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EXHIBIT 10.24
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into
as of November 18, 1997 among U.S. PLASTIC LUMBER CORPORATION, a Nevada
corporation ("Purchaser") AND WASTE CONCEPTS, INC. ("Company") and XXXXXX X.
XXXXX ("Shareholder").
RECITALS
A. The Shareholder owns all of the issued and outstanding capital stock
of the Company.
B. The Shareholder wishes to sell, and the Purchaser wishes to purchase,
one hundred percent (100%) of the issued and outstanding capital stock
of the Company upon the terms and subject to the conditions
hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, the
terms defined in this Article 1 shall have the meanings herein specified for
all purposes of this Agreement, applicable to both the singular and plural
forms of any of the terms herein defined. Unless otherwise indicated, any
reference herein to a "Section", "Article", or "Schedule" shall mean the
applicable section, article or schedule of or to this Agreement. All accounting
terms used in this Agreement not defined in this Article 1 shall, except as
otherwise provided for herein, be construed in accordance with generally
accepted accounting principles, consistently applied.
"Action" shall mean any actual or threatened claim, action, suit,
arbitration, hearing, inquiry, proceeding, complaint, charge or investigation
by or before any Governmental Entity or arbitrator and any appeal from any of
the forgoing.
"Affiliate" of a Person shall mean any Person that directly or
indirectly controls, is controlled by, or is under common control with the
indicated Person.
"Agreement" shall mean this Securities Purchase Agreement.
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"Agreements" shall mean this Securities Purchase Agreement, the
Employment Agreement with Xxxxxx X. Xxxxx ("Sands"), the Stockholder Agreement
with Sands, the Stock Escrow Agreement with the Company and Sands, and all of
the Schedules and Exhibits attached hereto and thereto.
"Balance Sheet" and "Balance Sheet Date" shall have the meaning
assigned to such terms in Section 4.4(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Closing" and "Closing Date" shall have the respective meanings
assigned to such terms in Section 2.3.
"Common Stock" shall mean the Company's authorized class of common
stock, $0.01 par value per share.
"DOL" shall mean the United States Department of Labor.
"Damages" shall mean any and all losses, liabilities, obligations,
costs, expenses, damages or judgments of any kind or nature whatsoever
(including reasonable attorneys', accountants, and expert's fees, disbursements
of counsel, and other costs and expenses incurred pursuing indemnification
claims under Article 10 hereof).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any Person which is (or at any relevant
time was) a member of a controlled group of corporations within the meaning of
Code Section 414 (b), all trades or businesses under common control within the
meaning of Code Section 414(c), and all affiliated service groups within the
meaning of Code Section 414(m), of which the Company is (or any relevant time
was) a member.
"Environmental Laws" shall mean all Legal requirements pertaining to
the protection of the environment, the treatment, emission and discharge of
gaseous, particulate and effluent pollutants and the use, handling storage,
treatment, removal transport, transloading, cleanup decontamination, discharge
and disposal of Hazardous Substances, including, without limitation, those
statutes, laws, rules and regulations set forth below in the definitions of
"Hazardous Material".
"Governmental Entity" shall mean any local, state, federal or foreign
(i) court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the IRS and other taxing
authorities.
"Hazardous Material" shall mean any flammable, ignitable, corrosive,
reactive,
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radioactive or explosive substance or material, hazardous waste, toxic
substance or related material and any other substance or material defined or
designated as a hazardous or toxic substance, material or waste by any
Environmental Law currently in effect or as amended or promulgated in the
future and shall include, without limitation:
(a) those substances included within the definitions of
"hazardous substances", "hazardous materials", "toxic substances", or "solid
waste" in the Comprehensive Environmental response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Sections 9601, et. seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et.seq., and the
Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et. seq., and
in the regulations promulgated pursuant thereto.
(b) those substances defined as "hazardous substances",
"hazardous materials", "toxic substances", or "solid waste" in the Commonwealth
of Pennsylvania.
(c) those substances listed in the United States Department
of Transportation Table (49CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor thereto) as hazardous
substances (40CFR Part 302 and any amendments thereto).
(d) such other substances, materials and wastes that are or
become regulated under applicable local, state or federal laws or regulations,
or which are or become classified as hazardous or toxic under any Legal
Requirement; and
(e) any material, waste or substance that is, in whole or in
part, (i) petroleum, asbestos, polychorinated biphenyls, methylene chloride,
trichorothylene, 1, 2-transdichoroethylene, dioxins or dibenzofurans, (ii)
designated as an "extremely hazardous substance" pursuant to Section 302 of the
Emergency Planning and Community Right-to-Know Act of 1986, as amended, or
(iii) designated as a "hazardous substance" pursuant to Section 311 of the
Clean Water Act, 33 U.S.C. Sections 1251 et. seq. (U.S.C. Section 1321) or
listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section 1317),
or Section 112 or other sections of the Clean Water Act, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"Indebtedness" shall mean, when used with reference to any Person,
without duplication, (i) any liability of such Person created or assumed by
such Person, or any Subsidiary thereof, (A) for borrowed money, (B) evidenced
by a bond, note, debenture, or similar instrument (including a purchase money
obligation, deed of trust or mortgage) given in connection with the acquisition
of, or exchange for, any property or assets (other than inventory or similar
property acquired and consumed in the Ordinary Course), including securities
and other Indebtedness, (C) in respect of letters of credit issued for such
Person's account and "swaps" of interest and currency exchange rate (and other
interest and currency exchange rate hedging agreements) to which such Person is
a party or (D) for the payment of money as lessee under leases that should be,
in accordance with generally accepted accounting principles, recorded as
capital leases for financial reporting
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purposes; (ii) any liability of others described in the preceding clause (i)
guaranteed as to payment of principal and interest by such Person or in effect
guaranteed by such Person through an agreement, contingent or otherwise, to
purchase, repurchase or pay the related Indebtedness or to acquire security
therefor; (iii) all liabilities or obligations secured by a Lien upon property
owned by such Person and upon liabilities or obligations such Person
customarily pays interest or principal, whether or not such Person has not
assumed or become liable for the payment of such liabilities or obligations;
and (iv) any amendment, renewal, extension, revision or refunding or any such
liability or obligation; provide, however, that Indebtedness shall not include
any liability for compensation of such Person's employees or for inventory or
similar property acquired and consumed in the Ordinary Course or for services.
"Leased Real Property" shall mean all real property, including
Structures, leased by the Company.
"Legal Requirements" shall mean any statute, law, ordinance, rule,
regulation, permit, order, writ, judgment, injunction, decree or award issued,
enacted or promulgated by any Governmental Entity or any arbitrator.
"Lien" shall mean all liens (including judgment and mechanics liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options or other charges, encumbrances or restrictions.
"Material Adverse effect" shall mean a material adverse effect on the
business, financial condition, properties, profitability, prospects or
operations of the Company.
"Ordinary Course" shall mean, when used with reference to the Company,
the ordinary course of the Company's business, consistent with past practices.
"Owned Real Property" shall mean all real property, including
Structures, owned by the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall have the meaning assigned to such term in Section 4.16.
"Permitted Liens" shall mean (a) Liens for ad valorem real or personal
property taxes or assessments not at the time due and (b) Liens in respect of
pledges or deposits under worker's compensation laws or similar legislation,
carriers', warehousemen's, mechanic's, laborers' and materialmen's and similar
liens, if the obligations secured by such Liens are not then delinquent.
"Person" shall mean all natural person's, corporations, business
trusts, associations, limited liability companies, companies partnerships,
joint ventures, Governmental Entities and any other entities.
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"Real Property" shall mean the Owned Real Property and the Lease Real
Property, collectively.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share Percentage" with respect to any Shareholder shall mean the
percentage that the number of Shares held by such Shareholder represents of the
total number of Shares, as set forth on Exhibit "A".
"Shares" shall mean the shares of Common Stock of the Company held by
the Shareholder.
"Stock" shall mean shares of common stock issued by the Purchaser to
the Shareholder as payment of the Purchase Price, as contemplated by Article 2
hereof.
"Structure" shall mean any facility, building, plant, factory,
office, warehouse structure or other improvement owned or leased by the
Company.
"Subsidiary" of a Person shall mean any corporation, partnership,
limited liability company, association or other business entity at least 50% of
the outstanding voting power of which is at the time owned or controlled
directly or indirectly by such Person or by one or more of such subsidiary
entity, or both.
"Tax" shall mean any Federal, state, local or foreign income, gross
receipts, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, without limitation, taxes
under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), employment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated tax or other tax, assessment or charge
of any kind whatsoever, including, without limitation, any interest, fine,
penalty or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for
refund or information, or statement relating to Taxes, and any exhibit,
schedule, attachment or amendment thereto.
2. PURCHASE AND SALE OF SECURITIES
2.1 Sale and Delivery. Shareholder agrees to sell and deliver to
Purchaser, and Purchaser agrees to purchase and accept from Shareholder, free
and clear of all Liens, on the terms and conditions set forth in this
Agreement, and for the purchase price described in Section 2.2 below, good and
marketable title to the number of Shares set forth opposite the name of such
Shareholder on Exhibit "A". The Shares to be sold and purchased pursuant to
this Agreement, being 200 Shares, constitute one hundred percent (100%) of the
outstanding capital stock of the
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Company.
2.2 Purchase Price. The Purchase Price for one hundred percent of
the Shares shall be equal to One Hundred and Seventy-five Thousand Dollars
($175,000) plus Four Hundred Thousand Shares (400,000) of non registered common
stock of U.S. Plastic Lumber Corp.
2.3 Closing". The purchase and sale of the Shares and the
consummation of the other transactions contemplated by this Agreement, (the
"Closing") shall occur at 10:00AM, local time, on November 18, 1997,
simultaneously at the offices of the Purchaser, 0000 Xxxxxx Xx., Xxxxx 000X,
Xxxx Xxxxx, Xxxxxxx and at the office of the general counsel for the Company,
000 Xxxx Xxx, Xxxxx 000, Xxxx Xxxxxx, XX, among the Shareholder and the
Purchaser upon fulfillment of all conditions precedent to the Closing, such
hour and date being herein generally referred to as the "Closing Date". Time is
of the essence in Closing this transaction. At the Closing:
(a) Shareholder shall deliver or cause to be delivered to Purchaser,
against the delivery by the Purchaser of the Stock, in payment by
Purchaser of the Purchase Price to such Shareholder:
(i) a certificate or certificates representing the Shares
being sold by the Shareholder hereunder duly endorsed for
transfer, or accompanied by duly executed assignments
separate from the certificate, transferring to Purchaser good
and marketable title to such Shares, free and clear of all
Liens;
(ii) all of the documents, certificates, and instruments
required to be delivered, or caused to be delivered, by the
Shareholder pursuant to Section 8.1 hereof; and
(iii) access, during normal business hours and with
reasonable prior notice, to all records, documents, and files
of the Company, including, without limitation, all minute
books, stock records, stock certificate books, and internal
accounting records.
(iv) an executed Stock Escrow Agreement, in the form
attached hereto as Exhibit F and incorporated by reference
herein, holding 200,000 shares of Stock in escrow as
collateral against the collectability of accounts receivable
outstanding as of the Closing Date as represented by
Shareholder in Section 4.6 of this Agreement, and to support
the indemnity provisions of Section 10 of this Agreement.
(v) an executed Stock Sale Restriction Agreement in the
form attached hereto as Exhibit H and incorporated by
reference herein.
