AGREEMENT FOR PURCHASE AND SALE OF ASSETS
THIS AGREEMENT FOR PURCHASE AND SALE OF ASSETS ("Agreement"), made
as of the ______ day of April, 1996, by and between Earth Care Products of the
Midwest, Inc., a Florida corporation ("Buyer"), and Duratech Industries, Inc.,
a Michigan corporation ("Seller"), Xxxxx Xxxxxxx, Xxxx Xxxxxx and Xxxxxxx
Xxxxx (collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, Buyer is a wholly-owned subsidiary of Earth Care Global
Holdings, Inc., a Florida corporation ("ECGH"), which is a wholly-owned
subsidiary of U.S. Plastic Lumber, Inc. (f/k/a Educational Storybooks
International, Inc.), a Nevada corporation ("USI");
WHEREAS, Buyer desires to purchase from the Seller, and the Seller
desires to sell to the Buyer, all of the Assets (as hereinafter defined);
WHEREAS, as a material inducement to Buyer to purchase the Assets
of Seller, Stockholders, the stockholders of Seller, desire to make certain
representations and warranties and agree to be bound by certain covenants and
obligations as hereinafter provided; and
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, and
for other good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 Transfer of Assets. Subject to the terms and conditions set
forth in this Agreement, Seller does hereby sell, convey, transfer, assign and
deliver to Buyer, and Buyer does hereby purchase from Seller, all of the
assets, properties and businesses of Seller, tangible or intangible, as the
same shall exist on the date hereof (the assets being transferred hereunder
are collectively referred to as the "Assets"), including without limitation,
the following:
(a) All machinery, tools, furniture, equipment, leasehold
improvements and other tangible personalty owned by Seller, including without
limitation those items described on Schedule 1.1(a) attached hereto and
incorporated herein (collectively, the "Equipment");
(b) All of Seller's inventory of merchandise, raw
materials, plastics, work in process and finished goods, including without
limitation those items described on Schedule 1.1(b) attached hereto and
incorporated herein (collectively, the "Inventory");
(c) All of Seller's other recyclable goods, including
without limitation, any scrap aluminum and copper metals;
(d) All licenses, consents and permits issued by any
governmental authority which are assignable and which relate to the Seller or
its business;
(e) All warranties which the Seller may have received from
manufacturers or suppliers as to any of the Assets;
(f) All of Seller's customer lists, profile cards,
telephone lists and mailing lists;
(g) All formulae, mixes, secret processes and know how
with respect to the manufacture and production of Seller's products, including
without limitation, plastic lumber and reinforced plastic lumber;
(h) All accounts and notes receivable of Seller; and
(i) All rights to the Seller's telephone numbers and Post
Office Boxes, if any, and, in order to eliminate potential confusion with past
customers of Seller, the name "Duratech Industries", including any trademarks,
servicemarks or copyrights related thereto.
1.2 Purchase Price. In full consideration for the Assets and
the covenants in this Agreement, Buyer shall pay to Seller and Stockholders,
an aggregate purchase price (the "Purchase Price") which is allocated and
payable as follows:
(a) An amount equal to Ten Thousand Dollars ($10,000) in
cash and the issuance of 8,021 shares of USI Common Stock to Xxxxx Xxxxxxx at
Closing (as defined in Section 8.1 hereof).
(b) An amount equal to Ten Thousand Dollars ($10,000) in
cash and the issuance of 4,251 shares of USI Common Stock to Xxxx Xxxxxx at
Closing.
(c) An amount equal to Five Thousand Dollars ($5,000) in
cash and the issuance of 2,500 shares of USI Common Stock to Xxxx Xxxxx at
Closing.
(d) An amount equal to Sixteen Thousand Dollars ($16,000)
payable in fourteen (14) monthly installments at $1,200 per month, with the
first payment due at Closing and the issuance of 10,000 shares of USI Common
Stock to Xxxxx Xxxxxxxx at Closing.
(e) The issuance of up to One Hundred Fifty Thousand
(150,000) shares of Common Stock of USI in the form of a stock earn out ("Earn
Out"), payable to Seller, based on the Net Sales of Buyer, if and when earned,
as more fully set forth in Section 7.1 below.
(f) The assumption of liabilities set forth in Section 1.4.
1.3 Allocation of Purchase Price. Buyer and Seller and
Stockholders agree that they each will take the same position, as determined
by Buyer in its reasonable discretion, with regard to the allocation of the
purchase price (which may include allocations to the Employment Agreements,
including the covenants not to compete contained therein, as provided by
Section 6.9 hereof) for tax purposes and will use such allocation in any and
all tax returns or financial statements.
1.4 Assumption of Certain Designated Liabilities. At the
Closing and as part of the consideration for this transaction, the Seller
shall assign to the Buyer all of its right, title and interest, and the Buyer
shall assume as of the Closing Date and agree to pay when due and otherwise
perform thereunder, all of Seller's obligations and liabilities which arise or
relate to the period commencing on and after the Closing Date under those
unfilled orders, contracts and other commitments for sale of Seller's products
and services, as set forth on Schedule 1.4(a) attached hereto and incorporated
herein (collectively, the "Work-in-process"). In addition, Buyer will assume:
(i) the Delinquent Taxes (as defined in Section 2.2 hereof), including the
interest and penalties thereon as specifically set forth on Schedule 2.2
hereof; (ii) the Outstanding Bank Obligation (as defined in Section 2.5
hereof); (iii) up to One Hundred Thousand Dollars ($100,000) on the trade
accounts payable set forth on Schedule 1.4(b) attached hereto and incorporated
herein (collectively, "Accounts Payable"); (iv) the forklift leases with
Citicorp Dealer Finance described on Schedule 1.4(c); and (v) the $5,400
obligation to Xxx Xxxxxxxxxxx. All liabilities to be assumed by Buyer
pursuant to this Section 1.4 shall be referred to as the "Assumed
Liabilities". The parties agree to work together to attempt to negotiate
satisfactory negotiated settlements of such Accounts Payable in an effort to
limit the total amounts payable on such Accounts Payable to such $100,000. In
no event, however, shall Buyer's obligation with regard to Accounts Payable
exceed $100,000 and Seller shall be responsible for any amounts in excess of
such $100,000.
1.5 No General Assumption of Liabilities. Except as
specifically and unambiguously set forth in Section 1.4 and the related
Schedules 1.4(a), 1.4(b) and 1.4(c) hereof, the Buyer does not and shall not
assume any debts, obligations or liabilities of any nature whatsoever of the
Seller arising before or after the date hereof or in connection with any of
the Assets or the business of Seller.
1.6 Payment of Certain Fees and Taxes. Seller agrees to pay
recording costs and all sales, transfer and license taxes and fees payable
upon the transfer to Buyer of the Assets to be conveyed pursuant to this
Agreement. In addition, Seller shall be responsible for: (a) any business,
occupation, withholding, or similar tax other than the Delinquent Taxes, (b)
any taxes of any kind related to any period before the Closing Date (as
hereinafter defined) other than the Delinquent Taxes, or, if the transactions
contemplated by this Agreement are not consummated for any reason, any taxes
for any period, or (c) all income tax liabilities imposed on Seller
(including, without limitation, because of the sale of the Assets contemplated
hereby), other than the Delinquent Taxes.
2. REPRESENTATIONS AND WARRANTIES BY SELLER AND STOCKHOLDERS. Seller
and Stockholders jointly and severally represent and warrant to Buyer that:
2.1 Organization and Good Standing. Seller is a corporation
duly organized, validly existing and in good standing under the laws of
Michigan, and has all necessary corporate powers to own its properties and
carry on its business as now owned and operated by it.
2.2 Taxes. Except as provided on Schedule 2.2 (the "Delinquent
Taxes"), within the times and in the manner prescribed by law, Seller has
filed all foreign, federal, state, county and local tax returns required by
law and has paid all taxes, assessments, and penalties (collectively, "Taxes")
due and payable. There are presently no disputes as to taxes of any nature
payable by Seller. There are no present or, to the best of Seller's knowledge
and belief, potential disputes as to Taxes payable by Seller.
