SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as
of June 30, 1997 among U.S. PLASTIC LUMBER CORPORATION, a Nevada
corporation, any of its affiliates, subsidiaries, or other entities
established for the purposes of this transaction (the "Purchaser") and
EnviroPlastics Corporation, a Massachusetts corporation, and the
individuals listed on Schedule "I" (such individuals are sometimes
referred to herein collectively as the "Shareholders" and individually
as a "Shareholder").
RECITALS
A. The Shareholders own all of the issued and outstanding capital
stock of EnviroPlastics 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", "Schedule"
or "Exhibit" shall mean the applicable section, article, schedule or
exhibit 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 foregoing.
"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 fees and disbursements of attorneys, accountants,
and experts 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.
"ERISA Affiliate" shall mean any Person which is (or at any relevant
time was) a member of a controlled group of corporations within the
meaning of Code Section 414 (b), all trades or businesses under common
control within the meaning of Code Section 414(c), and all affiliated
service groups within the meaning of Code Section 414(m), of which the
Company is (or any relevant time was) a member.
"Environmental Laws" shall mean all Legal Requirements pertaining to the
protection of the environment, the treatment, emission and discharge of
gaseous, particulate and effluent pollutants and the use, handling
storage, treatment, removal transport, transloading, cleanup,
decontamination, discharge and disposal of Hazardous Substances,
including, without limitation, those statutes, laws, rules and
regulations set forth below in the definitions of "Hazardous Material".
"Governmental Entity" shall mean any local, state, federal or foreign
(i) court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the IRS and other
taxing authorities.
"Hazardous Material" shall mean any flammable, ignitable, corrosive,
reactive, radioactive or explosive substance or material, hazardous
waste, toxic substance or related material and any other substance or
material defined or designated as a hazardous or toxic substance,
material or waste by any Environmental Law currently in effect or as
amended or promulgated in the future and shall include, without
limitation:
(a) those substances included within the definitions of "hazardous
substances", "hazardous materials", "toxic substances", or "solid waste"
in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Sections 9601, et. seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et.seq., and the
Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et.
seq., and in the regulations promulgated pursuant thereto.
(b) those substances defined as "hazardous substances", "hazardous
materials", "toxic substances", or "solid waste" in the Commonwealth of
Massachusetts.
(c) those substances listed in the United States Department of
Transportation Table (49CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor thereto) as hazardous
substances (40CFR Part 302 and any amendments thereto).
(d) such other substances, materials and wastes that are or become
regulated under applicable local, state or federal laws or regulations,
or which are or become classified as hazardous or toxic under any Legal
Requirement; and
(e) any material, waste or substance that is, in whole or in part, (i)
petroleum, asbestos, polychorinated biphenyls, methylene chloride,
trichorothylene, 1, 2-transdichoroethylene, dioxins or dibenzofurans,
(ii) designated as an "extremely hazardous substance" pursuant to
Section 302 of the Emergency Planning and Community Right-to-Know Act of
1986, as amended, or (iii) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Sections 1251
et. seq. (U.S.C. Section 1321) or listed pursuant to Section 307 of the
Clean Water Act (33 U.S.C. Section 1317), or Section 112 or other
sections of the Clean Water Act, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"Indebtedness" shall mean, when used with reference to any Person,
without duplication, (i) any liability of such Person created or assumed
by such Person, or any Subsidiary thereof, (A) for borrowed money, (B)
evidenced by a bond, note, debenture, or similar instrument (including a
purchase money obligation, deed of trust or mortgage) given in
connection with the acquisition of, or exchange for, any property or
assets (other than inventory or similar property acquired and consumed
in the Ordinary Course), including securities and other Indebtedness,
(C) in respect of letters of credit issued for such Person"s account and
"swaps" of interest and currency exchange rate (and other interest and
currency exchange rate hedging agreements) to which such Person is a
party or (D) for the payment of money as lessee under leases that should
be, in accordance with generally accepted accounting principles,
recorded as capital leases for financial reporting 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 mechanic"s 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.
"Majority Shareholders" shall have the meaning assigned to such
term in Article 4.
"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(i).
"Ordinary Course" shall mean, when used with reference to the Company,
the ordinary course of the Company"s business, consistent with past
practices.
"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 persons, corporations, business trusts,
associations, limited liability companies, companies partnerships, joint
ventures, Governmental Entities and any other entities.
"Real Property" shall mean the Owned Real Property and the Leased Real
Property, collectively.
"Related Agreements" shall mean all agreements which are being entered
into and executed simultaneous with the execution of this Agreement,
including but not limited to the Stock Escrow Agreement, Employment
Agreement of Xxxxx X. Xxxxxx, Employment Agreement of Xxxxxx Xxxxxx,
Non-Compete Agreements with Xxxxx X. Xxxxxxxxx, Xx. and Xxxxxx X.
Xxxxxxxx, and such other agreements as may be necessary to carry out the
intent of this Agreement.
"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 "I".
"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 .
"Stock Escrow Agreement" shall mean the agreement referenced in
Section 8.1(c).
" Structure" shall mean any facility, building, plant, factory, office,
warehouse structure or other improvement owned or leased by the Company.
"Subsidiary" of a Person shall mean any corporation, partnership,
limited liability company, association or other business entity at least
50% of the outstanding voting power of which is at the time owned or
controlled directly or indirectly by such Person or by one or more of
such subsidiary entity, or both.
"Tax" shall mean any Federal, state, local or foreign income, gross
receipts, license, payroll, unemployment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including, without
limitation, taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
employment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated tax or other tax, assessment or charge of any kind whatsoever,
including, without limitation, any interest, fine, penalty or addition
thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for
refund or information, or statement relating to Taxes, and any exhibit,
schedule, attachment or amendment thereto.
2. PURCHASE AND SALE OF SECURITIES
2.1 Sale and Delivery. 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 , good and marketable title to the number of Shares set
forth opposite the name of such Shareholder on Schedule "I". The Shares
to be sold and purchased pursuant to this Agreement constitute all of
the outstanding capital stock of the Company.
Purchase Price. The Purchase Price for all of the Shares shall be Two
Hundred Eighty Thousand (280,000) shares of the Stock, subject to One
Hundred and Eighty Thousand (180,000) shares being held in accordance
with the Stock Escrow Agreement, all such shares to be allocated among
the Shareholders as set forth opposite their respective names on
Schedule "I". The Stock shall not have been registered pursuant to the
Securities Act, provided, however, Purchaser agrees to use its best
efforts to register the Stock at the same time as the Purchaser
registers stock of the Xxxxx Partnership in the Purchaser under the
Securities Act, at the cost of the Purchaser.
EnviroPlastics currently has a contract with DuPont which allows for
termination of the contract to occur on 30 days notice. The Majority
Shareholders agree to cause EnviroPlastics to renegotiate the DuPont
contract, prior to the Closing of this transaction, so as to have a 12
month termination provision in lieu of the current 30 days. In the event
EnviroPlastics and the Majority Shareholders are not successful in
accomplishing this contract revision prior to the Closing of this
transaction, 50,000 shares being transferred hereunder to the Majority
Shareholders shall be held in escrow bringing the total Stock Escrow
fund to 180,000 shares. In the event DuPont terminates the contract
with EnviroPlastics prior to 12 months subsequent to the date of
Closing, the Majority Shareholders shall forfeit their rights to a pro
rata portion of the 50,000 shares, releasing these shares from the Stock
Escrow Agreement back to Purchaser. Under this event, the number of
shares from the Stock Escrow Agreement to be delivered to the
Shareholders shall be based upon the number of days the DuPont contract
was in effect beginning with the day after the Closing Date and ending
on the date the DuPont contract terminates multiplied by 137 shares per
day. All other shares under the Stock Escrow Agreement will be returned
to Purchaser.
Additional Purchase Price consideration. Xxxxx X. Xxxxxx and Xxxxxx
Xxxxxx will each be provided with an opportunity to earn additional
shares of Purchaser"s common stock equal to 15,000 options for each
fiscal year ending December 31, 1997, 1998, and 1999, at an option
exercise price equal to $5.00 per share based upon established
performance goals as set forth in Schedule 2.2(b). The rights being
granted pursuant to this Section 2 (b) are being provided for good
business reasons, are not assignable, and can only ripen into additional
voting stock.
