EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement")
is made and entered into at Gardena, California on March 24, 1998 by and
between Rotonics Manufacturing Inc., a Delaware corporation (the "Buyer" or
the "Surviving Corporation"), GSC Industries, Inc., a Florida corporation
("GSC"), Rotocast International, Inc., a Delaware corporation ("Rotocast"),
Rotocast Plastic Products, Inc., a Florida corporation ("Plastic Products"),
Wonder Products, Inc., a Louisiana corporation ("Wonder"), Nutron Plastics,
Inc., a Florida corporation ("Nutron"), Rotocast Plastic Products Of Texas,
Inc., a Texas corporation ("Rotocast Texas"), Rotocast Plastic Products Of
Nevada, Inc., a Nevada corporation ("Rotocast Nevada"), Rotocast Plastic
Products Of Tennessee, Inc., a Tennessee corporation ("Rotocast Tennessee"),
and Rotocast Management Corporation, a Florida corporation ("Rotocast
Management") (Plastic Products, Wonder, Nutron, Rotocast Texas, Rotocast
Nevada, Rotocast Tennessee and Rotocast Management are hereinafter referred
to as the "Rotocast Subsidiaries"), Xxxxxx X. Xxxxxxxx, individually and as
Trustee U.A.D. May 30, 1997 ("Xxxxxxxx"), Xxxxx X. Xxx Xxxxxxxx, as Trustee
of the Xxxxxx X. Xxxxxxxx Living Trust dated 12-13-94 ("Xxxxx Xxxxxxxx"),
Xxxxxx X. Xxxxxxxx, individually and as Trustee of the Xxxxx X. Xxx Xxxxxxxx
Living Trust dated 12-13-94 ("Cornwall"), Xxxxxx X. Xxxxxxx, individually and
as Trustee of the Xxxxxx X. Xxxxxxx Trust dated 12-6-96 ("Schidel"), Xx.
Xxxxxx Xxxxxx, as Trustee of the Revocable
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Living Trust dated 9-11-78 as amended ("Xxxxxx"), Xxxxxxx X. Xxxxxx and Xxxxx X.
Xxxxxx, JTWROS ("Jaller"), and Xxxxxx X. Xxxxxxx, as Trustee of the Xxxxx
Xxxxxxx Trust dated 0-0-00 ("Xxxxx Xxxxxxx") (Xxxxxxxx, Xxxxx Xxxxxxxx,
Xxxxxxxx, Schidel, Levitt, Jaller and Xxxxx Xxxxxxx are hereinafter referred to
as the "GSC Shareholders"), with reference to and based upon the following
facts:
A. DESCRIPTION OF THE COMPANY, THE SELLERS AND THE COMPANY'S BUSINESS.
As used herein, the terms "Company" and the "Seller Corporations" shall mean
Rotocast and each of the Rotocast Subsidiaries or any of them as the context
requires. As used herein, the term "Sellers" shall mean GSC, the Company,
Xxxxxxxx, Cornwall and Schidel or any of them as the context requires. For
approximately 31 years, the Company has been engaged in the manufacture and sale
of rotationally molded plastic products and injection molded plastic products
and currently leases eight (8) separate manufacturing facilities two of which
are located in Miami, Florida, three of which are located in Brownwood, Texas
and one each of which is located in Las Vegas, Nevada, Knoxville, Tennessee and
Shreveport, Louisiana (the "Plants"). As used herein, the term "Constituent
Corporations" shall mean and include the Buyer, Rotocast and the Rotocast
Subsidiaries.
B. DESCRIPTION OF THE BUYER AND THE BUYER'S BUSINESS. The predecessor to
the Buyer and the Buyer have together been engaged in the manufacture and sale
of rotationally molded plastic products since May 1973. The Buyer's Corporate
Headquarters are in Gardena,
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California. The Buyer leases and owns various plants located in eight (8)
different locations throughout the United States of America.
C. ACQUISITION OF THE COMPANY BY MERGER. The parties have agreed that
the Buyer will acquire all of the assets and properties of the Company and
assume all of the disclosed liabilities and obligations of the Company by
causing the Rotocast Subsidiaries and Rotocast to be merged into the Buyer all
as set forth in more detail below. The parties intend that the Plan Of Merger
set forth herein shall constitute a tax free "reorganization" within the meaning
of Section 368(a)(1)(A) of the Internal Revenue Code of 1986 as amended to date
(the "Code").
D. OTHER RELATED AGREEMENTS. The parties have agreed to execute and
deliver additional agreements and documents described below at the "Closing"
described below.
NOW, THEREFORE, in consideration of, based upon and subject to the above
recitals and the mutual promises, covenants, conditions, representations and
warranties contained herein and the mutual benefits to be derived therefrom, the
parties agree as follows:
ARTICLE I
ADOPTION OF PLAN OF MERGER AND REORGANIZATION
1.1 INTENTION OF PARTIES. The parties hereby adopt the Plan of Merger
hereinafter set forth. As used herein, Rotocast and the Rotocast Subsidiaries
shall also be referred to as the "Disappearing Corporations" and the Buyer shall
also be referred to as the "Surviving Corporation". It is the intention of the
parties
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that the merger of the Disappearing Corporations into the Surviving Corporation
shall constitute a "reorganization" within the meaning of Section 368(a)(1)(A)
of the Code.
1.2 PLAN OF MERGER. On the "Effective Date" as defined in Section 1.6
below, each of the Disappearing Corporations shall be merged into the Buyer as
the Surviving Corporation of such merger.
1.3 CERTIFICATE OF INCORPORATION. The Certificate Of Incorporation of the
Buyer as in effect on the Effective Date shall be the Certificate Of
Incorporation of the Surviving Corporation and until further amended as provided
by law.
1.4 BY-LAWS. The By-laws of the Buyer as in effect on the Effective Date
shall be the By-laws of the Surviving Corporation until the same shall be
thereafter altered, amended or repealed.
1.5 DIRECTORS AND OFFICERS. The directors and officers of the Buyer on
the Effective Date shall be the directors and officers of the Surviving
Corporation until their successors shall have been elected and shall qualify and
as otherwise provided by the By-laws of the Surviving Corporation. GSC's
designated representative shall also be added to the Buyer's Board of Directors
as specified in Section 4.3.2 below.
1.6 EFFECTIVE DATE OF MERGERS. The mergers shall be effective upon the
earlier of March 31, 1998 or upon the filing of the Certificates Of Merger and
Agreements Of Merger in accordance with the requirements of the laws of the
states of Florida, Delaware, Louisiana, Texas, Nevada and Tennessee,
respectively, which the parties plan and intend will occur on or before March
31,
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1998 (the "Effective Date").
1.7 EFFECTS OF MERGERS. Upon the Effective Date, the Surviving
Corporation shall receive and possess all of the rights, privileges, powers and
franchises, both of a public and private nature, and shall be subject to all the
restrictions, disabilities and duties of each of the Disappearing Corporations,
and each of the rights, privileges, powers and franchises, and all and every
other interest of the Disappearing Corporations shall be thereafter as
effectually the property of the Surviving Corporation as they previously were of
the Disappearing Corporations. All property, real, personal, and mixed, and all
debts due to the Disappearing Corporations on any account, as well as for any
stock subscriptions and other choses in action belonging to the Disappearing
Corporations (the "Company Assets") shall vest in the Surviving Corporation as
effectually as they were vested in the Disappearing Corporations immediately
prior to the mergers. The Buyer shall take possession of the Company Assets on
the "Closing Date" specified in Section 5.4 below and be fully responsible for
the operations of the Company from and after the Closing Date.
1.8 DELIVERY OF CAPITAL STOCK OF DISAPPEARING CORPORATIONS. At the
"Closing" on the "Closing Date" more specifically defined in Section 5.4 below,
each holder of an outstanding certificate or certificates representing
outstanding capital stock of each of the Disappearing Corporations shall
surrender the same to the Surviving Corporation, duly endorsed with any required
documentary or transfer tax stamps duly affixed, and GSC shall thereupon receive
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in exchange certificates representing the number of shares of the Buyer's $0.01
par value Common Stock (the "Common Stock") into which the outstanding capital
stock of the Disappearing Corporations represented by the certificate or
certificates so surrendered shall have been converted by the provisions of this
Agreement as specified in Article II below.
1.9 FURTHER DOCUMENTS. If at any time after the Effective Date, the Buyer
shall reasonably desire any further documents, assignments or assurances in
order to vest in the Buyer title to any property or rights of the Disappearing
Corporations acquired or to be acquired by reason of or as a result of the
mergers, the Disappearing Corporations and their proper directors and officers
shall execute, acknowledge, deliver and file all such proper documents, deeds,
assignments and assurances and do all other acts necessary and proper to vest,
perfect or confirm title to such property or rights in the Buyer or otherwise to
carry out the purposes of this Agreement, and the proper directors and officers
of the Buyer are hereby fully authorized in the name of each of the Disappearing
Corporations or otherwise to take any and all such actions. The Buyer shall
furnish the Sellers with complete conformed copies of all documents prepared
pursuant to this Section promptly after their completion and delivery.
1.10 MANNER OF CONVERTING SHARES. The manner of converting the shares of
each of the Constituent Corporations upon the merger shall be as set forth in
Article II hereof.
1.11 TERMINATION. This Agreement and Plan of Merger may be
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terminated and the mergers may be abandoned at any time prior to the Effective
Date of the mergers by the mutual written consent of the Boards of Directors of
the Buyer, GSC and Rotocast and each of the individual Sellers.
ARTICLE II
MANNER OF CONVERTING SHARES OF CAPITAL STOCK,
THE BUYER'S PROMISSORY NOTE AND THE ESCROW PROVISIONS
2.1 CONVERSION OF SHARES. The manner of converting the shares of capital
stock of each of the Constituent Corporations upon the merger shall be as
follows:
2.1.1 VALUATION OF BUYER'S COMMON STOCK. The Buyer's Common Stock is now
and for many years has been regularly quoted and traded on the American Stock
Exchange ("AMEX"). The exact number of shares of the Buyer's Common Stock to be
delivered to GSC pursuant to this Agreement shall be determined by the average
of the closing asked prices for the Buyer's Common Stock for the 360 calendar
days up to and including the day prior to the Closing which the parties
anticipate will occur on March 25, 1998. For purposes of computing the exact
number of shares of the Buyer's Common Stock, and notwithstanding any actual
closing asked or bid prices for the Buyer's Common Stock, the parties agree that
the minimum value of the Buyer's Common Stock shall be $1.25 per share and the
maximum value of the Buyer's Common Stock shall be $1.75 per share.
2.1.2 SHARES OF BUYER'S COMMON STOCK TO BE ISSUED TO GSC. In
consideration for the sale by the Sellers of all of the Company
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Assets and the assumption by the Buyer of the disclosed liabilities of the
Company, pursuant to the Plan of Merger described herein, at the Closing of the
transaction, the Buyer shall issue and deliver to GSC $3,000,000 worth of the
Buyer's Common Stock with the exact number of shares to be determined in
accordance with Subsection 2.1.1 hereof.
2.2 BUYER'S NOTE. As additional consideration for the mergers, the Buyer
shall also deliver the Buyer's interest bearing Secured Promissory Note in the
principal amount of $2,000,000 with all principal and any accrued but unpaid
interest due and payable eighteen (18) months from the date of the Closing, a
copy of which is attached hereto as Exhibit "A" and incorporated herein by this
reference (the "Buyer's Note"). Interest on the Buyer's Note shall be payable
one (1) year from the Closing Date and at maturity. The Buyer shall have the
right to prepay all or any portion of the Buyer's Note without penalty at any
time.
2.3 COLLATERAL FOR BUYER'S NOTE. The Buyer will also deliver to the
Sellers at the Closing a $2,000,000 irrevocable standby letter of credit in
favor of the Sellers issued by Xxxxx Fargo Bank in the form of Exhibit "B" which
is attached hereto and incorporated herein by this reference (the "Letter of
Credit") to secure the Buyer's obligations to pay the Buyer's Note.