(b) Purchaser shall deliver or cause to be delivered to the Company,
against delivery of
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the certificate or certificates representing the Shares:
(i) Four Hundred Thousand (400,000) shares of Stock and One
Hundred and Seventy-five Thousand Dollars in cash or wire
transfer;
(ii) all of the documents, if any, required to be delivered
by Purchaser pursuant to Section 8.2 hereof;
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDER
The Shareholder hereby represents and warrants to, and covenants and
agree with, Purchaser that:
3.1 Ownership of Shares. The Shareholder owns of record and
beneficially the number of Shares set forth opposite the name of the
Shareholder on Exhibit "A" hereto, and has, and at all times prior to and as of
the Closing such Shareholder will have, good and marketable title to such
Shares free and clear of all Liens, except (i) as it relates to a lien by a
former Shareholder, Xxxxxxx "Xxxxx" Xxxxxxxx ("Xxxxxxxx"), pursuant to a Stock
Purchase Agreement as collateral for payment of purchase price by a loan by the
Shareholder to Xxxxxxxx, and (ii) a right of first refusal pursuant to a
Shareholder's Agreement between the Shareholder and Xxxxxxxx.
3.2 Delivery of Good Title. Upon delivery of the Shares to be sold
by the Shareholder hereunder and delivery of the Stock therefor pursuant to
this Agreement, Purchaser will have good and marketable title to such Shares
free and clear of all Liens.
3.3 Execution and Delivery. All consents, approvals, and
authorizations necessary for the execution, delivery and performance by the
Shareholder of this Agreement (including, without limitation, the transfer and
sale of the Shares to be sold by the Shareholder to Purchaser) have been duly
and lawfully obtained, and the Shareholder has, and at the Closing will have,
full right, power, authority and capacity to execute, deliver and perform this
Agreement. This Agreement has been duly executed and delivered by the
Shareholder and constitutes a legal, valid and binding agreement of the
Shareholder enforceable against the Shareholder in accordance with its terms.
3.4 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any term or provision of,
or (with or without notice or passage of time, or both) constitute a default
under, any indenture, mortgage, deed of trust, trust (constructive and other),
loan agreement or other agreement or instrument to which such Shareholder is a
party or by which the Shareholder or the Shareholder's Shares are bound, or
violate any Legal Requirement applicable to or binding upon the Shareholder.
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3.5 No Brokers. No broker, finder or similar agent has been employed
by or on behalf of the Shareholder in connection with this Agreement or the
transactions contemplated hereby, and the Shareholder has not entered into any
agreement or understanding of any kind with any person or entity for the
payment of any brokerage commission, finder's fee or any similar compensation
in connection with this Agreement or the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
The Shareholder hereby represents and warrants to, and covenant and
agree with, Purchaser that:
4.1 Organization and Good Standing.
(a) The Company has been duly organized and is existing as a
corporation in good standing under the laws of the Commonwealth of Pennsylvania
with full power and authority (corporate and other) to own and lease its
properties and to conduct its business as currently conducted. The Company has
been duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each jurisdiction set forth on
Schedule 4.1(a), such jurisdictions comprising all jurisdictions in which the
Company owns or leases any property, or conducts any business, so as to require
such qualifications.
(b) Except as set forth in Schedule 4.1(b), the Company has no
Subsidiary nor owns or controls, or has any other equity investment or other
interest in, directly or indirectly, any corporation, joint venture,
partnership, association or other entity.
4.2 No Conflicts. The execution, delivery and performance of the
Agreements and the consummation of the transactions contemplated thereby will
not (a) conflict with or result in a breach or violation of any term or
provision of, or constitute a default under (with or without notice or passage
of time, or both), or otherwise give any Person a basis for accelerated or
increased rights or termination or nonperformance under, any indenture,
mortgage, deed of trust, loan or credit agreement, lease, license or other
agreement or instrument of which the Company is a party or by which the Company
is bound or affected or to which any of the property or assets of the Company
is bound or affected including, without limitation, all arrangements in Section
4.19 hereof, (b) result in the violation of the provisions of the Articles of
Incorporation or Bylaws of the Company or any Legal Requirement applicable to
or binding upon it, (c) result in the creation or imposition of any Lien upon
any property or asset of the Company or (d) otherwise adversely affect the
contractual or other legal rights or privileges of the Company. Schedule 4.2
sets forth a list of all agreements requiring the consent of any party thereto
to any of the transactions contemplated thereby. The Purchaser agrees that the
Consents listed on Schedule 4.2 are not a condition to Closing nor are they a
post closing requirement.
4.3 Capitalization. The authorized capital stock of the Company
consists solely of (1,000) shares of Common Stock having a par value of $1.00
per share, of which only the
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number of Shares listed on Exhibit "A" are, and as of the Closing will be,
issued and outstanding. All of the Shares have been duly authorized and validly
issued and are fully paid, nonassessable and outstanding and are held by the
Shareholder in amounts reflected in Schedule "A" hereto. Other than as set
forth on Schedule 4.3, (i) there are no existing options, warrants, right,
calls or commitments of any character relating to the shares of Common Stock or
any other capital stock or securities of the Company, (ii) there are no
outstanding securities or other instruments convertible into or exchangeable
for shares of Common Stock or any other capital stock or securities of the
Company and no commitments to issue such securities or instruments and no
Person has any right of first refusal, preemptive right, subscription right or
similar right with respect to any shares of Common Stock or any other capital
stock or securities of the Company. The offer, issuance and sale of the Shares
were (i) exempt from the registration and prospectus delivery requirements of
the Securities Act, (ii) registered or qualified (or exempt from registration
or qualification) under the registration or qualification requirements of all
applicable state securities laws and (iii) accomplished in conformity with all
other Legal Requirements.
4.4 Financial Statements.
(a) Schedule 4.4 hereto contains true and complete copies of (i)
the unaudited balance sheet (the "Balance Sheet") of the Company at June 30,
1997 (the "Balance Sheet Date"), and the related unaudited statements of income
for the six (6) months then ended, (ii) the reviewed balance sheet of the
Company at December 31, 1996 and the related reviewed statements of income,
Shareholder' equity and cash flow for the fiscal year then ended (together with
the report thereon of Xxxxxxx XxXxxxxx, independent public accountants)(the
financial statements described in clause (i) and (ii) above are collectively
referred to as the "Financial Statements").
(b) The Financial Statements present fairly the financial
condition of the Company as of the dates indicated therein and the results of
operations and changes in financial position of the Company for the periods
specified therein, to the best of Shareholder's knowledge, have been prepared
in conformity with generally accepted accounting principles applied on a
consistent basis during the periods covered thereby and prior periods, have
been derived from the accounting records of the Company and represent only
actual, bona fide transactions. The Company's Financial Statements are true and
correct in all material respects and do not contain any untrue statement of a
material fact or omit to state a material fact.
4.5 Title to Property; Encumbrances.
(a) The Company has, and immediately prior to the Closing will
have, good, valid and marketable title in fee simple to all Real Property and
all personal property reflected on the Balance Sheet as owned by the Company
and all Real Property and personal property acquired by the Company since the
Balance Sheet Date, in each case free and clear of all Liens except (i) as set
forth on Schedule 4.5(a), (ii) for sales and other dispositions of inventory in
the Ordinary Course since the Balance Sheet Date which, in the aggregate, have
not been materially
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different from prior periods, and (iii) Permitted Liens.
(b) Schedule 4.5(b). contains a true and complete list and
legal description of each parcel of Owned Real Property and a general
description of each Structure situated thereon. The Shareholder has heretofore
furnished to Purchaser true and complete copies of all deeds, other instruments
of title and policies of title insurance indicating and describing the
Company's ownership of the Owned Real Property, as well as copies of any
surveys or environmental reports relating to the real property.
(c) Schedule 4.5(c). contains a list of all tangible personal
property having a cost or fair market value in excess of Five Thousand Dollars
($5,000.00) owned by the Company (other than personal property held by the
Company as lessee under a personal property lease).
(d) Schedule 4.5(d) contains a list of all real property
leases, licenses and personal property leases under which the Company is the
lessee or licensee, together with (i) the location and nature of each of the
leased or licensed properties (including a legal description of all Leased Real
Property), (ii) the termination date of each such lease or license, (iii) the
name of the lessor or licensor and (iv) all rental and other payments made or
required to be made for the fiscal years ending December 31, 1996 and December
31, 1995. All leases and licenses pursuant to which the Company leases or
licenses from others real or personal property are valid, subsisting in full
force and effect in accordance with their respective terms, and there is not,
under any real property lease, personal property lease or license, any existing
default or event of default (or event that, with notice or passage of time, or
both, would constitute a default, or would constitute a basis of force majeure
or other claim of excusable delay or nonperformance). True and complete copies
of all real property leases, licenses and personal property leases listed on
Schedule 4.5(d) have been delivered to Purchaser heretofore, as well as copies
of any title reports, surveys or environmental reports or audits, relating to
any Leased Real Property, which are in the possession of the Company. Except as
set forth in Schedule 4.5(d), no such lease or license will require the consent
of the lessor or licensor to or as a result of the consummation of the
transactions contemplated by this Agreement. For the purposes of this Section
4.5(d), a "lease" shall include a sublease.
(e) All personal property owned by the Company and all
personal property held by the Company pursuant to personal property leases is
in good operating condition and repair, subject only to ordinary wear and tear,
has been operated, serviced and maintained properly within the recommendations
and requirements of the manufacturers thereof (if any) and is suitable and
appropriate for the use thereof made and proposed to be made by the Company in
its business and operations. The Real Property and personal property described
in Sections 4.5(a), 4.5(b) and 4.5(c) and the Real Property and personal
property held by the Company pursuant to the leases and licenses described in
Schedule 4.5(d) comprise all of the real property and personal property used in
the conduct of business of the Company.
(f) Except as set forth in Schedule 4.5(f):
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(i) The Company is not in violation of, or default under,
any Legal Requirement pertaining to any of the Real Property. No
notice of violation of any Legal Requirement, or of any covenant,
condition, restriction or easement affecting any Real Property or with
respect to the use or occupancy thereof, has been given to the Company
or, to the Shareholder's knowledge, the lessor by any Person;
(ii) All of the Structures (A) are in good operating
condition and repair, (B) are adequate and suitable for the purposes
for which they are currently and proposed to be used, and (C) are
supplied with utilities and other services necessary for the operation
of such Structures, and the business conducted by the Company therein,
including gas, electricity, water, telephone, sanitary sewer and storm
sewer, all of which services are maintained in accordance with all
Legal Requirements and, to the knowledge of the Shareholder, are
provided via permanent, irrevocable, appurtenant easements in favor of
the lessor;
(iii) To the knowledge of the Shareholder, no condemnation
proceeding is pending or threatened which would impair the occupancy,
use or value of any Real Property;
(iv) To the knowledge of Shareholder, no Structure, nor the
operations of the Company therein or thereon, (A) is located outside
of the boundary lines of the described parcel of land on which it is
located, (B) is in violation of applicable setback requirements,
zoning laws, or ordinances, (C) is subject to "permitted
non-conforming use" or "permitted non-conforming structure"
classifications or (D) encroaches on any property owned by, or
easement granted in favor of, any Person;
(v) To the knowledge of Shareholder, there are no (A)
leases, subleases, licenses, concessions or other agreements, written
or oral, granting to any other Person the right to acquire, use or
occupy any portion of, any Real Property, (B) outstanding options or
rights of first refusal to purchase all or any portion of Real
Property or interest therein, and (C) Persons (other than the Company)
in possession of any Real Property;
(vi) To the knowledge of Shareholder, each parcel of Owned
Real Property (A) is fully and adequately described in the legal
description therefor contained in the deed thereof, (B) abuts a paved
public right-of-way, (C) does not serve any adjoining property for any
purpose inconsistent with the use of the land, and (D) is not located
within any flood plain or subject to any similar type restriction for
which any permits or licenses necessary to the use thereof have not
been obtained; and
(vii) With respect to each item of Leased Real Property, (A)
to the Shareholder' knowledge, the owner thereof has good and
marketable title thereto, free and clear of all Liens other than (I)
recorded easements, covenants and restrictions that do not impair the
current use, occupancy or value thereof and (II) the leasehold
interest of the Company, (B) there is adequate ingress and egress (and
a continuing right thereto), without the need
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for an easement, between paved public rights-of-way and such Leased
Real Property and (C) the Company has not sold, transferred or
subjected to a Lien such Leased Real Property or any interest therein.