2.3 Closing. The purchase and sale of the Shares and the consummation
of the other transactions contemplated by this Agreement (the "Closing")
shall occur at 10:00AM, local time, on June , 1997, simultaneously at
the offices of Purchaser, 0000 Xxxxxx Xx., Xxxxx 000X, Xxxx Xxxxx,
Xxxxxxx and at the office of the general counsel for the Company,
Worcester, Massachusetts, or at such other time or on such other date 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) all of the documents, certificates, and instruments required to be
delivered, or caused to be delivered, by such Shareholder pursuant to
Section 8.1 ; and
(iii) all records, documents, and files of the Company, including,
without limitation, all minute books, stock records, stock certificate
books, and internal accounting records.
(b) 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 of the Purchaser representing the number of
shares allocated to the respective Shareholder as set forth on Schedule
"I";
(ii) all of the documents, if any, required to be delivered by Purchaser
pursuant to Section 8.2 .
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDERS
Each of the Shareholders hereby severally represents and warrants to,
and covenants and agrees 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 Schedule "I" , 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. All consents, approvals, and
authorizations 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. 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.
Except as set forth on Schedule II, Xxxxx X. Xxxxxx, Xxxxxx Xxxxxx,
Xxxxx X. Xxxxxxxxx, Xx., and Xxxxxx X. Xxxxxxxx ("Majority
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 Commonwealth of
Massachusetts with full power and authority to own and lease its
properties and to conduct its corporate business as currently conducted.
The Company is not required to qualify as a foreign corporation for the
transaction of business under the laws of any other jurisdiction.
(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, (b) result in the violation of the provisions of the
Articles of Organization 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 Two Hundred Thousand (200,000) shares of Common
Stock having a par value of $0.01 per share, of which only the number of
Shares listed on Schedule "A" are, and as of the Closing will be, issued
and outstanding. All of the Shares have been duly authorized and
validly issued and are fully paid, nonassessable and outstanding and are
held by the Shareholders in amounts reflected in Schedule "I" . 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 and March 31, 1997 (the "Balance Sheet Date"), and the related
unaudited statements of income for the twelve (12) months ended December
31, 1996 and the three months ended March 31, 1997 and (ii) the reviewed
balance sheet of the Company at December 31, 1995 and the related
reviewed statements of income, shareholders" equity and cash flow for
the fiscal year then ended (together with the report thereon of Love,
Bollus, Xxxxx & Xxxxxx, LLP , 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 to all personal property reflected on
the Balance Sheet as owned by the Company 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 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).
(c) Schedule 4.5(c) contains a list of all real property leases,
licenses and personal property leases under which the Company is the
lessee or licensee, together with (i) the location and nature of each of
the leased or licensed properties (including a legal description of all
Leased Real Property), (ii) the termination date of each such lease or
license, (iii) the name of the lessor or licensor and (iv) all rental
and other payments made or required to be made for the fiscal years
ending December 31, 1995 and December 31, 1996 and interim period ending
June , 1997. All leases and licenses pursuant to which the Company
leases or licenses from others real or personal property are valid,
subsisting in full force and effect in accordance with their respective
terms, and there is not, under any real property lease, personal
property lease or license, any existing default or event of default (or
event that, with notice or passage of time, or both, would constitute a
default, or would constitute a basis of force majeure or other claim of
excusable delay or nonperformance). True and complete copies of all
real property leases, licenses and personal property leases listed on
Schedule 4.5(c) 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(c), 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(c), a "lease" shall include a sublease.
(d) 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)and 4.5(b) )
and the Real Property and personal property held by the Company pursuant
to the leases and licenses described in Schedule 4.5(c) compromise all
of the real property and personal property used in the conduct of
business of the Company.
(e) Except as set forth in Schedule 4.5(e):
(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, to the knowledge of the Majority Shareholders, are
maintained in accordance with all Legal Requirements and are provided
via permanent, irrevocable, appurtenant easements in favor of the
Company;
(iii) To the knowledge of the Majority Shareholders no condemnation
proceeding is pending or threatened which would impair the occupancy,
use or value of any Real Property;
(iv) To the knowledge of the Majority Shareholders, no Structure, nor
the operations of the Company therein or thereon, (A) is located outside
of the boundary lines of the described parcel of land on which it is
located, (B) is in violation of applicable setback requirements, zoning
laws, or ordinances, (C) is subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications or (D) encroaches
on any property owned by, or easement granted in favor of, any Person;
(v) To the knowledge of the Majority Shareholders, 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; and
(vi) With respect to each item of Leased Real Property, (A) to the
Majority Shareholders" knowledge, the owner thereof has good and
marketable title thereto, free and clear of all Liens other than (I)
recorded easements, covenants and restrictions that do not impair the
current use, occupancy or value thereof and (II) the leasehold interest
of the Company, (B) there is adequate ingress and egress (and a
continuing right thereto), without the need for an easement, between
paved public rights-of-way and such Leased Real Property and (C) the
Company has not sold, transferred or subjected to a Lien such Leased
Real Property or any interest therein.
4.6 Accounts Receivable. All accounts receivable of the Company
reflected in the Balance Sheet and all accounts receivable of the
Company that have arisen since the Balance Sheet Date (except such
accounts receivable as have been collected since such dates) are valid
and enforceable claims, and the goods and services sold and delivered
that gave rise to such accounts were sold and delivered in conformity
with all applicable express and implied warranties, purchase orders,
agreements and specifications. Such accounts receivable of the Company
are subject to no valid defense, offset, except as set forth on Schedule
4.6 relative to DuPont, or counterclaim and are fully collectible,
except to the extent of the allowance for doubtful accounts reflected on
the Balance Sheet. Schedule 4.6 contains a true and complete aging of
the Company"s accounts receivable as of the Balance Sheet Date.
4.7 Inventories. Except as described in Schedule 4.7, all inventories
of raw materials, work-in-process and finished goods 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 Majority Shareholders" knowledge,
threatened, which challenges the rights of the Company in respect of any
Registered Right or any Proprietary Information.
4.9 Banking and Insurance.
(a) Schedule 4.9(a) contains a true and complete list of the names and
locations of all financial institutions at which the Company maintains a
checking account, deposit account, securities account, safety deposit
box or other deposit or safekeeping arrangement, the numbers or other
identification of all such accounts and arrangements and the names of
all persons authorized to draw against any funds therein.
(b) Schedule 4.9(b) contains a true and complete list of all insurance
policies and bonds and self insurance arrangements currently in force
that cover or purport to cover risks or losses to or associated with the
Company"s business, operations, premises, properties, assets, employees,
agents and directors and sets forth, with respect to each such policy,
bond and self insurance arrangement, a description of the insured loss
coverage, the expiration date and time of coverage, the dollar
limitations of coverage, a general description of each deductible
feature and principal exclusion and the premiums paid and to be paid
prior to expiration. The insurance policies, bonds and arrangements
described on Schedule 4.9(b) (the "Policies") provide such coverage
against such risk of loss and in such amounts as are customary for
corporations of established reputation engaged in the same or similar
business and similarly situated. The Company has no obligation,
liability or other commitment relating to any contract of insurance
containing a provision for retrospective rating or adjustment of the
Company"s premium obligation. To the Majority Shareholders" knowledge,
no facts or circumstances exist that would cause the Company to be
unable to renew its existing insurance coverage as and when the same
shall expire upon terms at least as favorable as those currently in
effect, other than possible increases in premiums that do not result
from any act or omission of the Company or any Shareholder.
4.10 Indebtedness.
(a) The Company has no liability or obligation for Indebtedness other
than as set forth on Schedule 4.10(a), and true and complete copies of
all instruments and documents evidencing, creating, securing or
otherwise relating to such Indebtedness have been delivered to 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 any Indebtedness of
the Company (the "Guaranties"). True and complete copies of all
Guaranties have been delivered to Purchaser.
4.11 Judgments; Litigation. Except as set forth on Schedule 4.11:
(a) There is no (i) outstanding judgment, order, decree, award,
stipulation or injunction of any Governmental Entity or arbitrator
against or affecting the Company or its properties, assets or business
or (ii) Action pending against or affecting the Company or its
properties, assets or business.
(b) To the Majority Shareholders" knowledge, there is no (i)
outstanding judgment, order, decree, award, stipulation, injunction of
any Governmental Entity or arbitrator against or affecting any officer,
director or employee of the Company relating to the Company or its
business, (ii) Action threatened against or affecting the Company or its
properties, assets or business, (iii) Action pending or threatened
against the Company"s officers, directors or employees relating to the
Company or its business or (iv) basis for the institution of any Action
against the Company or any of its officers, directors, employees,
properties or assets which, if decided adversely, would have a Material
Adverse Effect.
