As filed with the Securities and Exchange Commission on August 26, 1997
Registration No. 333-22949
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Amendment No. 1)
U.S. PLASTIC LUMBER CORP.
(Name of small business issuer in its charter)
Nevada 3080 87-0404343
(State or other jurisdiction of (Primary S.I.C. (I.R.S. Employer
incorporation or organization) Code Number) Identification No.)
2300 W. Glades Road, Suite 440 W, Boca Raton, Florida 33431 (561) 394-3511
(Address & phone number of principal executive office & place of business)
Harold H. Gebert
2300 W. Glades Road, Suite 440 W, Boca Raton, Florida 33431 (561) 394-3511
(Name, address & telephone number of agent for service)
Copies to:
Thomas G. Kimble & Van L. Butler
THOMAS G. KIMBLE & ASSOCIATES
311 South State Street, #440
Salt Lake City, Utah 84111
(801) 531-0066
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this registration statement.
CALCULATION OF REGISTRATION FEE
______________________________________________________________________________
CALCULATION OF REGISTRATION FEE
Title of Each Class|Amount to be|Proposed Maximum |Proposed Maximum|Amount
of Securities to be|Registered |Offering Price/Unit|Aggregate Price |of fee
Registered
______________________________________________________________________________
Common Stock 950,000 $ 2.50 $2,375,000 $719.70
(underlying Series
A Warrants)
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The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section
8(a), may determine.<PAGE>
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U.S. PLASTIC LUMBER CORP.
950,000 Shares of Common Stock
Underlying Series A Common Stock Purchase Warrants
U.S. Plastic Lumber Corp. (the "Company"), has registered, for sale to the
holders of outstanding Series A Common Stock Purchase Warrants (the "Series A
Warrants"), 950,000 shares of its $.0001 par value common stock, (the "Common
Stock" or the "Shares") which are issuable upon exercise of the Series A
Warrants, at a price of $2.50 per share. Each Series A Warrant entitles the
holder to purchase one share of Common Stock of the Company. The Series A
Warrants were distributed as a dividend with respect to the Common Stock of
the Company to shareholders of record as of March 18, 1996. By their terms,
the Series A Warrants were not exerciseable and did not constitute an offer by
the Company to sell the Shares prior to the effective date of the registration
statement, of which this prospectus is part, which registers the Shares
issuable upon such exercise. The Series A Warrants are exerciseable until
June 30, 1998. The Series A Warrants are callable and can be redeemed by the
Company for $.01 per Series A Warrant on 30 days notice at any time after the
effective date of this Prospectus if the closing bid price of the Common Stock
equals or exceeds $4.00 for 20 consecutive trading days. The Company's common
stock is quoted on the NASD Electronic Bulletin Board under the Symbol "ECPL"
and the current bid price quotation is $ . In the event management
calls for redemption of the Series A Warrants at any time in the future,
Series A Warrantholders would have 30 days to exercise, after which they would
be compelled to accept the nominal redemption price. The exercise and
redemption prices of the Series A Warrants were arbitrarily determined by the
Company and bear no relationship to assets, shareholders equity or any other
recognized criteria of value. Prior to this offering, there has been only a
limited public market for the Shares of Common Stock and there is no assurance
that such market will continue in the future.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL AND IMMEDIATE
DILUTION AND SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD TO RISK THE
LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" on page 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
Price to Commissions & Proceeds to
Public(1) Discounts(1)(2) Company(2)(3)
Per Share $2.50 $.00 $2.50
Total Maximum $2,375,000 $.00 $2,375,000
- ------------------------------------------------------------------------------
(1) The Shares are being offered by the Company only to the holders of
outstanding Series A Warrants, and will be sold by the Company without
any discounts or other commissions. The offering price is payable in
cash upon exercise of the Series A Warrants. No minimum number of
Series A Warrants must be exercised, and no assurance exists that any
Series A Warrants will be exercised. The Company will retain any
proceeds from Series A Warrant exercises, regardless of the number
exercised. See "Plan of Distribution."
(2) Proceeds to the Company are shown before deducting offering expenses
payable by the Company for legal and accounting fees and printing costs.
The date of this Prospectus is , 1997<PAGE>
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AVAILABLE INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form SB-2, under the
Securities Act of 1933, as amended (the "Securities Act), with respect to the
securities offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained
in the Registration Statement. For further information regarding both the
Company and the Securities offered hereby, reference is made to the
Registration Statement, including all exhibits and schedules thereto, which
may be inspected without charge at the public reference facilities of the
Commission's Washington, D.C. office, 450 Fifth Street, N.W., Washington, D.C.
20549. Copies may be obtained from the Washington, D.C. office upon request
and payment of the prescribed fee.
As of the date of this Prospectus, the Company became subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(The "Exchange Act") and, in accordance therewith, will file reports and other
information with the Commission. Reports and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act will be available for inspection and copying at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: New York Regional Office, 75 Park Place, New York, New York
10007; Chicago Regional Office, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material may be obtained from the public reference
section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission maintains an Internet Web site that
contains reports, proxy and information statements and other information
regarding issuers that file such reports electronically with the Commission.
Such site is accessible by the public through any Internet access service
provider and is located at http://www.sec.gov.
Copies of the Company's Annual, Quarterly and other Reports which will be
filed by the Company electronically with the Commission commencing with the
Quarterly Report for the first quarter ended after the date of this Prospectus
(due 45 days after the end of such quarter) will also be available upon
request, without charge, by writing U.S. Plastic Lumber Corp., 2300 W. Glades
Road, Suite 440 W, Boca Raton, Florida 33431.
UNTIL [90 DAYS AFTER THE DATE OF THIS PROSPECTUS], ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY STATE SECURITIES
COMMISSION OR OTHER STATE REGULATORY AUTHORITY, AND NO SUCH REGULATORY
AUTHORITY HAS PASSED UPON THE TERMS OF THIS OFFERING OR APPROVED THE MERITS
THEREOF. INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE
TERMS OF THIS OFFERING IN EVALUATING THE MERITS AND RISKS OF THE OFFERING AND
MAKING AN INVESTMENT DECISION.
THIS PROSPECTUS SHOULD BE READ IN ITS ENTIRETY BY ANY PROSPECTIVE INVESTOR
PRIOR TO HIS OR HER INVESTMENT.
2<PAGE>
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PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed information
appearing elsewhere in the Prospectus.
The Company
U.S. Plastic Lumber Corporation (the "Company") is a manufacturer and marketer
of recycled plastic lumber products and a provider of soil decontamination and
recycling services. The Company was originally incorporated under the laws of
the State of Utah on July 26, 1983, under the name of Front Street Energy,
Inc., and completed an initial public offering of its securities in 1983. The
Company changed its corporate domicile to the State of Nevada in June 1992 and
changed its name to Front Street, Inc. In 1994, the Company changed its name
to Educational Storybooks International, Inc. when it acquired all the
outstanding stock of Educational Storybooks, Inc. The Company subsequently
divested itself of Educational Storybooks, Inc. and another subsidiary, and
had no significant assets or business until March, 1996, when the Company
acquired Earth Care Global Holdings, Inc. ("Earth Care") as a wholly owned
subsidiary, through the acquisition of all the issued and outstanding stock of
Earth Care in a stock for stock exchange (the "Acquisition") and changed its
name to U.S. Plastic Lumber Corporation. The mailing address of the Company's
principal executive offices is 2300 W. Glades Road, Suite 440 W, Boca Raton,
Florida 33431. The Company's telephone number is (561) 394-3511.
The Company presently owns and operates five manufacturing, processing and
fabrication facilities in the U.S. The primary product produced in four of
these plants is feedstock and lumber made from recycled waste plastic.
Recycled plastic lumber is manufactured in a variety of colors, profiles and
shapes including standard lumber dimensions and many custom engineered
profiles and shapes. The plastic lumber is then sold as an end product, value
added decking products, or fabricated into park and site amenities such as
benches, picnic tables and trash receptacles. Plastic lumber's principal
intended use is as an environmentally friendly and non-toxic alternative to
pressure treated lumber or rain forest hardwoods, which is suitable for and
provides superior performance in most nonstructural, outdoor applications.
The Company's fifth plant operates a process for decontaminating and recycling
soil that has been contaminated with petroleum hydrocarbons and similar
compounds. See "Business."
The Offering
Securities offered 950,000 Shares of Common Stock, $.0001 par value
("Common Stock") of the Company underlying outstanding
Series A Warrants. See "Description of Securities".
Offering Prices $2.50 per share.
Plan of Distribution The Shares are offered and will be sold by the
Company, without any discounts or other commissions,
to the holders of the Series A Warrants upon the
exercise thereof. See "Plan of Distribution."
Use of Proceeds The Company could potentially receive gross proceeds
of as much as $2,375,000 from sale of the 950,000
Shares of Common Stock issuable upon exercise of the
Series A Warrants, if and to the extent such Warrants
are exercised. Any such proceeds will be used
generally to provide additional working capital, but
have not been specifically allocated, inasmuch as
there is no assurance any of the Series A Warrants
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will be exercised. See "Use of Proceeds."
Securities Outstanding The Company is authorized to issue up to 50,000,000
shares of Common Stock and presently has 14,986,910
shares of Common Stock issued and outstanding. The
Company has reserved from its authorized capital
950,000 shares of Common Stock for issuance upon
exercise of the Series A Warrants. In addition, the
Company also has Series B and other warrants or
options outstanding which give the holders thereof the
right, subject to certain conditions, to acquire an
additional 2,877,951 shares of Common Stock. The
Company is also authorized to issue up to 5,000,000
shares of Preferred Stock in one or more series with
such rights and preferences as the Board of Directors
may designate. The Board of Directors has designated
one series of Preferred Stock (Series A) and 199,249
Series A preferred shares are presently issued and
outstanding, which are convertible into 1,394,743
shares of Common Stock of the Company. See
"Description of Securities."
Series A Warrants Each Series A Warrant entitles the holder to purchase
one share of Common Stock at any time during the
period commencing on the date of this Prospectus and
ending June 30, 1998. The Series A Warrants are
callable and can be redeemed by the Company for $.01
per Series A Warrant on 30 days notice at any time
after the date of this Prospectus if the closing bid
price of the Common Stock equals or exceeds $4.00 for
20 consecutive trading days. In the event management
calls for redemption of the Series A Warrants at any
time in the future, Series A Warrantholders would then
have 30 days in which to decide whether to exercise
their warrants, after which time they would be
compelled to accept the nominal redemption price. The
exercise price is $2.50 per share for the Series A
Warrants, subject to adjustment in certain events.
See "Description of Securities - Series A and B
Warrants."
Transfer Agent Interwest Transfer Company, Inc., 1981 East 4800
South, Suite 100, Salt Lake City, Utah 84117, (801)
272-9294, serves as transfer agent and registrar for
the Company's outstanding securities.
Risk Factors An investment in the Company is highly speculative.
Investors will suffer substantial dilution in the book
value per share of the Common Stock compared to the
purchase price. The Company incurred a net loss
during 1996 of $3,551,144 and has an accumulated
deficit of $7,254,631 as of June 30, 1997. If
substantial funds are not received from exercise of
the Series A Warrants, of which there is no assurance,
the Company may require additional funding for which
it has no commitments. No person should invest in the
Company who cannot afford to risk loss of the entire
investment. See "Risk Factors."
4<PAGE>
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RISK FACTORS
This prospectus contains certain statements intended as "forward-looking
statements" within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. These Acts were amended by the Private
Securities Litigation Reform Act of 1995 to establish "safe harbors" for such
forward-looking statements. Prospective investors and other readers are
cautioned not to place undue reliance upon such forward looking statements,
which represent only the plans, beliefs, estimates, expectations and/or
anticipation of management as of the date of this prospectus. These forward
looking statements are subject to certain uncertainties and other factors
which could cause actual results in the future to differ materially from the
results contemplated in and by such statements. Such uncertainties and other
factors include, but are not limited to, those enumerated below as risk
factors.
The securities being offered hereby involve a high degree of risk.
Prospective investors should carefully consider the following risk factors
before investing in the Company.
Risks Inherent in a New Start Up Company
Accumulated Deficit and Operating Losses. The Company incurred a net loss of
$3,551,144 for the year ended December 31, 1996, and had an accumulated
deficit of $7,254,631 at June 30, 1997. The success of operations in the
future will be largely dependent upon the Company's ability to substantially
increase its sales revenue, as to which there is no assurance. See financial
statements attached hereto.
Conflicts of Interest Inherent in Material Related Party Transactions. The
Company has recently entered into several significant acquisitions and other
affiliated transactions, the terms of which were, in some instances,
determined without the benefit of arms length bargaining or negotiation and
necessarily involve conflicts between the interests of the related parties and
the Company. These include the recent acquisitions, as wholly owned
subsidiaries of the Company, of Earth Care Global Holdings and Earth Care
Partners, Duratech Industries, Clean Earth, Recycled Plastics Industries,
Intergrated Technical Services, Environmental Specialties Plastics,
EnviroPlastics and Advanced Remediation and Disposal Technologies, as well as
the granting or issuance of various stock, options and other rights to members
of management, principal stockholders, and other affiliates. See "Certain
Transactions."
Dependence on Management. The development of the Company's business and
operations is dependent upon the efforts and talents of its executive
officers, including, in particular, Harold Gebert, Chairman, David Farrow,
Vice Chairman and Chief Operating Officer, and Mark Alsentzer, Chief Executive
Officer. The loss of the services of one or more of these officers could have
a material adverse effect on the Company's business. See "Management."
No Cash Dividends. The Company does not currently intend to pay cash
dividends on its Common Stock and does not anticipate paying such dividends at
any time in the foreseeable future. At present, the Company will follow a
policy of retaining all of its earnings, if any, to finance development and
expansion of its business. The Company does intend to pay dividends in stock
on its outstanding Series A Preferred Stock. See "Dividend Policy."
Limited Liability of Management. The Company has adopted provisions to its
Articles of Incorporation and Bylaws which limit the liability of Officers and
Directors and provides for indemnification by the Company of Officers and
Directors to the full extent permitted by Nevada law, which provides that
officers and directors shall have no personal liability to a Company or its
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stockholders for monetary damages for breach of fiduciary duties as directors,
except for a breach of their duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law,
unlawful payment of dividends or unlawful stock purchases or redemptions, or
any transaction from which a director derives an improper personal benefit.
Such provisions substantially limit the shareholders' ability to hold officers
and directors liable for breaches of fiduciary duty, and may require the
Company to indemnify its officers and directors. See "Certain Transactions -
Conflicts of Interest".
Risks Related to the Nature of the Proposed Business
Newly Developing Industry. The reclamation and recycling of plastic waste and
the manufacture of plastic lumber for use in construction, and other composite
materials containing recycled waste plastics, are relatively new industries.
There is a general reluctance in the construction industry to use new
materials before they have been extensively tested, particularly in certain
segments which have exacting performance standards for component materials.
In the case of the Company's plastic lumber and composite materials in
particular, such testing may be extensive for each prospective customer and
may require substantial additional time and resources. In addition, the
Company may experience resistance from prospective customers who are
accustomed to more conventional, non-artificial wood materials. Moreover, the
Company may not have sufficient financial and other resources to undertake
extensive marketing and advertising activities or to afford the cost of the
necessary marketing and sales personnel at such time as it becomes appropriate
to broaden its marketing efforts. See "Business".
Availability of Raw Materials. The availability of low-cost raw materials,
namely consumer and industrial plastic waste products, is a material factor in
the Company's costs of operations. Historically, suppliers have provided
adequate quantities of such raw materials at favorable costs. The Company
generally maintains raw material inventories of approximately one half million
pounds, which is adequate for approximately two months of production. The
Company believes that its current sources of raw materials will continue to be
available on commercially reasonably terms. However, unavailability, scarcity
or increased cost of such raw materials would have a material adverse effect
upon the Company's business. The Company purchases most of its raw materials
through distributors. Disruption of these supply sources could have a
material adverse effect on the Company's business. The Company does not rely
on contractual arrangements with its raw materials suppliers and has no long-
term supply contracts.
Competition and Marketing. The Company's plastic lumber business faces
competition from other producers of recycled plastic lumber as well as
producers of vinyl and aluminum decking, and traditional wood lumber,
especially pressure treated wood lumber. The Company competes against other
makers of recycled plastic lumber principally on the basis of price and
quality as well as the immediate availability of its product, and competes
against other products such as pressure treated lumber by emphasizing the
superior suitability characteristics of recycled plastic lumber for certain
applications, as well as appealing to the environmental consciousness of
consumers. The Company's Clean Earth division has several local competitors
which provide similar services within a 150 mile radius.
Newly Developing Technologies. The Company's products and services involve
newly developing technologies, and there is no assurance the Company will be
able to compete effectively in developing and marketing such products and
services. There is a general lack of public awareness of these newly
developing products and services generally, or as alternatives to more
traditional and well established products, such as lumber made from wood. To
compete effectively, the Company must increase public knowledge and acceptance
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of its products and services, of which there is no assurance.
Industry Standards. ASTM (American Society for Testing and Materials) and
certain industry trade organizations have established general standards and
methods for measuring the characteristics of specific building materials.
Users of building materials (and frequently, issuers of building codes)
generally specify that the building materials comply with such standards
relative to the proposed applications. Since uniform, recognized standards or
methods have only recently been established for measuring the characteristics
of plastic lumber, potential users may not know of this, to judge whether or
not plastic lumber may be suitable for their particular requirements, without
being informed of such standards by the plastic lumber supplier or otherwise
becoming aware of them. The fact that such standards are not well known for
plastic lumber may limit the market potential of the Company's building
materials and make potential purchasers of such building materials reluctant
to use them. The Plastic Lumber Trade Association, of which the Company is a
member, is pursuing increased public awareness of such standards, but no
assurance can be given that public awareness will successfully be increased or
that increased awareness will increase the market for the Company's products.
Regulatory Matters. The Company's businesses are subject to laws and
regulations designed to protect the environment from toxic wastes and
hazardous substances or emissions and to provide a safe workplace for its
employees. Under current federal regulations (RCRA, Resource Conservation &
Recovery Act & CERCLA, Comprehensive Environmental Responsibility,
Compensation & Liability Act), the generator of toxic or hazardous waste is
financially and legally responsible for that waste forever, and strictly
liable for the clean up and disposal costs. In particular, the business of
decontaminating or otherwise handling toxic or hazardous waste materials is
fraught with potential liability to such handlers if the handling and tracking
of such wastes is not properly done. The Company believes it is either in
material compliance with all currently applicable laws and regulations or is
operating in accordance with appropriate variances or similar arrangements,
but there is no assurance that it will always be deemed in compliance, nor any
assurance that compliance with current laws and regulations will not require
significant capital expenditures that could have a material adverse effect on
its operations. Such laws and regulations are always subject to change and
could become more stringent in the future. Although state and federal
legislation currently provide for certain procurement preferences for recycled
materials, such preferences for materials containing waste plastics are
dependent upon the eventual promulgation of product or performance standard
guidelines by state or federal regulatory agencies. Such guidelines for
recycled plastic building materials may not be released or, if released, the
product performance standards required by such guidelines may be incompatible
with the Company's manufacturing capabilities.
Protection of Technology. The Company's composite materials manufacturing
process and its waste plastics reclamation technologies involve many
proprietary trade secrets, as well as certain methods, processes and equipment
designs for which the the Company has not sought patent protection. Although
the Company has taken measures to safeguard its trade secrets by limiting
access to manufacturing facilities and requiring confidentiality and
nondisclosure agreements with third parties, there is no assurance that its
trade secrets will not be disclosed or that others will not independently
develop comparable or superior technology. Rather than rely on patent
protection, the Company has generally chosen to rely on the unique and
proprietary nature of its processes. The Company has obtained exclusive
worldwide licensing rights with respect to patent pending technology related
to railroad crossties and the process to manufacture them, but there is no
assurance the Company will be able to maintain such rights for any specific
length of time.
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Risks Related to the Offering
No Assurance of Warrant Exercise and No Escrow of Funds. There is no
assurance that any proceeds will be received from exercise of Series A
Warrants in this offering. Proceeds may be insufficient to defray offering
expenses. There is no minimum number of Series A Warrants that must be
exercised and no escrow of funds received upon exercise. Any proceeds
received will immediately be retained by the Company to be used in its
business. The amount of capital currently available to the Company is
limited. In the event that any proceeds from this offering and the Company's
existing capital are not sufficient to enable the Company to develop and
expand its business and generate a profit, the Company may need to seek
additional financing from commercial lenders or other sources, for which it
presently has no commitments or arrangements. This creates an increased risk
to persons who do exercise their Series A Warrants, because there is no
assurance that additional Series A Warrants will be exercised or that the
Company will receive any further funding.
Risks of Warrant Exercise. Although the market price of the Common Stock
currently exceeds the exercise price of the Series A Warrants, there is no
assurance that exercising Series A Warrantholders will be able to sell their
Common Stock in the future at a price which equals or exceeds such exercise
price.
Outstanding Warrants, Options and Other Rights. In addition to the 950,000
Series A Warrants, the Company has outstanding 950,000 Series B Warrants, and
other warrants and options to purchase up to 1,927,951 shares, and Earn-out
rights to acquire up to 4,755,686 shares. The Company will also have other
options granted in the future in connection with an employee incentive stock
option program. The holders of such options, warrants or rights are given an
opportunity during the term of such rights to profit from a rise in the market
price of the Company's common stock, with a resultant dilution of the
interests of all other stockholders. The holders thereof are likely to
exercise them only if the then prevailing market price exceeds such exercise
prices, which would be at a time when, in all likelihood, the Company would
otherwise be able to obtain funds from the sale of its securities on terms
more favorable than those provided by the options and warrants. Accordingly,
the Company may find it more difficult to raise additional capital while the
options and warrants are outstanding.
Current Prospectus and Registration Required for Exercise. Holders of the
Series A Warrants will only be able to exercise such securities to acquire the
underlying Common Stock if a current prospectus relating to the Common Stock
is then in effect and such exercise is qualified or exempt from qualification
under applicable securities laws of the states in which such holders of the
Series A Warrants reside. Although the Company intends to use its best
efforts to update this prospectus as necessary to maintain a current
prospectus and federal and state registration/qualification for such exercise,
there is no assurance that the Company will be able to do so at such time as
such persons may wish to exercise such securities. The value of the Series A
Warrants may be greatly diminished if the ability to exercise such securities
is not maintained. If a current prospectus is in effect, the Series A
Warrants are redeemable for nominal consideration at any time after the date
hereof upon 30 days notice, if the bid price of the common stock equals or
exceeds $4.00 for 20 consecutive trading days. If redeemed, warrantholders
would have 30 days to exercise the Series A Warrants, after which they would
be compelled to accept the nominal redemption price.
Dilution. Series A Warrantholders who exercise their Series A Warrants to
purchase the underlying Shares of Common Stock will suffer substantial
dilution in the purchase price of the Shares compared to the net tangible book
value per share immediately after the purchase. The exact amount of dilution
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will vary depending upon the total number of Series A Warrants exercised, and
will be greater if less than all the Series A Warrants are exercised. The
fewer Series A Warrants exercised, the greater dilution will be with respect
to the Series A Warrants that are exercised. See "Dilution."
Potential Issuance of Additional Common and Preferred Stock. The Company is
authorized to issue up to 50,000,000 shares of Common Stock. To the extent of
such authorization, the Board of Directors of the Company will have the
ability, without seeking shareholder approval, to issue additional shares of
Common Stock in the future for such consideration as the Board of Directors
may consider sufficient. The issuance of additional Common Stock in the
future will reduce the proportionate ownership and voting power of the Common
Stock offered hereby. The Company is also authorized to issue up to 5,000,000
shares of preferred stock, the rights and preferences of which may be
designated in series by the Board of Directors. To the extent of such
authorization, such designations may be made without shareholder approval.
The Board of Directors has designated one series of Preferred Stock (Series A)
and issued 199,249 shares of Series A Preferred Stock. The designation and
issuance of series of preferred stock creates additional securities which have
dividend and liquidation preferences over the Common Stock offered hereby.
See "Description of Securities."
Potential Anti-Takeover Measures. Certain provisions in the articles of
incorporation or bylaws of the Company, such as staggered terms for the Board
of Directors and authorization to issue additional common or preferred stock
and designate the rights and preferences of the preferred stock without
further approval of shareholders, could be used as anti-takeover measures.
Provisions such as these could result in the Company being less attractive to
anyone who might consider a takeover attempt, and result in shareholders
receiving less than they otherwise might in the event of a takeover attempt.
Continuation of Management Control. Upon completion of this offering, present
shareholders, which includes current management of the Company, will own a
majority of the total outstanding securities and will have absolute control of
the Company. Investors in this offering as a group will have no ability to
remove, control or direct such management. Only one third of the outstanding
shares is required to constitute a quorum at any stockholders' meeting, and
action may be taken by a majority of the voting power present at a meeting, or
may be taken without a meeting by written consent of stockholders holding a
majority of the total voting power. See "Principal Stockholders" and
"Description of Securities."
Arbitrary Determination of Offering Price. The exercise price of the Series A
Warrants was arbitrarily determined by management of the Company and was set
at a level substantially in excess of prices recently paid for securities of
the same class. The price bears no relationship to the Company's assets, book
value, net worth or other economic or recognized criteria of value. In no
event should the exercise prices be regarded as an indicator of any future
market price for the Company's securities.
No Assurance of a Liquid Public Market for Securities. Although the Company's
shares of common stock are eligible for quotation on the Electronic Bulletin
Board maintained by the NASD, there can be no assurance that a regular and
established market will continue for the securities upon completion of this
offering. There can also be no assurance as to the depth or liquidity of any
market for common stock or the prices at which holders may be able to sell the
Shares. As a result, an investment in the Shares may be totally illiquid and
investors may not be able to liquidate their investment readily or at all when
they need or desire to sell.
Volatility of Stock Prices. In the event that an established public market
does develop for the Shares, market prices will be influenced by many factors,
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and will be subject to significant fluctuation in response to variations in
operating results of the Company and other factors such as investor
perceptions of the Company, supply and demand, interest rates, general
economic conditions and those specific to the industry, international
political conditions, developments with regard to the Company's activities,
future financial condition and management. See "Plan of Distribution."
Shares Eligible for Future Sale. Of the 14,986,910 shares of the Company's
common stock outstanding prior to the exercise of any Series A Warrants,
1,949,999 shares are freely tradeable or are eligible to be sold in the public
market, and the 950,000 shares of Common Stock underlying the Series A
Warrants will also be freely tradeable immediately upon issuance. All the
remaining shares of Common Stock presently outstanding are restricted and/or
affiliate securities which are not presently, but may in the future be sold
into any public market that may exist for the Common Stock, pursuant to Rule
144 promulgated pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). Future sales by current shareholders of substantial
amounts of this common stock into the public market could depress the market
prices of the Common Stock in any such market. See "Shares Eligible for
Future Sale".
Applicability of Low Priced Stock Risk Disclosure Requirements. The common
stock of the Company may be considered a low priced security under rules
promulgated under the Exchange Act. Under these rules, broker-dealers
participating in transactions in low priced securities must first deliver a
risk disclosure document which describes the risks associated with such
stocks, the broker-dealer's duties, the customer's rights and remedies, and
certain market and other information, and make a suitability determination
approving the customer for low priced stock transactions based on the
customer's financial situation, investment experience and objectives. Broker-
dealers must also disclose these restrictions in writing and provide monthly
account statements to the customer, and obtain specific written consent of the
customer. With these restrictions, the likely effect of designation as a low
priced stock is to decrease the willingness of broker-dealers to make a market
for the stock, to decrease the liquidity of the stock and increase the
transaction cost of sales and purchases of such stocks compared to other
securities.
DILUTION
Dilution is the difference between the Series A Warrant exercise price of
$2.50 per share for the Common Stock underlying the Series A Warrants, and the
net tangible book value per share of the Common Stock immediately after its
purchase. The Company's net tangible book value per share of Common Stock is
calculated by subtracting the Company's total liabilities and the amount of
the liquidation preferences of its outstanding preferred equity, from its
total assets less any intangible assets, and then dividing by the number of
shares of Common Stock then outstanding.
Based on the June 30, 1997, unaudited interim consolidated financial
statements of the Company, the net tangible book value attributable to the
Common Stock of the Company at that date was $1,002,291 or approximately $.07
per common share. Without taking into consideration any changes in operating
results or other changes in net tangible book value subsequent to June 30,
1997, the Company has 14,986,910 shares of Common Stock outstanding prior to
the exercise of any Series A Warrants.
If all the Series A Warrants were to be exercised (of which there is no
assurance), upon the exercise thereof, but prior to exercise of any Series B
Warrants or exercise or conversion of any other outstanding convertible
securities, options or stock rights, the Company would then have 15,936,910
Shares of Common Stock outstanding. The estimated post offering net tangible
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book value of the Company (which gives effect to receipt of the estimated net
proceeds from such exercise and issuance of the underlying Shares of Common
Stock, but does not take into consideration any other changes in net tangible
book value of the Company subsequent to June 30, 1997), would then be
$3,302,291 or approximately $.21 per share. This would result in dilution to
persons exercising Series A Warrants of $2.29 per share, or 92% of the
exercise price of $2.50 per share. Net tangible book value per share would
increase to the benefit of present stockholders from $.07 prior to the
offering to $.21 after the offering, or an increase of $.14 per share
attributable to the exercise of the Series A Warrants.
The following table sets forth the estimated net tangible book value ("NTBV")
per share after exercise of all Series A Warrants and the dilution to persons
purchasing the underlying Shares of Common Stock.
Exercise of all Series A Warrants:
Series A Warrant exercise price/share $2.50
NTBV/share prior to exercise $ .07
Increase attributable to Series A Warrant exercise .14
Pro forma NTBV/share after exercise .21
Dilution $2.29
If less than all the Series A Warrants are exercised, dilution to the
exercising Series A Warrantholders will be greater than the amount shown. The
fewer Series A Warrants exercised, the greater dilution will be to those who
do exercise.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares of Common Stock
underlying the Series A Warrants at the exercise price of $2.50 per Share for
Series A Warrants will vary depending upon the total number of Series A
Warrants exercised. If all Series A Warrants were to be exercised (of which
there is absolutely no assurance, nor any assurance that any Series A Warrants
will be exercised), the Company would receive gross proceeds of $2,375,000
from Series A Warrants. Regardless of the number of Series A Warrants
exercised, the Company expects to incur offering expenses estimated at
$100,000 for legal, accounting, printing and other costs in connection with
the offering. Inasmuch as there is no assurance that all Series A Warrants
will be exercised nor any requirement that any minimum amount of the Series A
Warrants be exercised, there are no escrow provisions and any proceeds that
are received will be immediately available to the Company to provide
additional working capital to be used for general corporate purposes. The
exact uses of any other proceeds will depend on the amounts received and the
timing of receipt. Management's general intent is to use whatever additional
funds may be generated from Series A Warrant exercise to finance further
development and expansion of the Company's business.
MARKET INFORMATION & DIVIDEND POLICY
The common stock of the Company has traded in the over-the-counter market on a
limited and sporadic basis, and is quoted on the National Association of
Securities Dealers, Inc. Electronic Bulletin Board under the symbol ECPL.
The following table sets forth the high and low bid price quotations for each
calendar quarter during the last two fiscal years and subsequent interim
period. The Company reverse split its common stock on a 1 for 16 basis in
March, 1996. Quotations for periods prior to such split and information
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regarding the number of shares have been restated here and elsewhere
throughout the prospectus to reflect post split amounts throughout.
Quarter Ended High Bid Low Bid
March 31, 1995 $ 1.76 $ 1.12
June 30, 1995 $ 1.60 $ 1.12
September 30, 1995 $ 1.60 $ 1.44
December 31, 1995 $ 3.20 $ 1.92
March 31, 1996 $ 3.50 $ 2.88
June 30, 1996 $ 4.75 $ 4.13
September 30, 1996 $ 5.13 $ 4.63
December 31, 1996 $ 4.75 $ 3.00
March 31, 1997 $ 6.50 $ 6.00
June 30, 1997 $ 6.13 $ 5.75
The above prices represent interdealer quotations, without retail markup,
markdown or commissions, and may not represent actual transactions. As of
Ausgust 20, 1997, there were approximately 300 record holders of the Company's
common stock.
Dividend Policy
The Company has not previously paid any cash dividends on its common stock and
does not anticipate or contemplate paying dividends on common stock in the
foreseeable future. Certain divisions or subsidiaries recently acquired by
the Company have in the past (prior to their acquisition by the Company) paid
cash dividends, but it is the present intention of management of the Company
to utilize all available funds for the development of the Company's business.
The Company does intend to pay stock dividends on its outstanding Series A
Preferred Stock in accordance with the terms thereof. The only restrictions
that limit the ability to pay dividends on common or preferred equity or that
are likely to do so in the future, are those restrictions imposed by law.
Under Nevada corporate law, no dividends or other distributions may be made
which would render the Company insolvent or reduce assets to less than the sum
of its liabilities plus the amount needed to satisfy outstanding liquidation
preferences.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and the notes associated with them
contained elsewhere in this prospectus. The financial statements of the
Company referred to in this discussion include and reflect the financial
condition and operating results of U.S. Plastic Lumber Corp. and its
consolidated subsidiaries for the period since its acquisition of Earth Care
Global Holdings, Inc. in March, 1996, through the year ended December 31,
1996, and of Earth Care Global Holdings, Inc. and its consolidated
subsidiaries for the period prior to such acquisition. This discussion should
not be construed to imply that the results discussed herein will necessarily
continue into the future or that any conclusion reached herein will
necessarily be indicative of actual operating results in the future. Except
for historical information, the matters discussed below may include
"forward-looking statements" within the definition of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties. The
Company wishes to caution readers that a number of factors, including those
stated in the section entitled "Risks Related to the Nature of the Proposed
Business" could affect the Company's actual results and cause them to differ
materially from those in the forward looking statements.
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Results of Operations.
Prior Fiscal Year. After deduction of interest, general and administrative
expenses, the Company incurred a net loss of $1,445,903 during the fiscal year
ended December 31, 1995. The Company's total revenues for the period were
$7,257,995. The Company's cost of sales for the year was $5,345,694. The
Company's general and administrative expenses were $2,961,018 for the fiscal
year ended December 31, 1995 which continues to be high due primarily to the
issuance of stock to management in lieu of cash compensation and the
associated charge to earnings resulting therefrom. The amount includes a
charge of $975,800 representing the valuation of 550,966 shares of stock based
on contemporaneous sales of stock for cash. 536,850 shares were issued to
management as compensation; 14,116 shares were issued as payment for $25,000
of interest.
Current Fiscal Year compared to Prior Fiscal Year. Operating performance in
1996 showed a decline from the previous year as Net Loss increased $2,105,241
or 145.6% from ($1,445,903) in 1995 to ($3,551,144) in 1996. The increase in
net loss in the plastic lumber division was ($1,384,927) of which 43.5% was
due to a decline in Gross Profit and 43.6% was due to an increase in general
and administrative expenses. The Tennessee manufacturing facility operated at
less than efficient capacity which contributed to the decrease in gross profit
from 1995. Management's focus in raising capital and closing acquisitions
detracted somewhat from the effort to increase the sales and production base.
The lack of capital funding impaired efforts in advertising and marketing that
limited projected sales and production growth. The Company incurred
additional administrative costs with the establishment of a national sales
force as well as a substantial increase in legal and professional fees related
to four mergers and acquisitions completed in 1996 which accounted for 56.7%
of the increase in Selling, General, and Administrative expenses over 1995.
In 1997, capital funding issues are expected to be more favorable as evidenced
by the raising of $4,880,000 from the private placement of Series A preferred
stock and common stock subsequent to year end and prior to the initial filing
of this registration. Efforts will focus on advertising, sales materials and
training and trade shows including the introduction of the "Carefree Decking
System" with the intent to increase sales and production in all plants. The
Company will also take advantage of combining duplicate administrative and
operating functions with other acquisitions to reduce expenses on a
consolidated basis.
In the environmental recycling division, the decrease in net income of
$720,314 was due to the lower sales volume and additional operating costs
associated with a facility fire that occurred in March of 1996. The plant
retrofit process continued throughout 1996 and adversely affected the plant's
processing capacity that in turn reduced net sales compared to the same period
in 1995. The retrofit process was substantially complete at the end of 1996
and is not expected to impact plant capacity in 1997. The existing facilities
at Clean Earth were substantially depreciated as of the end of 1996 and
consequently an additional estimated $400,000 of depreciation expense on these
facilities will not burden net income in 1997.
Sales
Total sales decreased $630,753 or 8.7% in 1996 from $7,257,995 in 1995 to
$6,627,242. The reduction in sales was due to a decrease in revenue of
$1,302,024 in the environmental recycling division offset by an increase in
revenue of $671,271 in the recycled plastic lumber division. In the plastic
lumber division, sales increased $671,271 or 55.3% from $1,214,032 in 1995 to
$1,885,303. This increase was primarily due to the contribution of sales from
the DuraTech Industries acquisition (refer to Certain Transactions) in April,
1996 (not present in 1995).
In the environmental recycling division, sales decreased by $1,302,024 or
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21.5% primarily due to a fire in the operating facility which occurred in
March of 1996 and interrupted business for a period of several months
resulting in lost processing capacity during the retrofit process. In
addition there was a decrease in revenue in the first quarter primarily due to
extraordinary harsh weather conditions in the Northeast during first quarter
of 1996 compared to 1995 which interfered with the ability to access soil
requiring recycling.
Cost of Goods Sold
Cost of Goods Sold increased $1,011,092 or 18.9% from $5,345,694 in 1995 to
$6,356,786 in 1996. Cost of goods sold increased in the plastic lumber
division by $1,273,805 offset by a cost of sales decrease of $262,713 in the
environmental recycling division.
In the plastic lumber division, the DuraTech acquisition contributed $806,833
or 63.3% of the $1,273,805 increase related to the nine months of sales
generated by that facility in 1996. In order to improve finished product
quality, the Tennessee manufacturing facility upgraded its raw material
quality during 1996. As a result, the Company incurred charges to cost of
goods sold of $165,000 relating to reduced valuation and scrap of second
quality raw material and finished goods remaining in inventory at the end of
the third quarter in 1996. The Tennessee manufacturing facility was staffed
to accommodate increased capacity from 1995 levels and incurred an increase in
indirect labor costs of $96,000 (including fringe benefits) over 1995. The
remaining increase was primarily due to increases in raw material prices for
upgrading the quality of raw material and colorant price increases.
In the environmental recycling division the decrease to cost of sales was
primarily due to the decrease in sales which were adversely affected by the
facility fire.
Gross Profit
Gross Profit declined $1,641,845 or 85.9% from $1,912,301 in 1995 to $270,456
in 1996. Gross profit margin decreased in the recycled plastic lumber
division primarily due the increase in raw material prices coupled with
Management's focus on raising capital and closing acquisitions as opposed to
organizing and funding programs in sales and marketing to increase production
capacity in the Tennessee facility.
Gross profit margins decreased in the environmental recycling division by 13.2
percentage points from 1995 primarily due to decreased production throughput
adversely affected by the facility fire.
General and Administrative Expenses
General and Administrative Expenses increased $768,770 or 26.0% from
$2,961,018 in 1995 to $3,729,788 in 1996. Both divisions recognized
administrative expense increases with $604,633 increase in the plastic lumber
division and $164,137 in the environmental recycling division.
In the plastic lumber division, the DuraTech acquisition accounted for an
increase of $160,557 representing nine months of expenses for 1996. An
additional $256,005 of administrative expenses were incurred in 1996 with the
acquisition of Earth Care Partners (the plastic lumber division's largest
distributor of the Company's products - See Certain Transactions) which became
the Company's national sales office in February 1996. The Company also
incurred additional legal and accounting fees of $87,000 associated with four
mergers and acquisitions that occurred in 1996. An additional $75,000 in
amortization was recognized in 1996 due to capitalized costs related to the
Magellan Finance Co. loan (see Note 5 - Notes Payable in the notes to annual
financial statements) which were completely amortized by the end of 1996.
In the environmental recycling division, the $164,137 increase in
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administrative expenses is primarily due to an increase of $50,000 in
administrative and management fees charged by a former related company (IA
Construction) with the remaining increase related to additional sales and
administrative wages.
During 1996 the Company abandoned efforts to complete the establishment of its
Camden New Jersey facility due to difficulties in negotiations with the local
government. As a result the Company recognized a loss of $199,087 consisting
primarily of leasehold improvements and estimated lease termination costs.
Interest income of $56,272 was earned in 1996 over and above 1995 as
short-term interest bearing accounts were established for cash generated from
operations and sales of capital stock.
The Company recognized a gain on involuntary conversion in the amount of
$66,859 related to fire damaged equipment at the environmental recycling plant
(Clean Earth). The gain represents the excess of insurance proceeds received
over the loss incurred. The Company and the insurance carrier have reached
pending final settlement in the amount of an additional $455,000 as of
December 31, 1996 and a check was issued to Clean Earth in the first quarter
of 1997. This amount has not been recognized in the December 31, 1996
statement, as the settlement is subject to adjustment and review by other
affected third parties as well as additional expenses relating to the fire
that may be charged to this reserve in the future.
Six Months 1997 compared to Six Months 1996. The Company experienced a 171%
increase in net sales in the first six months of 1997 compared to the same
period in 1996. This increase was due to increased sales from the base
businesses as well as sales contributions from acquired companies in both
business segments during the past year. Net income (loss) of $173,636 in
the first six months of 1997 improved from ($2,704,356) in the first six
months of 1996. This was due to certain one-time general and administrative
expenses that were recognized in the prior year, improved operating
performance in the base businesses and net income contribution from acquired
companies in the first half of 1997.
Sales
During the first six months of 1997, sales increased $4,694,299 or 171% over
the same period in 1996. Both business segments showed increases in sales
from acquired businesses, which were not part of the Company during the first
half of 1996. These acquisitions contributed $4,433,227 or 94.4% of the
increase. In addition there was an increase in sales at the Clean Earth
facility of $96,073 that recognized stronger seasonal sales in the first
quarter of 1997 due to milder weather conditions in the Northeast compared to
the previous year. Both business segments are now into the summer and fall
seasons that historically have been strong sales months for all of the units.
The Company has also experienced strong demand for its new "Carefree Decking
System" product that was introduced at the beginning of the year and accounted
for most of the $164,999 increase in sales in the plastic lumber base unit.
Demand for this product has pushed delivery lead times from the Wisconsin
plant back from 4-6 weeks to 12 weeks. The Company has committed to
increasing capacity at this facility and plans to add more machinery and floor
space before the end of 1997.
Plastic lumber division sales increased $1,466,969 or 209% in the first six
months of 1997 compared to the same period in 1996. Sales from the DuraTech
(first quarter only), Recycled Plastics Industries (RPI) and Environmental
Specialties Products (ESP) acquisitions (discussed in detail under Certain
Transactions) contributed $1,301,970 to first half 1997 sales. In addition,
the existing base company contributed an additional $164,999 primarily due to
the increase in demand for the Company's newly introduced "Carefree Decking
System."
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In the environmental recycling division, sales increased by $3,227,330 in the
first six months of 1997 compared to the same period in 1996. The ARDT and ITS
acquisitions (discussed in detail in Certain Transactions) contributed
incremental sales of $3,131,257 in the first half of 1997. The remaining
$96,073 increase at the Clean Earth unit was due to increased seasonal sales
at the Clean Earth unit due to milder weather conditions in the first quarter
of 1997 as compared to the same period in the prior year which allowed easier
access to contaminated soils.
Gross Profit
Gross Profit increased $2,266,918 from ($113,000) in the first half of 1996 to
$2,153,918 in the first half of 1997. The acquired businesses in both
business segments contributed gross profit of $1,604,944 or 70.7% of the total
increase with increased sales, improvements in cost of sales, and reduced
depreciation expense in the established units accounting for the rest of the
improvement.
In the plastic lumber division, gross profit increased $425,055 as the
DuraTech, RPI and ESP acquisitions contributed additional gross profit of
$377,097. Cost of sales was reduced by $122,408 in the first six months of
1997 in labor and fringe benefits as a result of a reduction in force but this
was offset somewhat by increased variable expenses associated with increase of
sales in the existing base unit.
Gross profit increased by $1,841,863 in the environmental recycling division
for the first six months of 1997 over the same period in 1996. The ARDT and
ITS acquisitions contributed $1,227,847 in gross margin during this period.
In the Clean Earth unit, the existing plant and equipment were substantially
depreciated in prior years and consequently, depreciation expense related to
these items was lower by $266,481 for the first half of 1997. Transportation
and disposal hauling costs were $82,935 less than the comparable period as the
milder season in the first quarter of 1997 increased hauling activity for
which the company could bill out and recover costs. The remaining reduction
was primarily due to reduced plant maintenance costs during the period and
increased profit margin on the incremental seasonal sales over the same period
in the prior year. The company continued to experience replacement of
equipment parts that related to last year's facility fire which were
identified and charged to reserves set aside for this purpose.
General and Administrative
General and administrative expenses decreased $276,985 or 11.7% in the first
six months of 1997 compared to the comparable period in 1996 despite the
addition of several acquisitions. Acquired businesses (DuraTech, RPI, ARDT,
ITS and ESP) contributed an additional $575,532 to general and administrative
expenses. These expenses were off set by certain non-recurring expenses in
both business segments during the first six months of the previous year.
General and administrative expenses in the plastic lumber business decreased
by $320,855 compared to the same six months of the previous year. The
DuraTech, RPI and ESP acquisitions contributed $221,636 in incremental
expense. The parent company however, experienced certain one-time charges
during the first six months of 1996 including a loan guarantee fee in company
stock of $220,000 and $30,000 of doubtful account reserve for receivables due
from Earth Care Partners (See 1996 Audited Financial Statements, Note 11 -
Related Party Transactions). The company reduced its expenses for outside
promotional services by $25,553 in its corporate office as well as reducing
corporate exempt salaries by $171,130 in an effort to reduce corporate
overhead and channel more resources to advertising, literature and trade
shows. The Company increased spending in advertising, promotions and trade
shows by 182% over the same six month period of the prior year in an effort to
increase sales and production throughput and improve margins during the
traditionally strong summer and fall seasons.
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During the first quarter of 1996 the Company abandoned efforts to complete the
establishment of its Camden New Jersey facility due to difficulties in
negotiations with the local government. As a result the Company recognized a
loss on abandonment of $150,548 for the first six months of 1996 consisting
primarily of leasehold improvements.
In the soil recycling division, general and administrative expenses increased
$43,870 in the first half of 1997 compared to the first half of 1996. The
ARDT and ITS acquisitions contributed $354,076 in incremental expenses in
1997. A payment of $300,000 in management service fees was made to IA
Construction, a former owner of Clean Earth, Inc. during the first quarter of
1996. This management fee is no longer paid in the current year and accounts
for most of the decrease in general and administrative expense in the Clean
Earth unit.
Interest expense increased $31,771 in the first six months of 1997 compared to
the same period in the prior year. Debt service for the DuraTech, RPI, ESP
and ITS acquisitions contributed $23,662 or 74.5% of the increase in interest
expense. The remaining increase in interest is primarily due to debt service
on an unsecured note payable of $1,000,000 to a related party (Schultes, Inc.)
(see Certain Transactions) that was not present in the prior year.