4.6 Accounts Receivable. All accounts receivable of the Company
reflected in the Balance Sheet and all accounts receivable of the Company that
have arisen since the Balance Sheet Date (except such accounts receivable as
have been collected since such dates) are valid and enforceable claims, and the
goods and services sold and delivered that gave rise to such accounts were sold
and delivered in conformity with all applicable express and implied warranties,
purchase orders, agreements and specifications. Such accounts receivable of the
Company are subject to no valid defense, offset or counterclaim and are fully
collectible, except to the extent of the allowance for doubtful accounts
reflected on the Balance Sheet, except as set forth on Schedule 4.6. Schedule
4.6 contains a true and complete aging of the Company's accounts receivable as
of the Balance Sheet Date.
4.7 Inventories. Except as described in Schedule 4.7, all
inventories of raw materials, work-in-process and finished good set forth or
reflected in the Balance Sheet or acquired by the Company since the Balance
Sheet Date, consist of a quality and quantity usable and saleable in the
Ordinary Course, except for slow-moving, damaged or obsolete items and
materials of below standard quality, all of which have been written down to net
realizable market value or in respect of which adequate reserves have been
provided, in each case as reflected in the Balance Sheet. The value at which
inventories are carried on the Balance Sheet reflect the normal inventory
valuation policy of the Company, as applicable, in accordance with generally
accepted accounting principles and on a basis consistent with that of preceding
periods, of stating inventory at the lower of cost or market value. There is no
reason to believe that the Company will experience in the foreseeable future
any difficulty in obtaining, in the desired quantity and quality, the inventory
necessary to conduct its business in the manner proposed to be conducted,
including, without limitation, inventory which historically has been imported.
4.8 Trademarks, Patents, Etc.
(a) Schedule 4.8(a) contains a true and complete list of all
letters patent, patent applications, trade names, trademarks, service marks,
trademark and service xxxx registrations and applications, copyrights,
copyright registrations and applications, grants of a license or right to the
Company with respect to the foregoing, both domestic and foreign, claimed by
either Company or used or proposed to be used by the Company in the conduct of
its business, whether registered or not, (collectively herein, "Registered
Rights").
(b) To the knowledge of Shareholder, except as described in
Schedule 4.8(b), the Company owns and has the unrestricted right to use the
Registered Rights and every trade secret, know-how, process, discovery,
development, design, technique, customer and supplier list, promotional idea,
marketing and purchasing strategy, invention, process, confidential data and or
other information (collectively herein, "Proprietary Information") required for
or incident of the design, development, manufacture, operation, sale and use of
all products and services sold or
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rendered or proposed to be sold or rendered by the Company, free and clear of
any right, equity or claim of others. The Company has taken reasonable security
measures to protect the secrecy, confidentiality and value of all Proprietary
Information.
(c) Schedule 4.8(c) contains a true and complete list and
description of all licenses of or rights to Proprietary Information granted to
the Company by others or to others by the Company. Except as described in
Schedule 4.8(c), (i) the Company has not sold, transferred, assigned, licensed
or subjected to any Lien, any Registered Right or Proprietary Information or
any interest therein, and (ii) the Company is not obligated or under any
liability whatever to make any payments by way of royalties, fees or otherwise
to any owner or licensor of, or other claimant to, any Registered Right or
Proprietary Information.
(d) There is no claim or demand of any Person pertaining to, or
any Action that is pending or, to the Shareholder' knowledge, threatened, which
challenges the rights of the Company in respect of any Registered Right or any
Proprietary Information.
4.9 Banking and Insurance.
(a) Schedule 4.9(a) contains a true and complete list of the
names and locations of all financial institutions at which the Company
maintains a checking account, deposit account, securities account, safety
deposit box or other deposit or safekeeping arrangement, the numbers or other
identification of all such accounts and arrangements and the names of all
persons authorized to draw against any funds therein.
(b) Schedule 4.9(b) contains a true and complete list of all
insurance policies and bonds and self insurance arrangements currently in force
that cover or purport to cover risks or losses to or associated with the
Company's business, operations, premises, properties, assets, employees, agents
and directors and sets forth, with respect to each such policy, bond and self
insurance arrangement, a description of the insured loss coverage, the
expiration date and time of coverage, the dollar limitations of coverage, a
general description of each deductible feature and principal exclusion and the
premiums paid and to be paid prior to expiration. To the knowledge of
Shareholder, the insurance policies, bonds and arrangements described on
Schedule 4.9(b) (the "Policies") provide such coverage against such risk of
loss and in such amounts as are customary for corporations of established
reputation engaged in the same or similar business and similarly situated. To
the knowledge of Shareholder, the Company has no obligation, liability or other
commitment relating to any contract of insurance containing a provision for
retrospective rating or adjustment of the Company's premium obligation. To the
Shareholder's knowledge, no facts or circumstances exist that would cause the
Company to be unable to renew its existing insurance coverage as and when the
same shall expire upon terms at least as favorable as those currently in
effect, other than possible increases in premiums that do not result from any
act or omission of the Company or any Shareholder.
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4.10 Indebtedness.
(a) The Company has no liability or obligation for Indebtedness
other than as set forth on Schedule 4.10(a), and true and complete copies of
all instruments and documents evidencing, creating, securing or otherwise
relating to such Indebtedness have been delivered to Purchaser heretofore.
Except as described in Schedule 4.10(a), no event has occurred and no condition
has become known to the Company or any Shareholder (including the transactions
contemplated hereby) that constitutes or, with notice or passage of time, or
both, would constitute a default or a basis of force majeure or other claim of
accelerated or increased rights, termination, excusable delay or nonperformance
by the Company or any other Person under any instrument or document relating to
or evidencing Indebtedness that would entitle any person to require the Company
to pay any portion of the principal amount of such Indebtedness prior to the
scheduled maturity thereof. Except as set forth in Schedule 4.10(a), no
instrument or document evidencing, creating, securing or otherwise relating to
Indebtedness will require the consent of any person to or as a result of the
consummation of the transactions contemplated by this Agreement.
(b) Schedule 4.10(b) contains a list and brief description of
all agreements or instruments pursuant to which any of the Company's directors,
employees or Shareholder have guaranteed by Indebtedness of the Company (the
"Guaranties"). True and complete copies of all Guaranties have been delivered
to Purchaser.
4.11 Judgments; Litigation. Except as set forth on Schedule 4.11:
(a) There is no (i) outstanding judgment, order, decree, award
stipulation or injunction of any Governmental Entity or arbitrator against or
affecting the Company or its properties, assets or business or (ii) Action
pending against or affecting the Company or its properties, assets or business.
(b) There is no (i) outstanding judgment, order, decree, award,
stipulation, injunction of any Governmental Entity or arbitrator against or
affecting any officer, director or employee of the Company relating to the
Company or its business, (ii) Action threatened against or affecting the
Company or its properties, assets or business, (iii) Action pending or to the
knowledge of Shareholder threatened against the Company's officers, directors
or employees relating to the Company or its business or (iv) to the knowledge
of Shareholder basis for the institution of any Action against the Company or
any of its officers, directors, employees, properties or assets which, if
decided adversely, would have a Material Adverse Effect.
4.12 Income and Other Taxes. Except as set forth on Schedule 4.12:
(a) To the knowledge of Shareholder, all Tax Returns required to
be filed through and including the date hereof in connection with the
operations of the Company are true, complete and correct in all respects and
have been properly and timely filed. The Company has not requested any
extension of time within which to file any Tax Return, which Tax Return has not
since been filed. Purchaser has heretofore been furnished by the Company with
true, correct and complete copies of each Tax Return of the Company with
respect to the past three (3)
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taxable years, and of all reports of, and communications from, any Governmental
Entities relating to such period. To the knowledge of Shareholder, the Company
has disclosed on its Federal Income Tax Returns all positions taken therein
that could give rise to a substantial understatement of income Taxes for
federal income tax purposes within the meaning of Code Section 6662.
(b) All Taxes required to be paid or withheld and deposited
through and including the date hereof in connection with the operations of the
Company have been duly and timely paid or deposited by the Company. The Company
has properly withheld or collected all amounts required by law for income Taxes
and employment Taxes relating to its employees, creditors, and other third
parties, and for sales Taxes on sales, and has properly and timely remitted
such withheld or collected amounts to the appropriate Governmental Entity. The
Company has no liabilities for any Taxes for any taxable period ending prior to
or coincident with the Closing Date.
(c) To the knowledge of Shareholder, the Company has made
adequate provision on its book of account for all Taxes with respect to its
business, properties and operations through the Balance Sheet Date, and the
accruals for Taxes in the Balance Sheet are adequate to cover all liabilities
for Taxes of the Company for all periods ending on or before the Closing Date.
(d) The Company has never (i) had a tax deficiency proposed,
asserted or assessed against it (ii) executed any waiver of any statute of
limitations on the assessment or collection of any Taxes, or (iii) been
delinquent in the payment of any Taxes.
(e) No Tax Return of the Company has been audited or the
subject of other Action by any Governmental Entity. The Company has not
received any notice from any Governmental Entity of any pending examination or
any proposed deficiency, addition, assessment, demand for payment or adjustment
relating to or affecting the Company or its assets or properties and no
Shareholder has reason to believe that any Governmental Entity may assess (or
threaten to assess) any Taxes for any periods ending on or prior to the Closing
Date.
(f) The Company (i) has not filed any consent or agreement
pursuant to Code Section 341(f), and no such consent or agreement will be filed
at any time on or before the Closing Date; (ii) has not made any payments, is
not obligated to make any payments and is not a party to any agreement that
under certain circumstances could obligate the Company to make any payments
that will not be deductible under Code Section 280G, (iii) is not a United
States real property holding corporation within the meaning of Code Section
897(c)(2); (iv) is not a party to a tax allocation or sharing agreement; (v)
has never been (or does not have any liability for unpaid Taxes because it was)
a member of an affiliated group with the meaning of Code Section 1504(a); (vi)
has never applied for a tax ruling from a Governmental Entity and (vii) has
never filed or been the subject of an election under Code Section 338(g) or
Code Section 338(h)(10) or caused or been the subject of a deemed election
under Code Section 338(e).
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4.13 Questionable Payments. Neither the Company nor, to the
Shareholder' knowledge, any of its directors, officers, agents, employees or
other Person associated with or acting on behalf of the Company has (a) used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) made any direct or
indirect unlawful payments to government officials or employees, or foreign
government officials or employees, from corporate funds, (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets,
(d) made any false or fictitious entries on the books of account of the
Company, (e) made or received any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment, or (f) made any other payment, favor or
gift not fully deductible for federal income tax purposes.
