SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as of
March , 1997 among U.S. PLASTIC LUMBER CORPORATION, a Nevada corporation
(the "Purchaser") and ENVIRONMENTAL SPECIALTY PRODUCTS, INC., a California
corporation and the individuals listed on Exhibit "A" attached hereto (such
individuals are sometimes referred to herein collectively as the
"Shareholders" and individually as a "Shareholder").
RECITALS
A. The Shareholders own (i) all of the issued and outstanding capital stock
of ENVIRONMENTAL SPECIALTY PRODUCTS, INC., a California corporation (the
"Company").
B. The Shareholders wish to sell, and the Purchaser wishes to purchase, all
of the issued and outstanding capital stock of the Company upon the terms and
subject to the conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, the terms
defined in this Article 1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms
of any of the terms herein defined. Unless otherwise indicated, any reference
herein to a "Section", "Article", or "Schedule" shall mean the applicable
section, article or schedule of or to this Agreement. All accounting terms
used in this Agreement not defined in this Article 1 shall, except as
otherwise provided for herein, be construed in accordance with generally
accepted accounting principles, consistently applied.
"Action" shall mean any actual or threatened claim, action, suit, arbitration,
hearing, inquiry, proceeding, complaint, charge or investigation by or before
any Governmental Entity or arbitrator and any appeal from any of the forgoing.
"Affiliate" of a Person shall mean any Person that directly or indirectly
controls, is controlled by, or is under common control with the indicated
Person.
"Agreement" shall mean this Securities Purchase Agreement.
"Balance Sheet" and "Balance Sheet Date" shall have the meaning assigned to
such terms in Section 4.4(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Closing" and "Closing Date" shall have the respective meanings assigned to
such terms in Section 2.3.
"Common Stock" shall mean the Company's authorized class of common stock,
$0.01 par value per share.
"DOL" shall mean the United States Department of Labor.
"Damages" shall mean any and all losses, liabilities, obligations, costs,
expenses, damages or judgments of any kind or nature whatsoever (including
reasonable attorneys', accountants, and expert's fees, disbursements of
counsel, and other costs and expenses incurred pursuing indemnification claims
under Article 10 hereof).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean any Person which is (or at any relevant time was)
a member of a controlled group of corporations within the meaning of Code
Section 414 (b), all trades or businesses under common control within the
meaning of Code Section 414(c), and all affiliated service groups within the
meaning of Code Section 414(m), of which the Company is (or any relevant time
was) a member.
"Environmental Laws" shall mean all Legal requirements pertaining to the
protection of the environment, the treatment, emission and discharge of
gaseous, particulate and effluent pollutants and the use, handling storage,
treatment, removal transport, transloading, cleanup decontamination, discharge
and disposal of Hazardous Substances, including, without limitation, those
statutes, laws, rules and regulations set forth below in the definitions of
"Hazardous Material".
"Governmental Entity" shall mean any local, state, federal or foreign (i)
court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the IRS and other
taxing authorities.
"Hazardous Material" shall mean any flammable, ignitable, corrosive, reactive,
radioactive or explosive substance or material, hazardous waste, toxic
substance or related material and any other substance or material defined or
designated as a hazardous or toxic substance, material or waste by any
Environmental Law currently in effect or as amended or promulgated in the
future and shall include, without limitation:
(a) those substances included within the definitions of "hazardous
substances", "hazardous materials", "toxic substances", or "solid waste" in
the Comprehensive Environmental response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Sections 9601, et. seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Sections 6901 et.seq., and the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 et. seq., and in the regulations
promulgated pursuant thereto.
(b) those substances defined as "hazardous substances", "hazardous materials",
"toxic substances", or "solid waste" in the State of California.
(c) those substances listed in the United States Department of Transportation
Table (49CFR 172.101 and amendments thereto) or by the Environmental
Protection Agency (or any successor thereto) as hazardous substances (40CFR
Part 302 and any amendments thereto).
(d) such other substances, materials and wastes that are or become regulated
under applicable local, state or federal laws or regulations, or which are or
become classified as hazardous or toxic under any Legal Requirement; and
(e) any material, waste or substance that is, in whole or in part, (i)
petroleum, asbestos, polychorinated biphenyls, methylene chloride,
trichorothylene, 1, 2-transdichoroethylene, dioxins or dibenzofurans, (ii)
designated as an "extremely hazardous substance" pursuant to Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended, or
(iii) designated as a "hazardous substance" pursuant to Section 311 of the
Clean Water Act, 33 U.S.C. Sections 1251 et. seq. (U.S.C. Section 1321) or
listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section
1317), or Section 112 or other sections of the Clean Water Act, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"Indebtedness" shall mean, when used with reference to any Person, without
duplication, (i) any liability of such Person created or assumed by such
Person, or any Subsidiary thereof, (A) for borrowed money, (B) evidence by a
bond, note, debenture, or similar instrument (including a purchase money
obligation, deed of trust or mortgage) given in connection with the
acquisition of, or exchange for, any property or assets (other than inventory
or similar property acquired and consumed in the Ordinary Course), including
securities and other Indebtedness, (C) in respect of letters of credit issued
for such Person's account and "swaps" of interest and currency exchange rate
(and other interest and currency exchange rate hedging agreements) to which
such Person is a party or (D) for the payment of money as lessee under leases
that should be, in accordance with generally accepted accounting principles,
recorded as capital leases for financial reporting purposes; (ii) any
liability of others described in the preceding clause (i) guaranteed as to
payment of principal and interest by such Person or in effect guaranteed by
such Person through an agreement, contingent or otherwise, to purchase,
repurchase or pay the related Indebtedness or to acquire security therefor;
(iii) all liabilities or obligations secured by a Lien upon property owned by
such Person and upon liabilities or obligations such Person customarily pays
interest or principal, whether or not such Person has not assumed or become
liable for the payment of such liabilities or obligations; and (iv) any
amendment, renewal, extension, revision or refunding or any such liability or
obligation; provide, however, that Indebtedness shall not include any
liability for compensation of such Person's employees or for inventory or
similar property acquired and consumed in the Ordinary Course or for services.
"Leased Real Property" shall mean all real property, including Structures,
leased by the Company.
"Legal Requirements" shall mean any statute, law, ordinance, rule, regulation,
permit, order, writ, judgment, injunction, decree or award issued, enacted or
promulgated by any Governmental Entity or any arbitrator.
"Lien" shall mean all liens (including judgment and mechanics liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options or other charges, encumbrances or restrictions.
"Material Adverse effect" shall mean a material adverse effect on the
business, financial condition, properties, profitability, prospects or
operations of the Company.
"Noncompetition Agreement(s)" shall have the meaning assigned to such term in
Section 8.1(h).
"Ordinary Course" shall mean, when used with reference to the Company, the
ordinary course of the Company's business, consistent with past practices.
"Owned Real Property" shall mean all real property, including Structures,
owned by the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall have the meaning assigned to such term in Section 4.16.
"Permitted Liens" shall mean (a) Liens for ad valorem real or personal
property taxes or assessments not at the time due and (b) Liens in respect of
pledges or deposits under worker's compensation laws or similar legislation,
carriers', warehousemen's, mechanic's, laborers' and materialmen's and similar
liens, if the obligations secured by such Liens are not then delinquent.
"Person" shall mean all natural person's, corporations, business trusts,
associations, limited liability companies, companies partnerships, joint
ventures, Governmental Entities and any other entities.
"Real Property" shall mean the Owned Real Property and the Lease Real
Property,
collectively.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share Percentage" with respect to any Shareholder shall mean the percentage
that the number of Shares held by such Shareholder represents of the total
number of Shares, as set forth on Exhibit "A".
"Shares" shall mean the shares of Common Stock of the Company held by the
shareholders.
"Stock" shall mean shares of common stock issued by the Purchaser to the
Shareholders as payment of the Purchase Price, as contemplated by Article 2
hereof.
" Structure" shall mean any facility, building, plant, factory, office,
warehouse structure or other improvement owned or leased by the Company.