2.3 Inventory. The Inventory consists of items of a quality and
quantity usable and saleable in the ordinary course of Seller's business. All
items included in the Inventory are the property of Seller. No items included
in the Inventory have been pledged as collateral or are held by Seller on
consignment from others.
2.4 Equipment. Schedule 1.1(a) to this Agreement is a complete
and accurate schedule describing all the Equipment. The Equipment constitutes
all tangible personal property necessary for the conduct by Seller of its
business as now conducted. The Equipment is in good and operable condition,
reasonable wear and tear excepted, except as described on Schedule 2.4.
2.5 Title and Interests in Property. Seller has possession and
good title to all the Assets and interest in Assets being purchased hereunder,
whether personal, mixed, tangible or intangible, which, together with assets
leased by Seller under leases disclosed to Buyer in the schedules to this
Agreement, constitute all the assets and interests in assets that are required
in the businesses of Seller as now conducted. Except for the lien from Union
Bank and Citicorp Dealer Finance, all of the Assets are free and clear of
restrictions on or conditions to transfer or assignment, and free and clear of
mortgages, liens, pledges, options, charges, encumbrances, claims or security
agreements. The present amounts owing to Union Bank (the "Outstanding Bank
Obligation") and Citicorp Dealer Finance are set forth on Schedule 2.5 hereto,
together with a listing of all documents, agreements, promissory notes and
other instruments relating to such matters. There are no outstanding
agreements or commitments of any nature obligating Seller to transfer the
Assets to any other party. Upon the sale, transfer and assignment of the
Assets hereunder, there shall be vested in Buyer good and valid title to all
of the Assets free and clear of any lien, security interest, encumbrance or
restrictions, except for any related to the Outstanding Bank Obligations,
Citicorp Dealer Finance, the Delinquent Taxes and items for taxes not yet due
and payable (together, the "Permitted Items").
2.6 Legal Compliance. Seller has complied with, and is not in
violation of, applicable federal, state and local statutes, laws and
regulations (including, without limitation, any applicable environmental,
safety and health, building, zoning, or other law, ordinance, or regulation)
affecting its employees, the operation of its business or the Assets
(collectively, "Laws"). Seller has not received notice of any violation of
any Laws and there are no such violations.
2.7 Litigation. Except as set forth on Schedule 2.7, there is
no suit, claim, audit, action, arbitration, or legal, administrative, or other
proceeding, or non-insured workmen's compensation claim, or governmental
investigation pending or, to the best of Seller's knowledge, threatened
against (including those involving Seller as plaintiff) Seller, its business
or the Assets. Seller is not a party or subject to any judgment or decree or
order entered in any suit or proceeding brought by any governmental agency or
by any other person enjoining it in respect of any aspect of its business.
Seller is not in default with respect to any order, writ, injunction or decree
of any federal, state, local, or foreign court, department, agency or
instrumentality.
2.8 Violations. Except as set forth on Schedule 2.8, the
consummation of the transactions contemplated by this Agreement and the other
documents and instruments required to be delivered herein will not result in
or constitute any of the following: (a) a violation of any provision of the
articles of incorporation, bylaws or other governing documents of Seller; (b)
to the best of Seller's knowledge, a violation of any provisions of any Law or
of any writ or decree of any court or governmental instrumentality; (c) a
default or an event that, with notice or lapse of time or both, would be a
default, breach, or violation of a lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust, or
other agreement, instrument, or arrangement to which Seller or Stockholders
are a party or by which any of them or the property of any of them is bound,
except as otherwise provided herein or in any Exhibits hereto; (d) an event
that would permit any party to terminate any agreement or to accelerate the
maturity of any indebtedness or other obligation of Seller, except as
otherwise provided herein or in any exhibits hereto; or (e) the creation or
imposition of any lien, pledge, option, security agreement, equity, claim,
charge, encumbrance or other restriction or limitation on the capital stock or
on any of the properties or assets of Seller.
2.9 Legal Authority. Seller and Stockholders have the right,
power, legal capacity, and authority to enter into and perform its or their
obligations under this Agreement and all documents delivered in connection
herewith, and this Agreement constitutes, and each document or instrument to
be executed by Seller or Stockholders pursuant to the terms hereof upon its
execution and delivery will have been duly executed and delivered and will
constitute, the valid and legally binding obligation of Seller enforceable in
accordance with its terms. The execution and delivery of this Agreement and
of each document or instrument to be executed by Seller or Stockholders, as
the case may be, pursuant to the terms hereof, has been duly authorized by
Seller's Board of Directors and stockholders.
2.10 Licenses and Permits. Schedule 2.10 is a schedule of all
licenses, consents and permits issued by any governmental authority used in
connection with the operation of Seller's business. All such licenses,
consents and permits have been duly and validly issued and are in full force
and effect.
2.11 Consents. Except as set forth on Schedule 2.11, no consent,
approval or authority of any nature, or other formal action, by any person,
firm or corporation, or any agency, bureau or department of any government or
any subdivision thereof, not already obtained, is required in connection with
the execution and delivery of this Agreement by Seller or Stockholders, and
the consummation by Seller and Stockholders of the transactions provided for
herein.
2.12 Prepaid Work-in-Process. Schedule 1.4(a) to this Agreement
is a complete and accurate listing of all payments received on account of or
relating to Work-in-process.
2.13 Common Shares. With regard to all shares of USI Common
Stock to be issued to Seller or the Stockholders hereunder, including any such
shares issued pursuant to the Earn Out (collectively, "Shares"), Seller and
Stockholders understand and represent and warrant the following:
(a) Buyer has made available to Seller and Stockholders,
or their designated representatives, during the course of this transaction and
prior to the receipt of the Common Stock of USI referred to herein, the
opportunity to ask questions of and receive answers from the officers and
directors of ECGH and USI (collectively, the "Issuer Group") concerning the
terms and conditions of the offering or otherwise relating to the financial
data and business of the Issuer Group, to the extent that the Issuer Group or
their respective officers and directors possess such information or can
acquire it without unreasonable effort or expense. The Issuer Group has also
made available to the Seller and Stockholders for inspection, documents,
records, books and other written information about the Issuer Group, its
business and this investment. Without limiting the generality of the
foregoing, on or before April 1, 1996, the Seller and each Stockholder
acknowledges that they have received and reviewed USI's Limited Offering
Memorandum dated March 7, 1996 and the related financial statements (the
"Memorandum").
(b) Seller and Stockholders understand and represent that:
(i) the Seller and Stockholders must bear the economic risk of this investment
for an indefinite period of time because the Shares have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), or under any
state securities laws, and therefore, cannot be resold unless they are
subsequently registered under the 1933 Act and the pertinent state securities
laws or unless an exemption from such registration is available; (ii) the
Seller and Stockholders are receiving their Shares for investment for the
benefit of the Seller and Stockholders, not for the account of any other
person, and not with any present view toward resale or other "distribution"
thereof within the meaning of the 1933 Act; and (iii) the Seller and
Stockholders agree not to resell or otherwise dispose of all or any part of
the Shares, except as permitted by law, including, without limitation, any and
all applicable provisions of this Agreement and any regulations under the 1933
Act.
(c) The Seller and Stockholders, either alone or together
with their independent advisors, have such knowledge and expertise in
financial and business matters that they are capable of evaluating the merits
and risks of an investment in the Shares. Each of the Stockholders is
familiar with the type of business conducted by the Issuer Group and
represents that he is principally engaged in a business that is in the same
line of business as the Issuer Group, e.g., the manufacture and sale of
recycled plastic products.