4.14 Employee Benefit Matters.
(a) Schedule 4.14 contains a complete list of all Plans. For
purposes of this Section 4.14, the term "Plan" shall mean any plan maintained
by the Company which is either an "employee benefit plan" as defined in Section
3(3) of ERISA or a "fringe benefit plan" as defined in Section 6039D of the
Code. True and complete copies of each of the following documents (and any
amendments thereto), where applicable, have been delivered previously to
Purchaser: (i) the Plan documents; (ii) a written description of any Plan which
is not in writing; (iii) if the Plan is funded through a trust or any
third-party funding vehicle, the trust or other funding agreement; (iv) the
Plan's most recent financial statements; (v) the two most recent annual reports
(including all schedules and attachments thereto) required by ERISA; (vi) the
most recent actuarial report and valuation; (vii) the most recent determination
letter received from the IRS with respect to each Plan that is intended to be
qualified under Code Section 401 or to be recognized as tax-exempt under Code
Section 501(c); (viii) the most recent summary plan description and each
summary of material modifications required by ERISA; (ix) any agreement
providing for the provision of administrative or investment management services
with respect to the Plan; and (x) all documents and correspondence received
from or provided to the DOL, IRS and PBGC during the past two years.
(b) Each Plan and related trust, annuity, or other funding
agreement complies and has been maintained in compliance with all applicable
Legal Requirements. No non-exempt prohibited transaction (as defined in Code
Section 4975 and ERISA Sections 406 and 408) has occurred and no "fiduciary"
(as defined in ERISA Section 3(21)) has committed any breach of duty which
could subject the Company, any ERISA Affiliate, or any director, officer, or
employee thereof to liability under Title I of ERISA or to tax under Code
Section 4975. All material obligations required to be performed by the Company
and other Person under the terms of each Plan and applicable Legal Requirement
have been performed.
(c) All required reports and descriptions, including, without
limitation, annual reports (Form 5500), summary annual reports, and summary
plan descriptions, have been filed and distributed timely. With respect to each
Plan which is a welfare plan (as defined in ERISA Section 3(1)), the
requirements of Party 6 of Subtitle B of Title I of ERISA and of Code Sections
162(k) and 4980B have been satisfied.
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(d) All contributions, premiums, and other payments,
including, without limitation, employer contributions and employee salary
reduction contributions, have been paid when due or accrued in accordance with
the past custom and practice of Seller and any ERISA Affiliate. No Plan that is
subject to Part 3 of Subtitle B of Title I of ERISA or to Code Section 412 has
incurred any accumulated funding deficiency, whether or not waived, and no
other actual or contingent liability for any other expenses or obligations of
any Plan exists.
(e) There are no pending or, to the Shareholder's knowledge,
threatened Actions (other than routine claims for benefits) asserted or
instituted against any Plan or the assets of any Plan, or against the Company,
or any ERISA Affiliate, trustee, administrator, or fiduciary of such Plan, and
the Shareholder have no knowledge of any facts that could form the basis of any
such Action. There is no pending or, to the Shareholder's knowledge, threatened
or contemplated Action by any Governmental Entity with respect to any Plan, and
the Shareholder have no knowledge of any facts that could reasonably be
expected to cause or trigger such an Action.
(f) The Company (or, if applicable, an ERISA Affiliate,) may
terminate, suspend, or amend each Plan at any time, except to the extent
otherwise required by Code Section 4980B, without the consent of the
participants or employees covered by such Plan. Neither the Company nor any
ERISA Affiliate has announced any intention, made any amendment or binding
commitment, or given any written or oral notice providing that the Company or
an ERISA Affiliate (i) will create additional Plans covering employees of the
Company or any ERISA Affiliate, (ii) will increase benefits promised or
provided pursuant to any Plan, or (iii) will not exercise after the Closing
Date any right or power it may have to terminate, suspend, or amend any Plan.
(g) Neither the Company nor any ERISA Affiliate maintains or
has maintained any time, or contributes to or has contributed to or is or was
required to contribute to, any (i) Plan subject to Title IV or ERISA,
including, without limitation, any multi-employer plan (as defined in ERISA
Section 3(37)), within the past five years, or (ii) funded or unfunded medical,
health, accident, or life insurance plan or arrangement for current or future
retirees or terminated employees or their spouses or dependents (except to the
extent required by Code Sections 162(k) or 4980B).
(h) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will constitute a
termination of employment or other event entitling any Person to any additional
or other benefits, or that would otherwise modify benefits or the vesting of
benefits, provided under any Plan.
(i) No event has occurred which could subject the Company of
any ERISA Affiliate to any material liability (i) under any Legal Requirement
relating to any Plan, or (ii) resulting from any obligation of Seller or an
ERISA Affiliate to indemnify any Person against liability incurred with respect
to or in connection with any Plan.
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(j) Each Plan which is intended to be qualified under Code
Section 401 has received, within the last five years, a favorable determination
letter from the IRS. No event has occurred and no facts or circumstances exist
which may cause or result in the loss or revocation of such determination.
4.15 No Undisclosed Liabilities. Except (i) to the extent set forth or
provided for in the Balance Sheet or the notes thereto, (ii) as set forth on
Schedule 4.15 or (iii) for non-material current liabilities incurred since the
Balance Sheet Date in the Ordinary Course, as of the date hereof the Company
has no liabilities, whether accrued, absolute, contingent or otherwise, whether
due or to become due and whether the amounts thereof are readily ascertainable
or not, or any unrealized or anticipated losses from any commitments of a
contractual nature, including Taxes with respect to or based upon the
transactions or events occurring at or prior to the Closing.
4.16 Permits, Licenses, Etc. The Company possesses, and is operating
in compliance with, all franchises, licenses, permits, certificates,
authorizations, rights and other approvals of Governmental Entities necessary
to (i) occupy, maintain, operate and use the Real Property as it is currently
used and proposed to be used, (ii) conduct its business as currently conducted
and as proposed to be conducted, and (iii) maintain and operate its Permits
(the "Permits"). Schedule 4.16 contains a true and complete list of all
Permits. Each Permit has been lawfully and validly issued, and no proceeding is
pending or, to the Shareholder's knowledge, threatened looking toward the
revocation, suspension or limitation of any Permit. The consummation of the
transactions contemplated by this Agreement will not result in the revocation,
suspension or limitation of any Permit and, except as set forth in Schedule
4.16, no Permit will require the consent of its issuing authority to or as a
result of the consummation of the transaction contemplated hereby.
4.17 Regulatory Filings. Except as listed on Schedule 4.17, the
Company has made all required registrations and filings with and submissions to
all applicable Governmental Entities relating to the operations of the Company
as currently conducted and as proposed to be conducted, including, without
limitation, all such applicable Governmental Entities having jurisdiction over
any matters pertaining to conservation or protection of the environment, and
the treatment, discharge, use, handling, storage or production, or disposal of
Hazardous Materials. All such registrations, filings and submissions were in
compliance with all Legal Requirements (including all Environmental Laws) and
other requirements when filed, no material deficiencies have been asserted by
any such applicable Governmental Entities with respect to such registrations,
filings or submissions and, to the Shareholder' knowledge, no facts or
circumstances exist which would indicate that a material deficiency may be
asserted by any such authority with respect to any such registration, filing or
submission.
4.18 Consents. All consents, authorizations and approvals of any
Person to or as a result of the consummation of the transactions contemplated
hereby, that are necessary or advisable in connection with the operations and
business of the Company as currently conducted and as proposed to be conducted,
or for which the failure to obtain the same might have,
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individually or in the aggregate, a Material Adverse Effect, have been lawfully
and validly obtained by the Company, except as described in Schedules 4.5(c),
4.10 and 4.16 hereto. All consents, authorizations and approvals described in
schedules 4.5(c), 4.10 and 4.16 will have been lawfully and validly obtained
prior to the Closing.
4.19 Material Contracts; No Defaults.
(a) Schedule 4.19(a) contains a true and complete list and
description of the outstanding sales order and sales contract backlog of the
Company having an indicated gross value in excess of Five Thousand Dollars
($5,000.00) or having a term of duration in excess of six months. All
outstanding sales orders and sales contracts of the Company have been entered
into in the Ordinary Course. Except as described in Schedule 4.19(a), the
Company has not received any advance, progress payment or deposit in respect of
any sales order or sales contract, and the Company has no sales order or sales
contract that will result, upon completion or performance thereof, in gross
margins materially lower than those normally experienced by the Company for the
services or products covered by such sales order or sales contract.
(b) Schedule 4.19(b) contains a true and complete list and
description of all outstanding purchase orders and purchase commitments of the
Company having a gross indicated value in excess of Ten Thousand Dollars
($10,000.00) in the aggregate from any single supplier or other vendor. All
outstanding purchase orders and purchase commitments of the Company have been
incurred in the Ordinary Course, and no purchase order or purchase commitment
of the Company is in excess of the normal, ordinary and usual requirements of
the business of the Company or at an excessive price. The principal raw
materials used in inventory sold by the Company are available from several
sources at competitive prices and upon competitive terms and no interruption in
production or Material Adverse Effect will result from the loss of any one of
such sources.
(c) Schedule 4.19(c) contains a true and complete list of all
sales agency, sales representative, distributor, wholesaler, dealer and similar
contracts or agreements of the Company, and true and complete copies of the
same have been delivered to Purchaser heretofore. Except as described in
Schedule 4.19(c), all of such contracts and agreements are terminable at any
time by the applicable Company without penalty (including, without limitation,
any obligation to repurchase inventories on hand) upon not more than thirty
(30) days' notice.
(d) Schedule 4.19(d) contains a true and complete list and
description of all noncompetition agreements and covenants under which the
Company or any of their respective officers, directors or employees or any
Shareholder is obligated, and true and complete copies of the same have been
delivered to Purchaser heretofore. Except as described in Schedule 4.19(d), the
Company is not restricted by any agreement from carrying on its business or
engaging in any other activity anywhere in the world (including relocating,
closing, or terminating any of its operations or facilities), and no such
officer, director, key employee or Shareholder is a party to or otherwise bound
or affected by any agreement, covenant or other arrangement or understanding
that would restrict or impair his ability to perform diligently his other
duties to the
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Company. Schedule 4.19(d) also contains a true and complete list and
description of all noncompetition agreements or covenants in favor of the
Company, and true and complete copies of the same have been delivered to
Purchaser heretofore.
(e) Schedule 4.19(e) contains a true and complete list and
description of all contracts, agreements, understandings, arrangements and
commitments, (collectively "Contracts") in writing and, to the best of
Shareholder's knowledge all oral Contracts, of the Company with any officer,
director, consultant, employee or Affiliate of the Company or with any
Affiliate or employee of any Affiliate of the Company, other than those
disclosed in Schedule 4.21(a) hereto; in each case a true and complete copy of
such written contract, agreement, understanding, arrangement or commitment or a
true and complete summary of such oral contract, agreement, understanding,
arrangement or commitment has been delivered to Purchaser heretofore.
(f) Schedule 4.19(f) contains a true and complete list and
description of all other material contracts, agreements, understandings,
arrangements and commitments, written or oral, of the Company by which it or
its properties, rights or assets are bound that are not otherwise disclosed in
this Agreement or the Schedule hereto. True and complete copies of such written
contracts, agreements, understandings, arrangements and commitments and true
and complete summaries of such oral contracts, agreements, understandings,
arrangements and commitments have been delivered to Purchaser heretofore. For
the purposes of this subsection (f), "material" means any contract, agreement,
understanding, arrangement or commitment that (i) involves performance by any
party more than ninety (90) days from the date hereof, (ii) involves payments
or receipts by the Company in excess of Five Thousand Dollars ($5,000.00),
(iii) involves capital expenditures in excess of Five Thousand Dollars
($5,000.00) or (iv) otherwise materially affects the Company.