The Clean Earth subsidiary experienced a fire at the plant at the end of March
1996. While the fire did not affect first quarter revenues in 1996, the
resulting decrease in plant capacity did effect plant capacity during the
summer months of last year. The Company assessed damages and recorded a
provision for fire loss of $220,000 as an extraordinary item during the first
quarter 1996.
Liquidity and Capital Resources.
Prior Fiscal Year. Cash proceeds from the issuance of stock during 1995
amounted to $1,414,070 and were the principal source of capital during this
period. The Company also received additional cash proceeds of $144,510 from
the issuance of notes payable and $300,306 cash proceeds from stockholder
loans. However, the cash provided by these financing activities was offset to
some extent by other financing activities which used cash, including payments
on stockholder loans of $102,000 and cash dividends of $400,000 paid by one of
the Company's recently acquired subsidiaries, prior to the time it was
acquired by the Company, so that the net cash provided by financing activities
was $1,456,886. The payment of such dividends reduced the Company's liquidity
by reducing the amount of cash available to the Company upon acquisition of
these subsidiaries. Operating activities used net cash of $1,163,980 mainly
because of the net loss generated by the Company from its operations. and
mainly because of capital expenditures. During this period investing
activities used net cash of $137,361, primarily capital expenditures for
additional equipment.
Fiscal Year Ended December 31, 1996. Cash proceeds from the issuance of stock
amounted to $2,747,491 and continued to be the principal source of capital
during this period. The Company also received additional cash proceeds of
$500,824 from the issuance of notes payable and $120,000 cash proceeds from
stockholder loans. However, the cash provided by these financing activities
was offset to some extent by other financing activities that used cash,
including payments for the purchase of treasury stock of $1,100,000, principal
payments of notes payable of $639,100 and cash dividends of $948,000 paid by
one of the Company's recently acquired subsidiaries, prior to the time it was
acquired by the Company, so that the net cash provided by financing activities
was only $681,215. Operating activities used net cash of $606,685 due mainly
to the net loss generated by the Company from its operations. Investing
activities included cash outlays of $414,203 primarily for machinery and
equipment in the plastic lumber operations and also included net cash outlay
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of $5,651 for the acquisitions of DuraTech Industries and Earth Care Partners
for total cash used in investing activities of $419,854.
Six Months Ended June 30, 1996. Net decrease in cash for the first half of
1996 totaled $329,193. Cash proceeds from the issuance of stock of $1,521,839
and an officer loan of $100,000 during the first six months of 1996 and were
the primary sources of capital for the period. This financing activity was
offset by dividends of $481,253 paid by Clean Earth and $850,000 paid to IA
Construction (former owner of Clean Earth) for purchase of treasury stock
prior to contemplation of acquiring this company. There was also repayment of
notes payable in the amount of $136,657 during the period. The net result of
financing activities was $153,929 for the period. Despite a net operating
loss of $2,704,356 during the first half of 1996, the Company still managed to
limit cash used of $286,981 from operating activities. This was primarily due
to collections of accounts receivable from the end of the busier season
totaling $756,809, issuance of common stock for services totaling $414,661,
increases in accounts payable of $818,668 and $459,060 of depreciation and
amortization which is a non-cash item. Total investing activities during this
period were $190,490 invested in capital for equipment as well as net cash
paid of $5,651 in the acquisition of DuraTech yielding $196,141 of net cash
used for investing activities.
Six Months Ended June 30, 1997. Net cash generated in the first half totaled
$2,620,509 of which $4,880,000 was generated from the private offering of
preferred and common stock and remained the principal source of capital during
this period. An additional $1,384,326 of capital was provided by the issuance
notes payable of which $1,000,000 was issued to Schultes, Inc., a related
party (see Certain Transactions). As of June 30, 1997 notes payable to
Schultes, Inc. totaled $1,000,000. Proceeds from issued debt were used to
consummate the RPI, ARDT, ESP, ITS and EnviroPlastics acquisitions as well as
to pay off other notes including the Stout Partnership Loan of $500,824 (see
Certain Transactions) and an officer loan payable. Net cash used in
operations was $780,395 primarily due to the increase in accounts receivable
of $1,120,807 as a result of increased sales entering peak season somewhat
offset by non-cash depreciation and amortization of $254,062. Investing
activities included the acquisitions of RPI, ESP, ARDT, ITS and EnviroPlastics
Corp. (discussed in detail in Certain Transactions) which required $1,522,186
of cash (net of cash received from these subsidiaries). Another $443,358 was
required for capital expenditures consisting primarily of machinery and
equipment for the Tennessee and Wisconsin manufacturing plants and the Clean
Earth facility. Cash used in Investing Activities totaled $2,116,234.
Due to response to the Company's new "Carefree Decking System", the Company
has committed to expanding the capacity of the RPI subsidiary. The Company
will lease an additional 15,000 square foot addition to the existing leased
facility and plans to add six new extruders and vacuum calibration systems in
addition to the two existing extruders at this site. The estimated cost of
this project is $1,000,000 and will be financed through an independent leasing
company or bank. The Company has access to an additional $1,300,000 from
Schultes, Inc. at Federal Reserve prime rate plus 1%, and the Company's Clean
Earth subsidiary has a commitment for a bank line of credit of $1,500,000 at
the bank's prime rate plus one half percent. (See Certain Transactions). None
of this amount was borrowed at June 30, 1997.
The Company has also committed to building a bio-organic soil recycling
facility in Carteret, New Jersey as part of a start-up company named Carteret
Biocycle, Inc, which is a wholly owned subsidiary of Clean Earth, Inc. (see
Certain Transactions). This facility is expected to be completed in the fall
of 1997 at an estimated cost of $1,000,000 and will be financed through a
conventional bank loan facility.
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Possible Future Acquisitions
The Company continues to seek acquisition candidates that can be vertically
integrated into either the recycled plastic lumber or environmental recycling
divisions. In the recycled plastic lumber division, targeted companies
include manufacturers and distributors of recycled plastic products as well as
raw material regrind operations. In the environmental recycling division
targeted companies include soil recycling companies including bio-organic
methodologies, consulting and construction companies involved in on-site
clean-up and potential joint ventures with dredging operations for remediation
and disposal of contaminated soils.
While the Company has entered into related party acquisitions in the past, it
is not expected to have any further significant dealings with affiliates in
the future. At present there are no known affiliates with which the Company
intends to negotiate an acquisition nor are there any related entities that
will be considered for acquisition in the foreseeable future. If there are
dealings with such entities in the future, the parties will attempt to deal on
terms competitive in the market and on the same terms either party would deal
with a third person. Management will attempt to resolve any conflicts of
interest that may arise in favor of the Company. Failure to do so could
result in fiduciary liability to management.
BUSINESS
U.S. Plastic Lumber Corporation is divided into two divisions; the recycled
plastic lumber division (Earth Care) and the environmental recycling division
(Clean Earth). The Earth Care division is comprised of five wholly owned
subsidiaries: Earth Care Products of Tennessee, which operates a
manufacturing plant in Sharon, Tennessee: Earth Care Products of the Midwest,
which operates a sales, manufacturing and assembly facility in Lake Odessa,
Michigan; RPI, which operates a sales and manufacturing facility in Green Bay,
Wisconsin; Environmental Specialties Products, which runs a sales and
distribution center of recycled plastic products in Guasti, California and
EnviroPlastics Corporation, which operates a recycled plastic regrind plant in
Auburn, Massachusetts. The Clean Earth division operates a plant in New
Castle, Delaware and two environmental construction companies: Integrated
Technology Systems (ITS), in Winslow, New Jersey and Advanced Remediation and
Disposal Technologies (ARDT) in Coopersberg, Pennsylvania. In addition, the
Company has started Carteret Biocycle, Inc. which will construct an earth
recycling facility in Carteret, New Jersey utilizing a bio-organic methodology
of recycling contaminated soils.
The Company's Earth Care division manufactures plastic lumber from recycled
waste plastic to produce a high quality, long lasting alternative to wood
lumber that provides superior performance in outdoor uses and is suitable for
most nonstructural applications. By producing a high quality recycled plastic
lumber product, the Company conserves natural resources by reducing the need
for lumber products made from wood and at the same time reduces the amount of
plastic waste streaming into landfills while providing a longer lasting,
useful product. The Company's plastic lumber products are intended as an
excellent replacement for pressure treated wood lumber, which is injected with
toxic chemicals to retard decay and insect infestation. Plastic lumber is not
subject to decay or insect infestation and so will outlast wood lumber,
especially in applications exposed to moisture. Recycled plastic lumber is
environmentally friendly in that it eliminates potential pollution from
leaching of such toxic chemicals into the environment.
The Company also offers recycling services through its environmental group.
The Company's Clean Earth division operates a low temperature thermal
desorbtion treatment plant, that ensures that contaminated soil is
decontaminated in accordance with local, state and federal regulations. This
thermal treatment process removes petroleum hydrocarbons from the soil and has
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been recognized by federal and state agencies (including Delaware, New Jersey,
New York, Maryland and Pennsylvania) as a cost effective technology for
cleaning up the environment. Contaminated solids, soils and construction
debris are recycled and reused in construction and industrial applications.
The Company's recycling center in New Castle, Delaware is in a prime location
for servicing the Northeast and Mid-Atlantic regions, where extensive
remodeling and rebuilding of infrastructure and abandoned industrial property
is ongoing. Hazardous waste landfills are expensive and environmentally
unfriendly, thereby providing opportunities for the Company's environmental
recycling group.
History and Development of the Company
The Company was incorporated in Utah on July 26, 1983, originally under the
name of Front Street Energy, Inc. The Company completed a public offering of
its securities in 1983, but had no active business for several years. The
Company changed its corporate domicile to the State of Nevada in June 1992 and
changed its name to Front Street, Inc. In 1994, the Company acquired all the
outstanding stock of Educational Storybooks, Inc. and changed its name to
Educational Storybooks International, Inc. The Company subsequently divested
itself of Educational Storybooks, Inc. and another subsidiary and had no
business operations prior to March, 1996.
In March, 1996, the Company entered into an Agreement and Plan of
Reorganization with Earth Care Global Holdings, Inc. ("Earth Care"), a
manufacturer and marketer of recycled plastic products and other recycling
services. Pursuant to the Agreement, the Company reverse split its common
stock on a 1 for 16 basis, and then issued 4,196,316 post split shares of its
authorized but previously unissued common stock to acquire all the issued and
outstanding stock of Earth Care in a stock for stock exchange (the
"Acquisition") which was intended to be a tax free reorganization under
Section 368(a) of the Internal Revenue Code.
Earth Care was incorporated under the laws of the State of Florida in April,
1994. This company was organized as a holding company, to engage in the
business of manufacturing and marketing plastic lumber products made from 100%
recycled plastics, through subsidiaries, including Earth Care Products of
America, Inc. (formerly known as Environmental Plastics of America).
Environmental Plastics of America was founded in April, 1992 by Harold H.
Gebert, Chairman, CEO and David A. Farrow, President. In March, 1993 this
company purchased Earth Care Products of North Carolina, a small recycled
plastic lumber manufacturer located in Statesville, North Carolina. Upon
completion of this acquisition the name was changed to Earth Care Products of
America, Inc. This company then acquired all of the assets of Duraplast
Corporation, a recycled plastic lumber manufacturer located in Upland,
Pennsylvania in April, 1993. Manufacturing equipment from this acquisition
was moved to the Statesville, North Carolina plant to increase production
capacity.
In April, 1994 the Board of Directors of Earth Care Products of America, Inc.
elected to reorganize into a holding company structure. Earth Care Global
Holdings, Inc., was incorporated as a Florida corporation, to be the parent or
holding company, with Earth Care Products of America, Inc. as its subsidiary.
In May, 1994 Earth Care formed another subsidiary called Earth Care Products
of Tennessee, Inc., a Florida corporation, through which it acquired all of
the assets of Jeanell Sales Corporation, a recycled plastic lumber
manufacturer located in Sharon, Tennessee. In January, 1995 it was determined
that significant savings could be achieved by consolidating the Statesville
manufacturing operation into the Sharon, Tennessee plant. As previously
mentioned, in March, 1996 Earth Care was then acquired as a wholly-owned
subsidiary of the Company, which changed its name to U.S. Plastic Lumber
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Corporation. (The Company continues to do business using the name Earth Care.)
The Company is a publicly-held Nevada corporation, and the Company's common
stock currently trades under the symbol "ECPL" on the NASD OTC Electronic
Bulletin Board.
In April, 1996 the Company acquired all of the assets of DuraTech Industries.
DuraTech Industries, in operation since 1986, is a manufacturer of recycled
plastic lumber, recycled plastic shapes and value added products located in
Lake Odessa, Michigan. This acquisition doubled the Company's recycled
plastic lumber sales.
In December, 1996, the Company formed the Clean Earth division, that acquired
in a pooling of interest a wholly owned subsidiary, Clean Earth of New Castle,
Inc., which has been in operation since 1991, and has treated over 600,000
tons of soil and construction debris that was contaminated with petroleum
hydrocarbon wastes, such as fuels, lubricating oils, tars and gasoline. Clean
Earth owns and operates a low temperature thermal desorbtion plant that can
treat and recycle up to 30,000 tons per month of petroleum contaminated soil.
In January, 1997, the Company acquired Recycled Plastics Industries, Inc.
(RPI), located in Green Bay, Wisconsin. RPI is a manufacturer of specialty
profile, recycled plastic lumber products that was formed in 1989. RPI's
production process utilizes an automated continuous flow extrusion process
with vacuum calibration forming technology. The special products and
additional dimensional lumber capacity complement the Company's existing
products manufactured at the Tennessee and Michigan plants. The recycled
plastic lumber industry is a young, highly fragmented industry with over 30
small manufacturers and many more marketers of recycled plastic lumber
products.
In February, 1997, the Company acquired Advanced Remediation and Disposal
Technologies, Inc. (ARDT). ARDT is engaged in environmental consulting and
clean up of contaminated sites primarily involving water and soils.
In March, 1997, the Company acquired Environmental Specialties Plastics, Inc.
(ESP), a marketing and distribution company of recycled plastic products in
Guasti, California. The Company also manufactures custom signs out of recycled
plastic lumber utilizing in house routing equipment and is able to personalize
site amenities, such as benches, ash urns and picnic tables, engraving logos
and designs into recycled plastic end products. This acquisition provides the
Company with a presence on the west coast of the U.S. market.
In March of 1997, the Company acquired Integrated Technical Services, Inc.
(ITS) located in Winslow, New Jersey. The Company is engaged in environmental
consulting and clean up of contaminated sites primarily involving water and
soils similar to the operations of ARDT.
In June of 1997, the Company acquired EnviroPlastics Corporation, in Auburn,
Massachusetts, which operates a recycled plastic processing business which
includes the washing, grinding and pelletizing of post-consumer and post-
industrial plastic waste. In the subsidiary, an estimated 70% of the
$5,230,000 in sales for the year ended December 31, 1996 were from one major
customer, Dupont, who was the prime customer for the pelletized, post-consumer
feedstock product.
In June of 1997 the Company formed Carteret Biocycle Inc. as a wholly owned
subsidiary of Clean Earth, Inc.. The Company will construct an 80,000 square
foot soil recycling facility on a 5-acre leased parcel in Carteret, New
Jersey. This facility will recycle contaminated soils utilizing a bio-organic
methodology of removing contaminants. The plant will have the capacity to
process 240,000 tons of contaminated soil annually.
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In July of 1997, the Company formed a joint venture partnership with
Interstate Industrial Corp. of Secaucus, New Jersey to bid on dredge/upland
disposal projects. The joint venture company does business as Interstate/U.S.
Plastic Lumber Corp. joint venture.
Corporate Structure
U.S. Plastic Lumber Corporation, a Nevada corporation, is a holding company
for the Company's wholly owned subsidiaries.
Earth Care Products of the Midwest, a Florida corporation
Earth Care Products of Tennessee, a Florida corporation
RPI Acquisition Corp., a Wisconsin corporation
Clean Earth Inc., a Delaware corporation
Advance Remediation and Disposal Technologies, Inc., a Pennsylvania
corporation
Integrated Technology Services, Inc. a New Jersey corporation
Environmental Specialties Products, Inc., a California corporation
EnviroPlastics Corp., a Massachusetts corporation
Carteret Biocycle Corp., a Delaware corporation
Physical Facilities and Employees
The Company's principal executive offices are located in Boca Raton, Florida.
The Company leases approximately 3,265 square feet of office space in a four
story office building for which it pays $4,600 per month. The Company has a
total of eight employees at the corporate offices in administration and
finance.
One the Company's manufacturing facilities is located in Sharon, Tennessee.
The Company leases, with an option to purchase, a 35,300 square foot metal
building for $7,000 per month. The Company employs an average of 20 people at
this facility.
The Company also has a manufacturing facility in Lake Odessa, Michigan which
it acquired as part of the DuraTech acquisition. The Company leases, on a
month to month basis, 12,000 square feet of space at $2,300 per month, and
employs 17 at this facility. The Company also leases 16,000 square feet in a
separate building at $3,333 per month for twelve months, which houses a
fabrication shop and employs an average of 9 people.
The Company also has a manufacturing facility in Green Bay, Wisconsin which it
acquired as part of the RPI acquisition. The Company leases approximately
20,000 square feet of space at $4,432 per month on a five year lease which
commenced January 27, 1997, and employs 11 people at this facility.
The Company also has a waste processing facility in New Castle, Delaware which
it acquired as part of the Clean Earth acquisition. The Company leases
approximately 7.5 acres of ground (on which it has erected the soil
decontamination facilities), for a fee of $1 per ton of soil received for
treatment, with an annual minimum of $50,000 and a put option under which the
landowner can require the Company to purchase the property for $750,000 at any
time. The Company employs 26 people at this facility.
The Company also previously leased, for $5,000 per month, another
manufacturing facility located in an enterprise zone in Camden, New Jersey.
The Company expended in excess of $100,000 for rent and lease alterations to
this facility. However, because of delays encountered in negotiations with
the City of Camden with respect to Enterprise Zone benefits, the Company
entered into negotiations to acquire an alternate facility and eventually
acquired the DuraTech facility, which rendered the Camden facility redundant.
The Company negotiated a termination of this lease in the first quarter of
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1997.
The Company has a sales and distribution office located in Guasti, California
as a result of the ESP acquisition. The company leases 6,120 square feet of
building space as well as 17,427 square feet of outdoor space at a cost of
$1,500 per month on a two year lease. The facilities are utilized as office
and fabrication space as well as a warehouse. This facility employs an
average of five people.
The ARDT subsidiary employs 9 people, all of whom report directly to job
sites.
The ITS subsidiary leases 7,000 square feet of office and utility space on a 3
acre parcel in Winslow, New Jersey at a cost of $ 1,000 per month on a month
to month basis. Office space consisting of 3,000 square feet in construction
trailers is complemented by a utility structure of 4,000 square feet which is
used for light repairs and equipment storage. The Company employs an average
of 22 employees of which seven are located at the premises and the remaining
generally report directly to job sites.
The EnviroPlastics Corp. subsidiary leases 33,494 square feet of manufacturing
and office space that houses a recycled plastic regrind, washing and
pelletizing operation of post consumer and post-industrial plastic waste. The
Company leases the property at $18,143 per month on a five-year lease and
employs an average of 47 people.
EARTH CARE DIVISION - Products
During the past several years, the Company's Earth Care division has
positioned itself to be a leading manufacturer in the emerging recycled
plastic lumber industry in North America. Recycled plastic lumber is
manufactured in a variety of colors, profiles and shapes including standard
lumber dimensions and many custom engineered profiles and shapes.
The Company's recycled plastic lumber products are made from 100% recycled,
post-consumer and post-industrial plastics and are used for numerous
municipal, commercial and residential applications. This non-toxic material
is an environmentally friendly alternative to pressure treated lumber and rare
woods and provides superior performance for most nonstructural, outdoor
applications where traditional wood lumber is subject to moisture damage and
rotting. Recycled plastic lumber products offer these unique advantages:
50 year limited warranty
Environmentally friendly and non-toxic
Virtually maintenance free
Saves trees and reduces use of exotic rain forest hardwoods
Can be worked with conventional tools
Aesthetically pleasing wood-like textured surface
Splinter proof - never rots
Not affected by termites, ants or other wood borers
No splitting, cracking or chipping
Holds nails and screws 40% better than wood
Non absorbent and waterproof
No leaching into soil or groundwater
Most graffiti easily washes off
Does not promote organic growth when wet
Products built with the Company's recycled plastic lumber have the appearance
of freshly stained or painted wood but the longevity and maintenance-free
qualities of plastic. Recycled plastic products are an ideal replacement for
wood, metal and concrete in numerous applications, including most non-
structural exterior functions. Some of the potential applications are:
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Decking for residential and commercial projects
Commercial, municipal and residential applications such as park
benches, picnic tables, trash receptacles, car stops, planters and
ash urns
Fencing
Highway spacer blocks, guardrail posts, sound attenuation barriers
and speed bumps
Trailer, farm equipment and railroad box car flooring
Industrial applications such as pallets, walkways in chemical
plants, catwalks on factory roofs
Sanitary animal pen flooring
Railroad ties
Engineered products such as pier piling cores
Sea pilings and marine bulkheads
Manufacturing
The Sharon, Tennessee manufacturing facility currently has three closed mold
forming extruders and one continuous flow forming extruder. Most of the
Company's large profiles are manufactured at this facility, including
engineered products such as marine piling cores, retaining wall timbers and
prototype products including the railroad cross tie, highway guardrail posts,
and highway spacer blocks.
The manufacturing facility in Lake Odessa, Michigan has two extruders with
closed mold forming and produces a high density polyethylene lumber in
assorted specialty shapes such as bench ends and table legs. Acquisition of
this facility gave the Company an increase in color selection as the facility
produces product in 9 different colors. The Michigan facility currently
supplies table legs, bench ends, and other molded shapes sold in the recycled
plastic lumber industry. This location also houses the assembly line that
fabricates most of the value added products sold by the Company. A regional
sales office is also maintained at this location.
The Green Bay, Wisconsin sales and manufacturing facility operates two
extruders that utilize a vacuum calibration continuous flow forming line.
This process allows for the manufacture of many special profiles, in any
length, that are not able to be produced with conventional roll forming or
closed mold systems. A regional sales office is also maintained in this
location. The facility will also manufacture the Company's "Carefree Decking
Systems".
The Company's manufacturing process involves proprietary technologies and
specialized manufacturing equipment custom built or modified to the company's
specifications. The manufacturing process utilizes granulated and/or
densified recycled plastic, which in certain cases, contains additives
formulated for desired end use characteristics of the product. A key
advantage of the process is the ability to utilize plentiful, recycled plastic
waste to create a consistent material which can be extruded into a desired
shape. While the end product maintains many of the desirable properties of
traditional wood materials, it also has superior characteristics such as
moisture resistance which give it an advantage over wood for many
applications.
The primary product of the Company's manufacturing process is molded plastic
lumber in various sizes ranging from 3/8" x 1", to 10" diameter profiles in
various lengths. The Company also markets and sells various engineered or
value added products for specific applications, in which the plastic lumber is
used to make the finished product.
The manufacturing process uses 100% recycled plastic raw material and consists
of three stages. First, the recycled plastic materials received at the plant
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are identified and categorized by resin type. These materials are processed
through a series of grinding, densifying and other operations to a consistent
particle size. The ground plastic resins are then blended with other
ingredients such as colorant and UV stabilizers to prepare specific mixes for
the products being produced by the plant. Second, the plastics are heated,
mixed and compounded into a thick molten composite which is extruded through
either closed mold, roll forming or vacuum calibration finishing lines into
specified shapes or profiles using equipment specifically designed for
processing recycled materials. Finally, the extruded products are cooled in a
downstream process, and the resulting profiles are inspected and cut to
specific lengths. The product is then ready to be shipped as plastic lumber
in sizes and shapes corresponding to standard lumber dimensions. The Company
utilizes only recycled polyethylenes and does not use plastics with PVC, toxic
chemicals, insecticide or paint residues. The Company's manufacturing process
produces no harmful environmental by-products or hazardous waste.
Raw Materials Supply
At the present time the Company obtains approximately 80% of its mixed
plastics feedstock through firms who obtain such materials from a large
variety of materials recycling facilities, including municipal recycling
programs as well as plastics discarded in various industrial and manufacturing
processes. Management believes the raw materials feedstock is currently
purchased from sources which it believes are dependable and adequate for at
least short term manufacturing requirements. Generally the company attempts
to maintain raw materials inventory sufficient to supply its manufacturing
requirements for approximately two months, and management believes that
suitable alternative sources are available in the event of disruption. In the
past, the Company has not experienced any significant disruptions or other
supply problems. However, the cost of recycled plastics has been subject to
significant cyclical market fluctuations over the past several years based on
supply and demand. The Company's long term strategy is to contract directly
with Municipal Recycling Facilities and industrial plastic manufacturers for
long term supply to mitigate the exaggerated fluctuation in pricing and supply
that the distributors' influence in the market promotes. The Company
maintains a flexible product pricing policy that fixes prices only on the
amount of product that it has raw material contracted for. This protects the
Company from significant losses from raw material market fluctuations.
However, no assurances can be given that raw materials will always be
available at commercially reasonable prices. Management is generally of the
belief that if significant increases in demand for recycled plastics of a
lasting nature were to occur, the potential supply of recycled plastics could
easily be expanded to meet any lasting increase in demand. Management
believes that both supply and demand will continue to increase as public
awareness of the need to recycle plastic waste increases. However, any
disruption of supply arrangements or significant lasting increases in raw
materials prices could have a material adverse effect on the company's
operations. The Company is presently negotiating for long term supply
contracts for its recycled plastic feedstock. The market for the Company's
products has continued to increase and therefore the sales price per pound has
been increased by the Company over the last three years. The Company believes
this is due to the increased awareness of the market place of the advantages
of plastic lumber and an overall awareness of the public of environmental
concerns.
Research and Development
Extensive testing of recycled plastic lumber has been performed for the past
several years at Rutgers University's Center for Plastics Recycling Research.
The Company has been an active participant along with others in the research
and development process. Since its formation, the Company has also devoted
significant efforts on its own, testing and refining its manufacturing
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processes, molds and recipes to improve its finished products.
In May, 1996, after a long period of research and development with the
Company, Rutgers University applied for U.S. Patent Protection for its
recycled plastic composite railroad cross tie and its related manufacturing
technology. These patents, if granted, would be held by Rutgers University,
with the Company being the exclusive worldwide licensee for the sale of this
and related products.
A group of plastic lumber manufacturers founded the Plastic Lumber Trade
Association (PLTA) to promote the benefits of plastic lumber and create proper
testing standards. The PLTA currently has approximately 22 manufacturing
members. Mr. Farrow, the Company's Vice Chairman, was a founding director of
the PLTA and now serves as Committee Chairman for the ASTM Standard Guide to
Plastic Lumber Residential Deck Construction. The Executive Vice President of
Earth Care Midwest, currently serves as the organization's Vice President.
PLTA holds committee meetings three time a year in conjunction with the
American Society of Testing & Materials (ASTM). Complete ASTM standards are
being established for plastic lumber and preliminary test results are now
available from the following institutions:
Rutgers University's Center for Plastics Recycling Research
University of Massachusetts at Lowell, Dept. of Engineering
Batelle, Engineering Mechanics Dept.
US Army Corps of Engineers Research Laboratories
A full set of ASTM standards has been developed and approved for plastic
lumber as of July of 1997. This will greatly expand the potential users who
are required to meet specifications and standards known to the wood industry.
A manual for use of residential decking material is anticipated to be
approved as early as 1998.
Proprietary Technology
Management is generally of the belief that maintaining state of the art
technology in its recipes, molds and manufacturing processes and maintaining
the proprietary nature of that technology through trade secrecy is more
important to maintaining a competitive position in the industry than seeking
any legal protections that patents may provide. However, patent protection
for technology related to railroad crossties and the process to manufacture
them, is currently being sought by Rutgers University, but there is no
assurance it will obtain any such protection. The Company has entered into an
agreement with Rutgers pursuant to which it has exclusively licensed such
technology.
Competition
There are over 30 manufacturers of recycled plastic lumber in the United
States, of which approximately 22 are members of the Plastic Lumber Trade
Association (PLTA). The competition is broken down into two separate
categories: plastic lumber manufacturers using strictly high density
polyethylene, and manufacturers that use a mixture of high density and other
polymers to produce a product that is less expensive.
The Company primarily uses only high quality polyethylenes and additives at
all of its plants. The major competitors in this segment of the market
include Eaglebrook Products, Inc., Chicago, Illinois, Bedford Industries,
Worthington, Minnesota; Cycle-Masters, Inc., Sweetster, Indiana and NEW
Plastics Corp., Luxemburg, Wisconsin. Management intends to compete with
these competitors on the basis of price, quality and service. The two major
commingled manufacturers are The Plastic Lumber Company, Inc., Akron, Ohio and
Hammer's Plastics Recycling, Iowa Falls, Iowa.
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In all its applications, the plastic lumber manufactured by the Company will
also be in direct competition with conventional wood lumber. At present, the
principal competitive disadvantage of plastic lumber compared to wood lumber
is that it is generally more expensive to purchase. Plastic lumber is
comparable in price to high grade cedar and redwood. Although plastic lumber
can be more expensive to initially purchase than comparable wood lumber,
plastic lumber can substantially outlast wood lumber, particularly in
applications where the lumber is exposed to the elements, and can therefore be
more cost effective in the long run. Furthermore, management believes that
environmental restrictions are presently impeding forestry operations in
United States forests. A second factor impeding the use of pressure treated
lumber is the toxic leaching characteristics. Chemicals injected into
pressure treated lumber contain hazardous constituents which are released into
the soil and create potentially toxic and hazardous conditions. Such factors
may reduce if not eliminate any price advantage that wood lumber presently has
with respect to its initial acquisition cost.
Potential Markets
By producing a suitable recycled plastic lumber product, the Company conserves
natural resources, reduces the plastic waste streaming into landfills and
provides a useful product that satisfies this growing market. One of the many
major markets for recycled plastic lumber is as a substitute for pressure
treated lumber. There are currently a number of states that have either
passed laws or have on their legislative agenda, restrictions on the use and
disposal of pressure treated lumber. The pressure treating process injects
copper, chromium and arsenic (all carcinogens) into the wood to provide a
defensive barrier against insect attack. Pressure treated wood has
legislative restrictions in some states on its disposal methods which require
disposal in toxic waste landfills. Plastic lumber is a safe alternative which
is fully recyclable.
Also, plastic lumber's increased resistance to weathering processes,
particularly moisture, makes it an ideal substitute for lumber made from wood
in any application in which the lumber is exposed to the elements. The
resistance to moisture and other weathering processes gives plastic lumber the
ability to outlast wood in such applications by several times.
In July, 1994 the Company was selected to participate in a cooperative venture
with Rutgers University, Norfolk & Southern Railroad, Conrail and the US Army
Corps of Engineers Research Laboratories to develop a prototype railroad
crosstie made from recycled commingled plastic. Rutgers University has
performed extensive tests on many formulas and the Company has developed a
prototype that is superior in many ways to the creosote wood crosstie.
Norfolk & Southern and Conrail are currently track testing the new prototype.
The Company believes it is the only plastic lumber manufacturer participating
in this project.
Presently there are approximately 180,000 miles of railroad track in the
United States, with 3,100 crossties per mile or a total of 558,000,000 ties in
place. In 1993, 11,300,000 crossties were replaced. The expected life of a
creosote wood crosstie is 12 years, creating a tremendous demand for the more
durable recycled plastic crossties that have an estimated useful life in
excess of 50 years. Conditions which shorten tie life are moisture, location
relative to curves and switches. Railroads know from extensive experience
which locations require highest maintenance and these will be the initial
target areas for longer lasting polymer crossties. Based on the replacement
rate of 11 million crossties per year, the total potential market for this
segment of the business is approximately $700 million annually.
The Company is currently in the process of developing new products for a
variety of uses. These new products include component center cores for a
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manufacturer of reinforced marine pilings and timbers, flooring for farm
equipment and railroad ties. The Company is also working with a supplier to
produce a recycled plastic highway guard rail spacer block. The project has
received conditional approval from the Federal Department of Transportation
(DOT) and several state DOT approvals. The Company is working with Texas A &
M University and the Southwest Research Institute to develop a highway
guardrail post to be marketed to DOTs all over the country. The Company has
been assigned national stock numbers from the U.S. Defense Construction Supply
Center which controls purchasing for all of the U.S. armed forces.
Although management believes that plastic lumber products are currently
suitable for many non-load bearing purposes for which conventional wood lumber
is used, the compressive and flexural strength characteristics of plastic
lumber are not as suitable as conventional wood lumber for most load bearing
applications without additional support; therefore the Company does not intend
at present to market its products for structural, framing or general
construction purposes.
Marketing Strategies
The recycled plastic lumber division (Earth Care) of the Company is itself
divided into four distinct classifications. These divisions are (i)
fabricated products, including park and site amenities such as picnic tables,
park benches, and trash receptacles; (ii) building products, including decking
systems, golf course related products, and standard plastic lumber; (iii)
engineered products, including marine piling center cores, highway guardrail
spacer blocks, and other engineered products; and (iv) railroad ties.
Each of these divisions contain a Division Head who reports to a senior
corporate officer in charge of Sales and Marketing. This senior corporate
officer is also in charge of managing and supporting existing Distributor
relationships and developing new Distributor relationships.
Within each division, the Company employs sales representatives to market and
sell its products utilizing traditional sources of sales including but not
limited to attending trade shows, select advertising, cold calling, customer
referrals, and the like. The Company also markets and sells through
Distributor like relationships; however, it is the Company's policy not to
grant any exclusive territory arrangements.
The focus of the Company's selling strategy is the high quality of its product
along with superior customer service. The Company also focuses on the
benefits of its products including such items as being maintenance free, 100%
recycled, environmentally sensitive, aesthetically pleasing in appearance,
free from rot and insect infestation, and durable.
The Company has experienced a seasonal slow-down in the winter months during
the past three years but expects to reduce the seasonality of its sales by
increasing its marketing efforts in warmer climates of the U.S. during winter
months and by adding contracts for custom items which are not as seasonal.
Government Regulation and Environmental Matters
Although the Company's operations do not and are not expected to generate
significant quantities of waste materials nor any hazardous substances or
result in hazardous emissions, operations are and will in the future be
subject to numerous existing and proposed laws and regulations designed to
protect the environment from waste materials generally and particularly
hazardous wastes and emissions. Management does not believe that its waste
disposal practices and manufacturing processes will be in violation of any
existing or presently proposed law or regulation or require special handling
permits or procedures or otherwise result in significant capital expenditures
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that would have a material adverse effect on operations. However, there can
be no assurance that regulatory requirements will not in the future adversely
affect operations or require the introduction of costly additional
manufacturing or waste disposal practices.
CLEAN EARTH DIVISION - Background
Clean Earth of New Castle, Inc. ("Clean Earth") was founded in 1991 to provide
a safe, cost effective and final solution to the environmental problem of
dealing with soils contaminated with light distillate petroleum hydrocarbons
such as diesel fuel, heating fuel, kerosene, jet fuel and gasoline, by
decontaminating such soils so they can then be recycled as clean fill. The
process essentially heats the contaminated soils in a controlled environment
to a point that the contaminants are burned or evaporated out. In 1995 Clean
Earth modified its plant to recycle products at higher temperatures (up to
1,100degrees fahrenheit), and is now capable of treating soils contaminated
with heavier products such as #6 oil, refinery wastes, waste oils and coal
distillates such as coal tar.
Clean Earth holds an air permit and solid waste permit, both of them from the
Department of Natural Resource and Environmental Control (DNREC) of Delaware.
Clean Earth operates a state-of-the-art thermal treatment plant which results
in the reduction of TPH (Total Petroleum Hydrocarbons) and BTEX (Benzene,
Toluene, Ethylbenzene, Xylenes) to non-detectable levels in the treated soils,
while the stack emissions remain below the levels allowable.
This facility was one of the first to be established in the Northeast and
Clean Earth has treated and recycled more than 600,000 tons of soils to the
satisfaction of the original generators, of the regulatory agencies, and the
end-users of the soil. This has been recognized by other States agencies
(such as the New Jersey D.E.P.) and by many major oil companies. Amerada Hess
Corp., Arco Products Company, Exxon, Getty Petroleum, Mobil Oil Co., Shell Oil
Co., Sun Oil Co., BP Oil Co., Citgo Petroleum and Chevron have all included
Clean Earth on their approved vendor list for remediation.
The Process
The 70 ton per hour plant and equipment belong to the most recent generation
of best available demonstrated technology. The system consists of a variable
speed conveyer belt, which feeds contaminated soil into a counterflow rotary
dryer. The moisture and contaminants in the soil and debris are evaporated in
this drum by the heat of a directly fired burner. Heat transfer to the soil
and debris is maximized by the design of the drum's interior.
The gases, which include dust particles in suspension as well as the
evaporated contaminants, are directed to a dual cyclone and baghouse where the
dust is removed. The remaining gases are ultimately purified in a thermal
oxidizer, where they are turned into harmless carbon dioxide and water vapor.
The cleaned soil and debris is mixed back with the baghouse dust through a
system which insures that the dust has been sufficiently decontaminated during
the process, before it is transferred to a cooler system where it is brought
back to a safe level of temperature and a dust controlling moisture content.
Liability Control and Government Regulation
The business of decontaminating or otherwise handling toxic or hazardous waste
materials is fraught with potential liability to such handlers if the handling
and tracking of such wastes is not properly done. Under current federal
regulations (RCRA, Resource Conservation & Recovery-Act & CERCLA,
Comprehensive Environmental Responsibility, Compensation & Liability-Act), the
generator of the waste is financially and legally responsible for that waste
forever, and is strictly liable for the costs of clean up and disposal of such
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wastes. Placing it in a landfill or mixing it with other materials does not
eliminate that liability. Therefore, proper control and tracking of all
wastes materials handled by the Company is essential for the Company to avoid
any liabilities with respect to such wastes. The Company takes great
precaution not only to eliminate, if possible, the liability of its customers,
who are the generators of the contaminated soil and debris, but also to
maintain proper control and tracking of each waste stream brought to the
facility. However, once the waste has successfully been thermally treated by
Clean Earth, the contamination is destroyed and the liability is virtually
eliminated. There is no more waste, it is now a reusable material.
Wastes which are sent to a landfill are merely stored until the landfill needs
to be excavated again for cleanup in the near or distant future. The waste is
still the ultimate responsibility of the generator in all cases. Landfills
are a necessary solution for certain hard to treat wastes; but Clean Earth has
created an environmentally friendly way to recycle petroleum hydrocarbon
contaminated soils, thus saving valuable landfill space for these other needs.
Most "recycling" systems merely dilute the contaminated soil by mixing it with
clean materials. Clean Earth's technology thoroughly cleans the soils before
it is made available for reuse. The best illustration of this crucial point
is that all production material to date has been sold as clean fill. Clean
Earth has enough contractual arrangements to provide this clean fill to offset
Clean Earth's output tonnage well into 1997.
Quality Control
The facility is operated with a strict commitment to safety, health and
environmental issues coupled with a rigorous system of controls, which lends
credence to the "Certificate of Destruction and Recycling" issued to each
generator.
The Waste Tracking System process starts before the contaminated soil is
accepted at the plant gate. A comprehensive disclosure testing and
manifesting system ensures that the solids brought to the facility falls well
within the limits of Clean Earth's permits and treatment capacities. This
system mirrors the procedures of hazardous waste facilities. Furthermore,
Clean Earth runs an EOX test (Extractable Organic Halogens) on every load of
material before it is authorized for unloading in the storage buildings. In
addition, management runs several spot checks with the comprehensive on-site
laboratory:
GC (Gas Chromatographer) for PCB's (Poly Chlorinated Biphenyls)
GC for VOC identification (Volatile Organic Compounds)
GC with a high temperature desorber for THC (Total Hydrocarbons) and
Desorption Temperatures EOX analyzer and the screening equipment for
"fines" content
These tests enable Clean Earth to determine quickly and efficiently that the
materials that are received are in accordance with their characterization by
the generator. This sizable investment in equipment and personnel protects
both the facility and the customers against the possibility of receiving
undesirable wastes.
The storage buildings are large, fully enclosed structures and are built on
continuous concrete slabs. Runoffs from the buildings are collected and
checked regularly. The buildings are divided into small compartments to
maintain a rigorous separation and tracking of each waste stream that
minimizes commingling. This mitigates the potential liability to a small
quantity in the case an undesirable waste is detected after it has been
accepted. This also ties into the sophisticated waste tracking system that
mobilizes a network of eight micro-computers so as to monitor each load of
material from the time of reception to the treatment test results. These
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computers function on-line and enables operators to view and analyze, at any
time, all the information relative to a given shipment.
In addition to this set of comprehensive control and recording devices that
insure compliance with the various permit requirements, Clean Earth further
guarantees the facility's performance by testing the production daily. As
recommended in EPA publication #SW846, Clean Earth composites a sample for
every 300 tons of production and tests it for BTEX with a GC and for TPH by
the EPA 418 method, using an independent State certified laboratory. For coal
tars, the treated materials are also tested for PAH's (Polynuclear Aromatic
Hydrocarbons) by the EPA 8270 method. It is management's belief that this
treatment plant is the first in the industry to control its emissions with a
C.E.M. (Continuous Emissions Monitoring) system. Information is collected
minute by minute and stored on computers for control purposes; this
information is available to both customers and regulators. The property
itself is monitored through several monitoring wells, that are tested
quarterly. The test results are reported to DNREC.
Liability Insurance
Clean Earth has fully bonded the costs of a closure plan approved by the
DNREC. In addition, Clean Earth has secured a total of $7 million of General
Liability and of Environmental Impairment Liability insurance coverages. The
waste generating companies recycled product is also protected with $1 million
single/$2 million aggregate Products and Completed Operations coverage that
includes a five year tail coverage.
Competition
Clean Earth has several local competitors which provide similar services
within a 150 mile radius. These competitors include R-3 Technologies in
Bristol, Pennsylvania, (of which the Company owns a minority interest), TPST
in Baltimore, Maryland and SRP in Philadelphia, Pennsylvania. Clean Earth has
obtained a permit to clean coal tar materials from DNREC and believes that
this provides a niche market. The nearest competitor with similar
capabilities is R-3 Technologies which is approximately 50 miles from the
facility. It is estimated that approximately 3 million tons of soils
contaminated with coal tar exist in the tri-state area of Delaware, New Jersey
and Pennsylvania, which must be cleaned up within the next 5 to 10 years.
Sales and Marketing
Clean Earth has five sales representatives who regularly call upon generators,
contractors, transporters and consulting engineers. Clean Earth is on the
approved remediation lists of a number of major utilities and refineries in
the area, and is currently exploring new markets for its services which
include the treatment of contaminated water, treatment and recycling of sewer
sludge and wastewater treatment plant sludge, and the grinding and recycling
of previously contaminated rock to sell to local contractors as fill material.
Clean Earth also receives business from a number of distributors and
contractors who have done business with the Company for a number of years.
MANAGEMENT
Executive Officers, Directors and Significant Employees
The following table sets forth the directors, executive officers and other
significant employees of the Company, their ages, terms of office and all
positions. Directors are divided into classes which are elected for staggered
terms of four years, and serve until the annual meeting of the year in which
the terms expire, or until their successors are duly elected by the
stockholders and qualify. Annual meetings are scheduled to be held the second
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Wednesday of April each year in Boca Raton, Florida. Officers and other
employees serve at the will of the Board of Directors.
Term served
Name of Director/Officer Age (Term expires) Positions with the Company
Harold H. Gebert 71 Apr 1992 (1999) Chairman
David A. Farrow 44 Apr 1992 (1998) Vice Chairman & Chief
Operating Officer
Mark S. Alsentzer 41 May 1994 (2000) President & Chief Executive
Officer/Director
Bruce C. Rosetto 39 Jan 1997 Vice Pres./General Counsel
Raymond F. Darling 48 Apr 1992 (1997) Director*
Robert W. Johnson 51 May 1994 (1997) Director*
Christopher J. Walter 62 Oct 1993 (1997) Director*
Raymond J. Kiernan 72 Dec 1994 (1999) Director
Eugene Arnold, Jr. 73 May 1994 (1998) Director*
Louis H. Jullien III 46 Apr 1992 (1998) Director*
Lester E. Moody 68 May 1996 (1997) Director
James Blosser 58 Aug 1996 (1999) Director
Roger Zitrin 49 Nov 1996 (1998) Director
August C. Schultes III 50 Feb 1997 (2000) Director
Gary J. Ziegler 49 Feb 1997 (2000) Director
Stephen M. Groth 39 Feb 1997 (1999) Director
Lionel A. Marquis 44 Apr 1996 Chief Financial Officer,
Treasurer
Hampton C. Randolph, Jr. 52 May 1995 Executive VP - Sales &
Marketing
Lee Anderson 56 Jan 1997 Executive VP - Manufacturing
M. Scott Irons 26 May 1997 Secretary
*Messrs. Darling, Johnson, Walter, and Jullien served as directors of the
Company up through the end of 1996, but have subsequently resigned to allow
the appointment as new directors of persons affiliated with various recently
acquired entities. Mr. Arnold also resigned in January, 1997. A brief
description of these individuals positions, proposed duties and their
background and business experience follows:
HAROLD H. GEBERT, Chairman; Philadelphia, Pennsylvania and Boca Raton,
Florida. Mr. Gebert is also Chairman of the Board of Franklin Realty
Development Corporation and Manor Properties, Ltd.; President of Hagan
Properties, Ltd. Mr. Gebert is responsible for the overall financial
direction and management of the Company and maintaining continuing relations
with the financial and investment community. Mr. Gebert is a graduate of
Pennsylvania State University with a BA Degree in finance. Mr. Gebert has
been the Company's chairman since April, 1992.
DAVID A. FARROW, Vice Chairman and COO; Boca Raton, Florida. Mr. Farrow is a
licensed General Contractor in Florida and founded Farrow Construction in
1978. He oversees all business aspects of the Company including marketing,
management, and product development. Mr. Farrow was a founding Director of
the Plastic Lumber Trade Association (PLTA), and now serves as Committee
Chairman for the ASTM Standard Guide to Plastic Lumber Residential Deck
Construction. He attended Villanova University and Nova University. Mr.
Farrow has been the Company's president since April, 1992.
MARK S. ALSENTZER, President & CEO; Flourtown, Pennsylvania. Mr. Alsentzer
has been a principal in the building of three successful businesses which have
provided excellent returns to shareholders. As former President of Stout
Environmental, Inc. Mr. Alsentzer developed that company from $2 million to
$90 million in revenues and 46 to 700 employees. Stout merged with Republic
Waste Industries, whose Chairman is Wayne Huizenga, and the net return to
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Stout's shareholders was $180 million. In addition, Mr. Alsentzer was
Director of Cemtech, a company whch grew from $6 to $21 million and was sold
to Waste Management for $17 million in 1991. Mr. Alsentzer founded Clean
Earth, which is currently a wholly owned subsidiary of the Company and a
leading recycler of contaminated soil and debris located in the northeast.
Mr. Alsentzer is a Chemical Engineer and has an B.S. from Lehigh University
and an MBA from Fairleigh Dickenson.