2.4 ESCROW FOR BUYER'S NOTE AND LETTER OF CREDIT. At the Closing, the
parties shall immediately deliver to Chicago Title Company, Escrow Department,
000 Xx. Xxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 ("Chicago
Title") the original Buyer's
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Note and the original Letter of Credit to be held by Chicago Title for the
benefit of the parties until the Buyer pays or prepays the Buyer's Note all
pursuant to the Chicago Title Escrow Instructions which are attached hereto as
Exhibit "C" and incorporated herein by this reference (the "Note Escrow
Instructions"). On the maturity date of the Buyer's Note, the Buyer shall be
obligated to pay the Buyer's Note and shall, upon any actual payment of the
Buyer's Note including accrued interest, receive back from Chicago Title the
original Letter of Credit. In the event that the Buyer fails to pay the Buyer's
Note within ten (10) business days after its maturity date, Chicago Title shall
then deliver the Letter of Credit to GSC so that GSC may obtain payment of the
Letter of Credit amount directly from Xxxxx Fargo Bank. Payment of the Letter
of Credit amount shall not release the Buyer from its obligation for any accrued
but unpaid interest owed on the Buyer's Note. The Escrow for the Buyer's Note
and the Letter of Credit will not be subject to offset for any claims of the
Buyer arising from any breaches of representations, warranties or covenants by
the Sellers.
2.5 ESCROW TO COVER CONTINGENCIES. At the Closing, the Sellers will also
deposit five percent (5%) of the shares of Common Stock of the Buyer received
pursuant to this Agreement in a second Escrow Account with Chicago Title. The
second Escrow Account will be known as the "Contingency Escrow". The shares
deposited in the Contingency Escrow shall be held by Chicago Title pursuant to
the Contingency Escrow Instructions which are attached hereto as
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Exhibit "D" and incorporated herein by this reference (the "Contingency Escrow
Instructions") and the Security Agreement which is attached hereto as Exhibit
"E" and incorporated herein by this reference (the "Security Agreement") until
the latter of December 31, 1998 or the resolution of claims asserted by December
31, 1998 to provide recourse to the Buyer in the event of any breaches of
representations, warranties or covenants by the Sellers in this Agreement or any
of the supporting Agreements. In the event that no claims are made by the Buyer
against the Contingency Escrow on or before December 31, 1998, the shares of
Common Stock deposited therein shall be released to GSC on or before January
10, 1999. In the event that claims against the Contingency Escrow are asserted
by the Buyer by written notice to the Sellers and Chicago Title on or before
December 31, 1998, the number of shares of Common Stock deposited in the
Contingency Escrow described in the next sentence shall be held by Chicago Title
until all such claims are resolved. The number of shares of Common Stock to
remain in the Contingency Escrow shall be determined by valuing the Common Stock
at the closing asked price on December 31, 1998, multiplying the amount of all
claims by one and one-quarter (1 1/4) and then dividing the product by the
December 31, 1998 closing asked price of the Buyer's Common Stock.
2.6 REGISTRATION OF SHARES OF BUYER'S COMMON STOCK. The Buyer, at its
expense, will cause the shares of Common Stock of the Buyer that are delivered
to the Sellers at Closing including any shares deposited into the Contingency
Escrow to be registered with
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the Securities and Exchange Commission ("SEC") on the earlier of the filing of
the Buyer's next Proxy Statement or the date that is eighteen (18) months
subsequent to the Closing Date. The requirement to register does not evidence
any intent on the part of the Sellers to sell or dispose of any of the shares of
Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers and each
of them represent and warrant to the Buyer that except as set forth in the
Disclosure Schedule attached hereto as Exhibit "F" and incorporated herein by
this reference that:
3.1.1 TITLE TO THE COMPANY SHARES OF CAPITAL STOCK. GSC owns beneficially
and of record all of the outstanding capital stock of Rotocast. Rotocast owns
beneficially and of record all of the outstanding capital stock of each of the
Rotocast Subsidiaries. The following individual parties own beneficially and of
record all of the outstanding capital stock of GSC:
Name Number of Shares Owned Ownership
---- ---------------------- ---------
Percentage
----------
Xxxxxxxx 540 54%
Xxxxx Xxxxxxxx 70 7%
Cornwall 70 7%
Schidel 100 10%
Xxxxxx 20 2%
Jaller 100 10%
Xxxxx Xxxxxxx 100 10%
As used herein, "Company Capital Stock" means all of the issued and outstanding
capital stock of Rotocast and each of the Rotocast Subsidiaries including
without limitation the Rotocast capital
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stock identified above. The Sellers together own all shares of the Company
Capital Stock free and clear of all Liens, encumbrances and security interests.
3.1.2 AUTHORITY FOR AGREEMENTS. The Sellers and each of them have the
legal capacity and the authority to execute and deliver this Agreement, the
Employment Agreements described below, the Security Agreement, the Covenants Not
To Compete described below, the Note Escrow Instructions, the Contingency Escrow
Instructions, the Disclosure Schedule and all other documents, agreements and
schedules specified herein (collectively the "Transaction Agreements"), to
perform his, her or its obligations under the Transaction Agreements and to
consummate the transactions contemplated by each Transaction Agreement.
3.1.3 BROKERS, FINDERS, ETC. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried on without the
participation of any Person acting on behalf of any of the Sellers in such
manner as to give rise to any valid claim against any of the Sellers or the
Buyer for any brokerage or finder's commission, fee or similar compensation.
3.1.4 FIRPTA STATEMENT. The Company is not a foreign person within the
meaning of Section 1.1445-2(b)(2)(i) of the Treasury Regulations, the Code and
other applicable Treasury Regulations.
3.1.5 COMPANY AUTHORITY FOR AGREEMENTS. The Company has the corporate
power and authority to execute and deliver the Transaction Agreements, to
perform its obligations under the Transaction Agreements and to consummate the
transactions
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contemplated by each such Agreement. The execution and delivery of the
Transaction Agreements and the consummation of the transactions contemplated by
each such Agreement have been duly authorized by the Boards of Directors and all
of the shareholders of each of the corporations comprising the Company. The
Transaction Agreements constitute the valid and legally binding obligations of
the Company, subject to bankruptcy, insolvency, reorganization and similar laws
and applicable principles of equity. Except as specified in Section 3.1.5 of
the Disclosure Schedule, the execution and delivery of the Transaction
Agreements and the consummation of the transactions contemplated by the
Transaction Agreements will not conflict with or result in any violation of or
default under any provision of the Articles of Incorporation or By-Laws of the
Company or any mortgage, indenture, lease, agreement, instrument, permit,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of the Company Assets. Except as
specified in Section 3.1.5 of the Disclosure Schedule, no consent, license,
approval, order or authorization of, or registration, declaration or filing
with, any governmental authority is required on the part of the Company in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby. Except as specified in Section 3.1.5
of the Disclosure Schedule, no consent of any third party is required to be
obtained by the Company in connection with the execution, delivery and
performance of the Transaction Agreements or the consummation of
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the transactions contemplated thereby.
3.1.6 CORPORATE STATUS. Each of the corporations comprising the Company
is a corporation which was incorporated on the date set forth below, is duly
organized, validly existing and in good standing under the laws of the state of
its incorporation which is also set forth below with full corporate power and
authority to carry on its business as now conducted and to own or lease and to
operate its properties as and in the places where such business is now conducted
and such properties are now owned, leased or operated. Each of the Corporations
comprising the Company is duly qualified or licensed to do business and is in
good standing in each of the jurisdictions specified in Section 3.1.6 of the
Disclosure Schedule, which includes each jurisdiction in which the failure to so
qualify or be licensed would have a material or adverse effect on its business.
Each of the Corporations comprising the Company has delivered to the Buyer
complete and correct copies of its Articles of Incorporation, By-Laws and
Minutes and all amendments as in effect on the date hereof. The dates and
states of incorporation for each of the Seller Corporations are as follows:
Corporate Name State of Date
-------------- Incorporation Incorporated
------------- ------------
XXX Xxxxxxx 0-00-00
Xxxxxxxx Xxxxxxxx 3-5-91
Plastic Products Florida 8-16-67
Wonder Louisiana 4-12-88
Nutron Florida 00-00-00
Xxxxxxxx Xxxxx Xxxxx 0-0-00
Xxxxxxxx Xxxxxx Xxxxxx 0-0-00
Xxxxxxxx Xxxxxxxxx Tennessee 10-10-84
Rotocast Management Florida 3-27-91
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3.1.7 INVESTMENTS. The Company has no subsidiaries other than the
Rotocast Subsidiaries and does not own any shares of the capital stock or other
securities of, or any interest in, any corporation, partnership, association or
other entity, other than items properly includable as cash equivalents on the
Company's Balance Sheet dated December 31, 1997 and the securities listed in
Section 3.1.7 of the Disclosure Schedule, if any.
3.1.8 CAPITALIZATION.
(a) The authorized and outstanding capital stock of the Seller
Corporations consists of the following:
Name Authorized Number Number of Shares
----- of Shares Issued and
----------------- Outstanding
----------------
GSC 1,000
Rotocast 10,000 10,000
Plastic Products 2,000,000 1,000
Wonder 1,000 100
Nutron 20,000 20,000
Rotocast Texas 40,000 40,000
Rotocast Nevada 2,500 2,500
Rotocast Tennessee 2,000 50
Rotocast Management 1,000 1,000
All of the foregoing issued and outstanding capital stock of each of the Seller
Corporations has been duly authorized and validly issued and is fully paid and
nonassessable and is owned by the persons and corporations specified in this
Agreement free and clear of all Liens, encumbrances and security interests.
(b) Except as set forth in Section 3.1.8(b) of the Disclosure
Schedule, (i) there are no preemptive or similar rights on the part of any
holders of any class of securities of the Seller Corporations, (ii) no options,
warrants, conversion or other rights, agreements or commitments of any kind
obligating any of the
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Sellers, contingently or otherwise, to issue or sell any shares of their capital
stock of any class or any securities convertible into or exchangeable for any
such shares, are outstanding, and no authorization therefor has been given; and
(iii) there are no outstanding contractual obligations of any of the Sellers to
repurchase, redeem or otherwise acquire any outstanding shares of any of the
Sellers capital stock.
3.1.9 FINANCIAL STATEMENTS. The Sellers have delivered to the Buyer
audited Financial Statements prepared by the Company for the two (2) fiscal
years ended on March 31, 1995 and March 31, 1996 and audited Financial
Statements for the nine (9) month period ended on December 31, 1996 and the
fiscal year ended on December 31, 1997 (collectively the "Financial
Statements"). The Balance Sheet included in the December 31, 1997 Financial
Statements reflects that as of that date the Total Shareholders Equity (Net
Worth) of the Company was $480,980. All of the Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered thereby, except as may be
indicated in the notes thereto, and present fairly in all material respects the
financial position of the Company as at the respective dates thereof, and the
results of operations of the Company for the respective periods indicated. The
Closing Net Worth as of the Effective Date shall be no less than $350,000.
3.1.10 UNDISCLOSED LIABILITIES. Except as disclosed in this Agreement or
in Section 3.1.10 of the Disclosure Schedule and
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except for liabilities which are disclosed or reserved against in the Balance
Sheet dated as of February 28, 1998 (the "Closing Balance Sheet"), or
liabilities incurred in the ordinary course of business of the Company
subsequent to the Effective Date and not prohibited by this Agreement, the
Company has no other liabilities or obligations of any nature, whether absolute,
accrued, contingent or otherwise, of the type required to be reflected or
disclosed in a Balance Sheet prepared in accordance with generally accepted
accounting principles.
