AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered
into as of __________________________, 1997 by among U.S. PLASTIC
LUMBER CORPORATION, a Nevada corporation (the "Parent"), RPI
ACQUISITION CORPORATION, a Wisconsin corporation and a wholly owned
subsidiary of Parent (the "Subsidiary"), and RECYCLED PLASTICS
INDUSTRIES, INC., a Wisconsin corporation (the "Company").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent and the
Company have each determined that the merger of the Company with
and into the Subsidiary (the "Merger") is consistent with and in
furtherance of the long-term business strategy of Parent and the
Company and their respective Shareholders;
WHEREAS, the respective Boards of Directors of Parent,
Subsidiary and the Company have each approved the Merger, upon the
terms and subject to the conditions set forth herein; and
WHEREAS, Parent, Subsidiary and the Company intend that the
Merger qualify as a tax-free reorganization under the provisions of
Section 368 of the Code (as hereinafter defined).
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 Agreement and Plan of Merger.
"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, radioactive or explosive substance or
material, hazardous waste, toxic substance or related material and
any other substance or material defined or designated as a
hazardous or toxic substance, material or waste by any
Environmental Law currently in effect or as amended or promulgated
in the future and shall include, without limitation:
(a) those substances included within the definitions of
"hazardous substances", "hazardous materials", "toxic substances",
or "solid waste" in the Comprehensive Environmental response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Sections 9601, et. seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Sections 6901 et.seq., and the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 et. seq., and in the
regulations promulgated pursuant thereto.
(b) those substances defined as "hazardous substances",
"hazardous materials", "toxic substances", or "solid waste" in the
State of Wisconsin.
(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) evidence by a bond, note, debenture, or
similar instrument (including a purchase money obligation, deed of
trust or mortgage) given in connection with the acquisition of, or
exchange for, any property or assets (other than inventory or
similar property acquired and consumed in the Ordinary Course),
including securities and other Indebtedness, (C) in respect of
letters of credit issued for such Person's account and "swaps" of
interest and currency exchange rate (and other interest and
currency exchange rate hedging agreements) to which such Person is
a party or (D) for the payment of money as lessee under leases that
should be, in accordance with generally accepted accounting
principles, recorded as capital leases for financial reporting
purposes; (ii) any liability of others described in the preceding
clause (i) guaranteed as to payment of principal and interest by
such Person or in effect guaranteed by such Person through an
agreement, contingent or otherwise, to purchase, repurchase or pay
the related Indebtedness or to acquire security therefor; (iii) all
liabilities or obligations secured by a Lien upon property owned by
such Person and upon liabilities or obligations such Person
customarily pays interest or principal, whether or not such Person
has not assumed or become liable for the payment of such
liabilities or obligations; and (iv) any amendment, renewal,
extension, revision or refunding or any such liability or
obligation; provide, however, that Indebtedness shall not include
any liability for compensation of such Person's employees or for
inventory or similar property acquired and consumed in the Ordinary
Course or for services.
"Leased Real Property" shall mean all real property, including
Structures, leased by the Company.
"Legal Requirements" shall mean any statute, law, ordinance,
rule, regulation, permit, order, writ, judgment, injunction, decree
or award issued, enacted or promulgated by any Governmental Entity
or any arbitrator.
"Lien" shall mean all liens (including judgment and mechanics
liens, regardless of whether liquidated), mortgages, assessments,
security interests, easements, claims, pledges, trusts
(constructive or other), deeds of trust, options or other charges,
encumbrances or restrictions.
"Material Adverse effect" shall mean a material adverse effect
on the business, financial condition, properties, profitability,
prospects or operations of the Company.
"Noncompetition Agreement(s)" shall have the meaning assigned
to such term in Section 8.1(g).
"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 Shareholders.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall have the meaning assigned to such term in
Section 4.16.
"Permitted Liens" shall mean (a) Liens for ad valorem real or
personal property taxes or assessments not at the time due and (b)
Liens in respect of pledges or deposits under worker's compensation
laws or similar legislation, carriers', warehousemen's, mechanic's,
laborers' and materialmen's and similar liens, if the obligations
secured by such Liens are not then delinquent.
"Person" shall mean all natural person's, corporations,
business trusts, associations, limited liability companies,
companies partnerships, joint ventures, Governmental Entities and
any other entities.
"Real Property" shall mean the Owned Real Property and the
Lease Real Property, collectively.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Share Percentage" with respect to any Shareholder shall mean
the percentage that the number of Shares held by such Shareholder
represents of the total number of Shares, as set forth on Schedule
"A".
"Shares" shall mean the shares of Common Stock of the Company
held by the shareholders.
"Stock" shall mean shares of common stock issued by the
Parent, 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, alterative 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. THE MERGER
2.1 Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined below) in
accordance with the Wisconsin Business Corporation Law (the
"WBCA"), the Company shall be merged with and into the Subsidiary
and the separate corporate existence of the Company shall thereupon
cease. The Subsidiary shall be the surviving corporation in the
Merger and is hereinafter sometimes referred to as the "Surviving
Corporation." The Merger shall become effective at such time (the
"Effective Time") as shall be stated in the Articles of Merger, in
a form mutually acceptable to Parent and the Company, to be filed
with the Department of Financial Institutions of the State of
Wisconsin in accordance with the WBCA (the "Merger Filing"). The
Merger Filing shall be made simultaneously with or as soon as
practicable after the Closing (as defined below) of the
transactions contemplated by this Agreement.
2.2 Conversion of Company Shares in the Merger. At the
Effective Time, by virtue of the Merger and without any action on
the part of any holder of the Shares, each of the Shares as
described opposite the name of such Shareholder on Schedule "A"
shall be canceled and extinguished and converted into the right to
receive (i) Two Hundred Ninety Nine and 925/1000 Dollars
($299.925), totaling One Million Two Hundred Thousand Dollars
($1,200,000.00); and (ii) 249.9371 shares of the Stock, which is
equivalent to One Million (1,000,000) shares of the Stock, both to
be allocated among the Shareholders as set forth opposite their
names on Schedule "A". The Stock shall not have been registered
pursuant to the Securities Act, provide, however, the Shareholders
shall be entitled to those rights granted pursuant to the
Registration Rights Agreement in the form of Exhibit "A" attached
hereto (the "Registration Rights Agreement").
2.3 Closing". The Closing of the transactions contemplated
by this Agreement, (the "Closing") shall occur at 10:00AM, local
time, on January 27, 1997, simultaneously at the offices of
Dickenson, Murdoch, Xxx and Xxxxx, Suite 410, 000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxx Xxxxx, Xxxxxxx and at the office of the general
counsel for the Company, Green Bay, Wisconsin, or at such other
time or on such other date as shall be agreed upon among the
Company and the Parent upon fulfillment of all conditions precedent
to the Closing, such hour and date being herein generally referred
to as the "Closing Date". At the Closing:
(a) Each Shareholder shall deliver or cause to be delivered to
the Surviving Corporation , against the delivery by the Parent
of the Stock, in payment of the merger consideration to such
Shareholder:
(i) a certificate or certificates representing the Shares
of such Shareholder;
(ii) all of the documents, certificates, and instruments
required to be delivered, or caused to be delivered, by
the Company and such Shareholder pursuant to Section 8.1
hereof; and
(iii) all records, documents, and files of the Company,
including, without limitation, all minute books, stock
records, stock certificate books, and internal accounting
records.
(b) The Surviving Corporation shall deliver or cause to be
delivered to each Shareholder, against delivery of the
certificate or certificates representing the Shares:
(i) certificate(s) of Stock of the Parent representing
the number of shares allocated to the respective
Shareholder as set forth on Schedule "A";
(ii) all of the documents, if any, required to be
delivered by the Surviving Corporation and the Parent
pursuant to Section 8.2 hereof; and
(iii) the cash payment to the Shareholders in the total
amount of One Million Two Hundred Thousand Dollars
($1,200,000.00) to be allocated among the Shareholders as
set forth on Schedule "A", by wire transfer no later than
January 27, 1997 to the trust account of Xxxxxx & Xxxx.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDERS
Each of the Shareholders hereby severally represents and
warrants to, and covenants and agree with, the Parent that:
3.1 Ownership of Shares. Such Shareholder owns of record and
beneficially the number of Shares set forth opposite the name of
such Shareholder on Schedule "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
as provided in Section 180.0622(2)(b) of the Wisconsin Statutes and
the cases decided thereunder.
3.2 OMITTED.
3.3 Execution and Delivery. All consents, approvals,
authorizations and order necessary for the execution, delivery and
performance by such Shareholder of this Agreement (including,
without limitation, the transfer of the Shares by such Shareholder)
have been duly and lawfully obtained, and such Shareholder has, and
at the Closing will have, full right, power, authority and capacity
to execute, deliver and perform this Agreement. This Agreement has
been duly executed and delivered by such Shareholder and
constitutes a legal, valid and binding agreement of such
Shareholder enforceable against such Shareholder in accordance with
its terms.
