SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as of
March 31, 1997 among U.S. PLASTIC LUMBER CORPORATION, a Nevada corporation and
Clean Earth, Inc. (the "Purchaser") or of any their affiliates or subsidiaries
and the Persons listed on Exhibit "A" attached hereto (such Persons are
sometimes referred to herein collectively as the "Shareholders" and
individually as a "Shareholder").
RECITALS
A. The Shareholders own (i) all of the issued and outstanding capital stock
of INTEGRATED TECHNICAL SERVICES, INC., a Delaware corporation (the
"Company").
B. The Shareholders wish to sell, and the Purchaser wishes to purchase, all
of the issued and outstanding capital stock of the Company upon the terms and
subject to the conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, the terms
defined in this Article 1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms
of any of the terms herein defined. Unless otherwise indicated, any reference
herein to a "Section", "Article", or "Schedule" shall mean the applicable
section, article or schedule of or to this Agreement. All accounting terms
used in this Agreement not defined in this Article 1 shall, except as
otherwise provided for herein, be construed in accordance with generally
accepted accounting principles, consistently applied.
"Action" shall mean any actual or threatened claim, action, suit, arbitration,
hearing, inquiry, proceeding, complaint, charge or investigation by or before
any Governmental Entity or arbitrator and any appeal from any of the forgoing.
"Affiliate" of a Person shall mean any Person that directly or indirectly
controls, is controlled by, or is under common control with the indicated
Person.
"Agreement" shall mean this Securities Purchase Agreement.
"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 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).
(c) 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
(d) 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; provided, however, that Indebtedness shall not include any
liability for compensation of such Person's employees or for inventory or
similar property acquired and consumed in the Ordinary Course or for services.
"Leased Real Property" shall mean all real property, including Structures,
leased by the Company.
"Legal Requirements" shall mean any statute, law, ordinance, rule, regulation,
permit, order, writ, judgment, injunction, decree or award issued, enacted or
promulgated by any Governmental Entity or any arbitrator.
"Lien" shall mean all liens (including judgment and mechanics liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options or other charges, encumbrances or restrictions.
"Material Adverse effect" shall mean a material adverse effect on the
business, financial condition, properties, profitability, prospects or
operations of the Company.
"Noncompetition Agreement(s)" shall have the meaning assigned to such term in
Section 8.1(h).
"Ordinary Course" shall mean, when used with reference to the Company, the
ordinary course of the Company's business, consistent with past practices.
"Owned Real Property" shall mean all real property, including Structures,
owned by the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall have the meaning assigned to such term in Section 4.16.
"Permitted Liens" shall mean (a) Liens for ad valorem real or personal
property taxes or assessments not at the time due and (b) Liens in respect of
pledges or deposits under worker's compensation laws or similar legislation,
carriers', warehousemen's, mechanic's, laborers' and materialmen's and similar
liens, if the obligations secured by such Liens are not then delinquent.
"Person" shall mean all natural person's, corporations, business trusts,
associations, limited liability companies, companies partnerships, joint
ventures, Governmental Entities and any other entities.
"Real Property" shall mean the Owned Real Property and used and Leased 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 Purchaser to the
Shareholders as payment of the Purchase Price, as contemplated by Article 2
hereof.
" Structure" shall mean any facility, building, plant, factory, office,
warehouse structure or other improvement owned or leased by the Company.
"Subsidiary" of a Person shall mean any corporation, partnership, limited
liability company, association or other business entity at least 50% of the
outstanding voting power of which is at the time owned or controlled directly
or indirectly by such Person or by one or more of such subsidiary entity, or
both.
"Tax" shall mean any Federal, state, local or foreign income, gross receipts,
license, payroll, unemployment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including, without limitation, taxes under
Code Section 59A), customs duties, 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. PURCHASE AND SALE OF SECURITIES
2.1 Sale and Delivery. Each Shareholder agrees to sell and deliver to
Purchaser, and Purchaser agrees to purchase and accept from each Shareholder,
free and clear of all Liens, on the terms and conditions set forth in this
Agreement, and for the purchase price described in Section 2.2 below, good and
marketable title to the number of Shares set forth opposite the name of such
Shareholder on Exhibit "A". The Shares to be sold and purchased pursuant to
this Agreement constitute all of the outstanding capital stock of the Company.
2.2 Purchase Price. The Purchase Price for all of the Shares shall be equal
to One Hundred and Ten Thousand dollars ($110,000) plus One Hundred Eighty
Five Thousand (185,000) shares of the unregistered common Stock of USPL, to be
allocated among the Shareholders as set forth opposite their respective names
on Exhibit "A", subject to and payable as follows:
(a) One Hundred and Ten Thousand dollars ($110,000) to be paid
at time of Closing of this transaction and One Hundred and Sixty-six Thousand
Five Hundred (166,500) shares of unregistered common stock of USPL to be
issued simultaneously.
(b) Eighteen Thousand Five Hundred (18,500 ) shares to be
placed into an Escrow Account at time of Closing. Such shares shall be held in
an escrow fund (the "Stock Escrow Fund") under the terms and conditions of an
escrow agreement (the "Stock Escrow Agreement"), as set forth in Exhibit "B".
(c) Execution at the Closing of Employment Agreements for
Xxx Xxxxxxxxx and Xxxxxx Xxxxxxxx as set forth in Exhibit "C" effective as of
the Closing Date, and
(d) Execution at the Closing of Non-Compete Agreements of
the individuals as set forth in Exhibit "D".
(e) USPL will pay off shareholder notes as set forth on the
Balance Sheet dated December 31, 1996, 75 days subsequent to the Closing Date.
2.3 Additional Terms of Purchase.
(a) Registration Rights. The Purchaser will use its reasonable
best efforts to register the securities being issued hereunder at such time as
the Purchaser registers the shares owned by the Xxxxx Partnership, but will be
under no obligation to register such shares.