BRUCE C. ROSETTO, Executive Vice-President and General Counsel, Boca Raton,
Florida. Mr. Rosetto was a partner in a New Jersey law firm; Paschon, Feurey,
and Rosetto from 1982-86. In 1986, Mr. Rosetto became Chairman and CEO of
Consolidated Waste Services of America, Inc., a fully integrated environmental
company, building that company primarily through mergers and acquisitions into
one of the largest privately owned environmental companies in New Jersey. In
1994, he became Chairman and CEO of Hemo Biologics International, Inc., a
biologic products company. He joined the Company in January, 1997 and his
primary responsibilities are acting as General Counsel to the Company, mergers
and acquisitions, and providing sales management support. He graduated from
LaSalle University in 1979 with a BA Degree in Political Science, and from
Villanova University School of Law in 1982, with a JD Degree.
RAYMOND F. DARLING, (former director), founded the South Florida Insurance
Agency in Boca Raton, Florida serving 28 agents. Mr. Darling attended the
University of Vermont.
ROBERT W. JOHNSON, (former director), served in various capacities (most
recently as Senior Vice President) for Six Flags Theme Parks Inc., a
subsidiary of Time Warner Enterprises, Inc. from 1979 to 1993. Mr. Johnson is
presently Executive Director of Outdoor Amusement Business Association, Inc.,
which represents over 400 Theme and Amusements Parks. Mr. Johnson is a
graduate of Parsons College.
CHRISTOPHER J. WALTER, (former director), opened new markets for Avon Products
in Latin America - Panama, Ecuador, Bolivia; Dominican Republic, Peru,
Uruguay, Paraguay, Brazil, Chile, and Venezuela, from 1963 to 1991. Mr.
Walter is a graduate of Westminster College, Buenos Aires, Argentina and
Bembridge College, Isle of Wight, England and is fluent in Spanish and
Portuguese.
RAYMOND J. KIERNAN, Director; Bronxville, New York and Ocean Ridge, Florida.
Mr. Kiernan was associated with Merrill Lynch and Co. in various capacities
from 1951-1980, ultimately holding the office of Vice President. He was also
on the board of directors of Merrill Lynch, Pierce Fenner & Smith, it's
predecessor. During his tenure with Merrill Lynch, Mr. Kiernan was an Allied
Member of the NYSE, a Director of Security Traders Association of NY, and was
on the Board of Governors of the National Association of Securities Dealers,
chairing the trading, marketing, and development committees. In 1980 Mr.
Kiernan formed R.J. Kiernan and Associates, a business consulting firm which
he operates presently in the capacity of President. Mr. Kiernan presently
holds Directorships on the boards of Fleet Bank of New York, Fleet Trust
Company of Florida and BCT International. Mr. Kiernan attended Villanova and
is a graduate of Iona College with a BA Degree in Finance.
EUGENE ARNOLD, JR., (former director), Berwyn, Pennsylvania. Mr. Arnold
served as Chairman of the Board of Governors for the NASD, Chairman of NASDAQ
and currently serves as arbitrator for the NASD. Mr. Arnold was Governor and
Man of the Year for the Philadelphia Securities Association and Chairman of
Investment Bankers of America for the Mid-Atlantic States. Mr. Arnold is
currently Managing Director for the Philadelphia Corporation and holds a BS in
Economics from the Wharton School at the University of Pennsylvania.
LOUIS H. JULLIEN III, (former director), is a Vice President of Bank One in
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Houston, Texas. Mr. Jullien is a graduate of the University of Oklahoma with
a degree in Finance and Marketing.
LESTER E. MOODY, Director; Fort Lauderdale, Florida, is a member of the Board
of Directors, Miami Heart Institute, Board of Directors C&S Bank, President
Committee of 100, Board of Directors 100 Club of Fort Lauderdale. He was an
automobile dealer for approximately forty years, was on the General Motors
President's Dealer Advisory Council, and owned 9 different dealerships,
including Pontiac, Cadillac, Buick, Honda and Acura. Mr. Moody attended
Christian Brothers College.
JAMES J. BLOSSER, Director; Fort Lauderdale, Florida, was the former Executive
Vice President and General Counsel of Huizenga Holdings, Inc. In addition,
Mr. Blosser served as special counsel to the Miami Dolphins, Florida Panthers
and the Florida Marlins. He was formerly a partner in Ruden, McClosky, Smith,
Schuster & Russell, P.A., is currently a member of the Florida Bar, New York
Bar and the American Bar Association, and is extremely active in community
affairs. Mr. Blosser received his J.D. from the University of Miami.
ROGER N. ZITRIN, Director; Boca Raton, Florida. Dr. Zitrin was the Founder
and President of the Heart Association of Palm Beach County where he was a
practicing physician specializing in Cardiology until he retired in 1992. He
is presently acting as an independent investor and investment advisor. Dr.
Zitrin is the Founder of Florida Medical Laser Corp. and Gold Coast Specialty
Lab and Co-founder of Physicians Cardiac Imaging. He is presently acting as a
Financial Advisor to Gold Coast Ventures, Inc., and serving as a Board Member
of Associated Home Health. Dr. Zitrin is a graduate of Rutgers College of
Medicine and Dentistry.
AUGUST C. SCHULTES III, Director; Wenonah, New Jersey. Mr. Schultes is
Chairman of the Board and CEO of A.C. Schultes, Inc., a contracting and
service organization specializing in water well drilling, water and waste
water treatment, and pump and motor repair services with offices in Maryland,
Delaware and two (2) locations in New Jersey. He is also the Chairman of the
Board and CEO of Life Care Institute, a medical diagnostic center with
facilities to perform stress tests, CAT scans, MRI scans and physical therapy
located in New Jersey. He was also the founder, Chairman of the Board and CEO
of Stout Environmental, Inc., a full service hazardous waste environmental
company. Stout merged with Republic Waste Industries in 1992. Mr. Schultes
is a graduate of Penn State University and has a BS in Civil Engineering.
GARY J. ZIEGLER, Director; Turnersville, New Jersey. Mr. Ziegler is President
of Consultants and Planners, Inc., which provides operating services to
several water utility companies in New Jersey. Mr. Ziegler is a Professional
Engineer and Professional Planner in New Jersey, a Professional Engineer in
Maryland, Pennsylvania, Ohio and New York and a member of the American Society
of Civil Engineers and the National Society of Professional Engineers. He was
President of W.C. Services, Inc. and Vice President of Stout Environmental,
Inc. Mr. Ziegler is a graduate of Clemson University with a BS degree in
Civil Engineering.
STEPHEN M. GROTH, Director, Green Bay, Wisconsin. In addition to his
responsibilities as Treasurer of Recycled Plastics Industries, Inc., Mr. Groth
is President of Outlet Mall Inc. and CST Investments, Inc., two commercial
real estate development companies located in northeast Wisconsin. Mr. Groth
has extensive background and experience in small business start up and was
instrumental in the start up of Recycled Plastics Industries, Inc. Mr. Groth
served as the Tax Director of Terex Corporation, a Fortune 500 company
headquartered in Green Bay, Wisconsin, and was a Senior Tax Consultant for
Price Waterhouse. Mr. Groth is a graduate of George Washington University
with a BA in Accounting, a JD from Marquette University Law School and a MST
from the University of Wisconsin - Milwaukee.
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LIONEL A. MARQUIS, Executive Vice President, CFO and Controller of the
Company, is responsible for the Company's financial reporting, accounting
operations and controls. Mr. Marquis has over 18 years of public and private
accounting experience in diverse manufacturing environments. Prior to joining
the Company, Mr. Marquis served as Controller of RTP Corp., a high tech
manufacturer in Pompano Beach, Florida. RTP Corp. is a wholly owned
subsidiary of Computer Products, Inc., a publicly traded company based in Boca
Raton, Florida. Mr. Marquis has a BS degree in Business Administration from
Bryant College and is a Certified Public Accountant in the State of Florida.
HAMPTON C. RANDOLPH, JR., Executive Vice President - Sales and Marketing;
joined the company with 25 years of sales and marketing experience, and was
responsible for the Company's largest distributor (Pennsylvania, New Jersey
and Delaware). Mr. Randolph currently oversees the entire distribution
network and procurement of new distributors along with national corporate
sales for the Company. He is a graduate of the University of Virginia. Mr.
Randolph has been an executive officer of the Company since May, 1995.
LEE ANDERSON, Executive Vice President - Manufacturing; is responsible for the
overall manufacturing operations of the Company. Mr. Anderson was a co-
founder of Recycled Plastics Industries, Inc. (RPI) in 1989, which was
subsequently purchased by the Company in January, 1997, at which time Mr.
Anderson was named Executive Vice President - Manufacturing. Mr. Anderson
brings a strong engineering and business background to the Company and has
pioneered many of the continuous extrusion methods used in the recycled
plastic lumber industry today. Mr. Anderson developed the recycled plastic
lumber operation at N.E.W. Plastics in Wisconsin and Eaglebrook Plastics in
Illinios. Mr. Anderson is a product of the Milwaukee based Falk Corporation;s
Engineering Program and the Milwaukee School of Engineering. His specialty is
Manufacturing Engineering and Design.
M. SCOTT IRONS, Secretary, joined the Company with a background in
manufacturing/computerized distribution management as well as accounting/
finance after serving as Controller of a national building services
contracting firm and Vice President, Controller for a $15 million Boynton
Beach based manufacturing company. Mr. Irons is responsible for order
administration, manufacturing accounting, and inventory controls.
Executive Compensation
The following table summarizes executive compensation paid or accrued during
the past three fiscal years for the Company's Chief Executive Officer during
that period and the most highly compensated executive officers whose total
annual salary and bonus exceeded $100,000 during those years.
Annual Compensation Long Term Compensation
- -----------------------------------------------------------------------------
Name and Restricted Securities
Principal Stock Underlying All Other
Position Year Salary($) Bonus($) Awards Options/SARS Compensation($)
- -----------------------------------------------------------------------------
CEO - 1996 $ 66,700 118,500(2) $73,342(4)
Harold 1995 $219,000(1) -0- -0-
Gebert 1994 -0- -0- -0-
- -----------------------------------------------------------------------------
COO - 1996 $ 66,700 116,000(3) $73,342(4)
David 1995 $219,000(1) -0- -0-
Farrow 1994 -0- -0- -0-
- -----------------------------------------------------------------------------
VP-Dist 1996
Raymond 1995 $106,800(1) $54,967(5)
Darling 1994
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- -----------------------------------------------------------------------------
(1) In 1995 Messrs. Gebert, Farrow, and Darling converted deferred
compensation due for services rendered in their capacities as corporate
officers to common stock which was valued at $1.77 per share. Mr. Gebert and
Mr. Farrow each received 123,729 shares of common stock, and Mr. Darling
received 60,339 shares of common stock.
(2) In 1996 Mr. Gebert received 16,000 shares of common stock options at
$4.75 per share as part of the Company's Incentive Stock Option Plan. Mr.
Gebert also received 100,000 shares of common stock options at $4.00 per share
per his employment agreement with the Company and an additional 5,000 shares
of common stock options at $2.50 per share for converting a personal loan owed
by the Company into preferred stock.
(3) In 1996, Mr. Farrow received 16,000 shares of common stock options at
$4.75 per share as part of the Company's Incentive Stock Option Plan. Mr.
Farrow also received 100,000 shares of common stock options at $4.00 per share
per his employment agreement with the Company.
(4) In 1996, Messrs. Gebert and Farrow each received 18,375 shares valued at
$1.00 per share in exchange for the sale of their own personal shares of the
Company in connection with the acquisition of Earth Care by the Company. In
addition, Messrs. Gebert and Farrow each received 31,055 shares valued at
$1.77 per share in exchange for their personal guarantees on the Magellan
Finance Co. loan.
(5) In 1996, Mr. Darling received 31,055 shares of common stock valued at
$1.77 per share for his personal guarantee on the Magellan Finance Co. loan.
Stock Option Plan
The Board of Directors of the Company has adopted, with the approval of
stockholders, a Stock Option Plan (the "Plan"). Under the Plan, the Company
has granted options to acquire 120,000 shares of Common Stock to the Company's
key employees and officers. Awards consist of stock options (both non-
qualified options and options intended to qualify as "Incentive" stock options
under Section 422 of the Internal Revenue Code of 1986, as amended),
restricted stock awards, deferred stock awards, stock appreciation rights and
other stock-based awards, as described in the Plan. The Plan is administered
by the Board of Directors which has determined the persons to whom awards are
granted, the number of awards granted and the specific terms of each grant,
including the vesting thereof, subject to the provisions of the Plan.
In connection with qualified stock options, the exercise price of each option
may not be less than 100% of the fair market value of the Common Stock on the
date of grant (or 110% of the fair market value in the case of a grantee
holding more than 10% of the outstanding stock of the Company). The aggregate
fair market value of shares for which qualified stock options are exercisable
for the first time by such employee during any calendar year may not exceed
$100,000. Non-qualified stock options granted under the Plan may be granted
at a price determined by the Board of Directors, not to be less than the fair
market value of the Common Stock on the date of grant.
The Plan may also contain certain change in control provisions which could
cause options and other awards to become immediately exercisable and
restrictions and deferral limitations applicable to other awards to lapse in
the event any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, including a "group" as defined in
Section 13(d), but excluding certain stockholders of the Company, became the
beneficial owners of more than 25% of the Company's outstanding shares of
Common Stock.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock by each person who is
proposed to serve, currently serves or has served during the past year as a
director of the Company, each person (or group of person whose shares are
required to be aggregated) known to the Company to be the beneficial owner of
more than five percent (5%) of said securities, and all such directors and
executive officers of the Company as a group:
Title of Amount and Nature of Percent
Name and Address Class Beneficial Ownership of Class
Harold Gebert Common 623,256 shares(1) 4.1%
David A. Farrow Common 492,532 shares(2) 3.3%
Mark Alzentzer Common 6,328,155 shares(3) 39.8%
Raymond F. Darling Common 334,283 shares 2.2%
Robert W. Johnson Common 103,468 shares 0.6%
Christopher J. Walter Common 84,089 shares 0.6%
Raymond J. Kiernan Common 161,926 shares(4) 1.1%
Eugene Arnold, Jr. Common 98,124 shares(5) 0.7%
Louis H. Jullien III Common 238,781 shares 1.6%
Lester E. Moody Common 189,186 shares(6) 1.3%
James J. Blosser Common 99,800 shares(7) 0.7%
Roger Zitrin Common 368,291 shares(8) 2.5%
August C. Schultes III Common 5,470,522 shares(9) 36.3%
Gary J. Ziegler Common 5,750,100 shares(10) 37.5%
Stephen M. Groth Common 291,677 shares 2.0%
Lee Anderson Common 311,677 shares(11) 2.1%
All officers & directors
as a group (18 persons) Common 11,294,794 shares(12) 66.7%
Stout Partnership Common 5,400,000 shares 36 %
Michael Lauer Common 1,111,111 shares 7.4%
(1) Includes 121,000 shares not presently outstanding which Mr. Gebert
presently has the right to acquire through the exercise of outstanding earned
options.
(2) Includes 116,000 shares not presently outstanding which Mr. Farrow
presently has the right to acquire through the exercise of outstanding earned
options.
(3) Includes 855,000 shares not presently outstanding which Mr. Alsentzer
presently has the right to acquire through the exercise of outstanding earned
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options, 42,000 shares not presently outstanding which he has the right to
acquire through conversion of outstanding preferred stock, and 5,400,000
shares as to which Mr. Alsentzer has shared beneficial ownership, which are
held of record by Stout Partnership, a partnership in which Mr. Alsentzer is a
principal partner.
(4) Includes 5,000 shares not presently outstanding which Mr. Kiernan
presently has the right to acquire through the exercise of outstanding earned
options and 7,000 shares not presently outstanding which he has the right to
acquire through conversion of outstanding preferred stock.
(5) Includes 89,695 shares not presently outstanding which Mr. Arnold
presently has the right to acquire through the exercise of outstanding earned
options and 7,000 shares not presently outstanding which he has the right to
acquire through conversion of outstanding preferred stock.
(6) Includes 96,278 shares not presently outstanding which Mr. Moody or his
wife presently has the right to acquire through conversion of outstanding
preferred stock.
(7) Includes 5,000 shares not presently outstanding which Mr. Blosser
presently has the right to acquire through the exercise of outstanding earned
options and 94,500 shares not presently outstanding which he has the right to
acquire through conversion of outstanding preferred stock.
(8) Includes 23,170 shares not presently outstanding which Mr. Zitrin
presently has the right to acquire through conversion of outstanding preferred
stock.
(9) Includes 70,322 shares not presently outstanding which Mr. Schultes
presently has the right to acquire through conversion of outstanding preferred
stock and 5,400,000 shares as to which Mr. Schultes has shared beneficial
ownership, which are held of record by Stout Partnership, a partnership in
which Mr. Schultes is a principal partner.
(10) Includes 350,000 shares of common stock not presently outstanding which
Mr. Ziegler presently has the right to acquire through the conversion of
50,000 shares of outstanding preferred stock and 5,400,000 shares as to which
Mr. Ziegler has shared beneficial ownership, which are held of record by Stout
Partnership, a partnership in which Mr. Ziegler is a principal partner.
(11) Includes 20,000 shares not presently outstanding which Mr. Anderson
presently has the right to acquire through the exercise of outstanding earned
options.
(12) Includes 15,000 shares not presently outstanding which 2 other officers
have the right to acquire through the exercise of outstanding options, in
addition to 47,332 shares held by such officers which are presently
outstanding.
The foregoing amounts include all shares these persons are deemed to
beneficially own regardless of the form of ownership. See "Certain
Transactions."
CERTAIN TRANSACTIONS
During the past two fiscal years, the Company has entered into several
significant acquisitions and other transactions with affiliates. The terms of
these transactions were, in some instances, determined without the benefit of
arms length bargaining or negotiation and necessarily involve conflicts
between the interests of the related parties and the Company. These include:
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Sales of approximately $153,000 during 1995 were to Earth Care Partners
("ECP") which is a partnership entity which at the time was controlled by
certain officers/stockholders of the Company. On February 1, 1996 the Company
acquired certain net assets of ECP for a total purchase price of $200,000 in
which the partners received 112,926 shares of the Company's common stock which
exceeded the fair value of the net assets of ECP by $114,259. The excess has
been recorded as goodwill, which is being amortized on a straight-line basis
over a 5-year period. The acquisition was negotiated between the Presidents
of both companies. The Chairman of the Company was also a principal partner
in ECP. The fair market value of assets acquired was used to calculate the
purchase price range. The Company also considered the fact that ECP was the
Company's largest distributor, had an established customer base, and would
retain three of the partners to establish a national sales office for the
parent company. All of these factors as well as the fact that there was no
cash outlay required for the purchase of the company were considered in
determining the number of shares eventually issued.
The Company has granted warrants to Eugene Arnold, a former director, to
acquire 84,695 shares of Company common stock at an aggregate exercise price
of $150,000. This option was granted in connection with an earlier extension
of a $50,000 note payable by the Company to Mr. Arnold in consideration of
extending the due date on the note and waiving certain interest payments. The
number of options granted were approved by the Compensation Committee of the
Board of Directors that consisted of outside members who were not officers of
the Company nor were they in any way affiliated with Mr. Arnold. The options
were granted at what was then the market price of the stock. The note is due
and warrants are exercisable on or before September 15, 1997.
At December 31, 1995 the Company converted accounts payable to officers of
$45,662 and amounts due to stockholders of $305,600 into 198,326 shares of
common stock. The shares were issued at the then market value of $1.77.
At December 31, 1995, the Company issued 550,966 shares of common stock to
certain of its officers, directors, and employees in satisfaction of $950,800
of compensation and $25,000 of accrued interest. The shares were issued at
the then market value of $1.77. This is not anticipated to be a recurring
expense.
In March, 1996, the Company entered into an Agreement and Plan of
Reorganization with Earth Care Global Holdings, Inc. ("Earth Care"), a
manufacturer and marketer of recycled plastic products and other recycling
services. Pursuant to the Agreement, the Company reverse split its common
stock on a 1 for 16 basis, and then issued 4,196,316 post split shares of its
authorized but previously unissued common stock to acquire all the issued and
outstanding stock of Earth Care in a stock for stock exchange (the
"Acquisition") which was intended to be a tax free reorganization under
Section 368(a) of the Internal Revenue Code. The Company also granted to the
former Earth Care shareholders earn-out rights with respect to an additional
2,000,000 shares of Common Stock, subject to fulfillment of certain conditions
relating to production and net sales. As a condition precedent to the closing
of the Acquisition, the Company raised $1,000,000 of capital through an
offering of its securities. The offering was completed and the Acquisition
closed on or about March 28, 1996. As part of the Acquisition, the Company
completed a distribution to common stockholders of Series A and B Warrants.
The Company has registered the Shares underlying the Series A Warrants by
means of the registration statement of which this prospectus is part. If all
the Series A Warrants registered hereby are exercised, of which there is no
assurance, the Company would receive an additional $2,375,000 of capital. As
a condition to closing the Acquisition of Earth Care, the Company was also
required to retire an existing note payable which at March 15, 1996, had a
balance due of $699,775 reflecting principal and accrued interest. The note
was secured by all assets of Earth Care. The note was retired upon payment of
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approximately $200,000 (representing approximately $95,000 principal
reduction) and by issuing a new note which is not convertible to stock, is not
secured by Earth Care assets, was due on December 31, 1996, and was personally
guaranteed by certain officers of Earth Care and their spouses. In
consideration of becoming personal guarantors on the new note, Harold H.
Gebert, David A. Farrow, Raymond F. Darling and Raymond J. Kiernan were issued
an aggregate of 32,000 shares of Earth Care (representing 180,682 shares of
the Company stock included in the 4,196,316 issued in the Acquisition).
In April, 1996 the Company acquired all of the assets of DuraTech Industries.
DuraTech Industries, in operation since 1986, is a manufacturer of recycled
plastic lumber, recycled plastic shapes and value added products located in
Lake Odessa , Michigan. The Company paid a total of $41,000 cash and issued
24,772 shares of common stock to the shareholders of DuraTech for a total
purchase price of $65,772 which exceeded the fair value of the net assets of
DuraTech by $125,423. The excess has been recorded as goodwill which is being
amortized over a 10-year period. There were a total of five shareholders of
DuraTech who represented 100% ownership of the company none of whom had any
relationship to U S Plastic Lumber prior to negotiations. The purchase price
was negotiated, at arms-length, primarily between the Presidents of both
companies. The fair market value of assets to be acquired was used as a basis
for determining a range for negotiating the purchase price. In addition, the
intangible value of the sales and operating skills of the officers eventually
retained to manage the sales and operations of this facility, the suitablility
of the business for vertical integration and the financial condition of
DuraTech were also considered in determining the final purchase price. As
part of the asset purchase, an earn-out incentive was granted which provides
for the issuance of 150,000 additional shares of common stock if DuraTech
meets certain production goals for plastic lumber by April 30, 1999. In June
1997, in exchange for reduction of future salary agreements with the retained
officers to terms more favorable to the Company, the Company provided some
some cash consideration, and accelerated the 150,000 additional earn-out
shares.
In December, 1996 the Company formed the Clean Earth division, and through it
acquired, in a transaction accounted for as a pooling of interests, a wholly
owned subsidiary, Clean Earth of New Castle, Inc. The company has been in
operation since 1991, and has treated over 600,000 tons of soil and
construction debris that was contaminated with petroleum hydrocarbon wastes
such as fuels, lubricating oil, tars and gasoline. Clean Earth owns and
operates a low temperature thermal desorption plant that can treat and recycle
up to 30,000 tons per month of petroleum contaminated soil. The Company
issued 5,400,000 shares of common stock to Stout Partnership, the sole
shareholder of Clean Earth, and also granted earn-out rights with respect to
2,573,686 shares of Company common stock. Gary Ziegler and August Schultes,
two of the principals of Stout partnership, then became directors of the
Company. Mr. Alsentzer, the remaining principal of Stout partnership, had
already assumed the position of President and Chief Executive Officer of the
Company prior to merging the two companies. The acquisition was negotiated
between the Mr. Harold Gebert, Chairman of the Board of the Company, and Mr.
August Schultes, principal of Stout partnership. The fair market value of the
assets of Clean Earth, its financial stability, and the fact that the
acquisition required no cash were all considered in the determination of the
purchase price.
On December 31, 1996 and simultaneous to the closing of the Clean Earth
merger, the Stout Partnership (owners of Clean Earth, Inc.) extended a note to
the Company in the amount of $500,824 at Federal prime rate plus 1%. The
proceeds were used to pay off the note payable to Magellan Finance Co which
matured on December 31, 1996.
On January 23, 1997 Schultes, Inc., loaned the Company an additional $700,000
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at Federal Reserve prime rate plus 1%, the proceeds of which some were used to
pay off the note payable due to the Stout Partnership. The Company has since
borrowed additional cash from Schultes, Inc. and as of June 30, 1997 owed
$1,000,000 on an unsecured line of credit from Schultes, Inc. at Federal
Reserve prime rate plus 1% The total available facility from Schultes, Inc is
$2,300,000 and is renewable on an annual basis.
On January 27, 1997 the Company acquired Recycled Plastics, Inc. (RPI) which
was merged into a newly formed wholly owned subsidiary of the Company. RPI is
engaged in the manufacture and sale of recycled plastic lumber products with
facilities located in Green Bay, WI. The stockholders of RPI received
$1,200,000 and 1,000,000 shares of the Company's common stock for a purchase
price of $1,200,000. The four officers of RPI represented 100% ownership of
the company none of which had any relationship to U S Plastic Lumber prior to
negotiations. The purchase price was negotiated, at arms length, by the CEO
of U S Plastic Lumber and the President and Treasurer of RPI. The discounted
value of normalized historic net income was calculated to determine a purchase
price range. In addition, factors such as the intangible value of "vacuum
calibration technology", expertise as well as the financial and operational
skills of two of the officers to be retained were also considered in
negotiating a final purchase price. Subsequent to the purchase of RPI, Steven
Groth, the former Treasurer of the company was elected as a director of U S
Plastic Lumber, Corp. In addition, Lee Anderson, the former President of RPI
was retained by the Company to serve as Vice President of Manufacturing for
the entire USPL recycled plastic division and entered into a four-year
employment agreement with USPL. RPI had sales of $1,395,322 and net income of
$188,903 for the year ended December 31, 1996 and management is not aware of
any events or conditions that would not allow this operating trend to
continue.
On February 24, 1997, Advanced Remediation and Disposal Technologies, Inc.
(ARDT) of Coopersburg, Pennsylvania was acquired by the Company. ARDT is
engaged in environmental consulting and construction clean-up of contaminated
sites primarily involving water and soils. The stockholders of ARDT received
300,000 shares of the Company's common stock for a purchase price of $525,000.
The shareholders of ARDT were also given a stock earn-out agreement based on
pre-tax profits for 1997 and 1998. ARDT's shareholders may be awarded up to a
range of 25,000 to a maximum of 75,000 shares of common stock per year based
on attainment of pre-tax profit levels in the ARDT subsidiary in 1997 and
1998. The discounted value of normalized historic net income was calculated to
determine a purchase price range. In addition, the intangible value of the
sales and operating skills of the officers eventually retained as well as the
fact that no cash consideration was required in the transaction were
considered in the negotiation. The purchase price was negotiated, at
arms-length, primarily between the Presidents of both companies. The six
officers of ARDT represented 100% of the shareholders of the company and no
relationship existed between ARDT or its officers and USPL prior to
negotiation. Two key officers of ARDT, John O'Donnell, President and Kevin
John, Vice President of ARDT have been retained by the Company to run sales
and operations of the ARDT subsidiary and have entered into three-year
employment contracts with the Company. Both officers were granted a total of
30,000 options of the Company's common stock for covenants-not-to-compete at
the fair market value of the Company's shares as traded on the NASD OTC
Bulletin Board as of the close of business on February 24, 1997. ARDT had
sales of $2,343,047 an operating loss of $102,666 for the year ended December
31, 1996. Management expects improved performance from this unit due to
increased sales volume, improved margins and elimination of certain general
and administrative expenses during 1997.
On March 28, 1997, the Company acquired Environmental Specialties Plastics
(ESP), a marketing and distribution company of recycled plastic lumber
products in Guasti, California. The shareholders of ESP received $110,000 in
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cash and 25,150 shares of the Company's common stock for a purchase price of
$110,000. As additional purchase price consideration, the Company shall pay
shareholders of ESP 5% percent of the ESP subsidiary's gross profit margin
each month for a period of 12 months provided net sales exceed $100,000 in
each month. The two officers of ESP represented 100% of the shareholders of
the company and no relationship existed between ESP or its officers and USPL
prior to negotiation. The purchase price was negotiated, at arms-length,
primarily between the Presidents of both companies. The fair market value of
assets acquired was used to determine a price range for ESP. Factors such as
the intangible value of sales and operations expertise of both officers to be
retained, gaining a foothold in the California market and the amount of cash
consideration required were also considered in negotiating a final purchase
price. Both officers of ESP, Elizabeth Head, President and James Chew, Vice
President of ESP have been retained by the Company to run sales and operations
of the ESP subsidiary and have entered into three-year employment contracts
with the Company. ESP had sales of $1,036,303 and net income of $8,332 for
the fiscal year ended February 28, 1997. Management is not aware of any
factors that would alter continuation of this operating trend in 1997.
On March 31, 1997, the Company acquired Integrated Technical Services, Inc.
(ITS) located in Winslow, New Jersey. ITS is an environmental consulting and
construction company which cleans up contaminated sites primarily involving
water and soils. The stockholders of ITS received $110,000 in cash, 185,000
shares of the Company's common stock and 67,572 common stock options, for a
purchase price of $400,450. The four officers of ITS represented 100% of the
shareholders of the company and no relationship existed between ITS or its
officers and USPL prior to negotiation. The purchase price was negotiated, at
arms-length, primarily between the Presidents of both companies. The
discounted value of normalized historic net income was calculated to determine
a purchase price range. In addition, the intangible value of the sales and
operating skills of the officers eventually retained as well as the amount of
cash consideration required in the transaction were considered in the
negotiation. Two key officers of ITS, Theodore Budzynski, President and
Martin Brubaker, Vice President of ITS have been retained by the Company to
run sales and operations of the ITS subsidiary and have entered into five-year
employment contracts with the Company. The retained officers of ITS were also
given a stock earn-out agreement based on pre-tax profits and sales volume for
1997 and 1998. The retained officers may be awarded up to a range of 8,600 to
a maximum of 16,000 shares of common stock per year based on attainment of
pre-tax profit levels and sales volume in the ITS subsidiary in 1997 and 1998.
Both officers were granted a total of 20,000 options of the Company's common
stock as an inducement to enter into employment contracts at the fair market
value of the Company's shares as traded on the NASD OTC Bulletin Board as of
the close of business on April 8, 1997. ITS had sales of $3,905,783 and net
loss of $93,751 for the year ended December 31, 1996. Management expects
improved performance from this unit due to increased sales volume, improved
margins and elimination of certain general and administrative expenses during
1997.
On June 9, 1997, the Company formed Carteret Biocycle Corporation, a wholly
owned subsidiary of Clean Earth, Inc. This start-up company will construct a
recycling facility in Carteret, New Jersey that will recycle contaminated
soils utilizing a bio-organic recycling methodology. The Company has entered
into a 30-year ground lease with two additional 10-year options on a 5-acre
parcel of land in Carteret, New Jersey at a rental cost of $210,000 per year
during the initial 30-year rental period. The Company will construct an
80,000 square foot recycling facility at an estimated cost of $1,000,000. The
Company simultaneously entered into a License and Operating Agreement with S
D& G Aggregates, Inc. who holds a license to operate a recycling operation on
the subject rental property. The Company also has right of first refusal to
lease the adjacent 17-acre parcel. The recycling facility is expected to be
operational by November 30, 1997 and will have the capacity to treat an
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estimated 240,000 tons annually. This is an estimate of the plant's potential
capacity and there can be no assurances that these results may be achieved or
that the plant will operate at full capacity year round.
On June 30, 1997, the Company acquired EnviroPlastics Corp., (EPC) a recycled
plastic raw material regrind operation in Auburn, MA. The stockholders of
EPC received 305,000 shares of the Company's common stock. The Company
assumed $825,000 of liabilities in excess of the fair value of the assets
acquired which excess was recorded as goodwill. The officers of EPC represent
100% of the shareholders of the company and no relationship exists between the
company or its officers and USPL. The purchase price was negotiated, at
arms-length, primarily between the Presidents of both companies. In addition,
the intangible value of the sales and operating skills of the officers who
were retained as well as the suitability of vertical integration of this
business with the Company were considered in the negotiation. Two key
officers of EPI, Bruce Fortin President and Franco Previd, Vice President were
retained by the Company to run sales and operations of the subsidiary and
entered into five-year employment contracts with the Company. EPC had sales
of $5,230,000 and net income of $1,502,010 for the year ended December 31,
1996 which included extraordinary income from the forgiveness of debt totaling
$1,807,230. The Company purchased EPC understanding that a significant
investment in relocation expenses to a larger facility of an estimated
$500,000 as well as additional machinery and equipment of $300,000 will be
required in order to achieve operating throughput in sufficient quantity to
achieve potential future earnings.
On July 17, 1997 the Company formed a joint venture partnership with
Interstate Industrial Corp. of Secaucus, New Jersey. The Company, identified
as Interstate Industrial Corp./USPL Joint Venture was formed to bid on
dredge/upland disposal projects. The Company was recently low bidder on a
$4,700,000 dredge/disposal contract over a one year period and is awaiting
award of the contract.
On July 23, 1997 the Company agreed, in principle, to purchase certain assets
of Tri-Max Lumber, Inc. a manufacturer of recycled plastic lumber products in
New York approved for certain structural uses. Consummation of the
acquisition is subject to a number of conditions including, but not limited
to, the renegotiation of the terms of certain liabilities and results of due
diligence. Due to the contingencies involved, the Company cannot predict
whether or when the acquisition will be consummated.
The Company also leases other office space and manufacturing facilities from
entities controlled by individuals who are stockholders. The Company leases a
small office in Blue Bell, Pennsylvania at a monthly rental of $1172.91 on a
month to month basis. Harold Gebert is a 21% owner of the building in which
the office is located. The Company leases the manufacturing facility located
in Tennessee from the entity from which the Company acquired the assets used
in such manufacturing operation, and the owners of which became stockholders
of the Company in such acquisition. This lease provides for minimum annual
rentals of $96,000 through 1999. The lease also provides the Company the
option to purchase the facility at any time during the term of the lease. The
purchase price is based on a decreasing sliding scale and was $310,673 at June
30, 1997. The Company's RPI subsidiary leases approximately 20,000 square
feet of office and manufacturing space at a cost of $4,432 per month from
Plastic Properties, LLC. The lease provides for minimum rentals of $265,945
through December 31, 2001 with an option to renew for an additional 5-year
terms. Lee Anderson, Vice President of Operations and Steven Groth, Company
Director are principal shareholders in Plastic Properties, LLC.
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Conflicts of Interest
Other than as described herein the Company is not expected to have significant
further dealings with affiliates. However, if there are such dealings the
parties will attempt to deal on terms competitive in the market and on the
same terms that either party would deal with a third person. Presently none
of the officers and directors have any transactions which they contemplate
entering into with the Company, aside from the matters described herein.
Management will attempt to resolve any conflicts of interest that may arise in
favor of the Company. Failure to do so could result in fiduciary liability to
management.
Indemnification and Limitation of Liability of Management
The General Corporation Law of Nevada permits provisions in the articles, by-
laws or resolutions approved by shareholders which limit liability of
directors for breach of fiduciary duty to certain specified circumstances,
namely, breaches of their duties of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of law,
acts involving unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director derives an improper
personal benefit. The Company's by-laws indemnify its Officers and
Directors to the full extent permitted by Nevada law. The by-laws with these
exceptions eliminate any personal liability of a Director to the Company or
its shareholders for monetary damages for the breach of a Director's fiduciary
duty and therefore a Director cannot be held liable for damages to the Company
or its shareholders for gross negligence or lack of due care in carrying out
his fiduciary duties as a Director. The Company's Articles provide for
indemnification to the full extent permitted under law which includes all
liability, damages and costs or expenses arising from or in connection with
service for, employment by, or other affiliation with the Company to the
maximum extent and under all circumstances permitted by law. Nevada law
permits indemnification if a director or officer acts in good faith in a
manner reasonably believed to be in, or not opposed to, the best interest's of
the corporation. A director or officer must be indemnified as to any matter
in which he successfully defends himself. Indemnification is prohibited as to
any matter in which the director or officer is adjudged liable to the
corporation. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
DESCRIPTION OF SECURITIES
The following statements do not purport to be complete and are qualified in
their entirety by reference to the detailed provisions of the Company's
Articles of Incorporation and Bylaws, copies of which will be furnished to an
investor upon written request therefor. See "Additional Information."
Common Stock
The Company is presently authorized to issue 50,000,000 shares of $.0001 par
value common stock. The Company presently has 14,986,910 shares of common
stock outstanding. The Company has reserved from its authorized but unissued
shares a sufficient number of shares of common stock for issuance of the
Shares offered hereby. The shares of common stock issuable on completion of
the offering will be, when issued in accordance with the terms of the
offering, fully paid and non-assessable.
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The holders of common stock, including the Shares offered hereby, are entitled
to equal dividends and distributions, per share, with respect to the common
stock when, as and if declared by the Board of Directors from funds legally
available therefor. No holder of any shares of common stock has a pre-emptive
right to subscribe for any securities of the Company nor are any common shares
subject to redemption or convertible into other securities of the Company.
Upon liquidation, dissolution or winding up of the Company, and after payment
of creditors and preferred stockholders, if any, the assets will be divided
pro-rata on a share-for-share basis among the holders of the shares of common
stock. All shares of common stock now outstanding are fully paid, validly
issued and non-assessable. Each share of common stock is entitled to one vote
with respect to the election of any director or any other matter upon which
shareholders are required or permitted to vote. Holders of the Company's
common stock do not have cumulative voting rights, so that the holders of more
than 50% of the combined shares voting for the election of directors may elect
all of the directors, if they choose to do so and, in that event, the holders
of the remaining shares will not be able to elect any members to the Board of
Directors.
Preferred Stock
The Company is also presently authorized to issue 5,000,000 shares of $.001
par value Preferred Stock. Under the Company's Articles of Incorporation, as
amended, the Board of Directors has the power, without further action by the
holders of the common stock, to designate the relative rights and preferences
of the preferred stock, and issue the preferred stock in such one or more
series as designated by the Board of Directors. The designation of rights and
preferences could include preferences as to liquidation, redemption and
conversion rights, voting rights, dividends or other preferences, any of which
may be dilutive of the interest of the holders of the common stock or the
Preferred Stock of any other series. The issuance of Preferred Stock may have
the effect of delaying or preventing a change in control of the Company
without further shareholder action and may adversely effect the rights and
powers, including voting rights, of the holders of common stock. In certain
circumstances, the issuance of preferred stock could depress the market price
of the common stock. The Board of Directors effects a designation of each
series of Preferred Stock by filing with the Nevada Secretary of State a
Certificate of Designation defining the rights and preferences of each such
series. Documents so filed are matters of public record and may be examined
in accordance with procedures of the Nevada Secretary of State, or copies
thereof may be obtained from the Company.
The Board of Directors of the Company has designated 750,000 shares as Series
A Preferred Stock, with a 10% cumulative stock dividend, payable semiannually
on March 31 and September 30 of each year, commencing on September 30, 1996,
at a rate of 10% per annum. The Company has issued 199,249 shares of Series A
Preferred Stock. Each share of Series A Preferred Stock is convertible: (i)
at the option of the holder into Common Stock of the Company at the rate of
seven (7) shares of Common Stock for each share of Series A Preferred Stock,
and (ii) mandatorily converted into Common Stock on the date on which a
Registration Statement, which is filed with the U.S. Securities and Exchange
Commission and would yield proceeds to the Company in excess of $10 million,
is declared effective by the SEC. The Series A Preferred Stock is subject to
redemption by the Company at its option at any time commencing from the date
of issue of such Series A Preferred Stock at a price of $25.00 per share.
None of the Series A Preferred Stock issued has been converted into Common
Stock of the Company or redeemed by the Company as of the date hereof.
Series A and Series B Warrants
At the same time that the Company distributed the Series A Warrants, it also
distributed Series B Warrants, so the Company now has 950,000 Series A and
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950,000 Series B common stock purchase warrants (the "Warrants") outstanding.
The Warrants are exercisable at $2.50 per share for the Series A Warrants and
$4.50 per share for the Series B Warrants, at any time prior to June 30, 1998,
subject to effectiveness of registration of the Warrants and underlying
shares.
(a) The Company may redeem all or a portion of the Warrants, in each
case at $.01 per warrant upon 30 days' prior written notice to the
warrant holders in the event the Closing bid price of the Company's
common stock exceeds or equals $4.00 per share for 20 consecutive
trading days, then the Series A Warrants can be redeemed and if the
price equals or exceeds $6.00 then the Series B Warrants may be
redeemed. The warrants may only be redeemed if a current registration
statement is in effect with respect thereto. Any warrant holder who
does not exercise his Warrants prior to the Redemption Date, as set
forth on the Company's Notice of Redemption, will forfeit his right to
purchase the shares of Common Stock underlying such Warrants, and after
such Redemption Date any outstanding Warrants referred to in such Notice
will become void and be canceled. If the Company does not redeem such
Warrants, such warrants will expire at the conclusion of the exercise
period unless extended by the Company.
(b) The Company may at any time, and from time to time, extend the
exercise period of the Warrants provided that written notice of such
extension is given to the warrant holders prior to the expiration date
thereof. Also, the Company may, at any time, reduce the exercise price
thereof by written notification to the holders thereof. The Company
does not presently contemplate any extensions of the exercise period or
reduction in the exercise price of the Warrants.
(c) The Warrants contain anti-dilution provisions with respect to the
occurrence of certain events, such as stock splits or stock dividends.
The anti-dilution provisions do not apply in the event of a merger or
acquisition. In the event of liquidation, dissolution or winding-up of
the Company, warrant holders will not be entitled to participate in the
assets of the Company. Warrant holders have no voting, preemptive,
liquidation or other rights of a stockholder of a Company, and no
dividends may be declared on the Warrants.
(d) The Warrants may be exercised by surrendering to the Company, a
Warrant certificate evidencing the Warrants to be exercised, with the
exercise form included therein duly completed and executed, and paying
to the Company the exercise price per share in cash or check payable to
the Company. Stock certificates will be issued as soon thereafter as
practicable.
(e) The Warrants are not exercisable until the Warrants and the shares
of Common Stock underlying the Warrants are registered. The Company has
agreed to file with the Commission a registration statement with respect
to the issuance of such shares underlying the Warrants as soon as
practicable following the Acquisition. The effective date of such
registration will be the "Commencement Date" for determining the
exercise period of such Warrants. The Company will also seek to
register or qualify the Common Stock issuable upon the exercise of the
Warrants under the Blue Sky laws of all states in which holders of the
Warrants may reside.
(f) The Warrants are deemed to be "restricted securities" in a manner
similar to the definition of that term used in Rule 144 and will only be
transferable, prior to registration, upon a showing to the satisfaction
of the Company that the transfer is exempt from the registration
provisions of the Securities Act of 1933. The Warrants are stamped with
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a restrictive legend.
Transfer Agent
The transfer agent for the Company is Interwest Stock Transfer Co., 1981 East
4800 South, Suite 100, Salt Lake City, Utah 84117.
Annual Reports
The Company intends to furnish annual reports to shareholders which will
contain financial statements audited by independent certified public
accountants and such other interim reports as the Company may determine.
Dividend Policy
The Company has not paid any cash dividends on common stock to date and does
not anticipate paying cash dividends on common stock in the foreseeable
future. The Company intends for the foreseeable future to follow a policy of
retaining all of its earnings, if any, to finance the development and
expansion of its business. The Company does intend to pay stock dividends on
its preferred stock in accordance with the terms thereof.
Earn-Out Shares
Pursuant to various agreements entered into between the Company and the former
shareholders of Earth Care, Clean Earth, ARDT, ITS and EPC as part of the
acquisitions of those companies, up to a total of 4,755,686 shares of the
Company's Common Stock is subject to the right of such shareholders to receive
such stock under certain conditions relating to earnings, sales or production
levels reached by the Company or by the entities which these person were
formerly shareholders of.
The Earth Care Historical Shareholders are entitled to receive on a pro rata
basis an aggregate of 2,000,000 additional shares of the Company's common
stock at any time prior to December 31, 2000, in the event that Earth Care, on
a consolidated basis, reaches production or sales of at least 2,000,000 pounds
of plastic lumber product per month for three consecutive months.
The Clean Earth Historical Shareholders are entitled to receive on a pro rata
basis an aggregate of 2,573,686 additional shares of the Company's common
stock at any time prior to December 31, 2000, in the event that the Company,
on a consolidated basis, reaches production or net sales of at least 2,000,000
pounds of plastic lumber product per month for three consecutive months.
The ARDT Historical Shareholders are entitled to receive on a pro rata basis
an aggregate of up to 150,000 additional shares of the Company's common stock
during 1997 and 1998 in the event that ARDT reaches certain specified levels
of profits as defined in the agreement during each of those years.
Two key operating officers at ITS are entitled to receive an aggregate of up
to 32,000 additional shares of the Company's stock during 1997 and 1998 in the
event that ITS reaches certain specified levels of sales and profits, as
defined in the acquisition agreement, during each of those years.
Two key operating officers of EnviroPlastics Corp. have been granted options
to purchase an aggregate of up to 90,000 shares on a pro rata basis of the
Company's common stock at an exercise price of $5.00 per share during 1997,
1998 and 1999 provided certain specified levels profits as defined in the
agreement during each of those years.
47
<PAGE>
Other Outstanding Options
The Company has reserved 353,684 shares of the Company's common stock for
issuance upon exercise of an option held by a former creditor of Earth Care
(the "Magellan Option"). The option is exercisable at an aggregate amount of
$626,021 for all 353,684 shares, with the option expiring as to 117,895 shares
on December 31, 1997, 117,895 shares on December 31, 1998 and 117,894 shares
on June 30, 1999. In the event the Magellan Option is not exercised in whole
or in part, then those shares reserved for the Option shall be issued on a pro
rata basis to the persons who formerly were shareholders of Earth Care, in
proportion to the Earth Care shares they owned immediately prior to closing
the Acquisition.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 14,986,910 shares of the Company's common stock outstanding prior to
the exercise of any Warrants, 1,949,999 shares are freely tradeable or
eligible to be sold in the public market that exists for the Common Stock. In
addition, the 950,000 shares of Common Stock underlying the Series A Warrants
will also be freely tradeable into the public market immediately upon
issuance. Sales of substantial amounts of this common stock in the public
market could adversely affect the market price of the common stock.
Furthermore, all of the remaining shares of Common Stock presently outstanding
are restricted and/or affiliate securities which are not presently, but may in
the future be sold into any public market that may exist for the Common Stock,
pursuant to Rule 144 promulgated pursuant to the Securities Act of 1933, as
amended (the "Securities Act").