3.1.11 ABSENCE OF CHANGES. Since December 31, 1997, except as specified
in Section 3.1.11 of the Disclosure Schedule or permitted pursuant to this
Agreement, the Company has not:
(a) undergone any change in its condition (financial or other),
properties, assets, liabilities, or operations, other than changes in the
ordinary course of business which has individually or in the aggregate had a
material adverse effect on the condition (financial or other), properties,
assets, liabilities, or operations of the Company (defined collectively as the
"Company Business" herein);
(b) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock or otherwise purchased or redeemed,
directly or indirectly, any shares of its capital stock;
(c) issued or sold any shares of its capital stock of any class or
any options, warrants or conversion or other rights to purchase any such shares
or any securities convertible into or
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exchangeable for such shares;
(d) incurred any indebtedness for borrowed money, issued or sold any
debt securities or prepaid any debt outstanding as of December 31, 1997, other
than in the ordinary course of business or pursuant to agreements and
instruments listed on the Disclosure Schedule;
(e) mortgaged, pledged or subjected to any Lien, any of its
properties or assets, tangible or intangible, except for Permitted Encumbrances
as defined in Section 3.1.13(a), other than in the ordinary course of business
or pursuant to agreements and instruments listed on the Disclosure Schedule;
(f) acquired or disposed of any material assets (including surplus or
obsolete inventory) or properties, or entered into any agreement or other
arrangement for such acquisition or disposition, except in the ordinary course
of business;
(g) forgiven or canceled any material debts or claims or waived any
material rights, except in the ordinary course of business;
(h) entered into any material agreement, commitment or other material
transaction other than in the ordinary course of business or entered into any
material agreement which, pursuant to its terms, is not cancellable without
penalty on less than 60 days' notice;
(i) paid any bonus to any officer, director or employee or granted to
any officer, director or employee any other increase in compensation in any
form, other than normally scheduled bonuses,
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payments and increases in the ordinary course of business;
(j) adopted or amended in any material respect, any employment,
collective bargaining, bonus, profit-sharing, compensation, stock option,
pension, retirement, deferred compensation or other plan, agreement, trust, fund
or arrangement for the benefit of employees other than as required by law;
(k) suffered any damage, destruction or loss (whether or not covered
by insurance) which may reasonably be expected to materially and adversely
affect (individually or in the aggregate) the Company Business;
(l) suffered any strike or other employment-related problem which may
reasonably be expected to materially and adversely affect the Company Business;
(m) suffered any loss of employees or customers that may reasonably
be expected to materially and adversely affect the Company Business;
(n) amended its Articles of Incorporation or By-Laws;
(o) changed in any material respect its accounting practices,
policies or principles;
(p) granted any rights or licenses under any of its trademarks, trade
names or patents or entered into any licensing or distributorship agreements,
other than distributor agreements entered into in the ordinary course of
business; or
(q) made any material changes in policies or practices relating to
selling practices, returns, discounts or other terms of sale or accounting
therefor or in policies of employment.
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3.1.12 TAXES. (a) Except as disclosed in Section 3.1.12 of the
Disclosure Schedule, the Company has duly filed all federal, state, local and
foreign Tax Returns which are required to be filed by it prior to the date
hereof and has paid all Taxes which are shown thereon to be due and all other
Taxes imposed by law upon any of its properties, assets, sales, income,
receipts, payrolls, transactions, capital, net worth or franchises which have
become due and payable as shown therein. No tax liens have been filed against
the Company and neither the Internal Revenue Service ("IRS") nor any other
taxing authority is now asserting or, to the knowledge of the Sellers,
threatening to assert against the Company any deficiency or claim for additional
Taxes. Except as provided in Section 3.1.12 of the Disclosure Schedule, no
Return of the Company is to the knowledge of the Sellers currently under audit
by the IRS or by the taxing authorities of any other jurisdiction. The Company
has not granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any federal, state, local or
foreign Tax. For purposes of this Agreement: (i) "Returns" shall include all
reports, declarations, information statements and returns required to be filed
with any taxing authority under all foreign, federal, state or local laws or
regulations, as appropriate, relating to Taxes; and (ii) "Taxes" shall include
all income taxes, franchise taxes, withholding taxes, estimated taxes,
unemployment insurance, social security, sales and use taxes, excise taxes,
occupancy taxes, real and personal property taxes, stamp taxes, transfer
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taxes and workers' compensation and other assessments or governmental charges or
obligations of the same or of a similar nature with respect to periods ending on
or prior to the date hereof and all interest, additions to taxes and penalties
payable by the Company with respect thereto, whether such interest, additions or
penalties arose before or after the Closing Date, but only to the extent they
relate to periods prior to Closing.
(b) No consent or agreement under Section 341(f) of the Code is in
effect with respect to the Company. The international boycott factor (as
defined in Section 999 of the Code) for the Company is zero.
(c) Except as disclosed in Section 3.1.12 of the Disclosure Schedule,
the Company has not (i) agreed to and is not required to make any adjustment
under Section 481(a) of the Code or Revenue Procedure 87-32 (or any successor
thereto), by reason of a change in taxable year, method of accounting or
otherwise; (ii) since formation been included in a combined or consolidated
income tax return; or (iii) since its formation owned stock representing 50% or
more of the voting power or value of another corporation.
(d) The Company's taxable years for federal and state income and
franchise tax purposes ended on March 31 through March 31, 1996 and have been at
all times since then and now are a taxable fiscal year ending on December 31.
3.1.13 PROPERTIES. (a) Section 3.1.13(a) of the Disclosure Schedule
contains a complete and correct list of all real properties and interests
therein owned or leased by the Company
21
(the "Real Property"). Section 3.1.13(a) of the Disclosure Schedule contains a
complete and correct list of all tangible Personal Property having an original
cost to the Company in excess of $10,000 and which is reflected as an asset (net
of depreciation) in the Financial Statements as of December 31, 1997 or acquired
after the date of such Financial Statements (except to the extent disposed of
since such date in the ordinary course of business). The Company has good and
marketable title to all Real Property and Personal Property owned by it and
valid leasehold interests in all Real Property and Personal Property leased by
it, in each case free and clear of all Liens, except (i) as indicated in Section
3.1.13(a) of the Disclosure Schedule, (ii) Liens securing liabilities as
reflected on the Balance Sheet included in the December 31, 1997 Financial
Statements, (iii) Liens for current taxes not due and payable, and (iv)
encumbrances and easements which do not in any material respect detract from the
value or interfere with the use of the Properties affected thereby (the
exceptions described in the foregoing clauses (i), (ii), (iii) and (iv) being
referred to herein as "Permitted Encumbrances").
(b) None of the Real Properties occupied by the Company nor any
current use thereof violates in any material respect any local zoning or similar
land use laws or environmental laws or other governmental laws or regulations.
No current use of any of the Company's Properties or assets is dependent on a
nonconforming use or other permit the absence of which would limit in any
material respect the use of such Properties or assets in the
22
Company Business as now conducted. All structures and all machinery and
equipment of the Company are fully located within the lines of record title.
There do not exist any material unsafe conditions or material defects in or need
for material repairs to or remediation of any portion of any Real Properties.
(c) Section 3.1.13(c) of the Disclosure Schedule contains a list
complete and correct in all material respects of all leases and conditional
sales or other title retention agreements involving annual payments by the
Company in excess of $1,000. The Company has delivered or made available to the
Buyer complete and correct copies of all leases and other agreements with
respect to Real Property and Personal Property; all such leases and other
agreements are valid, subsisting and effective in accordance with their terms;
and there does not exist thereunder any material default or event or condition
which, after notice or lapse of time or both, would constitute a material
default thereunder by the Company or any other party thereto.
(d) Except as specified in Section 3.1.13(d) of the Disclosure
Schedule, (i) all structures and other improvements located on the Real Property
and all tangible Personal Property currently in use by the Company are in
functional operating condition and repair, subject to ordinary wear and tear,
are suitable for the purposes for which they are used and are performing the
functions for which they were intended, (ii) all items of Personal Property have
performed at commercially reasonable standards since the later of 12 months
prior to the date
23
hereof and the time of their acquisition and are being used by the Company as of
the date hereof in connection with the business and operations of the Company,
and (iii) no repairs or other expenditures are presently required to be made on
any structure, improvement, machinery or equipment so as to maintain such asset
in its present condition, which repairs or capital expenditures would in the
aggregate involve the expenditure of more than $1,000.
3.1.14 MATERIAL CONTRACTS. Section 3.1.14 of the Disclosure Schedule
contains a complete and correct list as of the date hereof of all agreements,
contracts and commitments of the following types to which the Company is a party
or by which the Company or any of its Properties are bound as of the date
hereof: (a) mortgages, indentures, security agreements, financing statements
and other agreements, guarantees and instruments relating to the borrowing of
money or extension of credit; (b) employment, consulting, service, payroll,
severance and agency agreements (other than such agreements terminable upon less
than 30 days notice); (c) collective bargaining agreements; (d) bonus, profit
sharing, compensation, stock option, pension, retirement, deferred compensation
or other plans, trusts or funds for the benefit of employees, officers, agents
or directors (whether or not legally binding); (e) sales agency, manufacturer's
representative or distributorship agreements; (f) agreements, orders or
commitments for the purchase by the Company of raw materials, supplies or
finished products exceeding $1,000; (g) agreements, orders or commitments for
the sale by the Company of its products exceeding
24
$5,000 with respect to any one agreement; (h) licenses or assignments of patent,
copyright, trade names, trademark and other intellectual property rights; (i)
agreements or commitments for capital expenditures by the Company in excess of
$5,000 for any single project (it being warranted that all disclosed and
undisclosed agreements or commitments for capital projects do not exceed $30,000
in the aggregate); (j) brokerage or finder's agreements; (k) joint venture and
partnership agreements; and (l) other agreements, contracts and commitments
which in any case involve payments or receipts by the Company of more than
$5,000 with respect to any single transaction. The Company has delivered or
made available to the Buyer complete and correct copies of all such written
agreements, contracts and commitments, together with all amendments thereto, and
accurate descriptions of all such oral agreements are listed in Section 3.1.14
of the Disclosure Schedule. Such agreements, contracts and commitments are in
full force and effect and, except as disclosed in Section 3.1.14 of the
Disclosure Schedule, there does not exist thereunder any default or event or
condition which, after notice or lapse of time or both, would constitute a
default thereunder on the part of the Company or any other party thereto. The
Company does not have any outstanding powers of attorney, except routine powers
of attorney relating to representation before governmental agencies or given in
connection with qualification to conduct business in another jurisdiction.
3.1.15 ACCOUNTS RECEIVABLE; INVENTORIES. The accounts receivable of the
Company reflected on the December 31, 1997
25
Balance Sheet (except those collected since such date) and such additional
accounts as are reflected on the books of the Company as of February 28, 1998
and as shall be reflected on the books of the Company as of the Closing Date are
and shall be good and collectible as of the Closing Date and until fully
collected except to the extent expressly reserved against thereon. All such
accounts receivable have been generated in the ordinary course of business and
reflect a bona fide obligation for the payment of goods or services provided by
the Company. Section 3.1.15(a) of the Disclosure Schedule sets forth all such
accounts receivable of the Company as of February 28, 1998 and the age (to the
nearest month) of such receivables. The inventories reflected on the December
31, 1997 Balance Sheet and those inventories held by the Company on the date
hereof are in the aggregate in good, merchantable and usable condition and have
been reflected on the Balance Sheets at the lower of cost or market, in
accordance with generally accepted accounting principles, and include no
obsolete or discontinued items, except to the extent reserved against on the
December 31, 1997 Balance Sheet or except as disclosed in Section 3.1.15(b) of
the Disclosure Schedule.