(b) Dilution of Share Ownership. The Shareholders will suffer
dilution of share ownership to the same extent as other shareholders of
Purchaser, but Purchaser will not take any action to cause the Shareholders to
be diluted in their share ownership separate and apart from the share
ownership of other shareholders of Purchaser.
(c) Purchaser Guarantee. Purchaser shall provide Shareholders
at Closing with a corporate guarantee of payment of the Shareholder Notes
required pursuant to Section 2.2(e) in the form as attached on Exhibit I.
2.4 Closing". The purchase and sale of the Shares and the consummation of
the other transactions contemplated by this Agreement, (the "Closing") shall
occur at 10:00AM, local time, on April 8, 1997, simultaneously at the offices
of the Purchaser and at the office of the general counsel for the Company, or
at such other time, date and place as shall be agreed upon among the
Shareholders and the Purchaser upon fulfillment of all conditions precedent to
the Closing, such hour and date being herein generally referred to as the
"Closing Date". At the Closing:
(a) Each Shareholder shall deliver or cause to be delivered to Purchaser,
against the delivery by the Purchaser of the Stock, in payment by Purchaser of
the Purchase Price to such Shareholder:
(i) a certificate or certificates representing the Shares being sold by such
Shareholder hereunder duly endorsed for transfer, or accompanied by duly
executed assignments separate from the certificate, transferring to Purchaser
good and marketable title to such Shares, free and clear of all Liens;
(ii) executed non-compete agreements of the individuals as provided in Section
2.2(e).
(iii) all of the documents, certificates, and instruments required to be
delivered, or caused to be delivered, by such Shareholder pursuant to Section
8.1 hereof; and
(iv) all records, documents, and files of the Company, including, without
limitation, all minute books, stock records, stock certificate books, and
internal accounting records.
(b) Purchaser shall deliver or cause to be delivered to each Shareholder,
against delivery of the certificate or certificates representing the Shares:
(i) certificate(s) of Stock for One Hundred and Sixty-six Thousand (166,500)
shares of the unregistered common stock of USPL allocated among the
Shareholders as set forth opposite their respective names on Exhibit "A";
(ii) Eighteen Thousand Five Hundred (18,500) shares to be placed into an
Escrow Account as provided in Section 2.2 (b).
(iii) One Hundred and Ten Thousand Dollars ($110,000) by wire transfer to the
attorney escrow account of general counsel for the Company.
(iv) Executed Employment Agreements for Xxx Xxxxxxxxx and Xxxxxx Xxxxxxxx as
provided in Section 2.2(d); and
(v) all of the documents, if any, required to be delivered by Purchaser
pursuant to Section 8.2 hereof; and
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDERS
Each of the Shareholders hereby severally represents and warrants to, and
covenants and agree with, Purchaser that:
3.1 Ownership of Shares. Such Shareholder owns of record and beneficially
the number of Shares set forth opposite the name of such Shareholder on
Exhibit "A" hereto, and has, and at all times prior to and as of the Closing
such Shareholder will have, good and marketable title to such Shares free and
clear of all Liens.
3.2 Delivery of Good Title. Upon delivery of the Shares to be sold by such
Shareholder hereunder and delivery of the Stock therefor pursuant to this
Agreement, Purchaser will have good and marketable title to such Shares free
and clear of all Liens.
3.3 Execution and Delivery. Except as listed on Schedule 3.3, all consents,
approvals, authorizations and order necessary for the execution, delivery and
performance by such Shareholder of this Agreement (including, without
limitation, the transfer and sale of the Shares to be sold by such Shareholder
to Purchaser) have been duly and lawfully obtained, and such Shareholder has,
and at the Closing will have, full right, power, authority and capacity to
execute, deliver and perform this Agreement. This Agreement has been duly
executed and delivered by such Shareholder and constitutes a legal, valid and
binding agreement of such Shareholder enforceable against such Shareholder in
accordance with its terms.
3.4 No Conflicts. Except as listed on Schedule 3.4, 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, Purchaser that:
4.1 Organization and Good Standing.
(a) The Company has been duly organized and is existing as a corporation in
good standing under the laws of the State of Delaware with full power and
authority (corporate and other) to own and lease its properties and to conduct
its business as currently conducted. The Company has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each jurisdiction set forth on Schedule 4.1(a), such
jurisdictions comprising all jurisdictions in which the Company owns or leases
any property, or conducts any business, so as to require such qualifications.
(b) Except as set forth in Schedule 4.1(b), the Company has no Subsidiary nor
owns or controls, or has any other equity investment or other interest in,
directly or indirectly, any corporation, joint venture, partnership,
association or other entity.
4.2 No Conflicts. The execution, delivery and performance of 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 One Thousand (1,000) shares of Common Stock having a par value of
$1.00 per share, of which only the number of Shares listed on Exhibit "A" are,
and as of the Closing will be, issued and outstanding. All of the Shares have
been duly authorized and validly issued and are fully paid, nonassessable and
outstanding and are held by the Shareholders in amounts reflected in Exhibit
"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 December 31,
1996 (the "Balance Sheet Date"), and the related unaudited statements of
income for twelve (12) months then ended, (ii) the reviewed balance sheet of
the Company at December 31, 1996 and the related reviewed statements of
income, shareholders' equity and cash flow for the fiscal year then ended
(together with the report thereon of independent public accountants)(the
financial statements described in clause (i) and (ii) above are collectively
referred to as the "Financial Statements").
(b) The Financial Statements present fairly the financial condition of the
Company as of the dates indicated therein and the results of operations and
changes in financial position of the Company for the periods specified
therein, have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods covered thereby
and prior periods, have been derived from the accounting records of the
Company and represent only actual, bona fide transactions. The Company's
Financial Statements are true and correct in all material respects and do not
contain any untrue statement of a material fact or omit to state a material
fact.