(d) The Seller and Stockholders are aware that an
investment in the Shares is highly speculative and subject to substantial
risks. The Seller and Stockholders are capable of bearing the high degree of
economic risk and burdens of this investment, including the possibility of a
complete loss of their investment and the lack of a public market and limited
transferability of the Shares, which may make the liquidation of this
investment impossible for an indefinite period of time.
(e) The Stockholders are residents of the State of
Michigan and the Seller is domiciled in Michigan.
2.14 Assets in Possession of Others. Except as set forth on
Schedule 2.14, Seller does not hold title to or ownership of any Assets in the
possession of others.
2.15 Accounts and Notes Receivable. Set forth on Schedule 2.15
is a list of all accounts and notes receivable of the Seller as of February
29, 1996. Except as set forth on Schedule 2.15, all such accounts and notes
receivable, and all accounts and notes receivable accruing subsequently to
such date (except those which have been collected since February 29, 1996),
are (a) valid, genuine and subsisting, (b) subject to no defenses, set-offs,
counterclaims, security interest or other encumbrances except to the extent of
a provision for a reserve, and (c) collectible in the ordinary course of
business. All accounts receivable of Seller in existence on the Closing Date
will be paid in full, net of applicable reserves as set forth on Schedule
2.15, on or before 180 days after the Closing Date.
2.16 Undisclosed Liabilities. Except as set forth on Schedule
2.16 and the Assumed Liabilities, Seller does not have any liabilities
whatsoever, known or unknown, asserted or unasserted, liquidated or
unliquidated, accrued, absolute, contingent, or otherwise (collectively,
"Liabilities"), and there is no basis for any claim against Seller for any
such Liability except to the extent reflected on Schedule 2.16.
2.17 Real Property.
(a) Schedule 2.17 contains a list and brief description of
all real property leased by Seller and the improvements (including buildings
and other structures) located on such real property (including a brief
description of the use to which such property is being employed and the
termination date or notice requirement with respect to termination, annual
rental and renewal or purchase options) (the "Real Property"). Seller does
not own any Real Property. Seller has no written leases for Real Property.
Seller (or the lessor under the relevant lease), has legal and valid occupancy
permits and other required licenses or government approvals for each of the
properties and premises leased, used or occupied by Seller. Except as set
forth on Schedule 2.17, Seller has good and marketable title or a valid
leasehold interest, free and clear of all claims, to each improvement, fixture
and item of equipment located in or on each of the properties and premises
leased, used or occupied by it, except for Permitted Liens. Each such lease
is legal, valid and binding as between Seller, and the other party or parties
thereto and Seller is a tenant or possessor in good standing thereunder, free
of any default or breach whatsoever and quietly enjoys the premises provided
for therein. Each rental and other payment due thereunder has been duly made;
each act required to be performed has been duly performed; and no act
forbidden to be performed has been performed thereunder. Except as set forth
on Schedule 2.17 hereto, as of the date of this Agreement Seller has not
received any notice of, nor does Seller or any Stockholder have any knowledge
of (i) any violations (collectively, "Violations", and individually, a
"Violation") of any applicable law or requirements of any federal, state or
municipal department or agency having jurisdiction against or affecting the
Real Property or the construction, management, ownership, maintenance,
operation, use, improvement, acquisition or sale thereof (including, without
limitation, building, health, safety, zoning and environmental Laws)
(collectively, "Legal Requirements") whether or not officially noted or issued
or (ii) any condition relating to the Real Property which, to the best
knowledge of Seller or the Stockholders, would constitute a Violation. The
Real Property is and on the Closing Date shall be in full compliance with any
and all applicable Legal Requirements in any way pertinent or relating to the
acquisition, operation, management, maintenance, use, improvement, sale, and
ownership of the Real Property.
(b) To the best of Seller's and Stockholders' knowledge,
there is no (i) pending or contemplated annexation or condemnation or similar
proceedings affecting, or which may affect, all or any portion of the Real
Property (ii) proposed or pending proceeding to change or redefine the zoning
classification of all or any portion of such Real Property or (iii) proposed
change in road patterns or grades which may adversely affect access to any
roads providing a means of ingress to or egress from the Real Property.
(c) Except for one underground storage tank described in
Schedule 2.17, the Real Property now leased by Seller, or any predecessor
thereof or, to Seller's and Stockholders' knowledge, ever owned or leased by
Seller or any predecessor thereof (including all improvements thereon) does
not contain any underground storage tanks, asbestos, polychlorinated
biphenyls, solid wastes or hazardous substances as such terms may be defined
by all applicable federal, state and local environmental protection laws and
regulations ("Environmental Laws"). No part of the Real Property now leased
by Seller or any predecessor thereof or, to Seller and Stockholders'
knowledge, ever owned or leased by Seller or any predecessor thereof has been
listed or proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act or on a
registry or inventory of inactive hazardous waste sites maintained by any
state and Seller has not received any notices that it is a potentially
responsible person under such Act or any similar law with respect to any
hazardous waste site.
(d) The Real Property has adequate water and sewer supply
for the present and contemplated future use of the Real Property and all sewer
and water supply facilities required for the present and contemplated future
use of the Real Property are properly and fully installed and operating. All
other public or private utilities necessary for the operation of the Real
Property for its present and contemplated future use are properly and fully
installed and operating. There has been no damage to any portion of the Real
Property caused by fire or other casualty which has not been fully repaired or
restored. All oil and/or gas burners, incinerators, furnaces and other fuel
burning devices at the Real Property comply with all applicable Laws,
including, without limitation, all air pollution and Environmental Laws.
2.18 Labor Relations; Employees. The total number of full-time
employees and part-time employees of Seller is set forth on Schedule 2.18.
Seller has generally enjoyed a good employer-employee relationship with its
employees. Schedule 2.18 contains a list of all current officers, managers,
directors, employees, consultants and independent contractors of Seller who
during the past calendar year received, or are expected to receive in the
current calendar year, aggregate remuneration (bonus, benefits and salary) in
excess of $25,000 from Seller, together with the current job title and
aggregate remuneration rate (salary, bonus and benefits) for each such person.
To the best of Seller's and Stockholders' knowledge, no such person will
resign or retire in the near future. Upon termination of the employment of
any employee by Buyer, neither Buyer nor Seller shall incur any liability for
any severance or termination pay, pension or profit-sharing benefit or other
similar payment for periods prior to the Closing Date other than any
unemployment compensation payments, which shall be the responsibility of
Seller. Seller has not engaged in any unfair labor practice, there is no
unfair labor practice or similar complaint against Seller pending before the
National Labor Relations Board or similar authority or strike, dispute,
slowdown or stoppage pending or threatened against or involving Seller or any
complaint pending before the EEOC or any comparable federal, state or local
fair employment practices agency and none has occurred during the last 3 years
except as set forth on Schedule 2.18. No union organization efforts are
pending, nor have any occurred during the past year, at any facility of Seller
and no collective bargaining agreement is currently in effect or being
negotiated by Seller. Seller has complied with all Laws relating to the
employment of labor, including any provisions thereof relating to wages,
hours, equal employment, safety, collective bargaining and the payment of
social security and similar taxes.
2.19 Employee Benefit Plans. The Seller has no employee benefit
plans, as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or any other pension, bonus, deferred
compensation, stock bonus, stock purchase, post-retirement medical,
hospitalization, health and other employee benefit plan, program or
arrangement, whether formal or informal, under which Seller has any obligation
or liability, or under which any employee or former employee of Seller has any
rights to benefits (the "Benefit Plans").
2.20 Customers and Suppliers. Schedule 2.20 is a true and
complete list of all customers over $2,500 and the ten largest suppliers of
Seller during the period specified thereon, showing, with respect to each the
name and address, dollar volume involved, the percentage of the Seller's
business which each such customer and supplier represented and nature of the
relationship (including the principal categories of products bought and sold).
