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EXHIBIT 10.25
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as
of October 9, 1997 among U.S. PLASTIC LUMBER CORPORATION, a Nevada corporation
(the "Purchaser") AND CONSOLIDATED TECHNOLOGIES, INC. and the individuals listed
on Exhibit "A" attached hereto (such individuals are sometimes referred to
herein collectively as the "Shareholders" and individually as a "Shareholder").
RECITALS
A. The Shareholders own (i) all of the issued and outstanding capital
stock of Consolidated Technologies, Inc. (the "Company").
B. The Shareholders wish to sell, and the Purchaser wishes to purchase,
twenty five percent (25%) of the issued and outstanding capital stock
of the Company upon the terms and subject to the conditions hereinafter
set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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1. DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, the
terms defined in this Article 1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. Unless otherwise indicated, any reference
herein to a "Section", "Article", or "Schedule" shall mean the applicable
section, article or schedule of or to this Agreement. All accounting terms used
in this Agreement not defined in this Article 1 shall, except as otherwise
provided for herein, be construed in accordance with generally accepted
accounting principles, consistently applied.
"Action" shall mean any actual or threatened claim, action, suit,
arbitration, hearing, inquiry, proceeding, complaint, charge or investigation by
or before any Governmental Entity or arbitrator and any appeal from any of the
forgoing.
"Affiliate" of a Person shall mean any Person that directly or
indirectly controls, is controlled by, or is under common control with the
indicated Person.
"Agreement" shall mean this Securities Purchase Agreement.
"Balance Sheet" and "Balance Sheet Date" shall have the meaning
assigned to such terms in Section 4.4(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Closing" and "Closing Date" shall have the respective meanings
assigned to such terms in Section 2.3.
"Common Stock" shall mean the Company's authorized class of common
stock, $0.01 par value per share.
"DOL" shall mean the United States Department of Labor.
"Damages" shall mean any and all losses, liabilities, obligations,
costs, expenses, damages or judgments of any kind or nature whatsoever
(including reasonable attorneys', accountants, and expert's fees, disbursements
of counsel, and other costs and expenses incurred pursuing indemnification
claims under Article 10 hereof).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" shall mean any Person which is (or at any relevant
time was) a member of a controlled group of corporations within the meaning of
Code Section 414 (b), all trades or businesses under common control within the
meaning of Code Section 414(c), and all
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affiliated service groups within the meaning of Code Section 414(m), of which
the Company is (or any relevant time was) a member.
"Environmental Laws" shall mean all Legal requirements pertaining to
the protection of the environment, the treatment, emission and discharge of
gaseous, particulate and effluent pollutants and the use, handling storage,
treatment, removal transport, transloading, cleanup decontamination, discharge
and disposal of Hazardous Substances, including, without limitation, those
statutes, laws, rules and regulations set forth below in the definitions of
"Hazardous Material".
"Governmental Entity" shall mean any local, state, federal or foreign
(i) court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the IRS and other taxing
authorities.
"Hazardous Material" shall mean any flammable, ignitable, corrosive,
reactive, radioactive or explosive substance or material, hazardous waste, toxic
substance or related material and any other substance or material defined or
designated as a hazardous or toxic substance, material or waste by any
Environmental Law currently in effect or as amended or promulgated in the future
and shall include, without limitation:
(a) those substances included within the definitions of
"hazardous substances", "hazardous materials", "toxic substances", or "solid
waste" in the Comprehensive Environmental response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Sections 9601, et. seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et.seq., and the
Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et. seq., and in
the regulations promulgated pursuant thereto.
(b) those substances defined as "hazardous substances",
"hazardous materials", "toxic substances", or "solid waste" in the State of
Pennsylvania.
(c) those substances listed in the United States Department of
Transportation Table (49CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor thereto) as hazardous
substances (40CFR Part 302 and any amendments thereto).
(d) such other substances, materials and wastes that are or
become regulated under applicable local, state or federal laws or regulations,
or which are or become classified as hazardous or toxic under any Legal
Requirement; and
(e) any material, waste or substance that is, in whole or in
part, (i) petroleum, asbestos, polychorinated biphenyls, methylene chloride,
trichorothylene, 1, 2-transdichoroethylene, dioxins or dibenzofurans, (ii)
designated as an "extremely hazardous substance" pursuant to Section 302 of the
Emergency Planning and Community Right-to-Know Act of 1986, as amended, or (iii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Sections 1251 et. seq. (U.S.C. Section 1321) or listed pursuant
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to Section 307 of the Clean Water Act (33 U.S.C. Section 1317), or Section 112
or other sections of the Clean Water Act, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"Indebtedness" shall mean, when used with reference to any Person,
without duplication, (i) any liability of such Person created or assumed by such
Person, or any Subsidiary thereof, (A) for borrowed money, (B) evidence by a
bond, note, debenture, or similar instrument (including a purchase money
obligation, deed of trust or mortgage) given in connection with the acquisition
of, or exchange for, any property or assets (other than inventory or similar
property acquired and consumed in the Ordinary Course), including securities and
other Indebtedness, (C) in respect of letters of credit issued for such Person's
account and "swaps" of interest and currency exchange rate (and other interest
and currency exchange rate hedging agreements) to which such Person is a party
or (D) for the payment of money as lessee under leases that should be, in
accordance with generally accepted accounting principles, recorded as capital
leases for financial reporting purposes; (ii) any liability of others described
in the preceding clause (i) guaranteed as to payment of principal and interest
by such Person or in effect guaranteed by such Person through an agreement,
contingent or otherwise, to purchase, repurchase or pay the related Indebtedness
or to acquire security therefor; (iii) all liabilities or obligations secured by
a Lien upon property owned by such Person and upon liabilities or obligations
such Person customarily pays interest or principal, whether or not such Person
has not assumed or become liable for the payment of such liabilities or
obligations; and (iv) any amendment, renewal, extension, revision or refunding
or any such liability or obligation; provide, however, that Indebtedness shall
not include any liability for compensation of such Person's employees or for
inventory or similar property acquired and consumed in the Ordinary Course or
for services.
"Leased Real Property" shall mean all real property, including
Structures, leased by the Company.
"Legal Requirements" shall mean any statute, law, ordinance, rule,
regulation, permit, order, writ, judgment, injunction, decree or award issued,
enacted or promulgated by any Governmental Entity or any arbitrator.
"Lien" shall mean all liens (including judgment and mechanics liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options or other charges, encumbrances or restrictions.
"Material Adverse effect" shall mean a material adverse effect on the
business, financial condition, properties, profitability, prospects or
operations of the Company.
"Noncompetition Agreement(s)" shall have the meaning assigned to such
term in Section 8.1(h).
"Ordinary Course" shall mean, when used with reference to the Company,
the ordinary
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course of the Company's business, consistent with past practices.
"Owned Real Property" shall mean all real property, including
Structures, owned by the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall have the meaning assigned to such term in Section 4.16.
"Permitted Liens" shall mean (a) Liens for ad valorem real or personal
property taxes or assessments not at the time due and (b) Liens in respect of
pledges or deposits under worker's compensation laws or similar legislation,
carriers', warehousemen's, mechanic's, laborers' and materialmen's and similar
liens, if the obligations secured by such Liens are not then delinquent.
"Person" shall mean all natural person's, corporations, business
trusts, associations, limited liability companies, companies partnerships, joint
ventures, Governmental Entities and any other entities.
"Real Property" shall mean the Owned Real Property and the Lease Real
Property, collectively.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share Percentage" with respect to any Shareholder shall mean the
percentage that the number of Shares held by such Shareholder represents of the
total number of Shares, as set forth on Exhibit "A".
"Shares" shall mean the shares of Common Stock of the Company held by
the shareholders.
"Stock" shall mean shares of common stock issued by the Purchaser to
the Shareholders as payment of the Purchase Price, as contemplated by Article 2
hereof.
"Structure" shall mean any facility, building, plant, factory, office,
warehouse structure or other improvement owned or leased by the Company.
"Subsidiary" of a Person shall mean any corporation, partnership,
limited liability company, association or other business entity at least 50% of
the outstanding voting power of which is at the time owned or controlled
directly or indirectly by such Person or by one or more of such subsidiary
entity, or both.
"Tax" shall mean any Federal, state, local or foreign income, gross
receipts, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, without limitation, taxes
under Code Section 59A), customs duties,
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capital stock, franchise, profits, withholding, social security (or similar),
employment, disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated tax or other
tax, assessment or charge of any kind whatsoever, including, without limitation,
any interest, fine, penalty or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for
refund or information, or statement relating to Taxes, and any exhibit,
schedule, attachment or amendment thereto.
2. PURCHASE AND SALE OF SECURITIES
2.1 Sale and Delivery. Each Shareholder agrees to sell and deliver to
Purchaser, and Purchaser agrees to purchase and accept from each Shareholder,
free and clear of all Liens, on the terms and conditions set forth in this
Agreement, and for the purchase price described in Section 2.2 below, good and
marketable title to the number of Shares set forth opposite the name of such
Shareholder on Exhibit "A". The Shares to be sold and purchased pursuant to this
Agreement constitute twenty five percent (25%) of the outstanding capital stock
of the Company.
2.2 Purchase Price. The Purchase Price for twenty five percent of the
Shares shall be equal to Five Hundred Thousand ($500,000), to be paid to the
Company as a capital contribution. These monies shall be utilized by the Company
solely for purposes relating to the dredged material demonstration project at
Bark Camp, regardless of the source of the dredged material, and shall not be
used for any other purposes. Notwithstanding this provision, the Company may use
up to $150,000 of the purchase price consideration to re-pay a portion of the
accrued expenses in the development of the demonstration project at Bark Camp,
subject to the approval of the Purchaser.
2.3 Closing. The purchase and sale of the Shares and the consummation
of the other transactions contemplated by this Agreement, (the "Closing") shall
occur at 10:00AM, local time, on , simultaneously at the offices of the
Purchaser, 0000 Xxxxxx Xx., Xxxxx 000X, Xxxx Xxxxx, Xxxxxxx and at the office of
the general counsel for the Company, or at such other time or on such other date
as shall be agreed upon among the Shareholders and the Purchaser upon
fulfillment of all conditions precedent to the Closing, such hour and date being
herein generally referred to as the "Closing Date". At the Closing:
(a) The Company shall deliver or cause to be delivered to Purchaser,
against the n payment by Purchaser of the Purchase Price to such the
Company:
(i) a certificate representing 250 Shares being sold by the
Company hereunder duly endorsed for transfer, or accompanied
by duly executed assignments separate from the certificate,
transferring to Purchaser good and marketable title to such
Shares, free and clear of all Liens;
(ii) all of the documents, certificates, and instruments
required to be delivered, or
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caused to be delivered, by the Company or any Shareholder
pursuant to Section 8.1 hereof; and
(iii) access to all records, documents, and files of the
Company, including, without limitation, all minute books,
stock records, stock certificate books, and internal
accounting records.