"Subsidiary" of a Person shall mean any corporation, partnership, limited
liability company, association or other business entity at least 50% of the
outstanding voting power of which is at the time owned or controlled directly
or indirectly by such Person or by one or more of such subsidiary entity, or
both.
"Tax" shall mean any Federal, state, local or foreign income, gross receipts,
license, payroll, unemployment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including, without limitation, taxes under
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), employment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alterative or add-on minimum, estimated tax or other tax, assessment or charge
of any kind whatsoever, including, without limitation, any interest, fine,
penalty or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for refund or
information, or statement relating to Taxes, and any exhibit, schedule,
attachment or amendment thereto.
2. PURCHASE AND SALE OF SECURITIES
2.1 Sale and Delivery. Each Shareholder agrees to sell and deliver to
Purchaser, and Purchaser agrees to purchase and accept from each Shareholder,
free and clear of all Liens, on the terms and conditions set forth in this
Agreement, and for the purchase price described in Section 2.2 below, good and
marketable title to the number of Shares set forth opposite the name of such
Shareholder on Exhibit "A". The Shares to be sold and purchased pursuant to
this Agreement constitute all of the outstanding capital stock of the Company.
2.2 Purchase Price. The Purchase Price for all of the Shares shall be equal
to One Hundred and Ten Thousand dollars ($110,000) plus Twenty Five Thousand
One Hundred and Fifty (25,150) shares of the Stock, to be allocated among the
Shareholders as set forth opposite their respective names on Exhibit "A", and
the satisfaction of certain defined liabilities as set forth on Schedule 2.2.
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 additional stock of the
Purchaser under the Securities Act, at the cost of the Purchaser.
(a) At the Closing, Purchaser shall only deliver 22,150 shares of
Stock to the Shareholders to be allocated as set forth on Exhibit A. The
Purchaser shall hold 3,000 shares in Escrow for a period equal to twenty-four
months from the date of the Closing.
(b) As additional purchase price consideration hereunder,
during the twelve month period from the date of execution of this Agreement,
Purchaser shall pay Shareholders a commission equal to 5% of the Gross Profit
Margin of Environmental Specialty Products, Inc. less any monies paid to
shareholders as part of their employment, provided however, that no such
commission will be due and owing to the shareholders in any month in which Net
Sales are less than $100,000. Net Sales shall be defined as Gross Sales less
ordinary deductions such as but not limited to credits, rebates, sales tax,
freight charges, allowances, customer refunds, etc. Gross Profit Margin shall
be defined as the deduction of all costs of operations from sales. All monies
paid under this paragraph (b) shall be allocated on a pro rata basis in the
same ownership percentages as set forth on Exhibit A hereto.
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 10:00 A.M., local time, on March 28, 1997, simultaneously at the
offices of the Purchaser and at the office of the general counsel for the
Company, Guasti, California, 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 hereof; and
(iii) all records, documents, and files of the Company, including, without
limitation, all minute books, stock records, stock certificate books, and
internal accounting records.
(b) 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 Exhibit "A";
(ii) all of the documents, if any, required to be delivered by Purchaser
pursuant to Section 8.2 hereof; and
(iii) the Purchaser shall satisfy the liabilities of the Company as set forth
on Schedule 2.2.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDERS
Each of the Shareholders hereby severally represents and warrants to, and
covenants and agree with, Purchaser that:
3.1 Ownership of Shares. Such Shareholder owns of record and beneficially
the number of Shares set forth opposite the name of such Shareholder on
Exhibit "A" hereto, and has, and at all times prior to and as of the Closing
such Shareholder will have, good and marketable title to such Shares free and
clear of all Liens.
3.2 Delivery of Good Title. Upon delivery of the Shares to be sold by such
Shareholder hereunder and delivery of the Stock therefor pursuant to this
Agreement, Purchaser will have good and marketable title to such Shares free
and clear of all Liens.
3.3 Execution and Delivery. Except as listed on Schedule 3.3, all consents,
approvals, authorizations and order necessary for the execution, delivery and
performance by such Shareholder of this Agreement (including, without
limitation, the transfer and sale of the Shares to be sold by such Shareholder
to Purchaser) have been duly and lawfully obtained, and such Shareholder has,
and at the Closing will have, full right, power, authority and capacity to
execute, deliver and perform this Agreement. This Agreement has been duly
executed and delivered by such Shareholder and constitutes a legal, valid and
binding agreement of such Shareholder enforceable against such Shareholder in
accordance with its terms.
3.4 No Conflicts. Except as listed on Schedule 3.4, the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not conflict with or result in a breach or violation
of any term or provision of, or (with or without notice or passage of time, or
both) constitute a default under, any indenture, mortgage, deed of trust,
trust (constructive and other), loan agreement or other agreement or
instrument to which such Shareholder is a party or by which such Shareholder
or such Shareholder's Shares are bound, or violate any Legal Requirement
applicable to or binding upon such Shareholder.
3.5 No Brokers. No broker, finder or similar agent has been employed by or
on behalf of such Shareholder in connection with this Agreement or the
transactions contemplated hereby, and such Shareholder has not entered into
any agreement or understanding of any kind with any person or entity for the
payment of any brokerage commission, finder's fee or any similar compensation
in connection with this Agreement or the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
The Shareholders hereby jointly and severally represent and warrant to, and
covenant and agree with, Purchaser that:
4.1 Organization and Good Standing.
(a) The Company has been duly organized and is existing as a corporation in
good standing under the laws of the State of California with full power and
authority (corporate and other) to own and lease its properties and to conduct
its business as currently conducted. The Company has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each jurisdiction set forth on Schedule 4.1(a), such
jurisdictions comprising all jurisdictions in which the Company owns or leases
any property, or conducts any business, so as to require such qualifications.
(b) Except as set forth in Schedule 4.1(b), the Company has no Subsidiary nor
owns or controls, or has any other equity investment or other interest in,
directly or indirectly, any corporation, joint venture, partnership,
association or other entity.
4.2 No Conflicts. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not (a)
conflict with or result in a breach or violation of any term or provision of,
or constitute a default under (with or without notice or passage of time, or
both), or otherwise give any Person a basis for accelerated or increased
rights or termination or nonperformance under, any indenture, mortgage, deed
of trust, loan or credit agreement, lease, license or other agreement or
instrument of which the Company is a party or by which the Company is bound or
affected or to which any of the property or assets of the Company is bound or
affected including, without limitation, all arrangements in Section 4.19
hereof, (b) result in the violation of the provisions of the Articles of
Incorporation or Bylaws of the Company or any Legal Requirement applicable to
or binding upon it, (c) result in the creation or imposition of any Lien upon
any property or asset of the Company or (d) otherwise adversely affect the
contractual or other legal rights or privileges of the Company. Schedule 4.2
sets forth a list of all agreements requiring the consent of any party thereto
to any of the transactions contemplated hereby.
4.3 Capitalization. The authorized capital stock of the Company consists
solely of Ten Thousand (10,000) shares of Common Stock having a par value of
$0.01 per share, of which only the number of Shares listed on Exhibit "A" are,
and as of the Closing will be, issued and outstanding. All of the Shares have
been duly authorized and validly issued and are fully paid, nonassessable and
outstanding and are held by the Shareholders in amounts reflected in Exhibit
"A" hereto. Other than as set forth on Schedule 4.3, (i) there are no
existing options, warrants, right, calls or commitments of any character
relating to the shares of Common Stock or any other capital stock or
securities of the Company, (ii) there are no outstanding securities or other
instruments convertible into or exchangeable for shares of Common Stock or any
other capital stock or securities of the Company and no commitments to issue
such securities or instruments and no Person has any right of first refusal,
preemptive right, subscription right or similar right with respect to any
shares of Common Stock or any other capital stock or securities of the
Company. The offer, issuance and sale of the Shares were (i) exempt from the
registration and prospectus delivery requirements of the Securities Act, (ii)
registered or qualified (or exempt from registration or qualification) under
the registration or qualification requirements of all applicable state
securities laws and (iii) accomplished in conformity with all other Legal
Requirements.