3.1.16 INTELLECTUAL PROPERTY AND PROPRIETARY INFORMATION. Section 3.1.16
of the Disclosure Schedule contains a complete and correct list of all patents
and patent applications (including all reissues, divisions, continuations,
continuations-in-part, substitutions or extensions thereof); all registered and
unregistered trademarks, service marks, trade names, brand names,
26
fictitious names, certification marks, slogans, marks, logos and symbols and all
applications for registration or renewal of registration of any of the foregoing
used, owned or claimed by the Company; all copyright registrations and copyright
applications owned by or licensed to the Company; all Environmental Protection
Agency ("EPA") registrations and applications in each case used in or necessary
to the Company Business throughout the world; and all similar intellectual
property rights; in each case which is material to the Company. The Company is
the registered and beneficial owner of all of the property interests described
in the first sentence of this Section 3.1.16 (herein collectively called the
"Intellectual Property") and to the extent any ownership of the Intellectual
Property is registered the Company is also the registered owner thereof, in each
case free and clear of all licenses or Liens, except as specified in Section
3.1.16 of the Disclosure Schedule. Except as disclosed in Section 3.1.16 of the
Disclosure Schedule, the Company owns, or possesses adequate rights to use, all
the Intellectual Property and all inventions, processes, designs, formulae,
trade secrets, know-how, confidential information and other proprietary rights
(collectively, the "Proprietary Information") necessary for the conduct of the
Company Business, with no known conflict with or infringement on the asserted
rights of others. Except as disclosed in Section 3.1.16 of the Disclosure
Schedule, the Company has taken all steps reasonably necessary to preserve the
confidential nature of the Proprietary Information. To the knowledge of the
Sellers no third
27
party is infringing upon any of the Intellectual Property or Proprietary
Information, and to the knowledge of the Sellers no claim exists that any of the
Intellectual Property or Proprietary Information is not valid or enforceable by
the Company. The Company has not waived any of its material rights to any of
the Intellectual Property or Proprietary Information.
3.1.17 INSURANCE. Section 3.1.17 of the Disclosure Schedule contains a
complete and correct list of all insurance policies maintained by the Company.
The Company has delivered or made available to the Buyer complete and correct
copies of all such policies together with all riders and amendments thereto.
Such policies are in full force and effect, and all premiums due thereon have
been paid. The Company has complied with the provisions of such policies in all
material respects.
3.1.18 BANK ACCOUNTS. Section 3.1.18 of the Disclosure Schedule contains
a complete and correct list of each bank in which the Company has an account or
safe deposit box, together with the names of all persons authorized to draw
thereon or have access thereto.
3.1.19 LITIGATION. Except as disclosed in Section 3.1.19 of the
Disclosure Schedule, there is no judicial or administrative action, suit or
proceeding pending or, to the knowledge of the Sellers, threatened which affects
or could reasonably be expected to affect materially the Company Business or
result in any liability on the part of the Company in excess of $1,000, or which
involves or could involve the validity of this Agreement or of any
28
action taken or to be taken in connection herewith, nor has any such action,
suit or proceeding been pending since January 1, 1993 which remains unresolved.
Except as set forth in Section 3.1.19 of the Disclosure Schedule, no citations,
fines or penalties have been asserted in any material amount against the Company
within the last five years under any federal, state or local law relating to air
or water or soil pollution or contamination or other environmental protection
matters, or relating to occupational health or safety. The Company has
delivered or made available to the Buyer copies of all of the Company's files
containing information with respect to (i) customer and user complaints relating
to product performance since January 1, 1993, (ii) recalls of products or
notifications therefor by any governmental agency or voluntarily by the Company
since January 1, 1993, and (iii) claims made or threatened which the Company has
put in the hands of its insurance carriers since January 1 , 1993 relating to
personal or other injuries or other damages resulting from the manufacture, sale
or use of any products manufactured or sold by the Company.
3.1.20 COMPLIANCE; LICENSES AND PERMITS. (a) Except as set forth in
Section 3.1.20 of the Disclosure Schedule, the Company has complied in all
respects with all federal, state, local or foreign laws, ordinances, regulations
or orders applicable to the Company Business. Except as set forth in Section
3.1.20 of the Disclosure Schedule, the Company has all federal, state, local and
foreign governmental licenses and permits which are required for the conduct of
the Company Business as presently conducted by the
29
Company, which licenses and permits are in full force and effect, and no
violations are outstanding or uncured with respect to any such licenses or
permits and no proceeding is pending or, to the best knowledge of the Company
and the Sellers, threatened to revoke or limit any thereof. Section 3.1.20 of
the Disclosure Schedule lists all federal, state, local and foreign governmental
licenses and permits of the Company which are used in or relate to the Company
Business, copies of which have been previously delivered to the Buyer.
(b) The Company is not in violation of, and none of the
Properties, facilities or assets of the Company as currently used violates, any
applicable Environmental Law (as hereinafter defined), and no condition or event
has occurred which, with notice or the passage of time or both, would constitute
a violation of any Environmental Law.
(c) The Company is in possession of all Environmental Permits
(as defined below) required under any applicable Environmental Law for the
conduct or operation of the Company Business (or any part thereof), and is in
compliance with all of the requirements and limitations included in such
Environmental Permits.
(d) To the best of the Sellers' knowledge after reasonable
inquiry, the Company is not responsible, or potentially responsible, for the
remediation or cost of remediation of wastes, substances or materials at, on or
beneath any Properties or facilities or at, on or beneath any land adjacent
thereto or in
30
connection with any Waste or Contamination Site (as defined below).
(e) The Company is not the subject of any federal, state, local
or private litigation or proceedings involving a demand for damages or other
potential liability with respect to violations of Environmental Laws.
(f) Except as set forth in Section 3.1.20 of the Disclosure
Schedule, no notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or, to the best
knowledge of the Company and the Sellers, is threatened by any Governmental
Authority with respect to any alleged failure by the Company to have any permit
required in connection with the conduct of the Company Business or with respect
to any generation, treatment, storage, recycling, transportation, release or
disposal, or any release as defined in 42 U.S.C. Section 9601(22) (a "Release")
of any pollutants, contaminants, chemicals or industrial, hazardous or toxic
substances or wastes of any kind regulated under any Environmental Laws
("Hazardous Materials") generated by the Company.
(g) (i) The Company has not handled any Hazardous Material on
any Property ever owned or leased by the Company, and has not generated any
Hazardous Material which has been recycled, treated, stored, disposed or
Released by the Company in violation of any Environmental Law at any location;
(ii) no PCB is or has been present, in violation of any Environmental Law, at
any
31
Property ever owned or leased by the Company; (iii) no asbestos is or has been
present, in violation of any Environmental Law, at any Property ever owned or
leased by the Company; (iv) there are no underground storage tanks for Hazardous
Materials, active or abandoned, in violation of any Environmental Law, at any
Property ever owned or leased by the Company; (v) no Hazardous Materials have
been Released, in a reportable quantity, in violation of any Environmental law,
where such a quantity has been established by statute, ordinance, rule,
regulation or order, at, on or under any Property ever owned or leased by the
Company; and (vi) no Hazardous Materials have been otherwise Released, in
violation of any Environmental Law, at, on or under any Property ever owned or
leased by the Company.
(h) The Company has not transported or arranged for the
transportation of any Hazardous Material to any location which is listed on the
National Priorities List under the Comprehensive Environmental Response,
Compensation And Liability Act of 1980, as amended ("CERCLA"), listed for
possible inclusion on the National Priorities List under the Comprehensive
Environmental Response Compensation And Liability And Information System
("CERCLIS"), by the EPA or on any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations which may
lead to any claim against the Company for or with respect to clean-up costs,
remedial work, damages to natural resources or personal injury claims,
including, but not limited to, Encumbrances under CERCLA.
32
(i) The Company has complied with the filing and reporting
requirements under all applicable Environmental Laws as they relate to the
Company Business and has maintained all required data, documentation and records
under all applicable Environmental Laws.
(j) As used herein, (i) "Environmental Law" shall mean any law,
statute, regulation, rule, order, decree, judgment, consent decree, settlement
agreement or governmental requirement, which relates to or otherwise imposes
liability or standards of conduct concerning mining or reclamation of mined
land, discharges, emission, releases or threatened releases or noises, odors or
any pollutants, contaminants or hazardous or toxic wastes, substances or
materials, whether as matter or energy, into ambient air, water or land, or
otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants or hazardous or toxic wastes, substances or materials, including
(but not limited to) the Surface Mining Control And Reclamation Act of 1977, as
amended, the Comprehensive Environmental Response, Compensation And Liability
Act of 1980, as amended, the Resource Conservation And Recovery Act of 1976, as
amended, the Toxic Substances Control Act of 1976, as amended, the Clean Water
Act, as amended, the Clean Air Act, as amended, any so-called "Superfund" or
"Superlien" law, and any other similar federal, state or local statutes now in
effect, (ii) "Environmental Permit" shall mean any of the permits required by or
pursuant to any applicable
33
Environmental Law, and (iii) "Waste or Contamination Site" shall mean any site
or location, wherever located (including, but not limited to, any well, tank,
pit, pond, lagoon, tailings pile, spoil pile, impoundment, ditch, trench, drain,
landfill, warehouse or waste storage container), where pollutants, contaminants
or hazardous or toxic wastes, substances or materials shall have been deposited,
stored, treated, reclaimed, disposed of, placed or otherwise come to be located.
3.1.21 AFFILIATE TRANSACTIONS. Section 3.1.21 of the Disclosure Schedule
contains a complete and correct list of all agreements or arrangements (whether
or not written) between the Company, and/or any officer, director, employee or
shareholder (or family member thereof) of the Company currently in effect or to
be performed in the future, other than any such agreements and arrangements
which are terminable by the Company on less than 30 days notice. Other than
such agreements or arrangements, if any, there are no arrangements or agreements
between the Company and/or any officer, director, employee or shareholder (or
family member thereof) of the Company which will continue past the Closing which
may involve payments to, or from, or for the benefit of, any such officer,
director, employee or shareholder (or family member thereof) of more than $1,000
in any one fiscal year other than (a) salary and bonus paid as part of the
employment relationship for services rendered (including directors' fees), (b)
contributions by the Company under its Plans as defined in Section 7.1 hereof,
(c) reimbursement of expenses, and (d) transactions described in
34
Section 3.1.21 of the Disclosure Schedule. Except as set forth in Section
3.1.21 of the Disclosure Schedule, no officer, director, shareholder or, to the
knowledge of the Sellers, employee (or family member thereof) of the Company
owns, directly or indirectly, on an individual or joint basis, greater than a 5%
interest in, or serves as an officer, director, shareholder, partner or employee
of, any customer, competitor or supplier of the Company or any person or entity
which has a contract, agreement or arrangement with the Company.
3.1.22 EMPLOYEES, LABOR MATTERS, ETC. (a) Section 3.1.22(a) of the
Disclosure Schedule contains a complete and correct list of the names of all
directors, officers and employees of the Company. Except as identified in the
Disclosure Schedule, there is no payment that has not been paid for more than 30
days past the date on which such payment would ordinarily be made in the
ordinary course of business that is owed by the Company to any of its directors,
officers, employees, trustees, agents, brokers, representatives or other
personnel, current and former, or any beneficiaries, dependents or survivors of
the foregoing in any material amount (including, without limitation, expense
reimbursement and severance payments), in accordance with the terms of the
Company's respective employment arrangements or under its employment, severance
or agency agreements, if any. All employees and consultants are now and always
have been "at will" employees and consultants of the Company.
(b) Except as set forth in Section 3.1.19 of the
35
Disclosure Schedule, there has not been since January 1, 1993 any (i) unfair
labor practice complaint against the Company before the National Labor Relations
Board ("NLRB"); (ii) labor strike, similar dispute, or work stoppage actually
pending or threatened against or affecting the Company; (iii) representation
petition respecting the employees or staff of the Company filed with the NLRB;
or (iv) arbitration proceeding arising out of or under collective bargaining
agreements pending against the Company.
3.1.23 ERISA. Section 3.1.23 of the Disclosure Schedule contained a
complete and correct list of all pension and profit sharing Plans maintained or
sponsored by the Company.