(b) Purchaser shall deliver or cause to be delivered to the Company,
against delivery of the certificate or certificates representing the
Shares:
(i) the sum of Five Hundred Thousand dollars ($500,000);
(ii) all of the documents, if any, required to be delivered by
Purchaser pursuant to Section 8.2 hereof;
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDERS
Each of the Shareholders hereby severally represents and warrants to,
and covenants and agree with, Purchaser that:
3.1 Ownership of Shares. Such Shareholder owns of record and
beneficially the number of Shares set forth opposite the name of such
Shareholder on Exhibit"A" hereto, and has, and at all times prior to and as of
the Closing such Shareholder will have, good and marketable title to such Shares
free and clear of all Liens.
3.2 Execution and Delivery. All consents, approvals,
authorizations and order necessary for the execution, delivery and performance
by such Shareholder of this Agreement (including, without limitation, the
transfer and sale of the Shares to be sold by such Shareholder to Purchaser)
have been duly and lawfully obtained, and such Shareholder has, and at the
Closing will have, full right, power, authority and capacity to execute, deliver
and perform this Agreement. This Agreement has been duly executed and delivered
by such Shareholder and constitutes a legal, valid and binding agreement of such
Shareholder enforceable against such Shareholder in accordance with its terms.
3.3 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any term or provision of, or
(with or without notice or passage of time, or both) constitute a default under,
any indenture, mortgage, deed of trust, trust (constructive and other), loan
agreement or other agreement or instrument to which such Shareholder is a party
or by which such Shareholder or such Shareholder's Shares are bound, or violate
any Legal Requirement applicable to or binding upon such Shareholder.
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3.5 No Brokers. No broker, finder or similar agent has been
employed by or on behalf of such Shareholder in connection with this Agreement
or the transactions contemplated hereby, and such Shareholder has not entered
into any agreement or understanding of any kind with any person or entity for
the payment of any brokerage commission, finder's fee or any similar
compensation in connection with this Agreement or the transactions contemplated
hereby.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
The Shareholders hereby jointly and severally represent and warrant to,
and covenant and agree with, Purchaser that:
4.1 Organization and Good Standing.
(a) The Company has been duly organized and is existing as a
corporation in good standing under the laws of the State of Pennsylvania with
full power and authority (corporate and other) to own and lease its properties
and to conduct its business as currently conducted. The Company has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each jurisdiction set forth on Schedule 4.1(a),
such jurisdictions comprising all jurisdictions in which the Company owns or
leases any property, or conducts any business, so as to require such
qualifications.
(b) Except as set forth in Schedule 4.1(b), the Company has no
Subsidiary nor owns or controls, or has any other equity investment or other
interest in, directly or indirectly, any corporation, joint venture,
partnership, association or other entity.
(c) Delivery of Good Title. Upon delivery of the 250 Shares to
be sold by the Company hereunder and delivery of the Purchase Price
consideration therefor pursuant to this Agreement, Purchaser will have good and
marketable title to such Shares free and clear of all Liens.
4.2 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
(a) conflict with or result in a breach or violation of any term or provision
of, or constitute a default under (with or without notice or passage of time, or
both), or otherwise give any Person a basis for accelerated or increased rights
or termination or nonperformance under, any indenture, mortgage, deed of trust,
loan or credit agreement, lease, license or other agreement or instrument of
which the Company is a party or by which the Company is bound or affected or to
which any of the property or assets of the Company is bound or affected
including, without limitation, all arrangements in Section 4.19 hereof, (b)
result in the violation of the provisions of the Articles of Incorporation or
Bylaws of the Company or any Legal Requirement applicable to or binding upon it,
(c) result in the creation or imposition of any Lien upon any property or asset
of the Company or (d) otherwise adversely affect the contractual or other legal
rights or privileges of the Company. Schedule 4.2 sets forth a list of all
agreements requiring the consent of any party thereto to any
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of the transactions contemplated hereby.
4.3 Capitalization. The authorized capital stock of the Company
consists solely of (1,000) shares of Common Stock having a par value of $1.00
per share, of which only the number of Shares listed on Exhibit "A" are, and as
of the Closing will be, issued and outstanding. All of the Shares have been duly
authorized and validly issued and are fully paid, nonassessable and outstanding
and are held by the Shareholders in amounts reflected in Schedule "A" hereto.
Other than as set forth on Schedule 4.3, (i) there are no existing options,
warrants, right, calls or commitments of any character relating to the shares of
Common Stock or any other capital stock or securities of the Company, (ii) there
are no outstanding securities or other instruments convertible into or
exchangeable for shares of Common Stock or any other capital stock or securities
of the Company and no commitments to issue such securities or instruments and no
Person has any right of first refusal, preemptive right, subscription right or
similar right with respect to any shares of Common Stock or any other capital
stock or securities of the Company. The offer, issuance and sale of the Shares
were (i) exempt from the registration and prospectus delivery requirements of
the Securities Act, (ii) registered or qualified (or exempt from registration or
qualification) under the registration or qualification requirements of all
applicable state securities laws and (iii) accomplished in conformity with all
other Legal Requirements.
4.4 Financial Statements.
(a) Schedule 4.4 hereto contains true and complete copies of
(i) the unaudited balance sheet (the "Balance Sheet") of the Company at June 30,
1997 (the "Balance Sheet Date"), and the related unaudited statements of income
for the six (6) months then ended, (ii) the reviewed balance sheet of the
Company at December 31, 1996 and the related reviewed statements of income,
shareholders' equity and cash flow for the fiscal year then ended (together with
the report thereon of , independent public accountants)(the financial statements
described in clause (i) and (ii) above are collectively referred to as the
"Financial Statements").
(b) The Financial Statements present fairly the financial
condition of the Company as of the dates indicated therein and the results of
operations and changes in financial position of the Company for the periods
specified therein, have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis during the periods covered
thereby and prior periods, have been derived from the accounting records of the
Company and represent only actual, bona fide transactions. The Company's
Financial Statements are true and correct in all material respects and do not
contain any untrue statement of a material fact or omit to state a material
fact.
4.5 Title to Property; Encumbrances.
(a) The Company has, and immediately prior to the Closing will
have, good, valid and marketable title in fee simple to all Real Property and
all personal property reflected on the Balance Sheet as owned by the Company and
all Real Property and personal property
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acquired by the Company since the Balance Sheet Date, in each case free and
clear of all Liens except (i) as set forth on Schedule 4.5(a), (ii) for sales
and other dispositions of inventory in the Ordinary Course since the Balance
Sheet Date which, in the aggregate, have not been materially different from
prior periods, and (iii) Permitted Liens.
(b) Schedule 4.5(b). contains a true and complete list and
legal description of each parcel of Owned Real Property and a general
description of each Structure situated thereon. The Shareholders have heretofore
furnished to Purchaser true and complete copies of all deeds, other instruments
of title and policies of title insurance indicating and describing the Company's
ownership of the Owned Real Property, as well as copies of any surveys or
environmental reports relating to the real property.
(c) Schedule 4.5(c). contains a list of all tangible personal
property having a cost or fair market value in excess of Five Thousand Dollars
($5,000.00) owned by the Company (other than personal property held by the
Company as lessee under a personal property lease).
(d) Schedule 4.5(d) contains a list of all real property
leases, licenses and personal property leases under which the Company is the
lessee or licensee, together with (i) the location and nature of each of the
leased or licensed properties (including a legal description of all Leased Real
Property), (ii) the termination date of each such lease or license, (iii) the
name of the lessor or licensor and (iv) all rental and other payments made or
required to be made for the fiscal years ending December 31, 1996 and December
31, 1995. All leases and licenses pursuant to which the Company leases or
licenses from others real or personal property are valid, subsisting in full
force and effect in accordance with their respective terms, and there is not,
under any real property lease, personal property lease or license, any existing
default or event of default (or event that, with notice or passage of time, or
both, would constitute a default, or would constitute a basis of force majeure
or other claim of excusable delay or nonperformance). True and complete copies
of all real property leases, licenses and personal property leases listed on
Schedule 4.5(d) have been delivered to Purchaser heretofore, as well as copies
of any title reports, surveys or environmental reports or audits relating to any
Leased Real Property. Except as set forth in Schedule 4.5(d), no such lease or
license will require the consent of the lessor or licensor to or as a result of
the consummation of the transactions contemplated by this Agreement. For the
purposes of this Section 4.5(d), a "lease" shall include a sublease.
(e) All personal property owned by the Company and all
personal property held by the Company pursuant to personal property leases is in
good operating condition and repair, subject only to ordinary wear and tear, has
been operated, serviced and maintained properly within the recommendations and
requirements of the manufacturers thereof (if any) and is suitable and
appropriate for the use thereof made and proposed to be made by the Company in
its business and operations. The Real Property and personal property described
in Sections 4.5(a), 4.5(b) and 4.5(c) and the Real Property and personal
property held by the Company pursuant to the leases and licenses described in
Schedule 4.5(d) compromise all of the real property and personal property used
in the conduct of business of the Company.
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(f) Except as set forth in Schedule 4.5(f):
(i) The Company is not in violation of, or default under, any
Legal Requirement pertaining to any of the Real Property. No notice of
violation of any Legal Requirement, or of any covenant, condition,
restriction or easement affecting any Real Property or with respect to
the use or occupancy thereof, has been given by any Person;
(ii) All of the Structures (A) are in good operating condition
and repair, (B) are adequate and suitable for the purposes for which
they are currently and proposed to be used, and (C) are supplied with
utilities and other services necessary for the operation of such
Structures, and the business conducted by the Company therein,
including gas, electricity, water, telephone, sanitary sewer and storm
sewer, all of which services are maintained in accordance with all
Legal Requirements and are provided via permanent, irrevocable,
appurtenant easements in favor of the Company;
(iii) No condemnation proceeding is pending or, to the
knowledge of the Shareholders, threatened which would impair the
occupancy, use or value of any Real Property;
(iv) No Structure, nor the operations of the Company therein
or thereon, (A) is located outside of the boundary lines of the
described parcel of land on which it is located, (B) is in violation of
applicable setback requirements, zoning laws, or ordinances, (C) is
subject to "permitted non-conforming use" or "permitted non-conforming
structure" classifications or (D) encroaches on any property owned by,
or easement granted in favor of, any Person;
(v) There are no (A) leases, subleases, licenses, concessions
or other agreements, written or oral, granting to any other Person the
right to acquire, use or occupy any portion of, any Real Property, (B)
outstanding options or rights of first refusal to purchase all or any
portion of Real Property or interest therein, and (C) Persons (other
than the Company) in possession of any Real Property;
(vi) Each parcel of Owned Real Property (A) is fully and
adequately described in the legal description therefor contained in the
deed thereof, (B) abuts a paved public right-of-way, (C) does not serve
any adjoining property for any purpose inconsistent with the use of the
land, and (D) is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses necessary to
the use thereof have not been obtained; and
(vii) With respect to each item of Leased Real Property, (A)
to the Shareholders' knowledge, the owner thereof has good and
marketable title thereto, free and clear of all Liens other than (I)
recorded easements, covenants and restrictions that do not impair the
current use, occupancy or value thereof and (II) the leasehold interest
of the Company, (B) there is adequate ingress and egress (and a
continuing right thereto), without the need
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for an easement, between paved public rights-of-way and such Leased
Real Property and (C) the Company has not sold, transferred or
subjected to a Lien such Leased Real Property or any interest therein.