4.4 Financial Statements.
(a) Schedule 4.4 hereto contains true and complete copies of (i) the
unaudited balance sheet (the "Balance Sheet") of the Company at December 31,
1996 (the "Balance Sheet Date"), and the related unaudited statements of
income for ten (10) months then ended, (ii) the reviewed balance sheet for the
two months of the Company at February 28, 1997 and the related reviewed
statements of income, shareholders' equity and cash flow for the fiscal year
then ended (together with the report thereon of independent public
accountants)(the financial statements described in clause (i) and (ii) above
are collectively referred to as the "Financial Statements").
(b) The Financial Statements present fairly the financial condition of the
Company as of the dates indicated therein and the results of operations and
changes in financial position of the Company for the periods specified
therein, have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods covered thereby
and prior periods, have been derived from the accounting records of the
Company and represent only actual, bona fide transactions. The Company's
Financial Statements are true and correct in all material respects and do not
contain any untrue statement of a material fact or omit to state a material
fact.
4.5 Title to Property; Encumbrances.
(a) The Company has, and immediately prior to the Closing will have, good,
valid and marketable title in fee simple to all Real Property and all personal
property reflected on the Balance Sheet as owned by the Company and all Real
Property and personal property acquired by the Company since the Balance Sheet
Date, in each case free and clear of all Liens except (i) as set forth on
Schedule 4.5(a), (ii) for sales and other dispositions of inventory in the
Ordinary Course since the Balance Sheet Date which, in the aggregate, have not
been materially different from prior periods, and (iii) Permitted Liens.
(b) Schedule 4.5(b). contains a true and complete list and legal description
of each parcel of Owned Real Property and a general description of each
Structure situated thereon. The Shareholders have heretofore furnished to
Purchaser true and complete copies of all deeds, other instruments of title
and policies of title insurance indicating and describing the Company's
ownership of the Owned Real Property, as well as copies of any surveys or
environmental reports relating to the real property.
(c) Schedule 4.5(c). contains a list of all tangible personal property having
a cost or fair market value in excess of Five Thousand Dollars ($5,000.00)
owned by the Company (other than personal property held by the Company as
lessee under a personal property lease).
(d) Schedule 4.5(d) contains a list of all real property leases, licenses and
personal property leases under which the Company is the lessee or licensee,
together with (i) the location and nature of each of the leased or licensed
properties (including a legal description of all Leased Real Property), (ii)
the termination date of each such lease or license, (iii) the name of the
lessor or licensor and (iv) all rental and other payments made or required to
be made for the fiscal years ending (December 31), 1994 and December 31, 1995.
All leases and licenses pursuant to which the Company leases or licenses from
others real or personal property are valid, subsisting in full force and
effect in accordance with their respective terms, and there is not, under any
real property lease, personal property lease or license, any existing default
or event of default (or event that, with notice or passage of time, or both,
would constitute a default, or would constitute a basis of force majeure or
other claim of excusable delay or nonperformance). True and complete copies
of all real property leases, licenses and personal property leases listed on
Schedule 4.5(d) have been delivered to Purchaser heretofore, as well as copies
of any title reports, surveys or environmental reports or audits relating to
any Leased Real Property. Except as set forth in Schedule 4.5(d), no such
lease or license will require the consent of the lessor or licensor to or as a
result of the consummation of the transactions contemplated by this Agreement.
For the purposes of this Section 4.5(d), a "lease" shall include a sublease.
(e) All personal property owned by the Company and all personal property held
by the Company pursuant to personal property leases is in good operating
condition and repair, subject only to ordinary wear and tear, has been
operated, serviced and maintained properly within the recommendations and
requirements of the manufacturers thereof (if any) and is suitable and
appropriate for the use thereof made and proposed to be made by the Company in
its business and operations. The Real Property and personal property
described in Sections 4.5(a), 4.5(b) and 4.5(c) and the Real Property and
personal property held by the Company pursuant to the leases and licenses
described in Schedule 4.5(d) compromise all of the real property and personal
property used in the conduct of business of the Company.
(f) Except as set forth in Schedule 4.5(f):
(i) The Company is not in violation of, or default under, any Legal
Requirement pertaining to any of the Real Property. No notice of violation of
any Legal Requirement, or of any covenant, condition, restriction or easement
affecting any Real Property or with respect to the use or occupancy thereof,
has been given by any Person;
(ii) All of the Structures (A) are in good operating condition and repair, (B)
are adequate and suitable for the purposes for which they are currently and
proposed to be used, and (C) are supplied with utilities and other services
necessary for the operation of such Structures, and the business conducted by
the Company therein, including gas, electricity, water, telephone, sanitary
sewer and storm sewer, all of which services are maintained in accordance with
all Legal Requirements and are provided via permanent, irrevocable,
appurtenant easements in favor of the Company;
(iii) No condemnation proceeding is pending or, to the knowledge of the
Shareholders, threatened which would impair the occupancy, use or value of any
Real Property;
(iv) No Structure, nor the operations of the Company therein or thereon, (A)
is located outside of the boundary lines of the described parcel of land on
which it is located, (B) is in violation of applicable setback requirements,
zoning laws, or ordinances, (C) is subject to "permitted non-conforming use"
or "permitted non-conforming structure" classifications or (D) encroaches on
any property owned by, or easement granted in favor of, any Person;
(v) There are no (A) leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any other Person the right to
acquire, use or occupy any portion of, any Real Property, (B) outstanding
options or rights of first refusal to purchase all or any portion of Real
Property or interest therein, and (C) Persons (other than the Company) in
possession of any Real Property;
(vi) Each parcel of Owned Real Property (A) is fully and adequately described
in the legal description therefor contained in the deed thereof, (B) abuts a
paved public right-of-way, (C) does not serve any adjoining property for any
purpose inconsistent with the use of the land, and (D) is not located within
any flood plain or subject to any similar type restriction for which any
permits or licenses necessary to the use thereof have not been obtained; and
(vii) With respect to each item of Leased Real Property, (A) to the
Shareholders' knowledge, the owner thereof has good and marketable title
thereto, free and clear of all Liens other than (I) recorded easements,
covenants and restrictions that do not impair the current use, occupancy or
value thereof and (II) the leasehold interest of the Company, (B) there is
adequate ingress and egress (and a continuing right thereto), without the need
for an easement, between paved public rights-of-way and such Leased Real
Property and (C) the Company has not sold, transferred or subjected to a Lien
such Leased Real Property or any interest therein.
4.6 Accounts Receivable. All accounts receivable of the Company reflected
in the Balance Sheet and all accounts receivable of the Company that have
arisen since the Balance Sheet Date (except such accounts receivable as have
been collected since such dates) are valid and enforceable claims, and the
goods and services sold and delivered that gave rise to such accounts were
sold and delivered in conformity with all applicable express and implied
warranties, purchase orders, agreements and specifications. Such accounts
receivable of the Company are subject to no valid defense, offset or
counterclaim and are fully collectible, except to the extent of the allowance
for doubtful accounts reflected on the Balance Sheet. Schedule 4.6 contains a
true and complete aging of the Company's accounts receivable as of the Balance
Sheet Date.
4.7 Inventories. Except as described in Schedule 4.7, all inventories of
raw materials, work-in-process and finished good set forth or reflected in the
Balance Sheet or acquired by the Company since the balance Sheet Date, consist
of a quality and quantity usable and saleable in the Ordinary Course, except
for slow-moving, damaged or obsolete items and materials of below standard
quality, all of which have been written down to net realizable market value or
in respect of which adequate reserves have been provided, in each case as
reflected in the Balance Sheet. The value at which inventories are carried on
the Balance Sheet reflect the normal inventory valuation policy of the
Company, as applicable, in accordance with generally accepted accounting
principles and on a basis consistent with that of preceding periods, of
stating inventory at the lower of cost or market value. There is no reason to
believe that the Company will experience in the foreseeable future any
difficulty in obtaining, in the desired quantity and quality, the inventory
necessary to conduct its business in the manner proposed to be conducted,
including, without limitation, inventory which historically has been imported.