In general, under Rule 144 as currently in effect, a person (or group of
persons whose shares are aggregated), including affiliates of the Company, can
sell within any three-month period, an amount of restricted securities that
does not exceed the greater of 1% of the total number of outstanding shares of
the same class, or (if the Stock becomes quoted on NASDAQ or a stock
exchange), the reported average weekly trading volume during the four calendar
weeks preceding the sale; provided, that at least one year has elapsed since
the restricted securities being sold were acquired from the Company or any
affiliate of the Company, and provided further that certain other conditions
are also satisfied. If at least two years have elapsed since the restricted
securities were acquired from the Company or an affiliate of the Company, a
person who has not been an affiliate of the Company for at least three months
can sell restricted shares under Rule 144 without regard to any limitations on
the amount. Future sales by current shareholders could depress the market
prices of the Common Stock in any such market.
PLAN OF DISTRIBUTION
This Prospectus and the registration statement of which it is part relate to
the offer and sale of 950,000 shares of Common Stock of the Company underlying
Series A Warrants. The securities registered hereby include 950,000 shares of
Common Stock issuable upon the exercise of the Series A Warrants at an
exercise price of $2.50 per share. The Series A Warrants were recently
distributed as a dividend with respect to the Common Stock of the Company to
shareholders of record as of March 18, 1996. By their terms, the Warrants
were not exerciseable and did not constitute an offer by the Company to sell
the Shares prior to the date of this prospectus. The Warrants are now
exerciseable until June 30, 1998.
The offering will be managed by the Company without an underwriter, and the
Shares will be offered and sold by the Company, without any discount, sales
commissions or other compensation being paid to anyone in connection with the
offering. In connection therewith, the Company will pay the costs of
preparing, mailing and distributing this Prospectus to the holders of the
Warrants. Brokers, nominees, fiduciaries and other custodians will be
requested to forward copies of this Prospectus to the beneficial owners of
securities held of record by them, and such custodians will be reimbursed for
48
<PAGE>
their expenses.
There is no assurance that all or any of the Shares will be sold, nor any
requirement, or escrow provisions to assure that, any minimum amount of
Warrants will be exercised. All funds received upon the exercise of any
Warrants will be immediately available to the Company for its use.
Exercise Procedures
Warrants may be exercised in whole or in part by presentation of the Warrant
Certificate, with the Purchase Form on the reverse side thereof filled out and
signed at the bottom thereof, together with payment of the Exercise Price and
any applicable taxes at the principal office of Interwest Stock Transfer Co.,
1981 East 4800 South, Suite 100, Salt Lake City, Utah 84117. Payment of the
Exercise Price shall be made in lawful money of the United States of America
by wire transfer or check payable to the order of "U.S. Plastic Lumber Corp."
All holders of warrants will be given an independent right to exercise their
purchase rights. If, as and when properly completed and duly executed notices
of exercise are received by the Transfer Agent and/or Warrant Agent, together
with the Certificates being surrendered and full payment of the Exercise Price
in cleared funds, the checks or other funds will be delivered to the Company
and the Transfer Agent and/or Warrant Agent will promptly issue certificates
for the underlying Common Stock. It is presently estimated that certificates
for the shares of Common Stock will be available for delivery in Salt Lake
City, Utah at the close of business on the tenth business day after the
receipt of all required documents and funds.
LEGAL MATTERS
To the knowledge of management, there is no material litigation pending
against the Company. The validity of the issuance of the Shares offered
hereby will be passed upon for the Company by Thomas G. Kimble & Associates,
Salt Lake City, Utah.
EXPERTS
The December 31, 1996 consolidated financial statements of the Company
(formerly known as Earth Care Global Holdings, Inc.), and the December 31,
1996 financial statements of ITS included in this Prospectus have been audited
by Kuntz Lesher Siegrist & Martini, LLP, independent certified public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance on such reports given upon the authority of that
firm as experts in accounting and auditing.
The December 31, 1996 and 1995 financial statements of EPS included in this
Prospectus have been audited by Love, Bollus, Lynch & Rogers, independent
certified public accountants, as indicated in their report with respect
thereto, and are included herein in reliance on such report given upon the
authority of that firm as experts in accounting and auditing.
49
<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
UNAUDITED
<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,474,799
Accounts and notes receivable, net 4,237,376
Inventories 1,053,055
Prepaid expenses and other current assets 667,522
----------
TOTAL CURRENT ASSETS 9,432,752
Property and equipment, net 4,090,335
Intangible and other assets, net 3,132,277
----------
TOTAL ASSETS $16,655,364
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, current portion $ 1,763,323
Accounts payable 2,481,036
Accrued expenses and other liabilities 2,094,380
Deferred revenue 212,420
----------
TOTAL CURRENT LIABILITIES 6,551,159
Deferred income taxes 400,000
Notes payable, net of current portion 1,584,657
----------
TOTAL LIABILITIES 8,535,816
----------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001; authorized 5,000,000
shares; issued and outstanding 199,249 shares
(aggregate liquidation value of $3,984,980) 200
Common stock par value $.0001, authorized 50,000,000
shares; issued and outstanding 14,986,910 shares 1,496
Additional paid-in capital 15,372,483
Accumulated deficit (7,254,631)
----------
TOTAL STOCKHOLDERS' EQUITY 8,119,548
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $16,655,364
See accompanying notes to consolidated financial statements.<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1997 and 1996
(UNAUDITED)
1997 1996
--------- ---------
Net sales $ 7,440,597 $ 2,746,298
Cost of goods sold 5,286,679 2,859,298
--------- ---------
GROSS PROFIT (LOSS) 2,153,918 (113,000)
General and administrative expenses 1,938,369 2,215,354
Abandonment loss - 150,548
--------- ---------
OPERATING INCOME (LOSS) 215,549 (2,478,902)
Interest income 21,622 26,310
Interest expense (63,535) (31,764)
--------- ---------
INCOME (LOSS ) BEFORE PROVISION FOR
INCOME TAXES AND EXTRAORDINARY ITEM 173,636 (2,484,356)
Provision for income taxes - -
--------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 173,636 (2,484,356)
Extraordinary item - loss on involuntary conversion - (220,000)
--------- ---------
NET INCOME (LOSS) $ 173,636 $ (2,704,356)
--------- ---------
Primary earnings (loss) per share:
Income (loss) before extraordinary item $ .01 $ (.24)
Extraordinary item - (.02)
--------- ---------
NET INCOME (LOSS) $ .01 $ (.26)
--------- ---------
Weighted-average number of shares outstanding 13,027,565 10,415,305
---------- ----------
See accompanying notes to consolidated financial statements.<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
(UNAUDITED)
1997 1996
--------- ---------
Cash flows from operating activities:
Net income (loss) $ 173,636 $(2,704,356)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 254,062 459,060
Distributor and customer deposits - (12,620)
Issuance of common stock for services 1,264 414,661
Write-off of abandoned equipment - 92,191
Increase (decrease) in cash due to changes
in operating assets and liabilities, net
of effects of acquisitions:
Accounts receivable (1,120,807) 756,809
Inventories 430,299 (503,801)
Prepaid expenses and other current assets (466,369) 149,229
Accounts payable (524,346) 818,668
Accrued interest - (92,880)
Accrued expenses 582,182 182,677
Deferred revenue (110,316) 153,381
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (780,395) (286,981)
--------- ---------
Cash flows from investing activities:
Capital expenditures (443,358) (190,490)
Payment for acquisitions, net of cash received (1,522,186) (5,651)
Payments for deferred expenses (150,690) -
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (2,116,234) (196,141)
--------- ---------
Cash flows from financing activities:
Proceeds from the issuance of capital stock 4,880,000 1,521,839
Dividends paid - (481,253)
Proceeds from stockholder loans - 100,000
Proceeds from issuance of notes payable 1,384,326 -
Purchase of treasury stock - (850,000)
Payments on notes payable (683,188) (136,657)
Payments on stockholder loans (64,000) -
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,517,138 153,929
--------- ---------
NET INCREASE (DECREASE) IN CASH 2,620,509 (329,193)
Cash at beginning of period 854,290 1,199,614
--------- ---------
CASH AT END OF PERIOD $ 3,474,799 $ 870,421
--------- ---------
See accompanying notes to consolidated financial statements.<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying consolidated financial
statements of U.S. Plastic Lumber Corp. and Subsidiaries (the "Company")
includes all adjustments necessary to present fairly the financial position,
results of operations, and cash flows for the periods presented. These
consolidated financial statements should be read in connection with the
consolidated financial statements and notes thereto included in the December
31, 1996 consolidated financial statements of the Company. The results of
the operations for the six months ended June 30, 1997 are not necessarily
indicative of the results expected for the year.
NOTE 2 - ACQUISITIONS
On January 27, 1997, the Company acquired Recycled Plastics Industries,
Inc. (RPI), a recycled plastic lumber manufacturer. The stockholders of RPI
received $1,200,000 in cash and 1,000,000 shares of the Company's common
stock for a total purchase price of $1,200,000 which exceeded the fair value
of the net assets of RPI by approximately $922,000. The excess will be
recorded as goodwill and amortized on a straight-line basis over a forty-year
period.
On February 24, 1997, the Company acquired Advanced Remediation and
Disposal Technologies, Inc. (ARDT), an environmental consulting and
remediation company. The stockholders received 300,000 shares of the
Company's common stock and 30,000 stock options for a total purchase price of
$525,000 which exceeded the fair value of the net assets of ARDT by
approximately $422,000. The excess will be recorded as goodwill and
amortized on a straight-line basis over a forty-year period. The purchase
agreement also provides for the issuance of up to an additional 150,000
shares of the Company's common stock if ARDT meets certain profitability
levels during the years ending December 31, 1997 and 1998. The additional
shares will be issued at their then current fair value and allocated to
goodwill.
On March 28, 1997, the Company acquired Environmental Specialty Products,
Inc. (ESP). ESP is engaged in the sales and marketing of recycled plastic
lumber products. The stockholders received $110,000 in cash and 25,150 in
shares of the Company's common stock for a total purchase price of $110,000
which exceeded the fair value of the net assets of ESP by approximately
$15,000. The excess will be recorded as goodwill and amortized on a
straight-line basis over a forty-year period. The purchase agreement also
provides for additional cash compensation based upon the achievement of
certain gross margin and sales levels. The additional compensation will be
allocated to goodwill.
On March 31,1997, the Company acquired Integrated Technical Services, Inc.
(ITS), an environmental consulting and remediation company. The stockholders
received $110,000 in cash, 185,000 shares of the Company's common stock and
67,572 stock options for a total purchase price of $400,450 which exceeded
the fair value of the net assets of ITS by approximately $575,000. The
excess will be recorded as goodwill and amortized on a straight-line basis
over a forty-year period.
On June 30,1997, the Company acquired EnviroPlastics Corporation (EPC), a
recycler of post consumer plastic into raw materials for plastic product
manufacturers. The stockholders received 305,000 shares of the Company's
common stock and the Company assumed approximately $825,000 of
liabilities in excess of the fair value of assets acquired for a total
purchase price of $825,000. The excess will be recorded as goodwill on a
straight-line basis over a forty-year period.
<PAGE>
<PAGE>
NOTE 2 - ACQUISITIONS (CONTINUED)
The acquisitions will be accounted for as a purchase and, accordingly, the
results of operations of the acquired companies will be included with those
of the Company for periods subsequent to the date of acquisition. The
purchase price allocations are based on preliminary estimates of the fair
value of the net assets acquired and are subject to adjustment as additional
information becomes available.
NOTE 3 - CAPITAL STOCK
STOCK ISSUANCES
During the six months ended June 30, 1997, the Company issued 119,000
shares of 10% convertible preferred stock for net proceeds of $2,380,000.
During the six months ended June 30, 1997, the Company issued 1,111,111
shares of common stock for proceeds of $2,500,000.
During the six months ended June 30, 1997, the Company issued 1,710,150
shares of common stock in connection with the acquisition of certain
companies.
During the six months ended June 30, 1997, the Company issued 150,000
shares of common stock under contingent consideration agreements related to
the Duratech Industries, Inc. acquisition.
During the six months ended June 30, 1997, the Company issued 187,500
shares of common stock in connection with a license agreement (see Note 5).
STOCK OPTIONS
The Company granted 169,000 stock options in connection with various
employment agreements and noncompete contracts entered into with key
management members of the companies acquired.
PRIMARY EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share is computed based on the weighted-
average number of shares actually outstanding during the six months ended
June 30, 1997 and 1996. Common stock equivalents have been excluded as they
are anti-dilutive for the six months ended June 30, 1996 and not materially
dilutive for the six months ended June 30,1997. The income (loss) before
extraordinary item and net income (loss) have been adjusted for dividends on
convertible preferred stock. Fully diluted earnings (loss) per share amounts
are not presented as they are anti-dilutive for six months ended June 30,
1996 and not materially dilutive for the six months ended June 30, 1997.
NOTE 4 - NOTES PAYABLE
During the six months ended June 30, 1997, the Company borrowed $1,000,000
from an affiliate of a director/stockholder of the Company. The note payable
is due on demand, bears interest at prime plus 1% (9.5% as of June 30,
1997), and is uncollateralized. The Company may borrow up to $2,300,000 under
the note.
<PAGE>
<PAGE>
NOTE 5 - COMMITMENTS AND CONTINGENCIES
FORMATION OF NEW SUBSIDIARY
In June 1997, the Company formed Carteret Biocycle Corporation (Carteret),
as a wholly-owned subsidiary of Clean Earth, Inc. Carteret will operate a
bio-organic recycling facility for contaminated soils. In connection with
the formation of Carteret, the Company anticipates constructing a recycling
facility for approximately $1,000,000. The Company also entered into a 30
year lease for land at a lease rate of $210,000 per year. The lease contains
two ten year renewal options. Additionally, the Company entered into a
license and operating agreement with SD&G Aggregates, Inc. (SD&G) to conduct
remediation of contaminated soils. The Company will pay SD&G a royalty of 2%
of sales.
LICENSE AND RESEARCH AGREEMENT
In March 1997, the Company entered into a license agreement with Rutgers
University (Rutgers) for an exclusive worldwide license related to the
recycled plastic composite railroad tie technology. The Company paid Rutgers
initial consideration of $10,000 in cash and 187,500 shares of the Company's
common stock and has committed to pay Rutgers annual maintenance fees of
$5,000 beginning in 1998 and increasing to $10,000 per year thereafter. In
addition, the Company will pay a royalty of 3% of product sales with minimum
royalties of $60,000 per year after the initial two year period.
In March 1997, the Company entered into a research agreement with Rutgers
for a one year period to conclude certain research issues relating to the
marketability of the recycled plastic composite railroad tie technology.
The Company will pay Rutgers approximately $100,000 for the research.
NOTE 6 - SUBSEQUENT EVENTS
ACQUISITION UNDER AGREEMENT
On July 23, 1997, the Company has agreed in principle to acquire certain
net assets of Tri-Max Lumber, Inc. a manufacturer of recycled plastic lumber.
Consummation of the acquisition is subject to a number of conditions
including, but not limited to, the renegotiation of the terms of certain
liabilities and the results of the Company's due diligence. Due to the
contingencies involved, the Company cannot predict whether or when the
acquisition will be consummated.
FORMATION OF BUSINESS PARTNERSHIP
In July 1997, the Company and Interstate Industrial Corp. formed a joint
venture to operate a dredging operation. The Company will account for its
investment on the equity method<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<PAGE>
KUNTZ LESHER SIEGRIST & MARTINI LLP
CERTIFIED PUBLIC ACCOUNTANTS
215 S. CENTERVILLE ROAD
P. O. BOX 8408
LANCASTER, PA 17604
(717)394-5666
FAX (717)394-0693
INDEPENDENT ACCOUNTANTS' REPORT
To the Stockholders
U.S. Plastic Lumber Corp. and Subsidiaries
Boca Raton, Florida
We have audited the accompanying consolidated balance sheet of U.S.
Plastic Lumber Corp. and Subsidiaries as of December 31, 1996, and the
related consolidated statements of operations, changes in stockholders'
equity and cash flows for the year then ended. The consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of U.S.
Plastic Lumber Corp. and Subsidiaries as of December 31, 1996, and the
results of their operations and their cash flows for the year then ended,
in conformity with generally accepted accounting principles.
We previously audited and reported on the consolidated statements of
operations, changes in stockholders' deficiency and cash flows of U.S. Plastic
Lumber Corp. and Subsidiaries (formerly Earth Care Global Holdings, Inc. and
subsidiaries) for the year ended December 31, 1995, prior to their restatement
for the 1996 pooling of interests. The contribution of U.S. Plastic Lumber
Corp. and Subsidiaries to net sales and net loss represented 17% and 136% of
the respective restated totals. Separate financial statements of the other
company included in the 1995 restated consolidated statements of operations,
changes in stockholders' equity and cash flows were audited and reported on
separately by other auditors. We also audited the combination of the
accompanying consolidated consolidated statements of operations, changes in
stockholders' equity and cash flows for the year ended December 31, 1995,
after restatement for the 1996 pooling of interests; in our opinion, such
consolidated statements have been properly combined on the basis described in
Note 2 of notes to consolidated financial statements.
KUNTZ LESHER SIEGRIST & MARTINI LLP
CERTIFIED PUBLIC ACCOUNTANTS
Lancaster, Pennsylvania
February 10, 1997 (except as to Note 15
which is as of February 24, 1997)
1<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 854,290
Accounts and notes receivable, net of allowance
for doubtful accounts of $262,279 1,559,463
Inventories 574,381
Prepaid expenses and other current assets 99,462
-----------
TOTAL CURRENT ASSETS 3,087,596
Property and equipment, net 1,198,232
Goodwill, net of accumulated amortization
of $30,220 209,462
Deferred expenses and other assets 15,392
-----------
TOTAL ASSETS $4,510,682
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, current portion $ 707,582
Accounts payable 1,307,221
Accrued expenses 170,759
Deferred revenue 162,819
Other liabilities 27,654
-----------
TOTAL CURRENT LIABILITIES 2,376,035
Notes payable, net of current portion 6,730
-----------
TOTAL LIABILITIES 2,382,765
-----------
STOCKHOLDERS' EQUITY
10% Convertible preferred stock, par value $.001;
authorized 5,000,000 shares; issued and
outstanding 74,970 shares (aggregate
liquidation preference of $1,499,400) 75
Common stock par value $.0001, authorized
50,000,000 shares; issued and outstanding
11,672,349 shares 1,167
Additional paid-in capital 9,475,814
Accumulated deficit (7,349,139)
-----------
TOTAL STOCKHOLDERS' EQUITY 2,127,917
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,510,682
-----------
The accompanying notes are an integral part
of the consolidated financial statements.
2<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
1996 1995
---------- ----------
Net sales $ 6,627,242 $ 7,257,995
Cost of goods sold 6,356,786 5,345,694
---------- ----------
GROSS PROFIT 270,456 1,912,301
General and administrative expenses 3,729,788 2,961,018
Abandonment loss 199,087 -
---------- ----------
OPERATING LOSS (3,658,419) (1,048,717)
Interest income 56,272 -
Interest expense (77,372) (87,186)
---------- ----------
LOSS BEFORE PROVISION FOR INCOME TAXES
AND EXTRAORDINARY ITEM (3,679,519) (1,135,903)
Provision for income taxes (61,516) 310,000
---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM (3,618,003) (1,445,903)
Extraordinary item - gain (loss) on involuntary
conversion (net of income taxes of $44,500
for the year ended December 31, 1996) 66,859 -
---------- ----------
NET LOSS $(3,551,144) $(1,445,903)
---------- ----------
Primary loss per share:
Loss before extraordinary item $ (.33) $ (.19)
Extraordinary item .01 -
---------- ----------
NET LOSS $ (.32) $ (.19)
---------- ----------
Weighted-average number of shares outstanding 11,067,636 7,614,871
---------- ----------
The accompanying notes are an integral part
of the consolidated financial statements.
3<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL ACCUMULATED
SHARES AMOUNT SHARES AMOUNT PAID-IN CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994, as originally reported - $ - 365,520 $ 3,655 $1,182,495 $(1,845,194) $ (659,044)
Restatement for new capital structure acquired
with the merger of Educational Storybooks
International, Inc. (see Note 2) 1,698,317 (3,449) 3,449 - -
Restatement for pooling of interests(see Note 2) 5,400,000 540 2,999,460 848,962 3,848,962
------ ---- ---------- ------ --------- ---------- ---------
Balance, December 31, 1994, as restated - - 7,463,837 746 4,185,404 (996,232) 3,189,918
Issuance of common stock, net of issuance costs 737,842 74 1,398,996 - 1,399,070
Issuance of common stock for services 550,966 55 975,745 - 975,800
Exercise of stock options 84,695 8 149,992 - 150,000
Conversion of stockholders/officers loans
into common stock 198,326 20 351,232 - 351,252
Cash dividends paid - - - (400,000) (400,000)
Net loss - - - (1,445,903) (1,445,903)
------ ---- ---------- ------ --------- ---------- ---------
Balance, December 31, 1995 - - 9,035,666 903 7,061,369 (2,842,135) 4,220,137
Merger with Educational Storybooks International,
Inc. (see Note 2) 950,000 95 (491) - (396)
Issuance of common stock, net of issuance costs 1,267,380 127 1,362,729 - 1,362,856
Issuance of common stock for acquisitions 137,698 14 224,758 - 224,772
Issuance of common stock for services 276,040 28 414,633 - 414,661
Exercise of stock options 5,565 - 13,500 - 13,500
Issuance of convertible preferred stock 68,577 69 - - 1,371,462 - 1,371,531
Conversion of stockholders/directors loans into
preferred stock 6,000 6 - - 119,994 - 120,000
Purchase and retirement of treasury stock - - - - (1,100,000) - (1,100,000)
Cash dividends paid - - - - - (948,000) (948,000)
10% preferred stock dividend 393 - - - 7,860 (7,860) -
Net loss - - - - - (3,551,144) (3,551,144)
------ ---- ---------- ------ --------- ---------- ---------
Balance, December 31, 1996 74,970 $ 75 11,672,349 $ 1,167 $9,475,814 $(7,349,139) $2,127,917
------ ---- ---------- ------ --------- ---------- ---------
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1996 1995
---------- ----------
Cash flows from operating activities:
Net loss $(3,551,144) $(1,445,903)
---------- ---------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 880,565 1,039,556
Issuance of common stock for services 414,661 975,800
Provision for losses on accounts and notes
receivable 160,227 (5,448)
Write-off of abandoned and fire damaged
property and equipment 153,022 -
Gain on sale of assets - (84,500)
Deferred income taxes 121,300 (120,000)
Distributor deposits (25,142) (325,124)
Increase (decrease) in cash due to changes in
operating assets and liabilities, net of
effects of acquisitions:
Accounts receivable 1,175,011 (1,357,284)
Inventories 125,306 (259,262)
Prepaid expenses and other current assets 82,338 46,910
Accounts payable 96,711 (4,069)
Accrued expenses (213,304) 186,289
Deferred revenue (26,236) 189,055
---------- ---------
Total adjustments 2,944,459 281,923
---------- ---------
NET CASH USED IN OPERATING ACTIVITIES (606,685) (1,163,980)
---------- ---------
Cash flows from investing activities:
Capital expenditures (414,203) (337,583)
Proceeds from sale of property and equipment - 208,500
Payments for deferred expenses - (8,278)
Payment for acquisitions, net of cash received (5,651) -
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (419,854) (137,361)
---------- ---------
Cash flows from financing activities:
Proceeds from the issuance of capital stock 2,747,491 1,414,070
Dividends paid (948,000) (400,000)
Payment for purchase of treasury stock (1,100,000) -
Distributor deposits - 100,000
Proceeds from issuance of note payable 500,824 144,510
Principal payments on notes payable (639,100) -
Proceeds from stockholder loans 120,000 300,306
Payment on stockholder loans - (102,000)
---------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 681,215 1,456,886
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (345,324) 155,545
Cash and cash equivalent - beginning of year 1,199,614 1,044,069
---------- ---------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 854,290 $1,199,614
---------- ---------
The accompanying notes are an integral part
of the consolidated financial statements.
5<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
U.S. Plastic Lumber Corp. and its subsidiaries are engaged in the
manufacturing of recycled plastic lumber from post-consumer plastic waste and
the recycling of soils which have been exposed to hydrocarbons. The Company's
plastic lumber customers are located throughout the United States and
accounted for 28% and 17% of net sales in 1996 and 1995, respectively. The
Company's soil recycling customers are located primarily in the Northeastern
United States and accounted for 72% and 83% of net sales in 1996 and 1995,
respectively.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
U.S. Plastic Lumber Corp. and its wholly-owned subsidiaries Earth Care
Products of America, Inc., Earth Care Products of Tennessee, Inc., Earth Care
Products of the Midwest, Inc., Earth Care Products of New Jersey, Inc., Clean
Earth, Inc., Clean Earth of New Castle, Inc., Clean Earth In-Situ, and
Delaware Improvement Corp., (collectively the Company). All significant
intercompany balances and transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be a cash equivalent.
INVENTORIES
Inventories are valued at the lower of cost or market, cost being
determined by the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed for
financial purposes by the use of the straight-line method over the estimated
useful lives of the assets. Accelerated methods of computing depreciation are
used for tax purposes. Upon sale or retirement, the cost and related
accumulated depreciation of such assets are removed from the accounts and any
resulting gain or loss realized is credited or charged to income for the
period. Expenditures for maintenance and repairs are charged to income as
incurred. Significant renewals, improvements and betterments are capitalized.
6<PAGE>
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
GOODWILL
Goodwill represents the excess of the costs of companies acquired over the
fair value of their net assets at dates of acquisition and is being amortized
on a straight-line basis over 5 to 10 years. Amortization expense was $30,220
for the year ended December 31, 1996. Goodwill is reviewed for impairment
annually or whenever events or circumstances indicate that the carrying amount
may not be recoverable. If the sum of the expected future undiscounted cash
flows is less than the carrying amount, a loss is recognized for the
difference between the fair value and the carrying value of the asset.
LONG-LIVED ASSETS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121 - "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption of
SFAS No. 121 did not have an impact on the Company's financial position or
results of operations.
DEFERRED EXPENSES
Deferred expenses consist primarily of loan fees and organization costs.
These expenses are amortized over their estimated useful lives.
DEFERRED REVENUE
Revenue from soil recycling is recognized upon treatment and
certification. Billings for untreated soils are recorded as deferred revenue.
DISTRIBUTOR DEPOSITS
Included in other liabilities are deposits received from the Company's
distributors which represent advance payment for the purchase of plastic
lumber.
STOCK- BASED COMPENSATION
Effective January 1, 1996, the Company adopted SFAS No. 123 - "Accounting
for Stock-Based Compensation." As permitted by SFAS No. 123, the Company will
continue to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations and will disclose
the additional information relative to issued stock options and proforma net
income and earnings per share, as if the options granted were expensed at
their estimated fair value at the time of grant. The adoption of SFAS No. 123
did not have an impact on the Company's financial position or results of
operations.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax basis of assets and liabilities using enacted tax rates in effect for
the year which the differences are expected to be settled or realized.
7<PAGE>
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ADVERTISING COSTS
Advertising costs are charged to operations as incurred and were
approximately $152,000 and $59,000 in 1996 and 1995, respectively.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash, cash equivalents and
trade receivables. The Company maintains its cash and cash equivalents with
various financial institutions which are primarily located in the Eastern
United States. At December 31, 1996, the Company had bank balances of
approximately $774,000 in excess of amounts insured by federal deposit
insurance. Trade receivables are concentrated primarily in the Northeastern
United States. The Company generally does not require collateral from its
customers.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments include cash, cash equivalents, accounts and notes
receivable, accounts payable, and notes payable. The carrying amounts
reported in the consolidated balance sheets for these financial instruments
approximate their fair value due to their short-term nature.
LOSS PER SHARE
Primary loss per share is computed based on the weighted-average number of
shares actually outstanding in 1996 and 1995. Common stock equivalents have
been excluded as they are anti-dilutive. The loss before extraordinary item
and net loss have been adjusted for dividends on convertible preferred stock.
Fully diluted loss per share amounts are not presented for 1996 and 1995 as
they are anti-dilutive.
RECLASSIFICATION
The 1995 consolidated financial statements have been reclassified to
conform to the current year presentation.
NOTE 2 - ACQUISITIONS
During the year ended December 31, 1996, the Company acquired the entities
described below, which were accounted for as a purchase:
Effective March 29,1996, Earth Care Global Holdings, Inc. and
Subsidiaries (Earth Care) were acquired as a wholly-owned subsidiary of
Educational Storybooks International, Inc. (ESI), a publicly-held shell
corporation, trading on the NASD Electronic Bulletin Board, through the
exchange of 5.646304 shares of ESI for each outstanding share of Earth
Care. Upon completion of the acquisition ESI changed its name to U.S.
Plastic Lumber Corporation. For financial reporting purposes, Earth
Care is deemed to be the acquiring corporation and has accounted for the
transaction as a reverse merger with the historical financial statements
prior to March 29, 1996 being those of Earth Care. All references in
the consolidated financial statements referring to shares, share prices,
per share amounts and stock prices have been retroactively adjusted to
reflect the capital structure of ESI. In addition, the merger agreement
provided for 2,000,000 shares of common stock to be reserved for Earth
Care historical stockholders, as defined, to be issued upon the Company
meeting certain production or sales goals for plastic lumber product
prior to December 31, 2000. The additional shares will be issued at
their par value and accounted for as an adjustment to the initial
exchange rate of 5.646304 per share.
8<PAGE>
<PAGE>
NOTE 2 - ACQUISITIONS (Continued)
On February 1, 1996, the Company acquired certain net assets of Earth
Care Partners (ECP). ECP is engaged in the distribution of recycled
plastic lumber products in the Northeastern United States. Certain
partners of ECP are also stockholders of the Company. The ECP partners
received 112,926 shares of the Company's common stock for a purchase
price of $200,000 which exceeded the fair value of the net assets of ECP
by $114,259. The excess has been recorded as goodwill, which is being
amortized on a straight-line basis over a 5 year period.
On April 4, 1996 the Company acquired the net assets of Duratech
Industries, Inc. (Duratech). Duratech is engaged in the manufacturing
and sale of recycled plastic lumber products. The stockholders of
Duratech received $41,000 and 24,772 shares of the Company's common
stock for a purchase price of $65,772 which exceeded the fair value of
the net assets of Duratech by $125,423. The excess has been recorded as
goodwill, which is being amortized on a straight-line basis over a 10
year period. The purchase agreement also provides for the issuance of
an additional 150,000 shares of common stock if Duratech meets certain
production goals for plastic lumber product by April 30, 1999.
The additional shares will be issued at their then current fair value
and will be allocated to goodwill.
The following unaudited proforma information presents a summary of
consolidated results of operations of the Company and the acquired entities as
if the acquisition had occurred January 1, 1995:
1996 1995
Net sales $ 6,839,000 $ 8,561,000
Loss before extraordinary item $(3,628,000) $(1,643,000)
Net loss $(3,561,000) $(1,643,000)
These unaudited proforma results have been prepared for comparison
purposes only and include certain adjustments, such as additional depreciation
expense as a result of a step-up in the basis of fixed assets and additional
amortization expense as a result of goodwill. They do not purport to be
indicative of the results of operations which actually would have resulted had
the combination been in effect on January 1, 1995, or of future results of
operations of the consolidated entities.
POOLING OF INTERESTS
On December 30, 1996, the Company acquired Clean Earth Inc. and
Subsidiary (CEI) through the issuance of 5,400,000 shares of the Company's
common stock in exchange for all the outstanding stock of CEI. CEI is engaged
in the recycling of soils exposed to hydrocarbons. The acquisition was
accounted for as a pooling of interests. The historical stockholders of CEI
are also eligible to receive 2,573,686 additional shares of common stock if
the Company meets certain production or sales for plastic lumber product goals
prior to December 31, 2000. The additional shares will be issued at their par
value and accounted for as an adjustment to the initial number of shares
issued to effect the pooling. Accordingly, the Company's financial statements
have been restated to include the results of CEI for all periods presented.
9<PAGE>
<PAGE>
NOTE 2 - ACQUISITIONS (Continued)
Combined and separate results of the Company and CEI during the periods
prior to the acquisition were as follows:
INCOME
(LOSS) BEFORE
EXTRAORDINARY NET
NET SALES ITEM INCOME(LOSS)
For the year ended December 31, 1996:
U.S. Plastic Lumber Corp. $1,885,303 $(3,345,054) $(3,345,054)
CEI 4,741,939 (272,949) (206,090)
Combined $6,627,242 $(3,618,003) $(3,551,144)
For the year ended December 31, 1995:
U.S. Plastic Lumber Corp. $1,214,032 $(1,960,127) $(1,960,127)
CEI 6,043,963 514,224 514,224
$7,257,995 $(1,445,903) $(1,445,903)
NOTE 3 - INVENTORIES
Inventories consist of the following at December 31, 1996:
Supplies $ 71,143
Raw materials 79,040
Finished goods 424,198
$ 574,381
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1996:
Machinery and equipment $4,232,714
Leasehold improvements 455,627
Furniture and fixtures 53,411
4,741,752
Less accumulated depreciation (3,543,520)
$1,198,232
Depreciation expense was $748,744 and $974,054 for the years ended
December 31, 1996 and 1995, respectively.
10<PAGE>
<PAGE>
NOTE 5 - NOTES PAYABLE
Notes payable consist of the following at December 31, 1996:
Note payable to stockholder, bearing interest at
prime plus 1% (9.25% at December 31, 1996) due
December 31, 1997 retired in January 1997. $ 500,824
Promissory bank note, payable in monthly install-
ments of $3,263, including interest at the bank's
basic rate (10.25% at December 31, 1996), balloon
payment due in April 1997. 134,724
Note payable to stockholder/director, non interest
bearing, due September 1997. (A) 50,000
Other notes payable 28,764
714,312
Current portion 707,582
$ 6,730
(A) The $50,000 note payable provides an option for the holder to
purchase up to 84,695 shares of the Company's common stock at $1.77 per
share. The option expires September 15, 1997.
The Company's subsidiary, Clean Earth, Inc., has available a $500,000 line
of credit and a $1,000,000 commitment for a term loan both bearing interest at
the bank's prime rate (8.25% at December 31, 1996). Effective with the merger
these agreements terminated. The Company is currently renegotiating the new
terms of these agreements under the combined entities.
NOTE 6 - CAPITAL STOCK
SERIES A CONVERTIBLE PREFERRED STOCK
During the year ended December 31, 1996, the Company initiated an offering
of up to 250,000 shares of the Company's Series A Preferred Stock. The shares
are nonvoting and have a 10% cumulative stock dividend payable semiannually
and will be paid in Series A Preferred Stock. No cash dividends will be paid.
Each share is convertible into seven shares of the Company's common stock at
the option of the stockholder or mandatorily on the date a registration
statement which would yield the Company $10,000,000 in proceeds is declared
effective by the Securities and Exchange Commission. In the event of any
liquidation, after payment of debts and other liabilities, the stockholders of
Series A Preferred Stock will be entitled to receive, before the stockholder
of any of the Common stock, the stated value of $20.00 per share. The Series
A Preferred Stock can be redeemed at any time at the sole option of the
Company for $25.00 per share.
From January 1, 1997 through February 10, 1997, the Company sold 79,000
shares of Series A Preferred Stock for proceeds of $1,580,000.
TREASURY STOCK
Prior to the pooling of interest in March 1996, Clean Earth, Inc. acquired
stock from its sole stockholder for $1,100,000. Effective with the pooling of
interest, those treasury shares were cancelled and retired.
11<PAGE>
<PAGE>
NOTE 6 - CAPITAL STOCK (Continued)
STOCK WARRANTS
In connection with the merger with ESI, existing stockholders of ESI
received 950,000 Series A and 950,000 Series B Warrants to purchase the
Company common stock at $2.50 and $4.50 per share, respectively. Such
warrants are exercisable at any time prior to June 30, 1998 provided that a
registration statement is in effect for the underlying common shares. The
warrants are redeemable by the Company for .01 per warrant upon 30 days notice
and if the closing bid price for the Company's stock equals or exceeds $4.00
and $6.00 per share for the Series A and Series B Warrants, respectively, at
any time for twenty consecutive trading days. At December 31,1996 all Series
A and Series B Warrants were outstanding. As of February 10,1997, the Company
has not registered the underlying common stock for the Series A and Series B
Warrants.
STOCK OPTIONS
During 1996, the Company granted stock options to key employees and
directors. The option price at the date of grant is determined by the Board
of Directors and is generally tied to the market price of the Company's freely
trading shares. The term for exercising the stock options is generally ten
years. Stock options granted under the Company's stock option incentive plan
vest ratably over a period of three years. Stock option activity is as
follows:
WEIGHTED - AVERAGE
EXERCISE PRICE
Outstanding, December 31, 1995 - $ -
Granted 1,300,000 $3.44
Exercised (5,000) $2.50
Cancelled (13,000) $4.75
Outstanding, December 31, 1996 1,282,000 $3.43
Stock options exercisable 625,000 $3.94
The Company granted 550,000 stock options for a key employee which will be
earned upon the achievement of the following:
200,000 options will be earned at the time the Company reaches gross
sales of $5,000,000 over a consecutive twelve month period or if gross
sales reach an average of $500,000 over a consecutive three month period
prior to January 2002;
An additional 200,000 options will be earned at the time the Company
reaches gross sales of $7,500,000 over a consecutive twelve month period
or if gross sales reach an average of $700,000 over a consecutive three
month period prior to January 2002.
The initial exercise price for the options will be $2.25 per share and
will be adjusted every ninety days to be the lower of $2.25 per share or
a price equal to $1.75 below the market value of the Company's freely
trading shares. The options have a term of ten years.
Upon the achievement of the above sales goal or no later than January,
1999, the employee will earn an additional 50,000 options for each of
the next three years. The initial exercise price for the options will
be $3.50 per share and will be adjusted every ninety days to be the
lower of $3.50, or the price per share from the previous quarter, or the
market value of the Company's freely trading shares. The options have a
term of ten years.
12<PAGE>
<PAGE>
NOTE 6 - CAPITAL STOCK (Continued)
The Company accounts for its stock-based compensation plans under APB No
25. Accordingly, no compensation expense has been recognized as the exercise
price exceeds the estimated fair market value of the stock at the time of
grant. Had compensation cost for the Company's plans been determined based on
the fair value at the grant date consistent with the provisions of SFAS No.
123, the Company's net loss and primary loss per share would not have been
different from that as determined in accordance with APB No. 25.
The fair value is estimated on the date of grant using the Black-Scholes
opinion-pricing model. The assumptions used were as follows: dividend yield
of 0%, expected volatility of 0%, risk-free interest rate of 6.2%, and
expected lives of approximately 10 years.
STOCK RESERVATIONS
At December 31, 1996 and 1995, common stock was reserved for the following
reasons:
1996 1995
Contingently issuable under earn-out provisions 4,723,686 -
Exercise of Series A and Series B Warrants 1,900,000 -
Conversion of Preferred Stock 524,790 -
Exercise of options related to notes payable 438,379 438,379
Exercise of stock options 732,000 -
Exercise of stock options contingency issuable
under performance goals 550,000 -
8,868,855 438,379
NOTE 7 - EMPLOYEE BENEFIT PLANS
The Company's Clean Earth, Inc. subsidiary has defined contribution 401(k)
and profit sharing plans which cover substantially all employees who have met
the eligibility requirements. Employees may contribute up to the maximum
allowable under current regulations to the 401(k). There are no employee
contributions to the profit sharing plan. The Company's contribution to each
plan is at the discretion of the Company. There were no Company contributions
to either plan during 1996 and 1995.
NOTE 8 - ABANDONMENT OF ASSETS
During 1996, the Company abandoned the establishment of its Camden, New
Jersey production facility. As a result the Company recognized a loss of
$199,087 consisting primarily of leasehold improvements and estimated lease
termination costs.
13<PAGE>
<PAGE>
NOTE 9 - INCOME TAXES
The provision for income taxes includes federal and state taxes currently
payable and those deferred because of temporary differences between financial
statement and tax basis of assets and liabilities. The components of the
provision for income taxes for the years ended December 31, 1996 and 1995 are
as follows:
1996 1995
Current:
Federal $(145,529) $357,800
State (37,287) 72,200
(182,816) 430,000
Deferred:
Federal 94,918 (93,800)
State 26,382 (26,200)
121,300 (120,000)
$ (61,516) $310,000
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities at December 31, 1996:
Deferred tax assets:
Operating loss carryforwards $2,299,000
Property and equipment 198,000
Accounts and notes receivable 105,000
Goodwill 7,000
Valuation allowance (2,609,000)
Net deferred tax assets $ -
The sources of significant temporary differences which give rise to
deferred taxes and their effects are primarily attributable to depreciation,
amortization, common stock issued to employees and operating loss
carryforwards.
For federal tax purposes, the Company has net operating loss carryforwards
of approximately $5,747,000 at December 31, 1996. These losses expire in the
years 2008 through 2011.
NOTE 10 - GAIN ON INVOLUNTARY CONVERSION
During March 1996, fire damaged equipment at one of the Company's
subsidiaries. The extraordinary gain represents the excess of insurance
proceeds received over the loss incurred. The Company and the insurance
carrier have reached a pending final settlement in the amount of an additional
$455,000. This amount has not been recognized in the December 31, 1996
consolidated financial statement as settlement is subject to adjustment and
review by other affected third parties.
14<PAGE>
<PAGE>
NOTE 11 - RELATED PARTY TRANSACTIONS
The Company incurred the following expenses to various stockholders and
directors for the years ended December 31, 1996 and 1995:
1996 1995
Administrative and service fees $500,000 $450,000
Loan guarantee fee 220,000 -
Merger costs 91,875 -
Interest expense 52,970 87,186
Rent expense 107,638 66,700
Consulting fees 66,229 -
At December 31, 1996, the Company has $200,000 of amounts due to
stockholders included in accounts payable.
During the year ended December 31, 1996, certain stockholders and
directors loaned the Company $120,000 which was later converted to Series A
Preferred Stock. Each participating stockholder/director also received 5,000
stock options to purchase Company common stock at $2.50 per share.
At December 31, 1996, $113,535 of receivables due from the partners of ECP
are included in accounts and notes receivables. The partners of ECP have
pledged 70,579 shares of their holdings in the Company's common stock as
collateral. At such time as those shares are registered, the partners will
liquidate their holdings and repay the Company. The Company has recorded an
allowance equal to the receivable as there are no plans to register such
shares at this time.
The Company had sales of approximately $153,000 for the year ended
December 31, 1995, to ECP. Certain officers and stockholders of the Company
are also partners of ECP. In February 1996 the Company acquired the net
assets of ECP (see Note 2).
NOTE 12 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases office space, equipment, manufacturing facilities, and
land under non-cancelable operating leases which expire at various dates
through 1999.
Future minimum payments are as follows for the years ending December 31:
1997 $191,000
1998 191,000
1999 70,000
The Company leases land at its soil recycling facility at a rental of
$1.00 per ton of soil received with a minimum rental of $50,000 per year.
Rent expense under this lease was $144,915 and $159,762 for the years ended
December 31, 1996 and 1995, respectively. The lease currently expires in 1998
and contains three five year renewal options. The lessor has the right and
option at the time of renewal to require the Company to purchase the property
at a purchase price of $100,000 per acre subject to annual escalations based
on the Consumer Price Index from inception of the lease. The Company currently
leases 7.5 acres of land.
15<PAGE>
<PAGE>
NOTE 12 - COMMITMENTS AND CONTINGENCIES (Continued)
The Company leases certain office space and manufacturing facilities from
entities controlled by individuals who are stockholders. These leases provide
for minimum annual rentals of $96,000 through 1999. The manufacturing
facility lease provides the Company the option to purchase the facility at any
time during the term of the lease. The purchase price is based on a
decreasing sliding scale and was approximately $338,000 and $394,000 at
December 31, 1996 and 1995, respectively.
Rent expense for all operating leases for the years ended December 31,
1996 and 1995 was approximately $525,000 and $412,000, respectively.
COVENANT NOT TO COMPETE
The Company has a covenant not to compete agreement for which the Company
pays $2.00 per ton of soil received for processing. These payments expire
August, 1997. The expense for the covenant not to compete for 1996 and 1995
amounted to $336,546 and $503,980, respectively.
MAGELLAN FINANCE CORPORATION OPTIONS
The Company issued Magellan Finance Corporation (Magellan), a
stockholder, an option to purchase up to 353,684 shares of the Company's
common stock at $1.77 per share. This option was issued in connection with
Magellan's issuance of convertible notes payable to the Company. These notes
were retired in December 1996. The option expires on December 31, 1997. If
Magellan does not exercise its option to purchase the shares, then the Company
is obligated to issue the 353,684 shares to the historical stockholders, as
defined, at no cost.
LEGAL PROCEEDINGS
The Company is subject to claims and legal actions that arise in the
ordinary course of its business. The Company believes that the ultimate
liability, if any, with respect to these claims and legal actions, will not
have a material effect on the financial position or results of operations of
the Company.
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of cash flow information:
1996 1995
Cash paid during the year for:
Interest $ 170,252 $ 4,352
Income taxes $ 50,000 $ 210,000
Supplemental schedule of noncash investing and financing activities:
1996 1995
Capital stock issued for acquisitions $224,772 $ -
Stockholder/director loans converted
to capital stock $120,000 $ 351,252
Capital stock issued for deferred expenses $ - $ 135,000
16 <PAGE>
<PAGE>
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION (Continued)
The Company acquired the net assets of Earth Care Partners and Duratech
Industries, Inc. for $26,200 during the year ended December 31, 1996. The
details of the acquisitions were as follows:
Fair value of assets acquired $725,217
Liabilities assumed (474,245)
Capital stock issued (224,772)
Cash paid 26,200
Less cash acquired (20,549)
Net cash paid for acquisitions $ 5,651
NOTE 14 - BUSINESS SEGMENT INFORMATION
The Company operates in two industry segments: Plastic lumber and
environmental recycling. The plastic lumber segment includes the production
and marketing of recycled plastic lumber. The environmental recycling segment
includes the treatment and removal of petroleum hydrocarbons from construction
debris and contaminated soils. The Company's sales are solely within the
United States.
Summarized financial information by business segment for 1996 and 1995 is
as follows:
1996 1995
Net sales:
Plastic lumber $1,885,303 $1,214,032
Environmental recycling 4,741,939 6,043,963
$6,627,242 $7,257,995
Operating income (loss):
Plastic lumber (a)(b) $(3,279,195) $(1,872,941)
Environmental recycling (379,224) 824,224
$(3,658,419) $(1,048,717)
Identifiable assets:
Plastic lumber $1,945,405 $1,683,359
Environmental recycling 2,565,277 4,751,545
$4,510,682 $6,434,904
Depreciation and amortization:
Plastic lumber $ 250,868 $ 126,651
Environmental recycling 629,697 912,905
$ 880,565 $1,039,556
Capital expenditures:
Plastic lumber $ 163,168 $ 329,981
Environmental recycling 251,035 7,602
$ 414,203 $ 337,583
(a) 1996 includes special charges of $199,087 for facility abandonment costs.
(b) 1995 includes special charges of $950,800 for compensation in the form of
stock to certain officers and employees for current and past services.