4.5 Title to Property; Encumbrances.
(a) The Company has, and immediately prior to the Closing will have, good,
valid and marketable title in fee simple to all Real Property and all personal
property reflected on the Balance Sheet as owned by the Company and all Real
Property and personal property acquired by the Company since the Balance Sheet
Date, in each case free and clear of all Liens except (i) as set forth on
Schedule 4.5(a), (ii) for sales and other dispositions of inventory in the
Ordinary Course since the Balance Sheet Date which, in the aggregate, have not
been materially different from prior periods, and (iii) Permitted Liens.
(b) Schedule 4.5(b). contains a true and complete list and legal description
of each parcel of Owned Real Property and a general description of each
Structure situated thereon. The Shareholders have heretofore furnished to
Purchaser true and complete copies of all deeds, other instruments of title
and policies of title insurance indicating and describing the Company's
ownership of the Owned Real Property, as well as copies of any surveys or
environmental reports relating to the real property.
(c) Schedule 4.5(c). contains a list of all tangible personal property having
a cost or fair market value in excess of Five Thousand Dollars ($5,000.00)
owned by the Company (other than personal property held by the Company as
lessee under a personal property lease).
(d) Schedule 4.5(d) contains a list of all real property leases, uses,
licenses, permits, 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, 1995 and
December 31, 1996. All leases and licenses pursuant to which the Company
leases or licenses from others are subsisting in full force and effect in
accordance with their respective terms, and there is not, under any real
property lease, personal property lease or license, any existing default or
event of default (or event that, with notice or passage of time, or both,
would constitute a default, or would constitute a basis of force majeure or
other claim of excusable delay or nonperformance). True and complete copies
of all real property leases, licenses and personal property leases listed on
Schedule 4.5(d) have been delivered to Purchaser heretofore, as well as copies
of any title reports, surveys or environmental reports or audits relating to
any Leased Real Property. Except as set forth in Schedule 4.5(d), no such
lease or license will require the consent of the lessor or licensor to or as a
result of the consummation of the transactions contemplated by this Agreement.
For the purposes of this Section 4.5(d), a "lease" shall include a sublease.
(e) All personal property owned by the Company and all personal property held
by the Company pursuant to personal property leases is in good operating
condition and repair, subject only to ordinary wear and tear, has been
operated, serviced and maintained properly within the recommendations and
requirements of the manufacturers thereof (if any) and is suitable and
appropriate for the use thereof made and proposed to be made by the Company in
its business and operations. The Real Property and personal property
described in Sections 4.5(a), 4.5(b) and 4.5(c) and the Real Property and
personal property held by the Company pursuant to the leases and licenses
described in Schedule 4.5(d) compromise all of the real property and personal
property used in the conduct of business of the Company.
(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. To the best of
Shareholders' knowledge, 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 or except as listed on Schedule 4.6-1. Schedule 4.6-2 contains a true
and complete aging of the Company's accounts receivable as of the Balance
Sheet Date. Schedule 4.6.1 contains a listing of doubtful accounts 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 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) To the Shareholders' knowledge, the Company has no liability or
obligation for Indebtedness other than as set forth on Schedule 4.10(a), and
true and complete copies of all instruments and documents evidencing,
creating, securing or otherwise relating to such Indebtedness have been
delivered to Purchaser heretofore. Except as described in Schedule 4.10(a), no
event has occurred and no condition has become known to the Company or any
Shareholder (including the transactions contemplated hereby) that constitutes
or, with notice or passage of time, or both, would constitute a default or a
basis of force majeure or other claim of accelerated or increased rights,
termination, excusable delay or nonperformance by the Company or any other
Person under any instrument or document relating to or evidencing Indebtedness
that would entitle any person to require the Company to pay any portion of the
principal amount of such Indebtedness prior to the scheduled maturity thereof.
Except as set forth in Schedule 4.10(a), no instrument or document evidencing,
creating, securing or otherwise relating to Indebtedness will require the
consent of any person to or as a result of the consummation of the
transactions contemplated by this Agreement.
(b) Schedule 4.10(b) contains a list and brief description of all agreements
or instruments pursuant to which any of the Company's directors, employees or
shareholders have guaranteed the Indebtedness of the Company (the
"Guaranties"). True and complete copies of all Guaranties have been delivered
to Purchaser.
4.11 Judgments; Litigation. Except as set forth on Schedule 4.11:
(a) There is no (i) outstanding judgment, order, decree, award stipulation or
injunction of any Governmental Entity or arbitrator against the Company or its
properties, assets or business or (ii) Action pending against 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, and
(iii) Action pending or threatened against the Company's officers, directors
or employees relating to the Company or its business..
4.12 Income and Other Taxes. Except as set forth on Schedule 4.12:
(a) All Tax Returns required to be filed through and including the date
hereof in connection with the operations of the Company are true, complete and
correct in all respects and have been properly and timely filed. The Company
has not requested any extension of time within which to file any Tax Return,
which Tax Return has not since been filed. Purchaser has heretofore been
furnished by the Company with true, correct and complete copies of each Tax
Return of the Company with respect to the past three (3) taxable years, and of
all reports of, and communications from, any Governmental Entities relating to
such period. The Company has 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 Purchaser: (i) the plan
documents; (ii) a written description of any plan which is not in writing;
(iii) if the plan is funded through a trust or any third-party funding
vehicle, the trust or other funding agreement; (iv) the plans 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) To the best of Shareholders' knowledge, there are no pending or
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. To the best of Shareholders' knowledge, there is no pending
or, to the Shareholders' knowledge, threatened 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) To the best of Shareholders' knowledge, 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 , (iii) as set forth on Schedule 4.26, or (iv) for non-material
current liabilities incurred since the Balance Sheet Date in the Ordinary
Course, as of the date hereof, to the best of shareholders' knowledge, 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. To the best of Shareholders' knowledge 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, threatened, or looking toward the
revocation, suspension or limitation of any Permit. To the best of
Shareholders' knowledge, 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. To the best of Shareholders knowledge, 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. To the best of Shareholders' knowledge, 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
necessary for the consummation by the Company of the transactions contemplated
hereby 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 No sales order or sales contract have been obtained or bid in a
manner which is inconsistent with past practices of the Company, including but
not limited to gross margins on any such sales orders or sales contracts.