4.6 Accounts Receivable. All accounts receivable of the Company
reflected in the Balance Sheet and all accounts receivable of the Company that
have arisen since the Balance Sheet Date (except such accounts receivable as
have been collected since such dates) are valid and enforceable claims, and the
goods and services sold and delivered that gave rise to such accounts were sold
and delivered in conformity with all applicable express and implied warranties,
purchase orders, agreements and specifications. Such accounts receivable of the
Company are subject to no valid defense, offset or counterclaim and are fully
collectible, except to the extent of the allowance for doubtful accounts
reflected on the Balance Sheet. Schedule 4.6 contains a true and complete aging
of the Company's accounts receivable as of the Balance Sheet Date.
4.7 Inventories. Except as described in Schedule 4.7, all
inventories of raw materials, work-in-process and finished good set forth or
reflected in the Balance Sheet or acquired by the Company since the balance
Sheet Date, consist of a quality and quantity usable and saleable in the
Ordinary Course, except for slow-moving, damaged or obsolete items and materials
of below standard quality, all of which have been written down to net realizable
market value or in respect of which adequate reserves have been provided, in
each case as reflected in the Balance Sheet. The value at which inventories are
carried on the Balance Sheet reflect the normal inventory valuation policy of
the Company, as applicable, in accordance with generally accepted accounting
principles and on a basis consistent with that of preceding periods, of stating
inventory at the lower of cost or market value. There is no reason to believe
that the Company will experience in the foreseeable future any difficulty in
obtaining, in the desired quantity and quality, the inventory necessary to
conduct its business in the manner proposed to be conducted, including, without
limitation, inventory which historically has been imported.
4.8 Trademarks, Patents, Etc.
(a) Schedule 4.8(a) contains a true and complete list of all
letters patent, patent applications, trade names, trademarks, service marks,
trademark and service xxxx registrations and applications, copyrights, copyright
registrations and applications, grants of a license or right to the Company with
respect to the foregoing, both domestic and foreign, claimed by either Company
or used or proposed to be used by the Company in the conduct of its business,
whether registered or not, (collectively herein, "Registered Rights").
(b) Except as described in Schedule 4.8(b), the Company owns
and has the unrestricted right to use the Registered Rights and every trade
secret, know-how, process, discovery, development, design, technique, customer
and supplier list, promotional idea, marketing and purchasing strategy,
invention, process, confidential data and or other information (collectively
herein, "Proprietary Information") required for or incident of the design,
development, manufacture, operation, sale and use of all products and services
sold or rendered
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or proposed to be sold or rendered by the Company, free and clear of any right,
equity or claim of others. The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all Proprietary Information.
(c) Schedule 4.8(c) contains a true and complete list and
description of all licenses of or rights to Proprietary Information granted to
the Company by others or to others by the Company. Except as described in
Schedule 4.8(c), (i) the Company has not sold, transferred, assigned, licensed
or subjected to any Lien, any Registered Right or Proprietary Information or any
interest therein, and (ii) the Company is not obligated or under any liability
whatever to make any payments by way of royalties, fees or otherwise to any
owner or licensor of, or other claimant to, any Registered Right or Proprietary
Information.
(d) There is no claim or demand of any Person pertaining to,
or any Action that is pending or, to the Shareholders' knowledge, threatened,
which challenges the rights of the Company in respect of any Registered Right or
any Proprietary Information.
4.9 Banking and Insurance.
(a) Schedule 4.9(a) contains a true and complete list of the
names and locations of all financial institutions at which the Company maintains
a checking account, deposit account, securities account, safety deposit box or
other deposit or safekeeping arrangement, the numbers or other identification of
all such accounts and arrangements and the names of all persons authorized to
draw against any funds therein.
(b) Schedule 4.9(b) contains a true and complete list of all
insurance policies and bonds and self insurance arrangements currently in force
that cover or purport to cover risks or losses to or associated with the
Company's business, operations, premises, properties, assets, employees, agents
and directors and sets forth, with respect to each such policy, bond and self
insurance arrangement, a description of the insured loss coverage, the
expiration date and time of coverage, the dollar limitations of coverage, a
general description of each deductible feature and principal exclusion and the
premiums paid and to be paid prior to expiration. The insurance policies, bonds
and arrangements described on Schedule 4.9(b) (the "Policies") provide such
coverage against such risk of loss and in such amounts as are customary for
corporations of established reputation engaged in the same or similar business
and similarly situated. The Company has no obligation, liability or other
commitment relating to any contract of insurance containing a provision for
retrospective rating or adjustment of the Company's premium obligation. To the
Shareholders' knowledge, no facts or circumstances exist that would cause the
Company to be unable to renew its existing insurance coverage as and when the
same shall expire upon terms at least as favorable as those currently in effect,
other than possible increases in premiums that do not result from any act or
omission of the Company or any Shareholder.
4.10 Indebtedness.
(a) The Company has no liability or obligation for
Indebtedness other than as set
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forth on Schedule 4.10(a), and true and complete copies of all instruments and
documents evidencing, creating, securing or otherwise relating to such
Indebtedness have been delivered to Purchaser heretofore. Except as described in
Schedule 4.10(a), no event has occurred and no condition has become known to the
Company or any Shareholder (including the transactions contemplated hereby) that
constitutes or, with notice or passage of time, or both, would constitute a
default or a basis of force majeure or other claim of accelerated or increased
rights, termination, excusable delay or nonperformance by the Company or any
other Person under any instrument or document relating to or evidencing
Indebtedness that would entitle any person to require the Company to pay any
portion of the principal amount of such Indebtedness prior to the scheduled
maturity thereof. Except as set forth in Schedule 4.10(a), no instrument or
document evidencing, creating, securing or otherwise relating to Indebtedness
will require the consent of any person to or as a result of the consummation of
the transactions contemplated by this Agreement.
(b) Schedule 4.10(b) contains a list and brief description of
all agreements or instruments pursuant to which any of the Company's directors,
employees or shareholders have guaranteed by Indebtedness of the Company (the
"Guaranties"). True and complete copies of all Guaranties have been delivered to
Purchaser.
4.11 Judgments; Litigation. Except as set forth on Schedule 4.11:
(a) There is no (i) outstanding judgment, order, decree, award
stipulation or injunction of any Governmental Entity or arbitrator against or
affecting the Company or its properties, assets or business or (ii) Action
pending against or affecting the Company or its properties, assets or business.
(b) There is no (i) outstanding judgment, order, decree,
award, stipulation, injunction of any Governmental Entity or arbitrator against
or affecting any officer, director or employee of the Company relating to the
Company or its business, (ii) Action threatened against or affecting the Company
or its properties, assets or business, (iii) Action pending or threatened
against the Company's officers, directors or employees relating to the Company
or its business or (iv) basis for the institution of any Action against the
Company or any of its officers, directors, employees, properties or assets
which, if decided adversely, would have a Material Adverse Effect.
4.12 Income and Other Taxes. Except as set forth on Schedule 4.12:
(a) All Tax Returns required to be filed through and including
the date hereof in connection with the operations of the Company are true,
complete and correct in all respects and have been properly and timely filed.
The Company has not requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed. Purchaser has heretofore been
furnished by the Company with true, correct and complete copies of each Tax
Return of the Company with respect to the past three (3) taxable years, and of
all reports of, and communications from, any Governmental Entities relating to
such period. The Company has
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disclosed on its Federal Income Tax Returns all positions taken therein that
could give rise to a substantial understatement of income Taxes for federal
income tax purposes within the meaning of Code Section 6662.
(b) All Taxes required to be paid or withheld and deposited
through and including the date hereof in connection with the operations of the
Company have been duly and timely paid or deposited by the Company. The Company
has properly withheld or collected all amounts required by law for income Taxes
and employment Taxes relating to its employees, creditors, independent
contractors and other third parties, and for sales Taxes on sales, and has
properly and timely remitted such withheld or collected amounts to the
appropriate Governmental Entity. The Company has no liabilities for any Taxes
for any taxable period ending prior to or coincident with the Closing Date.
(c) The Company has made adequate provision on its book of
account for all Taxes with respect to its business, properties and operations
through the Balance Sheet Date, and the accruals for Taxes in the Balance Sheet
are adequate to cover all liabilities for Taxes of the Company for all periods
ending on or before the Closing Date.
(d) The Company has never (i) had a tax deficiency proposed,
asserted or assessed against it (ii) executed any waiver of any statute of
limitations on the assessment or collection of any Taxes, or (iii) been
delinquent in the payment of any Taxes.
(e) No Tax Return of the Company has been audited or the
subject of other Action by any Governmental Entity. The Company has not received
any notice from any Governmental Entity of any pending examination or any
proposed deficiency, addition, assessment, demand for payment or adjustment
relating to or affecting the Company or its assets or properties and no
Shareholder has reason to believe that any Governmental Entity may assess (or
threaten to assess) any Taxes for any periods ending on or prior to the Closing
Date.
(f) The Company (i) has not filed any consent or agreement
pursuant to Code Section 341(f), and no such consent or agreement will be filed
at any time on or before the Closing Date; (ii) has not made any payments, is
not obligated to make any payments and is not a party to any agreement that
under certain circumstances could obligate the Company to make any payments that
will not be deductible under Code Section 280G, (iii) is not a United States
real property holding corporation within the meaning of Code Section 897(c)(2);
(iv) is not a party to a tax allocation or sharing agreement; (v) has never been
(or does not have any liability for unpaid Taxes because it was) a member of an
affiliated group with the meaning of Code Section 1504(a); (vi) has never
applied for a tax ruling from a Governmental Entity and (vii) has never filed or
been the subject of an election under Code Section 338(g) or Code Section
338(h)(10) or caused or been the subject of a deemed election under Code Section
338(e).