(a) Each Plan that is intended to qualify under Section 401(a) of the
Code is so qualified. The Company has performed in all material respects all
obligations required to be performed by it by the terms of the Plans and all
applicable laws, rules and regulations including without limitation the
Employees Retirement Income Security Act of 1974 ("ERISA"). The Company has
complied in all material respects with all applicable laws, rules and
regulations relating to each Plan.
(b) The Company has not, and has no knowledge that any other party in
interest (as defined in Section 3(14) of ERISA) to any Plan has, engaged in any
transaction with respect to any Plan in connection with which the Company or any
other party in interest could be subjected to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code.
(c) No Plan which is a "defined benefit plan" (as defined in Section
3(35) of ERISA) or any trust created under any
36
such Plan has been terminated since December 31, 1987. No material liability to
the Pension Benefit Guaranty Corporation (the "PBGC"), other than annual premium
payments, has been or is expected by the Company to be incurred by the Company
with respect to any Plan. Since January 1, 1993 there has been no reportable
event (within the meaning of Section 4043(b) of ERISA), which at the time of
such event required notification to the PBGC. Since January 1, 1993, there has
been no other reportable event with respect to any Plan which could result in a
material liability to the Company Business as a result thereof. Since January
1, 1993, there has been no event or condition which presents a material risk of
termination of any such Plan by the PBGC.
(d) Full payment has been made of all amounts which the Company is
required under the terms of each Plan to have paid as contributions to such Plan
as of the last day of the most recent fiscal year of such Plan ended prior to
the date hereof or, if later, the most recent date as of which such amount is
required to be paid under such Plan (and, with respect to any Plan that is
subject to Section 412(m) of the Code, all payments required to be made have
been paid on or before each required installment due date [as defined in Section
412(m) of the Code] preceding the date hereof), and, with respect to any Plan,
no accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, exists. There has been no
failure to make any payment due prior to the date hereof that is or could become
a liability of the Company under Section 412(c) of the Code.
(e) No Plan is a Multiemployer Plan and the Company has
37
not withdrawn or partially withdrawn from any Multiemployer Plan under
circumstances giving rise to a withdrawal liability under ERISA.
(f) The Company has not engaged in any transaction since January 1,
1993 described in Section 4069(a) of ERISA.
3.1.24 DISCLOSURE. Neither this Agreement nor the Disclosure Schedule,
nor any certificate or other document furnished or to be furnished by the
Sellers to the Buyer or any agent or representative of the Buyer pursuant
hereto, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein and herein not
misleading. There is no fact presently actually known to any of the Sellers or
any of the officers or directors of the Company (other than matters of a general
economic or political nature which do not affect the Company uniquely or general
matters relating to the industry in which the Company is involved) which
materially and adversely affects the Company Business which has not been set
forth herein or in the Disclosure Schedule.
3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Sellers as follows:
3.2.1 CAPACITY TO CONTRACT. The Buyer has the legal capacity and ability
to execute and deliver the Transaction Agreements, to perform its obligations
thereunder and to consummate the transactions contemplated by each of the
Transaction Agreements. The Transaction Agreements constitute the valid and
legally binding obligations of the Buyer subject to bankruptcy, insolvency,
reorganization and similar laws and applicable principles of equity. The
execution and delivery of the Transaction Agreements
38
and the consummation of the transactions contemplated by each such Agreement
will not conflict with or result in any violation of or default under any
mortgage, indenture, lease, agreement or other instrument, permit, concession,
grant, franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Buyer or any of its Properties. Except as
specified in Section 3.2.1 of the Disclosure Schedule, no consent, approval,
order or authorization of, or registration, declaration or filing with any
governmental authority is required on the part of the Buyer in connection with
the execution and delivery of the Transaction Agreements.
3.2.2 BROKERS, FINDERS, ETC. All negotiations relating to this Agreement
and the transactions contemplated hereby have been carried on without the
participation of any Person acting on behalf of the Buyer in such manner as to
give rise to any valid claim against any of the Sellers or the Company for any
brokerage or finder's commission, fee or similar compensation.
3.2.3 BUYER'S AUTHORITY FOR AGREEMENT. The Buyer has the corporate power
and authority to execute and deliver the Transaction Agreements, to perform its
obligations under the Transaction Agreements and to consummate the transactions
contemplated by each such Agreement. The execution and delivery of the
Transaction Agreements and the transactions contemplated by each such Agreement
have been duly authorized by the Board of Directors of the Buyer (the "Buyer's
Board"). Except as specified in Section 3.2.3 of the Disclosure Schedule, no
consent of any third party is required to be obtained by the Buyer in connection
with the execution, delivery and performance of the Transaction
39
Agreements or the consummation of the transactions contemplated thereby.
3.2.4 ABSENCE OF CHANGES. Since December 31, 1997, except as specified in
Section 3.2.4 of the Disclosure Schedule or permitted pursuant to this
Agreement, the Buyer has not:
(a) undergone any change in its condition (financial or other),
properties, assets, liabilities, or operations, other than changes in the
ordinary course of business which has individually or in the aggregate had a
material adverse effect on the condition (financial or other), properties,
assets, liabilities, or operations of the Buyer (defined collectively as the
"Buyer Business" herein);
(b) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock except its normal annual dividend
paid in January 1998 or otherwise purchased or redeemed, directly or indirectly,
any shares of its capital stock;
(c) issued or sold any shares of its capital stock of any class or
any options, warrants or conversion or other rights to purchase any such shares
or any securities convertible into or exchangeable for such shares;
(d) incurred any indebtedness for borrowed money, issued or sold any
debt securities or prepaid any debt outstanding as of December 31, 1997, other
than in the ordinary course of business or pursuant to agreements and
instruments listed on the Disclosure Schedule;
(e) mortgaged, pledged or subjected to any Lien, any of its
properties or assets, tangible or intangible, except for
40
Permitted Encumbrances as defined in Section 3.1.13(a), other than in the
ordinary course of business or pursuant to agreements and instruments listed on
the Disclosure Schedule;
(f) acquired or disposed of any material assets (including surplus or
obsolete inventory) or properties, or entered into any agreement or other
arrangement for such acquisition or disposition, except in the ordinary course
of business;
(g) forgiven or canceled any material debts or claims or waived any
material rights, except in the ordinary course of business;
(h) entered into any material agreement, commitment or other material
transaction other than in the ordinary course of business or entered into any
material agreement which, pursuant to its terms, is not cancellable without
penalty on less than 60 days' notice;
(i) paid any bonus to any officer, director or employee or granted to
any officer, director or employee any other increase in compensation in any
form, other than normally scheduled bonuses, payments and increases in the
ordinary course of business;
(j) adopted or amended in any material respect, any employment,
collective bargaining, bonus, profit-sharing, compensation, stock option,
pension, retirement, deferred compensation or other plan, agreement, trust, fund
or arrangement for the benefit of employees other than as required by law;
(k) suffered any damage, destruction or loss (whether or not covered
by insurance) which may reasonably be expected to materially and adversely
affect (individually or in the aggregate) the Buyer Business;
41
(l) suffered any strike or other employment-related problem which may
reasonably be expected to materially and adversely affect the Buyer's Business;
(m) suffered any loss of employees or customers that may reasonably
be expected to materially and adversely affect the Buyer's Business;
(n) amended its Articles of Incorporation or By-Laws;
(o) changed in any material respect its accounting practices,
policies or principles;
(p) granted any rights or licenses under any of its trademarks, trade
names or patents or entered into any licensing or distributorship agreements,
other than distributor agreements entered into in the ordinary course of
business; or
(q) made any material changes in policies or practices relating to
selling practices, returns, discounts or other terms of sale or accounting
therefor or in policies of employment.
ARTICLE IV
COVENANTS OF THE PARTIES
4.1 COVENANTS OF THE SELLERS.
4.1.1 CONDUCT OF BUSINESS. From the date hereof to the Closing Date,
except as contemplated by this Agreement or otherwise consented to by the Buyer
in writing, which consent shall not unreasonably be withheld, the Company and
the Sellers will cause the Company to:
(a) carry on its business in, and only in, the usual, regular and
ordinary course, in substantially the same manner as heretofore conducted and
use all reasonable efforts to preserve intact its present business organization,
keep available the
42
services of its present officers and significant employees, and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and going business shall be in all material
respects unimpaired following the Closing Date;
(b) use its best efforts to maintain all its material structures,
equipment and other tangible Personal Property currently in use in good
operating condition and repair, except for ordinary wear and tear;
(c) keep in full force and effect insurance comparable in amount and
scope of coverage to insurance now carried by it;
(d) perform in all material respects all of its obligations under
agreements, contracts and instruments relating to or affecting its Properties,
assets and business;
(e) maintain its books of account and records in the usual, regular
and ordinary manner;
(f) comply with all statutes, laws, ordinances, rules, regulations,
judgments, orders, decrees, permits, franchises, licenses and other governmental
authorizations or approvals applicable to it or any of its Properties;
(g) not amend its Articles of Incorporation or By-Laws;
(h) not enter into or assume any agreement, contract or commitment of
the character referred to in Section 3.1.11, except for permitted agreements,
contracts and commitments of the character referred to in the clauses thereof in
the ordinary course of business;
(i) not merge or consolidate with, or agree to merge or consolidate
with, or purchase substantially all of the assets of,
43
or otherwise acquire any business or any corporation, partnership, association
or other business organization or division thereof;
(j) not take any action the taking of which would result in a
violation of any of the representations and warranties of the Sellers set forth
in this Agreement;
(k) promptly advise the Buyer in writing of any changes which,
individually or in the aggregate, have a material adverse affect on the Company
Business or breach this Section 4.1.1;
(l) not dispose of any of the Company Assets other than in the normal
course of business without the prior written permission of the Buyer which will
not be unreasonably withheld; and
(m) not incur any liabilities in excess of $10,000 other than in the
normal course of business without the prior written consent of the Buyer which
will not be unreasonably withheld.
4.1.2 NO SOLICITATION. The Company and the Sellers shall not, and shall
not permit the Company to, (i) solicit or encourage any inquiries or proposals
for, or enter into any discussions with respect to, the acquisition of any
shares of the Company Capital Stock or the Company Business or all, or
substantially all of the assets of the Company or (ii) except as required by law
furnish or cause to be furnished any non-public information concerning the
Company Business to any Person (other than the Buyer and its agents or the
Sellers and their agents). The Company shall not sell, transfer or otherwise
dispose of, grant any option or proxy to any Person with respect to, create any
Lien upon, or transfer any interest in, any of the shares of the Company Capital
Stock.
4.1.3 ACCESS AND INFORMATION. So long as this Agreement
44
remains in effect, the Company and the Sellers will cause the Company to give
the Buyer and its accountants, counsel, employees and other representatives full
access during normal business hours to all of the Company's Properties, books,
contracts, commitments, reports and records and to furnish to the Buyer and its
advisors all such documents, records and information with respect to its
Properties and business and copies of any work papers relating thereto as the
Buyer shall from time to time reasonably request. In addition, the Company and
the Sellers will cause the Company to permit the Buyer, its accountants,
counsel, employees and other representatives reasonable access to such personnel
of the Company during normal business hours as may be necessary or useful to the
Buyer in its review of the Properties and Company Business and the above
mentioned documents and information. All such access shall be coordinated
through Xxxxxxxx as the CEO of the Company or a person designated by the CEO,
provided that Xxxxxxxx shall be reasonably available during the normal business
hours of the Company for such coordination. The Company and the Sellers will
cause the Company to keep the Buyer informed as to the affairs of its business
and shall consult with the Buyer on important matters pertaining to its business
and Properties. The Company and the Sellers will cause the Company to use its
best efforts to cause its independent C.P.A. Xxxxx Xxxxxxxx ("Xxxxxxxx") and the
firm of Xxxxxxx, Xxxxx & Xxxxx (the "Xxxxxxx Firm") to give to the Buyer and its
advisors reasonable access to the books, records and work papers relating to the
Company.