Seller is not required to provide any bonding or other financial security
arrangements in connection with any transactions with any of its customers or
suppliers in the ordinary course of its business. Seller is not engaged in
any material disputes with its customers and suppliers. To the best knowledge
of Seller and the Stockholders, there has not been any loss or threatened loss
of any customer, supplier, distributor, account or product line of Seller nor
is any customer or supplier considering termination, non-renewal or any
adverse modification of its arrangements with the Seller.
3. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer and USI represent
and warrant that:
3.1 Organization and Good Standing. Buyer is a Florida
corporation, duly organized, validly existing, and in good standing under the
laws of Florida. Buyer has all necessary powers to own its properties and
carry on its business as now owned and operated by it.
3.2 Legal Authority. Buyer has the right, power, legal
capacity, and authority to enter into and perform its obligations under this
Agreement and this Agreement constitutes, and each document or instrument to
be executed by Buyer pursuant to the terms hereof upon its execution and
delivery will have been duly executed and delivered and will constitute, the
valid and legally binding obligation of Buyer, enforceable in accordance with
its terms. The execution and delivery of this Agreement by Buyer has been,
and the execution and delivery of each document or instrument to be executed
by Buyer pursuant to the terms hereof will be, duly authorized by all
necessary action.
3.3 Violations. Except as set forth on Schedule 3.3, the
consummation of the transactions contemplated by this Agreement and the other
documents and instruments required to be delivered herein will not result in
or constitute any of the following: (i) a violation of any provision of the
articles of incorporation, bylaws or other governing documents of Buyer; (ii)
to the best of Buyer's knowledge, a violation of any provision or any Law or
of any writ or decree of any court or governmental instrumentality; (iii) a
default or any event that, with notice or lapse of time or both, would be a
default, breach, or violation of a lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust, or
other agreement, instrument, or arrangement to which Buyer is a party or by
which it or the property of it is bound, except as otherwise provided herein
or in any Schedules hereto; (iv) an event that would permit any party to
terminate any agreement or to accelerate the maturity of any indebtedness or
other obligation of Buyer, except as otherwise provided herein or in any
exhibits hereto; or (v) the creation or imposition of any lien, pledge,
option, security agreement, equity, claim, charge, encumbrance or other
restriction or limitation on the capital stock or on any of the properties or
assets of Buyer.
3.4 Available Information. Buyer acknowledges that Seller and
the Stockholders are relying on the information contained in the Memorandum.
Such information is true and correct in all material respects as of the date
of such Memorandum.
4. OBLIGATIONS OF THE PARTIES BEFORE CLOSING.
4.1 Rights of Access.
(a) Each of USI and Buyer, and their respective counsel,
employees, accountants, and other representatives shall have full access to
all properties, books, accounts, records, contracts, files, correspondence,
tax records and documents of or relating to Seller or the Assets. Seller
shall, at its sole cost and expense, promptly furnish or cause to be furnished
to Buyer, USI and their representatives all data and information concerning
such businesses, assets, finances, and properties of Seller that may be
requested. Buyer and USI, at their cost, shall have the right to cause its
agents to conduct such reviews and investigations as Buyer and USI deem
necessary or advisable. Buyer and USI shall have the right to consult with
the accountants for Seller and said accountants are hereby authorized to
disclose all information in their possession to Buyer and USI with respect to
Seller and the assets and businesses being purchased hereunder.
(b) Buyer and USI agree that, unless and until the Closing
has been consummated, Buyer and USI and their respective officers, directors,
and other representatives will hold in strict confidence all data and
information obtained in connection with this transaction or Agreement, with
respect to the businesses of Seller and none of such information and data
which is confidential and proprietary in nature will be used in any manner
other than in connection with the consummation of the transaction contemplated
in this Agreement. If the transactions contemplated by this Agreement are not
consummated, Buyer or USI will return to Seller all data and information made
available to Buyer or USI in connection with this transaction. Seller
understands that, notwithstanding the foregoing, any data or information Buyer
or USI receives from Seller or Stockholders that: (i) is rightfully received
by Buyer or USI from a third party that is not subject to any disclosure
restrictions; (ii) is independently developed by employees of Buyer or USI who
have not had access to such data or information; (iii) is or becomes publicly
available through no wrongful act of the Buyer or USI; or (iv) is already
known by the Buyer or USI as evidenced by documentation bearing a date prior
to the date of disclosure, shall not be subject to the restrictions on use or
disclosure contained in this Section 4.1.
4.2 Continuation of Business. Seller will carry on its
businesses and activities diligently and in the same manner as they previously
have been carried out, and shall not make or institute any unusual or novel
methods of purchase, sale, lease, management, accounting, or operation that
will vary from those methods used by Seller as of the date of this Agreement.
4.3 Specific Acts. Prior to Closing, Seller and Stockholders
will use their respective, reasonable best efforts, without making any
commitments on behalf of Buyer, to preserve Seller's business intact,
including, without limiting the generality of the foregoing:
(a) do or cause to be done all things necessary to
preserve and keep in full force and effect Seller's corporate existence as
described in Section 2.1 and all franchises, rights and privileges, goodwill,
assets, real and personal property, operations, licenses, permits, approvals,
businesses and prospects, and comply with the requirements of all Laws and all
rules, regulations and orders of all regulatory agencies and authorities
having jurisdiction over Seller, its business, assets or its properties;
(b) prior to the date upon which penalties or interest
attach thereto, pay and discharge, or cause to be paid and discharged, all
lawful taxes, assessments and governmental charges or levies imposed upon
Seller or upon Seller's income or property except those for which a dispute
exists or the claim for which may be questionable provided that such matters
are contested in good faith by appropriate proceedings, and are disclosed to
Buyer and the Delinquent Taxes set forth on Schedule 2.2 (provided the amount
of such Delinquent Taxes shall not increase);
(c) promptly notify Buyer in writing of any actual or
threatened investigation, claim, action, suit or proceeding, and any
administrative or governmental actions, suits or claims which are commenced
against, by or relating to Seller the Assets or this Agreement before any
court or any governmental department, commission, board, bureau, agency or
instrumentality;
(d) refrain from knowingly doing any act or omitting to do
any act, or knowingly permit any act or omission to act, which will cause a
breach of any agreement to which Seller is bound or a failure of performance
of any obligation of Seller;
(e) continue to employ the employees of Seller, and
promptly notify Buyer if Seller has reason to know that any employee does not
plan to continue in his respective position of employment at any time after
the date of this Agreement;
(f) preserve each of Seller's existing relationships with
suppliers, customers and others having material business relationships with
any of them; and
(g) to keep the Assets in good working order and repair,
reasonable wear and tear excepted, and perform all necessary repairs,
maintenance, and replacements.
4.4 Insurance. With respect to the Assets and until 12:01 a.m.
on the day immediately following the Closing Date Seller will keep in full
force and effect insurance comparable in amount and scope of coverage to that
now maintained by it.
4.5 Prohibited Acts. Seller shall not, without Buyer's prior
written consent, do, or agree to do, any of the following acts:
(a) transfer, sell, assign or otherwise dispose of any of
its Assets other than in the ordinary course of its business, provided Seller
shall dispose of none of the Assets in such manner other than Inventory;
(b) assume, guarantee, endorse or become liable on, or
agree to repurchase the obligation of any person, firm or corporation, or
suffer to exist any such assumption, guarantee, endorsement, liability or
repurchase agreement except for the endorsement of negotiable instruments for
deposit or collection in the ordinary course of business; or
(c) make any loan or advance to, or make any investment
in, any person, firm or corporation whether by acquisition of stock or
indebtedness, by loan, guarantee or otherwise, or create any Account
Receivable, except in the ordinary course of business.
4.6 Business Documentation. At the request of Buyer, Seller
will document and describe any of its business procedures specified by Buyer,
in form and content satisfactory to Buyer in Buyer's sole and absolute
discretion.
