
periods. If accrued dividends on the Series D Preferred Stock
for all prior periods have not been paid in full, then any
dividends declared on the Series D Preferred Stock for any
dividend period and on any Parity Stock will be declared ratably
in proportion to accumulated and unpaid dividends on the Series D
Preferred Stock and such Parity Stock.
(c) So long as the shares of the Series D Preferred
Stock shall be outstanding, unless (i) full cumulative dividends
shall have been paid or declared and set apart for payment on all
outstanding shares of the Series D Preferred Stock and any Parity
Stock, (ii) sufficient funds have been paid or set apart for the
payment of the dividend for the current dividend period with
respect to the Series D Preferred Stock and any Parity Stock and
(iii) the Company is not in default or in arrears with respect to
the mandatory or optional redemption or mandatory repurchase or
other mandatory retirement of, or with respect to any sinking or
other analogous fund for, the Series D Preferred Stock or any
Parity Stock, the Company may not declare any dividends on any
Junior Stock, or make any payment on account of, or set apart
money for, the purchase, redemption or other retirement of, or
for a sinking or other analogous fund for, any shares of Junior
Stock or make any distribution in respect thereof, whether in
cash or property or in obligations or stock of the Company, other
than (x) Junior Stock which is neither convertible into, nor
exchangeable or exercisable for, any securities of the Company
other than Junior Stock, or (y) Common Stock acquired in
connection with the cashless exercise of options under employee
incentive or benefit plans of the Company or any subsidiary or
any other redemption or purchase or other acquisition of Common
Stock made in the ordinary course of business, which has been
approved by the Board of Directors of the Company, for the
purpose of any employee incentive or benefit plan of the Company.
The limitations in this paragraph do not restrict the Company's
ability to take the actions in this paragraph with respect to any
Parity Stock. As used in this subparagraph (c), the term
"dividend" with respect to Junior Stock does not include
dividends payable solely in shares of Junior Stock on Junior
Stock, or in options, warrants on rights to holders of Junior
Stock to subscribe for or purchase any Junior Stock.
(3) REDEMPTION.
(a) The shares of Series D Preferred Stock will be
redeemable at the option of the Company in whole or in part, for
cash or for such number of shares of Common Stock as equals the
Liquidation Preference (defined hereinafter in paragraph (4)) of
the Series D Preferred Stock to be redeemed (without regard to
accumulated and unpaid dividends) as of the opening of business
on the date set for such redemption. In order to exercise its
redemption option, the Company must notify the holders of record
of its Series D Preferred Stock in writing (the "Conditions
Satisfaction Notice") prior to the opening of business on the
second trading day after the conditions in the preceding
sentences have, from time to time, been satisfied.
(b) Notice of redemption (the "Redemption Notice")
will be given by mail to the holders of the Series D Preferred
Stock not less than 30 nor more than 60 days prior to the date
selected by the Company to redeem the Series D Preferred Stock.
The Redemption Notice shall be deemed to have been given when
deposited in the United States mail, first-class mail, postage
prepaid, whether or not such notice is actually received. The
Company's right to exercise its redemption option will not be
affected by changes in the closing price of the
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Common Stock following such 30-day period. If fewer than all of
the shares of Series D Preferred Stock are to be redeemed, the
shares to be redeemed shall be selected by lot or pro rata or in
some other equitable manner determined by the Board of Directors
of the Company; provided, however, that the Company shall not be
required to effect the redemption in any manner that results in
additional fractional shares being outstanding. If full
cumulative dividends on the outstanding shares of Series D
Preferred Stock shall not have been paid or declared and set
apart for payment for all regular dividend payment dates to and
including the last dividend payment date prior to the date fixed
for redemption, the Corporation shall not call for redemption any
shares of Series D Preferred Stock unless all such shares then
outstanding are called for simultaneous redemption.
(c) On the redemption date, the Company must pay, in
cash, on each share of Series D Preferred Stock to be redeemed
any accumulated and unpaid dividends through the redemption date.
In the case of a redemption date falling after a dividend payment
record date and prior to the related payment date, the holders of
the Series D Preferred Stock at the close of business on such
record date will be entitled to receive the dividend payable on
such shares on the corresponding dividend payment date,
notwithstanding the redemption of such shares following such
dividend payment record date. Except as provided for in the
preceding sentence, no payment or allowance will be made for
accumulated and unpaid dividends on any shares of Series D
Preferred Stock called for redemption or on the shares of Common
Stock issuable upon such redemption.
(d) On and after the date fixed for redemption,
provided that the Company has made available at the office of its
registrar and transfer agent a sufficient number of shares of
Common Stock and an amount of cash to effect the redemption,
dividends will cease to accrue on the Series D Preferred Stock
called for redemption (except that, in the case of a redemption
date after a dividend payment record date and prior to the
related dividend payment date, holders of Series D Preferred
Stock on the dividend payment record date will be entitled on
such dividend payment date to receive the dividend payable on
such shares), such shares shall be cancelled and shall no longer
be deemed to be outstanding and all rights of the holders of such
shares of Series D Preferred Stock shall cease except the right
to receive the shares of Common Stock upon such redemption and
any cash payable upon such redemption, without interest from the
date of such redemption. Such cancelled shares shall be restored
to the status of authorized but unissued shares of Preferred
Stock, without designation as to series, and may thereafter be
issued but not as shares of Series D Preferred Stock. At the
close of business on the redemption date upon surrender in
accordance with such notice of the certificates representing any
such shares (properly endorsed or assigned for transfer, if the
Board of Directors of the Company shall so require and the notice
shall so state), each holder of Series D Preferred Stock (unless
the Company defaults in the delivery of the shares of Common
Stock or cash) will be, without any further action, deemed a
holder of the number of shares of Common Stock for which such
Series D Preferred Stock is redeemable.
(e) Fractional shares of Common Stock are not to be
issued upon redemption of the Series D Preferred Stock, but, in
lieu thereof, the Company will pay a cash adjustment based on the
current market price of the Common Stock on the day prior to the
redemption date. If fewer than all the shares represented by any
such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares of Series D Preferred Stock
without cost to the holder thereof.
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(f) Any shares or cash set aside by the Company
pursuant to subparagraph (e) and unclaimed at the end of three
years from the date fixed for redemption shall revert to the
Company.
(g) Subject to applicable law and the limitation on
purchases when dividends on the Series D Preferred Stock are in
arrears, the Company may, at any time and from time to time,
purchase any shares of the Series D Preferred Stock by tender or
by private agreement.
(4) LIQUIDATION PREFERENCE.
(a) The holders of shares of Series D Preferred Stock
will be entitled to receive in the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary, $5.00 per share of Series D Preferred Stock (the
"Liquidation Preference"), plus an amount per share of Series D
Preferred Stock equal to all dividends (whether or not earned or
declared) accumulated and unpaid thereon to the date of final
distribution to such holders, and no more. If, upon any
liquidation, dissolution or winding up of the Company, the assets
of the Company, or proceeds thereof, distributable among the
holders of the Series D Preferred Stock are insufficient to pay
in full the liquidation preference with respect to the Series D
Preferred Stock and any other Parity Stock, then such assets, or
the proceeds thereof, will be distributed among the holders of
Series D Preferred Stock and any such Parity Stock ratably in
accordance with the respective amounts which would be payable on
such Series D Preferred Stock and any such Parity Stock if all
amounts payable thereon were paid in full.
(b) Neither a consolidation or merger of the Company
with or into another corporation, nor a sale, lease or transfer
of all or substantially all of the Company's assets will be
considered a liquidation, dissolution or winding up, voluntary or
involuntary, of the Company.
(5) VOTING RIGHTS. Except as may be required by applicable
law from time to time, the holders of shares of Series D
Preferred Stock will have no voting rights.
(6) SINKING FUND. The Series D Preferred Stock shall not
be entitled to any mandatory redemption or prepayment (except on
liquidation, dissolution or winding up of the affairs of the
Company) or to the benefit of any sinking fund.
WITNESS THE SIGNATURE of the undersigned who is the Chairman
of the Board and Chief Executive Officer of ThermoView
Industries, Inc. as of this day of April, 2000.
----
---------------------------------
Stephen A. Hoffmann
<PAGE>
<PAGE>
EXHIBIT B
RISK FACTORS
PRIOR TO MAKING AN INVESTMENT DECISION, A PROSPECTIVE
PURCHASER OF THE 12% CUMULATIVE SERIES D PREFERRED STOCK OFFERED
HEREBY SHOULD EVALUATE THE FOLLOWING RISK FACTORS INCLUDING THOSE
IN THE THERMOVIEW PROSPECTUS, DATED DECEMBER 2, 1999.
SERIES D PREFERRED STOCK
There can be no assurance that ThermoView's continuing
losses or consolidated earnings, if ever, in the future will be
sufficient to cover its combined fixed charges and dividends on
(i) the 12% Series D Cumulative Preferred Stock alone, or (ii)
its 9.6% Series C Convertible Preferred Stock and the Series D
Preferred Stock.
ABSENCE OF TRADING MARKET FOR SERIES D PREFERRED STOCK
There is no public market for the Series C Preferred
Stock and Series D Preferred Stock and ThermoView does not
anticipate that any public market will develop in the future.
However, the Series C Preferred Stock is convertible into Common
Stock at a conversion price, subject to adjustment in certain
circumstances of $15.00 per share of Common Stock (initially
equivalent to a conversion rate of 66 2/3 shares of stock per
share of Series C Preferred Stock). The Series D Preferred Stock
has no such conversion feature. The ThermoView Common Stock
trades on the American Stock Exchange, so a public market does
exist for the Common Stock. Without the ability to convert the
Series D Preferred Stock into Common Stock or have a market
available to sell the Series D Preferred Stock, the holders of
the Series D Preferred Stock may not be able to liquidate their
investment at any time.
RESTRICTION OF PAYMENT OF CASH DIVIDENDS ON SERIES D
PREFERRED STOCK
Pursuant to ThermoView's current line of credit with
its principal secured lender and documentation related to
financings with other parties, it may not pay dividends on its
Common Stock until all obligations thereunder have been paid in
full and on the Series D Preferred Stock until satisfaction of
all covenants under the line of credit and other financings.
ThermoView cannot provide any assurance that it will be able to
satisfy these covenants so as to pay quarterly the dividends due
on the Series D Preferred Stock. Considering that ThermoView has
in the past received waivers from its lenders for non-compliance
with its covenants, a history exists that non-compliance with its
loan or other covenants may occur in the future. Accordingly,
it is possible that ThermoView may not be able to pay any
dividends due on its Series D Preferred Stock.
<PAGE>
<PAGE>
LITIGATION
On March 3, 2000, Pro Futures Bridge Capital Fund, L.P. and
Pro Futures Bridge Capital Fund, L.P. filed an action titled PRO
FUTURES BRIDGE CAPITAL FUND, L.P. V. THERMOVIEW INDUSTRIES, INC.,
ET AL., Civil Action No. 00CV0559 (Colo. Dist. Ct., March 3,
2000) alleging breach of contract, common law fraud, fraudulent
misstatements and omissions in connection with the sale of
securities, negligent misrepresentations and breach of fiduciary
duty. These claims are in connection with (i) the mandatory
conversion of the ThermoView 10% Series A Convertible Preferred
Stock, held by the two funds, into ThermoView Common Stock upon
completion of the ThermoView public offering in December 1999,
and (ii) purchases by the two funds of ThermoView Common Stock
from ThermoView stockholders. The funds are seeking (a)
rescission of their purchases of the Series A Preferred Stock in
the amount of $3,250,000 plus interest and (b) unspecified
damages in connection with their purchases of the ThermoView
Common Stock. Although ThermoView believes that the claims are
without merit and intends to vigorously defend the suit, an
adverse outcome in this action could have a material adverse
effect on the financial position or results of operations of
ThermoView.
<PAGE>
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EXHIBIT C
[INTENTIONALLY OMITTED]
<PAGE>
<PAGE>
EXHIBIT D
AMENDMENT TO NONCOMPETITION AGREEMENT
-------------------------------------
THIS AMENDMENT TO NONCOMPETITION AGREEMENT (the "Amendment")
is made and entered into as of the 14th day of April, 2000, by
and between ThermoView Industries, Inc., a Delaware corporation
("ThermoView"), and Rodney H. Thomas (the "Shareholder").
PREMISES:
The Shareholder and ThermoView entered into a Noncompetition
Agreement dated as of January 1, 1999 (the "Noncompetition
Agreement").
The parties desire to amend the Noncompetition Agreement,
but only to the extent, and subject to the terms and conditions
set forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants and agreements contained herein and for
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
---------
Definition of Terms
-------------------
Terms used herein with their initial letters capitalized and
not otherwise defined herein shall have the meanings given to
such terms in the Noncompetition Agreement.
ARTICLE 2
---------
Amendments to Noncompetition Agreement
--------------------------------------
The Noncompetition Agreement is hereby amended in the
following respects:
2.1 ADDITION TO SECTION 1.2. A new paragraph is hereby
added at the end of Section 1.2 of the Noncompetition Agreement,
which paragraph shall provide in its entirety as follows:
"Notwithstanding anything in this Agreement to the contrary:
(a) if ThermoView has not redeemed all of the
1,113,500 shares of ThermoView's 12% Cumulative Series
D Preferred Stock issued to the Shareholder pursuant to
an Agreement dated April 14, 2000, by and between
ThermoView (the "Shareholder's Series D Stock") by
October 14, 2001, then this Agreement, including,
without limitation the Noncompete Period, shall
forthwith terminate, become null and void and of no
further force or effect; or,
(b) if ThermoView has not redeemed at least fifty
percent of the Shareholder's Series D Preferred Stock
by to April 14, 2001, and caused the
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<PAGE>
holder of the Promissory Note dated April 14, 2000,
made by the Shareholder payable to the order of
Founders Group, LLC, to extend its maturity date to
October 14, 2001, then this Agreement, including,
without limitation the Noncompete Period, shall
forthwith terminate, become null and void and of no
further force or effect; or,
(c) if ThermoView has not paid in full all of the
accrued dividends to the Shareholder on account of the
Series D Preferred Stock by April 14, 2001, then this
Agreement, including, without limitation the Noncompete
Period, shall forthwith terminate, become null and void
and of no further force or effect."
ARTICLE 3
---------
Acknowledgment and Ratification
-------------------------------
3.1 RATIFICATION. Except as expressly amended by this
Amendment, the Noncompetition Agreement is and shall be
unchanged, and all of the terms, provisions, covenants and
agreements thereof or thereto shall remain and continue in full
force and effect and are hereby ratified, reaffirmed and
confirmed by the Shareholder and ThermoView in all respects on
and as of the effective date of this Amendment.
ARTICLE 4
---------
General Provisions
------------------
4.1 GOVERNING LAW. The laws of the State of Missouri shall
govern the construction of this Amendment and the rights and
remedies and duties of the parties hereto.
4.2 SECTION HEADINGS. The section headings contained in
this Amendment have been inserted solely for convenience of
reference, and shall not be construed as part of this Amendment.
4.3 COUNTERPARTS. This Amendment may be signed by each
party hereto upon a separate copy, in which event all of said
copies shall constitute a single counterpart to this Amendment.
This Amendment may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument. It
shall not be necessary, in making proof of this Amendment, to
produce or account for more than one such counterpart.
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<PAGE>
IN TESTIMONY WHEREOF, ThermoView has caused its duly
authorized representative to execute and deliver, and the
Shareholder has executed and delivered, this Amendment, effective
as of the day and year first above written.
ThermoView Industries, Inc.
BY:
------------------------------
TITLE:
---------------------------
---------------------------------
Rodney H. Thomas
<PAGE>
<PAGE>
EXHIBIT E
AMENDMENT TO TRIPLE NET LEASE AGREEMENT
---------------------------------------
THIS AMENDMENT TO THAT CERTAIN TRIPLE NET LEASE AGREEMENT
(the "Amendment") is made and entered into as of the day of
---
April, 2000, by and between Thomas Construction, Inc., a Missouri
corporation ("Tenant"), and 13397 Lakefront Drive, LLC, a
Missouri limited liability company ("Landlord").
PREMISES:
The parties desire to amend the terms pursuant to which
Tenant leases certain Premises situated at 13397 Lakefront Drive,
Earth City, Missouri.
ThermoView Industries, Inc., a Delaware corporation
("ThermoView"), the owner of Tenant, has requested Rodney H.
Thomas (the "Shareholder"), an affiliate of Landlord, to exchange
certain amounts owed to the Shareholder by ThermoView for
1,113,500 shares of the ThermoView's 12% Cumulative Series D
Preferred Stock, and the Shareholder has requested that as part
of the consideration for such exchange Tenant and Landlord agree
to amend the Lease, but only to the extent, and subject to the
terms and conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants and agreements contained herein and for
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
---------
Definition of Terms
-------------------
[Intentionally omitted]
ARTICLE 2
---------
Amendments to Lease
-------------------
Such lease is hereby amended in the following respects:
2.1 ADDITION THERETO. A new paragraph is hereby added at
the end of such lease, which new paragraph shall provide in its
entirety as follows:
"Notwithstanding anything in this Lease to the contrary,
until such time as ThermoView Industries, Inc., a Delaware
corporation ("ThermoView") has redeemed all of the 1,113,500
shares of ThermoView's 12% Cumulative Series D Preferred
Stock issued to Rodney H. Thomas (the "Shareholder")
pursuant to an Agreement dated April 14, 2000, by and
between ThermoView and the Shareholder (the "Shareholder's
Series D Stock"), Landlord shall have the right and power to
terminate this Lease by delivering a written notice to
Tenant specifying a termination date at the end of the month
following the month in which such notice was delivered, and
upon Tenant's receipt of such notice the term of this Lease
shall be deemed to have expired on such termination date."
<PAGE>
<PAGE>
ARTICLE 3
---------
Acknowledgment and Ratification
-------------------------------
3.1 RATIFICATION. Except as expressly amended by this
Amendment, such lease is and shall be unchanged, and all of the
terms, provisions, covenants and agreements thereof or thereto
shall remain and continue in full force and effect, and are
hereby ratified, reaffirmed and confirmed by the parties. The
parties acknowledge that the Landlord, to the extent not a party
to this Amendment, under such lease is a third party beneficiary
of this Amendment.
ARTICLE 4
---------
General Provisions
------------------
4.1 GOVERNING LAW. The laws of the State of Missouri shall
govern the construction of this Amendment and the rights and
remedies and duties of the parties hereto.
4.2 SECTION HEADINGS. The section headings contained in
this Amendment have been inserted solely for convenience of
reference, and shall not be construed as part of this Amendment.
4.3 COUNTERPARTS. This Amendment may be signed by each
party hereto upon a separate copy, in which event all of said
copies shall constitute a single counterpart to this Amendment.
This Amendment may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument. It
shall not be necessary, in making proof of this Amendment, to
produce or account for more than one such counterpart.
IN TESTIMONY WHEREOF, the Tenant has caused its duly
authorized representative to execute and deliver, and the
Landlord has executed and delivered, this Amendment, effective as
of the day and year first above written.
13397 Lakefront Drive, LLC Thomas Construction, Inc.
BY: BY:
--------------------------- ---------------------------
TITLE: TITLE:
------------------------ ------------------------
- ------------------------------
Rodney H. Thomas
<PAGE>
<PAGE>
EXHIBIT F
AMENDMENT TO FURNITURE AND FIXTURE LEASE
----------------------------------------
THIS AMENDMENT TO THAT CERTAIN FURNITURE AND FIXTURE LEASE
(the "Amendment") is made and entered into as of the 14th day of
April, 2000, by and between Thomas Construction, Inc., a Missouri
corporation ("Lessee"), and Investors Property Holding I, LLC, a
Missouri limited liability company ("Lessor").
PREMISES:
The parties entered into a Furniture and Fixture Lease dated
January 1, 1999, (the "Lease") in connection with Lessee's lease
of the Premises situated at 13397 Lakefront Drive, Earth City,
Missouri.
ThermoView Industries, Inc., a Delaware corporation
("ThermoView"), the owner of Lessee, has requested Rodney H.
Thomas (the "Shareholder"), an affiliate of Lessor, to exchange
certain amounts owed to the Shareholder by ThermoView for
1,113,500 shares of the ThermoView's 12% Cumulative Series D
Preferred Stock, and the Shareholder has requested that as part
of the consideration for such exchange Lessee and Lessor agree to
amend the Lease, but only to the extent, and subject to the terms
and conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants and agreements contained herein and for
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
---------
Definition of Terms
-------------------
Terms used herein with their initial letters capitalized and
not otherwise defined herein shall have the meanings given to
such terms in the Lease.