4.13 Questionable Payments. Neither the Company nor, to the
Shareholders' knowledge, any of its directors, officers, agents, employees or
other Person associated with or acting on behalf of the Company has (a) used any
corporate funds for unlawful contributions,
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gifts, entertainment or other unlawful expenses relating to political activity,
(b) made any direct or indirect unlawful payments to government officials or
employees, or foreign government officials or employees, from corporate funds,
(c) established or maintained any unlawful or unrecorded fund of corporate
monies or other assets, (d) made any false or fictitious entries on the books of
account of the Company, (e) made or received any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment, or (f) made any other
payment, favor or gift not fully deductible for federal income tax purposes.
4.14 Employee Benefit Matters.
(a) Schedule 4.14 contains a complete list of all Plans. For
purposes of this Section 4.14, the term "Plan" shall mean any plan maintained by
the Company which is either an "employee benefit plan" as defined in Section
3(3) of ERISA or a "fringe benefit plan" as defined in Section 6039D of the
Code. True and complete copies of each of the following documents (and any
amendments thereto), where applicable, have been delivered previously to
Purchaser: (i) the Plan documents; (ii) a written description of any Plan which
is not in writing; (iii) if the Plan is funded through a trust or any
third-party funding vehicle, the trust or other funding agreement; (iv) the
Plan's most recent financial statements; (v) the two most recent annual reports
(including all schedules and attachments thereto) required by ERISA; (vi) the
most recent actuarial report and valuation; (vii) the most recent determination
letter received from the IRS with respect to each Plan that is intended to be
qualified under Code Section 401 or to be recognized as tax-exempt under Code
Section 501(c); (viii) the most recent summary plan description and each summary
of material modifications required by ERISA; (ix) any agreement providing for
the provision of administrative or investment management services with respect
to the Plan; and (x) all documents and correspondence received from or provided
to the DOL, IRS and PBGC during the past two years.
(b) Each Plan and related trust, annuity, or other funding
agreement complies and has been maintained in compliance with all applicable
Legal Requirements. No non-exempt prohibited transaction (as defined in Code
Section 4975 and ERISA Sections 406 and 408) has occurred and no "fiduciary" (as
defined in ERISA Section 3(21)) has committed any breach of duty which could
subject the Company, any ERISA Affiliate, or any director, officer, or employee
thereof to liability under Title I of ERISA or to tax under Code Section 4975.
All material obligations required to be performed by the Company and other
Person under the terms of each Plan and applicable Legal Requirement have been
performed.
(c) All required reports and descriptions, including, without
limitation, annual reports (Form 5500), summary annual reports, and summary plan
descriptions, have been filed and distributed timely. With respect to each Plan
which is a welfare plan (as defined in ERISA Section 3(1)), the requirements of
Party 6 of Subtitle B of Title I of ERISA and of Code Sections 162(k) and 4980B
have been satisfied.
(d) All contributions, premiums, and other payments,
including, without limitation, employer contributions and employee salary
reduction contributions, have been paid
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when due or accrued in accordance with the past custom and practice of Seller
and any ERISA Affiliate. No Plan that is subject to Part 3 of Subtitle B of
Title I of ERISA or to Code Section 412 has incurred any accumulated funding
deficiency, whether or not waived, and no other actual or contingent liability
for any other expenses or obligations of any Plan exists.
(e) There are no pending or, to the Shareholders' knowledge,
threatened Actions (other than routine claims for benefits) asserted or
instituted against any Plan or the assets of any Plan, or against the Company,
or any ERISA Affiliate, trustee, administrator, or fiduciary of such Plan, and
the Shareholders have no knowledge of any facts that could form the basis of any
such Action. There is no pending or, to the Shareholders' knowledge, threatened
or contemplated Action by any Governmental Entity with respect to any Plan, and
the Shareholders have no knowledge of any facts that could reasonably be
expected to cause or trigger such an Action.
(f) The Company (or, if applicable, an ERISA Affiliate,) may
terminate, suspend, or amend each Plan at any time, except to the extent
otherwise required by Code Section 4980B, without the consent of the
participants or employees covered by such Plan. Neither the Company nor any
ERISA Affiliate has announced any intention, made any amendment or binding
commitment, or given any written or oral notice providing that the Company or an
ERISA Affiliate (i) will create additional Plans covering employees of the
Company or any ERISA Affiliate, (ii) will increase benefits promised or provided
pursuant to any Plan, or (iii) will not exercise after the Closing Date any
right or power it may have to terminate, suspend, or amend any Plan.
(g) Neither the Company nor any ERISA Affiliate maintains or
has maintained any time, or contributes to or has contributed to or is or was
required to contribute to, any (i) Plan subject to Title IV or ERISA, including,
without limitation, any multi-employer plan (as defined in ERISA Section 3(37)),
within the past five years, or (ii) funded or unfunded medical, health,
accident, or life insurance plan or arrangement for current or future retirees
or terminated employees or their spouses or dependents (except to the extent
required by Code Sections 162(k) or 4980B).
(h) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will constitute a
termination of employment or other event entitling any Person to any additional
or other benefits, or that would otherwise modify benefits or the vesting of
benefits, provided under any Plan.
(i) No event has occurred which could subject the Company of
any ERISA Affiliate to any material liability (i) under any Legal Requirement
relating to any Plan, or (ii) resulting from any obligation of Seller or an
ERISA Affiliate to indemnify any Person against liability incurred with respect
to or in connection with any Plan.
(j) Each Plan which is intended to be qualified under Code
Section 401 has received, within the last five years, a favorable determination
letter from the IRS. No event has occurred and no facts or circumstances exist
which may cause or result in the loss or revocation
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of such determination.
4.15 No Undisclosed Liabilities. Except (i) to the extent set
forth or provided for in the Balance Sheet or the notes thereto, (ii) as set
forth on Schedule 4.15 or (iii) for non-material current liabilities incurred
since the Balance Sheet Date in the Ordinary Course, as of the date hereof the
Company has no liabilities, whether accrued, absolute, contingent or otherwise,
whether due or to become due and whether the amounts thereof are readily
ascertainable or not, or any unrealized or anticipated losses from any
commitments of a contractual nature, including Taxes with respect to or based
upon the transactions or events occurring at or prior to the Closing.
4.16 Permits, Licenses, Etc. The Company possesses, and is
operating in compliance with, all franchises, licenses, permits, certificates,
authorizations, rights and other approvals of Governmental Entities necessary to
(i) occupy, maintain, operate and use the Real Property as it is currently used
and proposed to be used, (ii) conduct its business as currently conducted and as
proposed to be conducted, and (iii) maintain and operate its Permits (the
"Permits"). Schedule 4.16 contains a true and complete list of all Permits. Each
Permit has been lawfully and validly issued, and no proceeding is pending or, to
the Shareholders' knowledge, threatened looking toward the revocation,
suspension or limitation of any Permit. The consummation of the transactions
contemplated by this Agreement will not result in the revocation, suspension or
limitation of any Permit and, except as set forth in Schedule 4.16, no Permit
will require the consent of its issuing authority to or as a result of the
consummation of the transaction contemplated hereby.
4.17 Regulatory Filings. Except as set forth on Schedule 4.17, the
Company has made all required registrations and filings with and submissions to
all applicable Governmental Entities relating to the operations of the Company
as currently conducted and as proposed to be conducted, including, without
limitation, all such applicable Governmental Entities having jurisdiction over
any matters pertaining to conservation or protection of the environment, and the
treatment, discharge, use, handling, storage or production, or disposal of
Hazardous Materials. All such registrations, filings and submissions were in
compliance with all Legal Requirements (including all Environmental Laws) and
other requirements when filed, no material deficiencies have been asserted by
any such applicable Governmental Entities with respect to such registrations,
filings or submissions and, to the Shareholders' knowledge, no facts or
circumstances exist which would indicate that a material deficiency may be
asserted by any such authority with respect to any such registration, filing or
submission.
4.18 Consents. All consents, authorizations and approvals of any
Person to or as a result of the consummation of the transactions contemplated
hereby, that are necessary or advisable in connection with the operations and
business of the Company as currently conducted and as proposed to be conducted,
or for which the failure to obtain the same might have, individually or in the
aggregate, a Material Adverse Effect, have been lawfully and validly obtained by
the Company, except as described in Schedules 4.5(c), 4.10 and 4.16 hereto. All
consents, authorizations and approvals described in schedules 4.5(c), 4.10 and
4.16 will have
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been lawfully and validly obtained prior to the Closing.
4.19 Material Contracts; No Defaults.
(a) Schedule 4.19(a) contains a true and complete list and
description of the outstanding sales order and sales contract backlog of the
Company having an indicated gross value in excess of Five Thousand Dollars
($5,000.00) or having a term of duration in excess of six months. All
outstanding sales orders and sales contracts of the Company have been entered
into in the Ordinary Course. Except as described in Schedule 4.19(a), the
Company has not received any advance, progress payment or deposit in respect of
any sales order or sales contract, and the Company has no sales order or sales
contract that will result, upon completion or performance thereof, in gross
margins materially lower than those normally experienced by the Company for the
services or products covered by such sales order or sales contract.
(b) Schedule 4.19(b) contains a true and complete list and
description of all outstanding purchase orders and purchase commitments of the
Company having a gross indicated value in excess of Ten Thousand Dollars
($10,000.00) in the aggregate from any single supplier or other vendor. All
outstanding purchase orders and purchase commitments of the Company have been
incurred in the Ordinary Course, and no purchase order or purchase commitment of
the Company is in excess of the normal, ordinary and usual requirements of the
business of the Company or at an excessive price. The principal raw materials
used and inventory sold by the Company are available from several sources at
competitive prices and upon competitive terms and no interruption in production
or Material Adverse Effect will result from the loss of any one of such sources.
(c) Schedule 4.19(c) contains a true and complete list of all
sales agency, sales representative, distributor, wholesaler, dealer and similar
contracts or agreements of the Company, and true and complete copies of the same
have been delivered to Purchaser heretofore. Except as described in Schedule
4.19(c), all of such contracts and agreements are terminable at any time by the
applicable Company without penalty (including, without limitation, any
obligation to repurchase inventories on hand) upon not more than thirty (30)
days' notice.
(d) Schedule 4.19(d) contains a true and complete list and
description of all noncompetition agreements and covenants under which the
Company or any of their respective officers, directors or employees or any
Shareholder is obligated, and true and complete copies of the same have been
delivered to Purchaser heretofore. Except as described in Schedule 4.19(d), the
Company is not restricted by any agreement from carrying on its business or
engaging in any other activity anywhere in the world (including relocating,
closing, or terminating any of its operations or facilities), and no such
officer, director, key employee or Shareholder is a party to or otherwise bound
or affected by any agreement, covenant or other arrangement or understanding
that would restrict or impair his ability to perform diligently his other duties
to the Company. Schedule 4.19(d) also contains a true and complete list and
description of all noncompetition agreements or covenants in favor of the
Company, and true and complete copies of the same have been delivered to
Purchaser heretofore.