17<PAGE>
<PAGE>
NOTE 15 - SUBSEQUENT EVENTS
ACQUISITIONS
On January 27, 1997, the Company acquired Recycled Plastics Industries,
Inc. (RPI) a recycled plastic lumber manufacturer. The stockholders of RPI
received $1,200,000 in cash and 1,000,000 shares of the Company's common stock
for a total purchase price of $1,200,000 which exceeded the fair value of the
net assets of RPI by approximately $922,000. The excess will be recorded as
goodwill and amortized on a straight-line basis over a forty-year period.
On February 24, 1997, the Company acquired Advanced Remediation and
Disposal Technologies, Inc. (ARDT), an environmental consulting and
remediation company. The stockholders of ARDT received 300,000 shares of the
Company's common stock and 30,000 stock options for a total purchase price of
$525,000 which exceeded the fair value of the net assets of ARDT by
approximately $422,000. The excess will be recorded as goodwill and amortized
on a straight-line basis over a forty-year period. The purchase agreement
also provides for the issuance of up to an additional 150,000 shares of the
Company's common stock if ARDT meets certain profitability levels during the
years ending December 31, 1997 and 1998. The additional shares will be issued
at their then current fair value and allocated to goodwill.
The acquisitions will be accounted for as a purchase and, accordingly,
the results of operations of the acquired companies will be included with
those of the Company for periods subsequent to the date of acquisition. The
purchase price allocations are based on preliminary estimates of the fair
value of the net assets acquired and are subject to adjustment as additional
information becomes available.
The unaudited proforma combined results of operations of the Company, RPI
and ARDT for the year ended December 31, 1996 after giving effect to certain
proforma adjustments are as follows:
Net sales $10,351,000
Loss before extraordinary items $ (3,577,000)
Net loss $ (3,510,000)
Primary loss per share:
Loss before extraordinary item $(.29)
Extraordinary item .01
Net loss $(.28)
The foregoing unaudited proforma results of operations reflect
adjustments for interest on notes issued to fund the purchase price,
amortization of goodwill and depreciation on revalued property and equipment.
They do not purport to be indicative of the results of operations which
actually would have resulted had the combination been in effect on January 1,
1996, or of future results of operations of the consolidated entities.
18<PAGE>
<PAGE>
INTEGRATED TECHNICAL SERVICES, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1996
<PAGE>
<PAGE>
KUNTZ LESHER SIEGRIST & MARTINI LLP
CERTIFIED PUBLIC ACCOUNTANTS
215 S. CENTERVILLE ROAD
P. O. BOX 8408
LANCASTER, PA 17604
(717)394-5666
FAX (717)394-0693
INDEPENDENT ACCOUNTANTS' REPORT
To the Stockholders
Integrated Technical Services, Inc.
We have audited the accompanying balance sheet of Integrated Technical
Services, Inc. as of December 31, 1996, and the related statements of
operations and retained earnings and cash flows for the year then ended. The
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Integrated Technical
Services, Inc. as of December 31, 1996, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
KUNTZ LESHER SIEGRIST & MARTINI LLP
CERTIFIED PUBLIC ACCOUNTANTS
Lancaster, Pennsylvania
August 7, 1997
1<PAGE>
<PAGE>
INTEGRATED TECHNICAL SERVICES, INC.
BALANCE SHEETS
December 31, March 31,
1996 1997
----------- ----------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 61,626 $ 94,550
Accounts receivable, net of allowance for
doubtful accounts of $45,000 in 1996 760,614 1,023,887
Cost and estimated earnings in excess of
billings on uncompleted contracts 7,467 368,424
Prepaid expenses 62,997 42,701
--------- ---------
TOTAL CURRENT ASSETS 892,704 1,529,562
Property and equipment, net 206,519 189,168
Deferred expenses, net 1,200 900
TOTAL ASSETS $1,100,423 $1,719,630
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 116,698 $ 86,343
Notes payable, stockholders 115,000 115,000
Accounts payable 391,431 1,015,113
Accrued expenses 107,893 98,960
Billings in excess of costs and estimated
earnings on uncompleted contracts 95,745 28,246
Deferred income taxes 91,447 104,460
--------- ---------
TOTAL CURRENT LIABILITIES 918,214 1,448,122
Long-term debt, net of current portion 79,984 80,043
--------- ---------
TOTAL LIABILITIES 998,198 1,528,165
STOCKHOLDERS' EQUITY
Common stock par value $1, authorized 1,000
shares; issued and outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 3,000 3,000
Retained earnings 98,225 187,465
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 102,225 191,465
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,100,423 $1,719,630
--------- ---------
The accompanying notes are an integral part
of the financial statements.
2<PAGE>
<PAGE>
INTEGRATED TECHNICAL SERVICES, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
For the Three
For the Year Ended Months Ended
December 31, 1996 March 31, 1997
----------------- --------------
(Unaudited)
Revenue $ 3,905,783 $ 1,785,026
Cost of goods sold 3,225,836 1,483,824
----------- ----------
GROSS PROFIT 679,947 301,202
Selling, general and administrative expenses 735,236 188,586
----------- ----------
INCOME (LOSS) FROM OPERATIONS (55,289) 112,616
Interest expense 25,914 4,638
----------- ----------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES (81,203) 107,978
Provision for income taxes 12,548 18,738
----------- ----------
NET INCOME (LOSS) (93,751) 89,240
Retained earnings - beginning of period 191,976 98,225
----------- ----------
RETAINED EARNINGS - END OF PERIOD $ 98,225 $ 187,465
----------- ----------
The accompanying notes are an integral part
of the financial statements.
3<PAGE>
<PAGE>
INTEGRATED TECHNICAL SERVICES, INC.
STATEMENTS OF CASH FLOWS
For the Three
For the Year Ended Months Ended
December 31, 1996 March 31, 1997
----------------- --------------
(Unaudited)
Cash flows from operating activities:
Net income (loss) $ (93,751) $ 89,240
-------- --------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 71,638 20,925
Deferred income taxes (36,855) 13,013
Increase (decrease) in cash due to changes
in operating assets and liabilities:
Accounts receivable (7,157) (263,273)
Cost and estimated earnings in excess of
billings on uncompleted contracts 53,754 (360,957)
Prepaid expenses 48,485 20,296
Accounts payable (35,602) 623,682
Accrued expenses 51,488 (8,933)
Billings in excess of costs and estimated
earnings on uncompleted contracts 59,220 (67,499)
-------- --------
Total adjustments 204,971 (22,746)
-------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 111,220 66,494
-------- --------
Cash flows from investing activities:
Capital expenditures (58,190) (3,274)
-------- --------
NET CASH USED IN INVESTING
ACTIVITIES (58,190) (3,274)
-------- --------
Cash flows from financing activities:
Principal payments on notes payable
- stockholders (10,000) -
Principal payments on long-term debt (102,602) (30,296)
Proceeds from issuance of long-term debt 15,000 -
-------- --------
NET CASH USED IN FINANCING
ACTIVITIES (97,602) (30,296)
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (44,572) 32,924
Cash and cash equivalent - beginning of the period 106,198 61,626
-------- --------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 61,626 $ 94,550
-------- --------
The accompanying notes are an integral part
of the financial statements.
4<PAGE>
<PAGE>
INTEGRATED TECHNICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Integrated Technical Services, Inc. is engaged in environmental
remediation and consulting services. The Company's customers are located
primarily in the state of New Jersey.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities
and disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be a cash equivalent.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed for
financial purposes by the use of the straight-line method over the estimated
useful lives of the assets. Accelerated methods of computing depreciation
are used for tax purposes. Upon sale or retirement, the cost and related
accumulated depreciation of such assets are removed from the accounts and any
resulting gain or loss realized is credited or charged to income for the
period. Expenditures for maintenance and repairs are charged to income as
incurred. Significant renewals, improvements and betterments are
capitalized.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121 - "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption of
SFAS No. 121 did not have an impact on the Company's financial position or
results of operations.
REVENUE AND COST RECOGNITION
Revenues are recognized for fixed-price contracts on the percentage-of-
completion method measured by the total costs incurred to date to estimated
total costs for each contract. Revenues from time-and-material contracts are
recognized currently as the work is performed.
Contract costs include all direct material, labor and other costs and
those indirect costs related to contract performance, such as indirect labor,
fringe benefits, general insurance, repairs and depreciation. General and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. No losses were anticipated on any jobs in process at
December 31, 1996. Changes in job conditions and estimated profitability may
result in revisions to costs and income and are recognized in the period in
which such revisions are determined. An amount equal to contract costs
attributable to claims is included in revenues when realization is probable
and can be reliably estimated.
5<PAGE>
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts", represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings
on uncompleted contracts", represents billings in excess of revenues
recognized.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax basis of assets and liabilities using enacted tax rates in effect for
the year which the differences are expected to be settled or realized.
ADVERTISING COSTS
Advertising costs are charged to operations as incurred and were
approximately $2,200 in 1996.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash, cash equivalents and
trade receivables. The Company maintains its cash and cash equivalents with
various financial institutions which are located in the state of New Jersey.
At December 31, 1996, the Company had bank balances of approximately $113,000
in excess of amount insured by federal deposit insurance. Trade receivables
are concentrated primarily in the state of New Jersey. The Company generally
does not require collateral from its customers.
UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the Company has made all adjustments
necessary for a fair presentation of financial position as of March 31, 1997,
and of the results of operations, and cash flows for the three months ended
March 31, 1997, as presented in the accompanying unaudited interim financial
statements. The results of operations for the three month period ended March
31, 1997 are not necessarily indicative of the results to be expected for the
full year.
NOTE 2 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs incurred on uncompleted contracts $284,136
Estimated earnings on uncompleted contracts 139,399
423,535
Less billings on uncompleted contracts 511,813
$ (88,278)
Included in the accompanying balance sheet under the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 7,467
Billings in excess of costs and estimated
earnings on uncompleted contracts (95,745)
$ (88,278)
6<PAGE>
<PAGE>
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1996:
Machinery and equipment $180,162
Vehicles 145,448
325,610
Less accumulated depreciation (119,091)
$206,519
Depreciation expense was $70,438 for the year ended December 31, 1996.
NOTE 4 - NOTES PAYABLE - STOCKHOLDERS
The Company has notes payable from its stockholders, bearing interest
ranging from 7.5% to 10%. The notes are payable on demand and are
uncollateralized.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following as of December 31, 1996:
Notes payable, monthly principal and interest payments of
$5,560, bearing interest at 9.0% to 10.45%, collateralized by
related equipment. $135,227
Note payable, monthly principal and interest payments
of $1,798, bearing interest at 10.75%, uncollateralized. 10,457
Note payable, monthly principal and interest payments
of $4,165, bearing interest at 9.81%, uncollateralized. 35,998
Bank line of credit, bearing interest at prime plus 1.25%
(9.50% as of December 31, 1996), maximum availability of
$100,000. 15,000
196,682
Less current portion 116,698
$ 79,984
Future maturities of long-term debt are as follows:
1997 $116,698
1998 58,996
1999 17,848
2000 3,140
$196,682
7<PAGE>
<PAGE>
NOTE 6 - INCOME TAXES
The provision for income taxes includes federal and state taxes currently
payable and those deferred because of temporary differences between financial
statement and tax basis of assets and liabilities. The components of the
provision for income taxes for the year ended December 31, 1996 are as
follows:
Current:
Federal $ 36,849
State 12,554
49,403
Deferred:
Federal (28,735)
State (8,120)
(36,855)
$ 12,548
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities at December 31, 1996:
Deferred tax assets:
Accounts payable $159,900
Accrued expenses 23,302
Billings in excess of costs and estimated
earnings on uncompleted contracts 36,062
Gross deferred tax assets 219,264
Deferred tax liabilities:
Accounts receivable 310,711
Net deferred tax liabilities $ 91,447
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company routinely subcontracts services to one of its stockholders.
During the year ended December 31, 1996, such subcontracts amounted to
approximately $277,000. As of December 31, 1996, $21,358 was included in
accounts payable to the stockholder.
8<PAGE>
<PAGE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASE
The Company leases a vehicle under a non-cancelable operating lease which
expires in November 2000.
Future minimum payments are as follows for the years ending December 31:
1997 $ 5,256
1998 5,256
1999 5,256
2000 4,818
Rent expense for the year ended December 31, 1996 was approximately
$15,200.
LEGAL PROCEEDINGS
The Company is subject to claims and legal actions that arise in the
ordinary course of its business. The Company believes that the ultimate
liability, if any, with respect to these claims and legal actions, will not
have a material effect on the financial position or results of operations of
the Company.
NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of cash flow information for the year ended
December 31, 1996:
Cash paid during the year for:
Interest $ 16,584
Income taxes $ -
Supplemental schedule of noncash investing and financing activities for
the year ended December 31, 1996:
Long-term debt issued for capital expenditures $152,744
Long-term debt issued for prepaid expenses $ 51,477
NOTE 10 - SUBSEQUENT EVENTS
On March 31, 1997, the Company was acquired by U.S. Plastic Lumber Corp.
(USPLC). The Company will continue to operate as a wholly-owned subsidiary
of USPLC.
9<PAGE>
<PAGE>
ENVIROPLASTICS CORPORATION
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
<PAGE>
ENVIROPLASTICS CORPORATION
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Financial Statements:
Balance Sheets 2
Statements of Earnings (Loss) and Retained Earnings (Deficit) 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 9
<PAGE>
<PAGE>
LOVE, BOLLUS, LYNCH & ROGERS
Certified Public Accountants and Consultants
10 Mechanic Street, Worcester, Massachusetts 01608
Telephone 508-755-7107 Facsimile 508-755-3896
INDEPENDENT AUDITORS' REPORT
Board of Directors
EnviroPlastics Corporation
We have audited the accompanying balance sheets of EnviroPlastics Corporation
as of December 31, 1996 and 1995, and the related statements of earnings
(loss) and retained earnings (deficit) and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EnviroPlastics Corporation as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Love, Bollus, Lynch & Rogers
Worcester, Massachusetts
July 25, 1997
<PAGE>
<PAGE>
<TABLE>
ENVIROPLASTICS CORPORATION
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<CAPTION>
Interim Unaudited
Financial Statements
For the Periods Ended
JUNE 30,
1996 1995 1997 1996
--------- --------- --------- ---------
Assets
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 81,650 $ 87,539 $ 62,251 $ 43,687
Accounts receivable, trade 211,787 82,935 328,235 259,913
Inventories 58,100 54,114 43,364 51,500
Prepaid expense 55,333 50,674 - 15,621
--------- --------- --------- ---------
Total current assets 406,870 275,262 433,850 370,721
--------- --------- --------- ---------
Property and equipment 3,172,720 3,336,103 3,341,934 3,535,729
Less: Accumulated depreciation and amortization 1,055,434 882,569 1,211,434 1,032,569
--------- --------- --------- ---------
2,117,286 2,453,534 2,130,500 2,503,160
--------- --------- --------- ---------
Other assets
Security and other deposits 42,681 44,681 41,036 43,296
Due from affiliate - 115,215 - -
Deferred charge, net of amortization of
$43,874 in 1995 - 95,657 - 89,657
--------- --------- --------- ---------
42,681 255,553 41,036 132,953
--------- --------- --------- ---------
$2,566,837 $2,984,349 $2,605,386 $3,006,834
--------- --------- --------- ---------
<PAGE>
<PAGE>
<CAPTION>
Interim Unaudited
Financial Statements
For the Periods Ended
JUNE 30,
1996 1995 1997 1996
--------- --------- --------- ---------
Liabilities and Stockholders' Equity
<S> <C> <C> <C> <C>
Current liabilities
Current maturities of long-term debt $ 199,790 $ 1,267,900 $ 119,033 $ 124,451
Accounts payable, trade 542,670 387,109 886,679 341,600
Accrued and other liabilities 36,425 31,340 75,506 24,731
Deferred revenue 53,400 - - -
--------- --------- --------- ---------
Total current liabilities 832,285 1,686,349 1,081,218 490,782
--------- --------- --------- ---------
Long-term debt, less current maturities 983,079 2,048,537 1,277,350 3,064,637
--------- --------- --------- ---------
Stockholders' equity
Common stock, $.01 par value, 200,000
shares authorized, 22,692 shares
issued and outstanding 227 227 227 227
Additional paid-in capital 299,773 299,773 299,773 299,773
Retained earnings (deficit) 451,473 (1,050,537) (53,182) (848,585)
--------- --------- --------- ---------
751,473 (750,537) 246,818 (548,585)
--------- --------- --------- ---------
$2,566,837 $2,984,349 $2,605,386 $3,006,834
--------- --------- --------- ---------
See accompanying notes to financial statements.
2
<PAGE>
<PAGE>
ENVIROPLASTICS CORPORATION
STATEMENTS OF EARNINGS (LOSS) AND RETAINED EARNINGS (DEFICIT)
YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
Interim Unaudited
Financial Statements
For the Periods Ended
JUNE 30,
1996 1995 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $ 5,229,915 $ 7,187,469 $ 2,891,508 $ 2,440,423
Cost of revenue 4,529,969 6,360,022 3,125,953 1,916,915
---------- ---------- ---------- ----------
Gross profit 699,946 827,447 (234,445) 523,508
General and administrative expenses 478,220 220,547 285,019 232,641
---------- ---------- ---------- ----------
Operating profit 221,726 606,900 (519,464) 290,867
---------- ---------- ---------- ----------
Other income (expenses)
Interest income - 408 - -
Interest expense (161,543) (217,280) (51,639) (90,121)
Loss on advance - affiliate (147,851) - - -
Miscellaneous income - - 97,822 1,206
Loss on acquisition of building (66,297) - - -
Loss on disposal of property and equipment (138,004) - - -
---------- ---------- ---------- ----------
(513,695) (216,872) 46,183 (88,915)
---------- ---------- ---------- ----------
Earnings (loss) before income taxes and
extraordinary item (291,969) 390,028 (473,281) 201,952
Income taxes 13,251 8,908 - -
---------- ---------- ---------- ----------
Earnings (loss) before extraordinary item (305,220) 381,120 (473,281) 201,952
Extraordinary item
Forgiveness of debt 1,807,230 - - -
---------- ---------- ---------- ----------
Net earnings (loss) 1,502,010 381,120 (473,281) 201,952
Retained earnings (deficit), beginning of year (1,050,537) (1,431,657) 451,473 (1,050,537)
Less: Distributions to stockholders - - (31,374) -
---------- ---------- ---------- ----------
Retained earnings (deficit), end of year $ 451,473 $(1,050,537) $ (53,182) $ (848,585)
---------- ---------- ---------- ----------
See accompanying notes to financial statements.
3
<PAGE>
<PAGE>
ENVIROPLASTICS CORPORATION
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
Interim Unaudited
Financial Statements
For the Periods Ended
JUNE 30,
1996 1995 1997 1996
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 1,502,010 $ 381,120 $ (473,281) $ 201,952
---------- --------- ---------- ---------
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Loss on advance to affiliate 147,851 - - 115,215
Depreciation and amortization 315,861 295,358 156,000 156,000
Forgiveness of debt (1,807,230) - - -
Loss on disposal of property and equipment 138,004 - - -
Distributions to stockholders - - (31,374) -
(Increase) decrease in operating assets:
Accounts receivable, trade (128,852) 327,002 (116,448) (176,978)
Inventories (3,986) 54,059 14,736 2,614
Prepaid expenses (4,659) (14,534) 55,333 35,053
Increase (decrease) in operating liabilities:
Accounts payable, trade 155,561 (263,503) 344,009 (45,509)
Accrued and other liabilities 5,085 (9,634) 39,081 (6,609)
Deferred revenue 53,400 - (53,400) -
---------- --------- ---------- ---------
Total adjustments (1,128,965) 388,748 407,937 79,786
---------- --------- ---------- ---------
Net cash provided by (used in) operating
activities 373,045 769,868 (65,344) 281,738
---------- --------- ---------- ---------
Cash flows from investing activities:
Expenditures for property and equipment (106,617) (395,717) (169,214) (199,626)
(Increase) decrease in security and other deposits 2,000 19,966 1,645 1,385
Advance to affiliate (32,636) (49,655) - -
---------- --------- ---------- ---------
Net cash provided by (used in) investing
activities (137,253) (425,406) (167,569) (198,241)
---------- --------- ---------- ---------
Cash flows from financing activities:
Additional borrowing from long-term debt - - 300,000 -
Principal payments of long-term debt (241,681) (292,266) (86,486) (127,349)
---------- --------- ---------- ---------
Net cash provided by (used in) financing
activities (241,681) (292,266) 213,514 (127,349)
---------- --------- ---------- ---------
Net increase (decrease) in cash and cash equivalents (5,889) 52,196 (19,399) (43,852)
Cash and cash equivalents, beginning of year 87,539 35,343 81,650 87,539
---------- --------- ---------- ---------
Cash and cash equivalents, end of year $ 81,650 $ 87,539 $ 62,251 $ 43,687
---------- --------- ---------- ---------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 114,482 $ 146,705 $ 51,369 $ 90,121
Income taxes 9,531 2,120 - -
See accompanying notes to financial statements.
4
/TABLE
<PAGE>
<PAGE>
ENVIROPLASTICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business
EnviroPlastics Corporation recycles post consumer plastics into high
quality clear and colored resins that are sold as raw materials for plastic
products. A significant amount of sales for both years were primarily
generated by one customer.
Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses. Actual results
could differ from those estimates.
Cash and cash equivalents
For financial statement purposes, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
Inventories
Inventories are valued at the lower of cost or market. Raw materials
mainly consist of recycled milk bottles and colored laundry detergent bottles.
Cost is determined principally on the basis of the first-in, first-out (FIFO)
method.
Property and equipment
Property and equipment are carried at cost. Depreciation and
amortization are computed using the straight-line method.
Deferred charge
Deferred charge represents legal fees and other costs incurred in
organizing the Company and negotiating the Master Recycling Agreement as
discussed in Note 5. Because of the termination of the Master Recycling
Agreement, the balance of the unamortized charge was fully amortized in 1996.
Income taxes
The Company has elected to be taxed as a small business corporation
under the provisions of the Internal Revenue Code (S Corporation). Under
those provisions, the Company does not pay federal and only certain state
corporate income taxes on its taxable income. Instead, the stockholders are
liable for individual income taxes on their respective shares of the Company's
taxable income. The Company distributes earnings to the stockholders to the
extent necessary to pay these income taxes.
Impairment of long-lived assets
During 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed of ". SFAS No. 121
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Adoption of
this statement did not have a material impact on the Company's financial
position, results of operations, or liquidity.
Deferred revenue
Deferred revenue represents advanced payments on product sales.
5<PAGE>
<PAGE>
ENVIROPLASTICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
2 - INVENTORIES
Inventories consist of the following:
1996 1995
Raw materials $41,500 $31,204
Work in process 4,000 9,910
Finished goods 12,600 13,000
$58,100 $54,114
3 - PROPERTY AND EQUIPMENT
Property and equipment, together with estimated useful lives, consists
of the following:
Estimated
Useful Lives 1996 1995
Leasehold improvements 31 years $ 100,476 $ 100,476
Manufacturing system 10 years 1,790,374 2,060,374
Manufacturing support equipment 10 - 12 years 1,142,721 1,036,104
Office furniture and fixtures 7 years 139,149 139,149
$3,172,720 $3,336,103
Depreciation and amortization expense was $304,861 and $283,358 in 1996
and 1995, respectively.
4 - LONG-TERM DEBT
Long-term debt consists of the following:
1996 1995
Note payable - Bank. Collateralized by primary
lien on all assets of the business and is guaranteed
by four of the Company's stockholders. Due in monthly
principal payments of $7,083, plus interest at the
prime rate plus 2%, through September 1998, at which
time the entire principal and interest shall be due
and payable. $403,738 $488,750
Note payable - Guaranteed by the Small Business
Administration. Collateralized by secondary lien on
all assets of the business and is guaranteed by four
of the Company's stockholders. Due in monthly payments
of $9,288 including interest at 7.565%, through April
2002. 462,319 531,450
Economic Development note payable - Town of Auburn,
MA. Subordinated loan collateralized by third lien
on all assets of the business and is guaranteed by
four of the Company's stockholders. Due in monthly
payments of $6,293, including interest at 10% through
December 1998, at which time the entire principal is
due and payable. 316,812 395,411
6<PAGE>
<PAGE>
ENVIROPLASTICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
4 - LONG-TERM DEBT (Continued)
1996 1995
Bond payable - Occidental Chemical Corporation.
Interest is being accrued at a rate of 8.5%
compounded quarterly payable on the maturity date
of the bond which is September 1, 1996. The bond
is convertible to common shares of the company at
any time after the maturity date up to and
including September 1, 2001. - 980,826
Advance payable - Occidental Chemical Corporation.
Collateralized by primary lien on the equipment
purchased from the proceeds of this Advance. Due
December, 1997, provided certain financial
covenants are maintained. - 864,000
Economic Development note payable - Town of Auburn,
MA. Collateralized by second mortgages on four of
the Company's stockholders' principal residences.
Due in monthly payments of $7,200, plus interest
at 7.5% through May, 1996. - 36,000
Note payable - Other collateralized by equipment.
Due in monthly installments of $5,000,
through April, 1996. - 20,000
1,182,869 3,316,437
Less: Current Maturities of long-term debt 199,790 1,267,900
$ 983,079 $2,048,537
Maturities of long-term debt in subsequent years are as follows:
1997 $ 199,790
1998 675,692
1999 86,682
2000 93,472
2001 100,794
Thereafter 26,439
$1,182,869
The debt contains certain usual financial covenants which the company
was not in compliance with at December 31, 1996. Management is currently in
negotiations to resolve the defaults. Management believes that they will be
able to successfully negotiate the debt and therefore the presentation has
remained consistent with the original terms and conditions.
5 - FORGIVENESS OF DEBT
EnviroPlastics and Occidental Chemical Corporation, a New York
Corporation ("Oxychem"), entered into an agreement dated August 30, 1991,
amended on April 15, 1993 (as amended, the "Master Recycling Agreement"),
wherein EnviroPlastics agreed to supply Oxychem with quantities of post-
consumer recycled plastic. The initial term of the agreement was 15 years.
7<PAGE>
<PAGE>
ENVIROPLASTICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
5 - FORGIVENESS OF DEBT (Continued)
Contemporaneously with the Master Recycling Agreement, Enviroplastics
entered into an agreement with Oxychem dated as of August 30, 1991 (the "Bond
Purchase Agreement") in which Oxychem advanced funds to EnviroPlastics to fund
the design, procurement, construction, start up and initial capital
requirements to construct and operate a facility for the processing of post
consumer recycled plastic.
Under the terms of the Bond Purchase Agreement, EnviroPlastics issued
and delivered to Oxychem, a bond dated August 30, 1991 in the principal amount
of $1,027,887 for the original issue discounted price of $675,000 (the
"Bond"), due on September 1, 1996.
Under an intercreditor agreement dated April 15, 1993 between
EnviroPlastics, Oxychem, Shawmut Bank, N.A. and the United States Small
Business Administration, Oxychem advanced EnviroPlastics an additional
$864,000 for working capital with regard to the operation of the plastic
recycling facility (as defined in the intercreditor agreement, the "Oxychem
Advance").
On May 1, 1995, Lyondell acquired certain assets of Oxychem and as a
result, became the successor in interest to Oxychem in the Master Recycling
Agreement, the Bond Purchase Agreement, the Bond, and the Oxychem Advance.
On November 30, 1996, EnviroPlastics and Lyondell mutually agreed to
terminate the Master Recycling Agreement. Under the terms of the agreement,
Lyondell forever canceled, released and forgave the obligation of
EnviroPlastics to redeem the bond and to pay the interest accrued since the
issuance of the bond. As of the date of the Agreement, the principal amount
due on the bond was $1,027,887. In addition, Lyondell forgave, canceled and
released the Company from any obligation under the Oxychem Advance in the
amount of $864,000.
The forgiveness of debt is presented as an extraordinary item in the
Statement of Earnings (Loss) and Retained Earnings (Deficit). It is comprised
of $1,891,887 of the total principal due to Lyondell on the date of
forgiveness, net of the remaining unamortized deferred charges of $84,657.
6 - MAJOR CUSTOMERS
The approximate sales and accounts receivable, trade and related
percentages to the Company's major customers were as follows:
Sales for the year ended
December 31, 1996 December 31, 1995
Customer Amount % Amount %
A $4,491,281 85.9% $6,731,469 94.0%
Accounts receivable, trade
December 31, 1996 December 31, 1995
Customer Amount % Amount %
A $15,486 7.2% $52,735 60.8%
8<PAGE>
<PAGE>
ENVIROPLASTICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Continued)
7 - RELATED PARTY TRANSACTIONS
The Company made operating advances to an affiliated company,
EnviroProducts Corporation, to support general business activities. The
balance due to the Company as of December 31, 1995 was $115,215 which
increased to a total of $147,851 during 1996. EnviroProducts suspended
operations during 1996 and was unable to repay the Company. As a result, the
company wrote off the $147,851 due from the affiliate.
8 - LOSS ON ACQUISITION OF BUILDING
The Company made a $5,000 security deposit and incurred $66,297 of pre-
development costs for a new production facility. The efforts to purchase the
building were terminated in 1996 due to factors outside of the company's
control. As a result, the $66,297 was recorded as a loss in 1996. The $5,000
security deposit was returned to the company early in 1997.
9 - CONCENTRATION OF CREDIT RISK
The Company maintains cash balances with a financial institution. The
balances at this institution are insured by the Federal Deposit Insurance
Corporation. The uninsured cash balances totaled $59,000 as of December 31,
1996.
10 - LEASE OF BUILDING
The Company's five year lease that began July 1, 1991, expired on June
30, 1996. The rent expense payment at the end of the lease agreement was
$6.50 per square foot. The Company and lessor amended the lease to extend the
term by one year, beginning July 1, 1996, and negotiated the rent payment to
remain the same as of June 30, 1996. The rent expense was $255,627 and
$209,337 for December 31, 1996 and 1995 respectively.
11 - INTERM UNAUDITED FINANCIAL STATEMENTS
In the opinion of management, the accompanying financial statements of
EnviroPlastics Corporation (the "Company") includes all adjustments necessary
to present fairly the financial position, results of operations, and cash
flows for the periods presented. These financial statements should be read in
connection with the financial statements and notes thereto included in the
December 31, 1996 and 1995 financial statements of the Company. The results
of operations for the six months ended June 30, 1997 and 1996 are not
necessarily indicative of the results expected for the year.
9<PAGE>
<PAGE>
U. S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma consolidated financial statements
gives effect to the combination of U.S. Plastic Lumber Corp. and Subsidiaries
(the "Company") with RPI (acquired January 27, 1997), ARDT (acquired February
24, 1997), ESP (acquired March 28, 1997), ITS (acquired March 31, 1997), and
EPC (acquired June 30, 1997). The pro forma consolidated financial statements
are based on the historical financial statements of the Company, RPI, ARDT,
ESP, ITS and EPC and estimates and assumptions set forth below and in the
notes to the pro forma consolidated financial statements.
The pro forma consolidated statements of operations presents pro forma
results from operations for the year ended December 31, 1996 and the six month
period ended June 30, 1997. For purposes of the pro forma consolidated
statements of operations, the acquisitions of RPI, ARDT, ESP, ITS and EPC are
included as if the acquisitions had been made on January 1, 1996. The pro
forma consolidated statements of operations for the year ended December 31,
1996 includes: (i) the audited financial information of the Company for the
year ended December 31, 1996; (ii) the audited financial information of ITS
and EPC for the year ended December 31, 1996; and (iii) the unaudited
financial information of RPI, ARDT and ESP for the year ended December 31,
1996.
The pro forma consolidated statement of operations for the six months
ended June 30, 1997 includes: (i) the unaudited financial information of the
Company for the six months ended June 30, 1997 (which includes RPI for the
five months ended June 30, 1997, ARDT for the four months ended June 30, 1997,
and ESP and ITS for the three months ended June 30, 1997); (ii) the unaudited
financial information of RPI for the one month period ended January 31, 1997;
(iii) the unaudited financial information of ARDT for the two months ended
February 28, 1997; (iv) the unaudited financial information of ESP and ITS for
the three months ended March 31, 1997 and (v) the unaudited financial
information of EPC for the six months ended June 30, 1997.
Pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deems appropriate. The
unaudited pro forma consolidated financial statements presented herein are not
necessarily indicative of the results the Company would have obtained had such
events occurred at the beginning of the period, as assumed, or the future
results of the Company.
<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
CONSOLIDATED
PRO FORMA STATEMENT
USPLC RPI ARDT ESP ITS EPC ADJUSTMENTS OF OPERATIONS
---------- --------- --------- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 6,627,242 $1,395,322 $2,343,047 $1,036,303 $3,905,783 $5,229,915 (a)$(425,000) $20,112,612
(c) (77,000)
Cost of goods sold 6,356,786 949,182 1,624,935 737,979 3,225,836 4,529,969 (a) (425,000) 16,922,687
---------- --------- --------- --------- --------- --------- ----------- ----------
GROSS PROFIT 270,456 446,140 718,112 298,324 679,947 699,946 77,000 3,189,925
General and admin-
istrative expenses 3,729,788 233,791 808,685 286,539 735,236 478,220 (b) 68,000 6,340,259
Abandonment loss 199,087 - - - - 66,297 - 265,384
---------- --------- --------- --------- --------- --------- ----------- ----------
OPERATING INCOME (LOSS) (3,658,419) 212,349 (90,573) 11,785 (55,289) 155,429 9,000 (3,415,718)
Interest income 56,272 1,608 - - - - - 57,880
Interest expense (77,372) (23,744) (14,662) (1,524) (25,914) (161,543) (d) 43,000 (347,759)
Other income (expense) - 452 3,069 - - (285,855) - (282,334)
---------- --------- --------- --------- --------- --------- ----------- ----------
INCOME (LOSS) BEFORE PRO-
VISION FOR INCOME TAXES
AND EXTRAORDINARY ITEMS (3,679,519) 190,665 (102,166) 10,261 (81,203) (291,969) (34,000) (3,987,931)
Provision for income taxes (61,516) 1,762 - 1,929 12,543 13,251 (e) (66,000) (98,026)
---------- --------- --------- --------- --------- --------- ----------- ----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS (3,618,003) 188,903 (102,166) 8,332 (93,751) (305,220) 32,000 (3,889,905)
Extraordinary items,
net of taxes 66,859 - - - - 1,807,230 (f)(741,000) 1,133,089
---------- --------- --------- --------- --------- --------- ----------- ----------
NET INCOME (LOSS) $(3,551,144) $ 188,903 $ (102,166) $ 8,332 $ (93,751) $1,502,010 $ (709,000) $(2,756,816)
---------- --------- --------- --------- --------- --------- ---------- ----------
Primary loss per share:
Loss before extra-
ordinary items $ (.30)
Extraordinary items .09
---------
NET LOSS $ (.21)
---------
Weighted-average number of
shares outstanding (g) 12,930,358
----------
</TABLE>
See accompanying notes to the pro forma
consolidated financial statements.<PAGE>
<PAGE>
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
CONSOLIDATED
PRO FORMA STATEMENT
USPLC RPI ARDT ESP ITS EPC ADJUSTMENTS OF OPERATIONS
---------- --------- -------- -------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $7,440,597 $ 82,868 $ 38,276 $ 147,145 $1,785,026 $2,891,508 (a)$(951,000) $11,434,420
Cost of goods sold 5,286,679 62,604 59,984 137,434 1,483,824 3,125,953 (a) (951,000) 9,168,778
(c) (36,700)
---------- --------- -------- -------- --------- --------- ----------- -----------
GROSS PROFIT 2,153,918 20,264 (21,708) 9,711 301,202 (234,445) 36,700 2,265,642
General and admin-
istrative expenses 1,938,369 13,032 38,432 131,545 188,586 285,019 (b) 23,000 2,617,983
---------- --------- -------- -------- --------- --------- ----------- -----------
OPERATING INCOME (LOSS) 215,549 7,232 (60,140) (121,834) 112,616 (519,464) 13,700 (352,341)
Other income - - - - - 97,822 - 97,822
Interest income 21,622 189 - - - - - 21,811
Interest expense (63,535) (2,055) (1,911) (1,693) (4,638) (51,639) (d) 2,900 (122,571)
---------- --------- -------- -------- --------- --------- ----------- -----------
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES 173,636 5,366 (62,051) (123,527) 107,978 (473,281) 16,600 (355,279)
Provision for income taxes - - - (29,918) 18,738 - (e) 11,180 -
---------- --------- -------- -------- --------- --------- ----------- -----------
NET INCOME (LOSS) $ 173,636 $ 5,366 $ (62,051) $ (93,609) $ 89,240 $ (473,281) $ 5,420 $ (355,279)
---------- --------- -------- -------- --------- --------- ----------- -----------
Primary loss per share:
Net loss $ (.03)
-----------
Weighted-average number of
shares outstanding (g) 13,535,071
----------
</TABLE>
See accompanying notes to the pro forma
consolidated financial statements.
<PAGE>
<PAGE>
U. S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Unaudited Pro Forma Consolidated Statement of Operations Adjustments
(a) Adjustment to eliminate intercompany sales.
(b) Adjustment to reflect the increase in amortization expense for the
goodwill recorded related to the acquisitions. The goodwill is
being amortized on a straight-line basis over an estimated life of
40 years.
(c) Adjustment to reflect the decrease in depreciation expense for
property and equipment recorded at their estimated fair value and
depreciated over their estimated future lives.
(d) Adjustment to reflect the net increase in interest expense for
notes issued to fund the RPI acquisition and for notes not assumed
in the acquisition of ARDT.
(e) Adjustment to income taxes for benefit of the consolidated
entities.
(f) Adjustment to provide income taxes on extraordinary item for
entity treated as subchapter S corporation had they been subject
to federal and state income taxes for the periods presented.
(g) The weighted average shares outstanding used to calculate pro
forma primary loss per share is based on the historical average
number of shares of common stock of the Company outstanding during
the period adjusted for the acquisitions as if they had occurred
on January 1, 1996. Common stock equivalents have been excluded
as they are anti-dilutive. Fully diluted loss per share amounts
are not presented as they are anti-dilutive. The loss before
extraordinary items and net loss has been adjusted for dividends
on convertible preferred stock.
<PAGE>
<PAGE>
No dealer, salesman or other person
is authorized to give any
information or to make any
representations other that those
contained in this Prospectus in
connection with the offer made
hereby. If given or made, such
information or representations must
not be relied upon as having been
authorized by the Company. This
Prospectus does not constitute an
offer to sell or a solicitation of
an offer to buy any of the
securities covered hereby in any
jurisdiction or to any person to
whom it is unlawful to make such
offer or solicitation in such
jurisdiction. Neither the delivery
of this Prospectus nor any sale made
hereunder shall, in any
circumstances, create any
implication that there has been no
change in the affairs of the Company
since the date hereof.
TABLE OF CONTENTS Page
AVAILABLE INFORMATION. . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . 5
DILUTION . . . . . . . . . . . . . 10
USE OF PROCEEDS. . . . . . . . . . 11
MARKET INFORMATION & DIVIDEND
POLICY . . . . . . . . . . . 11
MANAGEMENT'S DISCUSSION AND
ANALYSIS . . . . . . . . . . 12
BUSINESS . . . . . . . . . . . . . 19
MANAGEMENT . . . . . . . . . . . . 31
PRINCIPAL SHAREHOLDERS . . . . . . 37
CERTAIN TRANSACTIONS . . . . . . . 38
DESCRIPTION OF SECURITIES. . . . . 44
SHARES ELIGIBLE FOR FUTURE
SALE . . . . . . . . . . . . 48
PLAN OF DISTRIBUTION . . . . . . . 48
LEGAL MATTERS. . . . . . . . . . . 49
EXPERTS. . . . . . . . . . . . . . 49
FINANCIAL STATEMENTS . . . . See Index
<PAGE>
U.S. PLASTIC LUMBER CORP.
950,000 Shares
Common Stock
PROSPECTUS
, 1997
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers
The statutes, charter provisions, bylaws, contracts or other arrangements
under which controlling persons, directors or officers of the registrant are
insured or indemnified in any manner against any liability which they may
incur in such capacity are as follows:
(a) Section 78.751 of the Nevada Business Corporation Act provides that each
corporation shall have the following powers:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with the action, suit or proceeding if he acted in good faith
and in a manner which he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him in connection with the defense or settlement of
the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction, determines upon application that in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsections 1 and 2, or in defense of any claim,
issue or matter therein, he must be indemnified by the corporation against
expenses, including attorneys' fees, actually and reasonably incurred by him
in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court
or advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding so orders, by independent legal
counsel, in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the act, suit
or proceeding cannot be obtained, by independent legal counsel in a written
opinion.
5. The certificate or articles of incorporation, the bylaws or an agreement
made by the corporation may provide that the expenses of officers and
directors incurred in defending a civil or criminal action, suit or proceeding
must be paid by the corporation as they are incurred and in advance of the
final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if
it is ultimately determined by a court of competent jurisdiction that he is
not entitled to be indemnified by the corporation. The provisions of this
subsection do not affect any rights to advancement of expenses to which
corporate personnel other than director of officers may be entitled under any
contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered
by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
certificate or articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding his
office, except that indemnification, unless ordered by a court pursuant to
subsection 2 or for the advancement of expenses made pursuant to subsection 5,
may not be made to or on behalf of any director or officer if a final
adjudication establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action.
(b) Continues for a person who has ceased to be a director, officer, employee
or agent and inures to the benefit of the heirs, executors and administrators
of such a person."
(b) The registrant's Articles of Incorporation limit liability of its
Officers and Directors to the full extent permitted by the Nevada Business
Corporation Act.
<PAGE>
ITEM 25. Other Expenses of Issuance and Distribution*
The following table sets forth all estimated costs and expenses, other than
underwriting discounts, commissions and expense allowances, payable by the
registrant in connection with the maximum offering for the securities included
in this registration statement:
Amount
SEC registration fee $ 719.70
Blue sky fees and expenses 5,000.00
Printing and shipping expenses 2,500.00
Legal fees and expenses 45,000.00
Accounting fees and expenses 10,000.00
Transfer and Miscellaneous expenses 11,780.30
-----------
Total $ 75,000.00
* All expenses are estimated except the Commission filing fee.
ITEM 26. Recent Sales of Unregistered Securities
During 1994, the Company (which was then known as Front Street, Inc.), issued
18,750,000 shares (pre-split) in February and 15,000,000 shares (pre-split) in
June, in connection with the acquisitions of Educational Storybooks, Inc. and
one other company, both of which were privately held companies, in stock for
stock exchanges which were intended to be tax free reorganizations under
Section 368(a) of the Internal Revenue Code. Later that same year, these
acquisitions were both rescinded and the stock issued was cancelled. These
transactions were not registered under the Securities Act of 1933 (the "Act")
in reliance on the exemption from registration in Section 4(2) of the Act, as
transactions not involving any public offering. These securities were issued
as restricted securities and the certificates were stamped with restrictive
legends to prevent any resale without registration under the Act or in
compliance with an exemption.
In October, 1995, the Company (which was then known as Educational Storybooks
International, Inc.) issued 200,000 shares (pre-split) for $10,000 in a
private placement. This transaction was not registered under the Act in
reliance on the exemption from registration in Section 4(2), as transactions
not involving any public offering. These securities were issued as restricted
securities and the certificates were stamped with restrictive legends to
prevent any resale without registration under the Act or in compliance with an
exemption.
In March, 1996, the Company entered into an Agreement and Plan of
Reorganization with Earth Care Global Holdings, Inc. ("Earth Care"), pursuant
to which the Company reverse split its common stock on a 1 for 16 basis, and
then issued 4,196,316 post split shares of its authorized but previously
unissued common stock to the shareholders of Earth Care to acquire all the
issued and outstanding stock of Earth Care in a stock for stock exchange,
which was intended to be a tax free reorganization under Section 368(a) of the
Internal Revenue Code, and was accounted for, for financial reporting
purposes, as an acquisition by Earth Care of the Company. This transaction
was not registered under the Act in reliance on the exemption from
registration in Section 4(6) of the Act, as an offering made to accredited
investors, all of whom were officers and directors of Earth Care and/or
represented that they were otherwise accredited investors. These securities
were issued as restricted securities and the certificates were stamped with
restrictive legends to prevent any resale without registration under the Act
or in compliance with an exemption.
As a condition precedent to the closing of the Earth Care acquisition, the
Company raised $1,000,000 of capital through an offering of its securities.
The offering was completed and the acquisition closed on or about March 28,
1996. These transactions were not registered under the Act in reliance on the
exemption from registration in Section 3(b) of the Act, and Rule 504 of
Regulation D promulgated thereunder, in that securities with an aggregate
offering price not exceeding $1,000,000 were offered and sold by an issuer
that was not subject to the reporting requirements of the Securities Exchange
Act of 1934, and was not an investment company or a company that had no
specified business purpose.
In April, 1996 the Company acquired all of the assets of DuraTech Industries.
The Company issued 24,772 post-split shares of its authorized but previously
unissued common stock to the shareholders of Duratech to acquire all the
issued and outstanding stock of Duratech in a stock for stock exchange which
was intended to be a tax free reorganization under Section 368(a) of the
Internal Revenue Code. This transaction was not registered under the Act in
reliance on the exemption from registration in Section 4(2), as transactions
not involving any public offering. These securities were issued as restricted
securities and the certificates were stamped with restrictive legends to
prevent any resale without registration under the Act or in compliance with an
exemption.
In December, 1996, the Company formed the Clean Earth division, that acquired
in a pooling of interest a wholly owned subsidiary, Clean Earth of New Castle,
Inc. The Company issued 5,400,000 post-split shares of its authorized but
previously unissued common stock to the shareholder of Clean Earth to acquire
all the issued and outstanding stock of Clean Earth in a stock for stock
exchange which was intended to be a tax free reorganization under Section
368(a) of the Internal Revenue Code. This transaction was not registered
under the Act in reliance on the exemption from registration in Section 4(2),
as transactions not involving any public offering. These securities were
issued as restricted securities and the certificates were stamped with
restrictive legends to prevent any resale without registration under the Act
or in compliance with an exemption.
In January, 1997, the Company acquired Recycled Plastics Industries, Inc.
(RPI), located in Green Bay, Wisconsin. The Company paid $1,200,000 cash and
issued 1,000,000 shares of its Common Stock to the shareholders of RPI in the
acquisition. This transaction was not registered under the Act in reliance on
the exemption from registration in Section 4(2), as transactions not involving
any public offering. These securities were issued as restricted securities
and the certificates were stamped with restrictive legends to prevent any
resale without registration under the Act or in compliance with an exemption.
In February, 1997, the Company acquired Advanced Remediation and Disposal
Technologies, Inc. (ARDT). ARDT is engaged in environmental consulting and
clean up of contaminated sites primarily involving water and soils. The
Company issued 300,000 shares of its Common Stock to the former shareholders
of ARDT. This transaction was not registered under the Act in reliance on the
exemption from registration in Section 4(2), as transactions not involving any
public offering. These securities were issued as restricted securities and
the certificates were stamped with restrictive legends to prevent any resale
without registration under the Act or in compliance with an exemption.