3.4 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 such Shareholder or such
Shareholder's Shares are bound, or violate any Legal Requirement
applicable to or binding upon such Shareholder.
3.5 No Brokers. No broker, finder or similar agent has been
employed by or on behalf of such Shareholder in connection with
this Agreement or the transactions contemplated hereby, and such
Shareholder has not entered into any agreement or understanding of
any kind with any person or entity for the payment of any brokerage
commission, finder's fee or any similar compensation in connection
with this Agreement or the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
The Shareholders hereby jointly and severally represent and
warrant to, and covenant and agree with, the Parent that:
4.1 Organization and Good Standing.
(a) The Company has been duly organized and is existing
as a corporation in good standing under the laws of the State of
Wisconsin 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, and the failure to so qualify
would have a Material Adverse Effect upon the Company.
(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. Except as set forth on Schedule 4.2, the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (a)
conflict with or result in a breach or violation of any term or
provision of, or constitute a default under (with or without notice
or passage of time, or both), or otherwise give any Person a basis
for accelerated or increased rights or termination or
nonperformance under, any indenture, mortgage, deed of trust, loan
or credit agreement, lease, license or other agreement or
instrument of which the Company is a party or by which the Company
is bound or affected or to which any of the property or assets of
the Company is bound or affected including, without limitation, all
arrangements in Section 4.19 hereof, (b) result in the violation of
the provisions of the Articles of Incorporation or Bylaws of the
Company or any Legal Requirement applicable to or binding upon it,
(c) result in the creation or imposition of any Lien upon any
property or asset of the Company or (d) otherwise adversely affect
the contractual or other legal rights or privileges of the Company.
Schedule 4.2 sets forth a list of all agreements requiring the
consent of any party thereto to any of the transactions
contemplated hereby.
4.3 Capitalization. The authorized capital stock of the
Company consists solely of Ten Thousand (10,000) shares of Common
Stock having a par value of $0.01 per share, of which only the
number of Shares listed on Schedule "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 ,
except as provided in Section 180.0622(2)(b) of the Wisconsin
Statutes and the cases decided thereunder, and outstanding and are
held by the Shareholders in amounts reflected in Schedule "A"
hereto. Other than as set forth on Schedule 4.3, (i) there are no
existing options, warrants, right, calls or commitments of any
character relating to the shares of Common Stock or any other
capital stock or securities of the Company, (ii) there are no
outstanding securities or other instruments convertible into or
exchangeable for shares of Common Stock or any other capital stock
or securities of the Company and no commitments to issue such
securities or instruments and no Person has any right of first
refusal, preemptive right, subscription right or similar right with
respect to any shares of Common Stock or any other capital stock or
securities of the Company. The offer, issuance and sale of the
Shares were (i) exempt from the registration and prospectus
delivery requirements of the Securities Act, (ii) registered or
qualified (or exempt from registration or qualification) under the
registration or qualification requirements of all applicable state
securities laws and (iii) accomplished in conformity with all other
Legal Requirements.
4.4 Financial Statements.
(a) Schedule 4.4 hereto contains true and complete
copies of (i) the unaudited balance sheet (the "Balance Sheet") of
the Company at November 30, 1996 (the "Balance Sheet Date"), and
the related unaudited statements of income for eleven (11) months
then ended, (ii) the reviewed balance sheet of the Company at
(December) 31, 1995 and the related reviewed statements of income,
shareholders' equity and cash flow for the fiscal year then ended
(together with the report thereon of Jonet & Fountain, independent
public accountants)(the financial statements described in clause
(i) and (ii) above are collectively referred to as the "Financial
Statements").
(b) The Financial Statements present fairly the financial
condition of the Company as of the dates indicated therein and the
results of operations and changes in financial position of the
Company for the periods specified therein, have been prepared in
conformity with generally accepted accounting principles applied on
a consistent basis during the periods covered thereby and prior
periods, have been derived from the accounting records of the
Company and represent only actual, bona fide transactions. The
Company's Financial Statements are true and correct in all material
respects and do not contain any untrue statement of a material fact
or omit to state a material fact.
4.5 Title to Property; Encumbrances.
(a) The Company has, and immediately prior to the
Closing will have, good, valid and marketable title in fee simple
to all personal property reflected on the Balance Sheet as owned by
the Company and all 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 different from prior periods, and (iii) Permitted Liens.
(b) Schedule 4.5(b). contains a true and complete list
and legal description of each parcel of Owned Real Property and a
general description of each Structure situated thereon. The
Shareholders have heretofore furnished to Parent 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),
1994 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 Parent heretofore, as well
as copies of any title reports, surveys or environmental reports or
audits relating to any Leased Real Property. Except as set forth
in Schedule 4.5(d), no such lease or license will require the
consent of the lessor or licensor to or as a result of the
consummation of the transactions contemplated by this Agreement.
For the purposes of this Section 4.5(d), a "lease" shall include a
sublease.
(e) All personal property owned by the Company and all
personal property held by the Company pursuant to personal property
leases is in good operating condition and repair, subject only to
ordinary wear and tear, has been operated, serviced and maintained
properly within the recommendations and requirements of the
manufacturers thereof (if any) and is suitable and appropriate for
the use thereof made and proposed to be made by the Company in its
business and operations. The Real Property and personal property
described in Sections 4.5(a), 4.5(b) and 4.5(c) and the Real
Property and personal property held by the Company pursuant to the
leases and licenses described in Schedule 4.5(d) compromise all of
the real property and personal property used in the conduct of
business of the Company.
(f) Except as set forth in Schedule 4.5(f):
(i) The Company is not in violation of, or default under,
any Legal Requirement pertaining to any of the Real Property.
No notice of violation of any Legal Requirement, or of any
covenant, condition, restriction or easement affecting any
Real Property or with respect to the use or occupancy thereof,
has been given by any Person;
(ii) All of the Structures (A) are in good operating
condition and repair, (B) are adequate and suitable for the
purposes for which they are currently and proposed to be used,
and (C) are supplied with utilities and other services
necessary for the operation of such Structures, and the
business conducted by the Company therein, including gas,
electricity, water, telephone, sanitary sewer and storm sewer,
all of which services are maintained in accordance with all
Legal Requirements and are provided via permanent,
irrevocable, appurtenant easements in favor of the Company;
(iii) No condemnation proceeding is pending or, to the
knowledge of the Shareholders, threatened which would impair
the occupancy, use or value of any Real Property;
(iv) No Structure, nor the operations of the Company
therein or thereon, (A) is located outside of the boundary
lines of the described parcel of land on which it is located,
(B) is in violation of applicable setback requirements, zoning
laws, or ordinances, (C) is subject to "permitted non-conforming use" or
"permitted non-conforming structure"
classifications or (D) encroaches on any property owned by, or
easement granted in favor of, any Person;
(v) There are no (A) leases, subleases, licenses,
concessions or other agreements, written or oral, granting to
any other Person the right to acquire, use or occupy any
portion of, any Real Property, (B) outstanding options or
rights of first refusal to purchase all or any portion of Real
Property or interest therein, and (C) Persons (other than the
Company) in possession of any Real Property;
(vi) Each parcel of Owned Real Property (A) is fully and
adequately described in the legal description therefor
contained in the deed thereof, (B) abuts a paved public right-of-way, (C)
does not serve any adjoining property for any
purpose inconsistent with the use of the land, and (D) is not
located within any flood plain or subject to any similar type
restriction for which any permits or licenses necessary to the
use thereof have not been obtained; and
(vii) With respect to each item of Leased Real Property,
(A) to the Shareholders' knowledge, the owner thereof has good
and marketable title thereto, free and clear of all Liens
other than (I) recorded easements, covenants and restrictions
that do not impair the current use, occupancy or value thereof
and (II) the leasehold interest of the Company, (B) there is
adequate ingress and egress (and a continuing right thereto),
without the need for an easement, between paved public rights-of-way and
such Leased Real Property and (C) the Company has
not sold, transferred or subjected to a Lien such Leased Real
Property or any interest therein.
4.6 Accounts Receivable. All accounts receivable of the
Company reflected in the Balance Sheet and all accounts receivable
of the Company that have arisen since the Balance Sheet Date
(except such accounts receivable as have been collected since such
dates) are valid and enforceable claims, and the goods and services
sold and delivered that gave rise to such accounts were sold and
delivered in conformity with all applicable express and implied
warranties, purchase orders, agreements and specifications. Such
accounts receivable of the Company are subject to no valid defense,
offset or counterclaim and are fully collectible, except to the
extent of the allowance for doubtful accounts reflected on the
Balance Sheet. Schedule 4.6 contains a true and complete aging of
the Company's accounts receivable as of the Balance Sheet Date.