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(e) Schedule 4.19(e) contains a true and complete list and
description of all contracts, agreements, understandings, arrangements and
commitments, written or oral, of the Company with any officer, director,
consultant, employee or Affiliate of the Company or with any associate,
Affiliate or employee of any Affiliate of the Company, other than those
disclosed in Schedule 4.21(a) hereto; in each case a true and complete copy of
such written contract, agreement, understanding, arrangement or commitment or a
true and complete summary of such oral contract, agreement, understanding,
arrangement or commitment has been delivered to Purchaser heretofore.
(f) Schedule 4.19(f) contains a true and complete list and
description of all other material contracts, agreements, understandings,
arrangements and commitments, written or oral, of the Company by which it or its
properties, rights or assets are bound that are not otherwise disclosed in this
Agreement or the Schedule hereto. True and complete copies of such written
contracts, agreements, understandings, arrangements and commitments and true and
complete summaries of such oral contracts, agreements, understandings,
arrangements and commitments have been delivered to Purchaser heretofore. For
the purposes of this subsection (f), "material" means any contract, agreement,
understanding, arrangement or commitment that (i) involves performance by any
party more than ninety (90) days from the date hereof, (ii) involves payments or
receipts by the Company in excess of Five Thousand Dollars ($5,000.00), (iii)
involves capital expenditures in excess of Five Thousand Dollars ($5,000.00) or
(iv) otherwise materially affects the Company.
(g) Except as described in Schedule 4.19(g):
(i) each agreement, contract, arrangement or
commitment described above in this Section 4.19 is, and after the
Closing on identical terms will be, legal, valid, binding, enforceable
and in full force and effect;
(ii) no event or condition has occurred or become
known to the Company or any Shareholder or is alleged to have occurred
that constitutes or, with notice or the passage of time, or both, would
constitute a default or a basis of force majeure or other claim of
excusable delay, termination, nonperformance or accelerated or
increased rights by the Company or any other Person under any contract,
agreement, arrangement, commitment or other understanding, written or
oral, described above in this Section 4.19, or described or otherwise
disclosed pursuant to this Agreement; and
(iii) no person with whom the Company has such a
contract, agreement, arrangement, commitment or other understanding is
in default thereunder or has failed to perform fully thereunder by
reason of force majeure or other claim of excusable delay, termination
or nonperformance thereunder, the delay, termination or nonperformance
of which, or a default under which, has had or may have a Material
Adverse Effect.
4.20 Absence of Certain Changes. Since December 31, 1996, except as
disclosed in
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Schedule 4.20, the Company has not: (i) incurred any debts, obligations or
liabilities (absolute, accrued, contingent or otherwise), other than current
liabilities incurred in the Ordinary Course which, individually or in the
aggregate, are not material; (ii) subjected to or permitted a Lien (other than a
Permitted Lien) upon or otherwise encumbered any of its assets, tangible or
intangible; (iii) sold, transferred, licensed or leased any of its assets or
properties except in the Ordinary Course; (iv) discharged or satisfied any Lien
other than a Lien securing, or paid any obligation or liability other than,
current liabilities shown on the Balance Sheet and current liabilities incurred
since the Balance Sheet Date, in each case in the Ordinary Course; (v) canceled
or compromised any debt owed to or by or claim of or against it, or waived or
released any right of material value other than in the Ordinary Course; (vi)
suffered any physical damage, destruction or loss (whether or not covered by
insurance) causing a Material Adverse Effect; (vii) entered into any material
transaction or otherwise committed or obligated itself to any capital
expenditure other than in the Ordinary Course; (viii) made or suffered any
change in, or condition affecting, its condition (financial or otherwise),
properties, profitability, prospects or operations other than changes, events or
conditions in the Ordinary Course, none of which (individually or in the
aggregate) has had or may have a Material Adverse Effect; (ix) made any change
in the accounting principles, methods, records or practices followed by it or
depreciation or amortization policies or rates theretofore adopted; (x) other
than in the Ordinary Course, made or suffered any amendment or termination of
any material contract, agreement, lease or license to which it is a party; (xi)
paid, or made any accrual or arrangement for payment of, any severance or
termination pay to, or entered into any employment or loan or loan guarantee
agreement with, any current or former officer, director or employee or
consultant; (xii) paid, or made any accrual or arrangement for payment of, any
increase in compensation, bonuses or special compensation of any kind to any
employee other than pursuant to an agreement disclosed on Schedule 4.21(a) or
Schedule 4.21(b) or other than in the Ordinary Course, or paid, or made any
accrual or arrangement for payment of, any increase in compensation, bonuses or
special compensation of any kind to any officer or director of the Company or
any consultant to the Company; (xiii) made or agreed to make any charitable
contributions or incurred any nonbusiness expenses; (xiv) changed or suffered
change in any benefit plan or labor agreement affecting any employee of the
Company otherwise than to conform to Legal Requirements; or (xv) entered into
any agreement or otherwise obligated itself to do any of the foregoing.
4.21 Employees and Labor Matters.
(a) Schedule 4.21(a) contains a true and complete list of all
contracts, agreements, plans, arrangements, commitments and understandings
(formal and informal) pertaining to terms of employment, compensation, bonuses,
profit sharing, stock purchases, stock repurchases, stock options, commissions,
incentives, loans or loan guarantees, severance pay or benefits, use of the
Company's property and related matters of the Company with any current or former
officer, director, employee or consultant, and true and complete copies of all
such contracts, agreements, plans, arrangements and understandings have been
delivered to Purchaser heretofore. Attached to Schedule 4.21(a) is the most
current copy of the employee handbook utilized by the Company and distributed to
each of its employees.
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(b) Schedule 4.21(b) contains a true and complete list of all
labor, collective bargaining, union and similar agreements under or by which the
Company is obligated, and true and complete copies of all such agreements have
been delivered to Purchaser heretofore.
(c) Except as set forth on Schedules 4.21(a) and 4.21(b),
neither Purchaser nor the Company will have any responsibility for continuing
any person in the employ (or retaining any person as a consultant) of the
Company from and after the Closing or have any liability for any severance
payments to or similar arrangements with any such Person who shall cease to be
an employee of the Company at or prior to the Closing.
(d) There is not occurring or, to the Shareholders' knowledge,
threatened, any strike, slow down, picket, work stoppage or other concerted
action by any union or other group of employees or other persons against either
Company or its premises or products. Except for activities by the unions that
are parties to any of the agreements listed on Schedule 4.21(b) with respect to
the existing members of such unions, to the Shareholders' knowledge, no union or
other labor organization has attempted to organize any of the employees of the
Company.
(e) The Company has complied with all Legal Requirements
relating to employment and labor, and, to the Shareholders' knowledge, no facts
or circumstances exist that could provide a reasonable basis for a claim of
wrongful termination by any current or former employee of the Company against
the Company.
4.22 Affiliation. Except as disclosed on Schedule 4.22, none of the
Shareholders, any officer, director or key employee of the Company or any
associate or Affiliate of the Company or any of such Persons has, directly or
indirectly, (i) an interest in any Person that (A) furnishes or sells, or
proposes to furnish or sell, services or products that are furnished or sold by
the Company or (B) purchases from or sells or furnishes to, or proposes to
purchase from or sell or furnish to, the Company any goods or services or (ii) a
beneficial interest in any contract or agreement to which the Company is a party
or by which the Company or any of the assets of the Company are bound or
affected.
4.23 Principal Customers and Suppliers.
(a) Schedule 4.23(a) contains a true and complete list of the
name and address of each customer that purchased in excess of five percent (5%)
of the Company's sales of goods or services during the twelve months ended on
the Balance Sheet Date, and since that date no such customer has terminated its
relationship with or adversely curtailed its purchases from the Company or
indicated (for any reason) its intention so to terminate its relationship or
curtail its purchases.
(b) Schedule 4.23(b) contains a true and complete list of each
supplier from whom the Company purchased in excess of five percent (5%) of the
Company's purchases of goods or services during the twelve months ended on the
balance Sheet Date, and since that date no such supplier has terminated its
relationship with or adversely curtailed its accommodations, sales or
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services to the Company or indicated (for any reason) its intention to terminate
such relationship or curtail its accommodations, sales or services.
4.24 Compliance with Law. Through and including the date hereof,
the Company (i) has not violated or conducted its business or operations in
violation of, and has not used or occupied its properties or assets in violation
of, any Legal Requirement, (ii) to the Shareholders' knowledge, has not been
alleged to be in violation of any Legal Requirement, and (iii) has not received
any notice of any alleged violation of, or any citation for noncompliance with,
any Legal Requirement.
4.25 Product Returns. Schedule 4.25 contains a true and complete
description of the product return experience of the Company for the immediately
preceding twelve (12) months. The Company has not experienced any product
returns which have had or may have a Material Adverse Effect.
4.26 Product Liability and Product Warranty. Schedule 4.26 hereto
contains a true and complete description of (i) all warranties granted or made
with respect to products sold, or services rendered, by the Company and (ii) the
Company's product liability and product warranty experience for the last three
years. The Company has not suffered any product liability or product warranty
claims which have had or may have a Material Adverse Effect.
4.27 Corporate Records. The copies or originals of the Articles of
Incorporation, Bylaws, minute books and stock records of the Company previously
delivered to, or made available for inspection by, Purchaser are true, complete
and correct.
4.28 Hazardous Materials. Except as set forth on Schedule 4.28:
(a) No Hazardous Material (i) has been released, placed,
stored, generated, used, manufactured, treated, deposited, spilled, discharged,
released or disposed or on or under any real property currently or previously
owned or leased by the Company or is presently located on or under any Real
Property (or, to the Shareholders' knowledge, any property adjoining any Real
Property), (ii) is presently maintained, used, generated, or permitted to remain
in place by the Company in violation of any Environmental Law, (iii) is required
by any Environmental Law to be eliminated, removed, treated or mitigated by the
company, given the nature of its present condition, location, nature, material
or maintenance, or (iv) is of a type, location, material, nature or condition
which requires special notification to third parties by the Company under
Environmental Law or common law.
(b) No notice, citation, summons or order has been received by
the Company or any Shareholder, no notice has been given by the Company and no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or threatened by any Governmental Entity, with respect to (i)
any alleged violation by the Company of any Environmental Law of (ii) any
alleged failure by the Company to have any environmental permit, certificate,
license, approval, registration or authorization required in connection with its
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business or properties, or (iii) any use, possession, generation, treatment,
storage, recycling, transportation, release or disposal by or on behalf of the
Company of any Hazardous Material.