ARTICLE 2
---------
Amendments to Lease
-------------------
The Lease is hereby amended in the following respects:
2.1 ADDITION TO SECTION 2. A new Section 2.D. is hereby
added at the end of Section 2 of the Lease, which Section 2.D
shall provide in its entirety as follows:
"D. Notwithstanding anything in this Lease to the contrary,
until such time as ThermoView Industries, Inc., a Delaware
corporation ("ThermoView") has redeemed all
<PAGE>
<PAGE>
of the 1,113,500 shares of ThermoView's 12% Cumulative
Series D Preferred Stock issued to Rodney H. Thomas (the
"Shareholder") pursuant to an Agreement dated April 14,
2000, by and between ThermoView and the Shareholder (the
"Shareholder's Series D Stock"), Lessor shall have the right
and power to terminate this Lease by delivering a written
notice to Lessee specifying a termination date at the end of
the month following the month in which such notice was
delivered, and upon Lessee's receipt of such notice the term
of this Lease shall be deemed to have expired on such
termination date."
ARTICLE 3
---------
Acknowledgment and Ratification
-------------------------------
3.1 RATIFICATION. Except as expressly amended by this
Amendment, the Lease is and shall be unchanged, and all of the
terms, provisions, covenants and agreements thereof or thereto
shall remain and continue in full force and effect, and are
hereby ratified, reaffirmed and confirmed by Lessee and Lessor in
all respects on and as of the effective date of this Amendment.
ARTICLE 4
---------
General Provisions
------------------
4.1 GOVERNING LAW. The laws of the State of Missouri shall
govern the construction of this Amendment and the rights and
remedies and duties of the parties hereto.
4.2 SECTION HEADINGS. The section headings contained in
this Amendment have been inserted solely for convenience of
reference, and shall not be construed as part of this Amendment.
4.3 COUNTERPARTS. This Amendment may be signed by each
party hereto upon a separate copy, in which event all of said
copies shall constitute a single counterpart to this Amendment.
This Amendment may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument. It
shall not be necessary, in making proof of this Amendment, to
produce or account for more than one such counterpart.
IN TESTIMONY WHEREOF, the Lessee has caused its duly
authorized representative to execute and deliver, and the Lessor
has executed and delivered, this Amendment, effective as of the
day and year first above written.
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<PAGE>
Investors Property Holding I, LLC Thomas Construction, Inc.
BY: BY:
--------------------------- --------------------------
TITLE: TITLE:
------------------------ -----------------------
<PAGE>
EXHIBIT G
PROMISSORY NOTE
---------------
$1,500,000.00 Louisville, Kentucky
April 14, 2000
FOR VALUE RECEIVED, the undersigned, Rodney H. Thomas
("Borrower"), an individual and a resident of St. Louis County,
Missouri, having a business address at 13397 Lakefront Drive,
Earth City Missouri 63045, promises to pay to the order of
Founders Group, LLC (the "Lender"), a Kentucky limited liability
company having an address at 1101-C Herr Lane, Louisville,
Kentucky 40222, Attention: Mr. Stephen Hoffmann, the principal
sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000.00),
together with interest on the principal of this Note from time to
time outstanding. Principal and interest are payable in lawful
currency of the United States.
The Borrower's obligations under this Note are secured by a
Stock Pledge Agreement of even date (the "Stock Pledge
Agreement"), pursuant to which the Borrower has pledged to the
Lender certain stock (the "Stock"), as more particularly
described in the Stock Pledge Agreement. If and when any shares
of the Stock are redeemed, sold or otherwise transferred, the
Borrower shall immediately make a payment under this Note, in an
amount equal to (a) all accrued but unpaid interest, plus (b) the
product of:
(i) the then-outstanding principal balance of this
Note, multiplied by
(ii) the quotient of (A) the number of shares of Stock
redeemed, sold or transferred, divided by (B) the total
number of shares of Stock pledged to the Lender.
For example, if fifty percent of the Stock pledged to the Lender
were redeemed, then this Note would require that the Borrower
immediately make a prepayment in an amount equal to (a) all
accrued interest, plus (b) fifty percent of the then-outstanding
principal balance of this Note. Each such payment shall be due
and payable in full immediately upon the occurrence of such
redemption, sale or transfer, without notice or demand of any
kind. Additionally, any provisions of this Note to the contrary
notwithstanding, all principal of and interest accruing on this
Note shall be due and payable in full on April 14, 2001 (the
"Maturity Date").
Interest on this Note shall accrue from the date of this
Note until the entire principal balance of and all accrued
interest on this Note have been paid in full. This Note shall
bear interest at a rate of twelve percent (12.0%) per annum. All
interest shall be computed over an assumed month of thirty days
and an assumed year of three hundred and sixty (360) days and
over the actual number of days elapsed. Any provision of this
Note to the contrary notwithstanding, on the Maturity Date, all
unpaid principal and all accrued but unpaid interest then
outstanding shall be due and payable in full.
This Note may be prepaid by the Borrower in whole or in
part, without premium or penalty, at any time, provided that no
such prepayment shall relieve the Borrower from the obligation to
make the payments of principal and interest called for in this
Note until such time
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as this Note is paid in full. All payments on this Note shall be
applied first to accrued charges under this Note, second to
unpaid interest, and then to unpaid principal.
All payments hereunder shall be paid to the Lender in
immediately available funds at 1101-C Herr Lane, Louisville,
Kentucky 40222, Attention: Stephen Hoffmann, or to such other
person and at such other place as may be designated in a writing
sent to the Borrower by the holder hereof. If any principal of,
or interest on, this Note is not paid within ten (10) days
following the date such payment becomes due and payable, such
overdue principal and, to the extent permitted by applicable law,
overdue interest, shall bear interest from the due date (whether
stated or by acceleration) until paid at a rate (the "Default
Rate") equal to fourteen percent (14.0%). Additionally, if the
Borrower fails to make any payment of principal, interest or
other amount due pursuant to the provisions of this Note within
ten (10) calendar days after such amount becomes due and payable,
the Borrower shall pay to the Lender a late fee equal to the
greater of two percent (2.0%) of the amount of such payment or
Twenty-Five Dollars ($25.00). The charging and/or collection of
any such late charge shall not in any way be deemed a waiver of
(i) any rights of the holder to declare a default, or (ii) any of
the holder's rights arising thereby or hereunder.
Any security interest granted by Borrower to the Lender in
any collateral, real or personal, whether by way of mortgage,
security agreement, assignment, pledge, hypothecation or
otherwise to secure this Note shall also secure all amendments,
renewals, extensions, or modifications hereof. Failure of the
holder of this Note to exercise any of its rights and remedies
shall not constitute a waiver of the right to exercise the same
at that or any other time. All rights and remedies of the holder
hereof for default hereunder shall be cumulative to the greatest
extent permitted by law. This Note is secured as provided in the
Pledge Agreement. The occurrence of an Event of Default under
the Pledge Agreement shall constitute a default under this Note.
Upon the occurrence of a default under this Note, the outstanding
principal balance of, and all accrued but unpaid interest on,
this Note shall become immediately due and payable in full, this
Note shall thereafter bear interest at the Default Rate, and the
Lender may exercise any rights and remedies available to the
Lender under this Note, the Pledge Agreement, at law or in
equity.
If there is any default under this Note and this Note is
placed in the hands of an attorney for collection or is collected
through any suit, including but not limited to any bankruptcy
court, the Borrower promises to pay to the holder hereof its
reasonable attorneys' fees and court costs incurred in collecting
or attempting to collect, or securing or attempting to secure,
this Note, or enforcing or attempting to enforce the holder's
right in any collateral securing this Note, to the extent allowed
by law.
All parties hereto, whether makers, endorsers, sureties,
guarantors, or otherwise, hereby waive all acts on the part of
the holder otherwise required in fixing the liabilities of
sureties, including, among other acts, presentment, demand,
notice of dishonor, protest, notice of nonpayment and all other
notice and further waive all legal diligence to enforce
collection. The Lender may, with or without notice to any other
party, (1) extend the time for payment of either principal or
interest from time to time, (2) release or discharge any party
liable on this Note, (3) suspend or release the right to enforce
this Note with respect to any person, (4) change, exchange or
release any property in which the Lender or any other holder of
this Note has any interest securing this Note, (5) justifiably or
otherwise impair any collateral securing this Note or
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suspend or release the right to enforce against such collateral,
and (6) call for and accept additional collateral. The Lender
shall not be under an obligation to exercise any of its rights
hereunder, and no failure to do so or delay in doing so shall
waive or impair any rights or remedies which the Lender may
otherwise have. In case this Note shall be transferred, the
transferee shall be entitled to all rights secured to the Lender
hereunder.
Time is of the essence in the payment of this Note.
This Note has been delivered in, and shall be governed by
and construed in accordance with the laws of, the Commonwealth of
Kentucky. The Borrower irrevocably consents to the exclusive
jurisdiction of the Jefferson County, Kentucky Circuit Court and
the United States District Court for the Western District of
Kentucky, and agrees that all process may be served by any
nationally-recognized overnight courier to the Borrower at the
address indicated above. Service so made will be deemed to have
been made upon receipt by the Borrower. Borrower further agrees
that nothing contained in this Note is intended to, or shall,
prevent the Lender from bringing any action, enforcing any award
or judgment or exercising any rights against the Borrower or any
of his property in any other county, state, foreign or domestic
jurisdiction. The Borrower agrees that the foregoing courts
offer the most convenience forum for the Borrower and the Lender
and waivers any objection to venue or based upon the
inconvenience of the foregoing forum.
This Note is delivered in connection with a Stock Pledge
Agreement of even date between the Borrower and the Lender (the
"Stock Pledge Agreement") and is secured by a perfected pledge of
certain stock pursuant to the Stock Pledge Agreement. Reference
is made to the Stock Pledge Agreement for a statements of terms
and provisions relevant to this Note but not contained herein,
provided, however, that neither reference herein to the Stock
Pledge Agreement nor to any provision thereof shall impair the
absolute and unconditional obligation of the Borrower to pay the
principal of and interest on this Note when and as due. ANY
PROVISION OF THIS NOTE AND/OR THE STOCK PLEDGE AGREEMENT TO THE
CONTRARY NOTWITHSTANDING, EXCEPT IN THE CASE OF FRAUDULENT OR
WILLFUL MISCONDUCT ON THE PART OF THE BORROWER IN CONNECTION WITH
HIS EXECUTION, DELIVERY OR PERFORMANCE OF THE STOCK PLEDGE
AGREEMENT, THE HOLDER OF THIS NOTE SHALL HAVE NO CLAIM OR RIGHT
TO PROCEED AGAINST THE BORROWER FOR ANY DEFICIENCY OR OTHER SUM
OWING ON ACCOUNT OF THE INDEBTEDNESS EVIDENCED BY THIS NOTE, AND
THE HOLDER HEREOF BY ITS ACCEPTANCE OF THIS NOTE AGREES TO LOOK
SOLELY TO THE ASSETS PLEDGED PURSUANT TO THE STOCK PURCHASE
AGREEMENT FOR PAYMENT OF SUCH INDEBTEDNESS; PROVIDED, HOWEVER,
THAT NOTHING HEREIN CONTAINED SHALL LIMIT, RESTRICT OR IMPAIR THE
RIGHT OF THE HOLDER OF THIS NOTE TO FORECLOSE UPON OR OTHERWISE
RECOVER UPON ANY PLEDGES, LIENS OR SECURITY INTERESTS GRANTED
PURSUANT TO THE STOCK PLEDGE AGREEMENT.
-----------------------------------
Rodney H. Thomas
<PAGE>
<PAGE>
EXHIBIT H
STOCK PLEDGE AGREEMENT
----------------------
THIS STOCK PLEDGE AGREEMENT, made and entered into as of the
14th day of April, 2000, by and between (i) Rodney H. Thomas (the
"Stockholder"), an individual and a resident of St. Louis County,
Missouri; and (ii) Founders Group, LLC (the "Lender"), a Kentucky
limited liability company.
PREMISES:
---------
The Stockholder owns One Million One Hundred Thirteen
Thousand Five Hundred (1,113,500) of the outstanding shares of
Series D Preferred Stock of ThermoView Industries, Inc. (the
"Stock").
Simultaneously with the execution of this Stock Pledge
Agreement, the Stockholder is making a Promissory Note (the
"Note") payable to the order of the Lender, pursuant to which the
Lender will make a One Million Five Hundred Thousand Dollar
($1,500,000) loan (the "Loan") available to the Stockholder.
To induce the Lender to make the Loan, the Stockholder has
agreed to pledge all of the Stock to secure its obligations under
the Note.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, and for other
good and valuable consideration, the parties hereto hereby
covenant, agree, represent and warrant as follows:
1. DEPOSIT AND PLEDGE OF SHARES. Contemporaneously with
the execution of this Stock Pledge Agreement, the Stockholder has
deposited and hereby pledges and assigns to the Lender, and
grants to the Lender a security interest in, the Stock, such
Stock being represented by Certificate No. 1, standing in the
Stockholder's name, with a duly executed stock power attached
thereto. All new shares of capital stock or securities created
in respect to the Stock, whether by stock split, stock dividend,
merger, consolidation or otherwise, that the Stockholder may
hereafter acquire, shall be delivered by the Stockholder to, and
shall be held by, the Lender subject to the terms, provisions and
conditions of this Stock Pledge Agreement, and the term "Stock"
as used herein shall be deemed to include all such new shares of
securities.
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2. OBLIGATIONS SECURED. All Stock pledged pursuant to
this Agreement shall be held by the Lender as security for
(i) the due and punctual payment of all amounts payable by the
Stockholder pursuant to the Note, and (ii) the due and punctual
performance and observance of all other agreements, covenants,
obligations, warranties and representations of the Stockholder as
set forth in this Stock Pledge Agreement (collectively, the
"Secured Obligations").
3. VOTING AND OWNERSHIP OF SHARES. So long as no Event of
Default occurs hereunder or under the Note (and upon the
occurrence of an Event of Default, then following the cure of
such Event of Default), the Stockholder shall be entitled to vote
the Stock, but only for purposes not inconsistent with the
covenants, obligations and conditions contained in this Stock
Pledge Agreement. Immediately upon the occurrence of any "Event
of Default", as hereinafter defined, and for so long as such
Event of Default continues, the Lender shall be entitled to
exercise all voting rights and privileges whatsoever with respect
to the Stock, and to that end the Stockholder hereby appoints the
Lender as its proxy and attorney-in-fact for purposes of voting
the Stock, and this appointment shall be deemed coupled with an
interest and is and shall be irrevocable until all of the
Stockholder's obligations to the Lender have been fully and
finally paid. All persons whatsoever shall be conclusively
entitled to rely upon the Lender's oral or written certification
that it is entitled to vote the Stock hereunder. The Stockholder
shall execute and deliver to the Lender any additional proxies
and powers of attorney that the Lender may desire in order to
vote more effectively the Stock in its own name. Upon the
occurrence of any Event of Default hereunder and for so long as
such Event of Default continues, the Lender may (but shall not be
obligated to) vote the Stock.
4. PAYMENTS OF DIVIDENDS AND NEW SHARES. During the
period that the Stock is being held as security hereunder:
(a) The Stockholder shall not, without the prior
written consent of the Lender, vote the Stock in favor of
allowing ThermoView Industries, Inc., to pay any partial or
complete liquidating distributions; and
(b) The Stockholder shall not, without the prior
written consent of the Lender, vote the Stock in favor of
allowing ThermoView Industries, Inc., to issue any additional
shares or options,subscription rights, warrants or other
instruments with respect to the Stock.
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<PAGE>
5. STATUS OF STOCK. The Stockholder hereby represents and
warrants to the Lender that the Stock is validly issued and
outstanding, fully paid and nonassessable; that the Stockholder
is the registered owner of the Stock, free and clear of all
liens, charges, equities and encumbrances; and that Stockholder
has the full power and authority to pledge the Stock to the
Lender pursuant to this Stock Pledge Agreement. Stockholder
covenants and agrees that none of the Stock shall be sold,
transferred, or assigned without the Lender's prior written
consent, which consent may be arbitrarily withheld so long as
this Stock Pledge Agreement is in effect.
6. MAINTENANCE OF PRIORITY OF PLEDGE. The Stockholder
shall be liable for and shall from time to time pay and discharge
all taxes, assessments and governmental charges imposed upon the
Stock by federal, state or local authority, the liens of which
would or might be held prior to the right of the Lender in and to
the Stock. The Stockholder shall not, at any time while this
Stock Pledge Agreement is in effect, do or suffer any act or
thing whereby the rights of the Lender in the Stock would or
might be impaired. The Stockholder shall execute and deliver
such further documents and take such further actions as may be
reasonably required to confirm the rights of the Lender in and to
the Stock or otherwise to effectuate the intention of this Stock
Pledge Agreement.
7. EVENTS OF DEFAULT. Each of the following shall be
deemed an "Event(s) of Default" hereunder:
(a) Any default occurs in the payment of interest or
principal or other sums due with respect to the Secured
Obligations, when the same are due and payable in accordance with
their respective terms (provided, that any required notices have
been given and any applicable grace periods have expired); or
(b) A breach of any kind whatsoever occurs under the
terms of this Stock Pledge Agreement or any covenant, warranty,
representation or agreement made by the Stockholder herein, or in
connection herewith, shall be broken or proven to be untrue at
any time (provided, that any required notices have been given and
any applicable grace periods have expired).
<PAGE>
<PAGE>
8. REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of
any Event of Default, as referred to in Section 7 hereof, and for
so long as such Event of Default continues, the Lender shall have
the following rights and remedies, in addition to all other
rights and remedies provided at law or in equity, all of which
shall be cumulative and may be exercised from time to time,
either successively or concurrently, either by itself or through
a court or courts of appropriate jurisdiction:
(a) The Lender may exercise its rights as proxy and
attorney-in-fact pursuant to Section 3 hereof to exercise all
voting rights and privileges granted to shareholders of
ThermoView Industries, Inc.
(b) The Lender may exercise all rights of a secured
party under the Uniform Commercial Code and all other applicable
laws.
(c) The Lender may take such steps as may be necessary
to cause all or any portion of the Stock as it, in its sole
discretion, deems necessary or desirable to be transferred into
the Lender's name or into the name of the Lender's nominee on the
books of ThermoView Industries, Inc., and following such
transfer, the Lender may exercise all rights granted to holders
of shares of Series D Preferred Stock of ThermoView Industries,
Inc., under its Certificate of Incorporation and By-laws, and
applicable law, including without limitation, the right to
arrange a bona fide sale of the Stock or any portion thereof
within a reasonable time at a public sale or sales or at a
private sale or sales or to vote the Stock in favor of the
declaration of a dividend in kind.
In the event that a sale or sales of the Stock is
determined necessary in the Lender's sole discretion, the Lender
will give notice to the Stockholder and grant the Stockholder a
reasonable time (as determined by the Lender, giving
consideration to the Stockholder's and ThermoView Industries,
Inc.'s then existing financial condition) either to purchase the
Stock or to arrange for a purchase of the Stock by another person
who has such knowledge and experience concerning the financial
affairs of the Stockholder and ThermoView Industries, Inc., that
registration of the Stock under any federal or state securities
laws is not deemed necessary or advisable in the opinion of the
Lender's counsel before such sale, for an amount not less than
all the Secured Obligations then due and
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<PAGE>
payable. In the event such a sale satisfactory to the Lender
cannot be arranged, then the Lender may take such steps as may be
necessary to effect either a public sale of the Stock or a sale
of the Stock not involving a public offering within the meaning
of the regulations of the Securities and Exchange Commission, at
the cost and expense of the Stockholder. In either event, the
Lender may sell the Stock, or any portion thereof, from time to
time, upon not less than ten (10) days prior written notice to
the Stockholder of the time and place of sale (which notice the
Stockholder hereby agrees is commercially reasonable), for cash
or for future delivery, the Stockholder hereby waiving all
rights, if any, of marshaling the Stock and other security for
the payment of the Obligations. At such sale or sales, the
Lender may bid for and acquire the Stock or any portion thereof
free from any further redemption rights of the Stockholder, and
in lieu of paying cash therefor, may make settlement for the
selling price of the Stock or part thereof by crediting upon the
payment of the Secured Obligations the net selling price of the
Stock, after deducting all of the Lender's reasonable costs and
expenses of every kind and nature therefrom, including the
Lender's reasonable attorneys' fee incurred in connection with
realizing upon the Stock, provided the same is not prohibited by
applicable law.
In the case of any sale by the Lender of the Stock, or
any portion thereof, on credit or for future delivery, which may
be elected at the option and in the complete discretion of the
Lender, the Stock so sold may, at the Lender's option, either be
delivered to the purchaser or retained by the Lender until the
selling price is paid by the purchaser, but in either event the
Lender shall incur no liability in case of failure of the
purchaser to take up and pay for the Stock so sold. In case of
any such failure, such Stock may be sold again by the Lender in
the manner provided in this paragraph.