4.7 Discussions with Others. Neither Seller nor Stockholders
will permit or authorize any officer, director, employee or representative of
Seller to solicit or encourage inquiries (including by way of furnishing
information) or the making of any proposal which is reasonably expected to
lead to any acquisition or purchase of any portion of the Assets or any merger
or consolidation of Seller with any third party.
4.8 Pursuit of Consents. Commencing on the date hereof and
continuing to the Closing, Seller and Stockholders shall use their respective,
reasonable best efforts and due diligence to obtain all consents, approvals
and estoppel letters necessary for the lawful consummation of the transactions
contemplated hereby, including the consents of Union Bank and Citicorp Dealer
Finance. Buyer shall cooperate in all reasonable respects to enable Seller to
obtain the necessary consents.
4.9 Update of Schedules. Seller shall update all schedules and
exhibits referred to in Section 2 hereof, including the prepaid Work-in-
process schedule provided in Section 2.12, through and as of the Closing Date,
and shall deliver such updated schedules and exhibits to Buyer.
5. BULK TRANSFER. Seller shall not be required to comply with any
applicable Bulk Transfer Law in respect to the transactions contemplated by
this Agreement. The Seller and Stockholders shall, jointly and severally,
indemnify, defend, and hold harmless the Buyer against any and all claims,
demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries, and deficiencies (other than with respect to the Assumed
Liabilities), including, but not limited to, interest, penalties, and
attorneys' and paraprofessional fees and disbursements (including, but not
limited to, any attorneys' and paraprofessional fees and disbursements
incident to any appeals), that it shall incur or suffer, which arise, result
from, or relate to failure by the Seller to comply with any such applicable
Bulk Transfer Law. Seller reserves the right to contest in good faith any
claims made pursuant to such laws.
6. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE.
6.1 General. The obligations of Buyer to purchase the Assets
under this Agreement are subject to the satisfaction, at or before the
Closing, of all the conditions set out below in this Section 6. Buyer may
waive in writing any or all of these conditions in whole or in part without
prior notice; provided, however, that no such waiver of a condition shall
constitute a waiver by Buyer of any of its other rights or remedies, at law or
in equity, if Seller or Stockholders shall be in default of any of their
representations, warranties, or covenants under this Agreement. Written
notice of all waivers by Buyer, if any, shall be delivered to Seller at or
before the Closing.
6.2 Renewal of Representations and Warranties. Except as
otherwise permitted by this Agreement, all representations and warranties by
Seller and Stockholders in this Agreement or in any written statement that
shall be delivered to Buyer by any of them under this Agreement shall be true
on and as of the Closing Date as though made at that time. No written
statement contrary to the representations and warranties herein shall result
in or cause the waiver of any or all of Seller's or Stockholders'
representations and warranties herein.
6.3 Performance of Covenants. Seller and Stockholders shall
have performed, satisfied, and complied with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by
them, or any of them, on or before the Closing Date.
6.4 Adverse Changes. During the period from the date of this
Agreement to the Closing Date, there shall not have been any material adverse
change in the financial condition or the results of operations of Seller or
the value of the Assets, or any increase in the amount of liabilities to be
assumed by Buyer pursuant to Section 1.4 hereof. If any of the Assets to be
transferred or conveyed to Buyer pursuant to this Agreement is damaged or
destroyed by fire or other casualty prior to the Closing Date and the
aggregate amount of all such damage or destruction equals or exceeds $20,000,
Buyer may terminate this Agreement and all parties shall thereupon be relieved
of liability under this Agreement, or Buyer may elect to close and accept in
lieu of any diminution in the purchase price the insurance proceeds payable
with respect to the damage; provided, however, that Buyer shall be required to
make one of these elections in such case.
6.5 Performance Certificate. Buyer shall have received a
certificate, dated the Closing Date, signed and verified by Seller's President
certifying, in such form and detail as Buyer and its counsel may reasonably
request, that the conditions specified in Article 6 of this Agreement have
been fulfilled.
6.6 Due Authorization. The execution and delivery of this
Agreement by Seller and the performance of its covenants and obligations under
it, shall have been duly authorized by all necessary corporate action, and
Buyer shall have received copies of all resolutions pertaining to that
authorization, certified by the secretary of Seller, all in form and substance
satisfactory to Buyer and its counsel.
6.7 Consents. All necessary agreements and consents of any
person to the consummation of the transactions contemplated by this Agreement,
or otherwise pertaining to the matters covered by it shall have been obtained
by Seller at its sole cost and expense and delivered to Buyer in form and
substance satisfactory to Buyer and its counsel.
6.8 Corporate Documentation. Buyer shall have received the
following with respect to Seller:
(a) Certificate of good standing (as of a date not more
than five (5) days prior to the Closing Date) from the Secretary of State of
Michigan or oral confirmation from such authority acceptable to Buyer; and
(b) A certificate executed by Seller's secretary, dated as
of the Closing Date, with respect to the incumbency of its officers and
attesting to the validity and accuracy of Seller's articles of incorporation
and by-laws.
6.9 Employment Agreement. Buyer and Xxxxx Xxxxxxx, Xxxx Xxxxxx
and Xxxxxxx Xxxxx shall have executed and delivered an Employment Agreement as
of the Closing Date in the forms attached hereto as Exhibits 6.9(a), (b) and
(c), which Employment Agreements also contain a covenant not to compete.
7. POST-CLOSING OBLIGATIONS.
7.1 Earn Out. The Earn Out shall be payable upon the occurrence
of certain events. A payout of 75,000 shares of the common stock of USI shall
be issued to the Seller (or, subject to compliance with applicable state and
federal securities laws, its assigns) in the event that Buyer achieves net
sales of products manufactured at the Lake Odessa, Michigan facility or any
successor location (the "Michigan Facility") of at least $1,500,000 for any
trailing twelve (12) month period ending not later than April 30, 1999 and
commencing not earlier than May 1, 1996 (the "Measuring Period"). In the
event that the net sales of Buyer reach $2,000,000 during this Measuring
Period, then the Seller (or, subject to compliance with applicable state and
federal securities laws, its assigns) is entitled to be issued an additional
payout of 75,000 shares of USI's common stock. Any such shares shall be
issued within thirty (30) days of receipt by Buyer of a report from its
regularly engaged accountants confirming that the appropriate net sales
amounts have been achieved during the Measuring Period. Stockholders shall
have access to the financial books and records of Buyer solely for the purpose
of determining whether such Earn Out net sales numbers have been achieved and
upon written notice from the Stockholders that they believe such Earn Out net
sales numbers have been achieved, Buyer shall instruct its regularly engaged
accounts to examine such net sales and to use all reasonable efforts to issue
a report to Buyer within thirty (30) days of the Stockholders' notice to Buyer
with respect to such net sales. Net sales shall be calculated in accordance
with generally accepted accounting principles, except that for purposes hereof
net sales shall include only those sales for which payment has been received
by Buyer; provided, however, such collection requirement shall not apply with
respect to net sales by USI or any of its affiliated entities (other than the
Buyer) of products manufactured at the Michigan Facility. If USI at any time
subdivides by any stock split or stock dividend its outstanding shares of
common stock into a greater number of shares, then the number of shares of USI
common stock subject to this Section 7.1 shall be proportionately increased.
If USI at any time combines by any reverse stock split or similar mechanism
its outstanding shares of common stock into a smaller number of shares, then
the number of shares of USI common stock subject to this Section 7.1 shall be
proportionately decreased.
7.2 Registration Rights.
(a) Definitions. As used in this Section 7.2, the
following terms shall have the following respective meanings:
(1) "Commission" means the Securities and Exchange
Commission, or any other Federal agency at the time administering the
Securities Act.
(2) "Exchange Act" means the Securities Exchange Act
of 1934, as amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they each may, from
time to time, be in effect.
(3) "Securities Act" means the Securities Act of
1933, as amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they each may, from
time to time, be in effect.
(4) "Registration Statement" means a registration
statement filed by USI with the Commission for a public offering and sale of
securities of USI (other than a registration statement on Form S-4 or Form S-
8, or their successors, or any other form for a limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).