(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 Five Thousand Dollars ($5,000.00) 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 inconsistent with the past practices of the Company, including but not
limited to being in excess of the normal, ordinary and usual requirements of
the business of the Company or at an excessive price. The principal raw
materials used and inventory sold by the Company are available from several
sources at competitive prices and upon competitive terms and no interruption
in production or Material Adverse Effect will result from the loss of any one
of such sources.
(c) Schedule 4.19(c) contains a true and complete list of all sales agency,
sales representative, distributor, wholesaler, dealer and similar contracts or
agreements of the Company, and true and complete copies of the same have been
delivered to Purchaser heretofore. Except as described in Schedule 4.19(c),
all of such contracts and agreements are terminable at any time by the Company
without penalty (including, without limitation, any obligation to repurchase
inventories on hand) upon not more than thirty (30) days' notice.
(d) Schedule 4.19(d) contains a true and complete list and description of all
noncompetition agreements and covenants under which the Company or any of
their respective officers, directors or employees or any Shareholder is
obligated, and true and complete copies of the same have been delivered to
Purchaser heretofore. Except as described in Schedule 4.19(d), the Company is
not restricted by any agreement from carrying on its business or engaging in
any other activity anywhere in the world (including relocating, closing, or
terminating any of its operations or facilities), and no such officer,
director, key employee or Shareholder is a party to or otherwise bound or
affected by any agreement, covenant or other arrangement or understanding that
would restrict or impair his ability to perform diligently his other duties to
the Company. Schedule 4.19(d) also contains a true and complete list and
description of all noncompetition agreements or covenants in favor of the
Company, and true and complete copies of the same have been delivered to
Purchaser heretofore.
(e) Schedule 4.19(e) contains a true and complete list and description of all
contracts, agreements, understandings, arrangements and commitments, written
or oral, of the Company with any officer, director, consultant, employee or
Affiliate of the Company or with any associate, Affiliate or employee of any
Affiliate of the Company, other than those disclosed in Schedule 4.21(a)
hereto; in each case a true and complete copy of such written contract,
agreement, understanding, arrangement or commitment or a true and complete
summary of such oral contract, agreement, understanding, arrangement or
commitment has been delivered to Purchaser heretofore.
(f) Schedule 4.19(f) contains a true and complete list and description of all
other material contracts, agreements, understandings, arrangements and
commitments, written or oral, of the Company by which it or its properties,
rights or assets are bound that are not otherwise disclosed in this Agreement
or the Schedule hereto. True and complete copies of such written contracts,
agreements, understandings, arrangements and commitments and true and complete
summaries of such oral contracts, agreements, understandings, arrangements and
commitments have been delivered to Purchaser heretofore. For the purposes of
this subsection (f), "material" means any contract, agreement, understanding,
arrangement or commitment that (i) involves performance by any party more than
ninety (90) days from the date hereof, (ii) involves payments or receipts by
the Company in excess of Five Thousand Dollars ($5,000.00), (iii) involves
capital expenditures in excess of Five Thousand Dollars ($5,000.00) or (iv)
otherwise materially affects the Company.
(g) To the best of Shareholders' knowledge, 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 in full
force and effect;
(ii) no event or condition has occurred or become known to the Company or any
Shareholder or is alleged to have occurred that constitutes or, with notice or
the passage of time, or both, would constitute a default or a basis of force
majeure or other claim of excusable delay, termination, nonperformance or
accelerated or increased rights by the Company or any other Person under any
contract, agreement, arrangement, commitment or other understanding, written
or oral, described above in this Section 4.19, or described or otherwise
disclosed pursuant to this Agreement; and
(iii) no person with whom the Company has such a contract, agreement,
arrangement, commitment or other understanding is in default thereunder or has
failed to perform fully thereunder by reason of force majeure or other claim
of excusable delay, termination or nonperformance thereunder, the delay,
termination or nonperformance of which, or a default under which, has had or
may have a Material Adverse Effect.
4.20 Absence of Certain Changes. Since December 31, 1996, except as
disclosed in 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)
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 employees,
contracts, agreements, plans, arrangements, commitments and understandings
(formal and informal) pertaining to terms of employment, compensation,
bonuses, profit sharing, stock purchases, stock repurchases, stock options,
commissions, incentives, loans or loan guarantees, severance pay or benefits,
use of the Company's property and related matters of the Company with any
current or former officer, director, employee or consultant, and true and
complete copies of all such contracts, agreements, plans, arrangements and
understandings have been delivered to Purchaser heretofore. Attached to
Schedule 4.21(a) is the most current copy of the employee handbook utilized by
the Company and distributed to each of its employees.
(b) Schedule 4.21(b) contains a true and complete list of all labor,
collective bargaining, union and similar agreements under or by which the
Company is obligated, and true and complete copies of all such agreements have
been delivered to Purchaser heretofore.
(c) Except as set forth on Schedules 4.21(a) and 4.21(b), neither Purchaser
nor the Company will have any 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) To the best of Shareholders' knowledge, the Company has complied with all
Legal Requirements relating to employment and labor, and, to the Shareholders'
knowledge pending or threatened claims or actions 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, to the best
of Shareholders' knowledge, 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 a Material Adverse Effect.
4.27 Corporate Records. The copies or originals of the Articles of
Incorporation, Bylaws, minute books and stock records of the Company
previously delivered to, or made available for inspection by, Purchaser are
true, complete and correct.
4.28 Hazardous Materials. Except as set forth on Schedule 4.28:
(a) To the Shareholders' knowledge, no Hazardous Material (i) has been
released, placed, stored, generated, used, manufactured, treated, deposited,
spilled, discharged, released or disposed by the Company 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) To the best of Shareholders' knowledge, 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..