4.8 Trademarks, Patents, Etc.
(a) Schedule 4.8(a) contains a true and complete list of all letters patent,
patent applications, trade names, trademarks, service marks, trademark and
service xxxx registrations and applications, copyrights, copyright
registrations and applications, grants of a license or right to the Company
with respect to the foregoing, both domestic and foreign, claimed by either
Company or used or proposed to be used by the Company in the conduct of its
business, whether registered or not, (collectively herein, "Registered
Rights").
(b) Except as described in Schedule 4.8(b), the Company owns and has the
unrestricted right to use the Registered Rights and every trade secret,
know-how, process, discovery, development, design, technique, customer and
supplier list, promotional idea, marketing and purchasing strategy, invention,
process, confidential data and or other information (collectively herein,
"Proprietary Information") required for or incident of the design,
development, manufacture, operation, sale and use of all products and services
sold or rendered or proposed to be sold or rendered by the Company, free and
clear of any right, equity or claim of others. The Company has taken
reasonable security measures to protect the secrecy, confidentiality and value
of all Proprietary Information.
(c) Schedule 4.8(c) contains a true and complete list and description of all
licenses of or rights to Proprietary Information granted to the Company by
others or to others by the Company. Except as described in Schedule 4.8(c),
(i) the Company has not sold, transferred, assigned, licensed or subjected to
any Lien, any Registered Right or Proprietary Information or any interest
therein, and (ii) the Company is not obligated or under any liability whatever
to make any payments by way of royalties, fees or otherwise to any owner or
licensor of, or other claimant to, any Registered Right or Proprietary
Information.
(d) There is no claim or demand of any Person pertaining to, or any Action
that is pending or, to the Shareholders' knowledge, threatened, which
challenges the rights of the Company in respect of any Registered Right or any
Proprietary Information.
4.9 Banking and Insurance.
(a) Schedule 4.9(a) contains a true and complete list of the names and
locations of all financial institutions at which the Company maintains a
checking account, deposit account, securities account, safety deposit box or
other deposit or safekeeping arrangement, the numbers or other identification
of all such accounts and arrangements and the names of all persons authorized
to draw against any funds therein.
(b) Schedule 4.9(b) contains a true and complete list of all insurance
policies and bonds and self insurance arrangements currently in force that
cover or purport to cover risks or losses to or associated with the Company's
business, operations, premises, properties, assets, employees, agents and
directors and sets forth, with respect to each such policy, bond and self
insurance arrangement, a description of the insured loss coverage, the
expiration date and time of coverage, the dollar limitations of coverage, a
general description of each deductible feature and principal exclusion and the
premiums paid and to be paid prior to expiration. The insurance policies,
bonds and arrangements described on Schedule 4.9(b) (the "Policies") provide
such coverage against such risk of loss and in such amounts as are customary
for corporations of established reputation engaged in the same or similar
business and similarly situated. The Company has no obligation, liability or
other commitment relating to any contract of insurance containing a provision
for retrospective rating or adjustment of the Company's premium obligation.
To the Shareholders' knowledge, no facts or circumstances exist that would
cause the Company to be unable to renew its existing insurance coverage as and
when the same shall expire upon terms at least as favorable as those currently
in effect, other than possible increases in premiums that do not result from
any act or omission of the Company or any Shareholder.
4.10 Indebtedness.
(a) The Company has no liability or obligation for Indebtedness other than as
set forth on Schedule 4.10(a), and true and complete copies of all instruments
and documents evidencing, creating, securing or otherwise relating to such
Indebtedness have been delivered to Purchaser heretofore. Except as set forth
on Schedule 4.10(a), the Purchaser is not assuming any liabilities or
obligations of the Company. Except as described in Schedule 4.10(a), no event
has occurred and no condition has become known to the Company or any
Shareholder (including the transactions contemplated hereby) that constitutes
or, with notice or passage of time, or both, would constitute a default or a
basis of force majeure or other claim of accelerated or increased rights,
termination, excusable delay or nonperformance by the Company or any other
Person under any instrument or document relating to or evidencing Indebtedness
that would entitle any person to require the Company to pay any portion of the
principal amount of such Indebtedness prior to the scheduled maturity thereof.
Except as set forth in Schedule 4.10(a), no instrument or document evidencing,
creating, securing or otherwise relating to Indebtedness will require the
consent of any person to or as a result of the consummation of the
transactions contemplated by this Agreement.
(b) Schedule 4.10(b) contains a list and brief description of all agreements
or instruments pursuant to which any of the Company's directors, employees or
shareholders have guaranteed by Indebtedness of the Company (the
"Guaranties"). True and complete copies of all Guaranties have been delivered
to 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 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 book of account for all
Taxes with respect to its business, properties and operations through the
Balance Sheet Date, and the accruals for Taxes in the Balance Sheet are
adequate to cover all liabilities for Taxes of the Company for all periods
ending on or before the Closing Date.
(d) The Company has never (i) had a tax deficiency proposed, asserted or
assessed against it (ii) executed any waiver of any statute of limitations on
the assessment or collection of any Taxes, or (iii) been delinquent in the
payment of any Taxes.
(e) No Tax Return of the Company has been audited or the subject of other
Action by any Governmental Entity. The Company has not received any notice
from any Governmental Entity of any pending examination or any proposed
deficiency, addition, assessment, demand for payment or adjustment relating to
or affecting the Company or its assets or properties and no Shareholder has
reason to believe that any Governmental Entity may assess (or threaten to
assess) any Taxes for any periods ending on or prior to the Closing Date.
(f) The Company (i) has not filed any consent or agreement pursuant to Code
Section 341(f), and no such consent or agreement will be filed at any time on
or before the Closing Date; (ii) has not made any payments, is not obligated
to make any payments and is not a party to any agreement that under certain
circumstances could obligate the Company to make any payments that will not be
deductible under Code Section 280G, (iii) is not a United States real property
holding corporation within the meaning of Code Section 897(c)(2); (iv) is not
a party to a tax allocation or sharing agreement; (v) has never been (or does
not have any liability for unpaid Taxes because it was) a member of an
affiliated group with the meaning of Code Section 1504(a); (vi) has never
applied for a tax ruling from a Governmental Entity and (vii) has never filed
or been the subject of an election under Code Section 338(g) or Code Section
338(h)(10) or caused or been the subject of a deemed election under Code
Section 338(e).
4.13 Questionable Payments. Neither the Company nor, to the Shareholders'
knowledge, any of its directors, officers, agents, employees or other Person
associated with or acting on behalf of the Company has (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (b) made any direct or indirect
unlawful payments to government officials or employees, or foreign government
officials or employees, from corporate funds, (c) established or maintained
any unlawful or unrecorded fund of corporate monies or other assets, (d) made
any false or fictitious entries on the books of account of the Company, (e)
made or received any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment, or (f) made any other payment, favor or gift not fully
deductible for federal income tax purposes.
4.14 Employee Benefit Matters.
(a) Schedule 4.14 contains a complete list of all Plans. True and complete
copies of each of the following documents (and any amendments thereto), where
applicable, have been delivered previously to Purchaser: (i) the Plan
documents; (ii) a written description of any Plan which is not in writing;
(iii) if the Plan is funded through a trust or any third-party funding
vehicle, the trust or other funding agreement; (iv) the Plan'Shareholder most
recent financial statements; (v) the two most recent annual reports (including
all schedules and attachments thereto) required by ERISA; (vi) the most recent
actuarial report and valuation; (vii) the most recent determination letter
received from the IRS with respect to each Plan that is intended to be
qualified under Code Section 401 or to be recognized as tax-exempt under Code
Section 501(c); (viii) the most recent summary plan description and each
summary of material modifications required by ERISA; (ix) any agreement
providing for the provision of administrative or investment management
services with respect to the Plan; and (x) all documents and correspondence
received from or provided to the DOL, IRS and PBGC during the past two years.
(b) Each Plan and related trust, annuity, or other funding agreement complies
and has been maintained in compliance with all applicable Legal Requirements.