After deducting all its reasonable costs and expenses
of every kind, including without limitation, legal and accounting
fees incident to a registration of the stock under the Securities
Act of 1933 or any rule or rules adopted pursuant thereto or
under the securities (Blue Sky) laws of any state or incident to
a public or private offering in connection with the sale of the
Stock, the Lender shall apply the residue of the proceeds of the
sale or sales of the Stock to the Secured Obligations in the
order or priority selected by the Lender. The Lender shall not
incur any liability as a result of the sale of the Stock at any
private sale or sales, and the
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Stockholder hereby waives any claim arising by reason of the fact
that the price or prices for which the Stock, or any portion
thereof, is sold at such private sale or sales is less than the
price which would have been obtained at a public sale or sales or
is less than the amount due on the Note, even if the Lender
accepts the first offer received and does not offer the Stock, or
any portion thereof, to more than one offeree. The Stockholder
shall remain liable for any deficiency remaining due with respect
to the Secured Obligations. The Lender will account to the
Stockholder for any surplus resulting from such sale or sales
within sixty (60) days following the Lender's receipt of final
payment in cash.
9. NOTICES. All notices, elections, requests, demands and
other communications hereunder shall be in writing and shall be
given at the time delivered or deposited in the United States
mails, certified or registered mail, postage prepaid, return
receipt requested, or sent by telex or telecopy, addressed to the
parties as follows (or to such other person or place of which any
party hereto shall have given written notice to the other):
If to the Lender: Founders Group, LLC
1101-C Herr Lane
Louisville, Kentucky 40202
Attn: Mr. Stephen Hoffmann
If to the Stockholder: Rodney H. Thomas
13397 Lakefront Drive
Earth City, Missouri 63045
The address of any party for any purpose may be changed at
any time and from time to time in the manner provided for in this
Section 9 and shall be the most recent such address furnished in
writing to the other party. A notice shall be deemed to have
been given when dispatched, if by telex or telecopy, addressed as
aforesaid (or to such other designated address), or if by mail on
the third Business Day after it is enclosed in an envelope,
addressed to the party to be notified at the address stated above
(or to such other designated address), properly stamped, sealed
and deposited in the United States mail.
10. GOVERNING LAW. THE LAWS OF THE COMMONWEALTH OF
KENTUCKY SHALL GOVERN THE CONSTRUCTION OF THIS STOCK PLEDGE
AGREEMENT AND THE RIGHTS AND REMEDIES AND DUTIES OF THE PARTIES
HEREUNDER.
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<PAGE>
11. SUCCESSORS AND ASSIGNS. This Stock Pledge Agreement
shall bind the Stockholder, its successors and assigns, and shall
inure to the benefit of the Lender, its successors and assigns.
12. TIME OF ESSENCE. Time shall be of the essence in the
performance of the Stockholder's obligations hereunder.
13. WAIVER OF TRIAL BY JURY. Each of the parties hereto
waives all right to trial by jury in any action or proceeding to
enforce or defend his or its rights under this Agreement and/or
the Note.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their
duly authorized representatives to duly execute and deliver this
Stock Pledge Agreement on the dates set forth opposite their
respective signatures, but effective as of the date first above
written.
The "Stockholder"
Rodney H. Thomas
By:
--------------------------------
Title:
-----------------------------
The "Lender"
Founders Group, LLC
By:
--------------------------------
Title:
----------------------------
EXHIBIT 10.6
FIFTH AMENDMENT TO LOAN AGREEMENT
AND AMENDMENT TO NOTE
---------------------
THIS FIFTH AMENDMENT TO LOAN AGREEMENT AND AMENDMENT TO
NOTE (the "AGREEMENT") is made and entered into as of April 14th,
2000, by and among [i] THERMOVIEW INDUSTRIES, INC., a Delaware
corporation ("THERMOVIEW"), [ii] AMERICAN HOME DEVELOPERS CO.,
INC., a California corporation ("AMERICAN HOME"), [iii]
THERMOVIEW INDUSTRIES, INC. OF CALIFORNIA, a California
corporation, formerly known as Five Star Builders, Inc.,
successor in interest to American Home Remodeling ("THERMOVIEW
CALIFORNIA"), [iv] KEY HOME CREDIT, INC., a Delaware corporation
("KEY HOME"), [v] KEY HOME MORTGAGE, INC., a Delaware corporation
("KEY HOME MORTGAGE"), [vi] LEINGANG SIDING AND WINDOW, INC., a
North Dakota business corporation ("LEINGANG SIDING"), [vii]
PRIMAX WINDOW CO., a Kentucky corporation ("PRIMAX"), [viii]
PRECISION WINDOW MFG., INC., a Missouri corporation
("PRECISION"), [ix] ROLOX, INC., a Kansas corporation ("ROLOX"),
[x] TD WINDOWS, INC., a Kentucky corporation ("TD WINDOWS"), [xi]
THERMAL LINE WINDOWS, INC., a North Dakota corporation, formerly
known as Ice Inc., successor in interest to Thermal Line Windows,
LLP, and Blizzard Enterprises, Inc. ("THERMAL LINE"), [xii]
THERMOVIEW OF MISSOURI, INC., a Missouri corporation ("THERMOVIEW-
MISSOURI"), [xiii] THERMO-TILT WINDOW COMPANY, a Delaware
corporation ("THERMO-TILT"), [xiv] THOMAS CONSTRUCTION, INC., a
Missouri corporation ("THOMAS"), [xv] THERMO-SHIELD OF AMERICA
(ARIZONA), INC., an Arizona corporation ("TSAAI"), [xvi] THERMO-
SHIELD OF AMERICA (MICHIGAN), INC., a Michigan corporation
("TSAMI"), [xvii] THERMO-SHIELD COMPANY, LLC, an Illinois limited
liability company ("TSC"), [xviii] THERMO-SHIELD OF AMERICA
(WISCONSIN), LLC, a Wisconsin limited liability company ("TSAW"),
[xix] THERMOVIEW ADVERTISING GROUP, INC., a Delaware corporation
("TAG") (ThermoView, American Home, ThermoView California, Key
Home, Key Home Mortgage, Leingang Siding, Primax, Precision,
Rolox, TD Windows, Thermal Line, ThermoView-Missouri, Thermo-
Tilt, Thomas, TSAAI, TSAMI, TSC, TSAW, and TAG individually are
referred to in this Agreement as a "BORROWER" and collectively
are referred to in this Agreement as the "BORROWERS"), and
[xx] PNC BANK, NATIONAL ASSOCIATION, a national banking
association (the "BANK").
RECITALS:
A. The Borrowers and the Bank are parties to a
certain Loan Agreement, dated as of August 31, 1998, as amended
pursuant to that certain Joinder to Loan Documents and Amendment
to Loan Documents (Thomas Construction, Inc.) dated as of January
1, 1999, by and among certain of the Borrowers and the Bank, as
further amended by that certain Joinder to Loan Documents and
Amendment to Loan Documents (Precision Window Mfg., Inc.) dated
as of January 5, 1999, by and among certain of the Borrowers and
the Bank, as further amended by that certain Joinder to Loan
Documents and Amendment to Loan Documents (Thermo-Shield) dated
as of July 8, 1999, by and among the Borrowers and the Bank, as
further amended by that certain Amendment to Loan Agreement dated
as of July 30, 1999, by and among the Borrowers and the Bank, as
<PAGE>
<PAGE>
further amended by that certain Second Amendment to Loan
Agreement dated as of October 14, 1999, by and among the
Borrowers and the Bank, as further amended by that certain Third
Amendment to Loan Agreement dated as of November , 1999, by
----
and among the Borrowers and the Bank, and as further amended by
that certain Fourth Amendment to Loan Agreement and Amendment to
Note and Term Note dated as of November 10, 1999, by and among
the Borrowers and the Bank (as so amended, the "LOAN AGREEMENT")
(certain capitalized terms used in this Agreement have the
meanings set forth for them in the Loan Agreement unless
expressly otherwise defined herein), pursuant to which, among
other things, the Bank established a $15,000,000.00 Committed
Line of Credit in favor of the Borrowers.
B. The Borrowers have requested that the Bank amend
the Loan Agreement and the Note as more particularly described in
this Agreement.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements set forth in this Agreement
and for other good and valuable consideration, the mutuality,
receipt and sufficiency of which are hereby acknowledged, the
Borrowers and the Bank hereby agree as follows:
ARTICLE 1
AMENDMENTS TO LOAN AGREEMENT
The Loan Agreement is hereby amended as follows:
1.1 By deleting Section 1.D. of the Loan Agreement and
substituting a new Section 1.D. reading in its entirety as
follows:
D. TERMINATION OF COMMITMENT. Bank's obligation to
make Advances under the Loan (the "COMMITMENT") shall
continue until the earlier of May 1, 2001, or any later
date or dates, if applicable, as to which Borrowers and
the Bank (each in their sole and absolute discretion,
which may be exercised arbitrarily) may agree in
writing (May 1, 2001, or such later date is referred to
herein as the "LOAN EXPIRATION DATE"), and the amount
of all Advances not earlier repaid, together with
interest thereon, shall be due and payable in full as
of the Loan Expiration Date.
1.2 By deleting the last sentence of Section 1.E. of the
Loan Agreement and substituting a new last sentence to Section
1.E. of the Loan Agreement reading in its entirety as follows:
The applicable Unused Loan Fee rate (the "UNUSED LOAN
FEE RATE") shall be one eighth of one percent (.125%)
per annum.
2
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1.3 By deleting the first sentence of Section 1.F. of the
Loan Agreement and substituting a new first sentence to Section
1.F. of the Loan Agreement reading in its entirety as follows:
Subject to the provisions of this Agreement, Bank
agrees to issue irrevocable standby Letters of Credit
from time to time after January 1, 1999, until the
earlier of May 1, 2001, or any later date or dates, if
applicable, as to which Borrowers and Bank may agree
(each in their sole and absolute discretion, which may
be exercised arbitrarily) in writing (May 1, 2001, or
such later date is referred to herein as the "LETTER OF
CREDIT EXPIRATION DATE") upon the request of, for the
account of, and with recourse to Borrowers (the "LETTER
OF CREDIT FACILITY").
1.4 By deleting Section 4B.[1] of the Loan Agreement and
substituting a new Section 4B.[1] reading in its entirety as
follows:
[1] MONTHLY INFORMATION. Commencing with the
month ending March 31, 2000, Borrowers will deliver to
Bank as soon as practicable after the end of each
month, but in any event within thirty (30) days
thereafter: [i] an unaudited consolidated balance sheet
of Borrowers at the end of such month; [ii] unaudited
consolidated statements of income, retained earnings
and cash flows of Borrowers for such month and for the
portion of such year ending with such month; [iii] an
acquisition pipeline report; [iv] projected
consolidated cash flow statements of each Borrower,
including summary details of cash disbursements, for
the immediately succeeding calendar month; [v] a report
(now known as the Earn-Out Forecast) detailing all
anticipated payments for all Earn-Outs, as that term
is defined in this Agreement; and [vi] a certificate
("COMPLIANCE CERTIFICATE") signed by the Chief
Executive Officer or Chief Financial Officer of
ThermoView, certifying that such officer has reviewed
the relevant terms of this Agreement and the other Loan
Documents, has made, or caused to be made under his or
her supervision, an adequate review of the transactions
and condition of each of the Borrowers during such
period and as at the date of such signing, and that
such review has not disclosed the existence, during
such period or as at the date of such signing, of any
Event of Default, or if so, specifying the nature and
period of existence thereof and what action ThermoView
or the applicable Borrower has taken or is taking or
proposes to take with respect thereto together with a
certification that, as applicable, ThermoView or the
applicable Borrower as at the end of such month, if
applicable, was, or was not, in compliance with the
financial covenants set forth in the Section of this
Agreement entitled "Financial Covenants," and a
schedule disclosing the calculations forming the basis
for such certification.
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1.5 By deleting Section 4B.[2] of the Loan Agreement and
substituting a new Section 4B.[2] reading in its entirety as
follows:
[2] QUARTERLY INFORMATION. Borrowers will
deliver to Bank as soon as practicable after the end of
each of the first three quarterly fiscal periods in
each fiscal year of ThermoView, but in any event within
forty-five (45) days thereafter, [i] an unaudited
consolidated balance sheet of Borrowers as at the end
of such quarter, and [ii] unaudited consolidated
statements of income, retained earnings and cash flows
of Borrowers for such quarter and (in the case of the
second and third quarters) for the portion of the
fiscal year ending with such quarter, setting forth in
comparative form in each case the projected
consolidated figures for such period and the actual
consolidated figures for the comparable period of the
prior fiscal year. Such statements shall be [a]
prepared in accordance with GAAP consistently applied,
[b] in reasonable detail, [c] certified by the
principal financial or accounting officer of ThermoView
and [d] accompanied by a Compliance Certificate or
other statement in reasonable detail, certified by the
Chief Executive Officer or Chief Financial Officer of
ThermoView showing the calculations used in determining
compliance with each of the financial covenants set
forth in this Agreement.
1.6 By deleting Section 4I.[1]of the Loan Agreement and
substituting a new Section 4I.[1] reading in its entirety as
follows:
[1] FUNDED DEBT TO EBITDA. The ratio, calculated
as of the end of each fiscal quarter of Borrowers
beginning March 31, 2000 (each a "CALCULATION DATE"),
of the consolidated (and combined, if applicable)
Funded Debt of Borrowers as of each Calculation Date
divided by the consolidated (and combined, if
applicable) EBITDA for Borrowers for the four (4)
fiscal quarters of Borrowers immediately preceding the
applicable Calculation Date shall not be greater than
10.00 to 1.00 as of the Calculation Date occurring on
March 31, 2000, and thereafter until, but not
including, the Calculation Date occurring on June 30,
2000; 7.50 to 1.00 as of the Calculation Date occurring
on June 30, 2000, and thereafter until, but not
including, the Calculation Date occurring on September
30, 2000; 5.25 to 1.00 as of the Calculation Date
occurring on September 30, 2000, and thereafter until,
but not including, the Calculation Date occurring on
December 31, 2000, and 4.25 to 1.00 as of the
Calculation Date occurring on December 31, 2000, and as
of all Calculation Dates thereafter.
1.7 By deleting Section 4I.[2]of the Loan Agreement and
substituting a new Section 4I.[2] reading in its entirety as
follows:
[2] SENIOR DEBT TO EBITDA. The ratio as of each
Calculation Date of the consolidated (and combined, if
applicable) Senior Debt of Borrowers as of each
Calculation Date divided by the consolidated (and
combined, if applicable) EBITDA
4
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for Borrowers for the four (4) fiscal quarters of
Borrowers immediately preceding the applicable
Calculation Date shall not be greater than 4.60 to 1.00
as of the Calculation Date occurring on March 31, 2000,
and thereafter until, but not including, the
Calculation Date occurring on June 30, 2000; 4.50 to
1.00 as of the Calculation Date occurring on June 30,
2000, and thereafter until, but not including, the
Calculation Date occurring on September 30, 2000; and
3.50 to 1.00 as of the Calculation Date occurring on
September 30, 2000, and as of all Calculation Dates
thereafter.
1.8 By deleting Section 4I.[3]of the Loan Agreement and
substituting a new Section 4I.[3] reading in its entirety as
follows:
[3] FIXED CHARGE COVERAGE. The ratio as of each
Calculation Date of the consolidated (and combined, if
applicable) EBITDA LESS the amount of any cash taxes
("CASH TAXES") LESS the amount of all Earn-Outs, as
that term is defined herein, not financed with the
proceeds of loans or other borrowings from any person
or entity ("UNFINANCED EARN-OUTS") LESS the amount of
any Capital Expenditures, as that term is defined
herein, of the Borrowers not financed with the proceeds
of loans or other borrowings from any person or entity
("UNFINANCED CAPITAL EXPENDITURES"), which Cash Taxes,
Unfinanced Earn-Outs, and Unfinanced Capital
Expenditures were incurred during the immediately
preceding four (4) fiscal quarters of the Borrowers,
divided by the sum of, for the same period,
consolidated (and combined, if applicable) current
maturities of Funded Debt for Borrowers PLUS any and
all dividends paid or accrued by the Borrowers PLUS all
consolidated interest expenses paid or accrued by the
Borrowers, shall not be less than .70 to 1.00 as of
the Calculation Date occurring on March 31, 2000, and
thereafter until, but not including, the Calculation
Date occurring on June 30, 2000; and .75 to 1.00 as of
the Calculation Date occurring on June 30, 2000, and
thereafter until, but not including, the Calculation
Date occurring on September 30, 2000; and 1.10 to 1.00
as of the Calculation Date occurring on September 30,
2000, and thereafter until, but not including, the
Calculation Date occurring on December 31, 2000; and
1.20 to 1.00 as of the Calculation Date occurring on
December 31, 2000, and as of all Calculation Dates
thereafter.
1.9 By deleting Section 4I.[4] of the Loan Agreement and
substituting a new Section 4I[4] reading in its entirety as
follows:
[i] CONVERSION OF FINANCIAL COVENANTS USE OF MODIFIED
BORROWER EBITDA TO EBITDA. Notwithstanding anything
contained in this Agreement to the contrary, effective
with the Calculation Date occurring on December 31,
1999, the financial covenants set forth in Sections
4I.[1], 4I.[2], and 4I.[3] of this Agreement and all
other calculations required by this Agreement,
including the calculations contained
5
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<PAGE>
in the "Limitation of Commitment" Section of this
Agreement, shall be calculated using EBITDA instead of
Modified Borrower EBITDA.
1.10 By deleting Section 4I.[d] of the Loan Agreement and
substituting a new Section 4I.[d] reading in its entirety as
follows:
[d] "FUNDED DEBT" is defined as the
consolidated (and combined, if applicable) sum of all
line borrowings, plus current (i.e. less than or equal
to one (1) year) and non-current maturities of long
term debt of each of the Borrowers (including but not
limited to any obligations of any Borrower that are
determined based on the future performance of any
Acquired Entity ("EARN-OUTS")) to the Bank or any other
person or entity. For purposes of this calculation,
Funded Debt shall be deemed to include, at all times,
the actual principal amount of the GE Subordinated Debt
due and owing without regard to any carrying value
thereof shown on the books and records of the
Borrowers.
1.11 By deleting Section 4J. of the Loan Agreement and
substituting a new Section 4J. reading in its entirety as
follows:
J. NET WORTH. Borrowers will maintain at all
times a consolidated (and combined, if applicable)
minimum Net Worth in an amount equal to ninety percent
(90%) of Borrowers' actual book net worth as indicated
in Borrowers' consolidated (and combined, if
applicable) Financial Statements dated as of December
31, 1999 (the "BASE NET WORTH"), plus, for each fiscal
quarter of Borrowers ending after December 31, 1999, an
amount equal to the sum of [i] seventy-five percent
(75%) of Borrowers' consolidated (and combined, if
applicable) net income (without giving effect to
losses) for each such fiscal quarter and [ii] one
hundred percent (100%) of the net proceeds (whether in
the form of cash or a decrease in any debt of any of
the Borrowers) of any equity offering (including, but
not limited to, all public equity offerings, all
private equity offerings and any conversions of any
debt of any of the Borrowers to equity) resulting in
the issuance for any reason of any equity interest in
Borrowers of any type or character (including, but not
limited to, common stock, preferred stock, or
redeemable preferred stock) for Borrowers for each such
fiscal quarter. As used in this financial covenant the
parties agree that the [i] term "NET WORTH" means
stockholders' equity in the Borrowers and [ii] Base Net
Worth as of December 31, 1999, was $
-------------
(i.e. ninety percent (90%) of $ ).
-----------------
1.12 By deleting the third sentence of Section 4P. of the
Loan Agreement and substituting a new third sentence to Section
4P. of the Loan Agreement reading in its entirety as follows:
The Bank may require additional field audits during the
term of this Agreement as often as is deemed necessary
by the Bank in the exercise of the Bank's sole and
absolute discretion.
6
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1.13 By adding a new Section 4S. to the Loan Agreement
reading in its entirety as follows:
S. RENEWAL FEE. Pay to Bank [i] on or before
June 30, 2000, $50,000.00, which represents a portion
of the $70,000.00 fee (the "EXTENSION FEE") charged by
Bank for extending the Loan Expiration Date to May 1,
2001, and [ii] on or before July 31, 2000, $20,000.00,
which represents the remainder of the Extension Fee.