(5) "Registration Expenses" means the expenses
described in Section 7.2(d).
(6) "Registrable Shares" means the shares of Common
Stock comprising the Shares offered hereunder, and any other shares of Common
Stock issued or issuable in respect of the shares of Common Stock comprising
the Shares offered hereunder (because of stock splits, stock dividends,
reclassification, recapitalizations, or similar events, if applicable);
provided, however, that the shares of Common Stock which are Registrable
Shares shall cease to be Registrable Shares upon any sale of such shares
pursuant to a Registration Statement, Section 4(1) of the Securities Act or
Rule 144 under the Securities Act.
(b) Piggyback Registration.
(1) Whenever USI proposes to file a Registration
Statement (other than with respect to the registration of USI's Series A or
Series B Common Stock Purchase Warrants and the shares of Common Stock
underlying such Warrants) and at any time thereafter and from time to time, it
will, prior to such filing, give written notice to all holders of the
Registrable Shares of its intention to do so and, upon the written request of
a holder or holders given within ten (10) days after USI provides such notice
(which request shall state the intended method of disposition of such
Registrable Shares), USI shall use its best efforts to cause all Registrable
Shares which USI has been requested by such holder or holders to register to
be registered under the Securities Act to the extent necessary to permit their
sale or other disposition in accordance with the intended methods of
distribution specified in the request of such holder or holders; provided that
USI shall have the right to postpone or withdraw any registration effected
pursuant to this Section 7.2(b) without obligation to any holder.
(2) In connection with any offering under this
Section 7.2 involving an underwriting, USI shall not be required to include
any Registrable Shares in such underwriting unless the holders thereof accept
the terms of the underwriting as agreed upon between USI and the underwriters
selected by it, and then only in such quantity as will not, in the opinion of
the underwriters, jeopardize the success of the offering by USI. If in the
opinion of the managing underwriter or underwriters the registration of all,
or part of, the Registrable Shares which the holders have requested to be
included would materially and adversely affect such public offering, then USI
shall be required to include in the underwriting only that number of
Registrable Shares, if any, which the managing underwriter believes may be
sold without causing such adverse effect. If the number of Registrable Shares
to be included in the underwriting in accordance with the foregoing is less
than the total number of shares which the holders of Registrable Shares have
requested to be included, then the holders of Registrable Shares (either alone
or in conjunction with the registration of shares of Common Stock held by
other stockholders of USI) who have requested registration shall participate
in the underwriting pro rata based upon the combined ownership of the
Registrable Shares (or in any other proportion as agreed upon by all holders
of Registrable Shares) together with the total number of shares of Common
Stock owned by other stockholders for whom USI has otherwise undertaken to
register shares.
(c) Registration Procedures. If and when USI is required
by the provisions of this Agreement to use its best efforts to effect the
registration of any of the Registrable Shares under the Securities Act, USI
shall:
(1) file with the Commission a Registration
Statement with respect to such Registrable Shares and use its best efforts to
cause that Registration Statement to become and remain effective;
(2) prepare and file with the Commission any
amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective for a period of up to 120 days from the
effective date;
(3) furnish to each holder such reasonable numbers
of copies of the prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents as the
holder may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Shares owned by the holder; and
(4) use its reasonable efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states as the holder shall reasonably
request, and do any and all other acts and things that may be necessary to
enable the holders to consummate the public sale or other disposition in such
jurisdictions of the Registrable Shares owned by the holder; provided,
however, that USI shall not be required in connection with this Section
7(c)(4) to qualify as a foreign corporation or execute a general consent to
service of process in any jurisdiction.
If USI has delivered preliminary or final prospectuses
to the holders and after having done so the prospectus is amended to comply
with the requirements of the Securities Act, USI shall promptly notify the
holders and, if requested, the holders shall immediately cease making offers
of Registrable Shares and return all prospectuses to USI. USI shall promptly
provide the holders with revised prospectuses to permit the holders to resume
making offers of the Registrable Shares.
(d) Allocation of Expenses. USI will pay all Registration
Expenses of all registrations under this Agreement; provided, however, that if
a registration is withdrawn at the request of the holders requesting such
registration (other than as a result of information concerning the business or
financial condition of USI which is made known to the holders after the date
on which such registration was requested), the requesting holders shall pay
any incremental increase in the Registration Expenses of such registration as
a result of the inclusion of their Registrable Shares pro rata in accordance
with the number of their Registrable Shares included in such registration.
For purposes of this Section 7.2, the term "Registration Expenses" shall mean
all expenses incurred by USI in complying with this Section 7.2, including,
without limitation, all registration and filing fees, exchange listing fees,
printing expenses, fees and disbursements of counsel for USI, state Blue Sky
fees and expenses, but excluding underwriting discounts and selling
commissions attributable to the Registrable Shares and the fees and expenses
of the holders' own counsel and accountants, which shall be borne by such
holders.
(e) Indemnification. In the event of any registration of
any of the Registrable Shares under the Securities Act, pursuant to this
Agreement, USI will indemnify and hold harmless the seller of such Registrable
Shares, each underwriter of such Registrable Shares, and each other person, if
any, who controls such seller or underwriter within the meaning of the
Securities Act or the Exchange Act against any losses, claims, damages or
liabilities, joint or several, to which such seller, underwriter or
controlling person may become subject under the Securities Act, the Exchange
Act, state securities laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Registrable
Shares were registered under the Securities Act, any preliminary prospectus or
final prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arise out of or are based upon
the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
USI will reimburse such seller, underwriter and each such controlling person
for any legal or any other expenses reasonably incurred by such seller,
underwriter or controlling person in connection with investigating and
defending any such loss, claim, damage, liability or action; provided,
however, that USI will not be liable in any such case to the extent that any
such loss, claim, damage, liability or expense arises out of or is based upon
any untrue statement or omission made in such Registration Statement,
preliminary prospectus or prospectus, or any such amendment or supplement, in
reliance upon and in conformity with information furnished to USI by or on
behalf of such seller, underwriter or controlling person for use in the
preparation thereof, or as a result of the failure of any seller, or agent of
any seller, to deliver any amendments and supplements to any Registration
Statement and the prospectus included in any such Registration Statement.
In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Agreement, each
seller of Registrable Shares, severally and not jointly, will indemnify and
hold harmless USI, each of its directors and officers and each underwriter (if
any) and each person, if any, who controls USI or any such underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages or liabilities, joint or several, to which USI, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities laws or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under
which such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and each seller of the Registrable Shares
will reimburse USI, each of its directors and officers, each underwriter and
each controlling person, severally and not jointly, for any legal or other
expenses reasonable incurred by USI, each director and officer, each
underwriter and each controlling person in connection with investigating and
defending any such loss, claim, damage, liability or action, if the statement
or omission was made in reliance upon and in conformity with information
furnished to USI by or on behalf of such seller, for use in connection with
the preparation of such Registration Statement, prospectus, amendment or
supplement.
Each party entitled to indemnification under this
Section 7.2(e) (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; provided, that
counsel for the Indemnifying Party, who shall conduct the defense of such
claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld); and, provided, further, that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 7.2(e).
The Indemnified Party may participate in such defense at such party's expense.
No Indemnifying Party, in the defense of any such claim or litigation shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
(f) Information by Holder. Each holder of Registrable
Shares included in any registration shall furnish to USI such information
regarding such holder and the distribution proposed by such holder as USI may
request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 7.2(f).
(g) "Stand-Off" Agreement. Each holder of Registrable
Shares, if requested by USI and an underwriter of Common Stock or other
securities of USI, shall agree not to sell or otherwise transfer or dispose of
any Registrable Shares or other securities of USI held by such holder for a
specified period of time (not to exceed 180 days) before or after the
effective date of a Registration Statement. Such agreement shall be in
writing in a form satisfactory to USI and such underwriter. USI may impose
stop transfer instructions with respect to the Registrable Shares or other
securities subject to the foregoing restriction until the end of the stand-off
period.