No non-exempt prohibited transaction (as defined in Code Section 4975 and
ERISA Sections 406 and 408) has occurred and no "fiduciary" (as defined in
ERISA Section 3(21)) has committed any breach of duty which could subject the
Company, any ERISA Affiliate, or any director, officer, or employee thereof to
liability under Title I of ERISA or to tax under Code Section 4975. All
material obligations required to be performed by the Company and other Person
under the terms of each Plan and applicable Legal Requirement have been
performed.
(c) All required reports and descriptions, including, without limitation,
annual reports (Form 5500), summary annual reports, and summary plan
descriptions, have been filed and distributed timely. With respect to each
Plan which is a welfare plan (as defined in ERISA Section 3(1)), the
requirements of Party 6 of Subtitle B of Title I of ERISA and of Code Sections
162(k) and 4980B have been satisfied.
(d) All contributions, premiums, and other payments, including, without
limitation, employer contributions and employee salary reduction
contributions, have been paid when due or accrued in accordance with the past
custom and practice of Seller and any ERISA Affiliate. No Plan that is
subject to Part 3 of Subtitle B of Title I of ERISA or to Code Section 412 has
incurred any accumulated funding deficiency, whether or not waived, and no
other actual or contingent liability for any other expenses or obligations of
any Plan exists.
(e) There are no pending or, to the Shareholders' knowledge, threatened
Actions (other than routine claims for benefits) asserted or instituted
against any Plan or the assets of any Plan, or against the Company, or any
ERISA Affiliate, trustee, administrator, or fiduciary of such Plan, and the
Shareholders have no knowledge of any facts that could form the basis of any
such Action. There is no pending or, to the Shareholders' knowledge,
threatened or contemplated Action by any Governmental Entity with respect to
any Plan, and the Shareholders have no knowledge of any facts that could
reasonably be expected to cause or trigger such an Action.
(f) The Company (or, if applicable, an ERISA Affiliate,) may terminate,
suspend, or amend each Plan at any time, except to the extent otherwise
required by Code Section 4980B, without the consent of the participants or
employees covered by such Plan. Neither the Company nor any ERISA Affiliate
has announced any intention, made any amendment or binding commitment, or
given any written or oral notice providing that the Company or an ERISA
Affiliate (i) will create additional Plans covering employees of the Company
or any ERISA Affiliate, (ii) will increase benefits promised or provided
pursuant to any Plan, or (iii) will not exercise after the Closing Date any
right or power it may have to terminate, suspend, or amend any Plan.
(g) Neither the Company nor any ERISA Affiliate maintains or has maintained
any time, or contributes to or has contributed to or is or was required to
contribute to, any (i) Plan subject to Title IV or ERISA, including, without
limitation, any multi-employer plan (as defined in ERISA Section 3(37)),
within the past five years, or (ii) funded or unfunded medical, health,
accident, or life insurance plan or arrangement for current or future retirees
or terminated employees or their spouses or dependents (except to the extent
required by Code Sections 162(k) or 4980B).
(h) Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will constitute a termination of
employment or other event entitling any Person to any additional or other
benefits, or that would otherwise modify benefits or the vesting of benefits,
provided under any Plan.
(i) No event has occurred which could subject the Company of any ERISA
Affiliate to any material liability (i) under any Legal Requirement relating
to any Plan, or (ii) resulting from any obligation of Seller or an ERISA
Affiliate to indemnify any Person against liability incurred with respect to
or in connection with any Plan.
(j) Each Plan which is intended to be qualified under Code Section 401 has
received, within the last five years, a favorable determination letter from
the IRS. No event has occurred and no facts or circumstances exist which may
cause or result in the loss or revocation of such determination.
4.15 No Undisclosed Liabilities. Except (i) to the extent set forth or
provided for in the Balance Sheet or the notes thereto, (ii) as set forth on
Schedule 4.15 or (iii) for non-material current liabilities incurred since the
Balance Sheet Date in the Ordinary Course, as of the date hereof the Company
has no liabilities, whether accrued, absolute, contingent or otherwise,
whether due or to become due and whether the amounts thereof are readily
ascertainable or not, or any unrealized or anticipated losses from any
commitments of a contractual nature, including Taxes with respect to or based
upon the transactions or events occurring at or prior to the Closing.
4.16 Permits, Licenses, Etc. The Company possesses, and is operating in
compliance with, all franchises, licenses, permits, certificates,
authorizations, rights and other approvals of Governmental Entities necessary
to (i) occupy, maintain, operate and use the Real Property as it is currently
used and proposed to be used, (ii) conduct its business as currently conducted
and as proposed to be conducted, and (iii) maintain and operate its Plans (the
"Permits"). Schedule 4.16 contains a true and complete list of all Permits.
Each Permit has been lawfully and validly issued, and no proceeding is pending
or, to the Shareholders' knowledge, threatened looking toward the revocation,
suspension or limitation of any Permit. The consummation of the transactions
contemplated by this Agreement will not result in the revocation, suspension
or limitation of any Permit and, except as set forth in Schedule 4.16, no
Permit will require the consent of its issuing authority to or as a result of
the consummation of the transaction contemplated hereby.
4.17 Regulatory Filings. The Company has made all required registrations and
filings with and submissions to all applicable Governmental Entities relating
to the operations of the Company as currently conducted and as proposed to be
conducted, including, without limitation, all such applicable Governmental
Entities having jurisdiction over any matters pertaining to conservation or
protection of the environment, and the treatment, discharge, use, handling,
storage or production, or disposal of Hazardous Materials. All such
registrations, filings and submissions were in compliance with all Legal
Requirements (including all Environmental Laws) and other requirements when
filed, no material deficiencies have been asserted by any such applicable
Governmental Entities with respect to such registrations, filings or
submissions and, to the Shareholders' knowledge, no facts or circumstances
exist which would indicate that a material deficiency may be asserted by any
such authority with respect to any such registration, filing or submission.
4.18 Consents. All consents, authorizations and approvals of any Person to
or as a result of the consummation of the transactions contemplated hereby,
that are necessary or advisable in connection with the operations and business
of the Company as currently conducted and as proposed to be conducted, or for
which the failure to obtain the same might have, individually or in the
aggregate, a Material Adverse Effect, have been lawfully and validly obtained
by the Company, except as described in Schedules 4.5(c), 4.10 and 4.16 hereto.
All consents, authorizations and approvals described in schedules 4.5(c), 4.10
and 4.16 will have been lawfully and validly obtained prior to the Closing.
4.19 Material Contracts; No Defaults.
(a) Schedule 4.19(a) contains a true and complete list and description of the
outstanding sales order and sales contract backlog of the Company having an
indicated gross value in excess of Five Thousand Dollars ($5,000.00) or having
a term of duration in excess of six months. All outstanding sales orders and
sales contracts of the Company have been entered into in the Ordinary Course.
Except as described in Schedule 4.19(a), the Company has not received any
advance, progress payment or deposit in respect of any sales order or sales
contract, and the Company has no sales order or sales contract that will
result, upon completion or performance thereof, in gross margins materially
lower than those normally experienced by the Company for the services or
products covered by such sales order or sales contract.
(b) Schedule 4.19(b) contains a true and complete list and description of all
outstanding purchase orders and purchase commitments of the Company having a
gross indicated value in excess of Five Thousand Dollars ($5,000.00) in the
aggregate from any single supplier or other vendor. All outstanding purchase
orders and purchase commitments of the Company have been incurred in the
Ordinary Course, and no purchase order or purchase commitment of the Company
is 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) Schedule 4.19(d) contains a true and complete list and description of all
noncompetition agreements and covenants under which the Company or any of
their respective officers, directors or employees or any Shareholder is
obligated, and true and complete copies of the same have been delivered to
Purchaser heretofore. Except as described in Schedule 4.19(d), the Company is
not restricted by any agreement from carrying on its business or engaging in
any other activity anywhere in the world (including relocating, closing, or
terminating any of its operations or facilities), and no such officer,
director, key employee or Shareholder is a party to or otherwise bound or
affected by any agreement, covenant or other arrangement or understanding that
would restrict or impair his ability to perform diligently his other duties to
the Company. Schedule 4.19(d) also contains a true and complete list and
description of all noncompetition agreements or covenants in favor of the
Company, and true and complete copies of the same have been delivered to
Purchaser heretofore.