4.12 Income and Other Taxes. Except as set forth on Schedule 4.12:
(a) All Tax Returns required to be filed through and including the date
hereof in connection with the operations of the Company are true,
complete and correct in all respects and have been properly and timely
filed. The Company has not requested any extension of time within which
to file any Tax Return, which Tax Return has not since been filed.
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 books 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 Majority 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 Majority
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 Employee Benefit
Plans ("Plans"). For purposes of this Section 4.14, the term "Plan"
shall mean any plan maintained by the Company which is either an
"employee benefit plan" as defined in Section 3(3) of ERISA or a "fringe
benefit plan" as defined in Section 6039D of the Code. True and complete
copies of each of the following documents (and any amendments thereto),
where applicable, have been delivered previously to Purchaser: (i) the
Plan documents; (ii) a written description of any Plan which is not in
writing; (iii) if the Plan is funded through a trust or any third-party
funding vehicle, the trust or other funding agreement; (iv) the Plan"s
most recent financial statements; (v) the two most recent annual reports
(including all schedules and attachments thereto) required by ERISA;
(vi) the most recent actuarial report and valuation; (vii) the most
recent determination letter received from the IRS with respect to each
Plan that is intended to be qualified under Code Section 401 or to be
recognized as tax-exempt under Code Section 501(c); (viii) the most
recent summary plan description and each summary of material
modifications required by ERISA; (ix) any agreement providing for the
provision of administrative or investment management services with
respect to the Plan; and (x) all documents and correspondence received
from or provided to the DOL, IRS and PBGC during the past two years.
(b) Each Plan and related trust, annuity, or other funding agreement
complies and has been maintained in compliance with all applicable Legal
Requirements. No non-exempt prohibited transaction (as defined in Code
Section 4975 and ERISA Sections 406 and 408) has occurred and no
"fiduciary" (as defined in ERISA Section 3(21)) has committed any breach
of duty which could subject the Company, any ERISA Affiliate, or any
director, officer, or employee thereof to liability under Title I of
ERISA or to tax under Code Section 4975. All material obligations
required to be performed by the Company and other Person under the terms
of each Plan and applicable Legal Requirement have been performed.
(c) All required reports and descriptions, including, without
limitation, annual reports (Form 5500), summary annual reports, and
summary plan descriptions, have been filed and distributed timely. With
respect to each Plan which is a welfare plan (as defined in ERISA
Section 3(1)), the requirements of Party 6 of Subtitle B of Title I of
ERISA and of Code Sections 162(k) and 4980B have been satisfied.
(d) All contributions, premiums, and other payments, including, without
limitation, employer contributions and employee salary reduction
contributions, have been paid when due or accrued in accordance with the
past custom and practice of Seller and any ERISA Affiliate. No Plan
that is subject to Part 3 of Subtitle B of Title I of ERISA or to Code
Section 412 has incurred any accumulated funding deficiency, whether or
not waived, and no other actual or contingent liability for any other
expenses or obligations of any Plan exists.
(e) There are no pending or, to the Majority Shareholders" knowledge,
threatened Actions (other than routine claims for benefits) asserted or
instituted against any Plan or the assets of any Plan, or against the
Company, or any ERISA Affiliate, trustee, administrator, or fiduciary of
such Plan, and the Majority Shareholders have no knowledge of any facts
that could form the basis of any such Action. There is no pending or,
to the Majority Shareholders" knowledge, threatened or contemplated
Action by any Governmental Entity with respect to any Plan, and the
Majority Shareholders have no knowledge of any facts that could
reasonably be expected to cause or trigger such an Action.
(f) The Company (or, if applicable, an ERISA Affiliate,) may terminate,
suspend, or amend each Plan at any time, except to the extent otherwise
required by Code Section 4980B, without the consent of the participants
or employees covered by such Plan. Neither the Company nor any ERISA
Affiliate has announced any intention, made any amendment or binding
commitment, or given any written or oral notice providing that the
Company or an ERISA Affiliate (i) will create additional Plans covering
employees of the Company or any ERISA Affiliate, (ii) will increase
benefits promised or provided pursuant to any Plan, or (iii) will not
exercise after the Closing Date any right or power it may have to
terminate, suspend, or amend any Plan.
(g) Neither the Company nor any ERISA Affiliate maintains or has
maintained any time, or contributes to or has contributed to or is or
was required to contribute to, any (i) Plan subject to Title IV or
ERISA, including, without limitation, any multi-employer plan (as
defined in ERISA Section 3(37)), within the past five years, or (ii)
funded or unfunded medical, health, accident, or life insurance plan or
arrangement for current or future retirees or terminated employees or
their spouses or dependents (except to the extent required by Code
Sections 162(k) or 4980B).
(h) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a
termination of employment or other event entitling any Person to any
additional or other benefits, or that would otherwise modify benefits or
the vesting of benefits, provided under any Plan.
(i) No event has occurred which could subject the Company of any ERISA
Affiliate to any material liability (i) under any Legal Requirement
relating to any Plan, or (ii) resulting from any obligation of Seller or
an ERISA Affiliate to indemnify any Person against liability incurred
with respect to or in connection with any Plan.
(j) Each Plan which is intended to be qualified under Code Section 401
has received, within the last five years, a favorable determination
letter from the IRS. No event has occurred and no facts or
circumstances exist which may cause or result in the loss or revocation
of such determination.
4.15 No Undisclosed Liabilities. Except (i) to the extent set forth or
provided for in the Balance Sheet or the notes thereto, (ii) as set
forth on Schedule 4.15 or (iii) for non-material current liabilities
incurred since the Balance Sheet Date in the Ordinary Course, as of the
date hereof the Company has no liabilities, whether accrued, absolute,
contingent or otherwise, whether due or to become due and whether the
amounts thereof are readily ascertainable or not, or any unrealized or
anticipated losses from any commitments of a contractual nature,
including Taxes with respect to or based upon the transactions or events
occurring at or prior to the Closing.
4.16 Permits, Licenses, Etc. The Company possesses, and is operating
in compliance with, all franchises, licenses, permits, certificates,
authorizations, rights and other approvals of Governmental Entities
necessary to (i) occupy, maintain, operate and use the Real Property as
it is currently used and proposed to be used, (ii) conduct its business
as currently conducted and as proposed to be conducted, and (iii)
maintain and operate its Permits (the "Permits"). Schedule 4.16
contains a true and complete list of all Permits. Each Permit has been
lawfully and validly issued, and no proceeding is pending or, to the
Majority Shareholders" knowledge, threatened looking toward the
revocation, suspension or limitation of any Permit. The consummation of
the transactions contemplated by this Agreement will not result in the
revocation, suspension or limitation of any Permit and, except as set
forth in Schedule 4.16, no Permit will require the consent of its
issuing authority to or as a result of the consummation of the
transaction contemplated hereby.
4.17 Regulatory Filings. The Company has made all required
registrations and filings with and submissions to all applicable
Governmental Entities relating to the operations of the Company as
currently conducted and as proposed to be conducted, including, without
limitation, all such applicable Governmental Entities having
jurisdiction over any matters pertaining to conservation or protection
of the environment, and the treatment, discharge, use, handling, storage
or production, or disposal of Hazardous Materials. All such
registrations, filings and submissions were in compliance with all Legal
Requirements (including all Environmental Laws) and other requirements
when filed, no material deficiencies have been asserted by any such
applicable Governmental Entities with respect to such registrations,
filings or submissions and, to the Majority Shareholders" knowledge, no
facts or circumstances exist which would indicate that a material
deficiency may be asserted by any such authority with respect to any
such registration, filing or submission.
4.18 Consents. All consents, authorizations and approvals of any
Person to or as a result of the consummation of the transactions
contemplated hereby, that are necessary or advisable in connection with
the operations and business of the Company as currently conducted and as
proposed to be conducted, or for which the failure to obtain the same
might have, individually or in the aggregate, a Material Adverse Effect,
have been lawfully and validly obtained by the Company, except as
described in Schedules 4.5(b), 4.10 and 4.16 . All consents,
authorizations and approvals described in Schedules 4.5(b), 4.10 and
4.16 will have been lawfully and validly obtained prior to the Closing.
4.19 Material Contracts; No Defaults.
(a) Schedule 4.19(a) contains a true and complete list and description
of the outstanding sales order and sales contract backlog of the Company
having an indicated gross value in excess of Five Thousand Dollars
($5,000.00) or having a term of duration in excess of six months. All
outstanding sales orders and sales contracts of the Company have been
entered into in the Ordinary Course. Except as described in Schedule
4.19(a), the Company has not received any advance, progress payment or
deposit in respect of any sales order or sales contract, and the Company
has no sales order or sales contract that will result, upon completion
or performance thereof, in gross margins materially lower than those
normally experienced by the Company for the services or products covered
by such sales order or sales contract.