During the period from June, 1997 through February, 1997, the Company has
offered and sold 193,970 shares of Class A Preferred Stock to investors at $20
per share, and raised $3,879,400 in proceeds, and subsequently issued an
additional 5,279 shares in stock dividends on these shares. These
transactions were not registered under the Act in reliance on the exemption
from registration in Section 4(2), as transactions not involving any public
offering. These securities were issued as restricted securities and the
certificates were stamped with restrictive legends to prevent any resale
without registration under the Act or in compliance with an exemption.
During 1996, the Company issued a total of 5,565 shares of Common Stock
pursuant to the exercise of outstanding options held by two individuals who
were officers or directors of the Company. In 1997, the Company issued 500
shares to directors for attendance at meetings. These transactions were not
registered under the Act in reliance on the exemption from registration in
Section 4(2), as transactions not involving any public offering. These
securities were issued as restricted securities and the certificates were
stamped with restrictive legends to prevent any resale without registration
under the Act or in compliance with an exemption.
During February, 1997, the Company issued 187,500 shares in connection with
and as partial consideration for the licensing agreement with Rutgers
University. These transactions were not registered under the Act in reliance
on the exemption from registration in Section 4(2), as transactions not
involving any public offering. The securities were issued as restricted
securities and certificates were stamped with restrictive legends to prevent
any resale without registration under the Act or in compliance with an
exemption.
On March 28, 1997, the Company acquired Environmental Specialties Plastics
(ESP), a marketing and distribution company of recycled plastic lumber
products in Guasti, California. The shareholders of ESP received $110,000 in
cash and 25,150 shares of the Company's common stock for a purchase price of
$122,575. These transactions were not registered under the Act in reliance on
the exemption from registration in Section 4(2), as transactions not involving
any public offering. The securities were issued as restricted securities and
certificates were stamped with restrictive legends to prevent any resale
without registration under the Act or in compliance with an exemption.
On March 31, 1997, the Company acquired Integrated Technical Services, Inc.
(ITS), an environmental consulting and construction company in Winslow, New
Jersey. The stockholders of ITS received cash, 185,000 shares of the
Company's common stock and 67,572 common stock options in the acquisition.
These transactions were not registered under the Act in reliance on the
exemption from registration in Section 4(2), as transactions not involving any
public offering. The securities were issued as restricted securities and
certificates were stamped with restrictive legends to prevent any resale
without registration under the Act or in compliance with an exemption.
On June 20, 1997, the Company issued 1,111,111 shares of Common Stock to two
investment funds, a partnership, and one accredited private investor. These
transactions were not registered under the Act in reliance on the exemption
from registration in Rule 506 of Regulation D, promulgated under Section 4(2),
as transactions not involving any public offering, consisting of sales made
solely to accredited investors. Each entity investor has assets substantially
in excess of $5,000,000 and was not formed for the purpose of investing in the
securities. The natural person who invested has net worth substantially in
excess of $1,000,000. The securities were issued as restricted securities and
certificates were stamped with restrictive legends to prevent any resale
without registration under the Act or compliance with an exemption.
On June 30, 1997, the Company acquired EnviroPlastics Corp., (EPC) a recycled
plastic raw material regrind operation in Auburn, MA. The stockholders of
EPC received 305,000 shares of the Company's common stock. These transactions
were not registered under the Act in reliance on the exemption from
registration in Section 4(2), as transactions not involving any public
offering. The securities were issued as restricted securities and
certificates were stamped with restrictive legends to prevent any resale
without registration under the Act or in compliance with an exemption.
<PAGE>
ITEM 27. Exhibits Index
SEC No. Document Exhibit No.
2 Agreement & Plan of Reorganization 2.1*
(Earth Care/Educational Storybooks)
3 Articles of Incorporation (Front Street) 3.1*
3 Articles of Amendment (Front Street) 3.2*
3 Articles of Amendment (Educational Storybooks) 3.3*
3 Articles of Amendment (Educational Resources) 3.4*
3 Articles of Merger (Educational Resources and 3.5*
U.S. Plastic Lumber Corp.
3 By-Laws 3.6*
4 Common Stock Specimen Certificate 4.1*
4 Warrant Agreement 4.2*
4 Series A Warrant Certificate 4.3*
4 Series B Warrant Certificate 4.4*
5,24 Opinion & Consent of Counsel 5.1 & 24.1*
10 Jeanell Sales Corp. Acquisition Agreement 10.1*
10 Duratech Acquisition Agreement 10.2*
10 Clean Earth Acquisition Agreement 10.3*
10 RPI Acquisition Agreement 10.4*
10 ARDT Acquisition Agreement 10.5*
10 Employment Agreement - Mark Alsentzer 10.6*
10 Employment Agreement - Harold Gebert 10.7*
10 Employment Agreement - David Farrow 10.8*
10 Rutgers Licensing Agreement 10.9*
10 ESP Acquisition Agreement 10.10
10 ITS Acquisition Agreement 10.11
10 EPC Acquisition Agreement 10.12
10 ICC/USPL Joint Venture Agreement 10.13
10 S D & G License and Operating Agreement 10.14
10 Ground Lease Agreement (Carteret Biocycle) 10.15
10 Lease Agreement (Brock Mgt/Earth Care TN) 10.16
10 Lease Agreement (APEC/Earth Care Midwest) 10.17
10 Lease Agreement (Plastic Properties LLC/RPI) 10.18
10 Lease Agreement (Dalphon Sr./Clean Earth) 10.19
10 Lease Agreement (Glades Twin Plaza/Earth Care) 10.20
10 Lease Agreement (Consol. Realty/EPC) 10.21
11 Statement re computation of per share earnings 11.1
21 List of subsidiaries 21.1
23 Consent of Accountants (USP) 23.1
23 Consent of Accountants (ITS) 23.2
23 Consent of Accountants (EPC) 23.3
27 Financial Data Schedule (USP) 27.1
* Exhibit previously filed
<PAGE>
ITEM 28. Undertakings
The registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a post-
effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
(ii) Include any additional or changed material information on the plan of
distribution; and
(iii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
Registration Statement.
(2) For determining any liability under the Securities Act, treat each post-
effective amendment as a new Registration Statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Boca Raton , State of Florida , on August 20 , 1997.
U.S. PLASTIC LUMBER CORP.
By: /s/ Mark S. Alsentzer
Mark S. Alsentzer, President (Chief Executive Officer)
By: /s/ Lionel A. Marquis
Lionel A. Marquis, (Chief Financial Officer)
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Thomas G. Kimble or Van L. Butler, the
undersigned's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for the undersigned and in the undersigned's
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same with all exhibits thereto, and all documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and
perform each and every act and thing, requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be
done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature: /s/ Harold H. Gebert Date: August 20 , 1997
Harold H. Gebert, Chairman & Director
Signature: /s/ David A. Farrow Date: August 20 , 1997
David A. Farrow, Vice Chairman & Director
Signature: /s/ Mark S. Alsentzer Date: August 20 , 1997
Mark S. Alsentzer, President & Director
Signature: /s/ Raymond J. Kiernan Date: August 21 , 1997
Raymond J. Kiernan, Director
Signature: /s/ Lester E. Moody Date: August 21 , 1997
Lester E. Moody, Director
Signature: /s/ James Blosser Date: August 21 , 1997
James Blosser, Director
Signature: /s/ Roger Zitrin Date: August 22 , 1997
Roger Zitrin, Director
Signature: /s/ August C. Schultes Date: August 21 , 1997
August C. Schultes, III, Director
Signature: /s/ Gary J. Ziegler Date: August 21 , 1997
Gary J. Ziegler, Director
Signature: /s/ Steve Groth Date: August 21 , 1997
Steve Groth, Director
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 mark 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 Elizabeth Head, 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) Elizabeth Head shall have entered into an Employment Agreement with the
Company in substantially the form attached as Exhibit B. James Chew 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
2300 W. Glades Road
Suite 440W
Boca Raton, Florida 33431
Attention: Mark Alsentzer, President and CEO
Telecopy: (561)394-5335
(b) If to any Shareholder or the Company:
Elizabeth Head
P.O. Box 1114
2825 Old Brookside Rd.
Guasti, CA 91743
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:_________________________
Mark S. Alsentzer, President
WITNESS
SHAREHOLDERS:
_______________________ _________________________
Elizabeth Head
_______________________ _________________________
James Chew
COMPANY:
Environmental Specialty Products,
Inc
_______________________ ______________________________
Elizabeth Head, President
List of Exhibits and Schedules
EXHIBITS
Exhibit A List of Shareholders
Exhibit B Employment Agreements of Elizabeth Head
Exhibit C Non-Compete Agreements of James Chew
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
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as of
March 31, 1997 among U.S. PLASTIC LUMBER CORPORATION, a Nevada corporation and
Clean Earth, Inc. (the "Purchaser") or of any their affiliates or subsidiaries
and the Persons listed on Exhibit "A" attached hereto (such Persons are
sometimes referred to herein collectively as the "Shareholders" and
individually as a "Shareholder").
RECITALS
A. The Shareholders own (i) all of the issued and outstanding capital stock
of INTEGRATED TECHNICAL SERVICES, INC., a Delaware corporation (the
"Company").
B. The Shareholders wish to sell, and the Purchaser wishes to purchase, all
of the issued and outstanding capital stock of the Company upon the terms and
subject to the conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, the terms
defined in this Article 1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms
of any of the terms herein defined. Unless otherwise indicated, any reference
herein to a "Section", "Article", or "Schedule" shall mean the applicable
section, article or schedule of or to this Agreement. All accounting terms
used in this Agreement not defined in this Article 1 shall, except as
otherwise provided for herein, be construed in accordance with generally
accepted accounting principles, consistently applied.
"Action" shall mean any actual or threatened claim, action, suit, arbitration,
hearing, inquiry, proceeding, complaint, charge or investigation by or before
any Governmental Entity or arbitrator and any appeal from any of the forgoing.
"Affiliate" of a Person shall mean any Person that directly or indirectly
controls, is controlled by, or is under common control with the indicated
Person.
"Agreement" shall mean this Securities Purchase Agreement.
"Balance Sheet" and "Balance Sheet Date" shall have the meaning assigned to
such terms in Section 4.4(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Closing" and "Closing Date" shall have the respective meanings assigned to
such terms in Section 2.3.
"Common Stock" shall mean the Company's authorized class of common stock,
$0.01 par value per share.
"DOL" shall mean the United States Department of Labor.
"Damages" shall mean any and all losses, liabilities, obligations, costs,
expenses, damages or judgments of any kind or nature whatsoever (including
reasonable attorneys', accountants, and expert's fees, disbursements of
counsel, and other costs and expenses incurred pursuing indemnification claims
under Article 10 hereof).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean any Person which is (or at any relevant time was)
a member of a controlled group of corporations within the meaning of Code
Section 414 (b), all trades or businesses under common control within the
meaning of Code Section 414(c), and all affiliated service groups within the
meaning of Code Section 414(m), of which the Company is (or any relevant time
was) a member.
"Environmental Laws" shall mean all Legal requirements pertaining to the
protection of the environment, the treatment, emission and discharge of
gaseous, particulate and effluent pollutants and the use, handling storage,
treatment, removal transport, transloading, cleanup decontamination, discharge
and disposal of Hazardous Substances, including, without limitation, those
statutes, laws, rules and regulations set forth below in the definitions of
"Hazardous Material".
"Governmental Entity" shall mean any local, state, federal or foreign (i)
court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the IRS and other
taxing authorities.
"Hazardous Material" shall mean any flammable, ignitable, corrosive, reactive,
radioactive or explosive substance or material, hazardous waste, toxic
substance or related material and any other substance or material defined or
designated as a hazardous or toxic substance, material or waste by any
Environmental Law currently in effect or as amended or promulgated in the
future and shall include, without limitation:
(a) those substances included within the definitions of "hazardous
substances", "hazardous materials", "toxic substances", or "solid waste" in
the Comprehensive Environmental response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Sections 9601, et. seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Sections 6901 et.seq., and the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 et. seq., and in the regulations
promulgated pursuant thereto.
(b) those substances listed in the United States Department of
Transportation Table (49CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor thereto) as hazardous
substances (40CFR Part 302 and any amendments thereto).
(c) such other substances, materials and wastes that are or become regulated
under applicable local, state or federal laws or regulations, or which are or
become classified as hazardous or toxic under any Legal Requirement; and
(d) any material, waste or substance that is, in whole or in part, (i)
petroleum, asbestos, polychorinated biphenyls, methylene chloride,
trichorothylene, 1, 2-transdichoroethylene, dioxins or dibenzofurans, (ii)
designated as an "extremely hazardous substance" pursuant to Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended, or
(iii) designated as a "hazardous substance" pursuant to Section 311 of the
Clean Water Act, 33 U.S.C. Sections 1251 et. seq. (U.S.C. Section 1321) or
listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section
1317), or Section 112 or other sections of the Clean Water Act, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"Indebtedness" shall mean, when used with reference to any Person, without
duplication, (i) any liability of such Person created or assumed by such
Person, or any Subsidiary thereof, (A) for borrowed money, (B) evidence by a
bond, note, debenture, or similar instrument (including a purchase money
obligation, deed of trust or mortgage) given in connection with the
acquisition of, or exchange for, any property or assets (other than inventory
or similar property acquired and consumed in the Ordinary Course), including
securities and other Indebtedness, (C) in respect of letters of credit issued
for such Person's account and "swaps" of interest and currency exchange rate
(and other interest and currency exchange rate hedging agreements) to which
such Person is a party or (D) for the payment of money as lessee under leases
that should be, in accordance with generally accepted accounting principles,
recorded as capital leases for financial reporting purposes; (ii) any
liability of others described in the preceding clause (i) guaranteed as to
payment of principal and interest by such Person or in effect guaranteed by
such Person through an agreement, contingent or otherwise, to purchase,
repurchase or pay the related Indebtedness or to acquire security therefor;
(iii) all liabilities or obligations secured by a Lien upon property owned by
such Person and upon liabilities or obligations such Person customarily pays
interest or principal, whether or not such Person has not assumed or become
liable for the payment of such liabilities or obligations; and (iv) any
amendment, renewal, extension, revision or refunding or any such liability or
obligation; provided, however, that Indebtedness shall not include any
liability for compensation of such Person's employees or for inventory or
similar property acquired and consumed in the Ordinary Course or for services.
"Leased Real Property" shall mean all real property, including Structures,
leased by the Company.
"Legal Requirements" shall mean any statute, law, ordinance, rule, regulation,
permit, order, writ, judgment, injunction, decree or award issued, enacted or
promulgated by any Governmental Entity or any arbitrator.
"Lien" shall mean all liens (including judgment and mechanics liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options or other charges, encumbrances or restrictions.
"Material Adverse effect" shall mean a material adverse effect on the
business, financial condition, properties, profitability, prospects or
operations of the Company.
"Noncompetition Agreement(s)" shall have the meaning assigned to such term in
Section 8.1(h).
"Ordinary Course" shall mean, when used with reference to the Company, the
ordinary course of the Company's business, consistent with past practices.
"Owned Real Property" shall mean all real property, including Structures,
owned by the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall have the meaning assigned to such term in Section 4.16.
"Permitted Liens" shall mean (a) Liens for ad valorem real or personal
property taxes or assessments not at the time due and (b) Liens in respect of
pledges or deposits under worker's compensation laws or similar legislation,
carriers', warehousemen's, mechanic's, laborers' and materialmen's and similar
liens, if the obligations secured by such Liens are not then delinquent.
"Person" shall mean all natural person's, corporations, business trusts,
associations, limited liability companies, companies partnerships, joint
ventures, Governmental Entities and any other entities.
"Real Property" shall mean the Owned Real Property and used and Leased Real
Property, collectively.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share Percentage" with respect to any Shareholder shall mean the percentage
that the number of Shares held by such Shareholder represents of the total
number of Shares, as set forth on Schedule "A".
"Shares" shall mean the shares of Common Stock of the Company held by the
shareholders.
"Stock" shall mean shares of common stock issued by the Purchaser to the
Shareholders as payment of the Purchase Price, as contemplated by Article 2
hereof.
" Structure" shall mean any facility, building, plant, factory, office,
warehouse structure or other improvement owned or leased by the Company.
"Subsidiary" of a Person shall mean any corporation, partnership, limited
liability company, association or other business entity at least 50% of the
outstanding voting power of which is at the time owned or controlled directly
or indirectly by such Person or by one or more of such subsidiary entity, or
both.
"Tax" shall mean any Federal, state, local or foreign income, gross receipts,
license, payroll, unemployment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including, without limitation, taxes under
Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), employment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alterative or add-on minimum, estimated tax or other tax, assessment or charge
of any kind whatsoever, including, without limitation, any interest, fine,
penalty or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for refund or
information, or statement relating to Taxes, and any exhibit, schedule,
attachment or amendment thereto.
2. PURCHASE AND SALE OF SECURITIES
2.1 Sale and Delivery. Each Shareholder agrees to sell and deliver to
Purchaser, and Purchaser agrees to purchase and accept from each Shareholder,
free and clear of all Liens, on the terms and conditions set forth in this
Agreement, and for the purchase price described in Section 2.2 below, good and
marketable title to the number of Shares set forth opposite the name of such
Shareholder on Exhibit "A". The Shares to be sold and purchased pursuant to
this Agreement constitute all of the outstanding capital stock of the Company.
2.2 Purchase Price. The Purchase Price for all of the Shares shall be equal
to One Hundred and Ten Thousand dollars ($110,000) plus One Hundred Eighty
Five Thousand (185,000) shares of the unregistered common Stock of USPL, to be
allocated among the Shareholders as set forth opposite their respective names
on Exhibit "A", subject to and payable as follows:
(a) One Hundred and Ten Thousand dollars ($110,000) to be paid
at time of Closing of this transaction and One Hundred and Sixty-six Thousand
Five Hundred (166,500) shares of unregistered common stock of USPL to be
issued simultaneously.
(b) Eighteen Thousand Five Hundred (18,500 ) shares to be
placed into an Escrow Account at time of Closing. Such shares shall be held in
an escrow fund (the "Stock Escrow Fund") under the terms and conditions of an
escrow agreement (the "Stock Escrow Agreement"), as set forth in Exhibit "B".
(c) Execution at the Closing of Employment Agreements for
Ted Budzynski and Martin Brubaker as set forth in Exhibit "C" effective as of
the Closing Date, and
(d) Execution at the Closing of Non-Compete Agreements of
the individuals as set forth in Exhibit "D".
(e) USPL will pay off shareholder notes as set forth on the
Balance Sheet dated December 31, 1996, 75 days subsequent to the Closing Date.
2.3 Additional Terms of Purchase.
(a) Registration Rights. The Purchaser will use its reasonable
best efforts to register the securities being issued hereunder at such time as
the Purchaser registers the shares owned by the Stout Partnership, but will be
under no obligation to register such shares.
(b) Dilution of Share Ownership. The Shareholders will suffer
dilution of share ownership to the same extent as other shareholders of
Purchaser, but Purchaser will not take any action to cause the Shareholders to
be diluted in their share ownership separate and apart from the share
ownership of other shareholders of Purchaser.
(c) Purchaser Guarantee. Purchaser shall provide Shareholders
at Closing with a corporate guarantee of payment of the Shareholder Notes
required pursuant to Section 2.2(e) in the form as attached on Exhibit I.
2.4 Closing". The purchase and sale of the Shares and the consummation of
the other transactions contemplated by this Agreement, (the "Closing") shall
occur at 10:00AM, local time, on April 8, 1997, simultaneously at the offices
of the Purchaser and at the office of the general counsel for the Company, or
at such other time, date and place as shall be agreed upon among the
Shareholders and the Purchaser upon fulfillment of all conditions precedent to
the Closing, such hour and date being herein generally referred to as the
"Closing Date". At the Closing:
(a) Each Shareholder shall deliver or cause to be delivered to Purchaser,
against the delivery by the Purchaser of the Stock, in payment by Purchaser of
the Purchase Price to such Shareholder:
(i) a certificate or certificates representing the Shares being sold by such
Shareholder hereunder duly endorsed for transfer, or accompanied by duly
executed assignments separate from the certificate, transferring to Purchaser
good and marketable title to such Shares, free and clear of all Liens;
(ii) executed non-compete agreements of the individuals as provided in Section
2.2(e).
(iii) all of the documents, certificates, and instruments required to be
delivered, or caused to be delivered, by such Shareholder pursuant to Section
8.1 hereof; and
(iv) all records, documents, and files of the Company, including, without
limitation, all minute books, stock records, stock certificate books, and
internal accounting records.
(b) Purchaser shall deliver or cause to be delivered to each Shareholder,
against delivery of the certificate or certificates representing the Shares:
(i) certificate(s) of Stock for One Hundred and Sixty-six Thousand (166,500)
shares of the unregistered common stock of USPL allocated among the
Shareholders as set forth opposite their respective names on Exhibit "A";
(ii) Eighteen Thousand Five Hundred (18,500) shares to be placed into an
Escrow Account as provided in Section 2.2 (b).
(iii) One Hundred and Ten Thousand Dollars ($110,000) by wire transfer to the
attorney escrow account of general counsel for the Company.
(iv) Executed Employment Agreements for Ted Budzynski and Martin Brubaker as
provided in Section 2.2(d); and
(v) all of the documents, if any, required to be delivered by Purchaser
pursuant to Section 8.2 hereof; and
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDERS
Each of the Shareholders hereby severally represents and warrants to, and
covenants and agree with, Purchaser that:
3.1 Ownership of Shares. Such Shareholder owns of record and beneficially
the number of Shares set forth opposite the name of such Shareholder on
Exhibit "A" hereto, and has, and at all times prior to and as of the Closing
such Shareholder will have, good and marketable title to such Shares free and
clear of all Liens.
3.2 Delivery of Good Title. Upon delivery of the Shares to be sold by such
Shareholder hereunder and delivery of the Stock therefor pursuant to this
Agreement, Purchaser will have good and marketable title to such Shares free
and clear of all Liens.
3.3 Execution and Delivery. Except as listed on Schedule 3.3, all consents,
approvals, authorizations and order necessary for the execution, delivery and
performance by such Shareholder of this Agreement (including, without
limitation, the transfer and sale of the Shares to be sold by such Shareholder
to Purchaser) have been duly and lawfully obtained, and such Shareholder has,
and at the Closing will have, full right, power, authority and capacity to
execute, deliver and perform this Agreement. This Agreement has been duly
executed and delivered by such Shareholder and constitutes a legal, valid and
binding agreement of such Shareholder enforceable against such Shareholder in
accordance with its terms.
3.4 No Conflicts. Except as listed on Schedule 3.4, the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not conflict with or result in a breach or violation
of any term or provision of, or (with or without notice or passage of time, or
both) constitute a default under, any indenture, mortgage, deed of trust,
trust (constructive and other), loan agreement or other agreement or
instrument to which such Shareholder is a party or by which such Shareholder
or such Shareholder's Shares are bound, or violate any Legal Requirement
applicable to or binding upon such Shareholder.
3.5 No Brokers. No broker, finder or similar agent has been employed by or
on behalf of such Shareholder in connection with this Agreement or the
transactions contemplated hereby, and such Shareholder has not entered into
any agreement or understanding of any kind with any person or entity for the
payment of any brokerage commission, finder's fee or any similar compensation
in connection with this Agreement or the transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
The Shareholders hereby jointly and severally represent and warrant to, and
covenant and agree with, Purchaser that:
4.1 Organization and Good Standing.
(a) The Company has been duly organized and is existing as a corporation in
good standing under the laws of the State of Delaware with full power and
authority (corporate and other) to own and lease its properties and to conduct
its business as currently conducted. The Company has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each jurisdiction set forth on Schedule 4.1(a), such
jurisdictions comprising all jurisdictions in which the Company owns or leases
any property, or conducts any business, so as to require such qualifications.
(b) Except as set forth in Schedule 4.1(b), the Company has no Subsidiary nor
owns or controls, or has any other equity investment or other interest in,
directly or indirectly, any corporation, joint venture, partnership,
association or other entity.
4.2 No Conflicts. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not (a)
conflict with or result in a breach or violation of any term or provision of,
or constitute a default under (with or without notice or passage of time, or
both), or otherwise give any Person a basis for accelerated or increased
rights or termination or nonperformance under, any indenture, mortgage, deed
of trust, loan or credit agreement, lease, license or other agreement or
instrument of which the Company is a party or by which the Company is bound or
affected or to which any of the property or assets of the Company is bound or
affected including, without limitation, all arrangements in Section 4.19
hereof, (b) result in the violation of the provisions of the Articles of
Incorporation or Bylaws of the Company or any Legal Requirement applicable to
or binding upon it, (c) result in the creation or imposition of any Lien upon
any property or asset of the Company or (d) otherwise adversely affect the
contractual or other legal rights or privileges of the Company. Schedule 4.2
sets forth a list of all agreements requiring the consent of any party thereto
to any of the transactions contemplated hereby.
4.3 Capitalization. The authorized capital stock of the Company consists
solely of One Thousand (1,000) shares of Common Stock having a par value of
$1.00 per share, of which only the number of Shares listed on Exhibit "A" are,
and as of the Closing will be, issued and outstanding. All of the Shares have
been duly authorized and validly issued and are fully paid, nonassessable and
outstanding and are held by the Shareholders in amounts reflected in Exhibit
"A" hereto. Other than as set forth on Schedule 4.3, (i) there are no
existing options, warrants, right, calls or commitments of any character
relating to the shares of Common Stock or any other capital stock or
securities of the Company, (ii) there are no outstanding securities or other
instruments convertible into or exchangeable for shares of Common Stock or any
other capital stock or securities of the Company and no commitments to issue
such securities or instruments and no Person has any right of first refusal,
preemptive right, subscription right or similar right with respect to any
shares of Common Stock or any other capital stock or securities of the
Company. The offer, issuance and sale of the Shares were (i) exempt from the
registration and prospectus delivery requirements of the Securities Act, (ii)
registered or qualified (or exempt from registration or qualification) under
the registration or qualification requirements of all applicable state
securities laws and (iii) accomplished in conformity with all other Legal
Requirements.
4.4 Financial Statements.
(a) Schedule 4.4 hereto contains true and complete copies of (i) the
unaudited balance sheet (the "Balance Sheet") of the Company at December 31,
1996 (the "Balance Sheet Date"), and the related unaudited statements of
income for twelve (12) months then ended, (ii) the reviewed balance sheet of
the Company at December 31, 1996 and the related reviewed statements of
income, shareholders' equity and cash flow for the fiscal year then ended
(together with the report thereon of independent public accountants)(the
financial statements described in clause (i) and (ii) above are collectively
referred to as the "Financial Statements").
(b) The Financial Statements present fairly the financial condition of the
Company as of the dates indicated therein and the results of operations and
changes in financial position of the Company for the periods specified
therein, have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods covered thereby
and prior periods, have been derived from the accounting records of the
Company and represent only actual, bona fide transactions. The Company's
Financial Statements are true and correct in all material respects and do not
contain any untrue statement of a material fact or omit to state a material
fact.
4.5 Title to Property; Encumbrances.
(a) The Company has, and immediately prior to the Closing will have, good,
valid and marketable title in fee simple to all Real Property and all personal
property reflected on the Balance Sheet as owned by the Company and all Real
Property and personal property acquired by the Company since the Balance Sheet
Date, in each case free and clear of all Liens except (i) as set forth on
Schedule 4.5(a), (ii) for sales and other dispositions of inventory in the
Ordinary Course since the Balance Sheet Date which, in the aggregate, have not
been materially different from prior periods, and (iii) Permitted Liens.
(b) Schedule 4.5(b). contains a true and complete list and legal description
of each parcel of Owned Real Property and a general description of each
Structure situated thereon. The Shareholders have heretofore furnished to
Purchaser true and complete copies of all deeds, other instruments of title
and policies of title insurance indicating and describing the Company's
ownership of the Owned Real Property, as well as copies of any surveys or
environmental reports relating to the real property.
(c) Schedule 4.5(c). contains a list of all tangible personal property having
a cost or fair market value in excess of Five Thousand Dollars ($5,000.00)
owned by the Company (other than personal property held by the Company as
lessee under a personal property lease).
(d) Schedule 4.5(d) contains a list of all real property leases, uses,
licenses, permits, and personal property leases under which the Company is the
lessee or licensee, together with (i) the location and nature of each of the
leased or licensed properties (including a legal description of all Leased
Real Property), (ii) the termination date of each such lease or license, (iii)
the name of the lessor or licensor and (iv) all rental and other payments made
or required to be made for the fiscal years ending December 31, 1995 and
December 31, 1996. All leases and licenses pursuant to which the Company
leases or licenses from others are subsisting in full force and effect in
accordance with their respective terms, and there is not, under any real
property lease, personal property lease or license, any existing default or
event of default (or event that, with notice or passage of time, or both,
would constitute a default, or would constitute a basis of force majeure or
other claim of excusable delay or nonperformance). True and complete copies
of all real property leases, licenses and personal property leases listed on
Schedule 4.5(d) have been delivered to Purchaser heretofore, as well as copies
of any title reports, surveys or environmental reports or audits relating to
any Leased Real Property. Except as set forth in Schedule 4.5(d), no such
lease or license will require the consent of the lessor or licensor to or as a
result of the consummation of the transactions contemplated by this Agreement.
For the purposes of this Section 4.5(d), a "lease" shall include a sublease.
(e) All personal property owned by the Company and all personal property held
by the Company pursuant to personal property leases is in good operating
condition and repair, subject only to ordinary wear and tear, has been
operated, serviced and maintained properly within the recommendations and
requirements of the manufacturers thereof (if any) and is suitable and
appropriate for the use thereof made and proposed to be made by the Company in
its business and operations. The Real Property and personal property
described in Sections 4.5(a), 4.5(b) and 4.5(c) and the Real Property and
personal property held by the Company pursuant to the leases and licenses
described in Schedule 4.5(d) compromise all of the real property and personal
property used in the conduct of business of the Company.
(f) Except as set forth in Schedule 4.5(f):
(i) The Company is not in violation of, or default under, any Legal
Requirement pertaining to any of the Real Property. No notice of violation of
any Legal Requirement, or of any covenant, condition, restriction or easement
affecting any Real Property or with respect to the use or occupancy thereof,
has been given by any Person;
(ii) All of the Structures (A) are in good operating condition and repair, (B)
are adequate and suitable for the purposes for which they are currently and
proposed to be used, and (C) are supplied with utilities and other services
necessary for the operation of such Structures, and the business conducted by
the Company therein, including gas, electricity, water, telephone, sanitary
sewer and storm sewer, all of which services are maintained in accordance with
all Legal Requirements and are provided via permanent, irrevocable,
appurtenant easements in favor of the Company;
(iii) No condemnation proceeding is pending or, to the knowledge of the
Shareholders, threatened which would impair the occupancy, use or value of any
Real Property;
(iv) No Structure, nor the operations of the Company therein or thereon, (A)
is located outside of the boundary lines of the described parcel of land on
which it is located, (B) is in violation of applicable setback requirements,
zoning laws, or ordinances, (C) is subject to "permitted non-conforming use"
or "permitted non-conforming structure" classifications or (D) encroaches on
any property owned by, or easement granted in favor of, any Person;
(v) There are no (A) leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any other Person the right to
acquire, use or occupy any portion of, any Real Property, (B) outstanding
options or rights of first refusal to purchase all or any portion of Real
Property or interest therein, and (C) Persons (other than the Company) in
possession of any Real Property;
(vi) Each parcel of Owned Real Property (A) is fully and adequately described
in the legal description therefor contained in the deed thereof, (B) abuts a
paved public right-of-way, (C) does not serve any adjoining property for any
purpose inconsistent with the use of the land, and (D) is not located within
any flood plain or subject to any similar type restriction for which any
permits or licenses necessary to the use thereof have not been obtained; and
(vii) With respect to each item of Leased Real Property, (A) to the
Shareholders' knowledge, the owner thereof has good and marketable title
thereto, free and clear of all Liens other than (I) recorded easements,
covenants and restrictions that do not impair the current use, occupancy or
value thereof and (II) the leasehold interest of the Company, (B) there is
adequate ingress and egress (and a continuing right thereto), without the need
for an easement, between paved public rights-of-way and such Leased Real
Property and (C) the Company has not sold, transferred or subjected to a Lien
such Leased Real Property or any interest therein.
4.6 Accounts Receivable. All accounts receivable of the Company reflected
in the Balance Sheet and all accounts receivable of the Company that have
arisen since the Balance Sheet Date (except such accounts receivable as have
been collected since such dates) are valid and enforceable claims, and the
goods and services sold and delivered that gave rise to such accounts were
sold and delivered in conformity with all applicable express and implied
warranties, purchase orders, agreements and specifications. To the best of
Shareholders' knowledge, such accounts receivable of the Company are subject
to no valid defense, offset or counterclaim and are fully collectible, except
to the extent of the allowance for doubtful accounts reflected on the Balance
Sheet or except as listed on Schedule 4.6-1. Schedule 4.6-2 contains a true
and complete aging of the Company's accounts receivable as of the Balance
Sheet Date. Schedule 4.6.1 contains a listing of doubtful accounts as of the
Balance Sheet Date.
4.7 Inventories. Except as described in Schedule 4.7, all inventories of
raw materials, work-in-process and finished good set forth or reflected in the
Balance Sheet or acquired by the Company since the Balance Sheet Date, consist
of a quality and quantity usable and saleable in the Ordinary Course, except
for slow-moving, damaged or obsolete items and materials of below standard
quality, all of which have been written down to net realizable market value or
in respect of which adequate reserves have been provided, in each case as
reflected in the Balance Sheet. The value at which inventories are carried on
the Balance Sheet reflect the normal inventory valuation policy of the
Company, as applicable, in accordance with generally accepted accounting
principles and on a basis consistent with that of preceding periods, of
stating inventory at the lower of cost or market value. There is no reason to
believe that the Company will experience in the foreseeable future any
difficulty in obtaining, in the desired quantity and quality, the inventory
necessary to conduct its business in the manner proposed to be conducted,
including, without limitation, inventory which historically has been imported.
4.8 Trademarks, Patents, Etc.
(a) Schedule 4.8(a) contains a true and complete list of all letters patent,
patent applications, trade names, trademarks, service marks, trademark and
service mark registrations and applications, copyrights, copyright
registrations and applications, grants of a license or right to the Company
with respect to the foregoing, both domestic and foreign, claimed by either
Company or used or proposed to be used by the Company in the conduct of its
business, whether registered or not, (collectively herein, "Registered
Rights").
(b) Except as described in Schedule 4.8(b), the Company owns and has the
unrestricted right to use the Registered Rights and every trade secret,
know-how, process, discovery, development, design, technique, customer and
supplier list, promotional idea, marketing and purchasing strategy, invention,
process, confidential data and or other information (collectively herein,
"Proprietary Information") required for or incident of the design,
development, manufacture, operation, sale and use of all products and services
sold or rendered or proposed to be sold or rendered by the Company, free and
clear of any right, equity or claim of others. The Company has taken
reasonable security measures to protect the secrecy, confidentiality and value
of all Proprietary Information.
(c) Schedule 4.8(c) contains a true and complete list and description of all
licenses of or rights to Proprietary Information granted to the Company by
others or to others by the Company. Except as described in Schedule 4.8(c),
(i) the Company has not sold, transferred, assigned, licensed or subjected to
any Lien, any Registered Right or Proprietary Information or any interest
therein, and (ii) the Company is not obligated or under any liability whatever
to make any payments by way of royalties, fees or otherwise to any owner or
licensor of, or other claimant to, any Registered Right or Proprietary
Information.
(d) There is no claim or demand of any Person pertaining to, or any Action
that is pending or, to the Shareholders' knowledge, threatened, which
challenges the rights of the Company in respect of any Registered Right or any
Proprietary Information.
4.9 Banking and Insurance.
(a) Schedule 4.9(a) contains a true and complete list of the names and
locations of all financial institutions at which the Company maintains a
checking account, deposit account, securities account, safety deposit box or
other deposit or safekeeping arrangement, the numbers or other identification
of all such accounts and arrangements and the names of all persons authorized
to draw against any funds therein.
(b) Schedule 4.9(b) contains a true and complete list of all insurance
policies and bonds and self insurance arrangements currently in force that
cover or purport to cover risks or losses to or associated with the Company's
business, operations, premises, properties, assets, employees, agents and
directors and sets forth, with respect to each such policy, bond and self
insurance arrangement, a description of the insured loss coverage, the
expiration date and time of coverage, the dollar limitations of coverage, a
general description of each deductible feature and principal exclusion and the
premiums paid and to be paid prior to expiration.. The Company has no
obligation, liability or other commitment relating to any contract of
insurance containing a provision for retrospective rating or adjustment of the
Company's premium obligation. To the Shareholders' knowledge, no facts or
circumstances exist that would cause the Company to be unable to renew its
existing insurance coverage as and when the same shall expire upon terms at
least as favorable as those currently in effect, other than possible increases
in premiums that do not result from any act or omission of the Company or any
Shareholder.
4.10 Indebtedness.
(a) To the Shareholders' knowledge, the Company has no liability or
obligation for Indebtedness other than as set forth on Schedule 4.10(a), and
true and complete copies of all instruments and documents evidencing,
creating, securing or otherwise relating to such Indebtedness have been
delivered to Purchaser heretofore. Except as described in Schedule 4.10(a), no
event has occurred and no condition has become known to the Company or any
Shareholder (including the transactions contemplated hereby) that constitutes
or, with notice or passage of time, or both, would constitute a default or a
basis of force majeure or other claim of accelerated or increased rights,
termination, excusable delay or nonperformance by the Company or any other
Person under any instrument or document relating to or evidencing Indebtedness
that would entitle any person to require the Company to pay any portion of the
principal amount of such Indebtedness prior to the scheduled maturity thereof.
Except as set forth in Schedule 4.10(a), no instrument or document evidencing,
creating, securing or otherwise relating to Indebtedness will require the
consent of any person to or as a result of the consummation of the
transactions contemplated by this Agreement.
(b) Schedule 4.10(b) contains a list and brief description of all agreements
or instruments pursuant to which any of the Company's directors, employees or
shareholders have guaranteed the Indebtedness of the Company (the
"Guaranties"). True and complete copies of all Guaranties have been delivered
to Purchaser.
4.11 Judgments; Litigation. Except as set forth on Schedule 4.11:
(a) There is no (i) outstanding judgment, order, decree, award stipulation or
injunction of any Governmental Entity or arbitrator against the Company or its
properties, assets or business or (ii) Action pending against the Company or
its properties, assets or business.
(b) To the Shareholders' knowledge, there is no (i) outstanding judgment,
order, decree, award, stipulation, injunction of any Governmental Entity or
arbitrator against or affecting any officer, director or employee of the
Company relating to the Company or its business, (ii) Action threatened
against or affecting the Company or its properties, assets or business, and
(iii) Action pending or threatened against the Company's officers, directors
or employees relating to the Company or its business..
4.12 Income and Other Taxes. Except as set forth on Schedule 4.12:
(a) All Tax Returns required to be filed through and including the date
hereof in connection with the operations of the Company are true, complete and
correct in all respects and have been properly and timely filed. The Company
has not requested any extension of time within which to file any Tax Return,
which Tax Return has not since been filed. Purchaser has heretofore been
furnished by the Company with true, correct and complete copies of each Tax
Return of the Company with respect to the past three (3) taxable years, and of
all reports of, and communications from, any Governmental Entities relating to
such period. The Company has disclosed on its Federal Income Tax Returns all
positions taken therein that could give rise to a substantial understatement
of income Taxes for federal income tax purposes within the meaning of Code
Section 6662.
(b) All Taxes required to be paid or withheld and deposited through and
including the date hereof in connection with the operations of the Company
have been duly and timely paid or deposited by the Company. The Company has
properly withheld or collected all amounts required by law for income Taxes
and employment Taxes relating to its employees, creditors, independent
contractors and other third parties, and for sales Taxes on sales, and has
properly and timely remitted such withheld or collected amounts to the
appropriate Governmental Entity. The Company has no liabilities for any Taxes
for any taxable period ending prior to or coincident with the Closing Date.
(c) The Company has made adequate provision on its book of account for all
Taxes with respect to its business, properties and operations through the
Balance Sheet Date, and the accruals for Taxes in the Balance Sheet are
adequate to cover all liabilities for Taxes of the Company for all periods
ending on or before the Closing Date.
(d) The Company has never (i) had a tax deficiency proposed, asserted or
assessed against it (ii) executed any waiver of any statute of limitations on
the assessment or collection of any Taxes, or (iii) been delinquent in the
payment of any Taxes.
(e) No Tax Return of the Company has been audited or the subject of other
Action by any Governmental Entity. The Company has not received any notice
from any Governmental Entity of any pending examination or any proposed
deficiency, addition, assessment, demand for payment or adjustment relating to
or affecting the Company or its assets or properties and no Shareholder has
reason to believe that any Governmental Entity may assess (or threaten to
assess) any Taxes for any periods ending on or prior to the Closing Date.
(f) The Company (i) has not filed any consent or agreement pursuant to Code
Section 341(f), and no such consent or agreement will be filed at any time on
or before the Closing Date; (ii) has not made any payments, is not obligated
to make any payments and is not a party to any agreement that under certain
circumstances could obligate the Company to make any payments that will not be
deductible under Code Section 280G, (iii) is not a United States real property
holding corporation within the meaning of Code Section 897(c)(2); (iv) is not
a party to a tax allocation or sharing agreement; (v) has never been (or does
not have any liability for unpaid Taxes because it was) a member of an
affiliated group with the meaning of Code Section 1504(a); (vi) has never
applied for a tax ruling from a Governmental Entity and (vii) has never filed
or been the subject of an election under Code Section 338(g) or Code Section
338(h)(10) or caused or been the subject of a deemed election under Code
Section 338(e).
4.13 Questionable Payments. Neither the Company nor, to the Shareholders'
knowledge, any of its directors, officers, agents, employees or other Person
associated with or acting on behalf of the Company has (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (b) made any direct or indirect
unlawful payments to government officials or employees, or foreign government
officials or employees, from corporate funds, (c) established or maintained
any unlawful or unrecorded fund of corporate monies or other assets, (d) made
any false or fictitious entries on the books of account of the Company, (e)
made or received any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment, or (f) made any other payment, favor or gift not fully
deductible for federal income tax purposes.
4.14 Employee Benefit Matters.
(a) Schedule 4.14 contains a complete list of all plans. True and complete
copies of each of the following documents (and any amendments thereto), where
applicable, have been delivered previously to Purchaser: (i) the plan
documents; (ii) a written description of any plan which is not in writing;
(iii) if the plan is funded through a trust or any third-party funding
vehicle, the trust or other funding agreement; (iv) the plans most recent
financial statements; (v) the two most recent annual reports (including all
schedules and attachments thereto) required by ERISA; (vi) the most recent
actuarial report and valuation; (vii) the most recent determination letter
received from the IRS with respect to each plan that is intended to be
qualified under Code Section 401 or to be recognized as tax-exempt under Code
Section 501(c); (viii) the most recent summary plan description and each
summary of material modifications required by ERISA; (ix) any agreement
providing for the provision of administrative or investment management
services with respect to the plan; and (x) all documents and correspondence
received from or provided to the DOL, IRS and PBGC during the past two years.
(b) Each plan and related trust, annuity, or other funding agreement complies
and has been maintained in compliance with all applicable Legal Requirements.
No non-exempt prohibited transaction (as defined in Code Section 4975 and
ERISA Sections 406 and 408) has occurred and no "fiduciary" (as defined in
ERISA Section 3(21)) has committed any breach of duty which could subject the
Company, any ERISA Affiliate, or any director, officer, or employee thereof to
liability under Title I of ERISA or to tax under Code Section 4975. All
material obligations required to be performed by the Company and other Person
under the terms of each plan and applicable Legal Requirement have been
performed.
(c) All required reports and descriptions, including, without limitation,
annual reports (Form 5500), summary annual reports, and summary plan
descriptions, have been filed and distributed timely. With respect to each
plan which is a welfare plan (as defined in ERISA Section 3(1)), the
requirements of Party 6 of Subtitle B of Title I of ERISA and of Code Sections
162(k) and 4980B have been satisfied.
(d) All contributions, premiums, and other payments, including, without
limitation, employer contributions and employee salary reduction
contributions, have been paid when due or accrued in accordance with the past
custom and practice of Seller and any ERISA Affiliate. No plan that is
subject to Part 3 of Subtitle B of Title I of ERISA or to Code Section 412 has
incurred any accumulated funding deficiency, whether or not waived, and no
other actual or contingent liability for any other expenses or obligations of
any plan exists.
(e) To the best of Shareholders' knowledge, there are no pending or
threatened Actions (other than routine claims for benefits) asserted or
instituted against any plan or the assets of any plan, or against the Company,
or any ERISA Affiliate, trustee, administrator, or fiduciary of such plan, and
the Shareholders have no knowledge of any facts that could form the basis of
any such Action. To the best of Shareholders' knowledge, there is no pending
or, to the Shareholders' knowledge, threatened Action by any Governmental
Entity with respect to any plan., and the Shareholders have no knowledge of
any facts that could reasonably be expected to cause or trigger such an
Action.
(f) The Company (or, if applicable, an ERISA Affiliate,) may terminate,
suspend, or amend each plan at any time, except to the extent otherwise
required by Code Section 4980B, without the consent of the participants or
employees covered by such plan. Neither the Company nor any ERISA Affiliate
has announced any intention, made any amendment or binding commitment, or
given any written or oral notice providing that the Company or an ERISA
Affiliate (i) will create additional plans covering employees of the Company
or any ERISA Affiliate, (ii) will increase benefits promised or provided
pursuant to any plan, or (iii) will not exercise after the Closing Date any
right or power it may have to terminate, suspend, or amend any Plan.
(g) Neither the Company nor any ERISA Affiliate maintains or has maintained
any time, or contributes to or has contributed to or is or was required to
contribute to, any (i) plan subject to Title IV or ERISA, including, without
limitation, any multi-employer plan (as defined in ERISA Section 3(37)),
within the past five years, or (ii) funded or unfunded medical, health,
accident, or life insurance plan or arrangement for current or future retirees
or terminated employees or their spouses or dependents (except to the extent
required by Code Sections 162(k) or 4980B).
(h) Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will constitute a termination of
employment or other event entitling any Person to any additional or other
benefits, or that would otherwise modify benefits or the vesting of benefits,
provided under any plan.
(i) To the best of Shareholders' knowledge, no event has occurred which could
subject the Company of any ERISA Affiliate to any material liability (i) under
any Legal Requirement relating to any plan, or (ii) resulting from any
obligation of Seller or an ERISA Affiliate to indemnify any Person against
liability incurred with respect to or in connection with any plan.
(j) Each plan which is intended to be qualified under Code Section 401 has
received, within the last five years, a favorable determination letter from
the IRS. No event has occurred and no facts or circumstances exist which may
cause or result in the loss or revocation of such determination.
4.15 No Undisclosed Liabilities. Except (i) to the extent set forth or
provided for in the Balance Sheet or the notes thereto, (ii) as set forth on
Schedule 4.15 , (iii) as set forth on Schedule 4.26, or (iv) for non-material
current liabilities incurred since the Balance Sheet Date in the Ordinary
Course, as of the date hereof, to the best of shareholders' knowledge, the
Company has no liabilities, whether accrued, absolute, contingent or
otherwise, whether due or to become due and whether the amounts thereof are
readily ascertainable or not, or any unrealized or anticipated losses from any
commitments of a contractual nature, including Taxes with respect to or based
upon the transactions or events occurring at or prior to the Closing.