4.7 Inventories. Except as described in Schedule 4.7, all
inventories of raw materials, work-in-process and finished good set
forth or reflected in the Balance Sheet or acquired by the Company
since the balance Sheet Date, consist of a quality and quantity
usable and saleable in the Ordinary Course, except for slow-moving,
damaged or obsolete items and materials of below standard quality,
all of which have been written down to net realizable market value
or in respect of which adequate reserves have been provided, in
each case as reflected in the Balance Sheet. The value at which
inventories are carried on the Balance Sheet reflect the normal
inventory valuation policy of the Company, as applicable, in
accordance with generally accepted accounting principles and on a
basis consistent with that of preceding periods, of stating
inventory at the lower of cost or market value. There is no reason
to believe that the Company will experience in the foreseeable
future any difficulty in obtaining, in the desired quantity and
quality, the inventory necessary to conduct its business in the
manner proposed to be conducted, including, without limitation,
inventory which historically has been imported.
4.8 Trademarks, Patents, Etc.
(a) Schedule 4.8(a) contains a true and complete list of
all letters patent, patent applications, trade names, trademarks,
service marks, trademark and service xxxx registrations and
applications, copyrights, copyright registrations and applications,
grants of a license or right to the Company with respect to the
foregoing, both domestic and foreign, claimed by either Company or
used or proposed to be used by the Company in the conduct of its
business, whether registered or not, (collectively herein,
"Registered Rights").
(b) Except as described in Schedule 4.8(b), the Company
owns and has the unrestricted right to use the Registered Rights
and every trade secret, know-how, process, discovery, development,
design, technique, customer and supplier list, promotional idea,
marketing and purchasing strategy, invention, process, confidential
data and or other information (collectively herein, "Proprietary
Information") required for or incident of the design, development,
manufacture, operation, sale and use of all products and services
sold or rendered or proposed to be sold or rendered by the Company,
free and clear of any right, equity or claim of others. The
Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all Proprietary Information.
(c) Schedule 4.8(c) contains a true and complete list
and description of all licenses of or rights to Proprietary
Information granted to the Company by others or to others by the
Company. Except as described in Schedule 4.8(c), (i) the Company
has not sold, transferred, assigned, licensed or subjected to any
Lien, any Registered Right or Proprietary Information or any
interest therein, and (ii) the Company is not obligated or under
any liability whatever to make any payments by way of royalties,
fees or otherwise to any owner or licensor of, or other claimant
to, any Registered Right or Proprietary Information.
(d) There is no claim or demand of any Person pertaining
to, or any Action that is pending or, to the Shareholders'
knowledge, threatened, which challenges the rights of the Company
in respect of any Registered Right or any Proprietary Information.
4.9 Banking and Insurance.
(a) Schedule 4.9(a) contains a true and complete list of
the names and locations of all financial institutions at which the
Company maintains a checking account, deposit account, securities
account, safety deposit box or other deposit or safekeeping
arrangement, the numbers or other identification of all such
accounts and arrangements and the names of all persons authorized
to draw against any funds therein.
(b) Schedule 4.9(b) contains a true and complete list of
all insurance policies and bonds and self insurance arrangements
currently in force that cover or purport to cover risks or losses
to or associated with the Company's business, operations, premises,
properties, assets, employees, agents and directors and sets forth,
with respect to each such policy, bond and self insurance
arrangement, a description of the insured loss coverage, the
expiration date and time of coverage, the dollar limitations of
coverage, a general description of each deductible feature and
principal exclusion and the premiums paid and to be paid prior to
expiration. The insurance policies, bonds and arrangements
described on Schedule 4.9(b) (the "Policies") provide such coverage
against such risk of loss and in such amounts as are customary for
corporations of established reputation engaged in the same or
similar business and similarly situated. The Company has no
obligation, liability or other commitment relating to any contract
of insurance containing a provision for retrospective rating or
adjustment of the Company's premium obligation. To the
Shareholders' knowledge, no facts or circumstances exist that would
cause the Company to be unable to renew its existing insurance
coverage as and when the same shall expire upon terms at least as
favorable as those currently in effect, other than possible
increases in premiums that do not result from any act or omission
of the Company or any Shareholder.
4.10 Indebtedness.
(a) The Company has no liability or obligation for
Indebtedness other than as set 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 Parent heretofore. Except as described in
Schedule 4.10(a), no event has occurred and no condition has become
known to the Company or any Shareholder (including the transactions
contemplated hereby) that constitutes or, with notice or passage of
time, or both, would constitute a default or a basis of force
majeure or other claim of accelerated or increased rights,
termination, excusable delay or nonperformance by the Company or
any other Person under any instrument or document relating to or
evidencing Indebtedness that would entitle any person to require
the Company to pay any portion of the principal amount of such
Indebtedness prior to the scheduled maturity thereof. Except as
set forth in Schedule 4.10(a), no instrument or document
evidencing, creating, securing or otherwise relating to
Indebtedness will require the consent of any person to or as a
result of the consummation of the transactions contemplated by this
Agreement.
(b) Schedule 4.10(b) contains a list and brief
description of all agreements or instruments pursuant to which any
of the Company's directors, employees or shareholders have
guaranteed by Indebtedness of the Company (the "Guaranties"). True
and complete copies of all Guaranties have been delivered to
Parent.
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) To the Shareholders' knowledge, there is no (i)
outstanding judgment, order, decree, award, stipulation, injunction
of any Governmental Entity or arbitrator against or affecting any
officer, director or employee of the Company relating to the
Company or its business, (ii) Action threatened against or
affecting the Company or its properties, assets or business, (iii)
Action pending or threatened against the Company's officers,
directors or employees relating to the Company or its business or
(iv) basis for the institution of any Action against the Company or
any of its officers, directors, employees, properties or assets
which, if decided adversely, would have a Material Adverse Effect.
4.12 Income and Other Taxes. Except as set forth on Schedule
4.12:
(a) All Tax Returns required to be filed through and
including the date hereof in connection with the operations of the
Company are true, complete and correct in all respects and have
been properly and timely filed. The Company has not requested any
extension of time within which to file any Tax Return, which Tax
Return has not since been filed. Parent has heretofore been
furnished by the Company with true, correct and complete copies of
each Tax Return of the Company with respect to the past three (3)
taxable years, and of all reports of, and communications from, any
Governmental Entities relating to such period. The Company has
disclosed on its Federal Income Tax Returns all positions taken
therein that could give rise to a substantial understatement of
income Taxes for federal income tax purposes within the meaning of
Code Section 6662.
(b) All Taxes required to be paid or withheld and
deposited through and including the date hereof in connection with
the operations of the Company have been duly and timely paid or
deposited by the Company. The Company has properly withheld or
collected all amounts required by law for income Taxes and
employment Taxes relating to its employees, creditors, independent
contractors and other third parties, and for sales Taxes on sales,
and has properly and timely remitted such withheld or collected
amounts to the appropriate Governmental Entity. The Company has no
liabilities for any Taxes for any taxable period ending prior to or
coincident with the Closing Date.
(c) The Company has made adequate provision on its book
of account for all Taxes with respect to its business, properties
and operations through the Balance Sheet Date, and the accruals for
Taxes in the Balance Sheet are adequate to cover all liabilities
for Taxes of the Company for all periods ending on or before the
Closing Date.
(d) The Company has never (i) had a tax deficiency
proposed, asserted or assessed against it (ii) executed any waiver
of any statute of limitations on the assessment or collection of
any Taxes, or (iii) been delinquent in the payment of any Taxes.
(e) No Tax Return of the Company has been audited or the
subject of other Action by any Governmental Entity. The Company
has not received any notice from any Governmental Entity of any
pending examination or any proposed deficiency, addition,
assessment, demand for payment or adjustment relating to or
affecting the Company or its assets or properties and no
Shareholder has reason to believe that any Governmental Entity may
assess (or threaten to assess) any Taxes for any periods ending on
or prior to the Closing Date.
(f) The Company (i) has not filed any consent or
agreement pursuant to Code Section 341(f), and no such consent or
agreement will be filed at any time on or before the Closing Date;
(ii) has not made any payments, is not obligated to make any
payments and is not a party to any agreement that under certain
circumstances could obligate the Company to make any payments that
will not be deductible under Code Section 280G, (iii) is not a
United States real property holding corporation within the meaning
of Code Section 897(c)(2); (iv) is not a party to a tax allocation
or sharing agreement; (v) has never been (or does not have any
liability for unpaid Taxes because it was) a member of an
affiliated group with the meaning of Code Section 1504(a); (vi) has
never applied for a tax ruling from a Governmental Entity and (vii)
has never filed or been the subject of an election under Code
Section 338(g) or Code Section 338(h)(10) or caused or been the
subject of a deemed election under Code Section 338(e).
4.13 Questionable Payments. Neither the Company nor, to the
Shareholders' knowledge, any of its directors, officers, agents,
employees or other Person associated with or acting on behalf of
the Company has (a) used any corporate funds for unlawful
contributions, 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.