(g) Except as described in Schedule 4.19(g):
(i) to the knowledge of Shareholder, each agreement,
contract, arrangement or commitment described above in this Section
4.19 is, and after the Closing on identical terms will be, legal,
valid, binding, enforceable and in full force and effect;
(ii) no event or condition has occurred or become
known to the Company or any Shareholder or is alleged to have occurred
that constitutes or, with notice or the passage of time, or both,
would constitute a default or a basis of force majeure or other claim
of excusable delay, termination, nonperformance or accelerated or
increased rights by the Company or any other Person under any
contract, agreement, arrangement, commitment or other understanding,
written or, or to the Shareholder's knowledge oral, described above in
this Section 4.19, or described or otherwise disclosed pursuant to
this Agreement; and
(iii) no person with whom the Company has such a
contract, agreement, arrangement, commitment or other understanding in
writing, or to the Shareholder's
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knowledge, oral, is in default thereunder or has failed to perform
fully thereunder by reason of force majeure or other claim of
excusable delay, termination or nonperformance thereunder, the delay,
termination or nonperformance of which, or a default under which, has
had or may have a Material Adverse Effect.
4.20 Absence of Certain Changes. Since December 31, 1996, except as
disclosed in Schedule 4.20, the Company has not: (i) incurred any debts,
obligations or liabilities (absolute, accrued, contingent or otherwise), other
than current liabilities incurred in the Ordinary Course which, individually or
in the aggregate, are not material; (ii) subjected to or permitted a Lien
(other than a Permitted Lien) upon or otherwise encumbered any of its assets,
tangible or intangible; (iii) sold, transferred, licensed or leased any of its
assets or properties except in the Ordinary Course; (iv) discharged or
satisfied any Lien other than a Lien securing, or paid any obligation or
liability other than, current liabilities shown on the Balance Sheet and
current liabilities incurred since the Balance Sheet Date, in each case in the
Ordinary Course; (v) canceled or compromised any debt owed to or by or claim of
or against it, or waived or released any right of material value other than in
the Ordinary Course; (vi) suffered any physical damage, destruction or loss
(whether or not covered by insurance) causing a Material Adverse Effect; (vii)
entered into any material transaction or otherwise committed or obligated
itself to any capital expenditure other than in the Ordinary Course; (viii)
made or suffered any change in, or condition affecting, its condition
(financial or otherwise), properties, profitability, prospects or operations
other than changes, events or conditions in the Ordinary Course, none of which
(individually or in the aggregate) has had or may have a Material Adverse
Effect; (ix) made any change in the accounting principles, methods, records or
practices followed by it or depreciation or amortization policies or rates
theretofore adopted; (x) other than in the Ordinary Course, made or suffered
any amendment or termination of any material contract, agreement, lease or
license to which it is a party; (xi) paid, or made any accrual or arrangement
for payment of, any severance or termination pay to, or entered into any
employment or loan or loan guarantee agreement with, any current or former
officer, director or employee or consultant; (xii) paid, or made any accrual or
arrangement for payment of, any increase in compensation, bonuses or special
compensation of any kind to any employee other than pursuant to an agreement
disclosed on Schedule 4.21(a) or Schedule 4.21(b) or other than in the Ordinary
Course, or paid, or made any accrual or arrangement for payment of, any
increase in compensation, bonuses or special compensation of any kind to any
officer or director of the Company or any consultant to the Company; (xiii)
made or agreed to make any charitable contributions or incurred any nonbusiness
expenses; (xiv) changed or suffered change in any benefit plan or labor
agreement affecting any employee of the Company otherwise than to conform to
Legal Requirements; or (xv) entered into any agreement or otherwise obligated
itself to do any of the foregoing.
4.21 Employees and Labor Matters.
(a) Schedule 4.21(a) contains a true and complete list of all
contracts, agreements, plans, arrangements, commitments and understandings
(written and to the Shareholder's knowledge, oral) pertaining to terms of
employment, compensation, bonuses, profit sharing, stock purchases, stock
repurchases, stock options, commissions, incentives, loans
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or loan guarantees, severance pay or benefits, use of the Company's property
and related matters of the Company with any current or former officer,
director, employee or consultant, and true and complete copies of all such
contracts, agreements, plans, arrangements and understandings have been
delivered to Purchaser heretofore. Attached to Schedule 4.21(a) is the most
current copy of the employee handbook utilized by the Company and distributed
to each of its employees.
(b) Schedule 4.21(b) contains a true and complete list of all
labor, collective bargaining, union and similar agreements under or by which
the Company is obligated, and true and complete copies of all such agreements
have been delivered to Purchaser heretofore.
(c) Except as set forth on Schedules 4.21(a) and 4.21(b),
neither Purchaser nor the Company will have any responsibility for continuing
any person in the employ (or retaining any person as a consultant) of the
Company from and after the Closing or have any liability for any severance
payments to or similar arrangements with any such Person who shall cease to be
an employee of the Company at or prior to the Closing.
(d) There is not occurring or, to the Shareholder's knowledge,
threatened, any strike, slow down, picket, work stoppage or other concerted
action by any union or other group of employees or other persons against either
Company or its premises or products. Except for activities by the unions that
are parties to any of the agreements listed on Schedule 4.21(b) with respect to
the existing members of such unions, to the Shareholder's knowledge, no union
or other labor organization has attempted to organize any of the employees of
the Company.
(e) To the knowledge of Shareholder, the Company has complied
with all Legal Requirements relating to employment and labor, and no facts or
circumstances exist that could provide a reasonable basis for a claim of
wrongful termination by any current or former employee of the Company against
the Company.
4.22 Affiliation. Except as disclosed on Schedule 4.22, none of the
Shareholder, any officer, director or key employee of the Company or Affiliate
of the Company or any of such Persons has, directly or indirectly, (i) an
interest in any Person that (A) furnishes or sells, or proposes to furnish or
sell, services or products that are furnished or sold by the Company or (B)
purchases from or sells or furnishes to, or proposes to purchase from or sell
or furnish to, the Company any goods or services or (ii) a beneficial interest
in any contract or agreement to which the Company is a party or by which the
Company or any of the assets of the Company are bound or affected.
4.23 Principal Customers and Suppliers.
(a) Schedule 4.23(a) contains a true and complete list of the
name and address of each customer that purchased in excess of five percent (5%)
of the Company's sales of goods or services during the twelve months ended on
the Balance Sheet Date, and, except as listed in Schedule 4.23(a), since that
date no such customer has terminated its relationship with or, to the
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knowledge of Shareholder, adversely curtailed its purchases from the Company or
indicated (for any reason) its intention so to terminate its relationship or
curtail its purchases.
(b) Schedule 4.23(b) contains a true and complete list of each
supplier from whom the Company purchased in excess of five percent (5%) of the
Company's purchases of goods or services during the twelve months ended on the
Balance Sheet Date, and, except as listed on Schedule 4.23 (b), since that date
no such supplier has terminated its relationship with or, to the Shareholder's
knowledge, adversely curtailed its accommodations, sales or services to the
Company or indicated (for any reason) its intention to terminate such
relationship or curtail its accommodations, sales or services.
4.24 Compliance with Law. Through and including the date hereof, the
Company (i) has not violated or conducted its business or operations in
violation of, and has not used or occupied its properties or assets in
violation of, any Legal Requirement, (ii) to the Shareholder' knowledge, has
not been alleged to be in violation of any Legal Requirement, and (iii) has not
received any notice of any alleged violation of, or any citation for
noncompliance with, any Legal Requirement.
4.25 Product Returns. Schedule 4.25 contains a true and complete
description of the product return experience of the Company for the immediately
preceding twelve (12) months. The Company has not experienced any product
returns which have had or may have a Material Adverse Effect.
4.26 Product Liability and Product Warranty. Schedule 4.26 hereto
contains a true and complete description of (i) all warranties granted or made
with respect to products sold, or services rendered, by the Company and (ii)
the Company's product liability and product warranty experience for the last
three years. The Company has not suffered any product liability or product
warranty claims which have had or may have a Material Adverse Effect.
4.27 Corporate Records. The copies or originals of the Articles of
Incorporation, Bylaws, minute books and stock records of the Company previously
delivered to, or made available for inspection by, Purchaser are true, complete
and correct.
4.28 Hazardous Materials. Except as set forth on Schedule 4.28:
(a) To the knowledge of Shareholder, no Hazardous Material (i)
has been released, placed, stored, generated, used, manufactured, treated,
deposited, spilled, discharged, released or disposed or on or under any real
property currently or previously owned or leased by the Company or is presently
located on or under any Real Property (or, to the Shareholder's knowledge, any
property adjoining any Real Property), (ii) is presently maintained, used,
generated, or permitted to remain in place by the Company in violation of any
Environmental Law, (iii) is required by any Environmental Law to be eliminated,
removed, treated or mitigated by the company, given the nature of its present
condition, location, nature, material or maintenance, or (iv) is of a type,
location, material, nature or condition which requires special
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notification to third parties by the Company under Environmental Law or common
law.
(b) No notice, citation, summons or order has been received by
the Company or any Shareholder, no notice has been given by the Company and no
complaint has been filed, no penalty has been assessed and no investigation, to
the knowledge of Shareholder, or review is pending or threatened by any
Governmental Entity, with respect to (i) any alleged violation by the Company
of any Environmental Law of (ii) any alleged failure by the Company to have any
environmental permit, certificate, license, approval, registration or
authorization required in connection with its business or properties, or (iii)
any use, possession, generation, treatment, storage, recycling, transportation,
release or disposal by or on behalf of the Company of any Hazardous Material.
(c) The Company has not received any request for information,
notice of claim, demand or notification that it is or that indicates that it
may be a "potentially responsible party" with respect to any investigation or
remediation of any threatened or actual release of any Hazardous Material.
(d) To the knowledge of Shareholder, no above-ground or
underground storage tanks, whether or not in use, are or have ever been located
at any property currently owned or leased by the Company.
(e) No notice has been received by the Company with respect to
the listing or proposed listing of any property currently or previously owned,
operated or leased by the Company on the National Priorities List promulgated
pursuant to CERCLA, CERCLIS or any similar state list of sites requiring
investigation or cleanup.
(f) To the knowledge of Shareholder, there have been no
environmental inspections, investigations, studies, tests, review or other
analyses conducted in relation to any Real Property.
(g) The Company has not yet released, transported, or arranged
for the transportation of any Hazardous Material from any property currently or
previously owned, operated or leased by the Company.
4.29 Brokers' Fees. No broker, finder or similar agent has been
employed by or on behalf of the Company in connection with the Agreements or
the transactions contemplated thereby, and the Company has not entered into any
agreement or understanding of any kind with any person or entity for the
payment of any brokerage commission, finder's fee or any similar compensation
in connection with the Agreements or the transactions contemplated thereby.
4.30 Disclosure.
(a) No representation or warranty of any Shareholder in the
Agreements and no information contained in any Schedule or other writing
delivered pursuant to the Agreements or
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at the Closing contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact required to make the statements
herein or therein not misleading. There is no fact that the Shareholder has not
disclosed to Purchaser in writing that has had or, insofar as the Shareholder
can now foresee, may have a Material Adverse Effect on the ability of the
Shareholder to perform fully this Agreement.