4.1.4 FINANCIALS, ETC. The Sellers and the Company will cause the
Company to provide the Buyer, as soon as the same become
45
available, copies of all Financial Statements of the Company for December 31,
1997 and all periods subsequent to December 31, 1997 which are prepared by or
for the Company.
4.1.5 FURTHER ASSURANCES. Following the Closing Date, the Sellers and the
Company shall, at the Company's sole expense, from time to time, execute and
deliver such additional instruments, documents, conveyances and assurances as
may reasonably have been requested by the Buyer to confirm and assure the rights
and obligations hereinabove set forth.
4.1.6 ACCESS TO TAX INFORMATION. The Sellers and the Company shall
provide the Buyer with complete and correct copies of all federal, state, local
and foreign Tax Returns of the Company filed prior to the Closing Date. After
the Closing, the Sellers shall consult in good faith and cooperate fully with
the Buyer and shall make available to the Buyer, as may be reasonably requested,
and to any taxing authority, as may be reasonably requested by the Buyer, all
information, records or documents relating to tax liabilities or potential tax
liabilities of the Company.
4.1.7 COMPLETION OF TAX RETURNS. As soon as reasonably possible and in
all events on or before March 31, 1998, the Sellers and the Company shall cause
to be prepared and filed all required federal and state Tax Returns for the
Company including those Returns due for the fiscal year ended on December 31,
1997. Copies of all such Returns shall be furnished to the Buyer at least three
business days prior to their filing.
4.2 COVENANTS OF THE BUYER.
4.2.1 CONFIDENTIALITY. Prior to the Closing or, if this Agreement is
terminated or abandoned for any reason, for two (2)
46
years after the date hereof, the Buyer shall, cause its employees and agents not
to, directly or indirectly, use in furtherance of its affairs or disclose to any
person any trade secret or other Proprietary Information relating to the Company
or any of its customers, suppliers, employees or others having business
relationships with them. The Buyer may, however, use such information in
connection with its consideration of the transactions contemplated hereby. The
provisions of this Section shall survive any termination of this Agreement.
4.2.2 TRADEMARK REGISTRATIONS. The Buyer shall, at its expense, protect
the Company's right to the exclusive use of the name "Rotocast International,
Inc." wherever such name is now being used by the Sellers and the Company by
renewing the existing registrations of existing registered names and trademarks
of the Company before they expire.
4.3 COVENANTS OF BOTH PARTIES.
4.3.1 THE LETTER OF INTENT. On March 3, 1998, the parties executed and
delivered the March 3, 1998 Letter of Intent consisting of eleven (11) pages
total (the "Letter of Intent"). The parties agree that until the actual Closing
of this Agreement that the mutual covenants contained in Sections 11, 13, 17,
18, 21 and 22 of the Letter of Intent shall remain in full force and effect as
though they were part of this Agreement. The parties further agree that once
the transactions specified in this Agreement have closed the Letter of Intent
shall be completely superseded by the terms and conditions contained in this
Agreement.
4.3.2 BOARD OF DIRECTORS POSITIONS. At any time that GSC owns in excess
of 1,500,000 shares of the Common Stock of the Buyer
47
or its successors, a representative of GSC shall be a member of the Buyer's
Board. If it is necessary to elect such representative to the Buyer's Board,
Xxxxxxx XxXxxxxxx ("XxXxxxxxx") will agree to vote those shares that he owns
directly, indirectly or as beneficial owner, for the election of such
representative designated by GSC. At such time as XxXxxxxxx is no longer
serving as Chairman of the Buyer's Board, XxXxxxxxx or his heirs will agree to
vote such shares owned directly, indirectly or beneficially for the appointment
of the GSC representative as a member of the Buyer's Board. By signing on the
signature page as an individual with respect to this Section 4.3.2 only,
XxXxxxxxx agrees to be bound by the terms and conditions of this Section 4.3.2
only. As long as XxXxxxxxx is on the Buyer's Board or is a candidate for the
Buyer's Board, GSC, its successors and the GSC Shareholders agree to vote all of
their shares of the Buyer's Common Stock for the election of XxXxxxxxx as a
director of the Buyer or its successors.
4.3.3 BOSSIER, LOUISIANA FACILITY. Since September 15, 1996, Wonder and
Rotocast have been the "Lessee" of GSC of a Plant located in Bossier, Louisiana
consisting of approximately 260,850 square feet (the "Bossier Facility"). Since
approximately March 5, 1997, a portion of the Bossier Facility (the "Xxxxxx
Portion") has been leased to Xxxxxx Bonded Warehouse, Inc. ("Xxxxxx") by GSC.
In May 1997, a fire caused major damage to the Xxxxxx Portion and to paper and
other personal property owned by International Paper Company ("International").
Since the fire, GSC, Rotocast and Wonder have been attempting to get the
Insurance Carrier to pay for the damage to the Bossier Facility without success
to date. On the Closing Date, an Amendment To Standard Industrial Lease - Net
48
between GSC, Wonder, Rotocast and the Buyer in a form acceptable to all parties
shall be executed and delivered by all parties. In addition, the Sellers shall
indemnify and hold harmless the Buyer from all claims by Xxxxxx and
International. In return, the Buyer shall promptly remit to GSC any insurance
proceeds received by the Buyer or Rotocast as compensation or otherwise with
respect to the damage of the roof of the Bossier Facility. Any such insurance
proceeds received by the Buyer or Rotocast shall be remitted to GSC in their
entirety with no offset for any items of any nature whatsoever other than legal
and other professional fees and costs directly related to and incurred in
connection with the collection of the insurance proceeds relating to the fire
damage to the Bossier Facility.
ARTICLE V
CONDITIONS PRECEDENT AND CLOSING
5.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The obligations of the
Sellers and the Buyer to consummate the transactions contemplated hereby shall
be subject to the fulfillment on or prior to the Closing Date of the following
conditions:
5.1.1 NO INJUNCTION, ETC. No action or proceeding shall be pending or
threatened by any public authority or private Person on the Closing Date before
any court or administrative body to restrain, enjoin or otherwise prevent the
consummation of the transactions contemplated hereby or to recover any damages
or obtain other relief as a result of such transactions.
5.1.2 TRANSACTION AGREEMENTS. Sellers and the Buyer shall
49
each have executed and delivered each of the Transaction Agreements specified in
Section 3.1.2 above.
5.2 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer
to consummate the transactions contemplated hereby shall be subject to the
fulfillment to the satisfaction of the Buyer (or waiver by the Buyer) on or
prior to the Closing Date of the following additional conditions, which the
Sellers and the Company agree to use their best efforts to cause to be
fulfilled:
5.2.1 REPRESENTATIONS, PERFORMANCE. The representations and warranties of
the Sellers and the Company contained in Section 3.1 shall be true and correct
at and as of the date hereof and shall be repeated and shall be true and correct
in all material respects on and as of the Closing Date with the same effect as
though made on and as of the Closing Date, except as affected by the
transactions contemplated hereby. The Sellers and the Company shall have duly
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by them
prior to and on the Closing Date. The Sellers and the Company shall have signed
and delivered to the Buyer certificates dated the Closing Date and signed by
each of the Sellers and the Company to the effect set forth above in this
Section 5.2.1.
5.2.2 NET WORTH. The Buyer shall have received a letter dated the Closing
Date signed by Xxxxxxxx on behalf of the Company in form satisfactory to the
Buyer reporting that the Total Shareholders Equity of the Company on the Closing
Date is no less
50
than $350,000.
5.2.3 CONSENTS. Any consent to the transactions contemplated by this
Agreement required by any governmental authority or under any agreement or
contract to which any of the Sellers or the Company is a party or by which they
or any of them are bound, the withholding of which would have a material adverse
effect on the Company Business, shall have been obtained.
5.2.4 OPINION OF COUNSEL. The Buyer shall have received an opinion,
addressed to it and dated the Closing Date, from Xxxxxx Xxxx & Associates, P.A.
(the "Xxxxxx Xxxx Firm"), as counsel for the Company, substantially in the form
of Exhibit "G" which is attached hereto and incorporated herein by this
reference.
5.2.5 PROCEEDINGS. All corporate and other proceedings of the Sellers and
the Company in connection with the transactions contemplated by this Agreement,
and all documents and instruments incident to such proceedings, shall be
reasonably satisfactory in substance and form to the Buyer and its counsel, and
the Buyer and its counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as may be reasonably
requested.
5.2.6 EMPLOYMENT AGREEMENTS. Xxxxxxxx, Xxxxxxx and Cornwall shall have
executed and delivered to the Buyer the three (3) separate Employment Agreements
which are attached hereto as Exhibit "H" and incorporated herein by this
reference (the "Employment Agreements").
5.2.7 COVENANTS NOT TO COMPETE. Xxxxxxxx, Schidel and
51
Cornwall shall have executed and delivered to the Buyer the three (3) separate
Covenants Not To Compete which are attached hereto as Exhibit "I" and
incorporated herein by this reference.
5.2.8 LEASE AMENDMENTS. The existing Leases for the Company's Plants,
other than the Shreveport, Louisiana Plant, shall be amended to (a) extend their
present terms to a fifteen (15) year period beginning on the Closing Date, (b)
and confirm that the Landlords are fully responsible for any Hazardous Waste and
contamination, if any, which presently exist at any of the Plants. The Buyer's
responsibility for the Lease on the Shreveport, Louisiana Plant shall end when
all of the Company's Assets have been removed therefrom.
5.3 CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to consummate the transactions contemplated hereby shall be subject to
the fulfillment (or waiver by the Sellers), on or prior to the Closing Date, of
the following additional conditions, which the Buyer agrees to use its best
efforts to cause to be fulfilled:
5.3.1 REPRESENTATIONS, PERFORMANCE, ETC. The representations and
warranties of the Buyer contained in Section 3.2 hereof shall be true and
correct at and as of the date hereof and shall be repeated and shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though made at and as of such time. The Buyer shall have duly
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date. The Buyer shall have delivered to the Sellers
a certificate dated the Closing Date and
52
signed by it to the effect set forth above in this Section 5.3.1.
5.3.2 OPINION OF COUNSEL. The Sellers shall have received an opinion,
addressed to them and dated the Closing Date, from E. Xxxx Xxxxxxxxx -
Professional Corporation (the "Xxxxxxxxx Corporation"), counsel for the Buyer,
substantially in the form of Exhibit "J" which is attached hereto and
incorporated herein by this reference.
5.4 THE CLOSING AND THE CLOSING DATE. The Closing of the Transaction
Agreements (the "Closing") shall take place at the offices of the Xxxxxxxxx
Corporation, 0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxx, Xxxxxxxxxx 00000 on
Wednesday, March 25, 1998 at 9:00 o'clock a.m. or such other time and date as
the parties may agree to in writing (the "Closing Date"). At the Closing:
(a) The Sellers shall deliver to the Buyer the original certificates
representing all of the outstanding Company Capital Stock duly endorsed as
required by this Agreement;
(b) The Sellers and the Company shall deliver to the Buyer executed
copies of all of the Transaction Agreements other than this Agreement duly
executed by all parties thereto plus all Minute Books and Stock Certificate
Books for each of the Seller Corporations;
(c) The Buyer shall deliver to GSC the Letter Of Credit, the number
of shares of the Buyer's Common Stock and the Buyer's Note required by Article I
of this Agreement; and
(d) The Buyer shall deliver to the Sellers executed copies of all of
the Transaction Agreements other than this Agreement duly executed by all
parties thereto.
53
ARTICLE VI
TERMINATION
6.1 AUTOMATIC TERMINATION. This Agreement shall automatically terminate
without any further action on the part of any party hereto at 6:00 p.m.
California time on March 31, 1998 if the transactions contemplated hereby shall
not have been consummated pursuant hereto, unless such date is extended by the
mutual written consent of the Sellers and the Buyer.