4.16 Permits, Licenses, Etc. To the best of Shareholders' knowledge the
Company possesses, and is operating in compliance with, all franchises,
licenses, permits, certificates, authorizations, rights and other approvals of
Governmental Entities necessary to (i) occupy, maintain, operate and use the
Real Property as it is currently used and proposed to be used, (ii) conduct
its business as currently conducted and as proposed to be conducted, and (iii)
maintain and operate its Plans (the "Permits"). Schedule 4.16 contains a true
and complete list of all Permits. Each Permit has been lawfully and validly
issued, and no proceeding is pending, threatened, or looking toward the
revocation, suspension or limitation of any Permit. To the best of
Shareholders' knowledge, the consummation of the transactions contemplated by
this Agreement will not result in the revocation, suspension or limitation of
any Permit and, except as set forth in Schedule 4.16, no Permit will require
the consent of its issuing authority to or as a result of the consummation of
the transaction contemplated hereby.
4.17 Regulatory Filings. To the best of Shareholders knowledge, the Company
has made all required registrations and filings with and submissions to all
applicable Governmental Entities relating to the operations of the Company as
currently conducted and as proposed to be conducted, including, without
limitation, all such applicable Governmental Entities having jurisdiction over
any matters pertaining to conservation or protection of the environment, and
the treatment, discharge, use, handling, storage or production, or disposal of
Hazardous Materials. To the best of Shareholders' knowledge, all such
registrations, filings and submissions were in compliance with all Legal
Requirements (including all Environmental Laws) and other requirements when
filed, no material deficiencies have been asserted by any such applicable
Governmental Entities with respect to such registrations, filings or
submissions and, to the Shareholders' knowledge, no facts or circumstances
exist which would indicate that a material deficiency may be asserted by any
such authority with respect to any such registration, filing or submission.
4.18 Consents. All consents, authorizations and approvals of any Person to
necessary for the consummation by the Company of the transactions contemplated
hereby have been lawfully and validly obtained by the Company, except as
described in Schedules 4.5(c), 4.10 and 4.16 hereto. All consents,
authorizations and approvals described in schedules 4.5(c), 4.10 and 4.16 will
have been lawfully and validly obtained prior to the Closing.
4.19 Material Contracts; No Defaults.
(a) Schedule 4.19(a) contains a true and complete list and description of the
outstanding sales order and sales contract backlog of the Company having an
indicated gross value in excess of Five Thousand Dollars ($5,000.00) or having
a term of duration in excess of six months. All outstanding sales orders and
sales contracts of the Company have been entered into in the Ordinary Course.
Except as described in Schedule 4.19(a), the Company has not received any
advance, progress payment or deposit in respect of any sales order or sales
contract No sales order or sales contract have been obtained or bid in a
manner which is inconsistent with past practices of the Company, including but
not limited to gross margins on any such sales orders or sales contracts.
(b) Schedule 4.19(b) contains a true and complete list and description of all
outstanding purchase orders and purchase commitments of the Company having a
gross indicated value in excess of Five Thousand Dollars ($5,000.00) in the
aggregate from any single supplier or other vendor. All outstanding purchase
orders and purchase commitments of the Company have been incurred in the
Ordinary Course, and no purchase order or purchase commitment of the Company
is inconsistent with the past practices of the Company, including but not
limited to being in excess of the normal, ordinary and usual requirements of
the business of the Company or at an excessive price. The principal raw
materials used and inventory sold by the Company are available from several
sources at competitive prices and upon competitive terms and no interruption
in production or Material Adverse Effect will result from the loss of any one
of such sources.
(c) Schedule 4.19(c) contains a true and complete list of all sales agency,
sales representative, distributor, wholesaler, dealer and similar contracts or
agreements of the Company, and true and complete copies of the same have been
delivered to Purchaser heretofore. Except as described in Schedule 4.19(c),
all of such contracts and agreements are terminable at any time by the Company
without penalty (including, without limitation, any obligation to repurchase
inventories on hand) upon not more than thirty (30) days' notice.
(d) Schedule 4.19(d) contains a true and complete list and description of all
noncompetition agreements and covenants under which the Company or any of
their respective officers, directors or employees or any Shareholder is
obligated, and true and complete copies of the same have been delivered to
Purchaser heretofore. Except as described in Schedule 4.19(d), the Company is
not restricted by any agreement from carrying on its business or engaging in
any other activity anywhere in the world (including relocating, closing, or
terminating any of its operations or facilities), and no such officer,
director, key employee or Shareholder is a party to or otherwise bound or
affected by any agreement, covenant or other arrangement or understanding that
would restrict or impair his ability to perform diligently his other duties to
the Company. Schedule 4.19(d) also contains a true and complete list and
description of all noncompetition agreements or covenants in favor of the
Company, and true and complete copies of the same have been delivered to
Purchaser heretofore.
(e) Schedule 4.19(e) contains a true and complete list and description of all
contracts, agreements, understandings, arrangements and commitments, written
or oral, of the Company with any officer, director, consultant, employee or
Affiliate of the Company or with any associate, Affiliate or employee of any
Affiliate of the Company, other than those disclosed in Schedule 4.21(a)
hereto; in each case a true and complete copy of such written contract,
agreement, understanding, arrangement or commitment or a true and complete
summary of such oral contract, agreement, understanding, arrangement or
commitment has been delivered to Purchaser heretofore.
(f) Schedule 4.19(f) contains a true and complete list and description of all
other material contracts, agreements, understandings, arrangements and
commitments, written or oral, of the Company by which it or its properties,
rights or assets are bound that are not otherwise disclosed in this Agreement
or the Schedule hereto. True and complete copies of such written contracts,
agreements, understandings, arrangements and commitments and true and complete
summaries of such oral contracts, agreements, understandings, arrangements and
commitments have been delivered to Purchaser heretofore. For the purposes of
this subsection (f), "material" means any contract, agreement, understanding,
arrangement or commitment that (i) involves performance by any party more than
ninety (90) days from the date hereof, (ii) involves payments or receipts by
the Company in excess of Five Thousand Dollars ($5,000.00), (iii) involves
capital expenditures in excess of Five Thousand Dollars ($5,000.00) or (iv)
otherwise materially affects the Company.
(g) To the best of Shareholders' knowledge, except as described in Schedule
4.19(g):
(i) each agreement, contract, arrangement or commitment described above in
this Section 4.19 is, and after the Closing on identical terms will be in full
force and effect;
(ii) no event or condition has occurred or become known to the Company or any
Shareholder or is alleged to have occurred that constitutes or, with notice or
the passage of time, or both, would constitute a default or a basis of force
majeure or other claim of excusable delay, termination, nonperformance or
accelerated or increased rights by the Company or any other Person under any
contract, agreement, arrangement, commitment or other understanding, written
or oral, described above in this Section 4.19, or described or otherwise
disclosed pursuant to this Agreement; and
(iii) no person with whom the Company has such a contract, agreement,
arrangement, commitment or other understanding is in default thereunder or has
failed to perform fully thereunder by reason of force majeure or other claim
of excusable delay, termination or nonperformance thereunder, the delay,
termination or nonperformance of which, or a default under which, has had or
may have a Material Adverse Effect.
4.20 Absence of Certain Changes. Since December 31, 1996, except as
disclosed in Schedule 4.20, the Company has not: (i) incurred any debts,
obligations or liabilities (absolute, accrued, contingent or otherwise), other
than current liabilities incurred in the Ordinary Course which, individually
or in the aggregate, are not material; (ii) subjected to or permitted a Lien
(other than a Permitted Lien) upon or otherwise encumbered any of its assets,
tangible or intangible; (iii) sold, transferred, licensed or leased any of its
assets or properties except in the Ordinary Course; (iv) discharged or
satisfied any Lien other than a Lien securing, or paid any obligation or
liability other than, current liabilities shown on the Balance Sheet and
current liabilities incurred since the Balance Sheet Date, in each case in the
Ordinary Course; (v) canceled or compromised any debt owed to or by or claim
of or against it, or waived or released any right of material value other than
in the Ordinary Course; (vi) suffered any physical damage, destruction or loss
(whether or not covered by insurance) causing a Material Adverse Effect; (vii)
committed or obligated itself to any capital expenditure other than in the
Ordinary Course; (viii) made or suffered any change in, or condition
affecting, its condition (financial or otherwise), properties, profitability,
prospects or operations other than changes, events or conditions in the
Ordinary Course, none of which (individually or in the aggregate) has had or
may have a Material Adverse Effect; (ix) made any change in the accounting
principles, methods, records or practices followed by it or depreciation or
amortization policies or rates theretofore adopted; (x) other than in the
Ordinary Course, made or suffered any amendment or termination of any material
contract, agreement, lease or license to which it is a party; (xi) paid, or
made any accrual or arrangement for payment of, any severance or termination
pay to, or entered into any employment or loan or loan guarantee agreement
with, any current or former officer, director or employee or consultant; (xii)
paid, or made any accrual or arrangement for payment of, any increase in
compensation, bonuses or special compensation of any kind to any employee
other than pursuant to an agreement disclosed on Schedule 4.21(a) or Schedule
4.21(b) or other than in the Ordinary Course, or paid, or made any accrual or
arrangement for payment of, any increase in compensation, bonuses or special
compensation of any kind to any officer or director of the Company or any
consultant to the Company; (xiii) made or agreed to make any charitable
contributions or incurred any nonbusiness expenses; (xiv) changed or suffered
change in any benefit plan or labor agreement affecting any employee of the
Company otherwise than to conform to Legal Requirements; or (xv) entered into
any agreement or otherwise obligated itself to do any of the foregoing.
4.21 Employees and Labor Matters.
(a) Schedule 4.21(a) contains a true and complete list of all employees,
contracts, agreements, plans, arrangements, commitments and understandings
(formal and informal) pertaining to terms of employment, compensation,
bonuses, profit sharing, stock purchases, stock repurchases, stock options,
commissions, incentives, loans or loan guarantees, severance pay or benefits,
use of the Company's property and related matters of the Company with any
current or former officer, director, employee or consultant, and true and
complete copies of all such contracts, agreements, plans, arrangements and
understandings have been delivered to Purchaser heretofore. Attached to
Schedule 4.21(a) is the most current copy of the employee handbook utilized by
the Company and distributed to each of its employees.
(b) Schedule 4.21(b) contains a true and complete list of all labor,
collective bargaining, union and similar agreements under or by which the
Company is obligated, and true and complete copies of all such agreements have
been delivered to Purchaser heretofore.
(c) Except as set forth on Schedules 4.21(a) and 4.21(b), neither Purchaser
nor the Company will have any liability for any severance payments to or
similar arrangements with any such Person who shall cease to be an employee of
the Company at or prior to the Closing.
(d) There is not occurring or, to the Shareholders' knowledge, threatened,
any strike, slow down, picket, work stoppage or other concerted action by any
union or other group of employees or other persons against either Company or
its premises or products. Except for activities by the unions that are
parties to any of the agreements listed on Schedule 4.21(b) with respect to
the existing members of such unions, to the Shareholders' knowledge, no union
or other labor organization has attempted to organize any of the employees of
the Company.
(e) To the best of Shareholders' knowledge, the Company has complied with all
Legal Requirements relating to employment and labor, and, to the Shareholders'
knowledge pending or threatened claims or actions of wrongful termination by
any current or former employee of the Company against the Company.
4.22 Affiliation. Except as disclosed on Schedule 4.22, none of the
Shareholders, any officer, director or key employee of the Company or any
associate or Affiliate of the Company or any of such Persons has, directly or
indirectly, (i) an interest in any Person that (A) furnishes or sells, or
proposes to furnish or sell, services or products that are furnished or sold
by the Company or (B) purchases from or sells or furnishes to, or proposes to
purchase from or sell or furnish to, the Company any goods or services or (ii)
a beneficial interest in any contract or agreement to which the Company is a
party or by which the Company or any of the assets of the Company are bound or
affected.
4.23 Principal Customers and Suppliers.
(a) Schedule 4.23(a) contains a true and complete list of the name and
address of each customer that purchased in excess of five percent (5%) of the
Company's sales of goods or services during the twelve months ended on the
Balance Sheet Date, and since that date no such customer has terminated its
relationship with or adversely curtailed its purchases from the Company or
indicated (for any reason) its intention so to terminate its relationship or
curtail its purchases.
(b) Schedule 4.23(b) contains a true and complete list of each supplier from
whom the Company purchased in excess of five percent (5%) of the Company's
purchases of goods or services during the twelve months ended on the balance
Sheet Date, and since that date no such supplier has terminated its
relationship with or adversely curtailed its accommodations, sales or services
to the Company or indicated (for any reason) its intention to terminate such
relationship or curtail its accommodations, sales or services.
4.24 Compliance with Law. Through and including the date hereof, to the best
of Shareholders' knowledge, the Company (i) has not violated or conducted its
business or operations in violation of, and has not used or occupied its
properties or assets in violation of, any Legal Requirement, (ii) to the
Shareholders' knowledge, has not been alleged to be in violation of any Legal
Requirement, and (iii) has not received any notice of any alleged violation
of, or any citation for noncompliance with, any Legal Requirement.
4.25 Product Returns. Schedule 4.25 contains a true and complete description
of the product return experience of the Company for the immediately preceding
twelve (12) months. The Company has not experienced any product returns which
have had or may have a Material Adverse Effect.
4.26 Product Liability and Product Warranty. Schedule 4.26 hereto contains a
true and complete description of (i) all warranties granted or made with
respect to products sold, or services rendered, by the Company and (ii) the
Company's product liability and product warranty experience for the last three
years. The Company has not suffered any product liability or product warranty
claims which have had a Material Adverse Effect.
4.27 Corporate Records. The copies or originals of the Articles of
Incorporation, Bylaws, minute books and stock records of the Company
previously delivered to, or made available for inspection by, Purchaser are
true, complete and correct.
4.28 Hazardous Materials. Except as set forth on Schedule 4.28:
(a) To the Shareholders' knowledge, no Hazardous Material (i) has been
released, placed, stored, generated, used, manufactured, treated, deposited,
spilled, discharged, released or disposed by the Company or on or under any
real property currently or previously owned or leased by the Company or is
presently located on or under any Real Property (or, to the Shareholders'
knowledge, any property adjoining any Real Property), (ii) is presently
maintained, used, generated, or permitted to remain in place by the Company in
violation of any Environmental Law, (iii) is required by any Environmental Law
to be eliminated, removed, treated or mitigated by the company, given the
nature of its present condition, location, nature, material or maintenance, or
(iv) is of a type, location, material, nature or condition which requires
special notification to third parties by the Company under Environmental Law
or common law.
(b) No notice, citation, summons or order has been received by the Company or
any Shareholder, no notice has been given by the Company and no complaint has
been filed, no penalty has been assessed and no investigation or review is
pending or threatened by any Governmental Entity, with respect to (i) any
alleged violation by the Company of any Environmental Law of (ii) any alleged
failure by the Company to have any environmental permit, certificate, license,
approval, registration or authorization required in connection with its
business or properties, or (iii) any use, possession, generation, treatment,
storage, recycling, transportation, release or disposal by or on behalf of the
Company of any Hazardous Material.
(c) The Company has not received any request for information, notice of
claim, demand or notification that it is or that indicates that it may be a
"potentially responsible party" with respect to any investigation or
remediation of any threatened or actual release of any Hazardous Material.
(d) No above-ground or underground storage tanks, whether or not in use, are
or have ever been located at any property currently owned or leased by the
Company.
(e) No notice has been received by the Company with respect to the listing or
proposed listing of any property currently or previously owned, operated or
leased by the Company on the National Priorities List promulgated pursuant to
CERCLA, CERCLIS or any similar state list of sites requiring investigation or
cleanup.
(f) There have been no environmental inspections, investigations, studies,
tests, review or other analyses conducted in relation to any Real Property.
(g) The Company has not yet released, transported, or arranged for the
transportation of any Hazardous Material from any property currently or
previously owned, operated or leased by the Company.
4.29 Brokers' Fees. No broker, finder or similar agent has been employed by
or on behalf of the Company in connection with this Agreement or the
transactions contemplated hereby, and the Company has not entered into any
agreement or understanding of any kind with any person or entity for the
payment of any brokerage commission, finder's fee or any similar compensation
in connection with this Agreement or the transactions contemplated hereby.
4.30 Disclosure.
(a) To the best of Shareholders' knowledge, no representation or warranty of
any Shareholder in this Agreement and no information contained in any Schedule
or other writing delivered pursuant to this Agreement or at the Closing
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to make the statements herein or
therein not misleading..
(b) To the extent that any representation or warranty in this Article 4 is
qualified to the Shareholders' "knowledge," the Shareholders represent and
warrant that they have made a reasonable investigation sufficient to express
an informed view concerning the matters to which such representation or
warranty relates, including diligent inquiries of the Company's officers,
directors and employees.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to, and covenants and agrees with,
each of the Shareholders that:
5.1 Organization and Good Standing. Purchaser has been duly organized and
is existing as a corporation in good standing under the laws of the State of
Nevada with full corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby.
5.2 Execution and Delivery. This Agreement has been duly authorized by all
necessary corporate action on the part of Purchaser, has been duly executed
and delivered by Purchaser and constitutes the legal, valid and binding
agreement of Purchaser enforceable against Purchaser in accordance with its
terms.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement by Purchaser and the consummation by Purchaser of the transactions
contemplated hereby will not conflict with or result in the violation of the
provisions of the Articles of Incorporation or Bylaws of Purchaser.
5.4 Full Disclosure. To the best of Purchaser's knowledge, the
information furnished by or on behalf of Purchaser to Shareholders or the
Company in connection with this Agreement and the transactions contemplated
hereby does not and will not contain any untrue statement of a material fact
and does not and will not omit to state any material fact necessary to make
the statements made, in the context in which made, not false or misleading.
The Purchaser, to the best of its knowledge, is not aware of any claims
threatened or pending against the Purchaser that may have a material adverse
impact upon the financial stability of Purchaser.
6. CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing through the
Closing Date, the Shareholders jointly and severally covenant and agree
(except as expressly contemplated by this Agreement or to the extent that
Purchaser shall otherwise expressly consent in writing) that:
6.1 Qualification. The Company shall maintain all qualifications to
transact business and remain in good standing in its jurisdiction of
incorporation and in the foreign jurisdictions set forth on Schedule 4.1(a).
6.2 Ordinary Course. The Company shall conduct its business in, and only
in, the Ordinary Course and, to the extent consistent with such business,
shall preserve intact its current business organizations, keep available the
services of its current officers and employees and preserve its relationships
with customers, suppliers and others having business dealings with it to the
end that its goodwill and going business value shall be unimpaired at the
Closing Date. The Company shall maintain its properties and assets in good
condition and repair.
6.3 Corporate Changes. The Company shall not (a) amend its Articles of
Incorporation or Bylaws (or equivalent documents), (b) acquire by merging or
consolidating with, or agreeing to merge or consolidate with, or purchase
substantially all of the stock or assets of, or otherwise acquire, any
business or any corporation, partnership, association or other business
organization or division thereof, (c) enter into any partnership or joint
venture, (d) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock or purchase or redeem, directly
or indirectly, any shares of its capital stock, (e) issue or sell any shares
of its capital stock of any class or any options, warrants, conversion or
other rights to purchase any such shares or any securities convertible into or
exchangeable for such shares, or (f) liquidate or dissolve or obligate itself
to do.
6.4 Indebtedness. Except for the Company's need to draw down on its
existing lines of credit, the Company shall not incur any Indebtedness, sell
any debt securities or lend money to or guarantee the Indebtedness of any
Person. The Company shall not restructure or refinance its existing
Indebtedness.
6.5 Accounting. The Company shall not make any change in the accounting
principles, methods, records or practices followed by it or depreciation or
amortization policies or rates heretofore adopted by it. The Company shall
maintain its books, records and accounts in accordance with generally accepted
accounting principles applied on a basis consistent with that of prior
periods.
6.6 Compliance with Legal Requirements. The Company shall comply promptly
with all requirements that applicable law may impose upon it and its
operations and with respect to the transactions contemplated by this
Agreement, and shall cooperate promptly with, and furnish information to,
Purchaser in connection with any such requirements imposed upon Purchaser, or
upon any of its affiliates, in connection therewith or herewith.
6.7 Disposition of Assets. The Company shall not sell, transfer, license,
lease or otherwise dispose of, or suffer or cause the encumbrance by any Lien
upon any of its properties or assets, tangible or intangible, or any interest
therein, except for sales of inventory in the Ordinary Course.
6.8 Compensation. The Company shall not (a) adopt or amend in any material
respect any collective bargaining, bonus, profit-sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other plan,
agreement, trust, fund or arrangement for the benefit of employees (whether or
not legally binding) other than to comply with any Legal Requirement or (b)
pay, or make any accrual or arrangement for payment of, any increase in
compensation, bonuses or special compensation of any kind, or any severance or
termination pay to, or enter into any employment or loan or loan guarantee
agreement with, any current or former officer, director, employee or
consultant of the Company, except for such bonuses as may be required to
offset the individual income tax liability of each Shareholder relating to the
Company.
6.9 Modification or Breach of Agreement; New Agreements. The Company shall
not terminate or modify, or commit or cause or suffer to be committed any act
that will result in breach or violation of any term of or (with or without
notice or passage of time, or both) constitute a default under or otherwise
give any person a basis for non-performance under, any indenture, mortgage,
deed of trust, loan or credit agreement, lease, license or other agreement,
instrument, arrangement or understanding, written or oral, disclosed in this
Agreement or the Schedules hereto. The Company shall refrain from becoming a
party to any contract or commitment other than in the Ordinary Course. The
Company shall meet all of its contractual obligations in accordance with their
respective terms.
6.10 Capital Expenditures. Except for capital expenditures or commitments
necessary to service its customers and maintain its properties and assets in
good condition and repair, the Company shall not purchase or enter into any
contract to purchase any capital assets.
6.11 Consents. The Company shall use its best efforts to obtain any consent,
authorization or approval of, or exemption by, any Person required to be
obtained or made by any party hereto in connection with the transactions
contemplated hereby or the taking of any action in connection with the
consummation thereof.
6.12 Maintain Insurance. The Company shall maintain its Policies in full
force and effect and shall not do, permit or willingly allow to be done any
act by which any of the Policies may be suspended, impaired or canceled.
6.13 Discharge. The Company shall not cancel, compromise, release or
discharge any claim of the Company upon or against any person or waive any
right of the Company of material value, and not discharge any Lien (other than
Permitted Liens) upon any asset of the Company or compromise any debt or other
obligation of the Company to any person other than Liens, debts or obligations
with respect to current liabilities of the Company.
6.14 Actions. The Company shall not institute, settle or agree to settle any
Action before any Governmental Entity without providing reasonable notice to
Purchaser in writing prior to taking any action hereunder..
6.15 Permits. The Company shall maintain in full force and effect, and
comply with, all Permits.
6.16 Tax Assessments and Audits. The Company shall furnish promptly to
Purchaser a copy of all notices of proposed assessment or similar notices or
reports that are received from any taxing authority and which relate to the
Company's operations for periods ending on or prior to the Closing Date. The
Shareholders shall cause the Company to promptly inform Purchaser, and permit
the participation in and control by Purchaser, of any investigation, audit or
other proceeding by a Governmental Entity in connection with any Taxes,
assessment, governmental charge or duty and shall not consent to any
settlement or final determination in any proceeding without the prior written
consent of Purchaser.
6.17 Confidentiality. Shareholders and Purchaser, and their officers,
directors, shareholders, employees, agents, servants, and assigns shall hold
in confidence and cause Purchasers and the Shareholders' and the Company's
Representatives (as defined below) to hold in confidence all Confidential
Information (as defined below) and not disclose the same to any third person
without the prior consent of Purchaser or Shareholders, as the case may be,
except to Purchaser's and the Shareholder's and the Company's Representatives
who need such information for the purpose of evaluating the transactions
contemplated by this Agreement (such person shall be informed by Purchaser,
Shareholders or the Company of the confidential nature of the material and
shall be subject to all the terms of this Agreement; the Purchaser and the
Shareholders and the Company shall be responsible for any breach of such terms
by any such Representatives). If this Agreement is terminated or dissolved
for any reason, Purchaser, Shareholders and the Company will promptly return
to each other all Confidential Information furnished by Purchaser and held by
each other, including all copies and summaries thereof and will not make use
of such Confidential Information. As used herein, "Confidential Information"
means all information concerning Purchaser, Shareholders, and the Company and
their business obtained by Purchaser, Shareholders, the Company, or their
directors, officers, employees, attorneys, agents or other representatives
(collectively, "Representatives") in connection with the transactions
contemplated by this Agreement except information which (i) was available to
the public prior to the time of such disclosure, (ii) becomes available to the
public through no act or omission of the Purchaser, Shareholders or the
Company or their Representatives, or is given to the Purchaser, Shareholders
or the Company thereafter, in either case by a third party not known by the
Purchaser, Shareholders or the Company to be under any obligation of
confidentiality to the Purchaser, shareholders, and the Company with respect
thereto. "Confidential Information" includes this Agreement.
6.18. Notice. Purchaser and shareholders promptly, by written
notice, shall advise each other of any information that indicates that any
representation or warranty of the Purchaser, the Company or Shareholders
contained in this Agreement is not true and correct or that Purchaser, the
Company or Shareholders have breached any of their obligations under this
Agreement. Purchaser and Shareholders promptly, by written notice, shall
advise each other of any event, condition or circumstance (an "Event")
occurring after the date hereof through the Closing Date which causes any of
the representations and warranties of Purchaser, the Company or Shareholders
not to be true and correct in all material respects as of the date hereof or
as of the date such Event occurred (as if Purchaser, Shareholders and the
Company had made such representation or warranty on the date such Event
occurred). Purchaser and Shareholders closing under this Agreement after
their receipt of information furnished by Purchaser, the Company or
Shareholders pursuant hereto shall not operate as a waiver of any of
Purchaser's or Shareholders' rights for any misrepresentation or breach of any
representation or warranty which is disclosed by such information.
7. ADDITIONAL COVENANTS
7.1 Covenants of the Shareholders. During the period from the date hereof
through the Closing Date, each Shareholder agrees to:
(a) comply promptly with all requirements that applicable Legal Requirements
may impose upon it with respect to the transactions contemplated by the
Agreement, and shall cooperate promptly with, and furnish information to,
Purchase in connection with any requirements imposed upon Purchaser or upon
any of its affiliates in connection therewith or herewith;
(b) use its reasonable best efforts to obtain (and to cooperate with
Purchaser in obtaining) any consent, authorization or approval of, or
exemption by, any Person required to be obtained or made by such Shareholder
in connection with the transactions contemplated by this Agreement;
(c) use its reasonable best efforts to bring about the satisfaction of the
conditions precedent to Closing set forth in Section 8.1 of this Agreement;
(d) promptly advise Purchaser orally and, within three (3) business days
thereafter, in writing of any change in such Company's business or condition
that has had or may have a Material Adverse Effect; and
7.2 Covenants of Purchaser. During the period from the date hereof to the
Closing Date, Purchaser shall:
(a) comply promptly with all requirements that applicable Legal Requirements
may impose upon it with respect to the transactions contemplated by this
Agreement, and shall cooperate promptly with, and furnish information to, the
Shareholders in connection with any such requirements imposed upon the
Shareholders or the Company or upon any of the Company's affiliates in
connection therewith or herewith;
(b) use its reasonable best efforts to obtain any consent, authorization or
approval of, or exemption by, any Person required to be obtained or made by
Purchaser in connection with the transactions contemplated by this Agreement;
and
(c) use its reasonable best efforts to bring about the satisfaction of the
condition precedent to Closing set forth in Section 8.2 of this Agreement.
7.3 Access and Information
(a) During the period commencing on the date hereof and continuing through the
Closing Date, Purchaser, the Company and the Shareholders shall afford each
other and their accountants, counsel, investment bankers and other
representatives, reasonable access to all of their properties, books,
contracts, commitments, records and personnel and, during such period, to
continue to cause Purchaser and the Company to furnish promptly to Purchaser
and Shareholders all information concerning their business, properties and
personnel as each may reasonably request.
(b) Except to the extent permitted by the provisions of Section 7.6 hereof,
Shareholders and Purchaser and their officers, directors, shareholders,
employees, agents, successors, and assigns shall hold in confidence, all
information supplied to them concerning Purchaser, Shareholders and the
Company and shall not disclose such information to any third party except as
may be required by any Legal Requirement and except for information that (i)
is or becomes generally available to the public other than as a result of
disclosure by Shareholders and Purchaser or their representatives, (ii)
becomes available to Shareholders and Purchaser or their representatives from
a third party other than Purchaser, Shareholders or the Company, and Purchaser
and Shareholders and their representatives have no reason to believe that such
third party is not entitled to disclose such information. Purchaser's and
Shareholders obligations under the foregoing sentence shall expire on the
Closing Date or, if the Closing does not occur, two (2) years after the date
hereof.
7.4 Expenses. All costs and expenses (including, without limitation, all
legal fees and expenses and fees and expenses of any brokers, finders or
similar agents) incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Purchaser or by the
Company for the Shareholders.
7.5 Certain Notifications. At all times from the date hereof to the Closing
Date, each party shall promptly notify the others in writing of the occurrence
of any event that will or may result in the failure to satisfy any of the
conditions specified in Article 8 hereof.
7.6 Publicity; Employee Communications. At all times prior to the Closing
Date, each party shall obtain the advance prior written consent of all other
parties hereto prior to issuing, or permitting any of its directors, officers,
employees or agents to issue, any press release or other information to the
press, employees of the Company or any third party with respect to this
Agreement or the transactions contemplated hereby; provided, however, that no
party shall be prohibited from supplying any information to any of its
representatives, agents, attorneys, advisors, financing sources and others to
the extent necessary to complete the transactions contemplated hereby so long
as such representatives, agents, attorneys, advisors, financing sources and
others are made aware of the terms of this Section 5.6. Nothing contained in
this Agreement shall prevent any party to this Agreement at any time from
furnishing any required information to any Governmental Entity or authority
pursuant to a Legal Requirement or from complying with its legal or
contractual obligations.
7.7 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Legal Requirements, to consummate and
make effective the transactions contemplated by this Agreement.
(b) If at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the Shareholders and
the property officers or directors of Purchaser, as the case may be, shall
take or cause to be taken all such necessary or convenient action and execute,
and deliver and file, or cause to be executed, delivered and filed, all
necessary or convenient documentation.
7.8 Competing Offers; Merger or Liquidation. The Shareholders agree that
they will not, and will cause the Company not to, directly or indirectly,
through any officer, director, agent, or otherwise, solicit, initiate or
encourage the submissions of bids, offers or proposals by, any Person with
respect to an acquisition of the Company or its assets or capital stock or a
merger or similar transaction, and the Shareholders will not, and will not
permit the Company to, engage any broker, financial adviser or consultant with
an incentive to initiate or encourage proposals or offers from other parties.
Furthermore, the Shareholders shall not, and shall not permit the Company to,
directly or indirectly, through any officer, director, agent or otherwise,
engage in negotiations concerning any such transaction with, or provide
information to, any Person other than Purchaser and its representatives with a
view to engaging, or preparing to engage, that Person with respect to any
matters in this Section. The Shareholders shall ensure that the Company shall
not commence any proceeding to merge, consolidate or liquidate or dissolve or
obligate itself to do so.
7.9 Inconsistent Action. The Shareholders shall not take or suffer to be
taken, and shall not permit the Company to take or cause or suffer to be
taken, any action that would cause any of the representations or warranties of
any of the Shareholders in this Agreement to be untrue, incorrect, incomplete
or misleading.
7.10 Post-Termination Employment. Except for the employment agreement to be
executed by Ted Budzynski and Martin Brubaker, 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 John Scagnelli, Esq., counsel for the
Shareholders and the Company, a written opinion dated the Closing date and
addressed to Purchaser, in substantially the form attached as Exhibit E
hereto;
(d) Purchaser shall have received from the President of the Company a
certificate dated the Closing Date in substantially the form attached as
Exhibit F hereto;
(e) Purchaser shall have received from each Shareholder a certificate dated
the Closing Date in substantially the form attached as Exhibit G hereto;
(f) Purchaser shall have received a consent from the Board of Directors of
the Company in substantially the form attached as Exhibit H hereto;
(g) The individuals as set forth in Exhibit D shall have entered into
Noncompetition Agreements with Purchaser and the Company in substantially the
form attached as Exhibit D hereto, (collectively, the "Noncompetition
Agreements"); and Ted Budzynski and Martin Brubaker shall have entered into
Employment Agreements substantially in the form attached as Exhibit C;
(h) Purchaser shall have concluded (through its representatives, accountants,
counsel and other experts) an investigation of the business, condition
(financial and other), properties, assets, prospects, operations and affairs
of the Company and shall be satisfied, in its sole discretion, with the
results thereof;
(i) All corporate and other proceedings and actions taken in connection with
the transactions contemplated hereby and all certificates, opinions,
agreements, instruments, releases and documents referenced herein or incident
to the transactions contemplated hereby shall be in form and substance
satisfactory to Purchaser and its counsel;
(j) All consents from third parties, including from any Governmental Entity,
landlord or other Person, necessary for the consummation of the transactions
contemplated hereby shall have been obtained;
(k) The Board of Directors of Purchaser shall have authorized and approved
this Agreement and the transactions contemplated hereby in a form as attached
as Exhibit F;
(l) All officers and directors of the Company shall have resigned as such,
effective of the Closing; and
(m) Payment by Purchaser in full of all outstanding Polaris Equipment Co.,
Inc. invoices to the Company which precede the Closing Date by thirty (30)
days or more by wire transfer to the attorney escrow account of General
Counsel for the Company.
(n) No act, event or condition shall have occurred after the date hereof
which Purchaser determines has had or could have had a Material Adverse
Effect;
8.2 Conditions of the Shareholders. Notwithstanding any other provision of
this Agreement, and except as set forth below, the obligations of the
Shareholders to consummate the transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Closing, of the condition set
forth in subsection (a) of Section 8.1, and the condition that the
representations and warranties of Purchaser in this Agreement shall be true
and correct in all material respects on and as of the Closing Date with the
same effect as if made on the Closing Date and Purchaser shall have complied
with all covenants and agreements and satisfied all conditions on its part to
be performed or satisfied on or prior to the Closing Date.
9. TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by either the Purchaser or any Shareholder in its sole discretion;
(b) by Purchaser if (i) there has been a material misrepresentation, breach
of warranty or breach of covenant by any Shareholder under this Agreement or
(ii) any of the conditions precedent to Closing set forth in Section 8.1 have
not been met on the Closing Date, or
(c) by the Shareholders if (i) there has been a material misrepresentation,
breach of warranty or breach of covenant by Purchaser under this Agreement or
(ii) any of the conditions precedent to Closing set forth in Section 8.2 have
not been met on the Closing Date.
9.2 Effect of Termination.
(a) In the case of any termination of this Agreement, the provisions of
Section 7.3 and 7.4 shall remain in full force and effect.
(b) Upon termination of this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party hereto or their
respective directors, officers, employees, agents or other representatives.
(c) In the event of termination of this Agreement, such termination shall be
without prejudice to any rights that the terminating party or parties may have
against the breaching party or parties or any other person under the terms of
this Agreement or otherwise.
(d) In the event of termination of this Agreement, Shareholders and Purchaser
shall, as soon as reasonably practicable, return to each other all originals
and copies of documents and written materials provided to the other under this
Agreement.
9.3 Amendment. This Agreement may be amended at any time by a written
instrument executed by Purchaser and the Shareholders. Any amendment effected
pursuant to this Section 9.3 shall be binding upon all parties hereto.
9.4 Waiver. Any term or provision of this Agreement may be waived in
writing at any time by the party or parties entitled to the benefits thereof.
Any waiver effected pursuant to this Section 9.4 shall be binding upon all
parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any other right, power or privilege. No waiver of any
breach of any covenant or agreement hereunder shall be deemed a waiver of any
preceding or subsequent breach of the same or any other covenant or agreement.
The rights and remedies of each party under this Agreement are in addition to
all other rights and remedies, at law or in equity, that such party may have
against the other parties.
9.5 Survival of Representations and Warranties. The representations and
warranties of the parties hereto contained in this Agreement or in any writing
delivered pursuant hereto or at the Closing shall survive the Closing and the
consummation of the transactions contemplated hereby (and any examination or
investigation by or on behalf of any party hereto) until the fourth
anniversary of the Closing Date; provided, that the representations and
warranties contained in Section 4.12 and Section 4.14 shall not terminate
until the expiration of any applicable statute of limitations; provided,
further, that representations and warranties contained in Article 3, Section
4.17, Section 4.24 and Section 4.28 shall not terminate but shall continue
indefinitely.
10. INDEMNFICATION
10.1 Indemnification.
(a) The Shareholders, jointly and severally, covenant and agree to defend,
indemnify and hold harmless Purchaser and the Company and each Person who
controls Purchaser or the Company within the meaning of the Securities Act
from and against any Damages arising out of or resulting from: (i) any
inaccuracy in or breach of any representation or warranty made by any
Shareholder in this Agreement or in any writing delivered pursuant to this
Agreement or at the closing [unless and except that such inaccuracy or breach
is a direct result of changes made by the Purchaser in accounting methods or
estimates utilized in financial reporting of the Company]; or (ii) the failure
of any Shareholder to perform or observe fully any covenant, agreement or
provision to be performed or observed by such Shareholder pursuant to this
Agreement or the Noncompetition Agreements; (iii) any claims, rights, title,
interest, actions, lawsuits, judgments, damages or other adverse consequences
which may arise from litigation between the Shareholders and the Company and
Republic Environmental Systems (RES) and Shareholders shall maintain control
over the defense of any action or claims as it relates to RES. Shareholders
shall use their best efforts to remove the Company as a litigant or
participant in the RES matters. Notwithstanding anything to the contrary in
this Section 10.1(a)(iii), the Purchaser will pay Shareholders up to $20,000
in support of their defense of the RES actions, and will have to consent to
any settlement of the RES actions as well as the equal right with Shareholders
to participate in all decisions, strategy, negotiations, litigation matters,
and other such events relative to RES actions. In the event the Shareholders
are successful in asserting their counterclaims against RES, Purchaser shall
be entitled to receive full reimbursement of any monies paid in support of the
defense of the RES actions not to exceed its cap of $20,000.
(b) Purchaser covenants and agrees to defend, indemnify and hold harmless the
Shareholders from and against any Damages arising out of or resulting from:
(i) any inaccuracy in or breach of any representation or warranty made by
Purchaser in this Agreement or in any writing delivered pursuant to this
Agreement or at the Closing; (ii) the failure by Purchaser to perform or
observe any covenant, agreement or condition to be performed or observed by it
pursuant to this Agreement; or (iii) the Shareholders' liability under the
Guaranties.
10.2 Third Party Claims.
(a) If any party entitled to be indemnified pursuant to Section 10.2 (an
"Indemnified Party") receives notice of the assertion by any third party of
any claim or of the commencement by any such third person of any Action (any
such claim or Action being referred to herein as an "Indemnifiable Claim")
with respect to which another party hereto (an "Indemnifying Party") is or may
be obligated to provide indemnification, the Indemnified Party shall promptly
notify the Indemnifying Party in writing (the "Claim Notice") of the
Indemnifiable Claim; provided, that the failure to provide such notice shall
not relieve or otherwise affect the obligation of the Indemnifying Party to
provide indemnification hereunder, except to the extent that any Damages
directly resulted or were caused by such failure.
(b) The Indemnifying Party shall have thirty (30) days after receipt of the
Claim Notice to undertake, conduct and control, through counsel of its own
choosing, and at its expense, the settlement or defense thereof, and the
Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith; provided, that (i) the Indemnifying Party shall permit the
Indemnified Party to participate in such settlement or defense through counsel
chosen by the Indemnified Party (subject to the consent of the Indemnifying
Party, which consent shall not be unreasonably withheld), provided that the
fees and expenses of such counsel shall not be borne by the Indemnifying
Party, and (ii) the Indemnifying Party shall not settle any Indemnifiable
Claim without the Indemnified Party Shareholder's consent. So long as the
Indemnifying Party is vigorously contesting any such Indemnifiable Claim in
good faith, the Indemnified Party shall not pay or settle such claim without
the Indemnifying Party's consent, which consent shall not be unreasonably
withheld.
(c) If the Indemnifying Party does not notify the Indemnified Party within
thirty (30) days after receipt of the Claim Notice that it elects to undertake
the defense of the Indemnifiable Claim described therein, the Indemnified
Party shall have the right to contest, settle or compromise the Indemnifiable
Claim in the exercise of its reasonable discretion provided that the fees and
expenses of the Indemnified Parties counsel shall be borne by the Indemnifying
Party; provided, that the Indemnified Party shall notify the Indemnifying
Party of any compromise or settlement of any such Indemnifiable Claim.
(d) Anything contained in this Section 10.3 to the contrary notwithstanding,
the Shareholders shall not be entitled to assume the defense for any
Indemnifiable Claim (and shall be liable for the reasonable fees and expenses
incurred by the Indemnified Party in defending such claim) if the
Indemnifiable Claim seeks an order, injunction or other equitable relief or
relief for other than money damages against Purchaser or the Company which
Purchaser determines, after conferring with its counsel, cannot be separated
from any related claim for money damages and which, if successfully, would
adversely affect the business, properties or prospects of the Company.
10.3 Indemnification Non-Exclusive. The foregoing indemnification provisions
are in addition to, and not in derogation of, any statutory, equitable or
common-law remedy any party may have for breach of representation, warranty,
covenant or agreement.
10.4 Set-off. Notwithstanding any provision of this Agreement or of any
other agreement, instrument or undertaking, it is understood and agreed that
Purchaser shall have the right to set-off the amount of any indemnity under
Sections 10.1 or 10.2 hereof to the extent any of the Shareholders shall be
liable therefor against any shares of the Purchaser held in escrow pursuant to
Section 2.2(b). Purchaser shall have no other rights of set-off.
11. GENERAL PROVISIONS
11.1 Notices. All notices and other communications under or in connection
with this Agreement shall be in writing and shall be deemed given (a) if
delivered personally (including by overnight express or messenger), upon
delivery, (b) if delivered by registered or certified mail (return receipt
requested), upon the earlier of actual delivery or three (3) days after being
mailed, or (c) if given by telecopy, upon confirmation of transmission by
telecopy, in each case to the parties at the following addresses:
(a) If to the Purchaser, addressed to:
U. S. Plastic Lumber Corporation
2300 W. Glades Road
Suite 440W
Boca Raton, Florida 33431
Attention: Mark Alsentzer, President and CEO
Telecopy: (561)394-5335
(b) If to any Shareholder, to the address set forth
below such Shareholder's name on Schedule "A" hereto:
With a copy to:
John M. Scagnelli, Esq.
Whitman Breed Abbott & Morgan
One Gateway Center - Fourth Floor
Newark, NJ 07102
Telecopy: (201) 623-4640
11.2 Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable such term or
provision in any other jurisdiction, the remaining terms and provisions of
this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or enforceable.
11.3 Entire Agreement. This Agreement, including the annexes and schedules
attached hereto and other documents referred to herein, contains the entire
understanding of the parties hereto in respect of its subject matter and
supersedes all prior and contemporaneous agreements and understandings, oral
and written, between the parties with respect to such subject matter.
11.4 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of Purchaser and the Shareholders and their respective
successors, heirs and assigns; provided, however, that no Shareholder shall
directly or indirectly transfer or assign any of such Shareholder's respective
rights hereunder in whole or in part without the prior written consent of
Purchaser, and any such transfer or assignment without said consent shall be
void, ab initio. Subject to the immediately preceding sentence, and except as
set forth in Article 10, this Agreement is not intended to benefit, and shall
not run to the benefit of or be enforceable by, any other person or entity
other than the parties hereto and their permitted successors and assigns.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.
11.6 Recitals, Schedules and Annexes. The recitals, schedules and annexes to
this Agreement are incorporated herein and, by this reference, made a part
hereof as if fully set forth at length herein.
11.7 Construction.
(a) The article, section and subsection headings used herein are inserted for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(b) As used in this Agreement, the masculine, feminine or neuter gender, and
the singular or plural, shall be deemed to include the others whenever and
wherever the context so requires.
(c) For the purposes of this Agreement, unless the context clearly requires,
"or" is not exclusive.
11.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State
of Delaware.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or
has caused this Agreement to be executed on its behalf by a representative
duly authorized, all as of the date first above set forth.
"PURCHASER"
ATTEST United States Plastic Lumber Corp.,
________________________ a Nevada corporation
By:_________________________
Mark S. Alsentzer, President
WITNESS SHAREHOLDERS:
_______________________ _________________________
Theodore S. Budzynski
_______________________ _________________________
Martin E. Brubaker
Polaris Equipment Co., Inc.
_______________________ By:_______________________
William R. Amaducci
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A List of Shareholders
Exhibit B Stock Escrow Agreement
Exhibit C Employment Agreements of Ted Budzynski and Martin Brubaker
Exhibit D Non-Compete Agreements of Robert Amaducci and William Amaducci
Exhibit E Opinion of Counsel
Exhibit F Certificate of Presidents
Exhibit G Certificate of Shareholders
Exhibit H Consent of Board of Directors
Exhibit I USPL Guaranty
SCHEDULES
3.3 Consents
3.4 Conflicts
4.1(a) Foreign Corp status
4.1(b) Subsidiaries
4.2 No Conflicts
4.3 Capitalization
4.4 Financial Statements
4.5(a) Liens
4.5(b) List of Real Property
4.5(c) List of Tangible Property
4.5(d) List of Leases
4.5(f) Realty representations
4.6-1 Accounts Receivable Collection issues
4.6-2 List of Accounts Receivable
4.7 Inventories
4.8(a) List of Patents and Trademarks
4.8(b) Registered Rights
4.8(c) Licenses
4.9(a) List of Banks
4.9(b) Insurance Policies
4.10(a) Indebtedness
4.10(b) Guaranties
4.11 Judgments
4.12 Income Taxes
4.14 Employee Benefit Plans
4.15 Undisclosed Liabilities
4.16 Permits
4.19(a) Sales Orders
4.19(b) Purchase Orders
4.19(c) Sales Reps
4.19(d) Non-Compete Agreements
4.19(e) Contracts (inside)
4.19(f) Contracts (outside)
4.19(g) Legality
4.20 Absence of Changes
4.21(a) List of Employees
4.21(b) Labor Agreements
4.22 Affiliation
4.23(a) Customer Lists
4.23(b) Supplier Lists
4.25 Product Return
4.26 Warranties
4.28 Hazardous Materials
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as
of June 30, 1997 among U.S. PLASTIC LUMBER CORPORATION, a Nevada
corporation, any of its affiliates, subsidiaries, or other entities
established for the purposes of this transaction (the "Purchaser") and
EnviroPlastics Corporation, a Massachusetts corporation, and the
individuals listed on Schedule "I" (such individuals are sometimes
referred to herein collectively as the "Shareholders" and individually
as a "Shareholder").
RECITALS
A. The Shareholders own all of the issued and outstanding capital
stock of EnviroPlastics Corporation
(the "Company").