(b) Schedule 4.19(b) contains a true and complete list and description
of all outstanding purchase orders and purchase commitments of the
Company having a gross indicated value in excess of Ten Thousand Dollars
($10,000.00) in the aggregate from any single supplier or other vendor.
All outstanding purchase orders and purchase commitments of the Company
have been incurred in the Ordinary Course, and no purchase order or
purchase commitment of the Company is in excess of the normal, ordinary
and usual requirements of the business of the Company or at an excessive
price. The principal raw materials used and inventory sold by the
Company are available from several sources at competitive prices and
upon competitive terms and no interruption in production or Material
Adverse Effect will result from the loss of any one of such sources.
(c) Schedule 4.19(c) contains a true and complete list of all sales
agency, sales representative, distributor, wholesaler, dealer and
similar contracts or agreements of the Company, and true and complete
copies of the same have been delivered to Purchaser heretofore. Except
as described in Schedule 4.19(c), all of such contracts and agreements
are terminable at any time by the applicable Company without penalty
(including, without limitation, any obligation to repurchase inventories
on hand) upon not more than thirty (30) days" notice.
(d) To the Majority Shareholders knowledge, 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) ; in each case a true and complete copy of
such written contract, agreement, understanding, arrangement or
commitment or a true and complete summary of such oral contract,
agreement, understanding, arrangement or commitment has been delivered
to Purchaser heretofore.
(f) Schedule 4.19(f) contains a true and complete list and description
of all other material contracts, agreements, understandings,
arrangements and commitments, written or oral, of the Company by which
it or its properties, rights or assets are bound that are not otherwise
disclosed in this Agreement or the Schedule hereto. True and complete
copies of such written contracts, agreements, understandings,
arrangements and commitments and true and complete summaries of such
oral contracts, agreements, understandings, arrangements and commitments
have been delivered to Purchaser heretofore. For the purposes of this
subsection (f), "material" means any contract, agreement, understanding,
arrangement or commitment that (i) involves performance by any party
more than ninety (90) days from the date hereof, (ii) involves payments
or receipts by the Company in excess of Five Thousand Dollars
($5,000.00), (iii) involves capital expenditures in excess of Five
Thousand Dollars ($5,000.00) or (iv) otherwise materially affects the
Company.
(g) Except as described in Schedule 4.19(g):
(i) each agreement, contract, arrangement or commitment described above
in this Section 4.19 is, and after the Closing on identical terms will
be, legal, valid, binding, enforceable and in full force and effect;
(ii) no event or condition has occurred or become known to the Company
or any Majority 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) entered into any material transaction or otherwise committed or
obligated itself to any capital expenditure other than in the Ordinary
Course; (viii) made or suffered any change in, or condition affecting,
its condition (financial or otherwise), properties, profitability,
prospects or operations other than changes, events or conditions in the
Ordinary Course, none of which (individually or in the aggregate) has
had or may have a Material Adverse Effect; (ix) made any change in the
accounting principles, methods, records or practices followed by it or
depreciation or amortization policies or rates theretofore adopted; (x)
other than in the Ordinary Course, made or suffered any amendment or
termination of any material contract, agreement, lease or license to
which it is a party; (xi) paid, or made any accrual or arrangement for
payment of, any severance or termination pay to, or entered into any
employment or loan or loan guarantee agreement with, any current or
former officer, director or employee or consultant; (xii) paid, or made
any accrual or arrangement for payment of, any increase in compensation,
bonuses or special compensation of any kind to any employee other than
pursuant to an agreement disclosed on Schedule 4.21(a) or Schedule
4.21(b) or other than in the Ordinary Course, or paid, or made any
accrual or arrangement for payment of, any increase in compensation,
bonuses or special compensation of any kind to any officer or director
of the Company or any consultant to the Company; (xiii) made or agreed
to make any charitable contributions or incurred any nonbusiness
expenses; (xiv) changed or suffered change in any benefit plan or labor
agreement affecting any employee of the Company otherwise than to
conform to Legal Requirements; or (xv) entered into any agreement or
otherwise obligated itself to do any of the foregoing.
4.21 Employees and Labor Matters.
(a) Schedule 4.21(a) contains a true and complete list of all
contracts, agreements, plans, arrangements, commitments and
understandings (formal and informal) pertaining to terms of employment,
compensation, bonuses, profit sharing, stock purchases, stock
repurchases, stock options, commissions, incentives, loans or loan
guarantees, severance pay or benefits, use of the Company"s property and
related matters of the Company with any current or former officer,
director, employee or consultant, and true and complete copies of all
such contracts, agreements, plans, arrangements and understandings have
been delivered to Purchaser heretofore. Attached to Schedule 4.21(a) is
the most current copy of the employee handbook utilized by the Company
and distributed to each of its employees.
(b) Schedule 4.21(b) contains a true and complete list of all labor,
collective bargaining, union and similar agreements under or by which
the Company is obligated, and true and complete copies of all such
agreements have been delivered to Purchaser heretofore.
(c) Except as set forth on Schedules 4.21(a) and 4.21(b), neither
Purchaser nor the Company will have any responsibility for continuing
any person in the employ (or retaining any person as a consultant) of
the Company from and after the Closing or have any liability for any
severance payments to or similar arrangements with any such Person who
shall cease to be an employee of the Company at or prior to the Closing.
(d) There is not occurring or, to the Majority 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 Majority Shareholders" knowledge, no union or other labor
organization has attempted to organize any of the employees of the
Company.
(e) The Company has complied with all Legal Requirements relating to
employment and labor, and, to the Majority Shareholders" knowledge, no
facts or circumstances exist that could provide a reasonable basis for a
claim of wrongful termination by any current or former employee of the
Company against the Company.
4.22 Affiliation. Except as disclosed on Schedule 4.22, none of the
Majority Shareholders, any officer, director or key employee of the
Company or any associate or Affiliate of the Company or any of such
Persons has, directly or indirectly, (i) an interest in any Person that
(A) furnishes or sells, or proposes to furnish or sell, services or
products that are furnished or sold by the Company or (B) purchases from
or sells or furnishes to, or proposes to purchase from or sell or
furnish to, the Company any goods or services or (ii) a beneficial
interest in any contract or agreement to which the Company is a party or
by which the Company or any of the assets of the Company are bound or
affected.
4.23 Principal Customers and Suppliers.
(a) Schedule 4.23(a) contains a true and complete list of the name and
address of each customer that purchased in excess of five percent (5%)
of the Company"s sales of goods or services during the twelve months
ended on the Balance Sheet Date, and since that date no such customer
has terminated its relationship with or adversely curtailed its
purchases from the Company or indicated (for any reason) its intention
so to terminate its relationship or curtail its purchases.
(b) Schedule 4.23(b) contains a true and complete list of each supplier
from whom the Company purchased in excess of five percent (5%) of the
Company"s purchases of goods or services during the twelve months ended
on the balance Sheet Date, and since that date no such supplier has
terminated its relationship with or adversely curtailed its
accommodations, sales or services to the Company or indicated (for any
reason) its intention to terminate such relationship or curtail its
accommodations, sales or services.
4.24 Compliance with Law. Through and including the date hereof, the
Company (i) has not violated or conducted its business or operations in
violation of, and has not used or occupied its properties or assets in
violation of, any Legal Requirement, (ii) to the Majority Shareholders"
knowledge, has not been alleged to be in violation of any Legal
Requirement, and (iii) has not received any notice of any alleged
violation of, or any citation for noncompliance with, any Legal
Requirement.
4.25 Product Returns. Schedule 4.25 contains a true and complete
description of the product return experience of the Company for the
immediately preceding twelve (12) months. The Company has not
experienced any product returns which have had or may have a Material
Adverse Effect.
4.26 Product Liability and Product Warranty. Schedule 4.26 hereto
contains a true and complete description of (i) all warranties granted
or made with respect to products sold, or services rendered, by the
Company and (ii) the Company"s product liability and product warranty
experience for the last three years. The Company has not suffered any
product liability or product warranty claims which have had or may have
a Material Adverse Effect.