(e) Schedule 4.19(e) contains a true and complete list and description of all
contracts, agreements, understandings, arrangements and commitments, written
or oral, of the Company with any officer, director, consultant, employee or
Affiliate of the Company or with any associate, Affiliate or employee of any
Affiliate of the Company, other than those disclosed in Schedule 4.21(a)
hereto; in each case a true and complete copy of such written contract,
agreement, understanding, arrangement or commitment or a true and complete
summary of such oral contract, agreement, understanding, arrangement or
commitment has been delivered to Purchaser heretofore.
(f) Schedule 4.19(f) contains a true and complete list and description of all
other material contracts, agreements, understandings, arrangements and
commitments, written or oral, of the Company by which it or its properties,
rights or assets are bound that are not otherwise disclosed in this Agreement
or the Schedule hereto. True and complete copies of such written contracts,
agreements, understandings, arrangements and commitments and true and complete
summaries of such oral contracts, agreements, understandings, arrangements and
commitments have been delivered to Purchaser heretofore. For the purposes of
this subsection (f), "material" means any contract, agreement, understanding,
arrangement or commitment that (i) involves performance by any party more than
ninety (90) days from the date hereof, (ii) involves payments or receipts by
the Company in excess of Five Thousand Dollars ($5,000.00), (iii) involves
capital expenditures in excess of Five Thousand Dollars ($5,000.00) or (iv)
otherwise materially affects the Company.
(g) Except as described in Schedule 4.19(g):
(i) each agreement, contract, arrangement or commitment described above in
this Section 4.19 is, and after the Closing on identical terms will be, legal,
valid, binding, enforceable and in full force and effect;
(ii) no event or condition has occurred or become known to the Company or any
Shareholder or is alleged to have occurred that constitutes or, with notice or
the passage of time, or both, would constitute a default or a basis of force
majeure or other claim of excusable delay, termination, nonperformance or
accelerated or increased rights by the Company or any other Person under any
contract, agreement, arrangement, commitment or other understanding, written
or oral, described above in this Section 4.19, or described or otherwise
disclosed pursuant to this Agreement; and
(iii) no person with whom the Company has such a contract, agreement,
arrangement, commitment or other understanding is in default thereunder or has
failed to perform fully thereunder by reason of force majeure or other claim
of excusable delay, termination or nonperformance thereunder, the delay,
termination or nonperformance of which, or a default under which, has had or
may have a Material Adverse Effect.
4.20 Absence of Certain Changes. Since December 31, 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'Shareholder 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 Shareholders' knowledge, threatened,
any strike, slow down, picket, work stoppage or other concerted action by any
union or other group of employees or other persons against either Company or
its premises or products. Except for activities by the unions that are
parties to any of the agreements listed on Schedule 4.21(b) with respect to
the existing members of such unions, to the Shareholders' knowledge, no union
or other labor organization has attempted to organize any of the employees of
the Company.
(e) The Company has complied with all Legal Requirements relating to
employment and labor, and, to the Shareholders' knowledge, no facts or
circumstances exist that could provide a reasonable basis for a claim of
wrongful termination by any current or former employee of the Company against
the Company.
4.22 Affiliation. Except as disclosed on Schedule 4.22, none of the
Shareholders, any officer, director or key employee of the Company or any
associate or Affiliate of the Company or any of such Persons has, directly or
indirectly, (i) an interest in any Person that (A) furnishes or sells, or
proposes to furnish or sell, services or products that are furnished or sold
by the Company or (B) purchases from or sells or furnishes to, or proposes to
purchase from or sell or furnish to, the Company any goods or services or (ii)
a beneficial interest in any contract or agreement to which the Company is a
party or by which the Company or any of the assets of the Company are bound or
affected.
4.23 Principal Customers and Suppliers.
(a) Schedule 4.23(a) contains a true and complete list of the name and
address of each customer that purchased in excess of five percent (5%) of the
Company's sales of goods or services during the twelve months ended on the
Balance Sheet Date, and since that date no such customer has terminated its
relationship with or adversely curtailed its purchases from the Company or
indicated (for any reason) its intention so to terminate its relationship or
curtail its purchases.
(b) Schedule 4.23(b) contains a true and complete list of each supplier from
whom the Company purchased in excess of five percent (5%) of the Company's
purchases of goods or services during the twelve months ended on the balance
Sheet Date, and since that date no such supplier has terminated its
relationship with or adversely curtailed its accommodations, sales or services
to the Company or indicated (for any reason) its intention to terminate such
relationship or curtail its accommodations, sales or services.
4.24 Compliance with Law. Through and including the date hereof, the Company
(i) has not violated or conducted its business or operations in violation of,
and has not used or occupied its properties or assets in violation of, any
Legal Requirement, (ii) to the Shareholders' knowledge, has not been alleged
to be in violation of any Legal Requirement, and (iii) has not received any
notice of any alleged violation of, or any citation for noncompliance with,
any Legal Requirement.
4.25 Product Returns. Schedule 4.25 contains a true and complete description
of the product return experience of the Company for the immediately preceding
twelve (12) months. The Company has not experienced any product returns which
have had or may have a Material Adverse Effect.
4.26 Product Liability and Product Warranty. Schedule 4.26 hereto contains a
true and complete description of (i) all warranties granted or made with
respect to products sold, or services rendered, by the Company and (ii) the
Company's product liability and product warranty experience for the last three
years. The Company has not suffered any product liability or product warranty
claims which have had or may have a Material Adverse Effect.
4.27 Corporate Records. The copies or originals of the Articles of
Incorporation, Bylaws, minute books and stock records of the Company
previously delivered to, or made available for inspection by, Purchaser are
true, complete and correct.
4.28 Hazardous Materials. Except as set forth on Schedule 4.28:
(a) No Hazardous Material (i) has been released, placed, stored, generated,
used, manufactured, treated, deposited, spilled, discharged, released or
disposed or on or under any real property currently or previously owned or
leased by the Company or is presently located on or under any Real Property
(or, to the Shareholders' knowledge, any property adjoining any Real
Property), (ii) is presently maintained, used, generated, or permitted to
remain in place by the Company in violation of any Environmental Law, (iii) is
required by any Environmental Law to be eliminated, removed, treated or
mitigated by the company, given the nature of its present condition, location,
nature, material or maintenance, or (iv) is of a type, location, material,
nature or condition which requires special notification to third parties by
the Company under Environmental Law or common law.
(b) No notice, citation, summons or order has been received by the Company or
any Shareholder, no notice has been given by the Company and no complaint has
been filed, no penalty has been assessed and no investigation or review is
pending or threatened by any Governmental Entity, with respect to (i) any
alleged violation by the Company of any Environmental Law of (ii) any alleged
failure by the Company to have any environmental permit, certificate, license,
approval, registration or authorization required in connection with its
business or properties, or (iii) any use, possession, generation, treatment,
storage, recycling, transportation, release or disposal by or on behalf of the
Company of any Hazardous Material.
(c) The Company has not received any request for information, notice of
claim, demand or notification that it is or that indicates that it may be a
"potentially responsible party" with respect to any investigation or
remediation of any threatened or actual release of any Hazardous Material.
(d) No above-ground or underground storage tanks, whether or not in use, are
or have ever been located at any property currently owned or leased by the
Company.
(e) No notice has been received by the Company with respect to the listing or
proposed listing of any property currently or previously owned, operated or
leased by the Company on the National Priorities List promulgated pursuant to
CERCLA, CERCLIS or any similar state list of sites requiring investigation or
cleanup.
(f) There have been no environmental inspections, investigations, studies,
tests, review or other analyses conducted in relation to any Real Property.
(g) The Company has not yet released, transported, or arranged for the
transportation of any Hazardous Material from any property currently or
previously owned, operated or leased by the Company.