(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 PURCHASER
Purchaser hereby represents and warrants to, and covenants and agrees with,
each of the Shareholders that:
5.1 Organization and Good Standing. Purchaser has been duly organized and
is existing as a corporation in good standing under the laws of the State of
Nevada with full corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby.
5.2 Execution and Delivery. This Agreement has been duly authorized by all
necessary corporate action on the part of Purchaser, has been duly executed
and delivered by Purchaser and constitutes the legal, valid and binding
agreement of Purchaser enforceable against Purchaser in accordance with its
terms.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby will not conflict with or result in the violation of the
provisions of the Articles of Incorporation or Bylaws of Purchaser.
5.4 Full Disclosure. To the best of Purchaser's knowledge, the
information furnished by or on behalf of Purchaser to Shareholders or the
Company in connection with this Agreement and the transactions contemplated
hereby does not and will not contain any untrue statement of a material fact
and does not and will not omit to state any material fact necessary to make
the statements made, in the context in which made, not false or misleading.
The Purchaser, to the best of its knowledge, is not aware of any claims
threatened or pending against the Purchaser that may have a material adverse
impact upon the financial stability of Purchaser.
6. CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing through the
Closing Date, the Shareholders jointly and severally covenant and agree
(except as expressly contemplated by this Agreement or to the extent that
Purchaser shall otherwise expressly consent in writing) that:
6.1 Qualification. The Company shall maintain all qualifications to
transact business and remain in good standing in its jurisdiction of
incorporation and in the foreign jurisdictions set forth on Schedule 4.1(a).
6.2 Ordinary Course. The Company shall conduct its business in, and only
in, the Ordinary Course and, to the extent consistent with such business,
shall preserve intact its current business organizations, keep available the
services of its current officers and employees and preserve its relationships
with customers, suppliers and others having business dealings with it to the
end that its goodwill and going business value shall be unimpaired at the
Closing Date. The Company shall maintain its properties and assets in good
condition and repair.
6.3 Corporate Changes. The Company shall not (a) amend its Articles of
Incorporation or Bylaws (or equivalent documents), (b) acquire by merging or
consolidating with, or agreeing to merge or consolidate with, or purchase
substantially all of the stock or assets of, or otherwise acquire, any
business or any corporation, partnership, association or other 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. Except for the Company's need to draw down on its
existing lines of credit, the Company shall not incur any Indebtedness, sell
any debt securities or lend money to or guarantee the Indebtedness of any
Person. The Company shall not restructure or refinance its existing
Indebtedness.
6.5 Accounting. The Company shall not make any change in the accounting
principles, methods, records or practices followed by it or depreciation or
amortization policies or rates heretofore adopted by it. The Company shall
maintain its books, records and accounts in accordance with generally accepted
accounting principles applied on a basis consistent with that of prior
periods.
6.6 Compliance with Legal Requirements. The Company shall comply promptly
with all requirements that applicable law may impose upon it and its
operations and with respect to the transactions contemplated by this
Agreement, and shall cooperate promptly with, and furnish information to,
Purchaser in connection with any such requirements imposed upon Purchaser, or
upon any of its affiliates, in connection therewith or herewith.
6.7 Disposition of Assets. The Company shall not sell, transfer, license,
lease or otherwise dispose of, or suffer or cause the encumbrance by any Lien
upon any of its properties or assets, tangible or intangible, or any interest
therein, except for sales of inventory in the Ordinary Course.
6.8 Compensation. The Company shall not (a) adopt or amend in any material
respect any collective bargaining, bonus, profit-sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other plan,
agreement, trust, fund or arrangement for the benefit of employees (whether or
not legally binding) other than to comply with any Legal Requirement or (b)
pay, or make any accrual or arrangement for payment of, any increase in
compensation, bonuses or special compensation of any kind, or any severance or
termination pay to, or enter into any employment or loan or loan guarantee
agreement with, any current or former officer, director, employee or
consultant of the Company, except for such bonuses as may be required to
offset the individual income tax liability of each Shareholder relating to the
Company.
6.9 Modification or Breach of Agreement; New Agreements. The Company shall
not terminate or modify, or commit or cause or suffer to be committed any act
that will result in breach or violation of any term of or (with or without
notice or passage of time, or both) constitute a default under or otherwise
give any person a basis for non-performance under, any indenture, mortgage,
deed of trust, loan or credit agreement, lease, license or other agreement,
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 service its customers and maintain its properties and assets in
good condition and repair, 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 without providing reasonable notice to
Purchaser in writing prior to taking any action hereunder..
6.15 Permits. The Company shall maintain in full force and effect, and
comply with, all Permits.
6.16 Tax Assessments and Audits. The Company shall furnish promptly to
Purchaser a copy of all notices of proposed assessment or similar notices or
reports that are received from any taxing authority and which relate to the
Company's operations for periods ending on or prior to the Closing Date. The
Shareholders shall cause the Company to promptly inform Purchaser, and permit
the participation in and control by Purchaser, of any investigation, audit or
other proceeding by a Governmental Entity in connection with any Taxes,
assessment, governmental charge or duty and shall not consent to any
settlement or final determination in any proceeding without the prior written
consent of Purchaser.