4.27 Corporate Records. The copies or originals of the Articles of
Organization, 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 and
limited only to acts, omissions, or conduct within the control of the
Company:
(a) No Hazardous Material (i) has been released, placed, stored,
generated, used, manufactured, treated, deposited, spilled, discharged,
released or disposed or on or under any real property currently or
previously owned or leased by the Company or is presently located on or
under any Real Property (or, to the Majority Shareholders" knowledge,
any property adjoining any Real Property), (ii) is presently maintained,
used, generated, or permitted to remain in place by the Company in
violation of any Environmental Law, (iii) is required by any
Environmental Law to be eliminated, removed, treated or mitigated by the
company, given the nature of its present condition, location, nature,
material or maintenance, or (iv) is of a type, location, material,
nature or condition which requires special notification to third parties
by the Company under Environmental Law or common law.
(b) No notice, citation, summons or order has been received by the
Company or any Shareholder, no notice has been given by the Company and
no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any Governmental
Entity, with respect to (i) any alleged violation by the Company of any
Environmental Law of (ii) any alleged failure by the Company to have any
environmental permit, certificate, license, approval, registration or
authorization required in connection with its business or properties, or
(iii) any use, possession, generation, treatment, storage, recycling,
transportation, release or disposal by or on behalf of the Company of
any Hazardous Material.
(c) The Company has not received any request for information, notice of
claim, demand or notification that it is or that indicates that it may
be a "potentially responsible party" with respect to any investigation
or remediation of any threatened or actual release of any Hazardous
Material.
(d) No above-ground or underground storage tanks, whether or not in
use, are or have ever been located at any property currently owned or
leased by the Company.
(e) No notice has been received by the Company with respect to the
listing or proposed listing of any property currently or previously
owned, operated or leased by the Company on the National Priorities List
promulgated pursuant to CERCLA, CERCLIS or any similar state list of
sites requiring investigation or cleanup.
(f) There have been no environmental inspections, investigations,
studies, tests, review or other analyses conducted in relation to any
Real Property.
(g) The Company has not yet released, transported, or arranged for the
transportation of any Hazardous Material from any property currently or
previously owned, operated or leased by the Company.
4.29 Brokers" Fees. No broker, finder or similar agent has been
employed by or on behalf of the Company in connection with this
Agreement or the transactions contemplated hereby, and the Company has
not entered into any agreement or understanding of any kind with any
person or entity for the payment of any brokerage commission, finder"s
fee or any similar compensation in connection with this Agreement or the
transactions contemplated hereby.
4.30 Disclosure.
(a) No representation or warranty of any Shareholder in this Agreement
and no information contained in any Schedule or other writing delivered
pursuant to this Agreement or at the Closing contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to make the statements herein or therein not
misleading. There is no fact that the Majority Shareholders have not
disclosed to Purchaser in writing that has had or, insofar as any
Majority Shareholder can now foresee, may have a Material Adverse Effect
on the ability of any Shareholder to perform fully this Agreement.
(b) To the extent that any representation or warranty in this Article 4
is qualified to the Majority Shareholders" "knowledge," the Majority
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
U.S. Plastic Lumber Corp. ("USPL"), not of any of its affiliates,
subsidiaries or sister companies, hereby represents and warrants to, and
covenants and agrees with, each of the Shareholders that:
5.1 Organization and Good Standing. USPL 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.
USPL is duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of the State of Florida.
5.2 Execution and Delivery. This Agreement has been duly authorized
by all necessary corporate action on the part of USPL, has been duly
executed and delivered by USPL and constitutes the legal, valid and
binding agreement of USPL enforceable against USPL in accordance with
its terms.
5.3 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 USPL is a party or by which USPL is bound or affected or to which
any of the property or assets of the USPL is bound or affected, (b)
result in the violation of the provisions of the Articles of
Incorporation or Bylaws of the USPL 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 USPL or (d) otherwise adversely
affect the contractual or other legal rights or privileges of USPL.
Schedule 5.3 sets forth a list of all agreements requiring the consent
of any party thereto, other than its own Board of Directors, to any of
the transactions contemplated hereby.
5.4 Capitalization. The authorized capital stock of USPL consists of
up to Fifty Million (50,000,000) shares of Common Stock having a par
value of $0.0001 per share, and presently has 14,275,009 shares of
Common Stock issued and outstanding. USPL has reserved from its
authorized capital 950,000 shares of Common Stock for issuance upon
exercise of the Series A Warrants. In addition, USPL also has Series B
and other Warrants or Options outstanding which give the holders thereof
the right, subject to certain conditions, to acquire an additional
2,710,379 shares of Common Stock. USPL is also authorized to issue up to
5,000,000 shares of Preferred Stock in one or more Series with such
rights and preferences as the Board of Directors may designate. The
Board of Directors has designated one series of Preferred Stock (Series
A) and 199,249 Series A Preferred Shares are presently issued and
outstanding, which are convertible into 1,357,790 shares of Common stock
of USPL. The offer, issuance and sale of the shares of Stock will be
(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.
5.5 Financial Statements.
(a) Schedule 5.5 hereto contains true and complete copies of (i) the
audited balance sheet (the "Balance Sheet") of USPL at December 31, 1996
and unaudited March 31, 1997 (the "Balance Sheet Date"), and the related
audited statements of income for the twelve (12) months ended December
31, 1996 and the unaudited three months ended March 31, 1997 and the
related reviewed statements of shareholders" equity and cash flow for
the fiscal year then ended (together with the report thereon of Xxxxx
Xxxxxx Xxxxxxxx & Martini, independent public accountants)(the financial
statements described in clause (i) are collectively referred to as the
"Financial Statements").
(b) The Financial Statements present fairly the financial condition of
USPL as of the dates indicated therein and the results of operations and
changes in financial position of USPL 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 USPL and represent only actual, bona fide transactions. To USPL"s
knowledge, its 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.
5.6 Judgments; Litigation. Except as set forth on Schedule 5.6:
(a) There is no (i) outstanding judgment, order, decree, award,
stipulation or injunction of any Governmental Entity or arbitrator
against or affecting USPL or its properties, assets or business or (ii)
Action pending against or affecting USPL or its properties, assets or
business which would have a material adverse affect on USPL.
(b) To the knowledge of USPL, 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
USPL relating to USPL or its business, (ii) Action threatened against or
affecting USPL or its properties, assets or business, (iii) Action
pending or threatened against the USPL"s officers, directors or
employees relating to USPL or its business or (iv) basis for the
institution of any Action against USPL or any of its officers,
directors, employees, properties or assets which, if decided adversely,
would have a Material Adverse Effect.
5.7 Income and Other Taxes. Except as set forth on Schedule 5.7:
(a) All Tax Returns required to be filed through and including the date
hereof in connection with the operations of USPL are substantially true,
complete and correct in all respects and have been properly and timely
filed. USPL 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) To the knowledge of USPL, all Taxes required to be paid or
withheld and deposited through and including the date hereof in
connection with the operations of USPL have been duly and timely paid or
deposited by USPL. To the knowledge of USPL, USPL 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. To its knowledge, USPL has no
liabilities for any Taxes for any taxable period ending prior to or
coincident with the Closing Date.
(c) USPL 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 to the best of its knowledge the accruals
for Taxes in the Balance Sheet are adequate to cover all liabilities for
Taxes of USPL for all periods ending on or before the Closing Date.
(d) USPL 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
USPL or its assets or properties and it 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.
(e) USPL (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 USPL to make any
payments that will not be deductible under Code Section 280G, (iii) is
not a United States real property holding corporation within the meaning
of Code Section 897(c)(2); (iv) is not a party to a tax allocation or
sharing agreement; (v) has never been (or does not have any liability
for unpaid Taxes because it was) a member of an affiliated group with
the meaning of Code Section 1504(a); (vi) has never applied for a tax
ruling from a Governmental Entity and (vii) has never filed or been the
subject of an election under Code Section 338(g) or Code Section
338(h)(10) or caused or been the subject of a deemed election under Code
Section 338(e).
5.8 Questionable Payments. USPL has not (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 USPL, (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.
5.9 Permits, Licenses, Etc. To its knowledge, USPL possesses, and is
operating in compliance with, all franchises, licenses, permits,
certificates, authorizations, rights and other approvals of Governmental
Entities necessary to (i) occupy, maintain, operate and use the Real
Property as it is currently used and proposed to be used, (ii) conduct
its business as currently conducted and as proposed to be conducted, and
(iii) maintain and operate its Permits (the "Permits"). Each Permit
has been lawfully and validly issued, and no proceeding is pending or,
to USPL"s knowledge, threatened looking toward the revocation,
suspension or limitation of any Permit. The consummation of the
transactions contemplated by this Agreement will not result in the
revocation, suspension or limitation of any Permit and, except as set
forth in Schedule 5.9, no Permit will require the consent of its issuing
authority to or as a result of the consummation of the transaction
contemplated hereby.