6.2 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual written consent of the Sellers and the Buyer;
(b) by the Buyer by written notice to the Sellers (i) if any of the
conditions set forth in Section 5.1 or 5.2 shall not, or if it becomes apparent
that any of such conditions will not, have been fulfilled by 6:00 p.m.
California time on March 31, 1998 or (ii) if any material default under or
material breach of this Agreement, or any material misrepresentation or material
breach of any representation or warranty contained herein, on the part of the
Sellers shall have occurred and shall not have been cured; or
(c) by the Sellers by written notice to the Buyer (i) if any of the
conditions set forth in Section 5.1 or 5.3 shall not, or if it becomes apparent
that any of such conditions will not, have been fulfilled by 6:00 p.m.
California time on March 31, 1998 or (ii) if any material default under or
material breach of this Agreement, or any material misrepresentation or material
breach of
54
any representation or warranty contained herein, on the part of the Buyer shall
have occurred and shall not have been cured.
6.3 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to the provisions of Sections 6.1 or 6.2, this Agreement
shall become void and have no effect, without any liability on the part of any
party hereto or its directors, officers or stockholders in respect of this
Agreement, except as specified in Section 21 of the Letter Of Intent.
ARTICLE VII
DEFINITIONS, INDEMNIFICATION AND MISCELLANEOUS PROVISIONS
7.1 DEFINITIONS OF CERTAIN TERMS. The following terms shall have the
following meanings:
XXXXXX XXXX FIRM. Xxxxxx Xxxx & Associates, P.A., counsel for the
Sellers.
AMEX. The American Stock Exchange.
BOSSIER FACILITY. See Section 4.3.3.
BUYER. Rotonics Manufacturing Inc.
BUYER'S BOARD. The Board of Directors of the Buyer.
BUYER'S NOTE. See Section 2.2
CERCLA. The Comprehensive Environmental Response, Compensation And
Liability Act of 1980, as amended. See Section 3.20(h).
CERCLIS. The Comprehensive Environmental Response, Compensation And
Liability And Information System. See Section 3.20(h).
CHICAGO TITLE. Chicago Title Company Escrow Department.
55
See Sections 2.4 and 2.5.
CLOSING. See Section 5.4
CLOSING BALANCE SHEET. The February 28, 1998 Balance Sheet for the
Company. See Section 3.1.10.
CLOSING DATE. See Section 5.4
CLOSING NET WORTH. The sum of the capital stock, retained earnings
and year to date profit or loss accounts of the Company appearing on the Closing
Balance Sheet of the Company prepared as of February 28, 1998 in accordance with
generally accepted accounting principles applied on a basis consistent with
prior years.
CODE. Internal Revenue Code of 1986 as amended to date.
COMMON STOCK. Buyer's $0.01 par value Common Stock.
COMPANY. Rotocast International, Inc. and each of the Rotocast
Subsidiaries identified below.
COMPANY ASSETS. See Section 1.7
COMPANY BUSINESS. See Section 3.1.11(a)
COMPANY CAPITAL STOCK. See Section 3.1.1
CONSTITUENT CORPORATIONS. The Buyer, Rotocast and the Rotocast
Subsidiaries.
CONTINGENCY ESCROW. See Section 2.5
CONTINGENCY ESCROW INSTRUCTIONS. See Section 2.5
XXXXX XXXXXXXX. Xxxxx X. Xxx Xxxxxxxx, as Trustee of the Xxxxxx X.
Xxxxxxxx Living Trust dated 12-13-94.
CORNWALL. Xxxxxx X. Xxxxxxxx, individually and as Trustee of the
Xxxxx X. Xxx Xxxxxxxx Living Trust dated 12-13-94.
56
DISAPPEARING CORPORATIONS. Rotocast and the Rotocast Subsidiaries.
See Section 1.1.
DISCLOSURE SCHEDULE. The Disclosure Schedule dated the date hereof,
which has been delivered to the Buyer by the Sellers and initialled by the
Sellers for identification and which is attached as Exhibit "E" hereto
EFFECTIVE DATE. On or before March 31, 1998.
EMPLOYMENT AGREEMENTS. See Section 5.2.6 and Exhibit "H" hereto.
EPA. The Federal Environmental Protection Agency.
ERISA. The Employee Retirement Income Security Act of 1974, as
amended. See Section 3.1.23.
ENVIRONMENTAL LAW. See Section 3.1.20(j).
ENVIRONMENTAL PERMIT. See Section 3.1.20(j).
FINANCIAL STATEMENTS. The Financial Statements of the Company as at
and for the fiscal years ended on March 31, 1995, March 31, 1996, December 31,
1996, December 31, 1997 and for the two months ended February 28, 1998 and any
additional interim unaudited Financial Statements delivered pursuant to this
Agreement including in each case a Summary Income Statement, a Balance Sheet, a
Retained Earnings Statement and an Income Statement.
XXXXXXXX. Xxxxxx X. Xxxxxxxx, individually and as Trustee U.A.D. May
30, 1997.
HAZARDOUS MATERIALS. See Section 3.1.20(f).
GSC SHAREHOLDERS. Xxxxxxxx, Xxxxx Cornwall, Cornwall, Schidel,
Levitt, Jaller and Xxxxx Xxxxxxx.
57
JALLER. Xxxxxxx X. Xxxxxx and Xxxxx X. Xxxxxx, JRWROS.
XXXXX XXXXXXX. Xxxxxx X. Xxxxxxx as Trustee of the Xxxxx Xxxxxxx
Trust dated 4-4-94.
INTELLECTUAL PROPERTY. See Section 3.1.16.
XXXXXXXX. Xxxxx X. Xxxxxxxx, C.P.A.
LETTER OF CREDIT. See Section 2.3 and Exhibit "B" hereto.
LETTER OF INTENT. See Section 4.3.1.
LIEN. Any mortgage, pledge, adverse claim, security interest,
encumbrance, title defect, title retention agreement, voting trust agreement,
interest, equity, option, lien or charge of any kind.
XXXXXX. Xx. Xxxxxx Xxxxxx, as Trustee of the Revocable Living Trust
dated 9-11-78 as amended.
XXXXXXXXX. Xxxxxxx XxXxxxxxx. See Section 4.3.2
MULTIEMPLOYER PLAN. A "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
XXXXXX. See Section 4.3.3.
NLRB. National Labor Relations Board. See Section 3.1.22(b).
NOTE ESCROW INSTRUCTIONS. See Section 2.4
PERMITTED ENCUMBRANCES. See Section 3.1.13(a).
PERSON. Any natural person, firm, partnership, association,
corporation, trust, public body or authority or government.
PERSONAL PROPERTY. See Section 3.1.13.
58
PLAN. Any pension, retirement, profit sharing, stock bonus or other
plan of deferred compensation, any medical, dental or other health benefit plan,
any life insurance, disability insurance or accident insurance plan, any
severance plan, policy or arrangement, or any other employee benefit plan within
the meaning of Section 3(3) of ERISA and any bonus, incentive, stock option,
restricted stock or other equity based compensation program to which the Company
is a party, to which the Company contributes, or under which employees of the
Company participate or have a right to receive benefits.
PLANTS. See recital A.
PROPERTIES. Real Property and Personal Property as defined herein.
PROPRIETARY INFORMATION. See Section 3.1.16.
XXXXXXX FIRM. Xxxxxxx, Xxxxx & Xxxxx. See Sections 4.1.3 and 7.4.
REAL PROPERTY. See Section 3.1.13.
RELEASE. See Section 3.1.20(f).
RETURNS OR TAX RETURNS. See Section 3.1.12.
SCHIDEL. Xxxxxx X. Xxxxxxx, individually and as Trustee of the Xxxxxx
X. Xxxxxxx Trust dated 12-6-96.
SEC. The Securities and Exchange Commission.
SECURITY AGREEMENT. See Section 2.5 and Exhibit "E: hereto.
SELLER CORPORATIONS. Rotocast and each of the Rotocast Subsidiaries.
59
SUPERFUND. See Section 3.1.20(j).
SUPERLIEN. See Section 3.1.20(j).
SURVIVING CORPORATION. Rotonics Manufacturing Inc.
TAXES. See Section 2.1.12.
XXXXXXXXX CORPORATION. E. Xxxx Xxxxxxxxx - Professional Corporation,
counsel for the Buyer.
TRANSACTION AGREEMENTS. See Section 3.1.2.
7.2 INDEMNIFICATION. (a) Subject to the restrictions and
limitations contained herein, the Sellers and each of them covenant and agree to
defend, indemnify and hold harmless the Buyer and its employees and agents from
and against any and all actual liability, obligation, loss, cost, deficiency or
damage (whether absolute, accrued, contingent, conditional or otherwise),
resulting from or arising out of (i) the breach in any material respect of any
representation or warranty made by the Sellers or the Company herein or in
connection herewith, (ii) the failure of the Sellers or the Company (up to the
Closing Date) to perform in any material respect any covenant or fulfill any
other obligation contained herein, (iii) the failure of any of the Sellers to
disclose any liabilities or obligations that the Sellers knew or should
reasonably have known, or (iv) actual fraud by any of the Sellers in connection
with the Transaction Agreements. The Sellers shall not be required to indemnify
the Buyer with respect to any claim for indemnification pursuant to this
Agreement unless and until (and only to the extent that) the aggregate amount of
all such claims against the Sellers exceeds $10,000.
60
(b) The Buyer covenants and agrees to defend, indemnify and hold
harmless the Sellers and each of them from and against any and all liability,
obligation, damage, loss, cost, deficiency or damage (whether absolute, accrued,
contingent, conditional or otherwise) resulting from or arising out of (i) the
breach in any material respect of any representation or warranty made by the
Buyer herein or in connection herewith, (ii) the failure of the Buyer to perform
in any material respect any covenant or fulfill any other obligation contained
herein, or (iii) the operation of the Company Business from and after the
Closing Date.
(c) In the case of any claim asserted by a third party against a
party entitled to indemnification under this Agreement (the "Indemnified
Party"), notice shall be given by the Indemnified Party to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought and the Indemnified Party shall permit the Indemnifying Party (at the
expense of such Indemnifying Party) to assume the defense of any claim or any
litigation resulting therefrom, PROVIDED that (i) counsel for the Indemnifying
Party who shall conduct the defense of such claim or litigation shall be
reasonably satisfactory to the Indemnified Party and the Indemnified Party may
participate in such defense but only at such Indemnified Party's expense, and
(ii) the omission by any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its indemnficiation obligation under
this Agreement except to the extent that such
61
omission results in a failure of actual notice to the Indemnifying Party and
such Indemnifying Party is actually damaged as a result of such failure to give
notice. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of the Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as a term thereof
the giving by the claimant or plaintiff to such Indemnified Party of a complete
release from all liability with respect to such claim or litigation. In the
event that the Indemnified Party shall reasonably and in good faith determine
that the conduct of the defense of any claim to indemnification hereunder or any
proposed settlement of any such claim by the Indemnifying Party might be
expected to affect adversely and materially the Indemnified Party's ability to
conduct future business, the Indemnified Party shall have the right at all times
to take over and assume control over the defense, settlement, negotiations or
lawsuit relating to any such claim at the sole cost of the Indemnified Party,
PROVIDED that if the Indemnified Party does so take over and assume control, the
amount of the indemnity required to be paid by the Indemnifying Party shall be
limited to the amount which the Indemnifying Party is able to demonstrate that
it could have settled the matter for immediately prior to the time of such
assumption. In the event that the Indemnifying Party does not accept the
defense of any matter as above provided, the Indemnified Party shall have the
full right to defend against any such claim or demand, and shall be entitled to
settle or agree to pay in full such claim or demand, in
62
its sole discretion without impacting on the Indemnified Party's rights to full
indemnification. In any event, the Sellers and the Buyer shall cooperate in the
defense of any action or claim subject to this Section 7.2 and the records of
each shall be available to the other with respect to such defense.