True and complete copies of each of the following documents (and
any amendments thereto), where applicable, have been delivered
previously to Parent: (i) the Plan documents; (ii) a written
description of any Plan which is not in writing; (iii) if the Plan
is funded through a trust or any third-party funding vehicle, the
trust or other funding agreement; (iv) the Plan's most recent
financial statements; (v) the two most recent annual reports
(including all schedules and attachments thereto) required by
ERISA; (vi) the most recent actuarial report and valuation; (vii)
the most recent determination letter received from the IRS with
respect to each Plan that is intended to be qualified under Code
Section 401 or to be recognized as tax-exempt under Code Section
501(c); (viii) the most recent summary plan description and each
summary of material modifications required by ERISA; (ix) any
agreement providing for the provision of administrative or
investment management services with respect to the Plan; and (x)
all documents and correspondence received from or provided to the
DOL, IRS and PBGC during the past two years.
(b) Each Plan and related trust, annuity, or other
funding agreement complies and has been maintained in compliance
with all applicable Legal Requirements. No non-exempt prohibited
transaction (as defined in Code Section 4975 and ERISA Sections 406
and 408) has occurred and no "fiduciary" (as defined in ERISA
Section 3(21)) has committed any breach of duty which could subject
the Company, any ERISA Affiliate, or any director, officer, or
employee thereof to liability under Title I of ERISA or to tax
under Code Section 4975. All material obligations required to be
performed by the Company and other Person under the terms of each
Plan and applicable Legal Requirement have been performed.
(c) All required reports and descriptions, including,
without limitation, annual reports (Form 5500), summary annual
reports, and summary plan descriptions, have been filed and
distributed timely. With respect to each Plan which is a welfare
plan (as defined in ERISA Section 3(1)), the requirements of Party
6 of Subtitle B of Title I of ERISA and of Code Sections 162(k) and
4980B have been satisfied.
(d) All contributions, premiums, and other payments,
including, without limitation, employer contributions and employee
salary reduction contributions, have been paid when due or accrued
in accordance with the past custom and practice of Seller and any
ERISA Affiliate. No Plan that is subject to Part 3 of Subtitle B
of Title I of ERISA or to Code Section 412 has incurred any
accumulated funding deficiency, whether or not waived, and no other
actual or contingent liability for any other expenses or
obligations of any Plan exists.
(e) There are no pending or, to the Shareholders'
knowledge, threatened Actions (other than routine claims for
benefits) asserted or instituted against any Plan or the assets of
any Plan, or against the Company, or any ERISA Affiliate, trustee,
administrator, or fiduciary of such Plan, and the Shareholders have
no knowledge of any facts that could form the basis of any such
Action. There is no pending or, to the Shareholders' knowledge,
threatened or contemplated Action by any Governmental Entity with
respect to any Plan, and the Shareholders have no knowledge of any
facts that could reasonably be expected to cause or trigger such an
Action.
(f) The Company (or, if applicable, an ERISA Affiliate,)
may terminate, suspend, or amend each Plan at any time, except to
the extent otherwise required by Code Section 4980B, without the
consent of the participants or employees covered by such Plan.
Neither the Company nor any ERISA Affiliate has announced any
intention, made any amendment or binding commitment, or given any
written or oral notice providing that the Company or an ERISA
Affiliate (i) will create additional Plans covering employees of
the Company or any ERISA Affiliate, (ii) will increase benefits
promised or provided pursuant to any Plan, or (iii) will not
exercise after the Closing Date any right or power it may have to
terminate, suspend, or amend any Plan.
(g) Neither the Company nor any ERISA Affiliate
maintains or has maintained any time, or contributes to or has
contributed to or is or was required to contribute to, any (i) Plan
subject to Title IV or ERISA, including, without limitation, any
multi-employer plan (as defined in ERISA Section 3(37)), within the
past five years, or (ii) funded or unfunded medical, health,
accident, or life insurance plan or arrangement for current or
future retirees or terminated employees or their spouses or
dependents (except to the extent required by Code Sections 162(k)
or 4980B).
(h) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will
constitute a termination of employment or other event entitling any
Person to any additional or other benefits, or that would otherwise
modify benefits or the vesting of benefits, provided under any
Plan.
(i) No event has occurred which could subject the
Company of any ERISA Affiliate to any material liability (i) under
any Legal Requirement relating to any Plan, or (ii) resulting from
any obligation of Seller or an ERISA Affiliate to indemnify any
Person against liability incurred with respect to or in connection
with any Plan.
(j) Each Plan which is intended to be qualified under
Code Section 401 has received, within the last five years, a
favorable determination letter from the IRS. No event has occurred
and no facts or circumstances exist which may cause or result in
the loss or revocation 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 Plans
(the "Permits"). Schedule 4.16 contains a true and complete list
of all Permits. Each Permit has been lawfully and validly issued,
and no proceeding is pending or, to the Shareholders' knowledge,
threatened looking toward the revocation, suspension or limitation
of any Permit. The consummation of the transactions contemplated
by this Agreement will not result in the revocation, suspension or
limitation of any Permit and, except as set forth in Schedule 4.16,
no Permit will require the consent of its issuing authority to or
as a result of the consummation of the transaction contemplated
hereby.
4.17 Regulatory Filings. The Company has made all required
registrations and filings with and submissions to all applicable
Governmental Entities relating to the operations of the Company as
currently conducted and as proposed to be conducted, including,
without limitation, all such applicable Governmental Entities
having jurisdiction over any matters pertaining to conservation or
protection of the environment, and the treatment, discharge, use,
handling, storage or production, or disposal of Hazardous
Materials. All such registrations, filings and submissions were in
compliance with all Legal Requirements (including all Environmental
Laws) and other requirements when filed, no material deficiencies
have been asserted by any such applicable Governmental Entities
with respect to such registrations, filings or submissions and, to
the Shareholders' knowledge, no facts or circumstances exist which
would indicate that a material deficiency may be asserted by any
such authority with respect to any such registration, filing or
submission.
4.18 Consents. All consents, authorizations and approvals of
any Person to or as a result of the consummation of the
transactions contemplated hereby, that are necessary or advisable
in connection with the operations and business of the Company as
currently conducted and as proposed to be conducted, or for which
the failure to obtain the same might have, individually or in the
aggregate, a Material Adverse Effect, have been lawfully and
validly obtained by the Company, except as described in Schedules
4.5(c), 4.10 and 4.16 hereto. All consents, authorizations and
approvals described in schedules 4.5(c), 4.10 and 4.16 will have
been lawfully and validly obtained prior to the Closing.
4.19 Material Contracts; No Defaults.
(a) Schedule 4.19(a) contains a true and complete list
and description of the outstanding sales order and sales contract
backlog of the Company having an indicated gross value in excess of
Five Thousand Dollars ($5,000.00) or having a term of duration in
excess of six months. All outstanding sales orders and sales
contracts of the Company have been entered into in the Ordinary
Course. Except as described in Schedule 4.19(a), the Company has
not received any advance, progress payment or deposit in respect of
any sales order or sales contract, and the Company has no sales
order or sales contract that will result, upon completion or
performance thereof, in gross margins materially lower than those
normally experienced by the Company for the services or products
covered by such sales order or sales contract.
(b) Schedule 4.19(b) contains a true and complete list
and description of all outstanding purchase orders and purchase
commitments of the Company having a gross indicated value in excess
of Ten Thousand Dollars ($10,000.00) in the aggregate from any
single supplier or other vendor. All outstanding purchase orders
and purchase commitments of the Company have been incurred in the
Ordinary Course, and no purchase order or purchase commitment of
the Company is in excess of the normal, ordinary and usual
requirements of the business of the Company or at an excessive
price. The principal raw materials used and inventory sold by the
Company are available from several sources at competitive prices
and upon competitive terms and no interruption in production or
Material Adverse Effect will result from the loss of any one of
such sources.
(c) Schedule 4.19(c) contains a true and complete list
of all sales agency, sales representative, distributor, wholesaler,
dealer and similar contracts or agreements of the Company, and true
and complete copies of the same have been delivered to Parent
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 Parent
heretofore. Except as described in Schedule 4.19(d), the Company
is not restricted by any agreement from carrying on its business or
engaging in any other activity anywhere in the world (including
relocating, closing, or terminating any of its operations or
facilities), and no such officer, director, key employee or
Shareholder is a party to or otherwise bound or affected by any
agreement, covenant or other arrangement or understanding that
would restrict or impair his ability to perform diligently his
other duties to the Company. Schedule 4.19(d) also contains a true
and complete list and description of all noncompetition agreements
or covenants in favor of the Company, and true and complete copies
of the same have been delivered to Parent heretofore.