8. THE CLOSING.
8.1 Time and Place. The transfer of the Assets by Seller to
Buyer (the "Closing") shall take place at the office of counsel for Buyer,
Proskauer Xxxx Xxxxx & Xxxxxxxxxx LLP, at One Boca Place, 0000 Xxxxxx Xxxx,
Xxxxx 000 Xxxx, Xxxx Xxxxx, Xxxxxxx 00000 at 10:00 a.m. local time, on the
third business day following satisfaction or waiver of all conditions
precedent to Buyer's obligations or at such other time and place as the
parties may agree to in writing; but in no event later than April 30, 1996,
unless otherwise extended by mutual agreement of the parties (the "Closing
Date").
8.2 Deliveries by Seller. At the Closing, Seller shall deliver
or cause to be delivered to Buyer the following instruments, in form and
substance satisfactory to Buyer and its counsel:
(a) A certificate executed by the President of Seller, and
each of the Stockholders, dated the Closing Date, certifying that Seller's and
Stockholders' representations and warranties in this Agreement are true and
correct at and as of the Closing Date, as though his representation and
warranty had been made on that date;
(b) Each of the documents and certificates referred to in
Article 6 hereof, including without limitation, the Employment Agreements;
(c) Such other deeds, bills of sale, endorsements,
assignments and other good and sufficient instruments of conveyance and
transfer as shall be effective to vest in Buyer all of Seller's rights, title
and interests in and to the Assets; and
(d) All contracts and copies of all documents,
instruments, books, records and data of Seller relating to the Assets.
Simultaneously with the consummation of the transfer of the
Assets, Seller, through its officers, agents, and employees, will put Buyer
into full possession and enjoyment of all properties and assets to be conveyed
and transferred by this Agreement.
Seller and Stockholders, at any time before or after the Closing
Date, will execute, acknowledge, and deliver any further deeds, assignments,
conveyances, and other assurances, documents, and instruments of transfer,
reasonably requested by Buyer, and will take any other action consistent with
the terms of this Agreement that may reasonably be requested by Buyer for the
purpose of assigning, transferring, granting, conveying, and confirming to
Buyer, or reducing to possession, any or all property to be conveyed and
transferred by this Agreement.
8.3 Deliveries by Buyer. At the Closing, Buyer shall deliver to
Seller or its agents the following against delivery of the items specified in
Section 8.2:
(a) A certificate executed by the President or Chief
Executive Officer of Buyer, dated the Closing Date, certifying that all
Buyer's representations and warranties in this Agreement are true and correct
at and as of the Closing Date, as though each representation and warranty had
been made on that date.
(b) That portion of the Purchase Price which is payable at
Closing in accordance with Section 1.2 hereof, including certificates
representing shares of the Common Stock of USI issued in the name of the
appropriate stockholders.
9. TERMINATION.
9.1 Termination of Agreement and Abandonment of Purchase.
Anything herein to the contrary notwithstanding, this Agreement and the
purchase contemplated hereby may be terminated as follows, and in no other
manner:
(a) at any time by mutual consent of Seller and Buyer;
(b) by Buyer, at any time in the event of any breach of a
representation, warranty or covenant by Seller or Stockholders; provided Buyer
notifies Seller of such breach and Seller or Stockholders do not cure such
breach to the satisfaction of Buyer within 5 days after notice thereof;
(c) subject to earlier termination pursuant to the
provisions of Section 6.4 hereof, by Buyer, if by April 30, 1996 the
transactions contemplated by this Agreement have not otherwise been
consummated, unless due to the failure by Buyer to perform its covenants and
obligations under this Agreement; or
(d) by Seller, if by April 30, 1996 the transactions
contemplated by this Agreement have not otherwise been consummated, unless due
to the failure by Seller to perform its covenants and obligations under this
Agreement.
9.2 Results of Termination. Any termination of this Agreement
shall operate as a complete release and extinguishment of all liabilities and
obligations of each party to any other party to this Agreement; provided,
however, that any termination pursuant to Sections 8.1(b), 8.1(c) or 8.1(d)
due to either a breach by Seller or Stockholders or the failure by Buyer or
Seller or Stockholders to perform any of their respective covenants or
obligations hereunder (the party breaching or failing to perform shall be
referred to as the "Failing Party") shall not affect the rights of the non-
Failing Party to pursue all of its rights and remedies for breach of this
Agreement by the Failing Party. Any termination of this Agreement pursuant to
Section 6.4 hereof shall not be deemed to result from a breach of this
Agreement.
10. OBLIGATIONS AND OTHER TRANSACTIONS AFTER CLOSING.
10.1 Indemnification.
(a) Seller and Stockholders, jointly and severally, shall
indemnify, defend, and hold harmless Buyer from and against any and all
claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries, and deficiencies, including, but not limited to, interest,
penalties, and reasonable attorneys' and paraprofessional fees and
disbursements (collectively, "Losses"), that Buyer shall incur or suffer,
which arise, result from, or relate to: (i) any breach of, or failure by
Seller or Stockholders to perform, any of its representations, warranties,
covenants, or agreements in this Agreement or in any exhibit, or other
instrument or document furnished or to be furnished by Seller or Stockholders
under this Agreement, (ii) the operation of Seller's business prior to the
Closing Date, including any customer complaints which were based on work
performed prior to the Closing Date or (iii) any liability of Seller or
Stockholders not expressly assumed hereunder, including any liability
affecting the Assets as a result of any applicable Bulk Transfer Law or the
termination of Seller's or Stockholders' employees pursuant to Section 10.2
hereof, but excluding the Assumed Liabilities. Notwithstanding the foregoing,
Seller and the Stockholders shall not be liable for any indemnification
obligation hereunder until the amount of Buyer's Losses exceeds Ten Thousand
Dollars ($10,000) in the aggregate (the "Basket"); provided, however, such
Basket shall not apply to any intentional breach of a representation or
warranty or to any breach of any covenant or agreement of Seller or the
Stockholders hereunder.
(b) Buyer shall indemnify, defend and hold harmless Seller
and Stockholders from and against any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries, and deficiencies,
including, but not limited to, interest, penalties, and reasonable attorneys'
and paraprofessional fees and disbursements, they shall incur or suffer, which
arise, result from, or relate to: (i) any breach of, or failure to perform,
any of its representations, warranties, covenants, or agreements in this
Agreement or in any exhibit, or other instrument or document furnished or to
be furnished by Buyer under this Agreement, (ii) any Assumed Liabilities, or
(iii) the conduct of the business of Buyer after the Closing Date.
(c) A party seeking indemnification hereunder shall
promptly notify the other of the existence of any claim, demand or other
matter to which the other's indemnification obligations would apply, and if a
third party claim is reasonably and in good faith disputed by such party shall
give it or them a reasonable opportunity to defend the same at its or their
own expense and with counsel of its or their own selection; provided that the
party seeking indemnification shall at all times also have the right to fully
participate in the defense at its expense. If the other party shall within a
reasonable time after this notice fail to defend, the party seeking
indemnification shall have the right, but not the obligation, to undertake the
defense of, and to compromise or settle (exercising reasonable business
judgment) the claim or other matter on behalf, for the account, and at the
risk, of the other party. A party obligated to provide indemnification
hereunder shall satisfy its or their indemnification obligations in cash
within thirty (30) days after receipt of notice of a claim from the other
party, or if with respect to a third party claim being defended in good faith
by the party with the indemnification obligation, upon resolution of such
claim and in any event not later than the rendering of a judgment by a court
or other tribunal with respect to such claim.