(b) To the extent that any representation or warranty in this
Article 4 is qualified to the Shareholder' "knowledge," the Shareholder
represents and warrants that he has made a reasonable investigation sufficient
to express an informed view concerning the matters to which such representation
or warranty relates, including diligent inquiries of the Company's officers,
directors and employees.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to, and covenants and agrees
with, each of the Shareholder that:
5.1 Organization and Good Standing. Purchaser has been duly
organized and is existing as a corporation in good standing under the laws of
the State of Nevada with full corporate power and authority to enter into the
Agreements and to consummate the transactions contemplated thereby. Purchaser
has the requisite corporate power and authority to own, lease and operate its
properties and conduct its business as currently conducted.
5.2 Execution and Delivery. The Agreements have been duly authorized
by all necessary corporate action on the part of Purchaser, have been duly
executed and delivered by Purchaser and constitute the legal, valid and binding
agreement of Purchaser enforceable against Purchaser in accordance with its
terms.
5.3 No Conflicts. The execution, delivery and performance of the
Agreements by Purchaser and the consummation by Purchaser of the transactions
contemplated thereby will not conflict with or result in the violation of the
provisions of the Articles of Incorporation or Bylaws of Purchaser.
5.4 No Registration. Purchaser understands that the Shares have not
been and will not be registered under applicable federal or state securities
law and may not be sold or transferred except in compliance with such laws or
an exemption therefrom.
5.5 Brokers' Fees. No broker, finder or similar agent has been
employed by or on behalf of the Company in connection with the Agreements or
the transactions contemplated thereby, and the Company has not entered into any
agreement or understanding of any kind with any person or entity for the
payment of any brokerage commission, finder's fee or any similar compensation
in connection with the Agreements or the transactions contemplated thereby.
5.6 Delivery and Good Title. Purchaser shall deliver to Shareholder
pursuant to the
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terms of this Agreement good and marketable title to the Stock to be delivered
free and clear of all liens.
5.7 No Adverse Action. There are no actions, suits, claims or other
proceedings pending or, to the best of Purchaser's knowledge, threatened, or
injunctions or orders entered, pending or, to the best of Purchaser's
knowledge, threatened against Purchaser, to restrain or prohibit the
consummation of the transactions contemplated hereby.
5.8 Material Misstatements or Omissions. Neither the Agreements nor
any other documents, certificate or statement furnished to the Shareholder by
or on behalf of Purchaser in connection with the Agreements, including but not
limited to Purchaser's August 1997 SB-2 Registration Statement currently
pending at the Securities and Exchange Commission ("SEC") and Financial
Statements contain any untrue statement of a material fact, or omit any
material act necessary to make the statements contained therein not misleading;
except, however, that Purchaser will be required to restate its 1996 and 1997
Financial Statements based upon SEC comments denying pooling of interest
accounting with regard to a purchase conducted by the Company in December 1996
and mandating purchase accounting with respect to said transaction in lieu
thereof.
5.9 No Material Adverse Changes. Since the date of Purchaser's
August 1997 SB-2 filing, there have been no changes materially adverse to the
assets, financial condition, operating results or business condition of
Purchaser and its Affiliates, taken as a whole; except, however, that Purchaser
will be required to restate its 1996 and 1997 Financial Statements based upon
SEC comments denying pooling of interest accounting with regard to a purchase
conducted by the Company in December 1996 and mandating purchase accounting
with respect to said transaction in lieu thereof.
5.10 Inspection and Value. The Shareholders' representations and
warranties include only the express written warranties that are contained in
the Agreements or any other documents furnished to Purchaser by Shareholder.
The Shareholder and the Company have given Purchaser ample opportunity to
conduct its due diligence.
5.11 Compliance with Applicable Law. Neither Purchaser nor any of its
Affiliates has received any notice or information of any violation, possible
violation, or default by Purchaser or any of Purchaser's Affiliates under any
applicable law, regulation or order of any governmental department, commission,
board or agency or instrumentality, domestic or foreign, having jurisdiction
over Purchaser's or any of its Affiliate's operations which could materially
adversely affect the ability to consummate the transaction contemplated hereby.
5.12 Consents and Approvals. The execution and delivery by Purchaser
of the Agreements, and the performance by Purchaser of its obligations
thereunder, do not require Purchaser to obtain any consent, approval or action
of, or make any filing with or give any notice to, any corporation, person or
firm or any public, governmental or judicial authority.
5.13 Litigation. There are no actions, proceedings or investigations
pending or, to
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Purchaser's knowledge, threatened against Purchaser or any of its Affiliates
before any court or administrative agency which could materially adversely
affect the Purchaser's ability to consummate the transaction contemplated by
the Agreements.
5.14 No known Adverse Effects. There is no material adverse fact
known to Purchaser, which when taken as a whole, would materially adversely
affect the financial ability of Purchaser to perform its financial obligations
under the Agreements.
6. CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing through
the Closing Date, the Shareholder covenants and agrees (except as expressly
contemplated by this Agreement or to the extent that Purchaser shall otherwise
expressly consent in writing) that:
6.1 Qualification. The Company shall maintain all qualifications to
transact business and remain in good standing in its jurisdiction of
incorporation and in the foreign jurisdictions set forth on Schedule 4.1(a).
6.2 Ordinary Course. The Company shall conduct its business in, and
only in, the Ordinary Course and, to the extent consistent with such business,
shall preserve intact its current business organizations, keep available the
services of its current officers and employees and preserve its relationships
with customers, suppliers and others having business dealings with it to the
end that its goodwill and going business value shall be unimpaired at the
Closing Date. The Company shall maintain its properties and assets in good
condition and repair.
6.3 Corporate Changes. The Company shall not (a) amend its Articles
of Incorporation or Bylaws (or equivalent documents), (b) acquire by merging or
consolidating with, or agreeing to merge or consolidate with, or purchase
substantially all of the stock or assets of, or otherwise acquire, any business
or any corporation, partnership, association or other business organization or
division thereof, (c) enter into any partnership or joint venture, (d) declare,
set aside, make or pay any dividend or other distribution in respect of its
capital stock or purchase or redeem, directly or indirectly, any shares of its
capital stock, (e) issue or sell any shares of its capital stock of any class
or any options, warrants, conversion or other rights to purchase any such
shares or any securities convertible into or exchangeable for such shares, or
(f) liquidate or dissolve or obligate itself to do.
6.4 Indebtedness. The Company shall not incur any Indebtedness, sell
any debt securities or lend money to or guarantee the Indebtedness of any
Person. The Company shall not restructure or refinance its existing
Indebtedness.
6.5 Accounting. The Company shall not make any change in the
accounting principles, methods, records or practices followed by it or
depreciation or amortization policies or rates heretofore adopted by it. The
Company shall maintain its books, records and accounts in accordance with
generally accepted accounting principles applied on a basis consistent with
that
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of prior periods.
6.6 Compliance with Legal Requirements. The Company shall comply
promptly with all requirements that applicable law may impose upon it and its
operations and with respect to the transactions contemplated by this Agreement,
and shall cooperate promptly with, and furnish information to, Purchaser in
connection with any such requirements imposed upon Purchaser, or upon any of
its affiliates, in connection therewith or herewith.
6.7 Disposition of Assets. The Company shall not sell, transfer,
license, lease or otherwise dispose of, or suffer or cause the encumbrance by
any Lien upon any of its properties or assets, tangible or intangible, or any
interest therein, except for sales of inventory in the Ordinary Course.
6.8 Compensation. The Company shall not (a) adopt or amend in any
material respect any collective bargaining, bonus, profit-sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other plan, agreement, trust, fund or arrangement for the benefit
of employees (whether or not legally binding) other than to comply with any
Legal Requirement or (b) pay, or make any accrual or arrangement for payment
of, any increase in compensation, bonuses or special compensation of any kind,
or any severance or termination pay to, or enter into any employment or loan or
loan guarantee agreement with, any current or former officer, director,
employee or consultant of the Company, except for such bonuses as may be
required to offset the individual income tax liability of each Shareholder
relating to the Company.
6.9 Modification or Breach of Agreement; New Agreements. The Company
shall not terminate or modify, or commit or cause or suffer to be committed any
act that will result in breach or violation of any term of or (with or without
notice or passage of time, or both) constitute a default under or otherwise
give any person a basis for non-performance under, any indenture, mortgage,
deed of trust, loan or credit agreement, lease, license or other agreement,
instrument, arrangement or understanding, written or oral, disclosed in this
Agreement or the Schedules hereto. The Company shall refrain from becoming a
party to any contract or commitment other than in the Ordinary Course. The
Company shall meet all of its contractual obligations in accordance with their
respective terms.
6.10 Capital Expenditures. Except for capital expenditures or
commitments necessary to maintain its properties and assets in good condition
and repair (the amount of which shall not exceed Five Thousand Dollars
($5,000.00) in the aggregate), the Company shall not purchase or enter into any
contract to purchase any capital assets.
6.11 Consents. The Company shall use its best efforts to obtain any
consent, authorization or approval of, or exemption by, any Person required to
be obtained or made by any party hereto in connection with the transactions
contemplated hereby or the taking of any action in connection with the
consummation thereof.
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6.12 Maintain Insurance. The Company shall maintain its Policies in
full force and effect and shall not do, permit or willingly allow to be done
any act by which any of the Policies may be suspended, impaired or canceled.
6.13 Discharge. The Company shall not cancel, compromise, release or
discharge any claim of the Company upon or against any person or waive any
right of the Company of material value, and not discharge any Lien (other than
Permitted Liens) upon any asset of the Company or compromise any debt or other
obligation of the Company to any person other than Liens, debts or obligations
with respect to current liabilities of the Company.
6.14 Actions. The Company shall not institute, settle or agree to
settle any Action before any Governmental Entity.
6.15 Permits. The Company shall maintain in full force and effect,
and comply with, all Permits.
6.16 Tax Assessments and Audits. The Company shall furnish promptly
to Purchaser a copy of all notices of proposed assessment or similar notices or
reports that are received from any taxing authority and which relate to the
Company's operations for periods ending on or prior to the Closing Date. The
Shareholder shall cause the Company to promptly inform Purchaser, and permit
the participation in and control by Purchaser, of any investigation, audit or
other proceeding by a Governmental Entity in connection with any Taxes,
assessment, governmental charge or duty and shall not consent to any settlement
or final determination in any proceeding without the prior written consent of
Purchaser.
7. ADDITIONAL COVENANTS
7.1 Covenants of the Shareholder. During the period from the date
hereof through the Closing Date, the Shareholder agrees to:
(a) comply promptly with all requirements that applicable Legal
Requirements may impose upon it with respect to the transactions contemplated
by the Agreement, and shall cooperate promptly with, and furnish information
to, Purchase in connection with any requirements imposed upon Purchaser or upon
any of its affiliates in connection therewith or herewith;
(b) use its reasonable best efforts to obtain (and to cooperate
with Purchaser in obtaining) any consent, authorization or approval of, or
exemption by, any Person required to be obtained or made by such Shareholder in
connection with the transactions contemplated by this Agreement;
(c) use its reasonable best efforts to bring about the
satisfaction of the conditions precedent to Closing set forth in Section 8.1 of
this Agreement;
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(d) promptly advise Purchase orally and, within three (3)
business days thereafter, in writing of any change in such Company's business
or condition that has had or may have a Material Adverse Effect; and
(e) deliver to Purchaser prior to the Closing a written
statement disclosing any untrue statement in this Agreement or any Schedule
hereto (or supplement thereto) or document furnished pursuant hereto, or any
omission to state any material fact required to make the statements herein or
therein contained complete and not misleading, promptly upon the discovery of
such untrue statement or omission, accompanied by a written supplement to any
Schedule to this Agreement that may be affected thereby; provided, however,
that the disclosure of such untrue statement or omission shall not prevent
Purchaser from terminating this Agreement pursuant to Section 9.1(c) hereof at
any time at or prior to the Closing in respect of any original untrue or
misleading statement.