(e) Schedule 4.19(e) contains a true and complete list
and description of all contracts, agreements, understandings,
arrangements and commitments, written or oral, of the Company with
any officer, director, consultant, employee or Affiliate of the
Company or with any associate, Affiliate or employee of any
Affiliate of the Company, other than those disclosed in Schedule
4.21(a) hereto; in each case a true and complete copy of such
written contract, agreement, understanding, arrangement or
commitment or a true and complete summary of such oral contract,
agreement, understanding, arrangement or commitment has been
delivered to Parent 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
Parent heretofore. For the purposes of this subsection (f),
"material" means any contract, agreement, understanding,
arrangement or commitment that (i) involves performance by any
party more than ninety (90) days from the date hereof, (ii)
involves payments or receipts by the Company in excess of Five
Thousand Dollars ($5,000.00), (iii) involves capital expenditures
in excess of Five Thousand Dollars ($5,000.00) or (iv) otherwise
materially affects the Company.
(g) Except as described in Schedule 4.19(g):
(i) each agreement, contract, arrangement or
commitment described above in this Section 4.19 is, and after
the Closing on identical terms will be, legal, valid, binding,
enforceable and in full force and effect;
(ii) no event or condition has occurred or become
known to the Company or any Shareholder or is alleged to have
occurred that constitutes or, with notice or the passage of
time, or both, would constitute a default or a basis of force
majeure or other claim of excusable delay, termination,
nonperformance or accelerated or increased rights by the
Company or any other Person under any contract, agreement,
arrangement, commitment or other understanding, written or
oral, described above in this Section 4.19, or described or
otherwise disclosed pursuant to this Agreement; and
(iii) no person with whom the Company has such a
contract, agreement, arrangement, commitment or other
understanding is in default thereunder or has failed to
perform fully thereunder by reason of force majeure or other
claim of excusable delay, termination or nonperformance
thereunder, the delay, termination or nonperformance of which,
or a default under which, has had or may have a Material
Adverse Effect.
4.20 Absence of Certain Changes. Since December 31, 1995,
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 (formal and informal) pertaining to terms of
employment, compensation, bonuses, profit sharing, stock purchases,
stock repurchases, stock options, commissions, incentives, loans or
loan guarantees, severance pay or benefits, use of the Company's
property and related matters of the Company with any current or
former officer, director, employee or consultant, and true and
complete copies of all such contracts, agreements, plans,
arrangements and understandings have been delivered to Parent
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 Parent
heretofore.
(c) Except as set forth on Schedules 4.21(a) and
4.21(b), neither nor the Company will have any responsibility for
continuing any person in the employ (or retaining any person as a
consultant) of the Company from and after the Closing or have any
liability for any severance payments to or similar arrangements
with any such Person who shall cease to be an employee of the
Company at or prior to the Closing.
(d) There is not occurring or, to the Shareholders'
knowledge, threatened, any strike, slow down, picket, work stoppage
or other concerted action by any union or other group of employees
or other persons against either Company or its premises or
products. Except for activities by the unions that are parties to
any of the agreements listed on Schedule 4.21(b) with respect to
the existing members of such unions, to the Shareholders'
knowledge, no union or other labor organization has attempted to
organize any of the employees of the Company.
(e) The Company has complied with all Legal Requirements
relating to employment and labor, and, to the Shareholders'
knowledge, no facts or circumstances exist that could provide a
reasonable basis for a claim of wrongful termination by any current
or former employee of the Company against the Company.
4.22 Affiliation. Except as disclosed on Schedule 4.22, none
of the Shareholders, any officer, director or key employee of the
Company or any associate or Affiliate of the Company or any of such
Persons has, directly or indirectly, (i) an interest in any Person
that (A) furnishes or sells, or proposes to furnish or sell,
services or products that are furnished or sold by the Company or
(B) purchases from or sells or furnishes to, or proposes to
purchase from or sell or furnish to, the Company any goods or
services or (ii) a beneficial interest in any contract or agreement
to which the Company is a party or by which the Company or any of
the assets of the Company are bound or affected.
4.23 Principal Customers and Suppliers.
(a) Schedule 4.23(a) contains a true and complete list
of the name and address of each customer that purchased in excess
of five percent (5%) of the Company's sales of goods or services
during the twelve months ended on the Balance Sheet Date, and since
that date no such customer has terminated its relationship with or
adversely curtailed its purchases from the Company or indicated
(for any reason) its intention so to terminate its relationship or
curtail its purchases.
(b) Schedule 4.23(b) contains a true and complete list of
each supplier from whom the Company purchased in excess of five
percent (5%) of the Company's purchases of goods or services during
the twelve months ended on the balance Sheet Date, and since that
date no such supplier has terminated its relationship with or
adversely curtailed its accommodations, sales or services to the
Company or indicated (for any reason) its intention to terminate
such relationship or curtail its accommodations, sales or services.
4.24 Compliance with Law. Through and including the date
hereof, the Company (i) has not violated or conducted its business
or operations in violation of, and has not used or occupied its
properties or assets in violation of, any Legal Requirement, (ii)
to the Shareholders' knowledge, has not been alleged to be in
violation of any Legal Requirement, and (iii) has not received any
notice of any alleged violation of, or any citation for
noncompliance with, any Legal Requirement.
4.25 Product Returns. Schedule 4.25 contains a true and
complete description of the product return experience of the
Company for the immediately preceding twelve (12) months. The
Company has not experienced any product returns which have had or
may have a Material Adverse Effect.
4.26 Product Liability and Product Warranty. Schedule 4.26
hereto contains a true and complete description of (i) all
warranties granted or made with respect to products sold, or
services rendered, by the Company and (ii) the Company's product
liability and product warranty experience for the last three years.
The Company has not suffered any product liability or product
warranty claims which have had or may have a Material Adverse
Effect.
4.27 Corporate Records. The copies or originals of the
Articles of Incorporation, Bylaws, minute books and stock records
of the Company previously delivered to, or made available for
inspection by, Parent are true, complete and correct.
4.28 Hazardous Materials. Except as set forth on Schedule
4.28:
(a) No Hazardous Material (i) has been released, placed,
stored, generated, used, manufactured, treated, deposited, spilled,
discharged, released or disposed or on or under any real property
currently or previously owned or leased by the Company or is
presently located on or under any Real Property (or, to the
Shareholders' knowledge, any property adjoining any Real Property),
(ii) is presently maintained, used, generated, or permitted to
remain in place by the Company in violation of any Environmental
Law, (iii) is required by any Environmental Law to be eliminated,
removed, treated or mitigated by the company, given the nature of
its present condition, location, nature, material or maintenance,
or (iv) is of a type, location, material, nature or condition which
requires special notification to third parties by the Company under
Environmental Law or common law.
(b) No notice, citation, summons or order has been
received by the Company or any Shareholder, no notice has been
given by the Company and no complaint has been filed, no penalty
has been assessed and no investigation or review is pending or
threatened by any Governmental Entity, with respect to (i) any
alleged violation by the Company of any Environmental Law of (ii)
any alleged failure by the Company to have any environmental
permit, certificate, license, approval, registration or
authorization required in connection with its business or
properties, or (iii) any use, possession, generation, treatment,
storage, recycling, transportation, release or disposal by or on
behalf of the Company of any Hazardous Material.
(c) The Company has not received any request for
information, notice of claim, demand or notification that it is or
that indicates that it may be a "potentially responsible party"
with respect to any investigation or remediation of any threatened
or actual release of any Hazardous Material.
(d) No above-ground or underground storage tanks,
whether or not in use, are or have ever been located at any
property currently owned or leased by the Company.
(e) No notice has been received by the Company with
respect to the listing or proposed listing of any property
currently or previously owned, operated or leased by the Company on
the National Priorities List promulgated pursuant to CERCLA,
CERCLIS or any similar state list of sites requiring investigation
or cleanup.
(f) There have been no environmental inspections,
investigations, studies, tests, review or other analyses conducted
in relation to any Real Property.
(g) The Company has not yet released, transported, or
arranged for the transportation of any Hazardous Material from any
property currently or previously owned, operated or leased by the
Company.
4.29 Brokers' Fees. No broker, finder or similar agent has
been employed by or on behalf of the Company in connection with
this Agreement or the transactions contemplated hereby, and the
Company has not entered into any agreement or understanding of any
kind with any person or entity for the payment of any brokerage
commission, finder's fee or any similar compensation in connection
with this Agreement or the transactions contemplated hereby.
4.30 Disclosure.
(a) No representation or warranty of any Shareholder in
this Agreement and no information contained in any Schedule or
other writing delivered pursuant to this Agreement or at the
Closing contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact required to
make the statements herein or therein not misleading. There is no
fact that the Shareholders have not disclosed to Parent in writing
that has had or, insofar as any Shareholder can now foresee, may
have a Material Adverse Effect on the ability of any Shareholder to
perform fully this Agreement.