(c) The Company has not received any request for information,
notice of claim, demand or notification that it is or that indicates that it may
be a "potentially responsible party" with respect to any investigation or
remediation of any threatened or actual release of any Hazardous Material.
(d) No above-ground or underground storage tanks, whether or
not in use, are or have ever been located at any property currently owned or
leased by the Company.
(e) No notice has been received by the Company with respect to
the listing or proposed listing of any property currently or previously owned,
operated or leased by the Company on the National Priorities List promulgated
pursuant to CERCLA, CERCLIS or any similar state list of sites requiring
investigation or cleanup.
(f) There have been no environmental inspections,
investigations, studies, tests, review or other analyses conducted in relation
to any Real Property.
(g) The Company has not yet released, transported, or arranged
for the transportation of any Hazardous Material from any property currently or
previously owned, operated or leased by the Company.
4.29 Brokers' Fees. No broker, finder or similar agent has been
employed by or on behalf of the Company in connection with this Agreement or the
transactions contemplated hereby, and the Company has not entered into any
agreement or understanding of any kind with any person or entity for the payment
of any brokerage commission, finder's fee or any similar compensation in
connection with this Agreement or the transactions contemplated hereby.
4.30 Disclosure.
(a) No representation or warranty of any Shareholder in this
Agreement and no information contained in any Schedule or other writing
delivered pursuant to this Agreement or at the Closing contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to make the statements herein or therein not misleading.
There is no fact that the Shareholders have not disclosed to Purchaser in
writing that has had or, insofar as any Shareholder can now foresee, may have a
Material Adverse Effect on the ability of any Shareholder to perform fully this
Agreement.
(b) To the extent that any representation or warranty in this
Article 4 is qualified to the Shareholders' "knowledge," the Shareholders
represent and warrant that they have made a reasonable investigation sufficient
to express an informed view concerning the matters to which such representation
or warranty relates, including diligent inquiries of the Company's officers,
directors and employees.
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5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to, and covenants and agrees
with, each of the Shareholders that:
5.1 Organization and Good Standing. Purchaser has been duly
organized and is existing as a corporation in good standing under the laws of
the State of Nevada with full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby.
5.2 Execution and Delivery. This Agreement has been duly
authorized by all necessary corporate action on the part of Purchaser, has been
duly executed and delivered by Purchaser and constitutes the legal, valid and
binding agreement of Purchaser enforceable against Purchaser in accordance with
its terms.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby will not conflict with or result in the violation of the
provisions of the Articles of Incorporation or Bylaws of Purchaser.
6. CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing through
the Closing Date, the Shareholders jointly and severally covenant and agree
(except as expressly contemplated by this Agreement or to the extent that
Purchaser shall otherwise expressly consent in writing) that:
6.1 Qualification. The Company shall maintain all qualifications
to transact business and remain in good standing in its jurisdiction of
incorporation and in the foreign jurisdictions set forth on Schedule 4.1(a).
6.2 Ordinary Course. The Company shall conduct its business in,
and only in, the Ordinary Course and, to the extent consistent with such
business, shall preserve intact its current business organizations, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and going business value shall be unimpaired at
the Closing Date. The Company shall maintain its properties and assets in good
condition and repair.
6.3 Corporate Changes. The Company shall not (a) amend its
Articles of Incorporation or Bylaws (or equivalent documents), (b) acquire by
merging or consolidating with, or agreeing to merge or consolidate with, or
purchase substantially all of the stock or assets of, or otherwise acquire, any
business or any corporation, partnership, association or other
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business organization or division thereof, (c) enter into any partnership or
joint venture, (d) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock or purchase or redeem, directly or
indirectly, any shares of its capital stock, (e) issue or sell any shares of its
capital stock of any class or any options, warrants, conversion or other rights
to purchase any such shares or any securities convertible into or exchangeable
for such shares, or (f) liquidate or dissolve or obligate itself to do.
6.4 Indebtedness. The Company shall not incur any Indebtedness,
sell any debt securities or lend money to or guarantee the Indebtedness of any
Person. The Company shall not restructure or refinance its existing
Indebtedness.
6.5 Accounting. The Company shall not make any change in the
accounting principles, methods, records or practices followed by it or
depreciation or amortization policies or rates heretofore adopted by it. The
Company shall maintain its books, records and accounts in accordance with
generally accepted accounting principles applied on a basis consistent with that
of prior periods.
6.6 Compliance with Legal Requirements. The Company shall comply
promptly with all requirements that applicable law may impose upon it and its
operations and with respect to the transactions contemplated by this Agreement,
and shall cooperate promptly with, and furnish information to, Purchaser in
connection with any such requirements imposed upon Purchaser, or upon any of its
affiliates, in connection therewith or herewith.
6.7 Disposition of Assets. The Company shall not sell, transfer,
license, lease or otherwise dispose of, or suffer or cause the encumbrance by
any Lien upon any of its properties or assets, tangible or intangible, or any
interest therein, except for sales of inventory in the Ordinary Course.
6.8 Compensation. The Company shall not (a) adopt or amend in any
material respect any collective bargaining, bonus, profit-sharing, compensation,
stock option, pension, retirement, deferred compensation, employment or other
plan, agreement, trust, fund or arrangement for the benefit of employees
(whether or not legally binding) other than to comply with any Legal Requirement
or (b) pay, or make any accrual or arrangement for payment of, any increase in
compensation, bonuses or special compensation of any kind, or any severance or
termination pay to, or enter into any employment or loan or loan guarantee
agreement with, any current or former officer, director, employee or consultant
of the Company, except for such bonuses as may be required to offset the
individual income tax liability of each Shareholder relating to the Company.
6.9 Modification or Breach of Agreement; New Agreements. The
Company shall not terminate or modify, or commit or cause or suffer to be
committed any act that will result in breach or violation of any term of or
(with or without notice or passage of time, or both) constitute a default under
or otherwise give any person a basis for non-performance under, any indenture,
mortgage, deed of trust, loan or credit agreement, lease, license or other
agreement,
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instrument, arrangement or understanding, written or oral, disclosed in this
Agreement or the Schedules hereto. The Company shall refrain from becoming a
party to any contract or commitment other than in the Ordinary Course. The
Company shall meet all of its contractual obligations in accordance with their
respective terms.
6.10 Capital Expenditures. Except for capital expenditures or
commitments necessary to maintain its properties and assets in good condition
and repair (the amount of which shall not exceed Five Thousand Dollars
($5,000.00) in the aggregate), the Company shall not purchase or enter into any
contract to purchase any capital assets.
6.11 Consents. The Company shall use its best efforts to obtain any
consent, authorization or approval of, or exemption by, any Person required to
be obtained or made by any party hereto in connection with the transactions
contemplated hereby or the taking of any action in connection with the
consummation thereof.
6.12 Maintain Insurance. The Company shall maintain its Policies
in full force and effect and shall not do, permit or willingly allow to be done
any act by which any of the Policies may be suspended, impaired or canceled.
6.13 Discharge. The Company shall not cancel, compromise, release
or discharge any claim of the Company upon or against any person or waive any
right of the Company of material value, and not discharge any Lien (other than
Permitted Liens) upon any asset of the Company or compromise any debt or other
obligation of the Company to any person other than Liens, debts or obligations
with respect to current liabilities of the Company.
6.14 Actions. The Company shall not institute, settle or agree to
settle any Action before any Governmental Entity.
6.15 Permits. The Company shall maintain in full force and effect,
and comply with, all Permits.
6.16 Tax Assessments and Audits. The Company shall furnish
promptly to Purchaser a copy of all notices of proposed assessment or similar
notices or reports that are received from any taxing authority and which
relate to the Company's operations for periods ending on or prior to the
Closing Date. The Shareholders shall cause the Company to promptly inform
Purchaser, and permit the participation in and control by Purchaser, of any
investigation, audit or other proceeding by a Governmental Entity in connection
with any Taxes, assessment, governmental charge or duty and shall not consent
to any settlement or final determination in any proceeding without the prior
written consent of Purchaser.
7. ADDITIONAL COVENANTS
7.1 Covenants of the Shareholders. During the period from the
date hereof through
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the Closing Date, each Shareholder agrees to:
(a) comply promptly with all requirements that applicable
Legal Requirements may impose upon it with respect to the transactions
contemplated by the Agreement, and shall cooperate promptly with, and furnish
information to, Purchase in connection with any requirements imposed upon
Purchaser or upon any of its affiliates in connection therewith or herewith;
(b) use its reasonable best efforts to obtain (and to
cooperate with Purchaser in obtaining) any consent, authorization or approval
of, or exemption by, any Person required to be obtained or made by such
Shareholder in connection with the transactions contemplated by this Agreement;
(c) use its reasonable best efforts to bring about the
satisfaction of the conditions precedent to Closing set forth in Section 8.1 of
this Agreement;
(d) promptly advise Purchase orally and, within three (3)
business days thereafter, in writing of any change in such Company's business or
condition that has had or may have a Material Adverse Effect; and
(e) deliver to Purchaser prior to the Closing a written
statement disclosing any untrue statement in this Agreement or any Schedule
hereto (or supplement thereto) or document furnished pursuant hereto, or any
omission to state any material fact required to make the statements herein or
therein contained complete and not misleading, promptly upon the discovery of
such untrue statement or omission, accompanied by a written supplement to any
Schedule to this Agreement that may be affected thereby; provided, however, that
the disclosure of such untrue statement or omission shall not prevent Purchaser
from terminating this Agreement pursuant to Section 9.1(c) hereof at any time at
or prior to the Closing in respect of any original untrue or misleading
statement.
7.2 Covenants of Purchaser. During the period from the date
hereof to the Closing Date, Purchaser shall:
(a) comply promptly with all requirements that applicable
Legal Requirements may impose upon it with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and furnish
information to, the Shareholders in connection with any such requirements
imposed upon the Shareholders or the Company or upon any of the Company's
affiliates in connection therewith or herewith;
(b) use its reasonable best efforts to obtain any consent,
authorization or approval of, or exemption by, any Person required to be
obtained or made by Purchaser in connection with the transactions contemplated
by this Agreement; and
(c) use its reasonable best efforts to bring about the
satisfaction of the condition
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precedent to Closing set forth in Section 8.2 of this Agreement.
7.3 Access and Information
(a) During the period commencing on the date hereof and
continuing through the Closing Date, the Shareholders shall continue to cause
the Company to afford to Purchaser and to Purchaser's accountants, counsel,
investment bankers and other representatives, reasonable access to all of its
properties, books, contracts, commitments, records and personnel and, during
such period, to continue to cause the Company to furnish promptly to Purchaser
all information concerning its business, properties and personnel as Purchaser
may reasonably request.