6.17 Confidentiality. Shareholders and Purchaser, and their officers,
directors, shareholders, employees, agents, servants, and assigns shall hold
in confidence and cause Purchasers and the Shareholders' and the Company's
Representatives (as defined below) to hold in confidence all Confidential
Information (as defined below) and not disclose the same to any third person
without the prior consent of Purchaser or Shareholders, as the case may be,
except to Purchaser's and the Shareholder's and the Company's Representatives
who need such information for the purpose of evaluating the transactions
contemplated by this Agreement (such person shall be informed by Purchaser,
Shareholders or the Company of the confidential nature of the material and
shall be subject to all the terms of this Agreement; the Purchaser and the
Shareholders and the Company shall be responsible for any breach of such terms
by any such Representatives). If this Agreement is terminated or dissolved
for any reason, Purchaser, Shareholders and the Company will promptly return
to each other all Confidential Information furnished by Purchaser and held by
each other, including all copies and summaries thereof and will not make use
of such Confidential Information. As used herein, "Confidential Information"
means all information concerning Purchaser, Shareholders, and the Company and
their business obtained by Purchaser, Shareholders, the Company, or their
directors, officers, employees, attorneys, agents or other representatives
(collectively, "Representatives") in connection with the transactions
contemplated by this Agreement except information which (i) was available to
the public prior to the time of such disclosure, (ii) becomes available to the
public through no act or omission of the Purchaser, Shareholders or the
Company or their Representatives, or is given to the Purchaser, Shareholders
or the Company thereafter, in either case by a third party not known by the
Purchaser, Shareholders or the Company to be under any obligation of
confidentiality to the Purchaser, shareholders, and the Company with respect
thereto. "Confidential Information" includes this Agreement.
6.18. Notice. Purchaser and shareholders promptly, by written
notice, shall advise each other of any information that indicates that any
representation or warranty of the Purchaser, the Company or Shareholders
contained in this Agreement is not true and correct or that Purchaser, the
Company or Shareholders have breached any of their obligations under this
Agreement. Purchaser and Shareholders promptly, by written notice, shall
advise each other of any event, condition or circumstance (an "Event")
occurring after the date hereof through the Closing Date which causes any of
the representations and warranties of Purchaser, the Company or Shareholders
not to be true and correct in all material respects as of the date hereof or
as of the date such Event occurred (as if Purchaser, Shareholders and the
Company had made such representation or warranty on the date such Event
occurred). Purchaser and Shareholders closing under this Agreement after
their receipt of information furnished by Purchaser, the Company or
Shareholders pursuant hereto shall not operate as a waiver of any of
Purchaser's or Shareholders' rights for any misrepresentation or breach of any
representation or warranty which is disclosed by such information.
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,
Purchase in connection with any requirements imposed upon Purchaser or upon
any of its affiliates in connection therewith or herewith;
(b) use its reasonable best efforts to obtain (and to cooperate with
Purchaser in obtaining) any consent, authorization or approval of, or
exemption by, any Person required to be obtained or made by such Shareholder
in connection with the transactions contemplated by this Agreement;
(c) use its reasonable best efforts to bring about the satisfaction of the
conditions precedent to Closing set forth in Section 8.1 of this Agreement;
(d) promptly advise Purchaser 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
7.2 Covenants of Purchaser. During the period from the date hereof to the
Closing Date, Purchaser shall:
(a) comply promptly with all requirements that applicable Legal Requirements
may impose upon it with respect to the transactions contemplated by this
Agreement, and shall cooperate promptly with, and furnish information to, the
Shareholders in connection with any such requirements imposed upon the
Shareholders or the Company or upon any of the Company's affiliates in
connection therewith or herewith;
(b) use its reasonable best efforts to obtain any consent, authorization or
approval of, or exemption by, any Person required to be obtained or made by
Purchaser in connection with the transactions contemplated by this Agreement;
and
(c) use its reasonable best efforts to bring about the satisfaction of the
condition 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, Purchaser, the Company and the Shareholders shall afford each
other and their accountants, counsel, investment bankers and other
representatives, reasonable access to all of their properties, books,
contracts, commitments, records and personnel and, during such period, to
continue to cause Purchaser and the Company to furnish promptly to Purchaser
and Shareholders all information concerning their business, properties and
personnel as each may reasonably request.
(b) Except to the extent permitted by the provisions of Section 7.6 hereof,
Shareholders and Purchaser and their officers, directors, shareholders,
employees, agents, successors, and assigns shall hold in confidence, all
information supplied to them concerning Purchaser, Shareholders and 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 Shareholders and Purchaser or their representatives, (ii)
becomes available to Shareholders and Purchaser or their representatives from
a third party other than Purchaser, Shareholders or the Company, and Purchaser
and Shareholders and their representatives have no reason to believe that such
third party is not entitled to disclose such information. Purchaser's and
Shareholders 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 Purchaser or by the
Company for the Shareholders.
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 advance prior written 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 Purchaser, as the case may be, shall
take or cause to be taken all such necessary or convenient action and execute,
and deliver and file, or cause to be executed, delivered and filed, all
necessary or convenient documentation.
7.8 Competing Offers; Merger or Liquidation. The Shareholders agree that
they will not, and will cause the Company not to, directly or indirectly,
through any officer, director, agent, or otherwise, solicit, initiate or
encourage the submissions of bids, offers or proposals by, any Person with
respect to an acquisition of the Company or its assets or capital stock or a
merger or similar transaction, and the Shareholders will not, and will not
permit the Company to, engage any broker, financial adviser or consultant with
an incentive to initiate or encourage proposals or offers from other parties.
Furthermore, the Shareholders shall not, and shall not permit the Company to,
directly or indirectly, through any officer, director, agent or otherwise,
engage in negotiations concerning any such transaction with, or provide
information to, any Person other than Purchaser and its representatives with a
view to engaging, or preparing to engage, that Person with respect to any
matters in this Section. The Shareholders shall ensure that the Company shall
not commence any proceeding to merge, consolidate or liquidate or dissolve or
obligate itself to do so.
7.9 Inconsistent Action. The Shareholders shall not take or suffer to be
taken, and shall not permit the Company to take or cause or suffer to be
taken, any action that would cause any of the representations or warranties of
any of the Shareholders in this Agreement to be untrue, incorrect, incomplete
or misleading.
7.10 Post-Termination Employment. Except for the employment agreement to be
executed by Xxx Xxxxxxxxx and Xxxxxx Xxxxxxxx, each Shareholder acknowledges
and agrees that after the Closing (a) neither Purchaser nor the Company shall
be required to employ or retain any employee of the Company or any other
Person, and (b) Purchaser, in its sole and absolute discretion, may cause the
Company to retain all, some, or none of such employees.
8. CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions of Purchaser. Notwithstanding any other provision of this
Agreement, the obligations of Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:
(a) There shall not be instituted and pending or threatened any Action before
any Governmental Entity (i) challenging the acquisition of the Shares by
Purchaser or otherwise seeking to restrain or prohibit the consummation of the
transactions contemplated hereby or (ii) seeking to prohibit the direct or
indirect ownership or operation by Purchaser of all or a material portion of
the business or assets of the Company, or to compel Purchaser or the Company
to dispose of or hold separate all or a material portion of the business or
assets of the Company or Purchaser;
(b) The representations and warranties of each of the Shareholders in this
Agreement shall be true and correct in all respects on and as of the Closing
Date with the same effect as if made on the Closing Date and each of the
Shareholders shall have complied with all covenants and agreements and
satisfied all conditions on such Shareholder' part to be performed or
satisfied on or prior to the Closing Date;
(c) Purchaser shall have received from Xxxx Xxxxxxxxx, Esq., counsel for the
Shareholders and the Company, a written opinion dated the Closing date and
addressed to Purchaser, in substantially the form attached as Exhibit E
hereto;
(d) Purchaser shall have received from the President of the Company a
certificate dated the Closing Date in substantially the form attached as
Exhibit F hereto;
(e) Purchaser shall have received from each Shareholder a certificate dated
the Closing Date in substantially the form attached as Exhibit G hereto;
(f) Purchaser shall have received a consent from the Board of Directors of
the Company in substantially the form attached as Exhibit H hereto;
(g) The individuals as set forth in Exhibit D shall have entered into
Noncompetition Agreements with Purchaser and the Company in substantially the
form attached as Exhibit D hereto, (collectively, the "Noncompetition
Agreements"); and Xxx Xxxxxxxxx and Xxxxxx Xxxxxxxx shall have entered into
Employment Agreements substantially in the form attached as Exhibit C;
(h) Purchaser shall have concluded (through its representatives, accountants,
counsel and other experts) an investigation of the business, condition
(financial and other), properties, assets, prospects, operations and affairs
of the Company and shall be satisfied, in its sole discretion, with the
results thereof;
(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 Purchaser and its counsel;
(j) 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;
(k) The Board of Directors of Purchaser shall have authorized and approved
this Agreement and the transactions contemplated hereby in a form as attached
as Exhibit F;
(l) All officers and directors of the Company shall have resigned as such,
effective of the Closing; and
(m) Payment by Purchaser in full of all outstanding Polaris Equipment Co.,
Inc. invoices to the Company which precede the Closing Date by thirty (30)
days or more by wire transfer to the attorney escrow account of General
Counsel for the Company.
(n) No act, event or condition shall have occurred after the date hereof
which Purchaser determines has had or could have had a Material Adverse
Effect;
8.2 Conditions of the Shareholders. Notwithstanding any other provision of
this Agreement, and except as set forth below, the obligations of the
Shareholders to consummate the transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing, of the condition set
forth in subsection (a) of Section 8.1, and the condition that the
representations and warranties of Purchaser in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with the
same effect as if made on the Closing Date and Purchaser shall have complied
with all covenants and agreements and satisfied all conditions on its part to
be performed or satisfied on or prior to the Closing Date.
9. TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by either the Purchaser or any Shareholder in its sole discretion;
(b) by Purchaser 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, or
(c) by the Shareholders if (i) there has been a material misrepresentation,
breach of warranty or breach of covenant by Purchaser under this Agreement or
(ii) any of the conditions precedent to Closing set forth in Section 8.2 have
not been met on the Closing Date.
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 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, 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.
(d) In the event of termination of this Agreement, Shareholders and Purchaser
shall, as soon as reasonably practicable, return to each other all originals
and copies of documents and written materials provided to the other under this
Agreement.
9.3 Amendment. This Agreement may be amended at any time by a written
instrument executed by Purchaser and the Shareholders. Any amendment effected
pursuant to this Section 9.3 shall be binding upon all parties hereto.
9.4 Waiver. Any term or provision of this Agreement may be waived in
writing at any time by the party or parties entitled to the benefits thereof.
Any waiver effected pursuant to this Section 9.4 shall be binding upon all
parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any other right, power or privilege. No waiver of any
breach of any covenant or agreement hereunder shall be deemed a waiver of any
preceding or subsequent breach of the same or any other covenant or agreement.
The rights and remedies of each party under this Agreement are in addition to
all other rights and remedies, at law or in equity, that such party may have
against the other parties.
9.5 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. INDEMNFICATION
10.1 Indemnification.
(a) The Shareholders, jointly and severally, covenant and agree to defend,
indemnify and hold harmless Purchaser and the Company and each Person who
controls Purchaser or the Company within the meaning of the Securities Act
from and against any Damages arising out of or resulting from: (i) any
inaccuracy in or breach of any representation or warranty made by any
Shareholder in this Agreement or in any writing delivered pursuant to this
Agreement or at the closing [unless and except that such inaccuracy or breach
is a direct result of changes made by the Purchaser in accounting methods or
estimates utilized in financial reporting of the Company]; or (ii) the failure
of any Shareholder to perform or observe fully any covenant, agreement or
provision to be performed or observed by such Shareholder pursuant to this
Agreement or the Noncompetition Agreements; (iii) any claims, rights, title,
interest, actions, lawsuits, judgments, damages or other adverse consequences
which may arise from litigation between the Shareholders and the Company and
Republic Environmental Systems (RES) and Shareholders shall maintain control
over the defense of any action or claims as it relates to RES. Shareholders
shall use their best efforts to remove the Company as a litigant or
participant in the RES matters. Notwithstanding anything to the contrary in
this Section 10.1(a)(iii), the Purchaser will pay Shareholders up to $20,000
in support of their defense of the RES actions, and will have to consent to
any settlement of the RES actions as well as the equal right with Shareholders
to participate in all decisions, strategy, negotiations, litigation matters,
and other such events relative to RES actions. In the event the Shareholders
are successful in asserting their counterclaims against RES, Purchaser shall
be entitled to receive full reimbursement of any monies paid in support of the
defense of the RES actions not to exceed its cap of $20,000.