(b) To the extent that any representation or warranty in
this Article 4 is qualified to the Shareholders' "knowledge," the
Shareholders represent and warrant that they have made a reasonable
investigation sufficient to express an informed view concerning the
matters to which such representation or warranty relates, including
diligent inquiries of the Company's officers, directors and
employees.
5. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY
Parent and Subsidiary, jointly and severally, hereby represent
and warrant to, and covenant and agree with, each of the
Shareholders that:
5.1 Organization and Good Standing. Parent and Subsidiary
were duly organized and are existing as a corporation in good
standing under the laws of the State of Nevada and Wisconsin,
respectively, with full corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated
hereby.
5.2 Execution and Delivery. This Agreement has been duly
authorized by all necessary corporate action on the part of the
Parent and Subsidiary, has been duly executed and delivered by the
Parent and the Subsidiary and constitutes the legal, valid and
binding agreement of the Parent and Subsidiary enforceable against
the Parent and Subsidiary in accordance with its terms.
5.3 No Conflicts. The execution, delivery and performance of
this Agreement by the Parent and Subsidiary and the consummation by
the Parent and Subsidiary of the transactions contemplated hereby
will not conflict with or result in the violation of the provisions
of the Articles of Incorporation or Bylaws of the Parent and
Subsidiary.
5.4 Board of Directors Position. The Parent agrees to take
all necessary action so as to cause the Board of Directors of
Parent to elect one (1) of the Shareholders, to be selected by the
Parent's Nominating Committee, as a director of the Parent, for a
two (2) year term beginning after the Closing.
5.5 Capitalization. (a)The authorized capital stock of the
Parent consists solely of Fifty Million (50,000,000) shares of
Common Stock having a par value of $0.0001 per share and Five
Million (5,000,000) shares of Preferred Stock having a par value of
$0.001 per share of which only the shares listed on Schedule 5.5(a)
are, and as of the Closing Date will be issued and outstanding.
All of the shares have been duly authorized and validly issued and
are fully paid, nonassessable, and outstanding. Other than as set
forth on Schedule 5.5 (a), (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 Parent, (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 Parent 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 Parent. 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) and since March
19, 1996 accomplished in conformity with all other Legal
Requirements.
(b) The authorized capital stock of the Subsidiary consists of
Nine Thousand (9,000) shares of the Subsidiary common stock of
which One Hundred (100) shares are issued and outstanding and owned
beneficially and of record by Parent.
5.6 Financial Statements.
(a) Schedule 5.6 hereto contains true and complete
copies of (i) the unaudited balance sheet (the "Balance Sheet") of
the Parent at November 30, 1996, and the related unaudited
statements of income and cash flow for eleven (11) months then
ended, (ii) the audited balance sheet of the Parent at December 31,
1995 and the related audited statements of income, shareholders'
equity and cash flow for the fiscal year then ended (together with
the report thereon of Kuntz, Lesher, Xxxxxxxx & Martini, LLP,
independent public accountants)(the financial statements described
in clause (i) and (ii) above are collectively referred to as the
"Financial Statements").
(b) Subject to the provisions of (c) below, the Financial
Statements present fairly the financial condition of the Parent as
of the dates indicated therein and the results of operations and
changes in financial position of the Parent for the periods
specified therein, have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis during
the periods covered thereby and prior periods, have been derived
from the accounting records of the Parent and represent only
actual, bona fide transactions. The Parent'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.
(c) The Shareholders acknowledge and agree that the Parent is
rapidly expanding through acquisitions and mergers, and that the
Parent's financial statements for periods subsequent to the date of
the Financial Statements will not and cannot accurately reflect the
financial condition of the Parent, and will be substantially
different from the Financial Statements.
5.7 Income and Other Taxes. Except as set forth on Schedule
5.7:
(a) All Tax Returns required to be filed through and
including the date hereof in connection with the operations of the
Parent are true, complete and correct in all respects and have been
properly and timely filed. The Parent has not requested any
extension of time within which to file any Tax Return, which Tax
Return has not since been filed.
(b) All Taxes required to be paid or withheld and
deposited through and including the date hereof in connection with
the operations of the Parent have been duly and timely paid or
deposited by the Parent. The Parent has properly withheld or
collected all amounts required by law for income Taxes and
employment Taxes relating to its employees, creditors, independent
contractors and other third parties, and for sales Taxes on sales,
and has properly and timely remitted such withheld or collected
amounts to the appropriate Governmental Entity. The Parent has no
liabilities for any Taxes for any taxable period ending prior to or
coincident with the Closing Date.
(c) The Parent 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 Parent for all periods ending on or before the
Closing Date.
(d) The Parent 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 Parent has been audited or the
subject of other Action by any Governmental Entity. The Parent 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
Parent or its assets or properties and the Parent has no 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 Parent (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 Parent 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).
5.8 Stock Restriction Agreements. Schedule 5.8 sets forth
complete copies of all agreements between Parent and any of its
shareholders which in any way relate to such shareholders'
inability to sell, gift, bequeath, or otherwise transfer such
shareholders' stock in the Parent (the "Shareholder Restriction
Agreements").
6. CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing
through the Closing Date, the Shareholders jointly and severally
covenant and agree (except as expressly contemplated by this
Agreement or to the extent that Parent 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 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, Parent in connection
with any such requirements imposed upon Parent, 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.
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 Parent a copy of all notices of proposed assessment or
similar notices or reports that are received from any taxing
authority and which relate to the Company's operations for periods
ending on or prior to the Closing Date. The Shareholders shall
cause the Company to promptly inform Parent, and permit the
participation in and control by Parent, 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 Parent.
7. ADDITIONAL COVENANTS
7.1 Covenants of the Shareholders. During the period from
the date hereof through the Closing Date, each Shareholder agrees
to:
(a) comply promptly with all requirements that
applicable Legal Requirements may impose upon it with respect to
the transactions contemplated by the Agreement, and shall cooperate
promptly with, and furnish information to, Parent in connection
with any requirements imposed upon Parent or upon any of its
affiliates in connection therewith or herewith;
(b) use its reasonable best efforts to obtain (and to
cooperate with Parent in obtaining) any consent, authorization or
approval of, or exemption by, any Person required to be obtained or
made by such Shareholder in connection with the transactions
contemplated by this Agreement;
(c) use its reasonable best efforts to bring about the
satisfaction of the conditions precedent to Closing set forth in
Section 8.1 of this Agreement;
(d) promptly advise Parent 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 Parent 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 Parent 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 Parent. During the period from the date
hereof to the Closing Date, Parent shall:
(a) comply promptly with all requirements that
applicable Legal Requirements may impose upon it with respect to
the transactions contemplated by this Agreement, and shall
cooperate promptly with, and furnish information to, the
Shareholders in connection with any such requirements imposed upon
the Shareholders or the Company or upon any of the Company's
affiliates in connection therewith or herewith;
(b) use its reasonable best efforts to obtain any
consent, authorization or approval of, or exemption by, any Person
required to be obtained or made by Parent 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 Shareholders shall
continue to cause the Company to afford to Parent and to Parent'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 Parent all
information concerning its business, properties and personnel as
Parent may reasonably request.
(b) Except to the extent permitted by the provisions of
Section 7.6 hereof, Parent 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
Shareholders or the Company concerning the Company and shall not
disclose such information to any third party except as may be
required by any Legal Requirement and except for information that
(i) is or becomes generally available to the public other than as
a result of disclosure by Parent or its representatives, (ii)
becomes available to Parent or its representatives from a third
party other than the Shareholders or the Company, and Parent or its
representatives have no reason to believe that such third party is
not entitled to disclose such information, (iii) is known to Parent
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. Parent's obligations under the foregoing
sentence shall expire on the Closing Date or, if the Closing does
not occur, two (2) years after the date hereof.
7.4 Expenses. All costs and expenses (including, without
limitation, all legal fees and expenses and fees and expenses of
any brokers, finders or similar agents) incurred in connection with
this Agreement and the transactions contemplated hereby shall be
paid by the party incurring the same.
7.5 Certain Notifications. At all times from the date hereof
to the Closing Date, each party shall promptly notify the others in
writing of the occurrence of any event that will or may result in
the failure to satisfy any of the conditions specified in Article
8 hereof.
7.6 Publicity; Employee Communications. At all times prior
to the Closing Date, each party shall obtain the consent of all
other parties hereto prior to issuing, or permitting any of its
directors, officers, employees or agents to issue, any press
release or other information to the press, employees of the Company
or any third party with respect to this Agreement or the
transactions contemplated hereby; provided, however, that no party
shall be prohibited from supplying any information to any of its
representatives, agents, attorneys, advisors, financing sources and
others to the extent necessary to complete the transactions
contemplated hereby so long as such representatives, agents,
attorneys, advisors, financing sources and others are made aware of
the terms of this Section 5.6. Nothing contained in this Agreement
shall prevent any party to this Agreement at any time from
furnishing any required information to any Governmental Entity or
authority pursuant to a Legal Requirement or from complying with
its legal or contractual obligations.