5.10 Regulatory Filings. To its knowledge, USPL has made all required
registrations and filings with and submissions to all applicable
Governmental Entities relating to the operations of USPL 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 its
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 USPL"s 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.
5.11 Consents. All consents, authorizations and approvals of any
Person to or as a result of the consummation of the transactions
contemplated hereby, that are necessary or advisable in connection with
the operations and business of USPL as currently conducted and as
proposed to be conducted, or for which the failure to obtain the same
might have, individually or in the aggregate, a Material Adverse Effect,
have been lawfully and validly obtained by USPL, except as may be
disclosed on Schedule 5.11 hereto.
5.12 Compliance with Law. Through and including the date hereof, USPL,
to its knowledge, (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 USPL"s
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.
5.13 Personal Guarantees of Shareholders. The Purchaser acknowledges
that certain Majority Shareholders have executed personal guaranties on
debt instruments of the Company as set forth and disclosed to Purchaser
on Schedule 4.10 (b). Prior to January 1, 1998, the Purchaser shall take
no action to remove the Shareholders as personal guarantors on said debt
instruments. Subject to Purchaser not exercising its rights to undo this
transaction as provided in Section 9.5, as soon as practical on or after
January 1, 1998, the Purchaser hereby covenants and agrees to either
pay-off in full all debt instruments in which any of the Shareholders
are personal guarantors or to renegotiate the terms of the existing
debt instruments to remove the Shareholders as personal guarantors. For
the period beginning on the Closing Date of this transaction through
January 1, 1998, in the event a default of any of the debt instruments
occurs due to the willful or negligent fault of the Purchaser, then in
such event, the Purchaser hereby agrees to indemnify such Shareholders
and hold them harmless from any claims, damages, or suits which they may
incur due to Purchaser"s default on any of the Notes set forth in
Schedule 4.10(b). Purchaser covenants and agrees that it will take no
action which prohibits the Company from observing all loan covenants or
pay the obligations of the debt instruments disclosed in the Schedule
4.10(b) when due in their Ordinary Course, subject to the rights of
Purchaser under Section 9.5.
5.14 Brokers" Fees. No broker, finder or similar agent has been
employed by or on behalf of USPL in connection with this Agreement or
the transactions contemplated hereby, and the Purchaser 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.
5.15 No Undisclosed Liabilities. Except (i) to the extent set forth or
provided for in the Balance Sheet or the notes thereto, (ii) or as may
be set forth on any Schedules hereto or (iii) for non-material current
liabilities incurred since the Balance Sheet Date in the Ordinary
Course, as of the date hereof USPL 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.
5.16 Disclosure.
(a) No representation or warranty of USPL in this Agreement and no
information contained in any Schedule or other writing delivered
pursuant to this Agreement or at the Closing contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to make the statements herein or therein not
misleading. There is no fact that USPL has not disclosed to
Shareholders in writing that has had or, insofar as USPL can now
foresee, may have a Material Adverse Effect on the ability of USPL to
perform fully this Agreement.
(b) To the extent that any representation or warranty in this Article 5
is qualified to the "knowledge" of USPL, USPL represents and warrants
that it has made a reasonable investigation sufficient to express an
informed view concerning the matters to which such representation or
warranty relates, including diligent inquiries of the officers,
directors and employees of USPL.
6. CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing through
the Closing Date, the Majority 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 remain in good standing in its
jurisdiction of incorporation.
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 Organization or Bylaws (or equivalent documents), (b) acquire by
merging or consolidating with, or agreeing to merge or consolidate with,
or purchase substantially all of the stock or assets of, or otherwise
acquire, any business or any corporation, partnership, association or
other business organization or division thereof, (c) enter into any
partnership or joint venture, (d) declare, set aside, make or pay any
dividend or other distribution in respect of its capital stock or
purchase or redeem, directly or indirectly, any shares of its capital
stock, (e) issue or sell any shares of its capital stock of any class or
any options, warrants, conversion or other rights to purchase any such
shares or any securities convertible into or exchangeable for such
shares, or (f) liquidate or dissolve or obligate itself to do.
6.4 Indebtedness. The Company shall not incur any Indebtedness, sell
any debt securities or lend money to or guarantee the Indebtedness of
any Person. The Company shall not restructure or refinance its existing
Indebtedness.
6.5 Accounting. The Company shall not make any change in the
accounting principles, methods, records or practices followed by it or
depreciation or amortization policies or rates heretofore adopted by it.
The Company shall maintain its books, records and accounts in accordance
with generally accepted accounting principles applied on a basis
consistent with that of prior periods.
6.6 Compliance with Legal Requirements. The Company shall comply
promptly with all requirements that applicable law may impose upon it
and its operations and with respect to the transactions contemplated by
this Agreement, and shall cooperate promptly with, and furnish
information to, Purchaser in connection with any such requirements
imposed upon Purchaser, or upon any of its affiliates, in connection
therewith or herewith.
6.7 Disposition of Assets. The Company shall not sell, transfer,
license, lease or otherwise dispose of, or suffer or cause the
encumbrance by any Lien upon any of its properties or assets, tangible
or intangible, or any interest therein, except for sales of inventory in
the Ordinary Course.
6.8 Compensation. The Company shall not (a) adopt or amend in any
material respect any collective bargaining, bonus, profit-sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other plan, agreement, trust, fund or arrangement for the
benefit of employees (whether or not legally binding) other than to
comply with any Legal Requirement or (b) pay, or make any accrual or
arrangement for payment of, any increase in compensation, bonuses or
special compensation of any kind, or any severance or termination pay
to, or enter into any employment or loan or loan guarantee agreement
with, any current or former officer, director, employee or consultant of
the Company, except for such bonuses as may be required to offset the
individual income tax liability of each Shareholder relating to the
Company.
6.9 Modification or Breach of Agreement; New Agreements. The Company
shall not terminate or modify, or commit or cause or suffer to be
committed any act that will result in breach or violation of any term of
or (with or without notice or passage of time, or both) constitute a
default under or otherwise give any person a basis for non-performance
under, any indenture, mortgage, deed of trust, loan or credit agreement,
lease, license or other agreement, instrument, arrangement or
understanding, written or oral, disclosed in this Agreement or the
Schedules hereto. The Company shall refrain from becoming a party to
any contract or commitment other than in the Ordinary Course. The
Company shall meet all of its contractual obligations in accordance with
their respective terms.
6.10 Capital Expenditures. Except for capital expenditures or
commitments necessary to maintain its properties and assets in good
condition and repair (the amount of which shall not exceed Five Thousand
Dollars ($5,000.00) in the aggregate), the Company shall not purchase or
enter into any contract to purchase any capital assets.
6.11 Consents. The Company shall use its best efforts to obtain any
consent, authorization or approval of, or exemption by, any Person
required to be obtained or made by any party hereto in connection with
the transactions contemplated hereby or the taking of any action in
connection with the consummation thereof.
6.12 Maintain Insurance. The Company shall maintain its Policies in
full force and effect and shall not do, permit or willingly allow to be
done any act by which any of the Policies may be suspended, impaired or
canceled.
6.13 Discharge. The Company shall not cancel, compromise, release or
discharge any claim of the Company upon or against any person or waive
any right of the Company of material value, and not discharge any Lien
(other than Permitted Liens) upon any asset of the Company or compromise
any debt or other obligation of the Company to any person other than
Liens, debts or obligations with respect to current liabilities of the
Company.
6.14 Actions. The Company shall not institute, settle or agree to
settle any Action before any Governmental Entity.
6.15 Permits. The Company shall maintain in full force and effect, and
comply with, all Permits.
6.16 Tax Assessments and Audits. The Company shall furnish promptly to
Purchaser a copy of all notices of proposed assessment or similar
notices or reports that are received from any taxing authority and which
relate to the Company"s operations for periods ending on or prior to the
Closing Date. The 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.
7. ADDITIONAL COVENANTS
7.1 Covenants of the Shareholders. During the period from the date
hereof through the Closing Date, each Majority 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, Purchaser 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 ;
(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
(e) deliver to Purchaser prior to the Closing a written statement
disclosing any untrue statement in this Agreement or any Schedule hereto
(or supplement thereto) or document furnished pursuant hereto, or any
omission to state any material fact required to make the statements
herein or therein contained complete and not misleading, promptly upon
the discovery of such untrue statement or omission, accompanied by a
written supplement to any Schedule to this Agreement that may be
affected thereby; provided, however, that the disclosure of such untrue
statement or omission shall not prevent Purchaser from terminating this
Agreement pursuant to Section 9.1(b) at any time at or prior to the
Closing in respect of any original untrue or misleading statement.