4.29 Brokers' Fees. No broker, finder or similar agent has been employed by
or on behalf of the Company in connection with this Agreement or the
transactions contemplated hereby, and the Company has not entered into any
agreement or understanding of any kind with any person or entity for the
payment of any brokerage commission, finder's fee or any similar compensation
in connection with this Agreement or the transactions contemplated hereby.
4.30 Disclosure.
(a) No representation or warranty of any Shareholder in this Agreement and no
information contained in any Schedule or other writing delivered pursuant to
this Agreement or at the Closing contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact required to
make the statements herein or therein not misleading. There is no fact that
the Shareholders have not disclosed to Purchaser in writing that has had or,
insofar as any Shareholder can now foresee, may have a Material Adverse Effect
on the ability of any Shareholder to perform fully this Agreement.
(b) To the extent that any representation or warranty in this Article 4 is
qualified to the Shareholders' "knowledge," the Shareholders represent and
warrant that they have made a reasonable investigation sufficient to express
an informed view concerning the matters to which such representation or
warranty relates, including diligent inquiries of the Company's officers,
directors and employees.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to, and covenants and agrees with,
each of the Shareholders that:
5.1 Organization and Good Standing. Purchaser has been duly organized and
is existing as a corporation in good standing under the laws of the State of
Nevada with full corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby.
5.2 Execution and Delivery. This Agreement has been duly authorized by all
necessary corporate action on the part of Purchaser, has been duly executed
and delivered by Purchaser and constitutes the legal, valid and binding
agreement of Purchaser enforceable against Purchaser in accordance with its
terms.
5.3 No Conflicts. The execution, delivery and performance of this Agreement
by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby will not conflict with or result in the violation of the
provisions of the Articles of Incorporation or Bylaws of Purchaser.
6. CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing through the
Closing Date, the Shareholders jointly and severally covenant and agree
(except as expressly contemplated by this Agreement or to the extent that
Purchaser shall otherwise expressly consent in writing) that:
6.1 Qualification. The Company shall maintain all qualifications to
transact business and remain in good standing in its jurisdiction of
incorporation and in the foreign jurisdictions set forth on Schedule 4.1(a).
6.2 Ordinary Course. The Company shall conduct its business in, and only
in, the Ordinary Course and, to the extent consistent with such business,
shall preserve intact its current business organizations, keep available the
services of its current officers and employees and preserve its relationships
with customers, suppliers and others having business dealings with it to the
end that its goodwill and going business value shall be unimpaired at the
Closing Date. The Company shall maintain its properties and assets in good
condition and repair.
6.3 Corporate Changes. The Company shall not (a) amend its Articles of
Incorporation or Bylaws (or equivalent documents), (b) acquire by merging or
consolidating with, or agreeing to merge or consolidate with, or purchase
substantially all of the stock or assets of, or otherwise acquire, any
business or any corporation, partnership, association or other business
organization or division thereof, (c) enter into any partnership or joint
venture, (d) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock or purchase or redeem, directly
or indirectly, any shares of its capital stock, (e) issue or sell any shares
of its capital stock of any class or any options, warrants, conversion or
other rights to purchase any such shares or any securities convertible into or
exchangeable for such shares, or (f) liquidate or dissolve or obligate itself
to do.
6.4 Indebtedness. 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 Shareholder agrees to:
(a) comply promptly with all requirements that applicable Legal Requirements
may impose upon it with respect to the transactions contemplated by the
Agreement, and shall cooperate promptly with, and furnish information to,
Purchase in connection with any requirements imposed upon Purchaser or upon
any of its affiliates in connection therewith or herewith;
(b) use its reasonable best efforts to obtain (and to cooperate with
Purchaser in obtaining) any consent, authorization or approval of, or
exemption by, any Person required to be obtained or made by such Shareholder
in connection with the transactions contemplated by this Agreement;
(c) use its reasonable best efforts to bring about the satisfaction of the
conditions precedent to Closing set forth in Section 8.1 of this Agreement;
(d) promptly advise Purchase orally and, within three (3) business days
thereafter, in writing of any change in such Company's business or condition
that has had or may have a Material Adverse Effect; and
(e) deliver to Purchaser prior to the Closing a written statement disclosing
any untrue statement in this Agreement or any Schedule hereto (or supplement
thereto) or document furnished pursuant hereto, or any omission to state any
material fact required to make the statements herein or therein contained
complete and not misleading, promptly upon the discovery of such untrue
statement or omission, accompanied by a written supplement to any Schedule to
this Agreement that may be affected thereby; provided, however, that the
disclosure of such untrue statement or omission shall not prevent Purchaser
from terminating this Agreement pursuant to Section 9.1(c) hereof at any time
at or prior to the Closing in respect of any original untrue or misleading
statement.
7.2 Covenants of Purchaser. During the period from the date hereof to the
Closing Date, Purchaser shall:
(a) comply promptly with all requirements that applicable Legal Requirements
may impose upon it with respect to the transactions contemplated by this
Agreement, and shall cooperate promptly with, and furnish information to, the
Shareholders in connection with any such requirements imposed upon the
Shareholders or the Company or upon any of the Company's affiliates in
connection therewith or herewith;
(b) use its reasonable best efforts to obtain any consent, authorization or
approval of, or exemption by, any Person required to be obtained or made by
Purchaser in connection with the transactions contemplated by this Agreement;
and
(c) use its reasonable best efforts to bring about the satisfaction of the
condition precedent to Closing set forth in Section 8.2 of this Agreement.
7.3 Access and Information
(a) During the period commencing on the date hereof and continuing through the
Closing Date, 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 hereof,
Purchaser shall hold in confidence, and shall use reasonable efforts to ensure
that its employees and representatives hold in confidence, all such
information supplied t 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, two (2) years after the date hereof.
7.4 Expenses. All costs and expenses (including, without limitation, all
legal fees and expenses and fees and expenses of any brokers, finders or
similar agents) incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring the
same.
7.5 Certain Notifications. At all times from the date hereof to the Closing
Date, each party shall promptly notify the others in writing of the occurrence
of any event that will or may result in the failure to satisfy any of the
conditions specified in Article 8 hereof.
7.6 Publicity; Employee Communications. At all times prior to the Closing
Date, each party shall obtain the consent of all other parties hereto prior to
issuing, or permitting any of its directors, officers, employees or agents to
issue, any press release or other information to the press, employees of the
Company or any third party with respect to this Agreement or the transactions
contemplated hereby; provided, however, that no party shall be prohibited from
supplying any information to any of its representatives, agents, attorneys,
advisors, financing sources and others to the extent necessary to complete the
transactions contemplated hereby so long as such representatives, agents,
attorneys, advisors, financing sources and others are made aware of the terms
of this Section 5.6. Nothing contained in this Agreement shall prevent any
party to this Agreement at any time from furnishing any required information
to any Governmental Entity or authority pursuant to a Legal Requirement or
from complying with its legal or contractual obligations.
7.7 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Legal Requirements, to consummate and
make effective the transactions contemplated by this Agreement.
(b) If at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the Shareholders and
the property officers or directors of Purchaser, as the case may be, shall
take or cause to be taken all such necessary or convenient action and execute,
and deliver and file, or cause to be executed, delivered and filed, all
necessary or convenient documentation.
7.8 Competing Offers; Merger or Liquidation. The Shareholders agree that
they will not, and will cause the Company not to, directly or indirectly,
through any officer, director, agent, or otherwise, solicit, initiate or
encourage the submissions of bids, offers or proposals by, any Person with
respect to an acquisition of the Company or its assets or capital stock or a
merger or similar transaction, and the Shareholders will not, and will not
permit the Company to, engage any broker, financial adviser or consultant with
an incentive to initiate or encourage proposals or offers from other parties.
Furthermore, the Shareholders shall not, and shall not permit the Company to,
directly or indirectly, through any officer, director, agent or otherwise,
engage in negotiations concerning any such transaction with, or provide
information to, any Person other than Purchaser and its representatives with a
view to engaging, or preparing to engage, that Person with respect to any
matters in this Section. The Shareholders shall ensure that the Company shall
not commence any proceeding to merge, consolidate or liquidate or dissolve or
obligate itself to do so.