1.14 By deleting Section 5F. of the Loan Agreement and
substituting a new Section 5F. reading in its entirety as
follows:
F. CHANGE IN BUSINESS, MANAGEMENT OR OWNERSHIP.
Except for the issuance of [i] the 9.6% Cumulative
Convertible Series C Preferred Stock ("SERIES C
PREFERRED STOCK"), [ii] the 12% Cumulative Series D
Preferred Stock ("SERIES D PREFERRED STOCK") on terms
and conditions acceptable to the Bank, [iii] 113,173
shares of the Series D Preferred Stock to Michael S.
Haines ("MR. HAINES") on terms and conditions
acceptable to the Bank, [iv] 60,745 shares of the
ThermoView common stock (the "COMMON STOCK") and 49,735
shares of the Series D Preferred Stock to Steven B.
Hoyt ("MR. HOYT") on terms and conditions acceptable to
the Bank, [v] 49,735 shares of the Series D Preferred
Stock and 60,745 shares of the Common Stock to Alvin W.
Leingang ("MR. LEINGANG"), [vi] 113,173 shares of the
Series D Preferred Stock to Bradley A. Smith ("MR.
SMITH"), and [vii] 1,113,500 shares of the Series D
Preferred Stock to Rodney H. Thomas ("MR. THOMAS") on
terms and conditions acceptable to the Bank, make or
permit any material change [a] in the nature of its
respective business as carried on as of the date
hereof, [b] in the composition of its respective
current executive management, or [c] in its respective
equity ownership.
1.15 By adding a new Section 5M. to the Loan Agreement
reading in its entirety as follows:
M. EARN-OUT PAYMENTS. Except for the
$1,000,000.00 Earn-Out payment paid to Mr. Thomas on
February 29, 2000, and financed (i.e. not an Unfinanced
Earn-Out) with the proceeds of the recent equity
offering by ThermoView, make or permit any payment with
respect to any Earn-Out at any time [i] the Funded Debt
to EBITDA ratio of Borrowers, as such ratio is more
particularly described in Section 4I.[1] of this
Agreement, is greater than or equal to 5.00 to 1.00 as
of the Calculation Date immediately preceding the date
any such Earn-Outs are due and payable or [ii] the
Fixed Charge Coverage Ratio of Borrowers, as such ratio
is more particularly described in Section 4I.[3] of
this Agreement, is less than or equal to 1.10 to 1.00
as of the Calculation Date immediately preceding the
date any such Earn-Outs are due and payable.
7
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1.16 By deleting the LOAN FEE CALCULATION SCHEDULE TO
AGREEMENT attached to the Loan Agreement.
ARTICLE 2
AMENDMENTS TO NOTE
The Note is hereby amended as follows:
2.1 By deleting the last sentence of paragraph 1 of the
Note and substituting a new last sentence to paragraph 1 of the
Note reading in its entirety as follows:
The "EXPIRATION DATE" shall mean the earliest to occur
of [a] May 1, 2001, or [b] the date on which the Bank
receives written notice from the Borrowers (which
notice shall be irrevocable) in which the Borrowers
shall state that they do not intend to request further
Advances hereunder, and shall acknowledge that the Bank
shall have no obligation to make further Advances
hereunder.
2.2 By deleting the definition of "Applicable Euro-Rate
Margin" in the Note and inserting a new definition of "Applicable
Euro-Rate Margin" into the Note reading in its entirety as
follows:
"Applicable Euro-Rate Margin" means four percent
(4.00%) per annum.
2.3 By deleting the first grammatical paragraph of section
5 of the Note and inserting a new first grammatical paragraph of
section 5 to the Note reading in its entirety as follows:
5. PAYMENT TERMS. Principal of this Note shall
be paid in a single payment on the Expiration Date.
Until June 1, 2000, interest on each Advance accruing
interest at the Euro-Rate Loan Rate shall be payable on
the last day of the Euro-Rate Interest Period for such
Advance unless such Euro-Rate Interest Period is longer
than three (3) months, in which case interest shall be
payable both on the three-month anniversary and on the
last day of the Euro-Rate Interest Period of such
Advance. On and after June 1, 2000, interest on each
Advance accruing interest at the Euro-Rate Loan Rate
shall be payable on the last day of the Euro-Rate
Interest Period for such Advance unless such Euro-Rate
Interest Period is longer than one (1) month, in which
case interest shall be payable both on the one-month
anniversary and on the last day of the Euro-Rate
Interest Period of such Advance. Interest on Advances
bearing interest at the Base Rate shall be payable on
the last day of each calendar month and on any and each
date that the principal of this Note is paid in full,
and on the Expiration Date.
2.4 By deleting SCHEDULE A TO PROMISSORY NOTE (COMMITTED
LINE OF CREDIT NOTE).
8
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ARTICLE 3
WAIVER OF COVENANT DEFAULT
Subject to delivery to the Bank of each of the
"Agreement Documents" more particularly described in Article 4 of
this Agreement, the Bank hereby grants a waiver of Borrowers' non-
compliance with [i] the financial covenants contained in the
Section 4I. and Section 4J. of the Loan Agreement and of the
Events of Default that would otherwise result from a violation of
those Sections, solely for the period November 10, 1999, to March
31, 2000, and [ii] the covenants contained in Section 4B.[1] of
the Loan Agreement and of the Events of Default that would
otherwise result from a violation of that Section, solely for the
period January 1, 2000, to March 31, 2000. The Borrowers agree
that they will hereafter comply fully with these provisions, as
amended, and all other provisions of the Loan Agreement and the
Loan Documents, which remain in full force and effect.
ARTICLE 4
CONDITIONS PRECEDENT
The modifications to the Loan Agreement described in
Article 1 of this Agreement, the modifications to the Note
described in Article 2 of this Agreement, and the waivers
described in Article 3 of this Agreement shall all become
effective on that date (the "EFFECTIVE DATE") on which on which
each of the following documents (collectively, the "AGREEMENT
DOCUMENTS") has been executed by each of the parties to them and
delivered to the Bank and when the Bank determines to its
satisfaction that each other condition set forth below has been
fulfilled:
A. This Agreement, duly executed by each of the
Borrowers and the Bank;
B. Copies of each of the fully-executed documents and
instruments modifying the financial covenants contained in the GE
Loan Documents so that such financial covenants are no more
restrictive than the financial covenants contained in the Loan
Documents after giving effect to the modifications to the Loan
Documents described in this Agreement;
C. Evidence satisfactory to the Bank in its sole
discretion that the Earn-Outs, as that term is defined in the
Loan Agreement, due and payable by the Borrowers as of March 31,
2000, have been paid and/or converted to the equity of
ThermoView;
D. The guaranty of payment to the Bank of a portion
of the Obligations by each of Stephen A. Hoffmann, Nelson E.
Clemmens, Richard E. Bowlds, and Douglas I Maxwell, III (the
"GUARANTY AGREEMENT"), which Guaranty Agreement will be in form
and substance satisfactory to
9
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the Bank and which will be secured by collateral in form and
amount acceptable to the Bank in its sole discretion;
E. Pledge Agreements from each of the Guarantors
("PLEDGE AGREEMENTS"), in form and substance satisfactory to the
Bank, granting the Bank a lien on and security interest in
certain certificates of deposit of each of the Guarantors on
deposit with the Bank;
F. UCC-1 Financing Statements showing the Bank as
Secured Party and each of American Home, ThermoView California,
Key Home Mortgage, Leingang Siding, Precision, Rolox, Thermal
Line, ThermoView-Missouri, Thomas, TSAAI, TSAMI, TSC, and TSAW as
Debtor for filing with the Office of the Secretary of State of
Kentucky; and
G. UCC-1 Financing Statements showing the Bank as
Secured Party and Thermal Line as Debtor for filing with the
Minnesota Secretary of State, the Colorado Secretary of State and
the North Dakota Secretary of State.
ARTICLE 5
OTHER STIPULATIONS
5.1 Upon the Effective Date, the provisions of Article 1,
Article 2 and Article 3 of this Agreement shall become effective
and modify or supersede and replace the applicable provisions of,
as applicable, the Loan Agreement and the Note recited as being
modified by them. From and after the Effective Date each
reference to the "Loan Agreement" and the "Note" shall mean and
be deemed a reference to, as applicable, the Loan Agreement and
the Note as modified by this Agreement but, except as modified by
this Agreement, the Loan Agreement and the Note shall each remain
in full force and effect in the same form as existed immediately
before the Effective Date.
5.2 This Agreement contains the final, complete and
exclusive agreement of the parties to it with regard to its
subject matter, may not be amended except in writing signed by
each of the parties to it, shall be binding upon and inure to the
benefit of the respective successors and assigns of each of the
parties to it (subject to applicable provisions of the Loan
Agreement), and shall be construed in accordance with and
otherwise governed in all respects by the laws of the
Commonwealth of Kentucky. This Agreement may be executed in
counterparts, and all counterparts collectively shall constitute
but one original document. Each of the Borrowers hereby agrees
to reimburse the Bank for all costs and expenses incurred by the
Bank in connection with the preparation, negotiation, documenta
tion, execution and delivery of this Agreement, including but not
limited to the reasonable fees of legal counsel to the Bank.
5.3 Each of the Borrowers join in this Agreement for the
purpose of consenting to the provisions of the foregoing
Agreement, and each of the Borrowers confirms and agrees that its
and their respective obligations under, as applicable, the Note
and the other Loan Documents shall be unimpaired by this
Agreement and that no Borrower has any defenses or set offs
against the Bank,
10
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or its respective officers, directors, employees, agents or
attorneys with respect to, as applicable, the Note or the other
Loan Documents and that all of the terms, conditions and
covenants in the Loan Documents remain unaltered and in full
force and effect and are hereby ratified and confirmed.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
11
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
"BORROWERS"
THERMOVIEW INDUSTRIES, INC.,
a Delaware corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
AMERICAN HOME DEVELOPERS CO., INC.,
a California corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
THERMOVIEW INDUSTRIES, INC. OF
CALIFORNIA, a California
corporation, formerly known as
Five Star Builders, Inc.,
successor in interest to
American Home Remodeling
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
KEY HOME CREDIT, INC.,
a Delaware corporation
By: /s/ Leigh Ann Barney
-------------------------------
Leigh Ann Barney, President
KEY HOME MORTGAGE, INC.,
a Delaware corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
<PAGE>
<PAGE>
LEINGANG SIDING AND WINDOW, INC.,
a North Dakota business corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
PRIMAX WINDOW CO.,
a Kentucky corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
PRECISION WINDOW MFG., INC.,
a Missouri corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
ROLOX, INC. a Kansas corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
TD WINDOWS, INC.
a Kentucky corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
<PAGE>
<PAGE>
THERMAL LINE WINDOWS, INC. a
North Dakota corporation,
formerly known as Ice Inc.,
successor in interest to
Blizzard Enterprises, Inc.
and Thermal Line Windows, LLP
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
THERMOVIEW OF MISSOURI, INC.,
a Missouri corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
THERMO-TILT WINDOW COMPANY,
a Delaware corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
THOMAS CONSTRUCTION, INC.,
a Missouri corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
THERMO-SHIELD OF AMERICA (ARIZONA),
INC., an Arizona corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
<PAGE>
<PAGE>
THERMO-SHIELD OF AMERICA
(MICHIGAN), INC.,
a Michigan corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
THERMO-SHIELD COMPANY, LLC,
an Illinois limited liability
company
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens,
Manager and President
THERMO-SHIELD OF AMERICA
(WISCONSIN), LLC, a Wisconsin
limited liability company
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens,
Manager and President
THERMOVIEW ADVERTISING GROUP, INC.,
a Delaware corporation
By: /s/ Charlton C. Hundley
-------------------------------
Charlton C. Hundley, Secretary
"Bank"
PNC BANK, NATIONAL ASSOCIATION,
a national banking association
By: /s/ Gregory M. Carroll
-------------------------------
Gregory M. Carroll,
Vice President
EXHIBIT 10.7
AMENDMENT NO. 2 AND WAIVER
AMENDMENT NO. 2 AND WAIVER (this "Amendment"), dated as of
April 14, 2000, between ThermoView Industries Inc. ("Company")
and GE Capital Equity Investments, Inc. ("GE Capital").
W I T N E S S E T H:
WHEREAS, Company and GE Capital are parties to that certain
Securities Purchase Agreement, dated as of July 8, 1999 (as from
time to time amended, restated, supplemented or otherwise
modified, the "Purchase Agreement", and unless the context
otherwise requires or unless otherwise defined herein,
capitalized terms used herein shall have the meanings assigned to
them in the Purchase Agreement); and
WHEREAS, Company issued Warrant No. 4 dated July 8, 1999 to
GE Capital (the "Warrant"); and
WHEREAS, Company has requested an amendment and/or waiver
of, and GE Capital has agreed to amend and/or waive, certain
provisions of the Purchase Agreement and the Warrant, on the
terms and subject to the conditions as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE PURCHASE AGREEMENT. Effective
as of the Effective Date (as defined herein), the Purchase
Agreement is amended as follows:
1.1 By amending and restating the definition of "Qualified
IPO" in its entirety as follows:
'"Qualified IPO" shall mean a sale of Common Stock
pursuant to an initial public offering of Common Stock on
Form S-1 (or any equivalent general registration form) under
the Securities Act (i) at a price not less than $5.50 per
share of Common Stock, (ii) in which the aggregate proceeds
(before expenses and underwriting discounts) to Company
shall not be less than $6,902,500 and (iii) following which
the Common Stock will be listed on the American Stock
Exchange.'
1.2 By amending and restating Sections 5.1(b)(i) and (ii)
of the Purchase Agreement in their entirety as follows:
'"(i) Monthly Information. Commencing with the month
ending March 31, 2000, Company will deliver to Purchaser as
soon as practicable after the end of each month, but in any
event within 30 days thereafter: (A) an unaudited
consolidated balance sheet of Company and its Subsidiaries,
if any, at the end of such month; (B)
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unaudited consolidated statements of income, retained
earnings and cash flows of Company and its Subsidiaries, if
any, for such month and for the portion of such year ending
with such month; (C) an acquisition pipeline report; (D)
projected consolidated cash flow statements of each of
Company and its Subsidiaries, including summary details of
cash disbursements, for the immediately succeeding calendar
month; (E) an Earn-Out forecast which shall detail all
anticipated payments for all Earn-Outs; and (F) a
certificate ("Compliance Certificate") signed by the Chief
Executive Officer or Chief Financial Officer of Company,
certifying that such officer has reviewed the relevant terms
of this Agreement and the other Transaction Documents, has
made, or caused to be made under his or her supervision, an
adequate review of the transactions and condition of each of
Company and its Subsidiaries during such period and as at
the date of such signing, and that such review has not
disclosed the existence, during such period or as at the
date of such signing, of any Event of Default, or if so,
specifying the nature and period of existence thereof and
what action Company or any of its Subsidiaries has taken or
is taking or proposes to take with respect thereto together
with a certification that, as applicable, Company and its
Subsidiaries as at the end of such month, if applicable,
was, or was not, in compliance with the financial covenants
set forth in Section 5.1(h) of this Agreement, and a
schedule disclosing the calculations forming the basis for
such certification.
(ii) Quarterly Information. Company will deliver to
Purchaser as soon as practicable after the end of each of
the first three quarterly fiscal periods in each Fiscal Year
of Company, but in any event within 45 days thereafter, (A)
an unaudited consolidated balance sheet of Company and its
Subsidiaries, if any, as at the end of such quarter; (B)
unaudited consolidated statements of income, retained
earnings and cash flows of Company and its Subsidiaries, if
any, for such quarter and (in the case of the second and
third quarters) for the portion of the Fiscal Year ending
with such quarter, setting forth in comparative form in each
case the projected consolidated figures for such period and
the actual consolidated figures for the comparable period of
the prior Fiscal Year. Such statements shall be (1) prepared
in accordance with GAAP consistently applied, (2) in
reasonable detail, (3) certified by the principal financial
or accounting officer of Company and (4) accompanied by a
Compliance Certificate or other statement in reasonable
detail, certified by the Chief Executive Officer or Chief
Financial Officer of Company showing the calculations used
in determining compliance with each of the financial
covenants set forth in Sections 5.1(h) and 5.2(i); and (C)
the pro forma financial reports of Company and its
Subsidiaries for such quarter."
1.3 By amending and restating Sections 5.1(h)(i) and (ii)
in their entirety as follows:
"(i) Funded Debt to Modified EBITDA. The ratio,
calculated as of the end of each fiscal quarter of Company
and its Subsidiaries beginning March 31, 2000 (each a
"Calculation Date"), of the
2
<PAGE>
<PAGE>
consolidated (and combined, if applicable) Funded Debt of
Company and its Subsidiaries as of each Calculation Date
divided by the consolidated (and combined, if applicable)
Modified EBITDA for Company and its Subsidiaries for the
four (4) fiscal quarters of Company and its Subsidiaries
immediately preceding the applicable Calculation Date shall
not be greater than 10.00 to 1.00 as of the Calculation Date
occurring on March 31, 2000, and thereafter until, but not
including, the Calculation Date occurring on June 30, 2000;
7.50 to 1.00 as of the Calculation Date occurring on June
30, 2000, and thereafter until, but not including, the
Calculation Date occurring on September 30, 2000; 5.25 to
1.00 as of the Calculation Date occurring on September 30,
2000, and thereafter until, but not including, the
Calculation Date occurring on December 31, 2000, and 4.25 to
1.00 as of the Calculation Date occurring on December 31,
2000, and as of all Calculation Dates thereafter.
For purposes of this financial covenant, the following
terms shall have the following meaning:
(A) "Base Earnings" shall mean the consolidated
(and combined, if applicable) sum of all earnings
before interest, taxes, depreciation and amortization
less any extraordinary gain, plus expenses, calculated
and estimated by Company and its Subsidiaries in a
manner and amount acceptable to Purchaser in each case,
incurred by Company and its Subsidiaries, if and to the
extent applicable, that reasonably are expected no
longer to be incurred because of operating efficiencies
realized as a result of and following each such entity
having become a Subsidiary of Company ("Non-Recurring
Expenses"), and before giving effect to "corporate
income" (e.g., interest income and similar revenues
generated by cash on hand) of Company and its
Subsidiaries and corporate overhead incurred by Company
and its subsidiaries during the period of calculation.
(B) "EBITDA" shall mean the sum of (i) Base
Earnings of Company and its Subsidiaries plus (ii) an
amount equal to all non-cash charges to income incurred
by Company and its Subsidiaries on or before the date
of this Agreement in respect of stock options
heretofore issued by Company and its Subsidiaries
("Stock Option Charges"), not to exceed (a) $6,120,000
for the Calculation Date occurring on September 30,
1999, until (but not including) the Calculation Date
occurring on December 31, 1999, (b) $620,000 for the
Calculation Date occurring on December 31, 1999, until
(but not including) the Calculation Date occurring on
March 31, 2000 and (c) $0.00 for all Calculation Dates
occurring on and after March 31, 2000.
3
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<PAGE>
(C) "Funded Debt" shall mean the consolidated
(and combined, if applicable) sum of borrowings
pursuant to the PNC Loan Agreement, plus current (i.e.
less than or equal to one (1) year) and non-current
maturities of long term Indebtedness of each of Company
and its Subsidiaries (including but not limited to any
obligations of any of Company or its Subsidiaries that
are determined based on the future performance of any
acquired entity ("Earn-Outs") to any other person or
entity). For purposes of this calculation, Funded Debt
shall be deemed to include, at all times, the actual
principal amount of any Senior Debt and Indebtedness
under this Agreement and the Note, in each case due and
owing without regard to any carrying value thereof
shown on the books and records of Company and its
Subsidiaries.
(D) "Modified EBITDA" is defined as the EBITDA of
Company and its Subsidiaries for which the Funded Debt
to Modified EBITDA financial covenant is being
calculated, except without giving effect to the EBITDA
of any of Company or its Subsidiaries (each an
"Unaudited Subsidiary") for which the Purchaser has not
received both (x) audited financial statements in form
and detail acceptable to the Purchaser, as well as (y)
other due diligence information concerning such of
Company or its Subsidiaries as Purchaser may request,
in form and substance acceptable to the Purchaser plus
fifty percent (50%) of the EBITDA of each Unaudited
Subsidiary.