7.2 Covenants of Purchaser. During the period from the date hereof
to the Closing Date, Purchaser shall:
(a) comply promptly with all requirements that applicable Legal
Requirements may impose upon it with respect to the transactions contemplated
by this Agreement, and shall cooperate promptly with, and furnish information
to, the Shareholder in connection with any such requirements imposed upon the
Shareholder or the Company or upon any of the Company's affiliates in
connection therewith or herewith;
(b) use its reasonable best efforts to obtain any consent,
authorization or approval of, or exemption by, any Person required to be
obtained or made by Purchaser in connection with the transactions contemplated
by this Agreement; and
(c) use its reasonable best efforts to bring about the
satisfaction of the condition precedent to Closing set forth in Section 8.2 of
this Agreement.
7.3 Access and Information
(a) During the period commencing on the date hereof and
continuing through the Closing Date, the Shareholder shall continue to cause
the Company to afford to Purchaser and to Purchaser's accountants, counsel,
investment bankers and other representatives, reasonable access to all of its
properties, books, contracts, commitments, records and personnel and, during
such period, to continue to cause the Company to furnish promptly to Purchaser
all information concerning its business, properties and personnel as Purchaser
may reasonably request.
(b) Except to the extent permitted by the provisions of Section
7.6 hereof, Purchaser shall hold in confidence, and shall use reasonable
efforts to ensure that its employees and representatives hold in confidence,
all such information supplied to it by the Shareholder or the Company
concerning the Company and shall not disclose such information to any third
party
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except as may be required by any Legal Requirement and except for information
that (i) is or becomes generally available to the public other than as a result
of disclosure by Purchaser or its representatives, (ii) becomes available to
Purchaser or its representatives from a third party other than the Shareholder
or the Company, and Purchaser or its representatives have no reason to believe
that such third party is not entitled to disclose such information, (iii) is
known to Purchaser or its representatives on a non-confidential basis prior to
is disclosure by any Shareholder or the Company or (iv) is made available by
any Shareholder or the Company to any other Person on a non-restricted basis.
The provisions of this Section 7.3 (b) shall survive the Closing of this
transaction.
7.4 Expenses. All costs and expenses (including, without limitation,
all legal fees and expenses and fees and expenses of any brokers, finders or
similar agents) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring the same.
7.5 Certain Notifications. At all times from the date hereof to the
Closing Date, each party shall promptly notify the others in writing of the
occurrence of any event that will or may result in the failure to satisfy any
of the conditions specified in Article 8 hereof.
7.6 Publicity; Employee Communications. At all times prior to the
Closing Date, each party shall obtain the consent of all other parties hereto
prior to issuing, or permitting any of its directors, officers, employees or
agents to issue, any press release or other information to the press, employees
of the Company or any third party, and information pursuant to a Legal
Requirement will be submitted to the other party for comments before the
information is disclosed, with respect to this Agreement or the transactions
contemplated hereby; provided, however, that no party shall be prohibited from
supplying any information to any of its representatives, agents, attorneys,
advisors, financing sources and others to the extent necessary to complete the
transactions contemplated hereby so long as such representatives, agents,
attorneys, advisors, financing sources and others are made aware of the terms
of this Section 5.6. Nothing contained in this Agreement shall prevent any
party to this Agreement at any time from furnishing any required information to
any Governmental Entity or authority pursuant to a Legal Requirement or from
complying with its legal or contractual obligations.
7.7 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each
of the parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Legal Requirements, to consummate and make
effective the transactions contemplated by this Agreement.
(b) If at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, the
Shareholder and the property officers or directors of Purchaser, as the case
may be, shall take or cause to be taken all such necessary or convenient action
and execute, and deliver and file, or cause to be executed, delivered and
filed, all
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necessary or convenient documentation.
7.8 Competing Offers; Merger or Liquidation. The Shareholder agree
that they will not, and will cause the Company not to, directly or indirectly,
through any officer, director, agent, or otherwise, solicit, initiate or
encourage the submissions of bids, offers or proposals by, any Person with
respect to an acquisition of the Company or its assets or capital stock or a
merger or similar transaction, and the Shareholder will not, and will not
permit the Company to, engage any broker, financial adviser or consultant with
an incentive to initiate or encourage proposals or offers from other parties.
Furthermore, the Shareholder shall not, and shall not permit the Company to,
directly or indirectly, through any officer, director, agent or otherwise,
engage in negotiations concerning any such transaction with, or provide
information to, any Person other than Purchaser and its representatives with a
view to engaging, or preparing to engage, that Person with respect to any
matters in this Section. The Shareholder shall ensure that the Company shall
not commence any proceeding to merge, consolidate or liquidate or dissolve or
obligate itself to do so.
7.9 Inconsistent Action. The Shareholder shall not take or suffer to
be taken, and shall not permit the Company to take or cause or suffer to be
taken, any action that would cause any of the representations or warranties of
any of the Shareholder in this Agreement to be untrue, incorrect, incomplete or
misleading.
7.10 Post-Termination Employment. Except for the employment agreement
to be executed by Xxxxxx X. Xxxxx, the Shareholder acknowledges and agrees
that after the Closing neither Purchaser nor the Company shall be required to
employ or retain any employee of the Company or any other Person.
8. CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions of Purchaser. Notwithstanding any other provision of
this Agreement, the obligations of Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:
(a) There shall not be instituted and pending or threatened any
Action before any Governmental Entity (i) challenging the acquisition of the
Shares by Purchaser or otherwise seeking to restrain or prohibit the
consummation of the transactions contemplated hereby or (ii) seeking to
prohibit the direct or indirect ownership or operation by Purchaser of all or a
material portion of the business or assets of the Company, or to compel
Purchaser or the Company to dispose of or hold separate all or a material
portion of the business or assets of the Company or Purchaser;
(b) The representations and warranties of each of the Shareholder
in the Agreements shall be true and correct in all respects on and as of the
Closing Date with the same effect as if made on the Closing Date and each of
the Shareholder shall have complied with all
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covenants and agreements and satisfied all conditions on such Shareholder' part
to be performed or satisfied on or prior to the Closing Date;
(c) Purchaser shall have received from Xxxxx Xxxxxx, Esq.,
counsel for the Shareholder and the Company, a written opinion dated the
Closing date and addressed to Purchaser, in substantially the form attached as
Exhibit B hereto;
(d) Purchaser shall have received from the President of the
Company a certificate dated the Closing Date in substantially the form attached
as Exhibit C hereto;
(e) The Shareholder shall have entered into a Stock Escrow
Agreement with Purchaser and the Company in substantially the form attached as
Exhibit F hereto, (the "Stock Escrow Agreement");
(f) Xxxxxx X. Xxxxx shall have executed an Employment
Agreement and Stock Sale Restriction Agreement substantially in the form
attached as Exhibit G and H, respectively, hereto.
(g) The Board of Directors of the Company shall have executed
a Board Resolution substantially in the form of Exhibit J.
(h) All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced herein or
incident to the transactions contemplated hereby shall be in form and substance
satisfactory to Purchaser and its counsel;
(i) All consents from third parties, including from any
Governmental Entity, landlord or other Person, necessary for the consummation
of the transactions contemplated hereby shall have been obtained;
(j) No act, event or condition shall have occurred after the
date hereof which Purchaser determines has had or could have had a Material
Adverse Effect;
8.2 Conditions of the Shareholder. Notwithstanding any other
provision of this Agreement, and except as set forth below, the obligations of
the Shareholder to consummate the transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing, of the following
representations:
(a) the condition set forth in subsection (a) of Section 8.1;
(b) the condition that the representations and warranties of
Purchaser in the Agreements shall be true and correct in all material respects
on and as of the Closing Date with the same effect as if made on the Closing
Date and Purchaser shall have complied with all covenants and agreements and
satisfied all conditions on its part to be performed or satisfied on
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or prior to the Closing Date;
(c) Purchaser shall have executed the Agreements in the forms of
Exhibit F, and G attached hereto and incorporated by reference herein and shall
have further provided the Certificate of the Secretary of the Purchaser and
Certificate of the President of the Purchaser in the form of Exhibits E and K,
respectively;
(d) All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced herein or
incident to the transactions contemplated hereby shall be in the form and
substance satisfactory to Shareholder and its counsel;
(e) All consents from third parties, including any Governmental
Entity, landlord or other Person, necessary for the consummation of the
transactions contemplated hereby shall have been obtained;
(f) No act, event or condition shall have occurred after the
date hereof which Shareholder determines has had or could have had a Material
Adverse Effect.
9. TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual consent of the Purchaser and the Shareholder;
(b) by Purchaser if (i) there has been a material
misrepresentation, breach of warranty or breach of covenant by the Shareholder
under this Agreement or (ii) any of the conditions precedent to Closing set
forth in Section 8.1 have not been met on the Closing Date, and, in each case,
Purchaser is not then in material default of its obligations hereunder; or
(c) by the Shareholder if (i) there has been a material
misrepresentation, breach of warranty or breach of covenant by Purchaser under
this Agreement or (ii) any of the conditions precedent to Closing set forth in
Section 8.2 have not been met on the Closing Date, and, in each case, the
Shareholder is not then in material default of his obligations hereunder.
9.2 Effect of Termination.
(a) In the case of any termination of this Agreement, the
provisions of Section 7.3(b) and 7.4 shall remain in full force and effect.
(b) Upon termination of this Agreement as provided in Section
9.1(a), except as stated in subsection (a) above, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of any party hereto or their respective directors, officers,
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employees, agents or other representatives.
(c) In the event of termination of this Agreement as provided in
Section 9.1(b), (c) or (d) hereof, such termination shall be without prejudice
to any rights that the terminating party or parties may have against the
breaching party or parties or any other person under the terms of this
Agreement or otherwise.
9.3 Amendment. This Agreement may be amended at any time by a written
instrument executed by Purchaser and the Shareholder. Any amendment effected
pursuant to this Section 9.3 shall be binding upon all parties hereto.
9.4 Waiver. Any term or provision of this Agreement may be waived in
writing at any time by the party or parties entitled to the benefits thereof.
Any waiver effected pursuant to this Section 9.4 shall be binding upon all
parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any other right, power or privilege. No waiver of any
breach of any covenant or agreement hereunder shall be deemed a waiver of any
preceding or subsequent breach of the same or any other covenant or agreement.
The rights and remedies of each party under this Agreement are in addition to
all other rights and remedies, at law or in equity, that such party may have
against the other parties.
10. INDEMNFICATION
10.1 Survival of Representations and Warranties. The representations
and warranties of the parties hereto contained in this Agreement or in any
writing delivered pursuant hereto or at the Closing shall survive the Closing
and the consummation of the transactions contemplated hereby (and any
examination or investigation by or on behalf of any party hereto) until the
fourth anniversary of the Closing Date, after which neither party can bring
suit against the other; provided, that the representations and warranties
contained in Section 4.12 and Section 4.14 shall not terminate until the
expiration of any applicable statute of limitations; further, that
representations and warranties contained in Article 3, Section 4.17, Section
4.24 and Section 4.28 shall not terminate but shall continue indefinitely.