7.2 Covenants of Purchaser. During the period from the date hereof to
the Closing Date, Purchaser shall:
(a) comply promptly with all requirements that applicable Legal
Requirements may impose upon it with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and
furnish information to, the 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 .
(d) promptly advise Shareholders orally and, within three (3) business
days thereafter, in writing of any change in such Purchaser"s business
or condition that has had or may have a Material Adverse Effect; and
(e) deliver to Shareholders prior to the Closing a written statement
disclosing any untrue statement in this Agreement or any Schedule
provided by Purchaser hereto (or supplement thereto) or document
furnished pursuant hereto, or any omission to state any material fact
required to make the statements herein or therein contained complete and
not misleading, promptly upon the discovery of such untrue statement or
omission, accompanied by a written supplement to any Schedule provided
by Purchaser to this Agreement that may be affected thereby; provided,
however, that the disclosure of such untrue statement or omission shall
not prevent Shareholders from terminating this Agreement pursuant to
Section 9.1(c) hereof at any time at or prior to the Closing in respect
of any original untrue or misleading statement.
7.3 Access and Information
(a) During the period commencing on the date hereof and continuing
through the Closing Date, the Shareholders shall continue to cause the
Company to afford to Purchaser and to Purchaser"s accountants, counsel,
investment bankers and other representatives, reasonable access to all
of its properties, books, contracts, commitments, records and personnel
and, during such period, to continue to cause the Company to furnish
promptly to Purchaser all information concerning its business,
properties and personnel as Purchaser may reasonably request.
(b) Except to the extent permitted by the provisions of Section 7.6,
Purchaser shall hold in confidence, and shall use reasonable efforts to
ensure that its employees and representatives hold in confidence, all
such information supplied to it by the Shareholders or the Company
concerning the Company and shall not disclose such information to any
third party except as may be required by any Legal Requirement and
except for information that (i) is or becomes generally available to the
public other than as a result of disclosure by Purchaser or its
representatives, (ii) becomes available to Purchaser or its
representatives from a third party other than the Shareholders or the
Company, and Purchaser or its representatives have no reason to believe
that such third party is not entitled to disclose such information,
(iii) is known to Purchaser or its representatives on a non-confidential
basis prior to is disclosure by any Shareholder or the Company or (iv)
is made available by any Shareholder or the Company to any other Person
on a non-restricted basis. Purchaser"s obligations under the foregoing
sentence shall expire on the Closing Date or, if the Closing does not
occur, three (3) years after the date hereof.
7.4 Expenses. All costs and expenses (including, without limitation,
all legal fees and expenses and fees and expenses of any brokers,
finders or similar agents) incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party
incurring the same, except that the Company may pay up to $5,000 toward
the legal expenses of closing this transaction on behalf of 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.
7.6 Publicity; Employee Communications. At all times prior to the
Closing Date, each party shall obtain the consent of all other parties
hereto prior to issuing, or permitting any of its directors, officers,
employees or agents to issue, any press release or other information to
the press, employees of the Company or any third party with respect to
this Agreement or the transactions contemplated hereby; provided,
however, that no party shall be prohibited from supplying any
information to any of its representatives, agents, attorneys, advisors,
financing sources and others to the extent necessary to complete the
transactions contemplated hereby so long as such representatives,
agents, attorneys, advisors, financing sources and others are made aware
of the terms of this Section 5.6. Nothing contained in this Agreement
shall prevent any party to this Agreement at any time from furnishing
any required information to any Governmental Entity or authority
pursuant to a Legal Requirement or from complying with its legal or
contractual obligations.
7.7 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Legal Requirements, to
consummate and make effective the transactions contemplated by this
Agreement.
(b) If at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the Shareholders
and the proper 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. Notwithstanding
anything to the contrary in this Section 7.8, it shall not be a
violation of this Section 7.8 if the Shareholders or the Company receive
an unsolicited offer and it would be a breach of the fiduciary duty of
the Board of Directors not to consider the unsolicited offer and make a
decision with respect thereto.
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 agreements
to be executed by Xxxxx X. Xxxxxx and Xxxxxx Xxxxxx, 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"s part to be
performed or satisfied on or prior to the Closing Date;
(c) Purchaser shall have received from the Shareholders an
executed copy of the Stock Escrow Agreement substantially in the form as
Exhibit A.
(d) Purchaser shall have received from Xxxxx X. Xxxxxx and Xxxxxx Xxxxxx
Employment Agreements substantially in the form attached as Exhibit B.
(e) Purchaser shall have received from Xxxxxx, O"Connell, DeMallie, &
Xxxxxx, LLP., counsel for the Company, a written opinion dated the
Closing Date and addressed to Purchaser, in substantially the form
attached as Exhibit C;
(f) Purchaser shall have received from the President of the Company a
certificate dated the Closing Date in substantially the form attached as
Exhibit D;
(g) Purchaser shall have received from each Shareholder a certificate
dated the Closing Date in substantially the form attached as Exhibit E;
(h) Purchaser shall have received a certificate of the Clerk of the
Company in substantially the form attached as Exhibit F;
(i) Xxxxx X. Xxxxxxxxx, Xx. and Xxxxxx X. Xxxxxxxx shall
have entered into a Noncompetition Agreement with Purchaser and the
Company in substantially the form attached as Exhibit G , (collectively,
the "Noncompetition Agreements");
(j) Each Shareholder shall sign a Stock Sale Restriction
Agreement in substantially the form attached as Exhibit H ;
(k) 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;
(l) 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;
(m) Purchaser shall have received reasonable assurances from those
employees, if any, of the Company that may be identified by Purchaser
in its discretion that they will remain in the employ of the Company for
a reasonable period of time after the consummation of the transactions
contemplated hereby.;
(n) All consents from third parties, including from any Bank or lending
institution which requires consent as part of the covenants of any debt
instruments with the Company, any Governmental Entity, landlord or other
Person, necessary for the consummation of the transactions contemplated
hereby shall have been obtained;
(o) The Board of Directors of Purchaser shall have authorized and
approved this Agreement and the transactions contemplated hereby;
(p) All officers and directors of the Company shall have resigned as
such, effective as of the Closing;
(q) No act, event or condition shall have occurred after the date
hereof which has had or could have had a Material Adverse Effect;
(r) The Lease Agreement made April 17, 1991 by and between the Company
and Consolidated Beverages Realty Trust is valid and enforceable and in
effect as of the date of Closing.
(s). Fleet Bank shall provide a written statement to Purchaser that it
will not call its debt instruments due to the technical default of the
Company"s net worth having decreased below the level set forth within
the Closing. If the covenants of any of the debt instruments contain
cross default provisions, then the Shareholders will take whatever
action is necessary and appropriate to obtain similar written statements
from its other Lenders.
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 conditions:
(a) There shall not be instituted and pending or threatened any Action
before any Governmental Entity (i) challenging the distribution of the
Shares to the Shareholders 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 the Purchaser in this
Agreement shall be true and correct in all respects on and as of the
Closing Date with the same effect as if made on the Closing Date and the
Purchaser shall have complied with all covenants and agreements and
satisfied all conditions on the Purchaser part to be performed or
satisfied on or prior to the Closing Date;
(c) Shareholders shall have received from the President of the
Purchaser a certificate dated the Closing Date in substantially the form
attached as Exhibit I ;
(d) Shareholders shall have received a certificate of the
Secretary of the Purchaser in substantially the form attached as Exhibit
J ;
(e) All corporate and other proceedings and actions taken in connection
with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced
herein or incident to the transactions contemplated hereby shall be in
form and substance satisfactory to the Company and its counsel;
(f) All consents from third parties, including from any Bank or lending
institution which requires consent as part of the covenants of any debt
instruments with the Purchaser, any Governmental Entity, landlord or
other Person, necessary for the consummation of the transactions
contemplated hereby shall have been obtained;
(g) The Board of Directors of the Company shall have authorized and
approved this Agreement and the transactions contemplated hereby;
(h) No act, event or condition shall have occurred after the date
hereof which has had or could have had a Material Adverse Effect;
9. TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual consent of the Purchaser and the Shareholders;
(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, and, in each case,
Purchaser is not then in material default of its obligations hereunder;
or
(c) by a majority interest of 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, and, in each case, no Shareholder is then in material default of
his obligations hereunder.