(ii) Fixed Charge Coverage Ratio. The ratio as of each
Calculation Date of the consolidated (and combined, if
applicable) Modified EBITDA less the amount of any Earn-Outs
(as that term is defined herein) not financed with the
proceeds of loans or other borrowings from any person or
entity ("Unfinanced Earn-Outs"), cash taxes ("Cash Taxes")
and Capital Expenditures of Company and its Subsidiaries not
financed with the proceeds of loans or other borrowings from
any person or entity ("Unfinanced Capital Expenditures"),
which Unfinanced Earn-Outs, Cash Taxes and Unfinanced
Capital Expenditures were incurred during the immediately
preceding four (4) fiscal quarters of Company and its
Subsidiaries divided by the sum of consolidated (and
combined, if applicable) current maturities of Funded Debt
for Company and its Subsidiaries plus any and all dividends
paid or accrued by Company and its Subsidiaries plus all
Fixed Charges paid or accrued by Company and its
Subsidiaries, shall not be less than .70 to 1.00 as of the
Calculation Date occurring on March 31, 2000, and thereafter
until, but not including, the Calculation Date occurring on
June 30, 2000; and .75 to 1.00 as of the Calculation Date
occurring on June 30,
4
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<PAGE>
2000, and thereafter until, but not including, the
Calculation Date occurring on September 30, 2000; and 1.10
to 1.00 as of the Calculation Date occurring on September
30, 2000, and thereafter until, but not including, the
Calculation Date occurring on December 31, 2000; and 1.20 to
1.00 as of the Calculation Date occurring on December 31,
2000, and as of all Calculation Dates thereafter."
1.4 By adding the following new clause (iv) to Section
5.1(h):
"(iv) Senior Debt to EBITDA. The ratio as of each
Calculation Date of the sum of consolidated (and combined,
if applicable) PNC Senior Debt and other Senior Debt as of
each Calculation Date divided by the consolidated (and
combined, if applicable) EBITDA for Company and its
Subsidiaries for the four (4) fiscal quarters of Company and
its Subsidiaries immediately preceding the applicable
Calculation Date shall not be greater than 4.60 to 1.00 as
of the Calculation Date occurring on March 31, 2000, and
thereafter until, but not including, the Calculation Date
occurring on June 30, 2000; 4.50 to 1.00 as of the
Calculation Date occurring on June 30, 2000, and thereafter
until, but not including, the Calculation Date occurring on
September 30, 2000; and 3.50 to 1.00 as of the Calculation
Date occurring on September 30, 2000, and as of all
Calculation Dates thereafter."
1.5 By deleting the reference in Section 5.1(k) each
reference to "September 30, 1999" and substituting therefor "June
30, 2000" in each case.
SECTION 2. WAIVER OF CERTAIN PROVISIONS. (a) Effective as of
the Effective Date, GE Capital hereby grants a waiver of
Company's and its Subsidiaries' non-compliance with:
(i) the covenants contained in Section 5.1(b)(ii) of
the Purchase Agreement and Section 13.2 of the Warrant and of the
Events of Default that would otherwise result from a violation of
those sections solely for the Fiscal Year ended December 31,
1999; provided, however, that Company shall deliver to GE Capital
such financial documents as soon as practicable after the filing
with SEC of its Form 10-K Annual Report for the Fiscal Year ended
December 31, 1999;
(ii) the financial covenants contained in the Sections
5.1(h)(i) and (ii) of the Purchase Agreement and of the Events of
Default that would otherwise result from a violation of those
sections, solely for the period from November 10, 1999 to March
30, 2000; and
(iii) the covenants contained in Section 5.1(k) of the
Purchase Agreement and of the Events of Default that would
otherwise result from a violation of that section, solely for the
period from September 30, 1999, to March 30, 2000.
(b) Effective as of the Effective Date, GE Capital hereby
waives, solely in respect of the issuance by Company of the Stock
as set forth on Schedule A hereto, of the applicability of
Articles IV and XVII of the Warrant and any other similar anti-
dilution provisions in the Loan Documents; provided, however,
that this waiver shall not be applicable to any shares of
5
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<PAGE>
Stock issued in respect of any purchase, redemption or other
retirement of Company's 12% Cumulative Series D Preferred Stock.
(c) Company agrees that it will, and will cause its
Subsidiaries to, hereafter comply fully with the provisions
waived pursuant to this Section 2, as amended, and all other
provisions of the Purchase Agreement and the other Loan
Documents, which remain in full force and effect
SECTION 3. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS
AMENDMENT. Except as otherwise expressly provided herein, this
Amendment shall be effective as of March 31, 2000 (such date is
referred to herein as the "Effective Date")so long as each of the
following conditions shall have been satisfied or provided for in
a manner satisfactory to GE Capital or waived by GE Capital on or
prior to April 14, 2000:
(a) This Amendment shall have been fully executed and
delivered by each of the parties hereto.
(b) Each of the Subsidiaries of Company party to the
Guaranty shall have executed and delivered the consent included
in the signature pages hereto.
(c) The Fifth Amendment to Loan Agreement and Amendment to
Note among Company, each of its Subsidiaries listed therein and
PNC Bank, National Association ("PNC Bank"), shall have been
executed and delivered by each of the parties thereto (the "Fifth
Amendment") in form and substance satisfactory to GE Capital.
(d) The Guaranty Agreement (as defined in the Fifth
Amendment) shall have been executed and delivered by each of
Stephen A. Hoffmann, Nelson E. Clemmens, Richard E. Bowlds and
Douglas I. Maxwell, III (each an "Individual Guarantor") in form
and substance satisfactory to GE Capital.
(e) Each Individual Guarantor shall have executed and
delivered the consent included in the signature pages hereto.
(f) Each of Alvin W. Leingang, Steven Hoyt, Rodney H.
Thomas, Bradley A. Smith and Michael S. Haines shall have
executed and delivered an Agreement, dated as of the date hereof,
in respect of Earn-Out of such Person in form and substance
satisfactory to GE Capital.
(g) Each of Brown Simpson Strategic Growth Fund, Ltd. and
Brown Simpson Strategic Growth Fund, L.P. shall have executed and
delivered a Waiver, Consent and Covenant in form and substance
satisfactory to GE Capital.
(h) Company shall have obtained, and delivered to GE
Capital a copy of, each consent required in connection with this
Amendment and the Fifth Amendment.
6
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<PAGE>
SECTION 4. EFFECT ON PURCHASE AGREEMENT.
(a) On and after the Effective Date, each reference in the
Purchase Agreement to "this Agreement", "herein", "hereof",
"hereunder" or words of similar import, shall mean and be a
reference to the Purchase Agreement as amended hereby.
(b) Except as specifically amended above in connection
herewith, the Purchase Agreement shall remain in full force and
effect and is hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power or remedy of GE Capital under any
of the Loan Documents or constitute a waiver of any provision of
any of the Loan Documents.
SECTION 5. GOVERNING LAW. THIS AMENDMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. SECTION TITLES. Section titles contained in this
Amendment are and shall be without substantive meaning or content
of any kind whatsoever and are not a part of the agreement
between the parties hereto.
SECTION 7. COUNTERPARTS. This Amendment may be executed in
any number of separate counterparts, each of which shall
collectively and separately constitute one agreement.
7
<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the date first written above.
THERMOVIEW INDUSTRIES, INC.
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ John Malfettone
--------------------------------
Duly Authorized signatory
8
<PAGE>
<PAGE>
CONSENT OF THE GUARANTORS
The Subsidiaries of Company hereby (i) acknowledge receipt
of a copy of this Amendment and (ii) agree that the terms and
provisions thereof shall not affect in any way the obligations
and liabilities of such Subsidiaries under the Guaranty or any of
the other Loan Documents, all of which obligations and
liabilities shall remain in full force and effect and each of
which are hereby reaffirmed.
AMERICAN HOME DEVELOPERS CO., INC.,
a California corporation
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
FIVE STAR BUILDERS, INC., a
California corporation, successor
in interest to American Home
Remodeling
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
KEY HOME CREDIT, INC.,
a Delaware corporation
By: /s/ Leigh Ann Barney
--------------------------------
Leigh Ann Barney, President
KEY HOME MORTGAGE, INC.,
a Delaware corporation
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
LEINGANG SIDING AND WINDOW, INC.,
a North Dakota business corporation
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
PRIMAX WINDOW CO.,
a Kentucky corporation
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
9
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<PAGE>
PRECISION WINDOW MFG., INC.,
a Missouri corporation
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
ROLOX, INC. a Kansas corporation
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
TD WINDOWS, INC.
a Kentucky corporation
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
THERMAL LINE WINDOWS, INC.
a North Dakota corporation,
formerly known as Ice Inc.,
successor in interest to Blizzard
Enterprises, Inc. and Thermal Line
Windows, LLP
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
THERMOVIEW OF MISSOURI, INC.,
a Missouri corporation
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
THERMO-TILT WINDOW COMPANY,
a Delaware corporation
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
10
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<PAGE>
THOMAS CONSTRUCTION, INC.,
a Missouri corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
THERMO-SHIELD OF AMERICA (ARIZONA),
INC., an Arizona corporation
By: /s/ Nelson E. Clemmens
-------------------------------
Nelson E. Clemmens, President
THERMO-SHIELD OF AMERICA
(MICHIGAN), INC., a Michigan
corporation
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens, President
THERMO-SHIELD COMPANY, LLC,
an Illinois limited liability
company
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens,
Manager and President
THERMO-SHIELD OF AMERICA
(WISCONSIN), LLC, a Wisconsin
limited liability company
By: /s/ Nelson E. Clemmens
--------------------------------
Nelson E. Clemmens,
Manager and President
THERMOVIEW ADVERTISING GROUP, INC.,
a Delaware corporation
By: /s/ Charlton C. Hundley
--------------------------------
Charlton C. Hundley, Secretary
11
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<PAGE>
CONSENT OF INDIVIDUAL GUARANTORS
Notwithstanding the provisions of that certain Subordination
and Intercreditor Agreement, dated July 8, 1999, among PNC Bank,
Company and GE Capital, if any amounts have become payable or
have been paid by any Individual Guarantor under the Guaranty
Agreement, each Individual Guarantor agrees that the rights of
such Individual Guarantor, in respect of such monies, to seek to
enforce repayment, obtain the benefit of any security or exercise
any other rights or legal remedies of any kind which may accrue
to such Individual Guarantor against the Company or any of its
Subsidiaries, whether by way of subrogation, offset, counterclaim
or otherwise, in respect of the amount so payable or so paid (or
in respect of any monies for the time being due to such Guarantor
from Company or any of its Subsidiaries) shall be pari passu with
the rights of GE Capital in respect of the Obligations and any
collateral security therefor or securing the reimbursement rights
of such Individual Guarantor if and for so long as any
Obligations shall be outstanding.
/s/ Stephen A. Hoffmann
---------------------------------
Stephen A. Hoffmann
/s/ Nelson E. Clemmens
---------------------------------
Nelson E. Clemmens
/s/ Richard E. Bowlds
---------------------------------
Richard E. Bowlds
/s/ Douglas I. Maxwell, III
---------------------------------
Douglas I. Maxwell, III
12
EXHIBIT 10.8
AMENDMENT TO TRIPLE NET LEASE AGREEMENT
---------------------------------------
THIS AMENDMENT TO THAT CERTAIN TRIPLE NET LEASE AGREEMENT (the
"Amendment") is made and entered into as of the 14th day of
April, 2000, by and between Thomas Construction, Inc., a Missouri
corporation ("Tenant"), and 13397 Lakefront Drive, LLC, a
Missouri limited liability company ("Landlord").
PREMISES:
The parties desire to amend the terms pursuant to which
Tenant leases certain Premises situated at 13397 Lakefront Drive,
Earth City, Missouri.
ThermoView Industries, Inc., a Delaware corporation
("ThermoView"), the owner of Tenant, has requested Rodney H.
Thomas (the "Shareholder"), an affiliate of Landlord, to exchange
certain amounts owed to the Shareholder by ThermoView for
1,113,500 shares of the ThermoView's 12% Cumulative Series D
Preferred Stock, and the Shareholder has requested that as part
of the consideration for such exchange Tenant and Landlord agree
to amend the Lease, but only to the extent, and subject to the
terms and conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants and agreements contained herein and for
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
---------
Definition of Terms
-------------------
[Intentionally omitted]
ARTICLE 2
---------
Amendments to Lease
-------------------
Such lease is hereby amended in the following respects:
2.1 ADDITION THERETO. A new paragraph is hereby added at
the end of such lease, which new paragraph shall provide in its
entirety as follows:
"Notwithstanding anything in this Lease to the contrary,
until such time as ThermoView Industries, Inc., a Delaware
corporation ("ThermoView") has redeemed all of the 1,113,500
shares of ThermoView's 12% Cumulative Series D Preferred
Stock issued to Rodney H. Thomas (the "Shareholder")
pursuant to an Agreement dated April 14, 2000, by and
between ThermoView and the Shareholder (the "Shareholder's
Series D Stock"), Landlord shall have the right and power to
terminate this Lease by delivering a written notice to
Tenant specifying a termination date at the end of the month
following the month in which such notice was delivered, and
upon Tenant's receipt of such notice the term of this Lease
shall be deemed to have expired on such termination date."
<PAGE>
<PAGE>
ARTICLE 3
---------
Acknowledgment and Ratification
-------------------------------
3.1 RATIFICATION. Except as expressly amended by this
Amendment, such lease is and shall be unchanged, and all of the
terms, provisions, covenants and agreements thereof or thereto
shall remain and continue in full force and effect, and are
hereby ratified, reaffirmed and confirmed by the parties. The
parties acknowledge that the Landlord, to the extent not a party
to this Amendment, under such lease is a third party beneficiary
of this Amendment.
ARTICLE 4
---------
General Provisions
------------------
4.1 GOVERNING LAW. The laws of the State of Missouri shall
govern the construction of this Amendment and the rights and
remedies and duties of the parties hereto.
4.2 SECTION HEADINGS. The section headings contained in
this Amendment have been inserted solely for convenience of
reference, and shall not be construed as part of this Amendment.
4.3 COUNTERPARTS. This Amendment may be signed by each
party hereto upon a separate copy, in which event all of said
copies shall constitute a single counterpart to this Amendment.
This Amendment may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument. It
shall not be necessary, in making proof of this Amendment, to
produce or account for more than one such counterpart.
IN TESTIMONY WHEREOF, the Tenant has caused its duly
authorized representative to execute and deliver, and the
Landlord has executed and delivered, this Amendment, effective as
of the day and year first above written.
13397 Lakefront Drive, LLC Thomas Construction, Inc.
BY: /s/ Rodney H. Thomas BY: /s/ Nelson E. Clemmens
--------------------------- ---------------------------
TITLE: TITLE: President
------------------------ -----------------------
/s/ Rodney H. Thomas
- ------------------------------
Rodney H. Thomas
2
EXHIBIT 10.9
AMENDMENT TO FURNITURE AND FIXTURE LEASE
----------------------------------------
THIS AMENDMENT TO THAT CERTAIN FURNITURE AND FIXTURE LEASE
(the "Amendment") is made and entered into as of the 14th day of
April, 2000, by and between Thomas Construction, Inc., a Missouri
corporation ("Lessee"), and Investors Property Holding I, LLC, a
Missouri limited liability company ("Lessor").
PREMISES:
The parties entered into a Furniture and Fixture Lease dated
January 1, 1999, (the "Lease") in connection with Lessee's lease
of the Premises situated at 13397 Lakefront Drive, Earth City,
Missouri.
ThermoView Industries, Inc., a Delaware corporation
("ThermoView"), the owner of Lessee, has requested Rodney H.
Thomas (the "Shareholder"), an affiliate of Lessor, to exchange
certain amounts owed to the Shareholder by ThermoView for
1,113,500 shares of the ThermoView's 12% Cumulative Series D
Preferred Stock, and the Shareholder has requested that as part
of the consideration for such exchange Lessee and Lessor agree to
amend the Lease, but only to the extent, and subject to the terms
and conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants and agreements contained herein and for
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
---------
Definition of Terms
-------------------
Terms used herein with their initial letters capitalized and
not otherwise defined herein shall have the meanings given to
such terms in the Lease.
ARTICLE 2
---------
Amendments to Lease
-------------------
The Lease is hereby amended in the following respects:
2.1 ADDITION TO SECTION 2. A new Section 2.D. is hereby
added at the end of Section 2 of the Lease, which Section 2.D
shall provide in its entirety as follows:
"D. Notwithstanding anything in this Lease to the contrary,
until such time as ThermoView Industries, Inc., a Delaware
corporation ("ThermoView") has redeemed all
1
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<PAGE>
of the 1,113,500 shares of ThermoView's 12% Cumulative
Series D Preferred Stock issued to Rodney H. Thomas (the
"Shareholder") pursuant to an Agreement dated April 14,
2000, by and between ThermoView and the Shareholder (the
"Shareholder's Series D Stock"), Lessor shall have the right
and power to terminate this Lease by delivering a written
notice to Lessee specifying a termination date at the end of
the month following the month in which such notice was
delivered, and upon Lessee's receipt of such notice the term
of this Lease shall be deemed to have expired on such
termination date."
ARTICLE 3
---------
Acknowledgment and Ratification
-------------------------------
3.1 RATIFICATION. Except as expressly amended by this
Amendment, the Lease is and shall be unchanged, and all of the
terms, provisions, covenants and agreements thereof or thereto
shall remain and continue in full force and effect, and are
hereby ratified, reaffirmed and confirmed by Lessee and Lessor in
all respects on and as of the effective date of this Amendment.
ARTICLE 4
---------
General Provisions
------------------
4.1 GOVERNING LAW. The laws of the State of Missouri shall
govern the construction of this Amendment and the rights and
remedies and duties of the parties hereto.
4.2 SECTION HEADINGS. The section headings contained in
this Amendment have been inserted solely for convenience of
reference, and shall not be construed as part of this Amendment.
4.3 COUNTERPARTS. This Amendment may be signed by each
party hereto upon a separate copy, in which event all of said
copies shall constitute a single counterpart to this Amendment.
This Amendment may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument. It
shall not be necessary, in making proof of this Amendment, to
produce or account for more than one such counterpart.
IN TESTIMONY WHEREOF, the Lessee has caused its duly
authorized representative to execute and deliver, and the Lessor
has executed and delivered, this Amendment, effective as of the
day and year first above written.
2
<PAGE>
Investors Property Holding I, LLC Thomas Construction, Inc.
BY: /s/ Rodney H. A. Thomas BY: /s/ Nelson E. Clemmens
--------------------------- --------------------------
TITLE: TITLE: President
------------------------ -----------------------
EXHIBIT 10.10
WINDOW LICENSE AGREEMENT
BETWEEN
RESEARCH FRONTIERS INCORPORATED
AND
THERMOVIEW INDUSTRIES, INC.
This License Agreement ("Agreement") effective as of March
21, 2000 by and between RESEARCH FRONTIERS INCORPORATED, a
Delaware corporation ("LICENSOR") and THERMOVIEW INDUSTRIES,
INC., a Delaware corporation ("LICENSEE").
RECITALS
WHEREAS, LICENSOR has been engaged in research and
development in the application of physiochemical concepts to
Light Valves and Licensed Products (both hereinafter defined) and
of methods and apparatus relating to products incorporating such
concepts; and is possessed of and can convey information and know-
how for such products and rights to manufacture, use and sell
such products; and
WHEREAS, LICENSEE is interested in manufacturing and selling
Licensed Products; and
WHEREAS, LICENSEE desires to acquire from LICENSOR, and
LICENSOR desires to grant to LICENSEE, certain rights and
licenses with respect to such technology of LICENSOR;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS.
-----------
The following terms when used herein shall have the
respective meanings set forth in this Article 1.
The "EFFECTIVE DATE" of this Agreement shall be the date which is
the last date of formal execution of this Agreement by duly
authorized representatives of the parties to this Agreement as
indicated on the signature page of this Agreement.
"LICENSED PRODUCT" means a Light Valve Architectural Window
Product incorporating a Light Valve. The term "Licensed Product"
shall not include Light Valves used or intended for use in any
product other than as specifically defined herein, such as other
window products not specifically defined herein, windows for
transportation vehicles, including, but not limited to passenger
cars, recreational vehicles, trucks, mobile cranes, trains,
aircraft, boats, vans, sport utility vehicles, spacer craft and
space-stations, and non-window products such as but not limited
to displays, eyewear, sunvisors, toys, mirrors or filters for
scientific instruments, lamps or contrast enhancement of
displays. The term "display" means any device for displaying
letters, numbers, images or other indicia or patterns. Nothing
contain herein shall permit LICENSEE to sell, lease, or otherwise
dispose of a Light Valve which is not combined or intended to be
combined as described above into a Light Valve Architectural
Window Product.
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"LICENSED TERRITORY" means all countries of the world except
North and South Korea.