10.2 Indemnification.
(a) The Shareholder covenants and agrees to defend, indemnify
and hold harmless Purchaser and the Company and each Person who controls
Purchaser or the Company within the meaning of the Securities Act from and
against any Damages arising out of or resulting from: (i) any inaccuracy in or
breach of any representation or warranty made by the Shareholder in this
Agreement or in any writing delivered pursuant to this Agreement or at the
closing [unless and except that such inaccuracy or breach is a direct result of
changes made by the Purchaser in accounting methods or estimates utilized in
financial reporting of the Company]; or (ii) the failure of the Shareholder to
perform or observe fully any covenant, agreement or provision to be performed
or observed by such Shareholder pursuant to this
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Agreement, the Stock Escrow Agreement, Stock Sale Restriction Agreement or the
Employment Agreement.
(b) Purchaser covenants and agrees to defend, indemnify and hold
harmless the Shareholder from and against any Damages arising out of or
resulting from: (i) any inaccuracy in or breach of any representation or
warranty made by Purchaser in this Agreement or in any writing delivered
pursuant to this Agreement or at the Closing; (ii) the failure by Purchaser to
perform or observe fully any covenant, agreement or provision to be performed
or observed by it pursuant to this Agreement, Stock Escrow Agreement, or the
Employment Agreement; or (iii) in the event Purchaser treats this transaction
as a pooling of interest, and due to no fault of the Shareholder a liability or
claim exists, the Purchaser shall indemnify and hold harmless the Shareholder.
10.3 Third Party Claims.
(a) If any party entitled to be indemnified pursuant to Section
10.2 (an "Indemnified Party") receives notice of the assertion by any third
party of any claim or of the commencement by any such third person of any
Action (any such claim or Action being referred to herein as an "Indemnifiable
Claim") with respect to which another party hereto (an "Indemnifying Party") is
or may be obligated to provide indemnification, the Indemnified Party shall
promptly notify, within ten days from the date the Indemnified Party received
notice, the Indemnifying Party in writing (the "Claim Notice") of the
Indemnifiable Claim; provided, that the failure to provide such notice shall
not relieve or otherwise affect the obligation of the Indemnifying Party to
provide indemnification hereunder, except to the extent that any Damages
directly resulted or were caused by such failure.
(b) The Indemnifying Party shall have thirty (30) days after
receipt of the Claim Notice to undertake, conduct and control, through counsel
of its own choosing, and at its expense, the settlement or defense thereof, and
the Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith; provided, that (i) the Indemnifying Party shall permit the
Indemnified Party to participate in such settlement or defense through counsel
chosen by the Indemnified Party (subject to the consent of the Indemnifying
Party, which consent shall not be unreasonably withheld), provided that the
fees and expenses of such counsel shall not be borne by the Indemnifying Party,
and (ii) the Indemnifying Party shall not settle any Indemnifiable Claim
without the Indemnified Party's consent. So long as the Indemnifying Party is
contesting any such Indemnifiable Claim in good faith, the Indemnified Party
shall not pay or settle such claim without the Indemnifying Party's consent,
which consent shall not be unreasonably withheld.
(c) If the Indemnifying Party does not notify the Indemnified
Party within thirty (30) days after receipt of the Claim Notice that it elects
to undertake the defense of the Indemnifiable Claim described therein, the
Indemnified Party shall have the right to contest, settle or compromise the
Indemnifiable Claim in the exercise of its reasonable discretion; provided,
that the Indemnified Party shall notify the Indemnifying Party of any
compromise or
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settlement of any such Indemnifiable Claim.
(d) Anything contained in this Section 10.3 to the contrary
notwithstanding, the Shareholder shall not be entitled to assume the defense,
but shall be permitted to participate in the settlement or defense by counsel
chosen by Shareholder, for any Indemnifiable Claim (and shall be liable for the
reasonable fees and expenses incurred by the Indemnified Party in defending
such claim) if the Indemnifiable Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against Purchaser or
the Company which Purchaser determines, after conferring with its counsel,
cannot be separated from any related claim for money damages and which, if
successfully, would adversely affect the business, properties or prospects of
the Company.
10.4 Indemnification Non-Exclusive. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common-law remedy any party may have for breach of representation,
warranty, covenant or agreement.
10.5 Set-off. Notwithstanding any provision of this Agreement or of
any other agreement, instrument or undertaking, it is understood and agreed
that Purchaser shall have the right to set-off the amount of any indemnity
under Sections 10.2 or 10.3 hereof to the extent any of the Shareholder shall
be liable therefor against any sums of money or any shares of the Purchaser at
any time payable or deliverable to the Shareholder. Notwithstanding the
contrary, Purchaser agrees to set-off against any stock held by Shareholder in
USPL prior to exercising its rights of set-off against any sums of cash due
Shareholder by Purchaser, such as but not limited to sums paid by the Company
to Shareholder pursuant to the royalty letter agreement involving the BFI
contract. The remedies provided in this Article shall be cumulative, shall
survive the termination of this Agreement, and shall not preclude the assertion
by any party of any other rights or the seeking of any other remedies by it
against any other party.
11. POST CLOSING COVENANTS
Notwithstanding anything to the contrary herein, the obligations of
the parties below shall survive the Closing of this transaction.
11.1 Corporate Status. The Company, currently being a Subchapter S
corporation, will terminate its Subchapter S status within a reasonable period
of time subsequent to the Closing.
11.2 Personal Guarantees of Shareholder. The Purchaser agrees to
utilize its best efforts immediately after Closing to remove the Shareholder
from any personal guarantees Shareholder has executed on behalf of the Company.
11.3 Waste Concepts of New York, Inc. The Shareholder, being the sole
shareholder of Waste Concepts of New York, Inc. agrees to transfer all shares
of Waste Concepts of New York, Inc. to Purchaser without any additional
consideration within ten days after the date of Closing.
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11.4 Shareholder Loans. Note #3 of the Financial Statements of the
Company as of June 30, 1997 shows a Shareholder loan owed to Shareholder, the
balance as of that date being $95,100. Note #2 of the Financial Statements of
the Company as of June 30, 1997 shows a loan of $29,374 owed to the Company by
the Shareholder. Purchaser agrees to pay Shareholder the balance due as of the
Closing date on any monies due from the loan indicated in Note #3 and any
additional loans from Shareholder less any monies due from Shareholder by the
loan indicated in Note #2 and any other loans to Shareholder. The settlement of
these transactions shall be paid within 60 days from the date of Closing.
11.5 Collection of Accounts Receivables. The Purchaser agrees to use
its best efforts to collect the accounts receivable of the Company outstanding
as of the Closing Date before exercising any set-off rights under Section 10.5
of this Agreement. Purchaser agrees to transfer and assign to the Shareholder
all of its rights, title and interest in the accounts receivable existing on
the Closing Date which Purchaser deems uncollectible after the expiration of
eighteen months and for which Purchaser exercises its set-off rights.
12. GENERAL PROVISIONS
12.1 Notices. All notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed given
(a) if delivered personally (including by overnight express or messenger), upon
delivery, (b) if delivered by registered or certified mail (return receipt
requested), upon the earlier of actual delivery or three (3) days after being
mailed, or (c) if given by telecopy, upon confirmation of transmission by
telecopy, in each case to at the following addresses:
(a) If to the Purchaser, addressed to:
U. S. Plastic Lumber Corporation
0000 X. Xxxxxx Xxxx
Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxxxx, President and CEO
Telecopy: (000)000-0000
(b) If to Shareholder, addressed to
Xxxxxx X. Xxxxx
0000 XxXxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telecopy: (000)-000-0000
With a copy to:
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Xxxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxxxxx, P.C.
000 Xxxx Xxx Xxxxx 000
Xxxx Xxxxxx, XX 00000
Telecopy: (000) 000-0000
12.2 Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable such term or
provision in any other jurisdiction, the remaining terms and provisions of this
Agreement or the application of such terms and provisions to circumstances
other than those as to which it is held invalid or enforceable.
12.3 Enforcement. In the event of any breach or enforcement of this
Agreement by either Purchaser or Shareholder, the prevailing party in any
litigation shall be entitled to an award of reasonable attorneys' fees and
litigation costs.
12.4 Entire Agreement. This Agreement, including the annexes and
schedules attached hereto and other documents referred to herein, contains the
entire understanding of the parties hereto in respect of its subject matter and
supersedes all prior and contemporaneous agreements and understandings, oral
and written, between the parties with respect to such subject matter.
12.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Purchaser and the Shareholder and their respective
successors, heirs and assigns; provided, however, that no Shareholder shall
directly or indirectly transfer or assign any of such Shareholder's respective
rights hereunder in whole or in part without the prior written consent of
Purchaser, and any such transfer or assignment without said consent shall be
void, ab initio. Subject to the immediately preceding sentence, and except as
set forth in Article 10, this Agreement is not intended to benefit, and shall
not run to the benefit of or be enforceable by, any other person or entity
other than the parties hereto and their permitted successors and assigns.
12.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.
12.7 Recitals, Schedules and Annexes. The recitals, schedules and
annexes to this Agreement are incorporated herein and, by this reference, made
a part hereof as if fully set forth at length herein.
12.8 Construction.
(a) The article, section and subsection headings used herein are
inserted for reference purposes only and shall not in any way affect the
meaning or interpretation of this
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Agreement.
(b) As used in this Agreement, the masculine, feminine or neuter
gender, and the singular or plural, shall be deemed to include the others
whenever and wherever the context so requires.
(c) For the purposes of this Agreement, unless the context
clearly requires, "or" is not exclusive.
12.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the
State of Florida.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or has caused this Agreement to be executed on its behalf by a
representative duly authorized, all as of the date first above set forth.
"PURCHASER"
United States Plastic Lumber, Inc.,
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Xxxx X. Xxxxxxxxx, President
SHAREHOLDER:
/s/ Xxxxxx X. Xxxxx
-----------------------------------
Xxxxxx X. Xxxxx
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A List of Shareholders
Exhibit B Opinion of Counsel
Exhibit C Certificate of President of WCI
Exhibit D Intentionally omitted
Exhibit E Certificate of Secretary of USPL
Exhibit F Stock Escrow Agreement
Exhibit G Employment Agreement
Exhibit H Stock Sale Restriction Agreement
Exhibit I Intentionally omitted
Exhibit J Board Resolution of WCI
Exhibit K Certificate of President of USPL
SCHEDULES
4.1(a) Foreign Corp status
4.1(b) Subsidiaries
4.2 No Conflicts
4.3 Capitalization
4.4 Financial Statements
4.5(a) Liens
4.5(b) List of Real Property
4.5(c) List of Tangible Property
4.5(d) List of Leases
4.5(f) Realty representations
4.6 List of Accounts Receivable
4.7 Inventories
4.8(a) List of Patents and Trademarks
4.8(b) Registered Rights
4.8(c) Licenses
4.9(a) List of Banks
4.9(b) Insurance Policies
4.10(a) Indebtedness
4.10(b) Guaranties
4.11 Judgments
4.12 Income Taxes
4.13 Questionable Payments
4.14 Employee Benefit Plans
4.15 Undisclosed Liabilities
4.16 Permits
4.17 Regulatory Filings
4.18 Consents
4.19(a) Sales Orders
4.19(b) Purchase Orders
4.19(c) Sales Reps
4.19(d) Non-Compete Agreements
4.19(e) Contracts (inside)
4.19(f) Contracts (outside)
4.19(g) Legality
4.20 Absence of Changes
4.21(a) List of Employees
4.21(b) Labor Agreements
4.22 Affiliation
4.23(a) Customer Lists
4.23(b) Supplier Lists
4.24 Compliance with Law
4.25 Product Return
4.26 Warranties
4.28 Hazardous Materials
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