7.9 Inconsistent Action. The Shareholders shall not take or suffer to be
taken, and shall not permit the Company to take or cause or suffer to be
taken, any action that would cause any of the representations or warranties of
any of the Shareholders in this Agreement to be untrue, incorrect, incomplete
or misleading.
7.10 Post-Termination Employment. Except for the employment agreement to be
executed by Xxxxxxxxx Xxxx, each Shareholder acknowledges and agrees that
after the Closing (a) neither Purchaser nor the Company shall be required to
employ or retain any employee of the Company or any other Person, and (b)
Purchaser, in its sole and absolute discretion, may cause the Company to
retain all, some, or none of such employees.
8. CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions of Purchaser. Notwithstanding any other provision of this
Agreement, the obligations of Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:
(a) There shall not be instituted and pending or threatened any Action before
any Governmental Entity (i) challenging the acquisition of the Shares by
Purchaser or otherwise seeking to restrain or prohibit the consummation of the
transactions contemplated hereby or (ii) seeking to prohibit the direct or
indirect ownership or operation by Purchaser of all or a material portion of
the business or assets of the Company, or to compel Purchaser or the Company
to dispose of or hold separate all or a material portion of the business or
assets of the Company or Purchaser;
(b) The representations and warranties of each of the Shareholders in this
Agreement shall be true and correct in all respects on and as of the Closing
Date with the same effect as if made on the Closing Date and each of the
Shareholders shall have complied with all covenants and agreements and
satisfied all conditions on such Shareholder' part to be performed or
satisfied on or prior to the Closing Date;
(c) Purchaser shall have received from the President of the Company a
certificate dated the Closing Date in substantially the form attached as
Exhibit D hereto;
(d) Purchaser shall have received from each Shareholder a certificate dated
the Closing Date in substantially the form attached as Exhibit E hereto;
(e) Purchaser shall have received a certificate of the Secretary of the
Company in substantially the form attached as Exhibit F hereto;
(f) Xxxxxxxxx Xxxx shall have entered into an Employment Agreement with the
Company in substantially the form attached as Exhibit B. Xxxxx Xxxx shall have
entered into a Noncompetition Agreement with Purchaser and the Company in
substantially the form attached as Exhibit C hereto;
(g) 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;
(h) All corporate and other proceedings and actions taken in connection with
the transactions contemplated hereby and all certificates, opinions,
agreements, instruments, releases and documents referenced herein or incident
to the transactions contemplated hereby shall be in form and substance
satisfactory to Purchaser and its counsel;
(i) 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.;
(j) All consents from third parties, including from any Governmental Entity,
landlord or other Person, necessary for the consummation of the transactions
contemplated hereby shall have been obtained;
(k) The Board of Directors of Purchaser shall have authorized and approved
this Agreement and the transactions contemplated hereby;
(l) All officers and directors of the company shall have resigned as such,
effective of the Closing;
(m) No act, event or condition shall have occurred after the date hereof
which Purchaser determines has had or could have had a Material Adverse
Effect;
8.2 Conditions of the Shareholders. Notwithstanding any other provision of
this Agreement, and except as set forth below, the obligations of the
Shareholders to consummate the transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing, of the condition set
forth in subsection (a) of Section 8.1, and the condition that the
representations and warranties of Purchaser in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with the
same effect as if made on the Closing Date and Purchaser shall have complied
with all covenants and agreements and satisfied all conditions on its part to
be performed or satisfied on or prior to the Closing Date substantially in the
form of Exhibit G attached hereto.
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 the Shareholders acting together 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), (c) or (d) hereof, such termination shall be without prejudice to any
rights that the terminating party or parties may have against the breaching
party or parties or any other person under the terms of this Agreement or
otherwise.
9.3 Amendment. This Agreement may be amended at any time by a written
instrument executed by Purchaser and the Shareholders. Any amendment effected
pursuant to this Section 9.3 shall be binding upon all parties hereto.
9.4 Waiver. Any term or provision of this Agreement may be waived in
writing at any time by the party or parties entitled to the benefits thereof.
Any waiver effected pursuant to this Section 9.4 shall be binding upon all
parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any other right, power or privilege. No waiver of any
breach of any covenant or agreement hereunder shall be deemed a waiver of any
preceding or subsequent breach of the same or any other covenant or agreement.
The rights and remedies of each party under this Agreement are in addition to
all other rights and remedies, at law or in equity, that such party may have
against the other parties.
10. INDEMNFICATION
10.1 Survival of Representations and Warranties. The representations and
warranties of the parties hereto contained in this Agreement or in any writing
delivered pursuant hereto or at the Closing shall survive the Closing and the
consummation of the transactions contemplated hereby (and any examination or
investigation by or on behalf of any party hereto) until the fourth
anniversary of the Closing Date; provided, that the representations and
warranties contained in Section 4.12 and Section 4.14 shall not terminate
until the expiration of any applicable statute of limitations; provided,
further, that representations and warranties contained in Article 3, Section
4.17, Section 4.24 and Section 4.28 shall not terminate but shall continue
indefinitely.
10.2 Indemnification.
(a) The Shareholders, jointly and severally, covenant and agree to defend,
indemnify and hold harmless 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'Shareholder 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, it is understood and agreed that
Purchaser shall have the right to set-off the amount of any indemnity under
Sections 10.2 or 10.3 hereof to the extent any of the Shareholder shall be
liable therefor against any sums of money or any shares of the Purchaser at
any time payable or deliverable to the Shareholders. The remedies provided in
this Article shall be cumulative and shall not preclude the assertion by any
party of any other rights or the seeking of any other remedies by it against
any other party.
11. GENERAL PROVISIONS
11.1 Notices. All notices and other communications under or in connection
with this Agreement shall be in writing and shall be deemed given (a) if
delivered personally (including by overnight express or messenger), upon
delivery, (b) if delivered by registered or certified mail (return receipt
requested), upon the earlier of actual delivery or three (3) days after being
mailed, or (c) if given by telecopy, upon confirmation of transmission by
telecopy, in each case to the parties at the following addresses:
(a) If to the 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 or the Company:
Xxxxxxxxx Xxxx
P.O. Box 1114
0000 Xxx Xxxxxxxxx Xx.
Xxxxxx, XX 00000
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"
ATTEST United States Plastic Lumber, Corp.,
________________________ a Nevada corporation
By:_________________________
Xxxx X. Xxxxxxxxx, President
WITNESS
SHAREHOLDERS:
_______________________ _________________________
Xxxxxxxxx Xxxx
_______________________ _________________________
Xxxxx Xxxx
COMPANY:
Environmental Specialty Products,
Inc
_______________________ ______________________________
Xxxxxxxxx Xxxx, President
List of Exhibits and Schedules
EXHIBITS
Exhibit A List of Shareholders
Exhibit B Employment Agreements of Xxxxxxxxx Xxxx
Exhibit C Non-Compete Agreements of Xxxxx Xxxx
Exhibit D Certificate of President of EPS
Exhibit E Consent of Shareholders
Exhibit F Consent of Board of Directors
Exhibit G Certificate of President of USPL
SCHEDULES
2.2 Liabilities to be Assumed
3.3 Consents
3.4 Conflicts
4.1(a) Foreign Corp status
4.1(b) Subsidiaries
4.2 Agreements requiring Consent
4.3 Capitalization
4.4 Financial Statements
4.5(a) Liens
4.5(b) List of Real Property
4.5(c) List of Tangible Property
4.5(d) List of Leases
4.5(f) Realty representations
4.6 List of Accounts Receivable
4.7 Inventories
4.8(a) List of Patents and Trademarks
4.8(b) Registered Rights
4.8(c) Licenses
4.9(a) List of Banks
4.9(b) Insurance Policies
4.10(a) Indebtedness
4.10(b) Guaranties
4.11 Judgments
4.12 Income Taxes
4.14 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