"LIGHT VALVE" means a variable light transmission device
comprising, a cell including cell walls, containing or adapted to
contain an activatable material, described hereinafter, such that
a change in the optical characteristics of the activatable
material affects the characteristics of light absorbed by,
transmitted through and/or reflect from the cell; means
incorporated in or on the cell, or separate therefrom for
applying an electric or magnetic field to the activatable
material within the cell; and coatings, (including, but not
limited to, electrodes), spacers, seals, electrical and/or
electronic components, and other elements incorporated in or on
the cell. The activatable material, which the cell contains or
is adapted to contain, includes in it solid suspended particles,
which when subjected to a suitable electric or magnetic field,
orient to produce a change in the optical characteristics of the
device, and may be in the form of liquid suspension, gel, film or
other material.
"LIGHT VALVE ARCHITECTURAL WINDOW PRODUCT" means a Light Valve
used or intended for use solely as a window integrally
incorporated in, or attached as a fixture to the external
structure or internal structure of any building, whether
permanent or temporary, and whether above or below ground.
The "NET SELLING PRICE" of Licensed Products on which royalties
are payable shall be the greater of the following: (A) the
genuine selling price of LICENSEE and its sublicensees hereunder
(including amounts charged for any writing, installation, and
related services provided by LICENSEE and its sublicensees
hereunder) f.o.b. factory at which nonaffiliated customers are
billed in the usual course of business for Licensed Products, as
packed for shipment to the customer, minus the genuine selling
price (which, of purposes of this calculation shall be deemed to
be not more than $100 per window) of a window similar to the
Licensed Product but not incorporating a Light Valve; (B) the
genuine selling price of LICENSEE and its sublicensees hereunder
(including amounts charged for any wiring, installation, and
related services provided by LICENSEE and its sublicensees
hereunder) f.o.b. factory at which nonaffiliated customers are
billed in the usual course of business for Licensed Products, as
packed for shipment to the customer, multiplied by a fraction,
the numerator of which is the cost of all components included in
the window associated with the incorporation of a Light Valve,
and the denominator of which is the total manufacturing cost for
such product; and (C) $100 per window. The aforementioned $100
figure specified in clauses (A) and (C) above shall be adjusted
upward as of each January 1st hereafter beginning on January 1,
2001 by any increase in the Producer Price Index for Finished
Goods (the "Index") for the 12 month period ending in December of
the prior year, prepared by the Bureau of Labor Statistics of the
United States Department of Labor (or if the Index is not then
being published, the most nearly comparable successor index). In
calculating a genuine selling price of a product for the above
calculation, such price may be reduced only by the applicable
proportions of the following if, and to the extent that, amounts
in respect thereof are reflected in such selling price: (i)
normal trade discounts actually allowed; (ii) sales, use or
excise and added value taxes and custom duties paid; (iii) if the
genuine selling price is other than f.o.b. factor, amounts paid
for f.o.b. transportation of the product to the customer's
premises or place of installation or delivery; (iv) insurance
costs and the costs of packing material, boxes, cartons and
crates required for shipping; PROVIDED, HOWEVER, that for
purposes of this calculation, the genuine selling price of a
product may not be less than 90% of the gross selling price of
said product after
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all deductions therefrom. If a product is leased, sold, used or
otherwise disposed of on terms not involving a bona fide arm's
length sale to an unaffiliated third party, then the Net Selling
Price for such transactions shall be deemed to be the Net Selling
Price as defined above for identical products sold to a
nonaffiliated customer nearest to the date of such lease, sale,
use, or other disposition.
"TECHNICAL INFORMATION" means all useful information relating to
apparatus, methods, processes, practices, formulas, techniques,
procedures, patterns, ingredients, designs and the like including
(by way of example) drawings, written recitations of data,
specifications, parts, lists, assembly procedures, operating and
maintenance manuals, test and other technical reports, know-how
of LICENSOR, and the like owned or controlled by LICENSOR, to the
extent they exist, that relate to Light Valves, Licensed Products
and/or to the suspensions or other components used or usable for
Licensed Products or Light Valves including, but not limited to,
particles, particle precursors, coatings, polymers, liquid
suspensions and suspending liquids, or any combination thereof,
and that consist of concepts invented or developed by LICENSOR.
Know-how of LICENSOR's suppliers and of LICENSOR's other
licensees and their sublicensees under licenses from LICENSOR
shall not be considered Technical Information owned or controlled
by LICENSOR.
2. GRANT OF LICENSE.
----------------
2.1 LICENSE. During the term of this Agreement, LICENSOR
hereby grants LICENSEE a non-exclusive right and license to use
(a) all of the Technical Information furnished by LICENSOR
pursuant to this Agreement, and (b) any invention claimed in (i)
any of the unexpired patents now or hereafter listed on Schedule
A attached hereto or (ii) unexpired patents which issue from
pending patent applications now or hereafter listed in Schedule
A, and any continuations, continuations-in-part, divisions,
reissues, reexaminations, or extensions thereof to make, and to
lease, sell, or otherwise dispose of Licensed Products in the
Licensed Territory.
2.2 NO OTHER RIGHTS. LICENSEE agrees that, except for the
specific licenses granted to it under Section 2.1 hereof,
LICENSEE has not acquired any rights or licenses under this
Agreement to use Light Valves or any components thereof made by
or for LICENSEE or its sublicensees pursuant to this Agreement
except for use in Licensed Products.
2.3 SUBLICENSES. LICENSEE shall have the right to grant
non-exclusive sublicenses to any of its wholly-owned and
controlled subsidiaries, whose obligations to LICENSOR hereunder
LICENSEE hereby guarantees, and which acknowledges to LICENSOR in
writing that it wishes to become a sublicensee hereunder prior to
doing so and agrees to be bound by the terms and conditions of
this Agreement. All sublicenses shall (i) be non-exclusive, (ii)
shall terminate with the termination of the rights and licenses
granted to LICENSEE under Section 2.1 hereof, and be otherwise
limited in accordance with the limitations and restrictions which
are imposed on the rights and licenses granted to LICENSEE
hereunder, (iii) contain confidentiality provisions no less
protective than those contained in Section 12.1 hereof, and (v)
shall contain such other terms, conditions, and licenses as are
necessary to enable LICENSEE to fulfill its obligations
hereunder. LICENSEE shall send LICENSOR a copy of every
sublicense agreement or other agreement entered into by LICENSEE
in connection with a sublicense hereunder within thirty (30) days
of the execution thereof. LICENSOR may terminate any such
sublicense if there is any change in the ownership or control of
a sublicensee.
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3. ROYALTY PAYMENTS, REPORTS AND RECORD-KEEPING.
--------------------------------------------
3.1 ROYALTIES AND REPORTS ON NET SALES. During the term of
this Agreement, LICENSEE agrees to pay LICENSOR an earned royalty
which shall be five percent (5%) of the Net Selling Price of
Licensed Products which embody, or the manufacture of which
utilizes, any of the rights granted under Section 2.1 hereof, and
which are manufactured by or for LICENSEE and sold, leased, used
or otherwise disposed of by or for LICENSEE or a permitted
sublicensee. Payments under this Section 3.1 shall be made on a
quarterly basis and made within 45 days after the end of the
calendar quarter in which such Licensed Products were sold,
leased, used or otherwise disposed of by or for Licensee or a
permitted sublicensee hereunder. Each royalty payment shall be
in U.S. dollars and shall be accompanied by a statement by
LICENSEE showing in reasonable detail the amount of Licensed
Products sold, used, leased or otherwise disposed of by or for
LICENSEE and its sublicensees during the preceding quarter, any
deductions taken or credits applied, and the currency exchange
rate used to report sales made in currencies other than U.S.
dollars. LICENSEE shall use the exchange rates for buying U.S.
dollars in effect on the last day of each quarter, as specified
in THE NEW YORK TIMES. The first such statement shall cover the
period from the Effective Date of this Agreement to the end of
the first calendar quarter in which a Licensed Product is sold,
used, leased or otherwise disposed of by or for LICENSEE or its
sublicensees. LICENSEE shall also furnish to LICENSOR at the
same time it becomes available to any third party, a copy of each
brochure, price list, advertisement or other marketing and
promotional materials prepared, published or distributed by
LICENSEE or its sublicensees relating to Licensed Products.
3.2 MINIMUM ROYALTIES. Except as otherwise specifically
provided for in Section 3.3, during the term of this Agreement
LICENSEE agrees to pay LICENSOR the non-refundable minimum
royalties (in U.S. Dollars) specified below for each of the
stated periods:
PERIOD MINIMUM ROYALTY
------ ---------------
From the Effective Date of this Agreement
to December 31, 2000 $ 50,000
From January 1, 2001 to December 31, 2001 $ 75,000
From January 1, 2002 to December 31, 2002 $ 75,000
From January 1 to December 31 of each
license year thereafter $100,000
3.3 ALTERNATIVE MINIMUM ROYALTIES IF TRAINING OPTION HAS
BEEN EXERCISED. If LICENSEE has exercised the Training Option
set forth in Section 8.l, during the term of this Agreement
LICENSEE agrees to pay LICENSOR the non-refundable minimum
royalties (in U.S. Dollars) specified below for each of the
stated periods:
PERIOD MINIMUM ROYALTY
------ ---------------
From the Effective Date of this Agreement
to December 31, 2000 $ 50,000
From January 1, 2001 to December 31, 2001 $150,000
From January 1 to December 31 of each
license year thereafter $225,000
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3.4 TIME AND METHOD OF PAYMENT. The initial payment under
Section 3.2 or Section 3.3, as applicable, shall be paid to
LICENSOR within 10 days of the Effective Date of this Agreement
and may be made, at LICENSEE's option either in cash or by
delivering to LICENSOR 12,500 shares of common stock of LICENSEE
issued in the name of Research Frontiers Incorporated, and each
subsequent payment under either Section 3.2 or Section 3.3, as
applicable, to LICENSOR shall be made on or before January 31 of
each license year commencing January 1, 2001. With respect to
minimum annual royalty payments dues under Section 3.2 or 3.3 for
the calendar years beginning January 1, 2001, 2002, and, 2003,
payment may be made at LICENSEE's option either in cash or, if
LICENSEE is a public company and current in all of its reporting
requirements under the Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder, by
delivering to LICENSOR of the number of shares of common stock of
LICENSEE issued in the name of Research Frontiers Incorporated
and rounded up to the nearest 100 shares equal to: (A) the
dollar amount of the payment to be made in stock, divided by (B)
the lesser of (X) 80% of the average closing price per share of
common stock of LICENSEE on the principal exchange on which such
shares of common stock are principally traded for the five
trading days immediately prior to the date LICENSEE instructs its
stock transfer agent to issue such shares, and (Y) $4.00 per
share. All such shares delivered to LICENSOR in payment
hereunder shall be considered fully paid and non-assessable. All
other payments shall be due on the date specified in this
Agreement, or if no date is specified, within 30 days of invoice.
All payments made to LICENSOR (except the initial minimum royalty
payment if made by delivery of LICENSEE's common stock as
aforesaid) shall be paid by wire transfer of immediately
available funds to the account of Research Frontiers Incorporated
at Chase Manhattan Bank, 1064 Old Country Road, Plainview, New
York 11803, Account No.: 904-709361, ABA Wire Code No.: 021 000
021, or to such other account or place, as LICENSOR may specify
in a notice to LICENSEE.
3.5 SALES, USE AND RETURNS. Licensed Products shall be
considered sold, leased or used and royalties shall accrue on the
earlier of when such Licensed Products are billed out, or when
delivered, shipped or mailed to the customer. If as a result of
a price reduction or a return of Licensed Products previously
sold, a credit or refund to a customer is given on part or all of
the sale price of such Licensed Products, a credit shall be
allowed against royalties accruing thereafter under this
Agreement equal to the royalty paid on that part of the sales
price so credited or refunded.
3.6 RECORDKEEPING. LICENSEE shall keep and shall cause
each sublicensee to keep for six (6) years after the date of
submission of each statement supported thereby, true and accurate
records, files and books of accounts that relate to Licensed
Products, all data reasonably required for the full computation
and verification of the Net Selling Price of Licensed Products,
deductions therefrom and royalties to be paid, as well as the
other information to be given in the statements herein provided
for, and shall permit LICENSOR or its duly authorized
representatives, upon reasonable notice, adequately to inspect
the same at any time during usual business hours. LICENSOR and
LICENSEE agree that an independent certified public accounting
firm (selected by LICENSOR from the largest ten certified public
accounting firms in the United States of America) may audit such
records, files and books of accounts to determine the accuracy of
the statements given by LICENSEE pursuant to Section 3.1 hereof.
Such an audit shall be made upon reasonable advance notice to
LICENSEE and
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during usual business hours no more frequently than annually.
The cost of the audit shall be borne by LICENSOR, unless the
audit shall disclose a breach by LICENSEE of any term of this
Agreement or an underpayment error in excess of two percent of
the total monies paid to LICENSOR by LICENSEE during the audited
period, in which case LICENSEE shall bear the full cost of such
audit. LICENSEE agrees to pay LICENSOR all additional monies
that are disclosed by the audit to be due and owing to LICENSOR
within thirty days of the receipt of the report.
4. OBLIGATIONS OF LICENSEE.
-----------------------
4.1 COMPLIANCE. LICENSEE agrees that, without limitation,
any manufacture, sale, lease, use or other disposition of
Licensed Products that is not in strict accordance with the
provisions of this Agreement shall be deemed a material breach of
this Agreement.
4.2 END USERS. LICENSEE agrees to require all direct
recipients of Licensed Products to whom Licensed Products is
sold, leased, or otherwise disposed of by LICENSEE or its
sublicensees, to look only to LICENSEE and not to LICENSOR or its
affiliates for any claims, warranties, or liability relating to
such Licensed Products. LICENSEE agrees to take all steps to
reasonable assure itself that Licensed Products sold, leased or
otherwise disposed of by or for LICENSEE is being used for
permitted purposes only.
4.3 LAWS AND REGULATIONS. LICENSEE agrees that it shall be
solely responsible for complying with all laws and regulations
affecting the manufacture, use and sale or other disposition of
Licensed Products by LICENSEE and its sublicensees, and for
obtaining all approvals necessary from governmental agencies and
other entities. LICENSEE agrees to maintain a file of all such
approvals and to send LICENSOR a c opy of all such approvals
(including English translations thereof in the case of approvals
required by any foreign country) within 10 business days of any
written request for such copies by LICENSOR. LICENSEE represents
and warrants to LICENSOR that no approval from any governmental
agency or ministry, or from any third party, is required to
effectuate the terms of this Agreement or the transactions
contemplated hereby.
4.4 PURCHASE OF COMPONENTS FROM OTHERS. By virtue of the
disclosure of Technical Information and training provided from
time to time by LICENSOR to LICENSEE and to its other licensees,
and each of their sublicensees and affiliates, any component of a
Light Valve, including without limitation, materials,
suspensions, films, polymers, coatings, particle precursors, and
particles (each a "Component"), which LICENSEE or its
sublicensees makes, has made for it, or purchases from any third
party for use in Licensed Products shall be deemed to have been
manufactured at least in part using the Technical Information
provided by LCIENSOR. LICENSEE and its sublicensees each hereby
agrees that (i) all Components shall be used only in strict
accordance with the provisions of this Agreement, and that such
Components may not be used for any other purpose or resold by
LICENSEE or its sublicensees except as specifically permitted by
the license granted in Section 2.1 hereof, and (ii) LICENSEE and
its sublicensees will only look to the manufacturer or supplier
of such Component or other item used by LICENSEE or its
sublicensees and not to LICENSOR or its affiliates for any
claims, warranties, or liability relating to such Component or
other item. LICENSEE acknowledges that LICENSOR has not made any
representations or warranties regarding the availability of any
Component, or the price thereof, and
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that in all respects LICENSEE shall deal directly with the
suppliers of such Components and will obtain from them
information regarding availability, pricing, and/or other terms
relating to such Components.
4.5 NO WARRANTIES BY LICENSOR. LICENSOR does not represent
or warrant the performance of any Licensed Product or of any
material, Component or information provided hereunder, and
LICENSEE expressly acknowledges and agrees that any such
material, Component or information provided by LICENSOR hereunder
is provided 'AS IS' and that LICENSOR makes no warranty with
respect thereto and DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, RELATED
THERETO, ITS USE OR ANY INABILITY TO USE IT, OR THE RESULTS OF
ITS USE. Except for any breach of the terms of this Agreement,
in no event shall any party to this Agreement be liable for any
damages, whether in contract or tort (including negligence),
including but not limited to direct, consequential, special,
exemplary, incidental and indirect damages, arising out of or in
connection with this Agreement or the use, the results of use, or
the inability to use any Licensed Product, material, Component or
information provided hereunder.
4.6 ANALYSIS. LICENSEE represents and agrees that it will
only incorporate Components received from authorized suppliers
into Licensed Products and for no other purpose, and that
LICENSEE will not directly or indirectly attempt to reverse-
engineer any material provided to it hereunder by LICENSEE or any
supplier of any Component.
4.7 PERSONNEL. LICENSEE agrees to assign personnel from
its technical staff who shall be responsible for the development
of the Licensed Products during the term of this Agreement.
5. TRADEMARKS.
----------
5.1 TRADEMARKS. All trademarks or service marks that
either party may adopt and use for Licensed Products or other
products incorporating Light Valves are and shall remain the
exclusive property of the adopting party, and the other party
shall not obtain any rights and license to such marks under this
Agreement, but may inform others that the adopting party has
produced Licensed Products or products incorporating Light Valves
under such mark or marks. LICENSOR may require LICENSEE or its
permitted sublicensees to indicate on packaging that such product
is licensed from Research Frontiers Incorporated or to otherwise
include language and/or designations approved by LICENSOR
indicating an affiliation with Research Frontiers Incorporated.
6. INSURANCE AND INDEMNIFICATION.
-----------------------------
6.1 INSURANCE. LICENSEE shall maintain at all times ample
product liability and other liability insurance covering its
operations relating to the subject matter of this Agreement.
6.2 INDEMNIFICATION. LICENSEE, and its affiliates,
successors and assigns and sublicensees (each, an "Indemnifying
Party"), each hereby indemnify and agree to hold harmless
LICENSOR and
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its shareholders, officers, directors, agents and employees
(each, an "Indemnified Party"), against any liability, damage,
loss, fine, penalty, claim, cost or expense (including reasonable
costs of investigation and settlement and attorneys',
accountants' and other experts' fees and expenses) arising out of
any action or inaction by any Indemnifying Party relating to this
Agreement including an Indemnifying Party's manufacture, sale,
use, lease or other disposition of Licensed Products, and related
materials, or other use of the information and rights granted
hereunder. Any knowledge of LICENSEE's or its sublicensee's
activities by LICENSOR or its representatives shall in no way
impose any liability on LICENSOR or reduce the responsibilities
of LICENSEE hereunder or relieve it from any of its obligations
and warranties under this Agreement.
7. FUTURE PATENTS.
--------------
7.1 FUTURE PATENTS. Each party, at its cost, shall have
the right to file patent applications in the United States and in
foreign countries covering any invention made by such party.
7.2 IMPROVEMENTS AND MODIFICATIONS. (a) Any future
improvements or modifications invented or developed by or on
behalf of LICENSEE, LICENSEE'S sublicensees and LICENSOR after
the Effective Date of this Agreement, if any, which relate in any
way to or are useful in the design, operation, manufacture and
assembly of Licensed Products, and/or to the suspensions or other
components used or usable in Licensed Products shall not be
included in this Agreement. Upon written request by the non-
inventing party, LICENSOR and LICENSEE shall negotiate with each
other regarding the grant of nonexclusive rights and licenses to
use such improvements and modifications, but neither party shall
be obligated to grant such rights and licenses to one another.
(b) During the term of this Agreement each of the parties
hereto agrees to inform the other in writing (without any
obligation to reveal details which would be confidential
information), at least as frequently as once a year in January of
each calendar year, if any significant improvements or
modifications have been made relating to the subject matter of
this Agreement, and as to the general nature of any such
improvements and modifications.
(c) Notwithstanding the foregoing, LICENSOR may, but shall
not be required to, voluntarily and without additional cost to
LICENSEE disclose certain information relating to future
improvements and modifications and license to LICENSEE rights in
such certain future improvements and modifications, and any
information so disclosed will be considered Technical Information
which LICENSEE shall be obligated to keep confidential pursuant
to Section 12.1 of this Agreement. In connection therewith,
LICENSOR, may voluntarily add patents and/or patent applications
to Schedule A hereof. No disclosure of any information by
LICENSOR shall in any way establish a course of dealing or
otherwise require LICENSOR to make any future disclosure of
information under this Agreement.
7.3 FOREIGN PATENT APPLICATIONS. During the term of this
Agreement, LICENSEE shall have the right to designate that any
patent application now or hereafter listed on or incorporated
into Schedule A shall be filed or maintained in any foreign
country. If so designated and if legally possible to do so,
LICENSOR agrees to promptly file, prosecute and maintain such
applications and resulting patents, and LICENSEE shall pay to
LICENSOR the complete cost, including reasonable
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attorney's fees, to file, prosecute and maintain any such patent
application and resulting patents specifically so designated by
LICENSEE.