(d) If the Buyer, on the one hand, or the Sellers or any of them, on
the other hand, become aware of any breach of any representation or warranty or
any breach or non-fulfillment of any covenant or obligation of another party
hereunder the party becoming so aware shall promptly notify the other party or
parties of such breach or non-fulfillment and afford such other party or parties
a reasonable opportunity to cure such breach or non-fulfillment.
(e) Each Indemnified Party shall use reasonable efforts to mitigate
damages with respect to claims hereunder. The Indemnifying Party shall, upon
payment to the Indemnified Party of damages with respect to any claim, be
subrogated to the rights of the Indemnified Party against third parties with
respect to the matters forming the basis for such claim to the extent of such
damages paid.
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS, ETC. The
representations, warranties and covenants contained in this Agreement shall
survive the execution and delivery of this Agreement, any examination by or on
behalf of the parties hereto and the completion of the transactions contemplated
herein, but only to the extent specified below:
63
(a) Except as set forth in Section (b) below, the representations and
warranties contained in Sections 3.1 and 3.2 shall survive for a period of
approximately nine and one-half (9 1/2) months until the close of business on
December 31, 1998 and no claim for any breach thereof may be brought unless
notice thereof, specifying in reasonable detail the basis therefor, is delivered
to the other party or parties and Chicago Title by the close of business on
December 31, 1998; and
(b) The representations and warranties contained in Sections 3.1.1,
3.1.2, 3.1.3, 3.1.4, 3.1.5, 3.1.6, 3.1.7, 3.1.8, 3.1.10, 3.1.12, 3.1.19, 3.1.20,
3.1.21 and 3.1.24 and the covenants contained in this Agreement shall survive
without limitation and notwithstanding the complete closure of the Chicago Title
Note Escrow and/or the Chicago Title Contingency Escrow.
7.4 EXPENSES. Except as set forth below, GSC and the GSC
Shareholders, on the one hand, and the Buyer, on the other hand, shall bear and
pay their respective expenses, costs and fees (including attorneys' and
auditors' fees) in connection with the transactions contemplated hereby,
including the preparation and execution of this Agreement and compliance
herewith, whether or not the transactions contemplated hereby shall be
consummated, PROVIDED that GSC and the GSC Shareholders, on the one hand, and
the Buyer, on the other hand, shall pay to the other all such expenses, costs or
fees incurred by the other if such party shall materially breach its obligations
hereunder. If the transactions contemplated hereby are consummated, a maximum
of $10,000 for legal fees, accounting
64
fees and expenses may be charged to the Company but no other expenses, costs or
fees shall be paid by or charged to the Company in excess of the reserve
therefor, if any, accrued on the Closing Balance Sheet of the Company dated as
of February 28, 1998.
Except to the extent expressly shown as accounts payable on the Closing
Balance Sheet of the Company and except for the $10,000 allowance set forth
above, neither the Buyer nor the Company shall have any liability or obligation
to pay the Sellers attorneys including the Xxxxxx Xxxx Firm or the Sellers
accountants including the Xxxxxxx Firm and Xxxxxxxx, or any other third party
professional any amounts for professional fees, costs or other obligations
whatsoever incurred on behalf of the Company in connection with the transactions
contemplated hereby. The Sellers shall obtain and deliver at the Closing
letters signed by the Xxxxxx Xxxx Firm, the Xxxxxxx Firm and Xxxxxxxx and such
third party professionals in which they each acknowledge that their only
recourse shall be against GSC and the GSC Shareholders and that they shall have
no recourse against the Buyer or the Company with respect to such unauthorized
or unrecorded liabilities and obligations.
7.5 SEVERABILITY. If any provision of this Agreement is determined
to be inoperative or unenforceable for any reason, such circumstances shall not
have the effect of rendering the provision in question inoperative or
unenforceable in any other case or circumstance, or of rendering any other
provisions herein contained invalid, inoperative, or unenforceable to any
extent whatsoever. The invalidity of any one or more phrases, sentences,
clauses, Sections or subsections of this Agreement shall not affect the
65
remaining portions of this Agreement.
7.6 NOTICES. All notices, requests, demands and other communications
required or permitted by this Agreement (collectively "Writings" herein) shall
be in writing, shall be addressed to the party to be charged and shall be either
personally delivered or sent by registered or certified mail, return receipt
requested, postage prepaid, or transmitted by hand delivery, facsimile,
telecopy, telegram or telex, addressed as follows:
(i) IF TO THE BUYER:
Xxxxxxx XxXxxxxxx, President
Rotonics Manufacturing Inc.
00000 Xx. Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
FAX (000) 000-0000
WITH A COPY TO:
E. Xxxx Xxxxxxxxx -
Professional Corporation
0000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxx, XX 00000
FAX NO. (000) 000-0000
(ii) IF TO ANY OF THE SELLERS:
Xxxxxx X. Xxxxxxxx, CEO
Rotocast International, Inc.
0000 X.X. 00xx Xx.
Xxxxx, XX 00000
FAX (000) 000-0000
WITH A COPY TO:
Xxxxx X. Xxxxxxxx, C.P.A.
0000 Xxxxxxxx Xxxxxx, Xxxxxxxxx
Xxxxx, XX 00000
FAX (000) 000-0000
Any party or counsel shall have the right to change their address for notice
purposes by complying with this Section 7.6. Any Writings personally delivered
to any adult at any of the foregoing addresses shall be deemed received by the
party to this Agreement as of the actual date and time of such personal
delivery.
7.7 MISCELLANEOUS.
7.7.1 HEADINGS. The headings contained in this
66
Agreement are for convenience purposes only and shall not affect the meaning or
interpretation of this Agreement.
7.7.2 ENTIRE AGREEMENT. This Agreement, together with the Exhibits
and Schedules hereto, constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
7.7.3 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
7.7.4 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors and
permitted assigns.
7.7.5 ASSIGNMENT. This Agreement shall not be assignable by any
party hereto without the prior written consent of the other parties hereto.
7.7.6 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall
confer any rights upon any person or entity other than the parties hereto and
their respective heirs, successors and permitted assigns.
7.7.7 AMENDMENT. No amendment, modification or discharge of this
Agreement, and no waiver hereunder, shall be valid or binding unless set forth
in writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought.
7.7.8 WAIVERS. Neither the waiver by any of the parties hereto of a
breach of or a default under any of the provisions of this Agreement, nor the
failure by any of the parties, on one or
67
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder, shall be construed as a waiver of
any other breach or default of a similar nature, or as a waiver of any such
provisions, rights or privileges hereunder.
7.7.9 RETENTION OF RECORDS. For a period of five years following the date
hereof, the Company and the Buyer shall retain the various books and records of
the Company with respect to the period prior to the Closing Date and shall, upon
reasonable prior notice, give the Sellers and their authorized representatives
access thereto during normal business hours.
7.7.10 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement or any of the other Transaction Agreements shall be subject,
at the request of the Sellers or the Buyer, to binding arbitration in accordance
with the rules of the American Arbitration Association and, judgment upon any
award rendered by such arbitrators may be entered in any court of competent
jurisdiction. The venue for any arbitration arising out of or relating to this
Agreement shall be Los Angeles County, California.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
ROTONICS MANUFACTURING INC.,
/s/ Xxxxxxx XxXxxxxxx a Delaware Corporation
-------------------------------
Xxxxxxx XxXxxxxxx, individually
as to Section 4.3.2 only
By /s/ Xxxxxxx XxXxxxxxx
-----------------------
Xxxxxxx XxXxxxxxx, President
GSC INDUSTRIES, INC., ROTOCAST INTERNATIONAL. INC.,
a Florida corporation a Delaware corporation
By /s/ Xxxxxx X. Xxxxxxxx By /s/ Xxxxxx X. Xxxxxxxx
------------------------- -------------------------
ROTOCAST PLASTIC PRODUCTS, INC., WONDER PRODUCTS, INC.,
68
a Florida corporation a Louisiana corporation
By /s/ Xxxxxx X. Xxxxxxxx By /s/ Xxxxxx X. Xxxxxxxx
------------------------- -------------------------
NUTRON PLASTICS, INC., ROTOCAST PLASTIC PRODUCTS
a Florida corporation OF TEXAS, INC.,
a Texas corporation
By /s/ Xxxxxx X. Xxxxxxxx By /s/ Xxxxxx X. Xxxxxxxx
------------------------ ------------------------
ROTOCAST PLASTIC PRODUCTS ROTOCAST PLASTIC PRODUCTS
OF NEVADA, INC., OF TENNESSEE, INC.,
a Nevada corporation a Tennessee corporation
By /s/ Xxxxxx X. Xxxxxxxx By /s/ Xxxxxx X. Xxxxxxxx
------------------------- -------------------------
ROTOCAST METAL PRODUCTS ROTOCAST MANAGEMENT CORPORATION,
COATING CORP., a Florida corporation
a Louisiana corporation
By /s/ Xxxxxx X. Xxxxxxxx By /s/ Xxxxxx X. Xxxxxxxx
------------------------- -----------------------
/s/ Xxxxxx X. Xxxxxxxx /s/ Xxxxx X. Xxx Xxxxxxxx
---------------------------- -----------------------------
Xxxxxx X. Xxxxxxxx, individually Xxxxx X. Xxx Xxxxxxxx, as
and as Trustee U.A.D. May 30, Trustee of the Xxxxxx X.
0000 Xxxxxxxx Living Trust dated
12-13-94
/s/ Xxxxxx X. Xxxxxxxx /s/ Xxxxxx X. Xxxxxxx
--------------------------- -----------------------------
Xxxxxx X. Xxxxxxxx, individually Xxxxxx X. Xxxxxxx, individually
and as Trustee of the Xxxxx X. and as Trustee of the Xxxxxx X.
Xxx Xxxxxxxx Living Trust dated Schidel Trust dated 12-6-96
12-13-94
/s/ Xxxxxx Xxxxxx /s/ Xxxxxxx X. Xxxxxx
---------------------------- -------------------------------
Xxxxxx Xxxxxx, as Trustee Xxxxxxx X. Xxxxxx, JTWROS
of the Revocable Living Trust
dated 9-11-78 as amended /s/ Xxxxx X. Xxxxxx
--------------------------------
Xxxxx X. Xxxxxx, JTWROS
/s/ Xxxxxx X. Xxxxxxx
------------------------------
Xxxxxx X. Xxxxxxx, as Trustee
of the Xxxxx Xxxxxxx Trust
dated 4-4-94
69
CLOSING DOCUMENTS LIST AND EXHIBIT LIST
Agreement Exhibit No.
Page No. Or Section No. Description
-------- --------------- --------------
7 2.1.2 Buyer's Common Stock Certificates
8 "A" Buyer's Note
8 "B" Letter of Credit
9 "C" Chicago Title Note Escrow
9 "D" Chicago Title Contingency Escrow
Instructions
10 "E" Security Agreement
11 "F" Disclosure Statement
48 4.3.3 Bossier Facility Amendment To Standard
Industrial Lease - Net
50 5.2.2 Seller Minimum Net Worth Letter
51 5.2.3 Waiver/Release Letter from National Bank
of Canada ("NBC")
51 "G" Xxxxxx Xxxx Firm Opinion
51 "H" Three (3) Employment Agreements
52 "I" Three (3) Covenants Not To Compete
52 5.2.8 All Other Lease Amendments
53 "J" Xxxxxxxxx Firm Opinion
53 "K" 3-3-98 Letter of Intent, 3-12-98 First
Extension Agreement and 0-00-00 Xxxxxx
Xxxxxxxxx Agreement
53 "L" 3-20-98 and 3-25-98 Letter Agreements
allowing Xxxxxxxx and Xxxxxxxx to act
for other, etc.
53 "M" Good Standing Certificates for Seller
Corporations
53 "N" Agreements of Merger
65 7.4 Xxxxxx Xxxx Firm Expenses Letter Xxxxxxx
Firm Expenses Letter Xxxxxxxx Letter
70