(b) Except to the extent permitted by the provisions of
Section 7.6 hereof, Purchaser shall hold in confidence, and shall use reasonable
efforts to ensure that its employees and representatives hold in confidence, all
such information supplied t it by the Shareholders or the Company concerning the
Company and shall not disclose such information to any third party except as may
be required by any Legal Requirement and except for information that (i) is or
becomes generally available to the public other than as a result of disclosure
by Purchaser or its representatives, (ii) becomes available to Purchaser or its
representatives from a third party other than the Shareholders or the Company,
and Purchaser or its representatives have no reason to believe that such third
party is not entitled to disclose such information, (iii) is known to Purchaser
or its representatives on a non-confidential basis prior to is disclosure by any
Shareholder or the Company or (iv) is made available by any Shareholder or the
Company to any other Person on a non-restricted basis. Purchaser's obligations
under the foregoing sentence shall expire on the Closing Date or, if the Closing
does not occur, two (2) years after the date hereof.
7.4 Expenses. All costs and expenses (including, without
limitation, all legal fees and expenses and fees and expenses of any brokers,
finders or similar agents) incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring the same.
7.5 Certain Notifications. At all times from the date hereof to
the Closing Date, each party shall promptly notify the others in writing of the
occurrence of any event that will or may result in the failure to satisfy any of
the conditions specified in Article 8 hereof.
7.6 Publicity; Employee Communications. At all times prior to the
Closing Date, each party shall obtain the consent of all other parties hereto
prior to issuing, or permitting any of its directors, officers, employees or
agents to issue, any press release or other information to the press, employees
of the Company or any third party with respect to this Agreement or the
transactions contemplated hereby; provided, however, that no party shall be
prohibited from supplying any information to any of its representatives, agents,
attorneys, advisors, financing sources and others to the extent necessary to
complete the transactions contemplated hereby so long as such representatives,
agents, attorneys, advisors, financing sources and others are made aware of the
terms of this Section 5.6. Nothing contained in this Agreement shall prevent any
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party to this Agreement at any time from furnishing any required information to
any Governmental Entity or authority pursuant to a Legal Requirement or from
complying with its legal or contractual obligations.
7.7 Further Assurances.
(a) Subject to the terms and conditions of this Agreement,
each of the parties hereto agrees to use all reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Legal Requirements, to
consummate and make effective the transactions contemplated by this Agreement.
(b) If at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, the
Shareholders and the property officers or directors of Purchaser, as the case
may be, shall take or cause to be taken all such necessary or convenient action
and execute, and deliver and file, or cause to be executed, delivered and filed,
all necessary or convenient documentation.
7.8 Competing Offers; Merger or Liquidation. The Shareholders
agree that they will not, and will cause the Company not to, directly or
indirectly, through any officer, director, agent, or otherwise, solicit,
initiate or encourage the submissions of bids, offers or proposals by, any
Person with respect to an acquisition of the Company or its assets or capital
stock or a merger or similar transaction, and the Shareholders will not, and
will not permit the Company to, engage any broker, financial adviser or
consultant with an incentive to initiate or encourage proposals or offers from
other parties. Furthermore, the Shareholders shall not, and shall not permit the
Company to, directly or indirectly, through any officer, director, agent or
otherwise, engage in negotiations concerning any such transaction with, or
provide information to, any Person other than Purchaser and its representatives
with a view to engaging, or preparing to engage, that Person with respect to any
matters in this Section. The Shareholders shall ensure that the Company shall
not commence any proceeding to merge, consolidate or liquidate or dissolve or
obligate itself to do so.
7.9 Inconsistent Action. The Shareholders shall not take or suffer
to be taken, and shall not permit the Company to take or cause or suffer to be
taken, any action that would cause any of the representations or warranties of
any of the Shareholders in this Agreement to be untrue, incorrect, incomplete or
misleading.
7.10 Post-Termination Employment. Each Shareholder acknowledges and
agrees that after the Closing (a) neither Purchaser nor the Company shall be
required to employ or retain any employee of the Company or any other Person,
and (b) Purchaser, in its sole and absolute discretion, may cause the Company to
retain all, some, or none of such employees.
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8. CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions of Purchaser. Notwithstanding any other provision
of this Agreement, the obligations of Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:
(a) There shall not be instituted and pending or threatened
any Action before any Governmental Entity (i) challenging the acquisition of the
Shares by Purchaser or otherwise seeking to restrain or prohibit the
consummation of the transactions contemplated hereby or (ii) seeking to prohibit
the direct or indirect ownership or operation by Purchaser of all or a material
portion of the business or assets of the Company, or to compel Purchaser or the
Company to dispose of or hold separate all or a material portion of the business
or assets of the Company or Purchaser;
(b) The representations and warranties of each of the
Shareholders in this Agreement shall be true and correct in all respects on and
as of the Closing Date with the same effect as if made on the Closing Date and
each of the Shareholders shall have complied with all covenants and agreements
and satisfied all conditions on such Shareholder' part to be performed or
satisfied on or prior to the Closing Date;
(c) Purchaser shall have received from Xxxxxx X. Xxxxxxx, Xx.,
Esq., counsel for the Shareholders and the Company, a written opinion dated the
Closing date and addressed to Purchaser, in substantially the form attached as
Exhibit B hereto;
(d) Purchaser shall have received from the President of the
Company a certificate dated the Closing Date in substantially the form attached
as Exhibit C hereto;
(e) Purchaser shall have received from each Shareholder a
certificate dated the Closing Date in substantially the form attached as Exhibit
D hereto;
(f) Purchaser shall have received a certificate of the
Secretary of the Company in substantially the form attached as Exhibit E hereto;
(g) Each Shareholder shall have entered into a Stockholders'
Agreement with Purchaser and the Company in the form attached as Exhibit F
hereto, (collectively, the "Stockholders' Agreements");
(h) Each Shareholder shall have executed a Personal Guaranty
substantially in the form attached as Exhibit G hereto.
(i) The Company shall have executed a Promissory Note
8uisubstantially in the form of Exhibit H hereto.
(j) Each Shareholder shall have executed a Stockholders
Agreement substantially in the form of Exhibit I hereto.
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(k) The Board of Directors of the Company shall have executed
a Board Resolution substantially in the form of Exhibit J.
(m) Purchaser shall have concluded (through its
representatives, accountants, counsel and other experts) an investigation of the
business, condition (financial and other), properties, assets, prospects,
operations and affairs of the Company and shall be satisfied, in its sole
discretion, with the results thereof;
(n) All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced herein or
incident to the transactions contemplated hereby shall be in form and substance
satisfactory to Purchaser and its counsel;
(o) Purchaser shall have received reasonable assurances from
those employees, if any, of the Company that may be identified by Purchaser in
its discretion that they will remain in the employ of the Company for a
reasonable period of time after the consummation of the transactions
contemplated hereby.;
(p) All consents from third parties, including from any
Governmental Entity, landlord or other Person, necessary for the consummation of
the transactions contemplated hereby shall have been obtained;
(q) The Board of Directors of Purchaser shall have authorized
and approved this Agreement and the transactions contemplated hereby;
(r) No act, event or condition shall have occurred after the
date hereof which Purchaser determines has had or could have had a Material
Adverse Effect;
8.2 Conditions of the Shareholders. Notwithstanding any other
provision of this Agreement, and except as set forth below, the obligations of
the Shareholders to consummate the transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing, of the condition set
forth in subsection (a) of Section 8.1, and the condition that the
representations and warranties of Purchaser in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as if made on the Closing Date and Purchaser shall have complied with all
covenants and agreements and satisfied all conditions on its part to be
performed or satisfied on or prior to the Closing Date.
9. TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual consent of the Purchaser and the Shareholders;
(b) by Purchaser if (i) there has been a material
misrepresentation, breach of
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warranty or breach of covenant by any Shareholder under this Agreement or (ii)
any of the conditions precedent to Closing set forth in Section 8.1 have not
been met on the Closing Date, and, in each case, Purchaser is not then in
material default of its obligations hereunder; or
(c) by the Shareholders acting together if (i) there has been
a material misrepresentation, breach of warranty or breach of covenant by
Purchaser under this Agreement or (ii) any of the conditions precedent to
Closing set forth in Section 8.2 have not been met on the Closing Date, and, in
each case, no Shareholder is then in material default of his obligations
hereunder.
9.2 Effect of Termination.
(a) In the case of any termination of this Agreement, the
provisions of Section 7.3 and 7.4 shall remain in full force and effect.
(b) Upon termination of this Agreement as provided in Section
9.1(a), except as stated in subsection (a) above, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of any
party hereto or their respective directors, officers, employees, agents or other
representatives.
(c) In the event of termination of this Agreement as provided
in Section 9.1(b), (c) or (d) hereof, such termination shall be without
prejudice to any rights that the terminating party or parties may have against
the breaching party or parties or any other person under the terms of this
Agreement or otherwise.
9.3 Amendment. This Agreement may be amended at any time by a
written instrument executed by Purchaser and the Shareholders. Any amendment
effected pursuant to this Section 9.3 shall be binding upon all parties hereto.
9.4 Waiver. Any term or provision of this Agreement may be waived
in writing at any time by the party or parties entitled to the benefits thereof.
Any waiver effected pursuant to this Section 9.4 shall be binding upon all
parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any other right, power or privilege. No waiver of any breach
of any covenant or agreement hereunder shall be deemed a waiver of any preceding
or subsequent breach of the same or any other covenant or agreement. The rights
and remedies of each party under this Agreement are in addition to all other
rights and remedies, at law or in equity, that such party may have against the
other parties.
10. INDEMNFICATION
10.1 Survival of Representations and Warranties. The
representations and warranties of the parties hereto contained in this Agreement
or in any writing delivered pursuant hereto or at the Closing shall survive the
Closing and the consummation of the transactions contemplated
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hereby (and any examination or investigation by or on behalf of any party
hereto) until the fourth anniversary of the Closing Date; provided, that the
representations and warranties contained in Section 4.12 and Section 4.14 shall
not terminate until the expiration of any applicable statute of limitations;
provided, further, that representations and warranties contained in Article 3,
Section 4.17, Section 4.24 and Section 4.28 shall not terminate but shall
continue indefinitely.
10.2 Indemnification.
(a) The Shareholders, jointly and severally, covenant and
agree to defend, indemnify and hold harmless Purchaser and the Company and each
Person who controls Purchaser or the Company within the meaning of the
Securities Act from and against any Damages arising out of or resulting from:
(i) any inaccuracy in or breach of any representation or warranty made by any
Shareholder in this Agreement or in any writing delivered pursuant to this
Agreement or at the closing [unless and except that such inaccuracy or breach is
a direct result of changes made by the Purchaser in accounting methods or
estimates utilized in financial reporting of the Company]; or (ii) the failure
of any Shareholder to perform or observe fully any covenant, agreement or
provision to be performed or observed by such Shareholder pursuant to this
Agreement.
(b) Purchaser covenants and agrees to defend, indemnify and
hold harmless the Shareholders from and against any Damages arising out of or
resulting from: (i) any inaccuracy in or breach of any representation or
warranty made by Purchaser in this Agreement or in any writing delivered
pursuant to this Agreement or at the Closing; (ii) the failure by Purchaser to
perform or observe any covenant, agreement or condition to be performed or
observed by it pursuant to this Agreement; or (iii) the Shareholders' liability
under the Guaranties.
10.3 Third Party Claims.
(a) If any party entitled to be indemnified pursuant to
Section 10.2 (an "Indemnified Party") receives notice of the assertion by any
third party of any claim or of the commencement by any such third person of any
Action (any such claim or Action being referred to herein as an "Indemnifiable
Claim") with respect to which another party hereto (an "Indemnifying Party") is
or may be obligated to provide indemnification, the Indemnified Party shall
promptly notify the Indemnifying Party in writing (the "Claim Notice") of the
Indemnifiable Claim; provided, that the failure to provide such notice shall not
relieve or otherwise affect the obligation of the Indemnifying Party to provide
indemnification hereunder, except to the extent that any Damages directly
resulted or were caused by such failure.
(b) The Indemnifying Party shall have thirty (30) days after
receipt of the Claim Notice to undertake, conduct and control, through counsel
of its own choosing, and at its expense, the settlement or defense thereof, and
the Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith; provided, that (i) the Indemnifying Party shall permit the
Indemnified Party to participate in such settlement or defense through counsel
chosen by the Indemnified Party (subject to the consent of the Indemnifying
Party, which consent shall
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not be unreasonably withheld), provided that the fees and expenses of such
counsel shall not be borne by the Indemnifying Party, and (ii) the Indemnifying
Party shall not settle any Indemnifiable Claim without the Indemnified Party's
consent. So long as the Indemnifying Party is vigorously contesting any such
Indemnifiable Claim in good faith, the Indemnified Party shall not pay or settle
such claim without the Indemnifying Party's consent, which consent shall not be
unreasonably withheld.
(c) If the Indemnifying Party does not notify the Indemnified
Party within thirty (30) days after receipt of the Claim Notice that it elects
to undertake the defense of the Indemnifiable Claim described therein, the
Indemnified Party shall have the right to contest, settle or compromise the
Indemnifiable Claim in the exercise of its reasonable discretion; provided, that
the Indemnified Party shall notify the Indemnifying Party of any compromise or
settlement of any such Indemnifiable Claim.
(d) Anything contained in this Section 10.3 to the contrary
notwithstanding, the Shareholders shall not be entitled to assume the defense
for any Indemnifiable Claim (and shall be liable for the reasonable fees and
expenses incurred by the Indemnified Party in defending such claim) if the
Indemnifiable Claim seeks an order, injunction or other equitable relief or
relief for other than money damages against Purchaser or the Company which
Purchaser determines, after conferring with its counsel, cannot be separated
from any related claim for money damages and which, if successfully, would
adversely affect the business, properties or prospects of the Company.
10.4 Indemnification Non-Exclusive. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common-law remedy any party may have for breach of representation,
warranty, covenant or agreement.
10.5 Set-off. Notwithstanding any provision of this Agreement or
of any other agreement, instrument or undertaking, it is understood and agreed
that Purchaser shall have the right to set-off the amount of any indemnity under
Sections 10.2 or 10.3 hereof or for any breach of the Stockholders Agreement,
Stock Restriction Agreement, Promissory Note and Personal Guaranty to the extent
any of the Shareholders are liable therefor against any sums of money or any
shares of the Purchaser at any time payable or deliverable to the Shareholders.
The remedies provided in this Article shall be cumulative, shall survive the
termination of this Agreement, and shall not preclude the assertion by any party
of any other rights or the seeking of any other remedies by it against any other
party.
11. POST CLOSING COVENANTS
Notwithstanding anything to the contrary herein, the obligations of the
parties below shall survive the Closing of this transaction.
11.1 Corporate Status. The Company, currently being a Subchapter S
corporation, will
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file for Subchapter C status within a reasonable period of time subsequent to
the Closing.
11.2 Dredge Sales. The parties hereto agree to allow the Purchaser
to manage certain dredge projects so as to allow the sales of such projects to
be invoiced through the Purchaser. In the event, the parties agree to manage any
sales in this manner, the Purchaser shall distribute to each of the Shareholders
of the Company their respective pro rata share of any earnings, defined as net
income before taxes utilizing generally accepted accounting principles, from
said projects.
11.3 Use of Proceeds. The Company may not use the proceeds provided
hereunder as a capital contribution by the Purchaser to the Company for any
purpose other than relating to the dredged material demonstration project at
Bark Camp, regardless of the source of the dredged material, unless approved by
Purchaser in writing or as otherwise set forth in Section 2.2. Such monies shall
not be used as distributions or dividends to any Shareholder, payments to any
subcontractors who are related entities or in some other manner are affiliated
with any Shareholder of the Company, or as an investment in any subsidiary,
affiliate, sister, or parent company of the Company.
11.4 Anti-Dilution Protection. The Company and the Shareholders
agree to fully protect the Purchaser from receiving any dilution of its pro rata
share interest of twenty five percent of the equity of the Company at all times
hereafter and shall take no actions which result in any dilution of Purchaser's
pro rata interest. For purposes of this Agreement, dilution shall mean any sale
of security, stock splits, dividends or other distributions convertible into
common stock or other securities, the issuance of any additional shares of
common stock or other securities convertible into common stock, mergers,
consolidations, new stock offerings, the issuance of warrants or options
convertible into common stock, or any other subdivision which has the effect of
reducing the pro rata holdings of the Purchaser within the Company to less than
twenty five percent (25%).
12. GENERAL PROVISIONS
12.1 Notices. All notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed given (a)
if delivered personally (including by overnight express or messenger), upon
delivery, (b) if delivered by registered or certified mail (return receipt
requested), upon the earlier of actual delivery or three (3) days after being
mailed, or (c) if given by telecopy, upon confirmation of transmission by
telecopy, in each case to the parties at the following addresses:
(a) If to the Purchaser, addressed to:
U. S. Plastic Lumber Corporation
0000 X. Xxxxxx Xxxx
Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxxxx, President and CEO
Telecopy: (000)000-0000
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(b) If to any Shareholder, to the address set
forth below such Shareholder's name on
Exhibit "A" hereto:
With a copy to:
Xxxxxx X. Xxxxxxx, Xx., Esquire
000 X. Xxxxxx Xx., P. O. Xxx 0000
Xxxxxxxxxx, XX 00000
12.2 Severability. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable such term or
provision in any other jurisdiction, the remaining terms and provisions of this
Agreement or the application of such terms and provisions to circumstances other
than those as to which it is held invalid or enforceable.
12.3 Entire Agreement. This Agreement, including the annexes and
schedules attached hereto and other documents referred to herein, contains the
entire understanding of the parties hereto in respect of its subject matter and
supersedes all prior and contemporaneous agreements and understandings, oral and
written, between the parties with respect to such subject matter.
12.4 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of Purchaser and the Shareholders and their respective
successors, heirs and assigns; provided, however, that no Shareholder shall
directly or indirectly transfer or assign any of such Shareholder's respective
rights hereunder in whole or in part without the prior written consent of
Purchaser, and any such transfer or assignment without said consent shall be
void, ab initio. Subject to the immediately preceding sentence, and except as
set forth in Article 10, this Agreement is not intended to benefit, and shall
not run to the benefit of or be enforceable by, any other person or entity other
than the parties hereto and their permitted successors and assigns.
12.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.
12.6 Recitals, Schedules and Annexes. The recitals, schedules and
annexes to this Agreement are incorporated herein and, by this reference, made a
part hereof as if fully set forth at length herein.
12.7 Construction.
(a) The article, section and subsection headings used herein
are inserted for
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reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(b) As used in this Agreement, the masculine, feminine or
neuter gender, and the singular or plural, shall be deemed to include the others
whenever and wherever the context so requires.
(c) For the purposes of this Agreement, unless the context
clearly requires, "or" is not exclusive.
12.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Florida.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or has caused this Agreement to be executed on its behalf by a
representative duly authorized, all as of the date first above set forth.
"PURCHASER"
United States Plastic Lumber, Inc.
By:/s/ Xxxx X. Xxxxxxxxx
-------------------------------
Xxxx X. Xxxxxxxxx, President
SHAREHOLDERS:
/s/ Xxxxxx X. Xxxxx
----------------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Al Silkoski
----------------------------------
Al Silkoski
/s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
--------
Exhibit A List of Shareholders
Exhibit B Opinion of Counsel
Exhibit C Certificate of President of CTI
Exhibit D Consent of Shareholders of CTI
Exhibit E Certificate of Secretary of USPL
Exhibit F Stockholder Agreement
Exhibit G Personal Guaranty
Exhibit H Promissory Note
Exhibit I Stockholders Agreement
Exhibit J Board Resolution of CTI
Exhibit K Certificate of President of USPL
SCHEDULES
---------
3.3 Consents
3.4 Conflicts
4.1(a) Foreign Corp status
4.1(b) Subsidiaries
4.2 No Conflicts
4.3 Capitalization
4.4 Financial Statements
4.5(a) Liens
4.5(b) List of Real Property
4.5(c) List of Tangible Property
4.5(d) List of Leases
4.5(f) Realty representations
4.6 List of Accounts Receivable
4.7 Inventories
4.8(a) List of Patents and Trademarks
4.8(b) Registered Rights
4.8(c) Licenses
4.9(a) List of Banks
4.9(b) Insurance Policies
4.10(a) Indebtedness
4.10(b) Guaranties
4.11 Judgments
4.12 Income Taxes
4.13 Questionable Payments
4.14 Employee Benefit Plans
4.15 Undisclosed Liabilities
4.16 Permits
4.17 Regulatory Filings
4.18 Consents
4.19(a) Sales Orders
4.19(b) Purchase Orders
4.19(c) Sales Reps
4.19(d) Non-Compete Agreements
4.19(e) Contracts (inside)
4.19(f) Contracts (outside)
4.19(g) Legality
4.20 Absence of Changes
4.21(a) List of Employees
4.21(b) Labor Agreements
4.22 Affiliation
4.23(a) Customer Lists
4.23(b) Supplier Lists
4.24 Compliance with Law
4.25 Product Return
4.26 Warranties
4.28 Hazardous Materials
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