8. TECHNOLOGY TRANSFER.
-------------------
8.1 LICENSEE'S TRAINING OPTION. LICENSEE shall have the
option of receiving training from LICENSOR (the "Training
Option"), provided that LICENSEE exercises such Training Option
by sending LICENSOR a notice stating that LICENSEE is exercising
its Training Option which notice is received by LICENSOR on or
before December 31, 2000 (time being of the essence and the
Training Option expiring null and void if not exercised and
notice received by LICENSOR on or before December 31, 2000).
Only if such Training Option is exercised in a timely manner
shall the provisions of Sections 3.3, 8.2, 8.3, and 8.4 be in
effect.
8.2 DOCUMENTATION PROVIDED IF TRAINING OPTION IS EXERCISED.
Within thirty business days after the Training Option is
exercised by LICENSEE, LICENSOR shall furnish LICENSEE with all
Technical Information owned or controlled by LICENSOR, which is
reasonably necessary or desirable in order for LICENSEE to
manufacture Licensed Products. Such Technical Information, which
relates to experimental products, shall include, without
limitation thereto (1) a document entitled HANDBOOK OF TECHNICAL
INFORMATION RELATING TO VARIABLE DENSITY OPTICAL DEVICES
INCORPORATING AN ACTIVATABLE MATERIAL which contains confidential
and proprietary information of LICENSOR and (2) photocopies of
all U.S. Patents and patent applications relating to Licensed
Products owned or controlled by LICENSOR as of the date that the
Training Option is exercised. LICENSOR shall not be obligated
hereunder to furnish copies of LICENSOR's foreign patents and
patent applications, but will furnish a list thereof in Schedule
A hereto. Patents and patent applications purchased by LICENSOR
from any third party shall not be considered owned or controlled
by LICENSOR until and unless LICENSOR has been notified in
writing that it has received written assignments relating to such
patents and patent applications.
8.3 TRAINING. LICENSEE's technically skilled personnel
designated by LICENSEE (with travel and living expenses paid by
LICENSEE) shall make one or more visits for training and to
inspect LICENSOR's research and development facilities relating
to Licensed Products. The visits of employees of LICENSEE to
LICENSOR's facility shall be carried out within the six-month
period commencing with LICENSEE's exercise of its Training Option
under Section 8.1 of this Agreement, and shall not exceed 200 man-
hours during such period. To assist LICENSEE's employees while
they are LICENSOR's facility, LICENSOR's technical staff shall
provide up to 200 man-hours assistance during such period at no
cost to LICENSEE. Additionally, there shall be no cost to
LICENSEE for materials used for training during the initial
training at LICENSOR's facility.
8.4 MATERIALS AND ADDITIONAL TRAINING. Upon request by
LICENSEE after LICENSEE's exercise of its Training Option under
Section 8.1 of this Agreement, during the term of this Agreement
and when mutually convenient to LICENSOR and LICENSEE, LICENSOR
shall supply LICENSEE with additional training and with small
quantities of materials related to Licensed Products for
experimental use only by LICENSEE, and shall charge LICENSEE $750
per man/day plus the cost of any other materials used in
providing such training or making such materials, plus the cost
of shipping such materials to LICENSEE. Each invoice submitted
by LICENSOR for such
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service shall include detailed explanations of the charges, and,
if requested by LICENSEE, copies of receipts.
8.5 INQUIRIES. LICENSEE and LICENSOR may also at any time
during the term of this Agreement make reasonable inquiry by
telephone, facsimile or mail to one another in regard to any
information or data furnished pursuant to this Agreement.
8.6 VISITS. During all visits by either party to the
facilities of the other party, visitors shall comply with the
reasonable rules of the host company, and each party to this
Agreement will indemnify and hold the other party harmless from
any liability, claim or loss whatsoever (i) for any injury to,
or, death of, any of its employees or agents while such persons
are present at the facility of the other party; and (ii) for any
damages to its own property or to the property of any such
employee or agent which may occur during the presence of any such
person at the facility of the other party, regardless of how such
damage occurs, if the rules of the host are followed.
8.7 SOLE PURPOSE. Any documentation or information
supplied pursuant to this Agreement by either party to the other
shall be used solely for the purposes set forth in this
Agreement.
9. INTELLECTUAL PROPERTY PROTECTION RESPONSIBILITIES.
-------------------------------------------------
9.1 PROPRIETARY RIGHTS; NOTICES. Each party shall provide
appropriate notices of patents, or other similar notice of the
patent rights of the other party on all products utilizing the
patented inventions of the other party. Either party may add its
own patent notice to any copy or embodiment which contains its
patented inventions.
9.2 LICENSOR EXCLUSIVE OWNER. LICENSEE hereby acknowledges
LICENSOR as purporting to be the sole and exclusive owner of the
patents and patent applications listed on Schedule A, and that,
except for the rights granted hereunder, LICENSEE shall not have
any rights or attempt to assert any ownership rights in and to
those patents and patent applications.
10. TERM AND TERMINATION.
--------------------
10.1 TERM. The term of this Agreement shall extend from the
Effective Date of this Agreement to the date of termination of
this Agreement. Unless sooner terminated or extended, as herein
provided for below, this Agreement shall terminate upon the
expiration of the later of (A) the last to expire of the patents
now or hereafter listed in Schedule A hereof, and (B) the
expiration of the period in which LICENSEE is obligated to
maintain confidential Technical Information of LICENSOR pursuant
to Section 12.1 hereof.
10.2 TERMINATION BY LICENSEE. LICENSEE may terminate this
Agreement effective as of December 31, 2003 or as of any
anniversary thereof by giving LICENSOR prior notice thereof
unless sooner terminated as hereinafter provided. Such notice
shall be made in writing and shall be given between 60 and 90
days prior to the effective date for which such termination is to
be effective. If LICENSEE decides to terminate this Agreement
for any reason, LICENSEE shall provide LICENSOR, along with the
aforementioned notice of termination, with a written report
describing
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the reasons for such termination. Notwithstanding anything
contained herein to the contrary, LICENSEE may terminate this
Agreement effective as of December 31, 2001 if by December 31,
2001 Light Valve film samples are not made available to third
party recipients by any of LICENSOR's licensees or their
permitted sublicensees.
10.3 TERMINATION BY LICENSOR. LICENSOR may terminate this
Agreement at any time effective as of December 31, 2003 or as of
any anniversary thereof upon at least 30 days' notice to LICENSEE
for any reason, and LICENSOR may terminate this Agreement at any
time upon at least 30 days' notice to LICENSEE if LICENSEE shall
have failed to make any payment when due or at any time breach
any material term of this Agreement and such payment is not made
or such breach is not cured within any applicable cure period
specified in Article 11 of this Agreement, or repeatedly provide
inaccurate reports hereunder, or if there has been a cessation by
LICENSEE of general operations or of work related to Licensed
Products.
10.4 EFFECT OF TERMINATION. If this Agreement expires or is
terminated for any reason whatsoever, in addition to any other
remedies which one party may have against the other: (1) all of
LICENSEE'S rights and licenses under this Agreement shall cease,
and LICENSEE shall immediately return to LICENSOR all Technical
Information furnished by LICENSEE under this Agreement, together
with all reproductions, copies and summaries thereof; PROVIDED,
HOWEVER, that LICENSEE may retain solely for archival purposes
one copy of all such documents in its legal department files, (2)
at LICENSOR's option, LICENSEE shall, within 30 days of the date
of such termination, either (A) sell and deliver to LICENSOR at
LICENSEE's direct cost of manufacture any Licensed Products which
shall then be in the possession of LICENSEE, and, if requested by
LICENSOR, LICENSEE shall furnish and deliver to LICENSOR any
Licensed Products in the process of manufacture as soon as
possible and, in any case, not later than 30 days after receiving
LICENSOR's request, and/or (B) with respect to any unsold
inventory and work in the process of manufacture, to complete
such work in process and sell any remaining inventory during the
period not to exceed six months from the date of termination or
expiration of this Agreement provided that at the completion of
such six-month period, LICENSEE shall promptly destroy and
dispose of any Licensed Products (and Licensed Products in the
process of manufacture) not sold under this Section 10.4 and (3)
if this Agreement is terminated for any reason on or before
December 31, 2003, LICENSEE hereby grants to LICENSOR a
nonexclusive, royalty-free, irrevocable, worldwide license with
the right to grant sublicenses to others to utilize all technical
information, improvements and/or modifications (whether or not
the subject of patents or pending patent applications) developed
or invented by or on behalf of LICENSEE and/or its sublicensees,
subcontractors, or agents hereunder through the date of such
termination of this Agreement relating to Light Valves, or
Licensed Products, and upon such termination, LICENSEE shall
provide LICENSOR in reasonable detail complete information
regarding such technical information, improvements and/or
modifications. The foregoing license shall be self-effectuating,
but LICENSEE agrees upon written notice by LICENSOR at any time
hereafter to deliver to LICENSOR within 30 days of such notice
any document or other instrument reasonably requested by LICENSOR
to convey such license rights to LICENSOR such as, by way of
example, confirmations or instruments of conveyance or
assignment. No termination of this Agreement by expiration or
otherwise shall release LICENSEE or LICENSOR from any of its
continuing obligations hereunder, if any, or limit, in any way
any other remedy one party may have against the other party.
Notwithstanding the foregoing, LICENSEE's obligations to LICENSOR
11
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under Sections 3.1, 3.6, 4.2, 4.3, 4.4, 4.5, 4.6, 6.1, 6.2, 7.2,
8.6, 8.7, 10.4, 12.1, and Articles 13 and 14 shall survive any
termination or expiration of this Agreement.
11. EVENTS OF DEFAULT AND REMEDIES.
------------------------------
11.1 EVENTS OF DEFAULT. Each of the following shall
constitute an "Event of Default" under this Agreement:
11.1.1 (a) A party's failure to make any payment due in a
timely manner or a party's material breach or material failure to
punctually perform any of its duties and obligations under this
Agreement, which material breach or failure, if curable, remains
uncured for thirty (30) days after written notice of such breach
or failure is received by the breaching party; or (b) a material
misrepresentation is made by a party in any representation or
warranty contained in this Agreement and the misrepresented facts
or circumstances, if curable, remain uncured thirty (30) days
after written notice of such misrepresentation is received by the
breaching party; and, in either case, if such breach or
misrepresentation is not curable, termination shall occur thirty
(30) days after such misrepresentation or breach at the option of
the non-breaching party; or
11.1.2 The failure by a party upon request to provide the
other party with adequate assurances of its performance of all
obligations under this Agreement upon: (a) such first party's
filing of a voluntary petition in bankruptcy; (b) the filing of
any involuntary petition to have such first party declared
bankrupt which has not been dismissed within ninety (90) days of
its filing; (c) the appointment of a receiver or trustee for such
first party which has not been rescinded within ninety (90) days
of the date of such appointment; or (d) such first party
otherwise becoming insolvent or otherwise making an assignment
for the benefit of creditors.
11.2 DEFAULT BY A PARTY. If there occurs an Event of
Default with respect to a party, the other party may:
(a) seek damages; and/or
(b) seek an injunction or an order for mandatory or
specific performance; and/or
(c) terminate this Agreement and the licenses granted to
LICENSEE hereunder whereupon the non defaulting party
shall have no further obligations under this Agreement
except those which expressly survive termination, and
except with respect to royalty payments due and owing
to LICENSOR as of the termination date or any
subsequent period specified in Section 10.4.
12. CONFIDENTIALITY.
---------------
12.1 CONFIDENTIAL INFORMATION. (a) LICENSEE agrees for
itself, its sublicensees, and their employees and agents that for
twenty (20) years from the later of the Effective Date of this
Agreement or the latest date of its receipt of information
disclosed to LICENSEE by LICENSOR pursuant to this Agreement,
such information shall be held in confidence; PROVIDED, HOWEVER,
there
12
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shall be no obligation to treat as confidential information which
is or becomes available to the public other than through a breach
of this obligation, or which was already possessed by LICENSEE in
writing (or otherwise provable to be in the possession of
LICENSEE) prior to the Effective Date of this Agreement (and was
not received from LICENSOR) or which is shown by LICENSEE to have
been received by it from a third party who had the legal right to
so disclose it without restrictions and without breach of any
agreement with LICENSOR or its licensees. LICENSOR shall affix
an appropriate legend on all written documentation given to
LICENSEE which contains confidential information. LICENSEE
acknowledges that the list of patent applications contained on
Schedule A is confidential information of LICENSOR. Other than
for the oral information conveyed during the training conducted
pursuant to Sections 8.3 and 8.4 hereof all of which shall be
deemed to be confidential information, if confidential
information is otherwise conveyed orally by LICENSOR after
training has been completed, LICENSOR shall specify to LICENSEE
at the time such information is being conveyed (or in a
subsequent letter referring to the conversation) that the
information conveyed is confidential. It is understood and
agreed that, unless otherwise provided in a separate agreement
between LICENSEE and LICENSOR, LICENSEE has no obligation
hereunder to provide LICENSOR with any confidential or
proprietary information, and that LICENSOR shall have no
obligation hereunder to LICENSEE to maintain in confidence or
refrain from commercial or other use of any information which
LICENSOR is or becomes aware of under this Agreement. The terms
and provisions of this Agreement or any other agreement between
the parties shall not be considered confidential, and the parties
hereto acknowledge that, pursuant to the Securities Exchange Act
of 1934, as amended, and the regulations promulgated thereunder,
LICENSOR may file copies of this Agreement with the Securities
and Exchange Commission and with NASDAQ and with any other stock
exchange on which LICENSOR's securities may be listed. LICENSEE
agrees that for the period of time during which LICENSEE is
obligated to keep information confidential hereunder, LICENSEE
will not make, use, sell, lease or otherwise dispose of products
using or directly or indirectly derived from Licensed Products,
Light Valves, or Components, or which otherwise comprise
suspending particles, which when subjected to a suitable electric
or magnetic field, orient to produce a change in the optical
characteristics of the suspension ("SPD Technology") unless an
agreement between LICENSOR and LICENSEE permitting it to do so is
in full force and effect and the royalties, if any, provided in
such agreement are being paid to LICENSOR on such products. The
foregoing restriction shall not apply to products (i) which do
not directly or indirectly incorporate SPD Technology, such as,
but not limited to, liquid crystal devices, or electrochromic
devices, or (ii) which incorporate technology involving suspended
particles, which when subjected to a suitable electric or
magnetic field, orient to produce a change in the optical
characteristics of the suspension but which is independently
developed and which is not in any way directly or indirectly
derived from any Technical Information of LICENSOR or its
licensees, sublicensees, or any of their affiliates. LICENSEE
shall have the burden of proving by clear and convincing evidence
that the availability of any exception of confidentiality exists
or that the foregoing restrictions do not apply to a particular
product. Nothing contained in this section, however, shall be
construed as granting LICENSEE any rights or licenses with
respect to any Technical Information or patents of LICENSOR or
its other licensees or their sublicensees.
(b) After LICENSEE's exercise of its Training Option under
Section 8.1 of this Agreement, LICENSEE shall have the right to
disclose to a subcontractor information of LICENSOR received
pursuant to Article 8 hereof; PROVIDED, HOWEVER, that LICENSEE
shall only disclose such information
13
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<PAGE>
as is strictly necessary to enable said subcontractor to perform
its manufacturing task, and provided that prior to disclosing any
information to said subcontractor, said subcontractor has signed
a secrecy agreement with LICENSEE at least as protective of
LICENSOR's Technical Information as the provisions of this
Agreement, including, without limitation, said subcontractor's
specific agreement to be bound by the provisions of Section 12.1
hereof to the same extent as LICENSEE. For such purposes,
LICENSEE may develop a standard form of secrecy agreement for
LICENSOR's approval, after which LICENSEE may use such secrecy
agreement with all subcontractors without LICENSOR's prior
approval of the secrecy agreement being necessary. LICENSEE
shall have all subcontractors sign said secrecy agreement prior
to the disclosure of Technical Information to said subcontractor,
and LICENSEE shall send LICENSOR a copy of every such secrecy
agreement within thirty (30) days after the execution thereof.
13. WARRANTIES AND REPRESENTATIONS.
------------------------------
13.1 RECIPROCAL REPRESENTATIONS. Each party represents and
warrants to the other that:
13.1.1 VALID AGREEMENT. The execution and delivery of this
Agreement by the officer or representative so doing, and the
consummation of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action by LICENSOR and
LICENSEE and this Agreement is a valid and binding obligation
enforceable against the parties in accordance with its terms,
except to the extent limited by bankruptcy, insolvency,
moratorium and other laws of general application relating to
general equitable principles;
13.1.2 NO CONFLICTS. Nothing herein conflicts with its
rights and obligations pursuant to any agreement by a party and
any other entity; and
13.1.3 PUBLICITY. The parties shall have the right to use
non-confidential information, including but not limited to
information concerning this Agreement, for marketing, sales,
technical assistance, investor relations, disclosure and public
relations purposes, and that information permitted to be
disclosed by a party under this Section 13.1.3 may appear on such
party's (or its subsidiaries' or sublicensees') Internet web
site, along with links to the Internet web sites of the other
party and its subsidiaries and sublicensees.
13.2 LICENSOR REPRESENTATIONS. LICENSOR represents and
warrants, for the benefit of LICENSEE, that:
13.2.1 TITLE. As of the date hereof, LICENSOR represents
and warrants that it has the right to convey the rights and
licenses granted by this Agreement, and otherwise to perform its
obligations under this Agreement. LICENSOR has caused its
employees who are employed to do research, development, and other
inventive work to disclose to it any invention or information
within the scope of this Agreement and to assign to it rights in
such inventions and information in order that LICENSEE shall
receive, by virtue of this Agreement, the licenses granted to it
under Section 2.1 hereof.
13.3.2 INFRINGEMENT. As of the date hereof, LICENSOR is
not ware of any claim for patent infringement or the
misappropriation of trade secrets, being asserted against it by
any third party; or of any infringement of the patents listed on
Schedule A hereto by any entity.
14
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<PAGE>
13.2.3 PATENTS IN FORCE. To the best of LICENSOR's
knowledge, all of the patents listed on Schedule A hereto are
currently in force.
13.3 NO WARRANTY. LICENSOR and LICENSEE make no guaranty or
warranty to one another under this Agreement (a) that LICENSEE
will be able to develop, manufacture, sell or otherwise
commercialize Licensed Products, or (b) as to the validity of any
patent.
14. MISCELLANEOUS.
-------------
14.1 APPLICABLE LAW. This Agreement shall be interpreted,
construed, governed and enforced in accordance with and governed
by the laws of the State of New York, and LICENSOR and LICENSEE
hereby submit to the exclusive jurisdiction of the state or
federal courts located in the County of Nassau and State of New
York for such purposes.
14.2 CONFIDENTIALITY IN COURT PROCEEDING. In order to
protect and preserve the confidential information of a party
which the parties recognize may be exchanged pursuant to the
provisions of this Agreement, the disclosing party may request,
and the receiving party shall not oppose, the court in any action
relating to this Agreement to enter a protective order to protect
information which is confidential information under Section 12.1
and to seal the record in the action or to hold the proceedings,
or portion of the proceedings, in camera; provided, that the
requested terms do not prejudice the receiving party's interests.
Nothing, however, shall preclude either party from thereafter
moving to unseal its own records or to have matter and
information designated as confidential under any relevant
protective order designated otherwise in accordance with the
circumstances as they shall appear at that time.
14.3 SEVERABILITY. If any provision of this Agreement is
declared or found to be illegal, unenforceable or void, the
parties shall negotiate in good faith to agree upon a substitute
provision that is legal and enforceable and is as nearly as
possible consistent with the intentions underlying the original
provision. If the remainder of this Agreement is not materially
affected by such declaration or finding and is capable of
substantial performance, then the remainder shall be enforced to
the extent permitted by law.
14.4 WAIVER. Unless agreed to by the parties in writing to
the contrary, the failure of either party to insist in any one or
more instances upon the strict performance of any one or more of
the provisions of this Agreement, or to exercise any right
contained in this Agreement or provided by law, shall not
constitute or be construed as a waiver or relinquishment of the
performance of such provision or right or the right subsequently
to demand such strict performance or exercise of such right, and
the rights and obligations of the parties shall continue
unchanged and remain in full force and effect.
14.5 CAPTIONS. The captions and headings in this Agreement
are inserted for convenience and reference only and in no way
define or limit the scope or content of this Agreement and shall
not affect the interpretation of its provisions.