(b) Purchaser covenants and agrees to defend, indemnify and hold harmless the
Shareholders from and against any Damages arising out of or resulting from:
(i) any inaccuracy in or breach of any representation or warranty made by
Purchaser in this Agreement or in any writing delivered pursuant to this
Agreement or at the Closing; (ii) the failure by Purchaser to perform or
observe any covenant, agreement or condition to be performed or observed by it
pursuant to this Agreement; or (iii) the Shareholders' liability under the
Guaranties.
10.2 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 Shareholder'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 fees and
expenses of the Indemnified Parties counsel shall be borne by the Indemnifying
Party; provided, that the Indemnified Party shall notify the Indemnifying
Party of any compromise or settlement of any such Indemnifiable Claim.
(d) Anything contained in this Section 10.3 to the contrary notwithstanding,
the Shareholders shall not be entitled to assume the defense for any
Indemnifiable Claim (and shall be liable for the reasonable fees and expenses
incurred by the Indemnified Party in defending such claim) if the
Indemnifiable Claim seeks an order, injunction or other equitable relief or
relief for other than money damages against Purchaser or the Company which
Purchaser determines, after conferring with its counsel, cannot be separated
from any related claim for money damages and which, if successfully, would
adversely affect the business, properties or prospects of the Company.
10.3 Indemnification Non-Exclusive. The foregoing indemnification provisions
are in addition to, and not in derogation of, any statutory, equitable or
common-law remedy any party may have for breach of representation, warranty,
covenant or agreement.
10.4 Set-off. Notwithstanding any provision of this Agreement or of any
other agreement, instrument or undertaking, it is understood and agreed that
Purchaser shall have the right to set-off the amount of any indemnity under
Sections 10.1 or 10.2 hereof to the extent any of the Shareholders shall be
liable therefor against any shares of the Purchaser held in escrow pursuant to
Section 2.2(b). Purchaser shall have no other rights of set-off.
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 Purchaser, addressed to:
U. S. Plastic Lumber Corporation
0000 X. Xxxxxx Xxxx
Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxxxx, President and CEO
Telecopy: (000)000-0000
(b) If to any Shareholder, to the address set forth
below such Shareholder's name on Schedule "A" hereto:
With a copy to:
Xxxx X. Xxxxxxxxx, Esq.
Xxxxxxx Breed Xxxxxx & Xxxxxx
Xxx Xxxxxxx Xxxxxx - Xxxxxx Xxxxx
Xxxxxx, XX 00000
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 Purchaser and the Shareholders and their respective
successors, heirs and assigns; provided, however, that no Shareholder shall
directly or indirectly transfer or assign any of such Shareholder's respective
rights hereunder in whole or in part without the prior written consent of
Purchaser, and any such transfer or assignment without said consent shall be
void, ab initio. Subject to the immediately preceding sentence, and except as
set forth in Article 10, this Agreement is not intended to benefit, and shall
not run to the benefit of or be enforceable by, any other person or entity
other than the parties hereto and their permitted successors and assigns.
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 Delaware.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or
has caused this Agreement to be executed on its behalf by a representative
duly authorized, all as of the date first above set forth.
"PURCHASER"
ATTEST United States Plastic Lumber Corp.,
________________________ a Nevada corporation
By:_________________________
Xxxx X. Xxxxxxxxx, President
WITNESS SHAREHOLDERS:
_______________________ _________________________
Xxxxxxxx X. Xxxxxxxxx
_______________________ _________________________
Xxxxxx X. Xxxxxxxx
Polaris Equipment Co., Inc.
_______________________ By:_______________________
Xxxxxxx X. Xxxxxxxx
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A List of Shareholders
Exhibit B Stock Escrow Agreement
Exhibit C Employment Agreements of Xxx Xxxxxxxxx and Xxxxxx Xxxxxxxx
Exhibit D Non-Compete Agreements of Xxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx
Exhibit E Opinion of Counsel
Exhibit F Certificate of Presidents
Exhibit G Certificate of Shareholders
Exhibit H Consent of Board of Directors
Exhibit I USPL Guaranty
SCHEDULES
3.3 Consents
3.4 Conflicts
4.1(a) Foreign Corp status
4.1(b) Subsidiaries
4.2 No Conflicts
4.3 Capitalization
4.4 Financial Statements
4.5(a) Liens
4.5(b) List of Real Property
4.5(c) List of Tangible Property
4.5(d) List of Leases
4.5(f) Realty representations
4.6-1 Accounts Receivable Collection issues
4.6-2 List of Accounts Receivable
4.7 Inventories
4.8(a) List of Patents and Trademarks
4.8(b) Registered Rights
4.8(c) Licenses
4.9(a) List of Banks
4.9(b) Insurance Policies
4.10(a) Indebtedness
4.10(b) Guaranties
4.11 Judgments
4.12 Income Taxes
4.14 Employee Benefit Plans
4.15 Undisclosed Liabilities
4.16 Permits
4.19(a) Sales Orders
4.19(b) Purchase Orders
4.19(c) Sales Reps
4.19(d) Non-Compete Agreements
4.19(e) Contracts (inside)
4.19(f) Contracts (outside)
4.19(g) Legality
4.20 Absence of Changes
4.21(a) List of Employees
4.21(b) Labor Agreements
4.22 Affiliation
4.23(a) Customer Lists
4.23(b) Supplier Lists
4.25 Product Return
4.26 Warranties
4.28 Hazardous Materials