7.7 Further Assurances.
(a) Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable
efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under
applicable Legal Requirements, to consummate and make effective the
transactions contemplated by this Agreement.
(b) If at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this
Agreement, the Shareholders and the property officers or directors
of Parent, as the case may be, shall take or cause to be taken all
such necessary or convenient action and execute, and deliver and
file, or cause to be executed, delivered and filed, all necessary
or convenient documentation.
7.8 Competing Offers; Merger or Liquidation. The
Shareholders agree that they will not, and will cause the Company
not to, directly or indirectly, through any officer, director,
agent, or otherwise, solicit, initiate or encourage the submissions
of bids, offers or proposals by, any Person with respect to an
acquisition of the Company or its assets or capital stock or a
merger or similar transaction, and the Shareholders will not, and
will not permit the Company to, engage any broker, financial
adviser or consultant with an incentive to initiate or encourage
proposals or offers from other parties. Furthermore, the
Shareholders shall not, and shall not permit the Company to,
directly or indirectly, through any officer, director, agent or
otherwise, engage in negotiations concerning any such transaction
with, or provide information to, any Person other than Parent and
its representatives with a view to engaging, or preparing to
engage, that Person with respect to any matters in this Section.
The Shareholders shall ensure that the Company shall not commence
any proceeding to merge, consolidate or liquidate or dissolve or
obligate itself to do so.
7.9 Inconsistent Action. The Shareholders shall not take or
suffer to be taken, and shall not permit the Company to take or
cause or suffer to be taken, any action that would cause any of the
representations or warranties of any of the Shareholders in this
Agreement to be untrue, incorrect, incomplete or misleading.
7.10 Post-Termination Employment. Except for the employment
agreement to be executed by Xxx Xxxxxxxx, each Shareholder
acknowledges and agrees that after the Closing (a) neither Parent
nor the Surviving Corporation shall be required to employ or retain
any employee of the Company or any other Person, and (b) Surviving
Corporation, in its sole and absolute discretion, may cause the
Company to retain all, some, or none of such employees.
8. CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions of Subsidiary. Notwithstanding any other
provision of this Agreement, the obligations of Subsidiary 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 merger 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 Parent of all or a material portion of the business or assets of
the Company, or to compel Parent or the Surviving Corporation to
dispose of or hold separate all or a material portion of the
business or assets of the Company or Surviving Corporation;
(b) The representations and warranties of each of the
Shareholders in this Agreement shall be true and correct in all
respects on and as of the Closing Date with the same effect as if
made on the Closing Date and each of the Shareholders shall have
complied with all covenants and agreements and satisfied all
conditions on such Shareholder' part to be performed or satisfied
on or prior to the Closing Date;
(c) OMITTED
(d) Subsidiary shall have received from the President of
the Company a certificate dated the Closing Date in substantially
the form attached as Schedule C hereto;
(e) Subsidiary shall have received from each Shareholder
a certificate dated the Closing Date in substantially the form
attached as Schedule D hereto;
(f) Subsidiary shall have received a certificate of the
Secretary of the Company in substantially the form attached as
Schedule E hereto;
(g) Each Shareholder shall have entered into a
Noncompetition Agreement with Parent and the Company in
substantially the form attached as Schedule F hereto,
(collectively, the "Noncompetition Agreements");
(h) Parent shall have concluded (through its
representatives, accountants, counsel and other experts) an
investigation of the business, condition (financial and other),
properties, assets, prospects, operations and affairs of the
Company and shall be satisfied, in its sole discretion, with the
results thereof;
(i) 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
Parent and its counsel;
(j) Parent shall have received reasonable assurances
from those employees, if any, of the Company that may be
identified by Parent in its discretion that they will remain in the
employ of the Company for a reasonable period of time after the
consummation of the transactions contemplated hereby.;
(k) 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;
(l) The Board of Directors of Parent shall have
authorized and approved this Agreement and the transactions
contemplated hereby;
(m) All officers and directors of the company shall have
resigned as such, effective of the Closing;
(n) No act, event or condition shall have occurred after
the date hereof which Parent determines has had or could have had
a Material Adverse Effect;
(o) The Lease Agreement made December 30, 1994 by and
between Plastic Properties, LLC, a Wisconsin Limited Liability
Company, as lessor, and the Company, as lessee, shall be amended to
delete Section IV (C) in its entirety, to provide for a five (5)
year lease term, with right to extend the term for an additional
five (5) years from the Closing Date, and to provide that the
Rental shall be equal to Four Thousand Four Hundred Thirty Two and
42/100 Dollars ($4,432.42) per month; and
(p) Each Shareholder shall execute and deliver the
Registration Rights Agreement.
8.2 Conditions of the Company and the Shareholders.
Notwithstanding any other provision of this Agreement, the
obligations of the Company and the Shareholders 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 challenging
the merger or otherwise seeking to restrain or prohibit the
consummation of the transactions contemplated hereby;
(b) The representations and warranties of the Parent and
Subsidiary in this Agreement shall be true and correct in all
respects on and as of the Closing Date with the same effect as if
made on the Closing Date and the Parent and Subsidiary shall have
complied with all covenants and agreements and satisfied all
conditions on the Parent's and Subsidiary's part to be performed or
satisfied on or prior to the Closing Date;
(c) The Shareholders shall have received from the
President of the Parent and Subsidiary a certificate dated the
Closing Date in substantially the form attached as Schedule 8.2(d)
hereto;
(d) The Shareholders shall have each received from a
certificate of the Secretary of the Parent and Subsidiary in
substantially the form attached as Schedule 8.2(e) hereto;
(e) Each Shareholder shall have entered into a
Noncompetition Agreement with Parent and Subsidiary in
substantially the form attached as Schedule 8.2(f) hereto,
(collectively, the "Noncompetition Agreements");
(f) The Shareholders shall have concluded (through its
representatives, accountants, counsel and other experts) an
investigation of the business, condition (financial and other),
properties, assets, prospects, operations and affairs of the Parent
and shall be satisfied, in its sole discretion, with the results
thereof;
(g) 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
the Shareholders, the Company and its counsel;
(h) No act, event or condition shall have occurred after
the date hereof which the Shareholders determine has had or could
have a Material Adverse Effect on the Parent;
(i) The Lease Agreement made December 30, 1994 by and
between Plastic Properties, LLC, a Wisconsin Limited Liability
Company, as lessor, and the Company, as lessee, shall be amended to
delete Section IV (C) in its entirety, to provide for a five (5)
year lease term, with right to extend the term for an additional
five (5) years from the Closing Date, and to provide that the
Rental shall be equal to Four Thousand Four Hundred Thirty Two and
42/100 Dollars ($4,432.42) per month;
(j) Parent and Subsidiary shall have executed and
delivered the Registration Rights Agreement; and
(k) the cash payment to the Shareholders in the total
amount of One Million Two Hundred Thousand Dollars ($1,200,000.00)
to be allocated among the Shareholders as set forth on Schedule
"A", shall be paid by wire transfer no later than January 27, 1997
to the trust account of Xxxxxx & Xxxx.
(l) Parent and Subsidiary shall have executed and
delivered to Xxx Xxxxxxxx an Employment Agreement in the form
attached hereto as Schedule 8.2(l); and
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 Parent and the
Shareholders;
(b) by Parent if (i) there has been a material
misrepresentation, breach of warranty or breach of covenant by any
Shareholder under this Agreement or (ii) any of the conditions
precedent to Closing set forth in Section 8.1 have not been met on
the Closing Date, and, in each case, Parent is not then in material
default of its obligations hereunder; or
(c) by the Shareholders acting together if (i) there has
been a material misrepresentation, breach of warranty or breach of
covenant by Parent or Subsidiary under this Agreement or (ii) any
of the conditions precedent to Closing set forth in Section 8.2
have not been met on the Closing Date, and, in each case, no
Shareholder is then in material default of his obligations
hereunder.
9.2 Effect of Termination.
(a) In the case of any termination of this Agreement,
the provisions of Section 7.3 and 7.4 shall remain in full force
and effect.
(b) Upon termination of this Agreement as provided in
Section 9.1(a), except as stated in subsection (a) above, this
Agreement shall forthwith become void and there shall be no
liability or obligation on the part of any party hereto or their
respective directors, officers, employees, agents or other
representatives.
(c) In the event of termination of this Agreement as
provided in Section 9.1(b), (c) or (d) hereof, such termination
shall be without prejudice to any rights that the terminating party
or parties may have against the breaching party or parties or any
other person under the terms of this Agreement or otherwise.
9.3 Amendment. This Agreement may be amended at any time by
a written instrument executed by Parent and the Shareholders. Any
amendment effected pursuant to this Section 9.3 shall be binding
upon all parties hereto.