14.6 ASSIGNMENT. This Agreement shall be binding on and
shall inure to the benefit of the parties and their successors
and assigns. However, LICENSEE agrees that it shall not assign
this Agreement or its rights hereunder without the prior written
consent of LICENSOR except to a successor to substantially all of
its business relating to Light Valves and whose obligations
hereunder
15
<PAGE>
<PAGE>
are guaranteed to LICENSOR by LICENSEE. LICENSOR may assign all
of its rights and obligations hereunder to any successor to any
of its business interests or to any company controlling or
controlled by LICENSOR. All assignees shall expressly assume in
writing the performance of all the terms and conditions of this
Agreement to be performed by the assigning party, and an
originally signed instrument of such assumption and assignment
shall be delivered to the non-assigning party within 30 days of
the execution of such instrument.
14.7 SCHEDULES. All schedules attached to this Agreement
shall be deemed to be a part of this Agreement as if set forth
fully in this Agreement.
14.8 ENTIRE AGREEMENT. This Agreement constitutes the
entire understanding and agreement between LICENSOR and LICENSEE
with respect to the subject matter hereof, supersedes all prior
agreements, proposals, understandings, letters of intent,
negotiations and discussions with respect to the subject matter
hereof and can be modified, amended, supplemented or changed only
by an agreement in writing which makes specific reference to this
Agreement and which is executed in writing by the parties;
PROVIDED, HOWEVER, that either party may unilaterally waive in
writing any provision imposing an obligation on the other.
14.9 NOTICES. Any notice required or permitted to be given
or made in this Agreement shall be in writing and shall be deemed
given on the earliest of (i) actual receipt, irrespective of
method of delivery, (ii) on the delivery day following dispatch
if sent by express mail (or similar next day courier service), or
(iii) on the sixth day after mailing by registered or certified
air mail, return receipt requested, postage prepaid and addressed
as follows:
LICENSOR: Robert L. Saxe, President
Research Frontiers Incorporated
240 Crossways Park Drive
Woodbury, New York 11797-2033 USA
Facsimile: (516) 364-3798
Telephone: (516) 364-1902
LICENSEE: Stephen A. Hoffmann
Chairman and Chief Executive Officer
Thermoview Industries, Inc.
1101 Herr lane
Louisville, KY 40222
Facsimile: (502) 412-0301
Telephone: (502) 412-5600
or to such substitute addresses and persons as a party may
designate to the other from time to time by written notice in
accordance with this provision.
14.10 BANKRUPTCY CODE. In the event that either party
should file a petition under the federal bankruptcy laws, or that
an involuntary petition shall be filed against such party, the
parties intend
16
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<PAGE>
that the non-filing party shall be protected in the continued
enjoyment of its rights hereunder to the maximum feasible extent
including, without limitation, if it so elects, the protection
conferred upon licensees under section 365(n) of Title 17 of the
U.S. Code. Each party agrees that it will give the other party
immediate notice of the filing of any voluntary or involuntary
petition under the federal bankruptcy laws.
14.11 CONSTRUCTION. This Agreement and the exhibits hereto
have been drafted jointly by the parties and in the event of any
ambiguities in the language hereof, there shall be no inference
drawn in favor or against either party.
14.12 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same
instrument.
14.13 STATUS OF THE PARTIES. The status of the parties
under this Agreement shall be solely that of independent
contractors. No party shall have the right to enter into any
agreements on behalf of the other party nor shall it represent to
any person that it has such right or authority.
The parties, through their duly authorized representatives,
and intending to be legally bound, have executed this Agreement,
as of the date and year first above written, whereupon it became
effective in accordance with its terms.
RESEARCH FRONTIERS INCORPORATED
By: /s/ Robert L. Saxe
-----------------------------
Robert L. Saxe, president
Date: March 21, 2000
THERMOVIEW INDUSTRIES, INC.
By: /s/ Stephen A. Hoffmann
----------------------------
Stephen A. Hoffmann, Chairman and
Chief Executive Officer
Date: March 20, 2000
17
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<PAGE>
SCHEDULE A
----------
(As of March 21, 2000)
LIST OF UNITED STATES AND
-------------------------
FOREIGN PATENTS
---------------
AND PATENT APPLICATIONS
-----------------------
DATE EXPIRATION
PATENTS IN THE UNITED STATES ISSUED DATE
- ---------------------------- ------ ----------
4,407,565 Robert L. Saxe
"Light Valve Suspension Containing
Fluorocarbon Liquid" 10/04/83 1/16/01
4,422,963 Robert I. Thompson et al
"Improved Light Polarizing Materials
and Suspension Thereof" 12/27/83 12/27/00
4,772,103 Robert L. Saxe
"Light Valve Containing an Improved
Suspension, and Liquids Therefor" 9/20/88 8/8/06
4,877,313 Robert L. Saxe et al
"Light Polarizing Materials and
Suspensions Thereof" (QA) 10/31/89 2/10/09
5,002,701 Robert L. Saxe
"Light Polarizing Materials and
Suspensions Thereof" 3/26/91 10/27/09
5,093,041 Joseph A. Check, III et al
"Light-Polarizing Material Based on
Ethylene-diamine Polyacetic Acid
Derivatives" 3/03/92 7/30/10
5,111,331 Paul Rosenberg
"Electro-Optical Light Modulator" 5/05/92 7/5/09
5,130,057 Robert L. Saxe
"Light Polarizing Materials and
Suspensions Thereof" 7/14/92 10/31/06
5,279,773 Robert L. Saxe
"Light Valve Incorporating a Suspension
Stablized With A Block Polymer" 1/18/94 3/23/12
5,325,220 Robert L. Saxe
"Light Valve With Low Emissivity
Coating As Electrode" (JDR-105) 6/28/94 3/9/13
A-1
<PAGE>
<PAGE>
SCHEDULE A (CONTINUED)
----------------------
DATE EXPIRATION
PATENTS IN THE UNITED STATES ISSUED DATE
- ---------------------------- ------ ----------
5,463,491 Joseph A. Check III
"Light Valve Employing a Film Comprising
An Encapsulated Liquid Suspension And
Method of Making Such File" (JDR-101) 10/31/95 11/6/12
5,463,492 Joseph A. Check III
"Light Modulating File of Improved
Clarity For A Light Valve" (JDR-102) 10/31/95 11/6/12
5,461,506 Joseph A. Check III et al
"Light Valve Suspensions Containing A
Trimellitate Or Trimesate And Light
Valves Containing the Same" (JDR-103) 10/24/95 5/11/13
5,467,217 Joseph A. Check III et al
"Light Valve Suspensions and Films
Containing UV Absorbers and Light
Valves Containing the Same" (JDR-104) 11/14/95 5/11/13
5,516,463 Joseph A. Check III et al
"Method of Making Light Polarizing Particles"
(JDR-106) 05/14/96 07/08/14
5,650,872 Robert L. Saxe et al
"Light Valve Containing Ultrafine Particles"
(JDR-108) [CIP of S.N. 351,665) 07/22/97 07/22/14
5,728,251 Joseph A. Check, III
"Light Modulating Film of Improved
UV Stability For a Light Valve"
(JDR-111) 03/17/98 09/27/15
A-2
<PAGE>
<PAGE>
PENDING APPLICATIONS
--------------------
SERIAL NUMBER FILING DATE
- ------------- -----------
176,367 Robert L. Saxe
"Light Valve Incorporating A Suspension
Stabilized With A Block Polymer" (JDR-110) 01/03/94
This case is identical with U.S. Patent No. 5,279,773 which
issued on January 18, 1994 except that certain claims are on
appeal.
08/947,559 Huifang Zhuang et al
"Ultraviolet Radiation-Curable
Light-Modulating Film for a Light
Valve, and Method of Making Same" (JDR-112) 10/09/97
09/258,677 Robert L. Saxe et al
"Light Polarizing Material, Liquid
Suspensions and Films Thereof, and Light
Valve Incorporating Same" (JDR-113) 02/26/99
60/092,331 Barry Fanning et al
"Improved Polyhalide Particles, Liquid
Suspensions and Films Thereof, Light
Valves Comprising Same, and Methods of Making
Such Particles (JDR-114) 07/09/99
60/092,198 Robert L. Saxe et al
"Method of Making Light-Polarizing Particles
of Improved Particle Size Distribution for
Liquid Light Valve Suspension, Set Suspension
and Light Valve Film" (JDR-115) 07/09/99
09/327/760 Robert L. Saxe
"Anisometrically Shaped Carbon and/or Graphite
Particles, Liquid Suspensions and Films Thereof
And Light Valves Comprising Same" 06/07/99
Robert L. Saxe et al
"Method and Materials for Enhancing the Adhesion of
SPD Films and Light Valves Comprising Same" 03/02/00
Srinivasan Chakrapani et al
"SPD Films Having Improved Properties and
Light Valves Comprising Same" 03/02/00
A-3
<PAGE>
<PAGE>
PATENT NUMBER
OR
COUNTRY SERIAL NUMBER ISSUED FILED EXPIRATION
- ------- ------------- ------ ----- ----------
Foreign patents and applications corresponding to U.S. Patent Number
4,407,565:
Germany P3200557.1 01/12/82
*Japan 1,551,551 03/23/90 06/28/82 06/28/02
Foreign patents and applications corresponding to U.S. Patent Number
4,772,103:
*Canada 1,315,088 03/30/93 05/20/88 03/30/10
*EPO (France,
Germany,
United Kingdom) 342,299 12/08/93 05/20/88 05/20/08
*Japan 2,716,459 11/07/97 06/08/88 06/08/08
*Korea 119,483 08/02/97 07/05/88 07/05/08
*Taiwan NI-43736 04/23/91 05/24/88 12/31/05
Foreign patents and applications corresponding to U.S. Patent Number
4,877,313:
*Canada 1,336,858 09/05/95 06/08/89 09/05/12
*EPO (France
Germany,
United Kingdom) 403,711 12/08/93 06/19/89 06/19/09
Japan 01-176982 07/07/89
*Korea 9650/89 07/02/98 07/07/89 07/02/13
*Taiwan NI-41699 01/12/91 06/21/89 09/30/05
Foreign patents and applications corresponding to U.S. Patent Number
5,002,701):
Canada 2,027,349-6 10/15/90
*EPO (France,
Germany,
Holland, Italy,
Sweden, Switzer-
land, United
Kingdom) 425,344 05/18/94 10/17/90 10/17/10
Japan 02-288254 10/22/90
Korea 16868/90 10/22/90
*Taiwan NI-46516 08/10/91 10/13/90 04/30/06
*-indicates a patent
A-4
<PAGE>
<PAGE>
PATENT NUMBER
OR
COUNTRY SERIAL NUMBER ISSUED FILED EXPIRATION
- ------- ------------- ------ ----- ----------
Foreign patents and applications corresponding to U.S. Patent Number
5,093,041:
Canada 2049869 08/26/91
*EPO (France,
Germany,
United Kingdom) 532,809 02/28/96 09/16/91 09/16/11
Japan 3-252,095 09/30/91
Korea 17043/91 09/30/91
Foreign patents and applications corresponding to U.S. Patent Number
5,279,773 (Block Polymer):
*Canada 1,335,845 06/06/95 06/08/89 06/06/12
*EPO (France,
Germany,
United Kingdom) 350,354 06/01/94 06/19/89 06/19/09
*Japan 2,710,415 10/24/97 07/07/89 07/07/09
Korea 9651/89 07/07/89
Foreign patents and applications corresponding to U.S. Patent Number
5,325,220 (Low-E (JDR-105):
*Argentina 250,625 04/29/97 05/02/94 04/29/12
Australia 59380/94 04/12/94
Brazil PI9402044-2 05/20/94
Canada 2120854 04/08/94
EPO (Austria, 94201185.9 04/28/94
Belgium, Denmark,
France, Germany,
Greece, Ireland,
Italy, Luxembourg,
Monaco, Netherlands,
Portugal, Spain,
Sweden, Switzerland,
[including Liechten-
stein] & United
Kingdom)
Japan 6-96451 05/10/94
Korea 10054/94 05/09/94
Mexico 9402944 04/22/94
*Taiwan NI-68190 02/15/95 03/10/93 03/09/13
*-indicates a patent
A-5
<PAGE>
<PAGE>
PATENT NUMBER
OR
COUNTRY SERIAL NUMBER ISSUED FILED EXPIRATION
- ------- ------------- ------ ----- ----------
Foreign patents and applications corresponding to U.S. Patent Number
743,808 (QAII)(:
*Canada 1,336,858 09/05/95 04/07/92 04/07/12
*EPO (Austria,
Denmark, France,
Germany, Greece,
Italy, Luxembourg,
Netherlands,
Portugal, Spain,
Sweden, Switzerland,
[including Liechten
stein] & United
Kingdom) 564,676 10/13/93 04/07/92 04/07/12
Japan 4-109708 04/28/92
Korea 6162/92 04/14/92
*Taiwan NI-60806 06/04/93 04/08/92 02/20/08
Foreign patents and applications corresponding to U.S. Patent Number
5,463,491 (JDR-101):
USPTO/RO PCT/US92/09034 10/22/92
*Australia 669,135 09/27/96 06/14/94 06/14/14
Canada 2125561 06/09/94
EPO (Austria, 92922886.4 10/22/92
Belgium, Denmark,
France, Germany,
Greece, Ireland,
Italy, Luxembourg,
Monaco, Netherlands,
Portugal, Spain,
Sweden, Switzerland,
[including liechten-
stein] & United
Kingdom)
Korea 702534/93 08/25/93
*Mexico 183,173 11/07/96 04/29/93 04/29/13
Taiwan 82102979 04/19/93
*-indicates a patent
A-6
<PAGE>
<PAGE>
PATENT NUMBER
OR
COUNTRY SERIAL NUMBER ISSUED FILED EXPIRATION
- ------- ------------- ------ ----- ----------
Foreign patents and applications corresponding to U.S. Patent Number
5,463,492 (JDR-102):
USPTCO/RO PCT/US93/10485 11/01/93
Argentina 327,984 04/22/94
Australia 55896/94 11/01/93
Australia 31573/97 07/28/97
Brazil PI9307402 11/01/93
Canada 21477868 11/01/93
EPO (Austria, 94901235.5 05/04/95
Belgium, Denmark,
France, Germany,
Greece, Ireland,
Italy, Luxembourg,
Monaco, Netherlands,
Portugal, Spain,
Sweden, Switzerland,
[including Liechten-
stein] & United
Kingdom
Japan 6/512156 11/01/93
Korea 701724/95 05/02/95
Mexico 942757 04/15/94
*Taiwan NI-071343 08/30/95 11/11/93 11/10/13
Foreign patents and applications corresponding to U.S. Patent Number
5,461,506 (JDR-103):
*Argentina 248,847 04/16/96 05/09/94 04/16/11
Australia 59382/94 04/12/94
Brazil PI9401916-9 05/06/94
Canada 2121062 04/12/94
EPO (Austria, 94201186.7 04/28/94
Belgium, Denmark,
France, Germany,
Greece, Ireland,
Italy, Luxembourg,
Monaco, Netherlands,
Portugal, Spain,
Sweden, Switzerland,
[including Liechten
stein} & United
Kingdom)
Japan 6-94637 05/09/94
Korea 9871/94 05/06/94
*Mexico 184,523 04/24/97 04/20/94
Taiwan 83103237 04/12/94
*-indicates a patent
A-7
<PAGE>
<PAGE>
PATENT NUMBER
OR
COUNTRY SERIAL NUMBER ISSUED FILED EXPIRATION
- ------- ------------- ------ ----- ----------
Foreign patents and applications corresponding to U.S. Patent Number
5,467,217 (JDR-104):
Argentina 328,075 05/02/94
*Australia 680,231 11/13/97 04/12/94 04/12/14
Brazil PI9401917.7 05/06/94
Canada 2121061 04/12/94
EPO (Austria, 94201184.2 04/28/94
Belgium, Denmark,
France, Germany,
Greece, Ireland,
Italy, Luxembourg,
Monaco, Netherlands,
Portugal, Spain,
Sweden, Switzerland,
[including Liechten
stein} & United
Kingdom)
Japan 6-96217 05/10/94
Korea 9870/94 05/06/94
Mexico 9402945 04/22/94
Taiwan 83103238 04/12/94
Foreign patents and applications corresponding to U.S. Patent Number
5,516,463 (JDR-106):
*Argentina 250,329 01/28/97 07/21/94 01/28/12
*Australia 682,367 01/22/98 07/20/94 07/20/14
Brazil PI9402876-1 07/20/94
Canada 2,128,484 07/20/94
EPO (Austria, 94111419.1 07/21/94
Belgium, Denmark,
France, Germany,
Greece, Ireland,
Italy, Luxembourg,
Monaco, Netherlands,
Portugal, Spain,
Sweden, Switzerland,
[including Liechten
stein} & United
Kingdom)
Japan 6-168249 07/20/94
Korea 17458/94 07/20/94
Mexico 9405529 07/20/94
Taiwan 83106635 07/20/94
*-indicates a patent
A-8
<PAGE>
<PAGE>
PATENT NUMBER
OR
COUNTRY SERIAL NUMBER ISSUED FILED EXPIRATION
- ------- ------------- ------ ----- ----------
Foreign patents and applications corresponding to U.S. Serial Number
534,516 (JDR-111):
Canada 2,186,318 09/24/96
EPO (Austria, 96402046.5 09/26/96
Belgium, Denmark,
France, Germany,
Greece, Ireland,
Italy, Luxembourg,
Monaco, Netherlands,
Portugal, Spain,
Sweden, Switzerland,
[including Liechten
stein} & United
Kingdom)
Japan 8-253225 09/25/96
Korea 39420/96 09/12/96
Foreign patents and applications corresponding to U.S. Serial Number
08/947,599:
Argentina P980105043 10/09/98
Australia 10/01/98
Brazil 10/08/98
Canada 10/08/98
EPO (Austria, 98402512.2 10/09/98
Belgium, Cyprus,
Denmark,
France, Germany,
Greece, Ireland,
Italy, Luxembourg,
Monaco, Netherlands,
Portugal, Spain,
Sweden, Switzerland,
[including Liechten-
stein] & United Kingdom)
Japan 10-287920 10/09/98
Korea 42138/98 10/09/98
Mexico 988231 10/09/98
Taiwan 87116407 10/02/98
*-indicates a patent
A-9
<PAGE>
RESEARCH FRONTIERS INCORPORATED
-------------------------------
240 CROSSWAYS PARKS DRIVE
WOODBURY, N.Y. 11797
TELEPHONE: (516) 394-1902
FACSIMILE: (516) 364-3798
April 14, 2000
VIA FACSIMILE (502-412-0301)
- ---------------------------
Stephen A. Hoffmann
Chairman and Chief Executive officer
ThermoView Industries, Inc.
1101 Herr Lane
Louisville, KY 40222
Dear Steve:
This letter is to confirm Research Frontier Incorporated's
willingness, in exchange for ThermoView's payment to it of
$50,000, to rescind the issuance of 12,500 shares of the common
stock of ThermoView Industries, Inc. which was paid to us as the
initial minimum annual royalty under our license agreement with
ThermoView Industries, Inc. effective as of March 21, 2000. In
order for us to effectuate this rescission, please let us know
whether you would like to proceed with this rescission by April
19, 2000, as we are in the process of preparing our financial
statements for our fiscal quarter ended March 31, 2000 and need
to reflect this transaction properly. If you would like to
proceed with the rescission, simply sign where indicated below
and fax this letter back to me by April 19, 2000. Thank you.
Sincerely,
/s/ Robert L. Saxe
Robert L. Saxe
President
We agree to the aforementioned rescission:
ThermoView Industries, Inc.
By: /s/ Stephen A. Hoffmann
----------------------------
Stephen A. Hoffmann
Chairman and Chief Executive Officer
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheets and condensed consolidated statements
of operations found on pages 1 and 2 for the three months ended March 31,
2000 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
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<RECEIVABLES> 3,440,575
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains amended summary financial information extracted from the
Company's condensed consolidated balance sheet and condensed consolidated
statement of operations for the three months ended March 31, 1999. The
condensed consolidated statement of operations for the three months ended March
31, 1999 can be found on page 2 of the Company's Form 10-Q for the three months
ended March 31, 2000 and is qualified in its entirety by reference to such
financial statements. The summary financial information has been
amended to reflect adjustments to previously filed information as a result of
SEC comments on the Company's Form S-1 filed in connection with the Company's
initial public offering.
<RESTATED>
<CIK> 0001083753
<NAME> THERMOVIEW INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
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0
3,380
<COMMON> 4,813
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<TOTAL-LIABILITY-AND-EQUITY> 82,569,037
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<TOTAL-REVENUES> 21,749,817
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</TABLE>