9.2 Effect of Termination.
(a) In the case of any termination of this Agreement, the provisions of
Section 7.3 and 7.4 shall remain in full force and effect.
(b) Upon termination of this Agreement as provided in Section 9.1(a),
except as stated in subsection (a) above, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
any party hereto or their respective directors, officers, employees,
agents or other representatives.
(c) In the event of termination of this Agreement as provided in
Section 9.1(b) or (c), such termination shall be without prejudice to
any rights that the terminating party or parties may have against the
breaching party or parties or any other person under the terms of this
Agreement or otherwise.
9.3 Amendment. This Agreement may be amended at any time by a written
instrument executed by Purchaser and a majority in interest of 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 Purchaser or a majority in interest of the
Shareholders . 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 Termination after Closing. The parties have agreed the Purchaser
shall have the absolute right in its sole discretion to unwind this
entire transaction at any time prior to January 1, 1998 (Purchaser"s
Put) if the Company does not achieve the performance criteria set forth
on Schedule 9.5. If Purchaser exercises its Put, all parties will be
placed into their respective positions as of immediately prior to the
Closing. If the Purchaser exercises its Put the transactions which must
take place will include but not be limited to the following events:
The Purchaser shall return all shares of the Company to the Shareholders
in their respective pro rata portions and the Shareholders of the
Company shall return all shares of Purchaser to Purchaser within ten
days from the date Purchaser provides the Shareholders with notice of
its decision to exercise its Put.
On January 1, 1998, any capital provided to the Company between date of
Closing and January 1, 1998 shall become a Promissory Note secured by
all the assets of the Company as a blanket lien subordinated only to
existing debt instruments. The Promissory Note shall be for a two year
term, interest only payments being due and payable during said term,
with interest accruing as of January 1, 1998 at a rate of 10.5% per
annum.
The Purchaser and the Shareholders will fully cooperate with another to
perform all other tasks which are necessary and appropriate to a
complete unwinding of this transaction.
(d) If the Purchaser terminates this Agreement pursuant to Section 9.5,
the Purchaser shall not utilize the technology, Registered Rights, or
Proprietary Information of the Company for a period of three years.
The Purchaser covenants and agrees that it will not take any action, the
intent of which is to prevent the Company from meeting the performance
criteria set forth on Schedule 9.5.
10. INDEMNIFICATION
10.1 Survival of Representations and Warranties. The representations
and warranties of the parties hereto contained in this Agreement or in
any writing delivered pursuant hereto or at the Closing shall survive
the Closing and the consummation of the transactions contemplated hereby
(and any examination or investigation by or on behalf of any party
hereto) until the first anniversary of the Closing Date subject to
audited financial statements being released which are satisfactory to
both parties; provided, that the representations and warranties
contained in Section 4.12 and Section 4.14 shall not terminate until the
expiration of any applicable statute of limitations; provided, further,
that representations and warranties contained in Article 3, Section
4.17, Section 4.24 and Section 4.28 shall not terminate but shall
continue indefinitely.
10.2 Indemnification.
(a) The Majority 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.
(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.
10.3 Third Party Claims.
(a) If any party entitled to be indemnified pursuant to Section 10.2
(an "Indemnified Party") receives notice of the assertion by any third
party of any claim or of the commencement by any such third person of
any Action (any such claim or Action being referred to herein as an
"Indemnifiable Claim") with respect to which another party hereto (an
"Indemnifying Party") is or may be obligated to provide indemnification,
the Indemnified Party shall promptly notify the Indemnifying Party in
writing (the "Claim Notice") of the Indemnifiable Claim; provided, that
the failure to provide such notice shall not relieve or otherwise affect
the obligation of the Indemnifying Party to provide indemnification
hereunder, except to the extent that any Damages directly resulted or
were caused by such failure.
(b) The Indemnifying Party shall have thirty (30) days after receipt of
the Claim Notice to undertake, conduct and control, through counsel of
its own choosing, and at its expense, the settlement or defense thereof,
and the Indemnified Party shall cooperate with the Indemnifying Party in
connection therewith; provided, that (i) the Indemnifying Party shall
permit the Indemnified Party to participate in such settlement or
defense through counsel chosen by the Indemnified Party (subject to the
consent of the Indemnifying Party, which consent shall not be
unreasonably withheld), provided that the fees and expenses of such
counsel shall not be borne by the Indemnifying Party, and (ii) the
Indemnifying Party shall not settle any Indemnifiable Claim without the
Indemnified Party"sr consent. So long as the Indemnifying Party is
vigorously contesting any such Indemnifiable Claim in good faith, the
Indemnified Party shall not pay or settle such claim without the
Indemnifying Party"s consent, which consent shall not be unreasonably
withheld.
(c) If the Indemnifying Party does not notify the Indemnified Party
within thirty (30) days after receipt of the Claim Notice that it elects
to undertake the defense of the Indemnifiable Claim described therein,
the Indemnified Party shall have the right to contest, settle or
compromise the Indemnifiable Claim in the exercise of its reasonable
discretion; provided, that the Indemnified Party shall notify the
Indemnifying Party of any compromise or settlement of any such
Indemnifiable Claim.
(d) Anything contained in this Section 10.3 to the contrary
notwithstanding, the Shareholders shall not be entitled to assume the
defense for any Indemnifiable Claim (and shall be liable for the
reasonable fees and expenses incurred by the Indemnified Party in
defending such claim) if the Indemnifiable Claim seeks an order,
injunction or other equitable relief or relief for other than money
damages against Purchaser or the Company which Purchaser determines,
after conferring with its counsel, cannot be separated from any related
claim for money damages and which, if successfully, would adversely
affect the business, properties or prospects of the Company.
10.4 Indemnification Non-Exclusive. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common-law remedy any party may have for breach of
representation, warranty, covenant or agreement.
10.5 Set-off. Notwithstanding any provision of this Agreement or of
any other agreement, instrument or undertaking, if the procedures
outlined in Section 10.3 are followed by Purchaser then it is understood
and agreed that Purchaser shall have the right to set-off the amount of
any indemnity under Sections 10.2 or 10.3 hereof to the extent any of
the Shareholders shall be liable therefor against any sums of money or
any shares of the Purchaser at any time payable or deliverable to the
Shareholders, including but not limited to shares held in the Stock
Escrow Agreement. The remedies provided in this Article shall be
cumulative and shall not preclude the assertion by any party of any
other rights or the seeking of any other remedies by it against any
other party.
11. GENERAL PROVISIONS
11.1 Notices. All notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed
given (a) if delivered personally (including by overnight express or
messenger), upon delivery, (b) if delivered by 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:
Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxx, O"Xxxxxxx, XxXxxxxx & Xxxxxx,LLP.
1700 Bank of Boston Tower
000 Xxxxx Xxxxxx
Xxxxxxxxx, 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 Florida.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or has caused this Agreement to be executed on its behalf by
a representative duly authorized, all as of the date first above set
forth.
"PURCHASER"
United States Plastic Lumber, Inc.,
a Nevada corporation
By:_________________________
____________________________
Print Name/Title
"COMPANY"
EnviroPlastics
Corporation,
A Massachusetts
corporation
By:_________________________
Xxxxxx Xxxxxx,
President
SHAREHOLDERS:
________________________ Xxxxx X. Xxxxxx
________________________
Xxxxxx Xxxxxx
________________________ Xxxxx X. Xxxxxxxxx, Xx.
________________________ Xxxxxx X. Xxxxxxxx
________________________
Xxxxxxx X. Xxxxx
________________________
Xxxxxxxx X. Xxxxx
________________________
Lolita Previd
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Stock Escrow Agreement
Exhibit B Employment Agreements of Xxxxx Xxxxxx and Xxxxxx Xxxxxx
Exhibit C Opinion of Counsel
Exhibit D Certificate of President
Exhibit E Certificate of Shareholders
Exhibit F Certificate of Clerk
Exhibit G Non-Competition Agreements
Exhibit H Stock Sale Restriction Agreement
Exhibit I Certificate of President " Purchaser
Exhibit J Certificate of Secretary - Purchaser
SCHEDULES
I List of Shareholders
II Exceptions to Representations and Warranties
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 Tangible Property
4.5(c) List of Leases
4.5(e) Realty representations
4.6 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
No Conflicts " Purchaser
5.5 Financial Statements - Purchaser
Judgements; Litigation - Purchaser
Income Taxes - Purchaser
5.9 Permits - Purchaser
5.11 Consents - Purchaser
9.5 Put Performance Criteria