9.4 Waiver. Any term or provision of this Agreement may be
waived in writing at any time by the party or parties entitled to
the benefits thereof. Any waiver effected pursuant to this Section
9.4 shall be binding upon all parties hereto. No failure to
exercise and no delay in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial
exercise of any other right, power or privilege. No waiver of any
breach of any covenant or agreement hereunder shall be deemed a
waiver of any preceding or subsequent breach of the same or any
other covenant or agreement. The rights and remedies of each party
under this Agreement are in addition to all other rights and
remedies, at law or in equity, that such party may have against the
other parties.
10. INDEMNIFICATION
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; provided, that the representations
and warranties contained in Section 4.12 and Section 4.14 shall not
terminate until the expiration of any applicable statute of
limitations; provided, further, that representations and warranties
contained in Article 3, Section 4.17, Section 4.24 and Section 4.28
shall not terminate but shall continue indefinitely.
10.2 Indemnification.
(a) The Shareholders, jointly and severally, covenant
and agree to defend, indemnify and hold harmless Parent and
Surviving Corporation and each Person who controls Parent or the
Surviving Corporation within the meaning of the Securities Act from
and against any Damages arising out of or resulting from: (i) any
inaccuracy in or breach of any representation or warranty made by
any Shareholder in this Agreement or in any writing delivered
pursuant to this Agreement or at the closing [unless and except
that such inaccuracy or breach is a direct result of changes made
by the Parent in accounting methods or estimates utilized in
financial reporting of the Company]; or (ii) the failure of any
Shareholder to perform or observe fully any covenant, agreement or
provision to be performed or observed by such Shareholder pursuant
to this Agreement or the Noncompetition Agreements. Except for the
representations and warranties set forth in Article III ( as to
which there shall be no limitation on any Shareholders' liability),
the Parent and Surviving Corporation and each person who controls
the Parent or Surviving Corporation shall be entitled to
indemnification hereunder only to the extent that the aggregate
amount of all Damages indemnified against hereunder shall exceed
One Hundred Thousand Dollars ($100,000.00), in which case, the
Shareholders shall be required to pay only the amount by which such
aggregate amount of Damages exceeds One Hundred Thousand Dollars
($100,000.00) (the "Basket Amount").
(b) Parent or Surviving Corporation covenants and agrees
to defend, indemnify and hold harmless the Shareholders from and
against any Damages arising out of or resulting from: (i) any
inaccuracy in or breach of any representation or warranty made by
Parent or Subsidiary Corporation in this Agreement or in any
writing delivered pursuant to this Agreement or at the Closing;
(ii) the failure by Parent or Subsidiary Corporation to perform or
observe any covenant, agreement or condition to be performed or
observed by it pursuant to this Agreement; or (iii) the
Shareholders' liability under the Guaranties. The Shareholders
shall be entitled to indemnification hereunder only to the extent
that the aggregate amount of all Damages indemnified against
hereunder shall exceed One Hundred Thousand Dollars ($100,000.00),
in which case, the Parent or Subsidiary Corporation shall be
required to pay only the amount by which such aggregate amount of
Damages exceeds the Basket Amount.
10.3 Third Party Claims.
(a) If any party entitled to be indemnified pursuant to
Section 10.2 (an "Indemnified Party") receives notice of the
assertion by any third party of any claim or of the commencement by
any such third person of any Action (any such claim or Action being
referred to herein as an "Indemnifiable Claim") with respect to
which another party hereto (an "Indemnifying Party") is or may be
obligated to provide indemnification, the Indemnified Party shall
promptly notify the Indemnifying Party in writing (the "Claim
Notice") of the Indemnifiable Claim; provided, that the failure to
provide such notice shall not relieve or otherwise affect the
obligation of the Indemnifying Party to provide indemnification
hereunder, except to the extent that any Damages directly resulted
or were caused by such failure.
(b) The Indemnifying Party shall have thirty (30) days
after receipt of the Claim Notice to undertake, conduct and
control, through counsel of its own choosing, and at its expense,
the settlement or defense thereof, and the Indemnified Party shall
cooperate with the Indemnifying Party in connection therewith;
provided, that (i) the Indemnifying Party shall permit the
Indemnified Party to participate in such settlement or defense
through counsel chosen by the Indemnified Party (subject to the
consent of the Indemnifying Party, which consent shall not be
unreasonably withheld), provided that the fees and expenses of such
counsel shall not be borne by the Indemnifying Party, and (ii) the
Indemnifying Party shall not settle any Indemnifiable Claim without
the Indemnified Party's consent. So long as the Indemnifying Party
is vigorously contesting any such Indemnifiable Claim in good
faith, the Indemnified Party shall not pay or settle such claim
without the Indemnifying Party's consent, which consent shall not
be unreasonably withheld.
(c) If the Indemnifying Party does not notify the
Indemnified Party within thirty (30) days after receipt of the
Claim Notice that it elects to undertake the defense of the
Indemnifiable Claim described therein, the Indemnified Party shall
have the right to contest, settle or compromise the Indemnifiable
Claim in the exercise of its reasonable discretion; provided, that
the Indemnified Party shall notify the Indemnifying Party of any
compromise or settlement of any such Indemnifiable Claim.
(d) Anything contained in this Section 10.3 to the
contrary notwithstanding, the Shareholders shall not be entitled to
assume the defense for any Indemnifiable Claim (and shall be liable
for the reasonable fees and expenses incurred by the Indemnified
Party in defending such claim) if the Indemnifiable Claim seeks an
order, injunction or other equitable relief or relief for other
than money damages against Parent or Subsidiary Corporationwhich
Parent or Subsidiary Corporation 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. Provided, however, the Basket Amount shall be in effect
with respect to all remedies exercised by the Parent or Subsidiary
Corporation.
10.5 Set-off. Notwithstanding any provision of this Agreement
or of any other agreement, instrument or undertaking, it is
understood and agreed that Parent or Subsidiary Corporation 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 Parent at any time payable or deliverable to the Shareholders.
The remedies provided in this Article shall be cumulative 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. GENERAL PROVISIONS
11.1 Notices. All notices and other communications under or
in connection with this Agreement shall be in writing and shall be
deemed given (a) if delivered personally (including by overnight
express or messenger), upon delivery, (b) if delivered by
registered or certified mail (return receipt requested), upon the
earlier of actual delivery or three (3) days after being mailed, or
(c) if given by telecopy, upon confirmation of transmission by
telecopy, in each case to the parties at the following addresses:
(a) If to the Parent or Subsidiary, 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
With a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Dickenson, Murdoch, Xxx and Xxxxx
000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Telecopy:(000) 000-0000
(b) If to any Shareholder, to the address set forth
below such Shareholder's name on Schedule "A"
hereto:
With a copy to:
Xxxxxxx & Xxxx, S. C.
000 Xxxx Xxxxxx
Xxxxx 000
Xxxxx Xxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
11.2 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.
11.3 Entire Agreement. This Agreement, including the annexes
and schedules attached hereto and other documents referred to
herein, contains the entire understanding of the parties hereto in
respect of its subject matter and supersedes all prior and
contemporaneous agreements and understandings, oral and written,
between the parties with respect to such subject matter.
11.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Parent, the Subsidiary, the
Company and the Shareholders and their respective successors, heirs
and assigns; provided, however, that no Shareholder shall directly
or indirectly transfer or assign any of such Shareholder's
respective rights hereunder in whole or in part without the prior
written consent of Parent, 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.
11.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but
all such counterparts together shall constitute but one and the
same Agreement.
11.6 Recitals, Schedules and Annexes. The recitals, schedules
and annexes to this Agreement are incorporated herein and, by this
reference, made a part hereof as if fully set forth at length
herein.
11.7 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 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.
11.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of
conflicts) of the State of Florida.
11.9 Tax Free Treatment of Transaction. The Parent and the
Shareholders shall each use their commercially reasonable efforts
to cause the transaction contemplated hereunder to be treated as a
tax-free reorganization for federal, state and foreign income tax
purposes, provided, however, Parent shall not be required to expend
any funds or suffer any other cost, expense or liability in
connection with its efforts, or the result thereof, to cause the
transaction to be treated as a tax-free transaction.
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.
"PARENT"
________________________ United States Plastic
Lumber, Inc.,
________________________ a Nevada corporation
By:_________________________
____________________________
Print Name/Title
SHAREHOLDERS:
________________________ ____________________________
XXXXXXX X. XXXXX
________________________
________________________ ____________________________
XXX XXXXXXXX
________________________
________________________ ____________________________
XXX XXX XXXXXXX
________________________
________________________ ____________________________
XXXXXX XXX XXXXXX
________________________
"SUBSIDIARY"
________________________ RPI Acquisition Corp., a
Wisconsin corporation
By:_________________________
________________________
____________________________
Print Name/Title
"COMPANY"
________________________ Recycled Plastics
Industries, Inc.,
a Wisconsin corporation
By:_________________________
_________________________ ____________________________
Print Name/Title