(d) In the event Seller and Stockholders should refuse or
fail to indemnify Buyer pursuant to any indemnification obligation under this
Agreement, Buyer shall have the right to set-off and deduct the amount of such
obligation from any amounts now or hereafter owed by Buyer to Seller and
Stockholders under any agreement (including shares of Common Stock of USI
which may otherwise be issuable pursuant to the Earn Out) or obligation (other
than base salary due under the Employment Agreements) and/or the Buyer shall
have the right to proceed directly against Seller or Stockholders for the
indemnity obligation.
10.2 Employees. Seller and Stockholders will terminate the
employment of each of their employees, effective at 12:01 a.m. on the day
following the date hereof, and will pay all liabilities relating to its
employment of and termination of such employees. Seller shall assist Buyer in
the orderly transition and immediate re-employment by Buyer of such of
Seller's employees designated by Buyer.
10.3 Taxes. Except as set forth on Schedule 10.3, Seller shall
file and pay all withholding tax reports for all periods ending prior to and
on the date hereof, shall file and pay all taxes for such periods and will be
entitled to any refunds of withholding taxes paid by it with respect to such
periods.
10.4 Name Change. Within fifteen (15) days of the Closing Date
Seller shall take all necessary steps to change the name of Seller, including
amending its Articles of Incorporation. Seller further agrees that it shall
not use any confusingly similar name and that all rights and goodwill
associated with its name are being transferred to Buyer hereunder.
11. MISCELLANEOUS.
11.1 Brokers. Each of the parties represents and warrants that
it or he has dealt with no broker or finder in connection with any of the
transactions contemplated by this Agreement and, insofar as it or he knows, no
broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions.
11.2 Amendments. The provisions of this Agreement may not be
amended, supplemented, waived or changed orally, but only by a writing signed
by the party as to whom enforcement of any such amendment, supplement, waiver
or modification is sought and making specific reference to this Agreement.
11.3 Assignments. No party shall assign his or its rights and/or
obligations hereunder without the prior written consent of each other party to
this Agreement, except that Buyer may freely assign this Agreement (and any of
the Exhibits hereto) and its rights and obligations hereunder (or thereunder)
to any corporation controlled by, controlling, under common control with, or
otherwise affiliated to, the Buyer.
11.4 Binding Effect. All of the terms and provisions of this
Agreement, whether so expressed or not, shall be binding upon, inure to the
benefit of, and be enforceable by the parties and their respective legal
representatives, successors and permitted assigns.
11.5 Notices. All notices, requests, consents and other
communications required or permitted under this Agreement shall be in writing
(including telex and telegraphic communication) and shall be (as elected by
the person giving such notice) hand delivered by messenger or courier service,
telecommunicated, or mailed (airmail if international) by registered or
certified mail (postage prepaid), return receipt requested, addressed to:
If to Buyer:
0000 Xxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, President
With a Copy to:
Xxxxxx X. Xxxxxxxx, XX, Esq.
Proskauer Xxxx Xxxxx & Xxxxxxxxxx
LLP
0000 Xxxxxx Xxxx, Xxxxx 000 Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
(000) 000-0000 Facsimile
If to Seller or Stockholders:
Duratech Industries, Inc.
P. O. Xxx 000
Xxxx Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, President
With a Copy to:
Xxxx Xxxxxxxxxx, Esq.
Miller, Johnson, Xxxxx & Xxxxxxxxx,
P.L.C.
000 Xxxxxx Xxxxx Xxxxxxxx
Xxxxx Xxxxxx, Xxxxxxxx 00000
(000) 000-0000 Facsimile
or to such other address as any party may designate by notice complying with
the terms of this Section. Each such notice shall be deemed delivered (a) on
the date delivered if by personal delivery; (b) on the date telecommunicated
if by telegraph; (c) on the date of transmission with confirmed answer back if
by telex, telefax or other telegraphic method; and (d) on the date upon which
the return receipt is signed or delivery is refused or the notice is
designated by the postal authorities as not deliverable, as the case may be,
if mailed.
11.6 Survival. All covenants, agreements, representations and
warranties made herein or otherwise made in writing by any party pursuant
hereto shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby; provided, however that
the representations and warranties set forth in this Agreement shall only
survive for a period of two years from the Closing Date, except that:
(a) the representations and warranties set out in Sections
2.5, 2.9 and 2.13 shall survive and continue in full force and effect without
limitation of time;
(b) the representations and warranties set out in Sections
2.17 and 2.18 shall survive and continue in full force and effect until the
third anniversary of the Closing Date;
(c) the representations and warranties set out in Section
2.2 shall survive the closing of the transactions contemplated hereby and
continue in full force and effect until, but not beyond, the expiration of the
period, if any, during which an assessment, reassessment or other form of
recognized document assessing liability for tax, interest or penalties under
applicable tax legislation in respect of any taxation year to which such
representations and warranties extend could be issued under such tax
legislation to the Seller, provided the Seller; respectively, did not file any
waiver or other document extending such period; and
(d) a claim for any breach of any of the representations
and warranties contained in this Agreement or in any agreement, instrument,
certificate or other document executed or delivered pursuant hereto involving
fraud or intentional misrepresentation may be made at any time following the
Closing Date, subject only to applicable limitation periods imposed by law.
11.7 Specific Performance. Each of the parties acknowledges that
the parties will be irreparably damaged (and damages at law would be an
inadequate remedy) if this Agreement is not specifically enforced. Therefore,
in the event of a breach or threatened breach by any party of any provision of
this Agreement, then the other parties shall be entitled, in addition to all
other rights or remedies, to injunctions restraining such breach, without
being required to show any actual damage or to post any bond or other
security, and/or to a decree for specific performance of the provisions of
this Agreement.
11.8 Enforcement Costs. If any legal action or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any provision
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees, sales and use taxes, court
costs and all expenses even if not taxable as court costs (including, without
limitation, all such fees, taxes, costs and expenses incident to arbitration,
appellate, bankruptcy and post-judgment proceedings), incurred in that action
or proceeding, in addition to any other relief to which such party or parties
may be entitled. Attorneys' fees shall include, without limitation, paralegal
fees, investigative fees, administrative costs, sales and use taxes and all
other charges billed by the attorney to the prevailing party.
11.9 Governing Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of Florida without
regard to principles of conflicts of laws.
11.10Preparation of Agreement. This Agreement shall not be
construed more strongly against any party regardless of who is responsible for
its preparation. The parties acknowledge each contributed and is equally
responsible for its preparation.
11.11Entire Agreement. This Agreement represents the entire
understanding and agreement among the parties with respect to the subject
matter hereof, and supersedes all other negotiations, understandings and
representations (if any) made by and among such parties, including without
limitation, the Letter Agreement.
11.12Remedies Cumulative. Except as otherwise expressly provided
herein, no remedy herein conferred upon any party is intended to be exclusive
of any other remedy, and each and every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise. No single or partial
exercise by any party of any right, power or remedy hereunder shall preclude
any other or further exercise thereof.
IN WITNESS WHEREOF, the parties of this Agreement have duly executed it
on the day and year first written.
WITNESSES:
"BUYER"
EARTH CARE PRODUCTS OF THE MIDWEST,
INC.
By:
Its:
"SELLER"
DURATECH INDUSTRIES, INC.
By:
Its:
"STOCKHOLDERS"
Xxxxx Xxxxxxx
Xxxx Xxxxxx
Xxxxxxx Xxxxx
The undersigned hereby executes this Agreement for the sole purpose of joining
in the representations and warranties set forth in Section 2.13 of the
Agreement and the provisions of Section 7.2 of the Agreement.
Xxxxx Xxxxxxxx
The undersigned hereby executes this Agreement for the sole purpose of being
jointly and severally liable with the Buyer after the Closing Date with
respect to the Outstanding Bank Obligation and the forklift leases with
Citicorp Dealer Finance described on Schedule 1.4(c) and for purposes of
agreeing to the terms of Sections 7.1 and 7.2 hereof.
"USI"
U. S. PLASTIC LUMBER, INC.
By:
Its:
