EXHIBIT 10.5
Series A Convertible Preferred Stock Purchase
Agreement dated January 1, 2000
INTERNATIONAL PLASTICS AND EQUIPMENT CORP.
SERIES A CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
JANUARY ___, 2000
Series A Convertible Preferred Stock Purchase Agreement dated as of
January ___, 2000 by and between International Plastics and Equipment Corp., a
Pennsylvania corporation (the "Company"), and Sherwood LLC, a Massachusetts
limited liability company (the "Purchaser").
WHEREAS, the Company wishes to issue and sell to the Purchaser, and the
Purchaser wishes to purchase on the terms and subject to the conditions set
forth in this Agreement, 1,000,000 shares (the "Preferred Shares") of the
authorized but unissued Series A Convertible Preferred Stock, no par value, of
the Company (the "Preferred Stock");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
ARTICLE I
THE PREFERRED SHARES
Section 1.01 AUTHORIZATION, ISSUANCE, SALE AND DELIVERY OF THE
PREFERRED SHARES.
(a) The Company shall adopt and file with the Secretary of the
Commonwealth of the Commonwealth of Pennsylvania on or before the Closing Date
(as hereinafter defined) a Restated Certificate of Incorporation, in the form
attached hereto as EXHIBIT A (the "Restated Certificate").
(b) Subject to the terms and conditions hereinafter set forth,
the Company hereby agrees to issue and sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company, the Preferred Shares at the purchase
price of $1.00 per share (the "Purchase Price").
Section 1.02 CLOSING. The closing of the purchase and sale of the
Preferred Shares shall take place at the offices of the Company at Xxxxxxxxx
Xxxxxxxxxx Xxxx, Xxx Xxxxxx, Xxxxxxxxxxxx 00000, at 11:00 a.m. on January ___,
2000, or at such other location, date and time as may be agreed upon between the
Purchaser and the Company (such closing being called the "Closing" and such date
and time being called the "Closing Date"). At the Closing, the Company shall
issue and deliver to the Purchaser, against payment in full of the Purchase
Price, a stock certificate or certificates in definitive form, registered in the
name of the Purchaser, representing the Preferred Shares.
Section 1.03 Payment of Purchase Price. As payment in full for the
Preferred Shares being purchased by it at Closing, and against delivery of the
stock certificate or certificates therefor as aforesaid, on the Closing Date the
Purchaser shall cause to be transferred to the account of the Company by wire
transfer, the Purchase Price for the Preferred Shares so purchased.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that, except as
set forth on the Disclosure Schedules attached hereto.
Section 2.01 ORGANIZATION AND CORPORATE POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania. The Company is duly licensed or
qualified to conduct business as a foreign corporation in the jurisdictions
identified on Schedule 2.01, and such jurisdictions are the only jurisdictions
in which the failure of the Company has the corporate power and authority to own
and hold its properties and to carry on its business as now conducted. The
Company holds all governmental licenses, franchises, and permits necessary for
the conduct of its business as now conducted and as proposed to be conducted;
set forth on Schedule 2.01 is a list of all such licenses, franchises and
permits. The Company has the corporate power and authority to execute, deliver
and perform this Agreement, to issue, sell and deliver the Preferred Shares and
to issue and deliver the shares of Common Stock, no par value, of the Company
(the "Common Stock") issuable upon conversion of the Preferred Shares (the
"Conversion Shares").
(b) Except as set forth on Schedule 2.01, the Company has no
subsidiaries. The Company does not own of record or beneficially, directly or
indirectly, (i) any shares of capital stock or securities convertible into
capital stock of any other corporation or (ii) any participating interest in any
partnership, joint venture or other non-corporate business enterprise and does
not control, directly or indirectly, any other entity.
Section 2.02 AUTHORIZATION OF AGREEMENTS, ETC.
(a) The execution and delivery by the Company of this
Agreement, the Voting Agreement (as such term is defined below), and the
Consulting Agreement (as such term is defined below), the performance by the
Company of its obligations hereunder and thereunder, the issuance, sale and
delivery of the Preferred Shares and the issuance and delivery of the Conversion
Shares have been duly authorized by all requisite corporate action and will not
violate any provision of any law applicable to the Company, any order of any
court or other agency of government applicable to the Company, the Restated
Certificate or the By-laws of the Company, or any provision of any material
indenture, agreement or other instrument to which the Company is bound, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such material indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance upon any of the properties or assets of the
Company.
(b) The Preferred Shares have been duly authorized and, when
issued and delivered against payment therefore in accordance with this
Agreement, will be validly issued, fully paid and nonassessable shares of
Preferred Stock and will be free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company. The
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Conversion Shares have been, or will be prior to the Closing, duly reserved for
issuance upon conversion of the Preferred Shares and, when so issued, will be
duly authorized, validly issued, fully paid and nonassessable shares of Common
Stock and will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company. Neither the issuance, sale or
delivery of the Preferred Shares nor the issuance or delivery of the Conversion
Shares is subject to any preemptive right of stockholders of the Company or to
any right of first refusal or other right in favor of any person which has not
been effectively waived.
Section 2.03 VALIDITY. This Agreement has been duly executed and
delivered by the Company and each of this Agreement, the Voting Agreement (when
executed and delivered as hereinafter contemplated), and the Consulting
Agreement (when executed and delivered as hereinafter contemplated), constitutes
the legal, valid and binding obligation of the Company, enforceable in
accordance with its respective terms, except as such enforcement may be limited
by bankruptcy, insolvency, moratorium or similar laws affecting creditors'
rights generally, or may be subject to the availability of equitable remedies,
as determined in the discretion of the court before which such a proceeding may
be brought.
Section 2.04 AUTHORIZED CAPITAL STOCK. Upon the filing of the Restated
Articles, the authorized capital stock of the Company will consist of 5,000,000
shares of Common Stock and 1,000,000 shares of Preferred Stock; all of which
will have been designated Series A Convertible Preferred Stock. Immediately
prior to the Closing, 3,000,000 shares of Common Stock will be validly issued
and outstanding, and no other shares of Common Stock or Preferred Stock will
have been issued. Schedule 2.04 sets forth the name of each shareholder of the
Company and the number of shares of Common Stock held of record by each such
shareholder. No subscription, warrant, option, convertible security, or other
right (contingent or other) to purchase or otherwise acquire from the Company
(or, to the best of the Company's knowledge, from any other person or entity)
any equity securities of the Company is outstanding and there is no commitment
by the Company to issue shares, subscriptions, warrants, options, convertible
securities, or other such rights or to distribute to holders of any of its
equity securities any evidence or indebtedness or asset. The Company has no
obligation (contingent or other) to purchase, redeem or otherwise acquire any of
its equity securities or any interest therein or to pay any dividend or make any
other distribution in respect thereof.
Section 2.05 CORPORATE RECORDS.
The minute books of the Company contain accurate summary records of all
meetings and written consents to action of the Company's shareholders, the
Company's Board of Directors and all committees, if any, appointed by the Board
of Directors. The Company's stock ledger is complete and reflects all issuances,
transfers, repurchases and cancellations of shares of capital stock of the
Company. The books of account and other financial records, if any, of the
Company accurately and completely reflect all material information purported to
be shown therein in all material respects.
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Section 2.06 FINANCIAL STATEMENTS.
The Company has furnished to the Purchaser the balance sheets of the
Company as of December 31, 1998 and the related statements of operations,
shareholders' equity and cash flows for the 12-month period then ended (the
"Financial Statements"). The Financial Statements (a) are complete and correct
in all material respects, (b) are in accordance with the Company's books and
records, (c) present fairly the Company's financial position for the periods and
as of the dates indicated and (d) have been prepared on the basis described in
the accountants' review report accompanying the Financial Statements.
Section 2.07 CERTAIN EVENTS.
Except as set forth on Schedule 2.07, the Company has not, since the
date of the Financial Statements, (i) issued any stock, bond or other corporate
security, (ii) borrowed any material amount or incurred or become subject to any
material liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities incurred in the ordinary course of business, (iv) declared
or made any payment or distribution to stockholders or purchased or redeemed any
shares of its capital stock or other security, (v) mortgaged, pledged or
subjected to lien any of its assets, tangible or intangible, other than liens of
current real property taxes not yet due and payable, (vi) sold, assigned or
transferred any of its tangible assets except in the ordinary course of
business, or cancelled any debt or claim, (vii) sold, assigned, transferred or
granted any exclusive license with respect to any patent, trademark, trade name,
service xxxx, copyright, trade secret or other intangible asset, (viii) suffered
any material loss of property or waived any right of substantial value whether
or not in the ordinary course of business, (ix) made any change in officer
compensation except in the ordinary course of business and consistent with past
practice, (x) made any material change in the manner of business or operations
of the Company, (xi) entered into any transaction except in the ordinary course
of business or as otherwise contemplated hereby or (xii) entered into any
commitment (contingent or otherwise) to do any of the foregoing.
Section 2.08 UNDISCLOSED LIABILITIES.
The Company has no material liability (whether known, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, due or to become due) except (i) as described in the Financial
Statements or quantified in notes to the Financial Statements or (ii)
liabilities which have arisen after the date of the Financial Statements in the
ordinary course of business and consistent with past practice.
Section 2.09 LITIGATION, COMPLIANCE WITH LAW. Except as set forth on
Schedule 2.09, there is no (i) action, suit, claim, proceeding or investigation
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company or either of the Founders (as such term is hereinafter
defined), at law or in equity, or before or by any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) arbitration proceeding relating to
the Company pending
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under collective bargaining agreements or otherwise, or (iii) governmental
inquiry pending or, to the best of the Company's knowledge, threatened against
or affecting the Company (including without limitation any inquiry as to the
qualification of the Company to hold or receive any governmental license or
permit), and, to the best of the Company's knowledge, there is no basis for any
of the foregoing. The Company is not in default with respect to any order, writ,
injunction or decree known to or served upon the Company of any court or of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. Except as set forth on
Schedule 2.09, there is no action or suit by the Company pending or threatened
against others.
Section 2.10 TAXES.
The Company has filed all tax returns, federal, state, county and
local, required to be filed by it, except such tax returns that are under a
current extension, and the Company has paid all taxes shown to be due by such
returns as well as all other taxes, assessments and governmental charges which
have become due or payable, including without limitation all taxes which the
Company is obligated to withhold from amounts owing to employees, creditors and
third parties. The Company has established adequate reserves for all taxes
accrued but not yet payable. The federal income tax returns of the Company have
never been audited by the Internal Revenue Service. No deficiency assessment
with respect to or proposed adjustment of the Company's federal, state, county
or local taxes is pending or, to the best of the Company's knowledge,
threatened. There is no tax lien, whether imposed by any federal, state, county
or local-taxing authority, outstanding against the assets, properties or
business of the Company.
Section 2.11 TITLE TO ASSETS.
(a) Identified on Schedule 2.11 is each parcel of real
property owned by the Company (the "Owned Property"). Set forth on Schedule 2.11
is a list of all leases, subleases and other occupancy agreements for real
property (the "Leased Property"), including all amendments and extensions, to
which the Company is a party as tenant or lessee. The Owned Property and the
Leased Property (together, the "Real Estate") constitutes all of the real
property owned, leased, occupied or otherwise utilized by the Company in
connection with the Company's business. Other than the Company, there are no
parties in possession or parties having any current or future right to occupy
any of the Owned Property or to occupy any of the Leased Property during the
term of any lease for such Leased Property. To the knowledge of the Company, the
Company has not violated any permit, license, approval, covenant, condition,
restriction, easement, agreement or other affecting any portion of the Real
Estate, which violation would have a material adverse impact on the use by the
Company of the relevant Real Estate. There is no pending or, to the knowledge of
the Company, any threatened condemnation proceeding, or material lawsuit or
administrative action affecting the ability of the Company to occupy and use the
Real Estate. All of the Real Estate is in operating condition and repair
reasonably adequate for the use for which it is intended, and, to the knowledge
of the Company, conforms in all material respects with all applicable
contractual requirements, and all zoning, fire, building, environmental and
administrative regulations to the extent relevant for such use. All
improvements located on the Real Estate have direct access to a public road
adjoining such Real Estate. To the knowledge of the Company, no such
improvements or accessways encroach
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on land not included in the Real Estate and no such improvement is dependent for
its access, operation or utility on any land, building or other improvement not
included in the Real Estate. The Company has good and marketable title to the
Owned Property, free and clear of all liens and mortgages. There are no
outstanding options or rights of first refusal to purchase the Owned Property or
any portion thereof or any interest therein. With respect to the Leased
Property: (i) the Company has a good and valid leasehold interest in and to all
of the Leased Property; (ii) each lease with respect to the Leased Property is
in full force and effect and is enforceable in accordance with its terms; and
(iii) there exists no material default by the Company, or any condition which,
with the giving of notice, the passage of time, or both, could become a material
default by the Company under any such lease.
(b) The Company has good and marketable title to, or a valid
leasehold interest in, or valid rights under contract to use, all assets used in
the Company's business. The Company's tangible assets are in good operating
condition, ordinary wear and tear excepted.
Section 2.12 ENVIRONMENTAL LAW.
To the knowledge of the Company, the Company is operating in compliance
with Environmental Law (as hereinafter defined), except for such non-compliance
which would not have a material adverse effect on the financial condition of the
Company. To the knowledge of the Company, none of the following exists at any
property or facility on the Real Estate in material violation of Environmental
Law: (i) underground storage tanks, (ii) asbestos-containing material in any
damaged form or condition, (iii) landfills, surface impoundments, or disposal
areas, or (iv) materials or equipment containing polychlorinated biphenyl. To
the knowledge of the Company, the Company has not treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or released any
substance, including any hazardous substance, or owned or operated any property
or facility in a manner that has given or would give rise to material
liabilities, including liabilities for response costs, corrective action costs,
personal injury, property damage, natural resources damages or attorney fees,
pursuant to any violation of Environmental Law. For purposes of this Agreement,
the term "Environmental Law" shall mean all federal, state, local or foreign
laws, statutes, regulations, ordinances and similar provisions having the force
or effect of law relating to pollution, protection of the environment, waste
generation, handling, treatment, storage, distribution, processing, testing,
labeling, release or threatened release, disposal or transportation, and
exposure to hazardous or toxic substances or wastes, public health and safety
and worker health and safety.
Section 2.13 INTELLECTUAL PROPERTY.
(a) The Company owns or has rights to use all material
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, software, information, proprietary rights and processes necessary for
its business as now conducted (collectively, the "Intellectual Property
Rights").
(b) No action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand is pending or, to the knowledge of the
Company, threatened which challenges the legality, validity, enforceability or
use of the Intellectual Property Rights.
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(c) The Company has no knowledge of any infringement by any
other party of any of the Intellectual Property Rights except for such matters
as would not, individually or in the aggregate, have a material adverse effect
on the condition (financial or otherwise), business, assets, or results of
operations of the Company.
(d) To the knowledge of the Company, the Company has not and
does not violate or infringe any intellectual property right of any other person
or entity, and the Company has not received any communication alleging that it
violates or infringes the intellectual property right of any other person or
entity, except any such violation or infringements as would not, individually or
in the aggregate, have material adverse effect on the condition (financial or
otherwise), business, assets, or results of operations of the Company.
(e) Except as described on Schedule 2.13, the Company has
not been sued for infringing any intellectual property right of another entity
or person, and the Company has not received any cease and desist order in
relation to any such infringement.
(f) None of the processes, techniques and formulae, research
and development results and other know-how relating to the business of the
Company, the value of which to the Company is contingent upon maintenance of the
confidentiality thereof, has been disclosed by the Company or, to he knowledge
of the Company, any affiliate of the Company to any person or entity other than
those persons or entities who are bound by obligations of confidentially or by
operation of law.
Section 2.14 PROPRIETARY INFORMATION OF THIRD PARTIES. To the knowledge
of the Company, no third party has claimed or has reason to claim that any
person employed by or affiliated with the Company has (a) violated or may be
violating any of the terms or conditions of his or her employment,
non-competition or nondisclosure agreement with such third party, (b) disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party or (c) interfered
or may be interfering in the employment relationship between such third party
and any of its present or former employees. No third party has requested
information from the Company which suggests that such a claim might be
contemplated. To the knowledge of the Company, no person employed by or retained
as a consultant by the Company has utilized or proposes to utilize any trade
secret or any information or documentation proprietary to any third party, and
to the knowledge of the Company,, no person employed by or retained as a
consultant by the Company has violated any confidential relationship which such
person may have had with any third party, in connection with the development,
manufacture or sale by the Company of any product or proposed product or the
development or sale by the Company of any service or proposed service of the
Company.
Section 2.15 EMPLOYEES.
To the knowledge of the Company, no executive, key employee, or
significant group of employees plans to terminate employment with the Company
within the next 12 months. The Company is not a party to or bound by any
collective bargaining agreement, nor has the Company experienced any strike or
material grievance, claim of unfair labor practices, or other collective
bargaining disputes within the last five years. The Company has not committed
any
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material unfair labor practice. The Company has no knowledge of any
organizational effort being made or threatened by or on behalf of any labor
union with respect to employees of the Company. The Company has not implemented
any plant closing or mass layoff of employees as those terms are defined in the
Worker Adjustment Retraining and Notification Act of 1988, as amended ("WARN")
or any similar state or local law or regulation, and the Company does not have
any present plans to implement any layoffs that could implicate WARN or such
other laws or regulations.
Section 2.16 EMPLOYEE PLANS.
(a) Schedule 2.16 lists (i) each "employee benefit plan," as
such term is defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), whether or not subject to the provisions of
ERISA, and (ii) each other employment, consulting, collective bargaining, stock
option, stock bonus, stock purchase, phantom stock, incentive, bonus, deferred
compensation, retirement, severance, vacation, medical or dental contract,
policy or arrangement which is not an employee benefit plan as defined in
Section 3(3) of ERISA (each such plan, contract, policy and arrangement being
herein referred to as an "Employee Plan") which currently is sponsored,
maintained or contributed to by (or required to be contributed to by) the
Company for the benefit of any current or former employee, director or other
personnel.)
(b) With respect to each Employee Plan which is an "employee
benefit plan" within the meaning of Section 3(3) of ERISA or which is a "plan"
within the meaning of Section 4975(e) of the Internal Revenue Code of 1986, as
amended (the "Code"), there has occurred no transaction which is prohibited by
Section 406 of ERISA or which constitutes a "prohibited transaction" under
Section 4975(c) of the Code and with respect to which a prohibited transaction
exception has not been granted and is not currently in effect.
Section 2.17 MATERIAL AGREEMENTS.
Set forth on Schedule 2.17 is a list of all agreements, transactions,
obligations, commitments, arrangements and liabilities to which the Company is a
party and which have not been fully performed by the Company or terminated and:
(a) is a lease or a contract for hire or rent, hire purchase
or purchase by way of credit sale or periodical payments whereby the Company is
required to pay amounts exceeding $250,000 in the aggregate in any calendar
year;
(b) requires payment of any commission or royalty; or
(c) is one of the following types of contracts or
agreements:
(i) contracts or commitments for capital
expenditures or acquisitions in excess $250,000 per
project;
(ii) distribution, dealer or sales agency
agreements;
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(iii) guarantees of third party
obligations;
(iv) agreements (including non-compete
agreements) which restrict the kinds of businesses in
which the Company may engage or the geographical
areas in which the Company may conduct its business;
(v) indentures, mortgages, loan
agreements or other agreements relating to
indebtedness for borrowed money, the granting of
liens or the establishment or maintenance of lines of
credit;
(vi) material licenses, agreements,
assignments or contracts (whether as licensor or
licensee, assignor or assignee) relating to any
Intellectual Property;
(vii) joint venture agreements,
partnership agreements or similar agreements with any
party;
(viii) employment, consulting or management
agreements requiring the payment of annual
compensation in excess of $150,000;
(ix) agreements or other arrangements
with any director, officer, employee or shareholder
of the Company;
(x) any other agreement or contract
which involves consideration in excess of $100,000;
and
(xi) agreements or commitments for the
purchase of raw materials which have terms of greater
than 6 months.
Section 2.18 GOVERNMENT APPROVALS. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement, the issuance, sale and delivery of the Preferred Shares or, upon
conversion thereof, the issuance and delivery of the Conversion Shares, other
than the filing of any notice that may be required pursuant to federal and state
securities laws in connection with the sale of the Preferred Shares.
Section 2.19 OFFERING OF THE PREFERRED SHARES.
Neither the Company nor any person authorized or employed by the
Company as agent, broker, dealer or otherwise in connection with the offering or
sale of the Preferred Shares or any security of the Company similar to the
Preferred Shares has offered the Preferred Shares or any such similar security
for sale to, or solicited any offer to buy the Preferred Shares or any such
similar security from, or otherwise approached or negotiated with respect
thereto with, any person or persons, and neither the Company nor any person
acting on its behalf has taken or will
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take any other action (including, without limitation, any offer, issuance or
sale of any security of the Company under circumstances which might require the
integration of such security with Preferred Shares under the Securities Act of
1933, as amended (the "Securities Act") or the rules and regulations of the
Securities and Exchange Commission (the "Commission") thereunder), in either
case so as to subject the offering, issuance or sale of the Preferred Shares to
the registration provisions of the Securities Act.
Section 2.20 BROKERS. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent pursuant to which the
Company or the Purchaser shall be obligated to make any payment to any such
broker, finder or similar agent with respect to the transactions contemplated by
this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows
Section 3.01 INVESTMENT REPRESENTATIONS
(a) the Purchaser is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act;
(b) the Purchaser has sufficient knowledge and experience in
investing in companies similar to the Company so as to be able to evaluate the
risks and merits of its investment in the Company and is able financially to
bear the risks thereof;
(c) the Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with the Founders;
(d) the Preferred Shares being purchased by the Purchaser
are being acquired for its own account for the purpose of investment and not
with a view to or for sale in connection with any distribution thereof;
(e) the Purchaser understands that (i) the Preferred
Shares and the Conversion Shares have not been registered under the Securities
Act by reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 505
or 506 promulgated under the Securities Act, (ii) the Preferred Shares and, upon
conversion thereof, the Conversion Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (iii) the Preferred Shares and the Conversion
Shares will bear a legend to such effect and (iv) the Company will make a
notation on its transfer books to such effect;
(f) the Purchaser has no present need for liquidity in
connection with its purchase of the Preferred Shares; and
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(g) the purchase of the Preferred Shares is consistent with
the general investment objectives of the Purchaser, and that the Purchaser
understands that the purchase of the Preferred Shares involves a high degree of
risk, and there may never be an established market for the Company's capital
stock.
Section 3.02 ORGANIZATION AND AUTHORITY. The Purchaser is a limited
liability company duly formed, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts. The Purchaser has the power and
authority to execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby.
Section 3.03 AUTHORIZATION OF AGREEMENTS; VALIDITY.
(a) The execution and delivery by the Purchaser of this
Agreement, the Voting Agreement, and the Consulting Agreement and the
performance by the Purchaser of its obligations hereunder and thereunder have
been duly authorized by all requisite action and will not violate any provision
of any law applicable to the Purchaser, any order of any court or other agency
of government applicable to the Purchaser, the Certificate of Organization or
the Operating Agreement of the Purchaser or conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
material indenture, agreement or other instrument by which the Purchaser is
bound.
(b) This Agreement has been duly executed and delivered by
the Purchaser and each of this Agreement, the Voting Agreement (when executed
and delivered as hereinafter contemplated), and the Consulting Agreement (when
executed and delivered as hereinafter contemplated), constitutes the legal,
valid and binding obligation of the Purchaser, enforceable in accordance with
its respective terms, except as such enforcement may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally, or
may be subject to the availability of equitable remedies, as determined in the
discretion of the court before which such a proceeding may be brought.
Section 3.04 BROKERS. The Purchaser has no contract, arrangement or
understanding with any broker, finder or similar agent pursuant to which the
Company or the Purchaser shall be obligated to make any payment to any such
broker, finder or similar agent with respect to the transactions contemplated by
this Agreement.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASER
The obligation of the Purchaser to purchase and pay for the Preferred
Shares being purchased by the Purchaser is, at the Purchaser's option, subject
to the satisfaction, on or before the Closing Date, of the following conditions:
Section 4.01 REPRESENTATIONS AND WARRANTIES TO BE TRUE AND CORRECT. The
representations and warranties contained in Article II shall be true, complete
and correct in all material respects on and as of the Closing Date with the same
effect as though such
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representations and warranties had been made on and as of such date, and the
President and Treasurer of the Company shall have certified to such effect to
the Purchaser in writing on behalf of the Company.
Section 4.02 PERFORMANCE. The Company shall have performed and complied
in all material respects with all agreements contained herein required to be
performed or complied with by it prior to or at the Closing Date, and the
President and Treasurer of the Company shall have certified to the Purchaser in
writing to such effect on behalf of the Company.
Section 4.03 PREEMPTIVE RIGHTS. Any preemptive, first refusal or other
rights with respect to the issuance of the Preferred Shares or the Conversion
Shares shall have been irrevocably waived.
Section 4.04 BANK CONSENTS.
First Western Bank, National Association shall have consented to the
transactions contemplated by this Agreement and shall have entered into all such
amendments to loan agreements and other agreements as the Purchaser shall
reasonably request.
Section 4.05 CONVERSION OF SHAREHOLDER LOANS.
The entire principal amount of all outstanding loans made by any
shareholder to the Company, and accrued and unpaid interest thereon, shall have
been converted into equity in the Company, and there shall be no amounts owed by
the Company to any shareholder.
Section 4.06 VOTING AGREEMENT; BOARD OF DIRECTORS.
The Company and each shareholder of the Company shall have executed and
delivered to the Purchaser a Voting Agreement in the form attached hereto as
EXHIBIT B (the "Voting Agreement"). As of the Closing Date, the number of
directors constituting the Company's Board of Directors (the "Board") shall have
been set at 5 and the following persons shall have been elected to the Board in
accordance with the Voting Agreement: Xxxxxxx X. Xxxx, Xx., Xxxxxx Xxxxxxxx,
Xx., _____________________, Xxxxxx X. Poor, Jr. and Xxxxxxxxx X. Xxxxxxx, Xx.
Section 4.07 CONSULTING AGREEMENT.
The Company shall have executed and delivered to the Purchaser a
Consulting Agreement in the form attached hereto as EXHIBIT C (the "Consulting
Agreement").
Section 4.08 ALL PROCEEDINGS TO BE SATISFACTORY. All corporate and
other proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser and its counsel.
ARTICLE V
COVENANTS OF THE COMPANY
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The Company covenants and agrees with the Purchaser that so long as the
Purchaser owns any of the Preferred Shares or Conversion Shares:
Section 5.01 FINANCIAL STATEMENTS, REPORTS, ETC. The Company shall
furnish to the Purchaser, within 90 days after the end of each fiscal year of
the Company, a consolidated balance sheet of the Company and its subsidiaries,
if any, as of the end of such fiscal year and the related consolidated
statements of income, stockholders' equity and cash flows for the fiscal year
then ended, prepared in accordance with generally accepted accounting principles
and reviewed by a firm of independent public accountants reasonably acceptable
to the Purchaser.
(b) As soon as available, but in any event not later than 45
days after the end of each of the first three fiscal quarters, the Company shall
furnish to the Purchaser the unaudited balance sheet of the Company as at the
end of each such period and the related unaudited consolidated statement of
operations, shareholders' equity and changes in cash flows of the Company for
such quarterly period and for the elapsed period in such fiscal year, and in
reasonable detail and stating in comparative form the figures as at the end of
and for the comparable periods of the preceding fiscal year and to the current
year's budget.
(c) As soon as available, but in any event not later than 15
days after the end of each month, the Company shall furnish to the Purchaser the
unaudited consolidated statement of operations and changes in cash flows of the
Company for such month.
(d) As soon as available, but in any event not later than 45
days prior to the end of each fiscal year of the Company, the Company shall
furnish to the Purchaser the financial plan of the Company for the next
succeeding fiscal year, including but not limited to a cash flow projection,
operating budget and balance sheet calculated monthly, as contained in its
operating plan approved by the Board.
Section 5.02 RESERVE FOR CONVERSION OF SHARES. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, for the purpose of effecting the conversion of the Preferred
Shares and otherwise complying with the terms of this Agreement, such number of
its duly authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Shares from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Shares or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Shares.
Section 5.03 INSPECTION, CONSULTATION AND ADVICE. The Company shall
permit and cause each of its subsidiaries to permit the Purchaser and such
persons as any the Purchaser may designate reasonable access at reasonable
frequency during normal business hours, upon 48 hours' prior notice, to visit
and inspect any of the properties of the Company and its subsidiaries,
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examine their books and take copies and extracts therefrom, discuss the affairs,
finances and accounts of the Company and its subsidiaries with their officers,
employees and public accountants (and the Company hereby authorizes said
accountants to discuss with such Purchaser and such designees such affairs,
finances and accounts), and consult with and advise the management of the
Company and its subsidiaries as to their affairs, finances and accounts;
provided, however, that the Company may require, as a condition to the
disclosure of any of the Company's confidential or proprietary information to
the Purchaser or any representative or designee of a Purchaser, that the
Purchaser and such representative or designee execute a non- disclosure
agreement in form reasonably acceptable to the Company.
Section 5.04 RESTRICTIVE AGREEMENTS PROHIBITED. Neither the Company nor
any of its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement or the Restated
Certificate.
Section 5.05 USE OF PROCEEDS. The Company shall use the proceeds from
the sale of the Preferred Shares hereunder solely for working capital.
ARTICLE VI
MISCELLANEOUS
Section 6.01 EXPENSES. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated.
Section 6.02 SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations and warranties made herein or in any agreement, certificate or
instrument delivered to the Purchasers pursuant to or in connection with this
Agreement shall, for a period of 18 months from the Closing Date, survive the
execution and delivery of this Agreement, the issuance, sale and delivery of the
Preferred Shares, and the issuance and delivery of the Conversion Shares.
Section 6.03 BROKERAGE. The Company will indemnify and hold the
Purchaser harmless against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by the Company with any third party. The Purchaser
will indemnify and hold the Company harmless against and in respect of any claim
for brokerage or other commissions relative to this Agreement or to the
transactions contemplated hereby, based in any way on agreements, arrangements
or understandings made or claimed to have been made by the Purchaser with any
third party.
Section 6.04 PARTIES IN INTEREST. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
Section 6.05 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be (i) delivered in
person, or (ii) mailed by certified or registered mail, return receipt
requested, or (iii) sent by a recognized overnight courier service,
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or (iv) sent by e-mail, facsimile or other means of electronic communication,
for which evidence of delivery is automatically
15
generated, addressed as follows:
(a) if to the Company, at
X.X.#0, Xxx 0-X
Xxxxxxxxx Xxxxxxxxxx Xxxx
X.X. Xxx 0000
Xxx Xxxxxx, Xxxxxxxxxxxx 00000
Attention: President
with a copy to
Xxxxx, Xxxx & Xxxxxxxxx LLP
Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxx, Esq.
(b) if to the Purchaser, at
Sherwood LLC
[Address]
Attention: ____________________
with a copy to
Peabody & Xxxxxx LLP
00 Xxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
or, in any such case, at such other address as shall have been furnished in
writing by the addressee to the others. Notices shall be effective (i) upon
delivery, if delivered in person, (ii) 3 days after deposit in the U.S. mails,
if mailed, (iii) on the day following deposit with the courier service, if sent
by overnight courier, and (iv) upon transmission, if sent by e-mail, facsimile
or other means of electronic communication.
Section 6.06 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania.
Section 6.07 ENTIRE AGREEMENT. This Agreement constitutes the sole
and entire agreement of the parties with respect to the subject matter hereof.
Section 6.08 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Signatures delivered by
facsimile transmission shall be deemed to be originals notwithstanding the
failure subsequently to deliver hard copies thereof.
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Section 6.09 AMENDMENTS AND WAIVERS. This Agreement may be amended or
modifed, and provisions hereof may be waived, only with the written consent of
the Company and of Purchasers holding, in the aggregate, and least sixty percent
(60%) of the Preferred Shares then issued and outstanding.
Section 6.10 SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 6.11 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
Section 6.12 NO WAIVER, CUMULATIVE REMEDIES. No failure or delay on the
part of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
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IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the day and year first above written.
INTERNATIONAL PLASTICS AND EQUIPMENT CORP.
By: _________________________________
President
SHERWOOD LLC
By: ________________________________
Member
PABOS2:WEK:341145_3
4687-28294
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