B. The Shareholders wish to sell, and the Purchaser wishes to
purchase, all of the issued and outstanding capital stock of the Company
upon the terms and subject to the conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions
hereinafter set forth, and other good and valuable considerations, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS
Unless otherwise defined herein or the context otherwise requires, the
terms defined in this Article 1 shall have the meanings herein specified
for all purposes of this Agreement, applicable to both the singular and
plural forms of any of the terms herein defined. Unless otherwise
indicated, any reference herein to a "Section", "Article", "Schedule"
or "Exhibit" shall mean the applicable section, article, schedule or
exhibit of or to this Agreement. All accounting terms used in this
Agreement not defined in this Article 1 shall, except as otherwise
provided for herein, be construed in accordance with generally accepted
accounting principles, consistently applied.
"Action" shall mean any actual or threatened claim, action, suit,
arbitration, hearing, inquiry, proceeding, complaint, charge or
investigation by or before any Governmental Entity or arbitrator and any
appeal from any of the foregoing.
"Affiliate" of a Person shall mean any Person that directly or
indirectly controls, is controlled by, or is under common control with
the indicated Person.
"Agreement" shall mean this Securities Purchase Agreement.
"Balance Sheet" and "Balance Sheet Date" shall have the meaning assigned
to such terms in Section 4.4(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Closing" and "Closing Date" shall have the respective meanings assigned
to such terms in Section 2.3.
"Common Stock" shall mean the Company"s authorized class of common
stock, $0.01 par value per share.
"DOL" shall mean the United States Department of Labor.
"Damages" shall mean any and all losses, liabilities, obligations,
costs, expenses, damages or judgments of any kind or nature whatsoever
(including reasonable fees and disbursements of attorneys, accountants,
and experts and other costs and expenses incurred pursuing
indemnification claims under Article 10 hereof).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any Person which is (or at any relevant
time was) a member of a controlled group of corporations within the
meaning of Code Section 414 (b), all trades or businesses under common
control within the meaning of Code Section 414(c), and all affiliated
service groups within the meaning of Code Section 414(m), of which the
Company is (or any relevant time was) a member.
"Environmental Laws" shall mean all Legal Requirements pertaining to the
protection of the environment, the treatment, emission and discharge of
gaseous, particulate and effluent pollutants and the use, handling
storage, treatment, removal transport, transloading, cleanup,
decontamination, discharge and disposal of Hazardous Substances,
including, without limitation, those statutes, laws, rules and
regulations set forth below in the definitions of "Hazardous Material".
"Governmental Entity" shall mean any local, state, federal or foreign
(i) court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the IRS and other
taxing authorities.
"Hazardous Material" shall mean any flammable, ignitable, corrosive,
reactive, radioactive or explosive substance or material, hazardous
waste, toxic substance or related material and any other substance or
material defined or designated as a hazardous or toxic substance,
material or waste by any Environmental Law currently in effect or as
amended or promulgated in the future and shall include, without
limitation:
(a) those substances included within the definitions of "hazardous
substances", "hazardous materials", "toxic substances", or "solid waste"
in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Sections 9601, et. seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et.seq., and the
Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et.
seq., and in the regulations promulgated pursuant thereto.
(b) those substances defined as "hazardous substances", "hazardous
materials", "toxic substances", or "solid waste" in the Commonwealth of
Massachusetts.
(c) those substances listed in the United States Department of
Transportation Table (49CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor thereto) as hazardous
substances (40CFR Part 302 and any amendments thereto).
(d) such other substances, materials and wastes that are or become
regulated under applicable local, state or federal laws or regulations,
or which are or become classified as hazardous or toxic under any Legal
Requirement; and
(e) any material, waste or substance that is, in whole or in part, (i)
petroleum, asbestos, polychorinated biphenyls, methylene chloride,
trichorothylene, 1, 2-transdichoroethylene, dioxins or dibenzofurans,
(ii) designated as an "extremely hazardous substance" pursuant to
Section 302 of the Emergency Planning and Community Right-to-Know Act of
1986, as amended, or (iii) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Sections 1251
et. seq. (U.S.C. Section 1321) or listed pursuant to Section 307 of the
Clean Water Act (33 U.S.C. Section 1317), or Section 112 or other
sections of the Clean Water Act, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"Indebtedness" shall mean, when used with reference to any Person,
without duplication, (i) any liability of such Person created or assumed
by such Person, or any Subsidiary thereof, (A) for borrowed money, (B)
evidenced by a bond, note, debenture, or similar instrument (including a
purchase money obligation, deed of trust or mortgage) given in
connection with the acquisition of, or exchange for, any property or
assets (other than inventory or similar property acquired and consumed
in the Ordinary Course), including securities and other Indebtedness,
(C) in respect of letters of credit issued for such Person"s account and
"swaps" of interest and currency exchange rate (and other interest and
currency exchange rate hedging agreements) to which such Person is a
party or (D) for the payment of money as lessee under leases that should
be, in accordance with generally accepted accounting principles,
recorded as capital leases for financial reporting purposes; (ii) any
liability of others described in the preceding clause (i) guaranteed as
to payment of principal and interest by such Person or in effect
guaranteed by such Person through an agreement, contingent or otherwise,
to purchase, repurchase or pay the related Indebtedness or to acquire
security therefor; (iii) all liabilities or obligations secured by a
Lien upon property owned by such Person and upon liabilities or
obligations such Person customarily pays interest or principal, whether
or not such Person has not assumed or become liable for the payment of
such liabilities or obligations; and (iv) any amendment, renewal,
extension, revision or refunding or any such liability or obligation;
provided, however, that Indebtedness shall not include any liability for
compensation of such Person"s employees or for inventory or similar
property acquired and consumed in the Ordinary Course or for services.
"Leased Real Property" shall mean all real property, including
Structures, leased by the Company.
"Legal Requirements" shall mean any statute, law, ordinance, rule,
regulation, permit, order, writ, judgment, injunction, decree or award
issued, enacted or promulgated by any Governmental Entity or any
arbitrator.
"Lien" shall mean all liens (including judgment and mechanic"s liens,
regardless of whether liquidated), mortgages, assessments, security
interests, easements, claims, pledges, trusts (constructive or other),
deeds of trust, options or other charges, encumbrances or restrictions.
"Majority Shareholders" shall have the meaning assigned to such
term in Article 4.
"Material Adverse Effect" shall mean a material adverse effect on the
business, financial condition, properties, profitability, prospects or
operations of the Company.
"Noncompetition Agreement(s)" shall have the meaning assigned to such
term in Section 8.1(i).
"Ordinary Course" shall mean, when used with reference to the Company,
the ordinary course of the Company"s business, consistent with past
practices.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permit" shall have the meaning assigned to such term in Section 4.16.
"Permitted Liens" shall mean (a) Liens for ad valorem real or personal
property taxes or assessments not at the time due and (b) Liens in
respect of pledges or deposits under worker"s compensation laws or
similar legislation, carriers", warehousemen"s, mechanic"s, laborers"
and materialmen"s and similar liens, if the obligations secured by such
Liens are not then delinquent.
"Person" shall mean all natural persons, corporations, business trusts,
associations, limited liability companies, companies partnerships, joint
ventures, Governmental Entities and any other entities.
"Real Property" shall mean the Owned Real Property and the Leased Real
Property, collectively.
"Related Agreements" shall mean all agreements which are being entered
into and executed simultaneous with the execution of this Agreement,
including but not limited to the Stock Escrow Agreement, Employment
Agreement of Bruce A. Fortin, Employment Agreement of Franco Previd,
Non-Compete Agreements with Henry P. Lisciotti, Jr. and Thomas W.
Whitcomb, and such other agreements as may be necessary to carry out the
intent of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share Percentage" with respect to any Shareholder shall mean the
percentage that the number of Shares held by such Shareholder represents
of the total number of Shares, as set forth on Schedule "I".
"Shares" shall mean the shares of Common Stock of the Company held by
the shareholders.
"Stock" shall mean shares of common stock issued by the Purchaser to the
Shareholders as payment of the Purchase Price, as contemplated by
Article 2 .
"Stock Escrow Agreement" shall mean the agreement referenced in
Section 8.1(c).
" Structure" shall mean any facility, building, plant, factory, office,
warehouse structure or other improvement owned or leased by the Company.
"Subsidiary" of a Person shall mean any corporation, partnership,
limited liability company, association or other business entity at least
50% of the outstanding voting power of which is at the time owned or
controlled directly or indirectly by such Person or by one or more of
such subsidiary entity, or both.
"Tax" shall mean any Federal, state, local or foreign income, gross
receipts, license, payroll, unemployment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including, without
limitation, taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
employment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated tax or other tax, assessment or charge of any kind whatsoever,
including, without limitation, any interest, fine, penalty or addition
thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for
refund or information, or statement relating to Taxes, and any exhibit,
schedule, attachment or amendment thereto.
2. PURCHASE AND SALE OF SECURITIES
2.1 Sale and Delivery. Each Shareholder agrees to sell and deliver to
Purchaser, and Purchaser agrees to purchase and accept from each
Shareholder, free and clear of all Liens, on the terms and conditions
set forth in this Agreement, and for the purchase price described in
Section 2.2 , good and marketable title to the number of Shares set
forth opposite the name of such Shareholder on Schedule "I". The Shares
to be sold and purchased pursuant to this Agreement constitute all of
the outstanding capital stock of the Company.
Purchase Price. The Purchase Price for all of the Shares shall be Two
Hundred Eighty Thousand (280,000) shares of the Stock, subject to One
Hundred and Eighty Thousand (180,000) shares being held in accordance
with the Stock Escrow Agreement, all such shares to be allocated among
the Shareholders as set forth opposite their respective names on
Schedule "I". The Stock shall not have been registered pursuant to the
Securities Act, provided, however, Purchaser agrees to use its best
efforts to register the Stock at the same time as the Purchaser
registers stock of the Stout Partnership in the Purchaser under the
Securities Act, at the cost of the Purchaser.
EnviroPlastics currently has a contract with DuPont which allows for
termination of the contract to occur on 30 days notice. The Majority
Shareholders agree to cause EnviroPlastics to renegotiate the DuPont
contract, prior to the Closing of this transaction, so as to have a 12
month termination provision in lieu of the current 30 days. In the event
EnviroPlastics and the Majority Shareholders are not successful in
accomplishing this contract revision prior to the Closing of this
transaction, 50,000 shares being transferred hereunder to the Majority
Shareholders shall be held in escrow bringing the total Stock Escrow
fund to 180,000 shares. In the event DuPont terminates the contract
with EnviroPlastics prior to 12 months subsequent to the date of
Closing, the Majority Shareholders shall forfeit their rights to a pro
rata portion of the 50,000 shares, releasing these shares from the Stock
Escrow Agreement back to Purchaser. Under this event, the number of
shares from the Stock Escrow Agreement to be delivered to the
Shareholders shall be based upon the number of days the DuPont contract
was in effect beginning with the day after the Closing Date and ending
on the date the DuPont contract terminates multiplied by 137 shares per
day. All other shares under the Stock Escrow Agreement will be returned
to Purchaser.
Additional Purchase Price consideration. Bruce A. Fortin and Franco
Previd will each be provided with an opportunity to earn additional
shares of Purchaser"s common stock equal to 15,000 options for each
fiscal year ending December 31, 1997, 1998, and 1999, at an option
exercise price equal to $5.00 per share based upon established
performance goals as set forth in Schedule 2.2(b). The rights being
granted pursuant to this Section 2 (b) are being provided for good
business reasons, are not assignable, and can only ripen into additional
voting stock.
2.3 Closing. The purchase and sale of the Shares and the consummation
of the other transactions contemplated by this Agreement (the "Closing")
shall occur at 10:00AM, local time, on June , 1997, simultaneously at
the offices of Purchaser, 2300 Glades Rd., Suite 440W, Boca Raton,
Florida and at the office of the general counsel for the Company,
Worcester, Massachusetts, or at such other time or on such other date as
shall be agreed upon among the Shareholders and the Purchaser upon
fulfillment of all conditions precedent to the Closing, such hour and
date being herein generally referred to as the "Closing Date". At the
Closing:
(a) Each Shareholder shall deliver or cause to be delivered to
Purchaser, against the delivery by the Purchaser of the Stock, in
payment by Purchaser of the Purchase Price to such Shareholder:
(i) a certificate or certificates representing the Shares being sold by
such Shareholder hereunder duly endorsed for transfer, or accompanied by
duly executed assignments separate from the certificate, transferring to
Purchaser good and marketable title to such Shares, free and clear of
all Liens;
(ii) all of the documents, certificates, and instruments required to be
delivered, or caused to be delivered, by such Shareholder pursuant to
Section 8.1 ; and
(iii) all records, documents, and files of the Company, including,
without limitation, all minute books, stock records, stock certificate
books, and internal accounting records.
(b) Purchaser shall deliver or cause to be delivered to each
Shareholder, against delivery of the certificate or certificates
representing the Shares:
(i) certificate(s) of Stock of the Purchaser representing the number of
shares allocated to the respective Shareholder as set forth on Schedule
"I";
(ii) all of the documents, if any, required to be delivered by Purchaser
pursuant to Section 8.2 .
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDERS
Each of the Shareholders hereby severally represents and warrants to,
and covenants and agrees with, Purchaser that:
3.1 Ownership of Shares. Such Shareholder owns of record and
beneficially the number of Shares set forth opposite the name of such
Shareholder on Schedule "I" , and has, and at all times prior to and as
of the Closing such Shareholder will have, good and marketable title to
such Shares free and clear of all Liens.
3.2 Delivery of Good Title. Upon delivery of the Shares to be sold by
such Shareholder hereunder and delivery of the Stock therefor pursuant
to this Agreement, Purchaser will have good and marketable title to such
Shares free and clear of all Liens.
3.3 Execution and Delivery. All consents, approvals, and
authorizations necessary for the execution, delivery and performance by
such Shareholder of this Agreement (including, without limitation, the
transfer and sale of the Shares to be sold by such Shareholder to
Purchaser) have been duly and lawfully obtained, and such Shareholder
has, and at the Closing will have, full right, power, authority and
capacity to execute, deliver and perform this Agreement. This Agreement
has been duly executed and delivered by such Shareholder and constitutes
a legal, valid and binding agreement of such Shareholder enforceable
against such Shareholder in accordance with its terms.
3.4 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
will not conflict with or result in a breach or violation of any term or
provision of, or (with or without notice or passage of time, or both)
constitute a default under, any indenture, mortgage, deed of trust,
trust (constructive and other), loan agreement or other agreement or
instrument to which such Shareholder is a party or by which such
Shareholder or such Shareholder"s Shares are bound, or violate any Legal
Requirement applicable to or binding upon such Shareholder.
3.5 No Brokers. No broker, finder or similar agent has been employed
by or on behalf of such Shareholder in connection with this Agreement or
the transactions contemplated hereby, and such Shareholder has not
entered into any agreement or understanding of any kind with any person
or entity for the payment of any brokerage commission, finder"s fee or
any similar compensation in connection with this Agreement or the
transactions contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
Except as set forth on Schedule II, Bruce A. Fortin, Franco Previd,
Henry P. Lisciotti, Jr., and Thomas W. Whitcomb ("Majority
Shareholders"), hereby jointly and severally represent and warrant to,
and covenant and agree with, Purchaser that:
4.1 Organization and Good Standing.
(a) The Company has been duly organized and is existing as a
corporation in good standing under the laws of the Commonwealth of
Massachusetts with full power and authority to own and lease its
properties and to conduct its corporate business as currently conducted.
The Company is not required to qualify as a foreign corporation for the
transaction of business under the laws of any other jurisdiction.
(b) The Company has no Subsidiary nor owns or controls, or has any other
equity investment or other interest in, directly or indirectly, any
corporation, joint venture, partnership, association or other entity.
4.2 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
will not (a) conflict with or result in a breach or violation of any
term or provision of, or constitute a default under (with or without
notice or passage of time, or both), or otherwise give any Person a
basis for accelerated or increased rights or termination or
nonperformance under, any indenture, mortgage, deed of trust, loan or
credit agreement, lease, license or other agreement or instrument of
which the Company is a party or by which the Company is bound or
affected or to which any of the property or assets of the Company is
bound or affected including, without limitation, all arrangements in
Section 4.19, (b) result in the violation of the provisions of the
Articles of Organization or Bylaws of the Company or any Legal
Requirement applicable to or binding upon it, (c) result in the creation
or imposition of any Lien upon any property or asset of the Company or
(d) otherwise adversely affect the contractual or other legal rights or
privileges of the Company. Schedule 4.2 sets forth a list of all
agreements requiring the consent of any party thereto to any of the
transactions contemplated hereby.
4.3 Capitalization. The authorized capital stock of the Company
consists solely of Two Hundred Thousand (200,000) shares of Common
Stock having a par value of $0.01 per share, of which only the number of
Shares listed on Schedule "A" are, and as of the Closing will be, issued
and outstanding. All of the Shares have been duly authorized and
validly issued and are fully paid, nonassessable and outstanding and are
held by the Shareholders in amounts reflected in Schedule "I" . Other
than as set forth on Schedule 4.3, (i) there are no existing options,
warrants, right, calls or commitments of any character relating to the
shares of Common Stock or any other capital stock or securities of the
Company, (ii) there are no outstanding securities or other instruments
convertible into or exchangeable for shares of Common Stock or any other
capital stock or securities of the Company and no commitments to issue
such securities or instruments and no Person has any right of first
refusal, preemptive right, subscription right or similar right with
respect to any shares of Common Stock or any other capital stock or
securities of the Company. The offer, issuance and sale of the Shares
were (i) exempt from the registration and prospectus delivery
requirements of the Securities Act, (ii) registered or qualified (or
exempt from registration or qualification) under the registration or
qualification requirements of all applicable state securities laws and
(iii) accomplished in conformity with all other Legal Requirements.
4.4 Financial Statements.
(a) Schedule 4.4 hereto contains true and complete copies of (i) the
unaudited balance sheet (the "Balance Sheet") of the Company at December
31, 1996 and March 31, 1997 (the "Balance Sheet Date"), and the related
unaudited statements of income for the twelve (12) months ended December
31, 1996 and the three months ended March 31, 1997 and (ii) the reviewed
balance sheet of the Company at December 31, 1995 and the related
reviewed statements of income, shareholders" equity and cash flow for
the fiscal year then ended (together with the report thereon of Love,
Bollus, Lynch & Rogers, LLP , independent public accountants)(the
financial statements described in clause (i) and (ii) above are
collectively referred to as the "Financial Statements").
(b) The Financial Statements present fairly the financial condition of
the Company as of the dates indicated therein and the results of
operations and changes in financial position of the Company for the
periods specified therein, have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
during the periods covered thereby and prior periods, have been derived
from the accounting records of the Company and represent only actual,
bona fide transactions. The Company"s Financial Statements are true and
correct in all material respects and do not contain any untrue statement
of a material fact or omit to state a material fact.
4.5 Title to Property; Encumbrances.
(a) The Company has, and immediately prior to the Closing will have,
good, valid and marketable title to all personal property reflected on
the Balance Sheet as owned by the Company and personal property acquired
by the Company since the Balance Sheet Date, in each case free and clear
of all Liens except (i) as set forth on Schedule 4.5(a), (ii) for sales
and other dispositions of inventory in the Ordinary Course since the
Balance Sheet Date which, in the aggregate, have not been materially
different from prior periods, and (iii) Permitted Liens.
(b) Schedule 4.5(b). contains a list of all tangible personal property
having a cost or fair market value in excess of Five Thousand Dollars
($5,000.00) owned by the Company (other than personal property held by
the Company as lessee under a personal property lease).
(c) Schedule 4.5(c) contains a list of all real property leases,
licenses and personal property leases under which the Company is the
lessee or licensee, together with (i) the location and nature of each of
the leased or licensed properties (including a legal description of all
Leased Real Property), (ii) the termination date of each such lease or
license, (iii) the name of the lessor or licensor and (iv) all rental
and other payments made or required to be made for the fiscal years
ending December 31, 1995 and December 31, 1996 and interim period ending
June , 1997. All leases and licenses pursuant to which the Company
leases or licenses from others real or personal property are valid,
subsisting in full force and effect in accordance with their respective
terms, and there is not, under any real property lease, personal
property lease or license, any existing default or event of default (or
event that, with notice or passage of time, or both, would constitute a
default, or would constitute a basis of force majeure or other claim of
excusable delay or nonperformance). True and complete copies of all
real property leases, licenses and personal property leases listed on
Schedule 4.5(c) have been delivered to Purchaser heretofore, as well as
copies of any title reports, surveys or environmental reports or audits
relating to any Leased Real Property. Except as set forth in Schedule
4.5(c), no such lease or license will require the consent of the lessor
or licensor to or as a result of the consummation of the transactions
contemplated by this Agreement. For the purposes of this Section
4.5(c), a "lease" shall include a sublease.
(d) All personal property owned by the Company and all personal
property held by the Company pursuant to personal property leases is in
good operating condition and repair, subject only to ordinary wear and
tear, has been operated, serviced and maintained properly within the
recommendations and requirements of the manufacturers thereof (if any)
and is suitable and appropriate for the use thereof made and proposed to
be made by the Company in its business and operations. The Real
Property and personal property described in Sections 4.5(a)and 4.5(b) )
and the Real Property and personal property held by the Company pursuant
to the leases and licenses described in Schedule 4.5(c) compromise all
of the real property and personal property used in the conduct of
business of the Company.
(e) Except as set forth in Schedule 4.5(e):
(i) The Company is not in violation of, or default under, any Legal
Requirement pertaining to any of the Real Property. No notice of
violation of any Legal Requirement, or of any covenant, condition,
restriction or easement affecting any Real Property or with respect to
the use or occupancy thereof, has been given by any Person;
(ii) All of the Structures (A) are in good operating condition and
repair, (B) are adequate and suitable for the purposes for which they
are currently and proposed to be used, and (C) are supplied with
utilities and other services necessary for the operation of such
Structures, and the business conducted by the Company therein, including
gas, electricity, water, telephone, sanitary sewer and storm sewer, all
of which services, to the knowledge of the Majority Shareholders, are
maintained in accordance with all Legal Requirements and are provided
via permanent, irrevocable, appurtenant easements in favor of the
Company;
(iii) To the knowledge of the Majority Shareholders no condemnation
proceeding is pending or threatened which would impair the occupancy,
use or value of any Real Property;
(iv) To the knowledge of the Majority Shareholders, no Structure, nor
the operations of the Company therein or thereon, (A) is located outside
of the boundary lines of the described parcel of land on which it is
located, (B) is in violation of applicable setback requirements, zoning
laws, or ordinances, (C) is subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications or (D) encroaches
on any property owned by, or easement granted in favor of, any Person;
(v) To the knowledge of the Majority Shareholders, there are no (A)
leases, subleases, licenses, concessions or other agreements, written or
oral, granting to any other Person the right to acquire, use or occupy
any portion of, any Real Property, (B) outstanding options or rights of
first refusal to purchase all or any portion of Real Property or
interest therein, and (C) Persons (other than the Company) in possession
of any Real Property; and
(vi) With respect to each item of Leased Real Property, (A) to the
Majority Shareholders" knowledge, the owner thereof has good and
marketable title thereto, free and clear of all Liens other than (I)
recorded easements, covenants and restrictions that do not impair the
current use, occupancy or value thereof and (II) the leasehold interest
of the Company, (B) there is adequate ingress and egress (and a
continuing right thereto), without the need for an easement, between
paved public rights-of-way and such Leased Real Property and (C) the
Company has not sold, transferred or subjected to a Lien such Leased
Real Property or any interest therein.
4.6 Accounts Receivable. All accounts receivable of the Company
reflected in the Balance Sheet and all accounts receivable of the
Company that have arisen since the Balance Sheet Date (except such
accounts receivable as have been collected since such dates) are valid
and enforceable claims, and the goods and services sold and delivered
that gave rise to such accounts were sold and delivered in conformity
with all applicable express and implied warranties, purchase orders,
agreements and specifications. Such accounts receivable of the Company
are subject to no valid defense, offset, except as set forth on Schedule
4.6 relative to DuPont, or counterclaim and are fully collectible,
except to the extent of the allowance for doubtful accounts reflected on
the Balance Sheet. Schedule 4.6 contains a true and complete aging of
the Company"s accounts receivable as of the Balance Sheet Date.
4.7 Inventories. Except as described in Schedule 4.7, all inventories
of raw materials, work-in-process and finished goods set forth or
reflected in the Balance Sheet or acquired by the Company since the
Balance Sheet Date, consist of a quality and quantity usable and
saleable in the Ordinary Course, except for slow-moving, damaged or
obsolete items and materials of below standard quality, all of which
have been written down to net realizable market value or in respect of
which adequate reserves have been provided, in each case as reflected in
the Balance Sheet. The value at which inventories are carried on the
Balance Sheet reflect the normal inventory valuation policy of the
Company, as applicable, in accordance with generally accepted accounting
principles and on a basis consistent with that of preceding periods, of
stating inventory at the lower of cost or market value. There is no
reason to believe that the Company will experience in the foreseeable
future any difficulty in obtaining, in the desired quantity and quality,
the inventory necessary to conduct its business in the manner proposed
to be conducted, including, without limitation, inventory which
historically has been imported.
4.8 Trademarks, Patents, Etc.
(a) Schedule 4.8(a) contains a true and complete list of all letters
patent, patent applications, trade names, trademarks, service marks,
trademark and service mark registrations and applications, copyrights,
copyright registrations and applications, grants of a license or right
to the Company with respect to the foregoing, both domestic and foreign,
claimed by either Company or used or proposed to be used by the Company
in the conduct of its business, whether registered or not. (collectively
herein, "Registered Rights").
(b) Except as described in Schedule 4.8(b), the Company owns and has
the unrestricted right to use the Registered Rights and every trade
secret, know-how, process, discovery, development, design, technique,
customer and supplier list, promotional idea, marketing and purchasing
strategy, invention, process, confidential data and or other information
(collectively herein, "Proprietary Information") required for or
incident of the design, development, manufacture, operation, sale and
use of all products and services sold or rendered or proposed to be sold
or rendered by the Company, free and clear of any right, equity or claim
of others. The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all Proprietary
Information.
(c) Schedule 4.8(c) contains a true and complete list and description
of all licenses of or rights to Proprietary Information granted to the
Company by others or to others by the Company. Except as described in
Schedule 4.8(c), (i) the Company has not sold, transferred, assigned,
licensed or subjected to any Lien, any Registered Right or Proprietary
Information or any interest therein, and (ii) the Company is not
obligated or under any liability whatever to make any payments by way of
royalties, fees or otherwise to any owner or licensor of, or other
claimant to, any Registered Right or Proprietary Information.
(d) There is no claim or demand of any Person pertaining to, or any
Action that is pending or, to the Majority Shareholders" knowledge,
threatened, which challenges the rights of the Company in respect of any
Registered Right or any Proprietary Information.
4.9 Banking and Insurance.
(a) Schedule 4.9(a) contains a true and complete list of the names and
locations of all financial institutions at which the Company maintains a
checking account, deposit account, securities account, safety deposit
box or other deposit or safekeeping arrangement, the numbers or other
identification of all such accounts and arrangements and the names of
all persons authorized to draw against any funds therein.
(b) Schedule 4.9(b) contains a true and complete list of all insurance
policies and bonds and self insurance arrangements currently in force
that cover or purport to cover risks or losses to or associated with the
Company"s business, operations, premises, properties, assets, employees,
agents and directors and sets forth, with respect to each such policy,
bond and self insurance arrangement, a description of the insured loss
coverage, the expiration date and time of coverage, the dollar
limitations of coverage, a general description of each deductible
feature and principal exclusion and the premiums paid and to be paid
prior to expiration. The insurance policies, bonds and arrangements
described on Schedule 4.9(b) (the "Policies") provide such coverage
against such risk of loss and in such amounts as are customary for
corporations of established reputation engaged in the same or similar
business and similarly situated. The Company has no obligation,
liability or other commitment relating to any contract of insurance
containing a provision for retrospective rating or adjustment of the
Company"s premium obligation. To the Majority Shareholders" knowledge,
no facts or circumstances exist that would cause the Company to be
unable to renew its existing insurance coverage as and when the same
shall expire upon terms at least as favorable as those currently in
effect, other than possible increases in premiums that do not result
from any act or omission of the Company or any Shareholder.
4.10 Indebtedness.
(a) The Company has no liability or obligation for Indebtedness other
than as set forth on Schedule 4.10(a), and true and complete copies of
all instruments and documents evidencing, creating, securing or
otherwise relating to such Indebtedness have been delivered to Purchaser
heretofore. Except as described in Schedule 4.10(a), no event has
occurred and no condition has become known to the Company or any
Shareholder (including the transactions contemplated hereby) that
constitutes or, with notice or passage of time, or both, would
constitute a default or a basis of force majeure or other claim of
accelerated or increased rights, termination, excusable delay or
nonperformance by the Company or any other Person under any instrument
or document relating to or evidencing Indebtedness that would entitle
any person to require the Company to pay any portion of the principal
amount of such Indebtedness prior to the scheduled maturity thereof.
Except as set forth in Schedule 4.10(a), no instrument or document
evidencing, creating, securing or otherwise relating to Indebtedness
will require the consent of any person to or as a result of the
consummation of the transactions contemplated by this Agreement.
(b) Schedule 4.10(b) contains a list and brief description of all
agreements or instruments pursuant to which any of the Company"s
directors, employees or shareholders have guaranteed any Indebtedness of
the Company (the "Guaranties"). True and complete copies of all
Guaranties have been delivered to Purchaser.
4.11 Judgments; Litigation. Except as set forth on Schedule 4.11:
(a) There is no (i) outstanding judgment, order, decree, award,
stipulation or injunction of any Governmental Entity or arbitrator
against or affecting the Company or its properties, assets or business
or (ii) Action pending against or affecting the Company or its
properties, assets or business.
(b) To the Majority Shareholders" knowledge, there is no (i)
outstanding judgment, order, decree, award, stipulation, injunction of
any Governmental Entity or arbitrator against or affecting any officer,
director or employee of the Company relating to the Company or its
business, (ii) Action threatened against or affecting the Company or its
properties, assets or business, (iii) Action pending or threatened
against the Company"s officers, directors or employees relating to the
Company or its business or (iv) basis for the institution of any Action
against the Company or any of its officers, directors, employees,
properties or assets which, if decided adversely, would have a Material
Adverse Effect.
4.12 Income and Other Taxes. Except as set forth on Schedule 4.12:
(a) All Tax Returns required to be filed through and including the date
hereof in connection with the operations of the Company are true,
complete and correct in all respects and have been properly and timely
filed. The Company has not requested any extension of time within which
to file any Tax Return, which Tax Return has not since been filed.
Purchaser has heretofore been furnished by the Company with true,
correct and complete copies of each Tax Return of the Company with
respect to the past three (3) taxable years, and of all reports of, and
communications from, any Governmental Entities relating to such period.
The Company has disclosed on its Federal Income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of income Taxes for federal income tax purposes within
the meaning of Code Section 6662.
(b) All Taxes required to be paid or withheld and deposited through and
including the date hereof in connection with the operations of the
Company have been duly and timely paid or deposited by the Company. The
Company has properly withheld or collected all amounts required by law
for income Taxes and employment Taxes relating to its employees,
creditors, independent contractors and other third parties, and for
sales Taxes on sales, and has properly and timely remitted such withheld
or collected amounts to the appropriate Governmental Entity. The
Company has no liabilities for any Taxes for any taxable period ending
prior to or coincident with the Closing Date.
(c) The Company has made adequate provision on its books of account for
all Taxes with respect to its business, properties and operations
through the Balance Sheet Date, and the accruals for Taxes in the
Balance Sheet are adequate to cover all liabilities for Taxes of the
Company for all periods ending on or before the Closing Date.
(d) The Company has never (i) had a tax deficiency proposed, asserted
or assessed against it (ii) executed any waiver of any statute of
limitations on the assessment or collection of any Taxes, or (iii) been
delinquent in the payment of any Taxes.
(e) No Tax Return of the Company has been audited or the subject of
other Action by any Governmental Entity. The Company has not received
any notice from any Governmental Entity of any pending examination or
any proposed deficiency, addition, assessment, demand for payment or
adjustment relating to or affecting the Company or its assets or
properties and no Majority Shareholder has reason to believe that any
Governmental Entity may assess (or threaten to assess) any Taxes for any
periods ending on or prior to the Closing Date.
(f) The Company (i) has not filed any consent or agreement pursuant to
Code Section 341(f), and no such consent or agreement will be filed at
any time on or before the Closing Date; (ii) has not made any payments,
is not obligated to make any payments and is not a party to any
agreement that under certain circumstances could obligate the Company to
make any payments that will not be deductible under Code Section 280G,
(iii) is not a United States real property holding corporation within
the meaning of Code Section 897(c)(2); (iv) is not a party to a tax
allocation or sharing agreement; (v) has never been (or does not have
any liability for unpaid Taxes because it was) a member of an affiliated
group with the meaning of Code Section 1504(a); (vi) has never applied
for a tax ruling from a Governmental Entity and (vii) has never filed or
been the subject of an election under Code Section 338(g) or Code
Section 338(h)(10) or caused or been the subject of a deemed election
under Code Section 338(e).
4.13 Questionable Payments. Neither the Company nor, to the Majority
Shareholders" knowledge, any of its directors, officers, agents,
employees or other Person associated with or acting on behalf of the
Company has (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political
activity, (b) made any direct or indirect unlawful payments to
government officials or employees, or foreign government officials or
employees, from corporate funds, (c) established or maintained any
unlawful or unrecorded fund of corporate monies or other assets, (d)
made any false or fictitious entries on the books of account of the
Company, (e) made or received any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment, or (f) made any other
payment, favor or gift not fully deductible for federal income tax
purposes.
4.14 Employee Benefit Matters.
(a) Schedule 4.14 contains a complete list of all Employee Benefit
Plans ("Plans"). For purposes of this Section 4.14, the term "Plan"
shall mean any plan maintained by the Company which is either an
"employee benefit plan" as defined in Section 3(3) of ERISA or a "fringe
benefit plan" as defined in Section 6039D of the Code. True and complete
copies of each of the following documents (and any amendments thereto),
where applicable, have been delivered previously to Purchaser: (i) the
Plan documents; (ii) a written description of any Plan which is not in
writing; (iii) if the Plan is funded through a trust or any third-party
funding vehicle, the trust or other funding agreement; (iv) the Plan"s
most recent financial statements; (v) the two most recent annual reports
(including all schedules and attachments thereto) required by ERISA;
(vi) the most recent actuarial report and valuation; (vii) the most
recent determination letter received from the IRS with respect to each
Plan that is intended to be qualified under Code Section 401 or to be
recognized as tax-exempt under Code Section 501(c); (viii) the most
recent summary plan description and each summary of material
modifications required by ERISA; (ix) any agreement providing for the
provision of administrative or investment management services with
respect to the Plan; and (x) all documents and correspondence received
from or provided to the DOL, IRS and PBGC during the past two years.
(b) Each Plan and related trust, annuity, or other funding agreement
complies and has been maintained in compliance with all applicable Legal
Requirements. No non-exempt prohibited transaction (as defined in Code
Section 4975 and ERISA Sections 406 and 408) has occurred and no
"fiduciary" (as defined in ERISA Section 3(21)) has committed any breach
of duty which could subject the Company, any ERISA Affiliate, or any
director, officer, or employee thereof to liability under Title I of
ERISA or to tax under Code Section 4975. All material obligations
required to be performed by the Company and other Person under the terms
of each Plan and applicable Legal Requirement have been performed.
(c) All required reports and descriptions, including, without
limitation, annual reports (Form 5500), summary annual reports, and
summary plan descriptions, have been filed and distributed timely. With
respect to each Plan which is a welfare plan (as defined in ERISA
Section 3(1)), the requirements of Party 6 of Subtitle B of Title I of
ERISA and of Code Sections 162(k) and 4980B have been satisfied.
(d) All contributions, premiums, and other payments, including, without
limitation, employer contributions and employee salary reduction
contributions, have been paid when due or accrued in accordance with the
past custom and practice of Seller and any ERISA Affiliate. No Plan
that is subject to Part 3 of Subtitle B of Title I of ERISA or to Code
Section 412 has incurred any accumulated funding deficiency, whether or
not waived, and no other actual or contingent liability for any other
expenses or obligations of any Plan exists.
(e) There are no pending or, to the Majority Shareholders" knowledge,
threatened Actions (other than routine claims for benefits) asserted or
instituted against any Plan or the assets of any Plan, or against the
Company, or any ERISA Affiliate, trustee, administrator, or fiduciary of
such Plan, and the Majority Shareholders have no knowledge of any facts
that could form the basis of any such Action. There is no pending or,
to the Majority Shareholders" knowledge, threatened or contemplated
Action by any Governmental Entity with respect to any Plan, and the
Majority Shareholders have no knowledge of any facts that could
reasonably be expected to cause or trigger such an Action.
(f) The Company (or, if applicable, an ERISA Affiliate,) may terminate,
suspend, or amend each Plan at any time, except to the extent otherwise
required by Code Section 4980B, without the consent of the participants
or employees covered by such Plan. Neither the Company nor any ERISA
Affiliate has announced any intention, made any amendment or binding
commitment, or given any written or oral notice providing that the
Company or an ERISA Affiliate (i) will create additional Plans covering
employees of the Company or any ERISA Affiliate, (ii) will increase
benefits promised or provided pursuant to any Plan, or (iii) will not
exercise after the Closing Date any right or power it may have to
terminate, suspend, or amend any Plan.
(g) Neither the Company nor any ERISA Affiliate maintains or has
maintained any time, or contributes to or has contributed to or is or
was required to contribute to, any (i) Plan subject to Title IV or
ERISA, including, without limitation, any multi-employer plan (as
defined in ERISA Section 3(37)), within the past five years, or (ii)
funded or unfunded medical, health, accident, or life insurance plan or
arrangement for current or future retirees or terminated employees or
their spouses or dependents (except to the extent required by Code
Sections 162(k) or 4980B).
(h) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a
termination of employment or other event entitling any Person to any
additional or other benefits, or that would otherwise modify benefits or
the vesting of benefits, provided under any Plan.
(i) No event has occurred which could subject the Company of any ERISA
Affiliate to any material liability (i) under any Legal Requirement
relating to any Plan, or (ii) resulting from any obligation of Seller or
an ERISA Affiliate to indemnify any Person against liability incurred
with respect to or in connection with any Plan.
(j) Each Plan which is intended to be qualified under Code Section 401
has received, within the last five years, a favorable determination
letter from the IRS. No event has occurred and no facts or
circumstances exist which may cause or result in the loss or revocation
of such determination.
4.15 No Undisclosed Liabilities. Except (i) to the extent set forth or
provided for in the Balance Sheet or the notes thereto, (ii) as set
forth on Schedule 4.15 or (iii) for non-material current liabilities
incurred since the Balance Sheet Date in the Ordinary Course, as of the
date hereof the Company has no liabilities, whether accrued, absolute,
contingent or otherwise, whether due or to become due and whether the
amounts thereof are readily ascertainable or not, or any unrealized or
anticipated losses from any commitments of a contractual nature,
including Taxes with respect to or based upon the transactions or events
occurring at or prior to the Closing.
4.16 Permits, Licenses, Etc. The Company possesses, and is operating
in compliance with, all franchises, licenses, permits, certificates,
authorizations, rights and other approvals of Governmental Entities
necessary to (i) occupy, maintain, operate and use the Real Property as
it is currently used and proposed to be used, (ii) conduct its business
as currently conducted and as proposed to be conducted, and (iii)
maintain and operate its Permits (the "Permits"). Schedule 4.16
contains a true and complete list of all Permits. Each Permit has been
lawfully and validly issued, and no proceeding is pending or, to the
Majority Shareholders" knowledge, threatened looking toward the
revocation, suspension or limitation of any Permit. The consummation of
the transactions contemplated by this Agreement will not result in the
revocation, suspension or limitation of any Permit and, except as set
forth in Schedule 4.16, no Permit will require the consent of its
issuing authority to or as a result of the consummation of the
transaction contemplated hereby.
4.17 Regulatory Filings. The Company has made all required
registrations and filings with and submissions to all applicable
Governmental Entities relating to the operations of the Company as
currently conducted and as proposed to be conducted, including, without
limitation, all such applicable Governmental Entities having
jurisdiction over any matters pertaining to conservation or protection
of the environment, and the treatment, discharge, use, handling, storage
or production, or disposal of Hazardous Materials. All such
registrations, filings and submissions were in compliance with all Legal
Requirements (including all Environmental Laws) and other requirements
when filed, no material deficiencies have been asserted by any such
applicable Governmental Entities with respect to such registrations,
filings or submissions and, to the Majority Shareholders" knowledge, no
facts or circumstances exist which would indicate that a material
deficiency may be asserted by any such authority with respect to any
such registration, filing or submission.
4.18 Consents. All consents, authorizations and approvals of any
Person to or as a result of the consummation of the transactions
contemplated hereby, that are necessary or advisable in connection with
the operations and business of the Company as currently conducted and as
proposed to be conducted, or for which the failure to obtain the same
might have, individually or in the aggregate, a Material Adverse Effect,
have been lawfully and validly obtained by the Company, except as
described in Schedules 4.5(b), 4.10 and 4.16 . All consents,
authorizations and approvals described in Schedules 4.5(b), 4.10 and
4.16 will have been lawfully and validly obtained prior to the Closing.
4.19 Material Contracts; No Defaults.
(a) Schedule 4.19(a) contains a true and complete list and description
of the outstanding sales order and sales contract backlog of the Company
having an indicated gross value in excess of Five Thousand Dollars
($5,000.00) or having a term of duration in excess of six months. All
outstanding sales orders and sales contracts of the Company have been
entered into in the Ordinary Course. Except as described in Schedule
4.19(a), the Company has not received any advance, progress payment or
deposit in respect of any sales order or sales contract, and the Company
has no sales order or sales contract that will result, upon completion
or performance thereof, in gross margins materially lower than those
normally experienced by the Company for the services or products covered
by such sales order or sales contract.
(b) Schedule 4.19(b) contains a true and complete list and description
of all outstanding purchase orders and purchase commitments of the
Company having a gross indicated value in excess of Ten Thousand Dollars
($10,000.00) in the aggregate from any single supplier or other vendor.
All outstanding purchase orders and purchase commitments of the Company
have been incurred in the Ordinary Course, and no purchase order or
purchase commitment of the Company is in excess of the normal, ordinary
and usual requirements of the business of the Company or at an excessive
price. The principal raw materials used and inventory sold by the
Company are available from several sources at competitive prices and
upon competitive terms and no interruption in production or Material
Adverse Effect will result from the loss of any one of such sources.
(c) Schedule 4.19(c) contains a true and complete list of all sales
agency, sales representative, distributor, wholesaler, dealer and
similar contracts or agreements of the Company, and true and complete
copies of the same have been delivered to Purchaser heretofore. Except
as described in Schedule 4.19(c), all of such contracts and agreements
are terminable at any time by the applicable Company without penalty
(including, without limitation, any obligation to repurchase inventories
on hand) upon not more than thirty (30) days" notice.
(d) To the Majority Shareholders knowledge, Schedule 4.19(d) contains
a true and complete list and description of all noncompetition
agreements and covenants under which the Company or any of their
respective officers, directors or employees or any Shareholder is
obligated, and true and complete copies of the same have been delivered
to Purchaser heretofore. Except as described in Schedule 4.19(d), the
Company is not restricted by any agreement from carrying on its business
or engaging in any other activity anywhere in the world (including
relocating, closing, or terminating any of its operations or
facilities), and no such officer, director, key employee or Shareholder
is a party to or otherwise bound or affected by any agreement, covenant
or other arrangement or understanding that would restrict or impair his
ability to perform diligently his other duties to the Company. Schedule
4.19(d) also contains a true and complete list and description of all
noncompetition agreements or covenants in favor of the Company, and true
and complete copies of the same have been delivered to Purchaser
heretofore.
(e) Schedule 4.19(e) contains a true and complete list and description
of all contracts, agreements, understandings, arrangements and
commitments, written or oral, of the Company with any officer, director,
consultant, employee or Affiliate of the Company or with any associate,
Affiliate or employee of any Affiliate of the Company, other than those
disclosed in Schedule 4.21(a) ; in each case a true and complete copy of
such written contract, agreement, understanding, arrangement or
commitment or a true and complete summary of such oral contract,
agreement, understanding, arrangement or commitment has been delivered
to Purchaser heretofore.
(f) Schedule 4.19(f) contains a true and complete list and description
of all other material contracts, agreements, understandings,
arrangements and commitments, written or oral, of the Company by which
it or its properties, rights or assets are bound that are not otherwise
disclosed in this Agreement or the Schedule hereto. True and complete
copies of such written contracts, agreements, understandings,
arrangements and commitments and true and complete summaries of such
oral contracts, agreements, understandings, arrangements and commitments
have been delivered to Purchaser heretofore. For the purposes of this
subsection (f), "material" means any contract, agreement, understanding,
arrangement or commitment that (i) involves performance by any party
more than ninety (90) days from the date hereof, (ii) involves payments
or receipts by the Company in excess of Five Thousand Dollars
($5,000.00), (iii) involves capital expenditures in excess of Five
Thousand Dollars ($5,000.00) or (iv) otherwise materially affects the
Company.
(g) Except as described in Schedule 4.19(g):
(i) each agreement, contract, arrangement or commitment described above
in this Section 4.19 is, and after the Closing on identical terms will
be, legal, valid, binding, enforceable and in full force and effect;
(ii) no event or condition has occurred or become known to the Company
or any Majority Shareholder or is alleged to have occurred that
constitutes or, with notice or the passage of time, or both, would
constitute a default or a basis of force majeure or other claim of
excusable delay, termination, nonperformance or accelerated or increased
rights by the Company or any other Person under any contract, agreement,
arrangement, commitment or other understanding, written or oral,
described above in this Section 4.19, or described or otherwise
disclosed pursuant to this Agreement; and
(iii) no person with whom the Company has such a contract, agreement,
arrangement, commitment or other understanding is in default thereunder
or has failed to perform fully thereunder by reason of force majeure or
other claim of excusable delay, termination or nonperformance
thereunder, the delay, termination or nonperformance of which, or a
default under which, has had or may have a Material Adverse Effect.
4.20 Absence of Certain Changes. Since December 31, 1996, except as
disclosed in Schedule 4.20, the Company has not: (i) incurred any debts,
obligations or liabilities (absolute, accrued, contingent or otherwise),
other than current liabilities incurred in the Ordinary Course which,
individually or in the aggregate, are not material; (ii) subjected to or
permitted a Lien (other than a Permitted Lien) upon or otherwise
encumbered any of its assets, tangible or intangible; (iii) sold,
transferred, licensed or leased any of its assets or properties except
in the Ordinary Course; (iv) discharged or satisfied any Lien other than
a Lien securing, or paid any obligation or liability other than, current
liabilities shown on the Balance Sheet and current liabilities incurred
since the Balance Sheet Date, in each case in the Ordinary Course; (v)
canceled or compromised any debt owed to or by or claim of or against
it, or waived or released any right of material value other than in the
Ordinary Course; (vi) suffered any physical damage, destruction or loss
(whether or not covered by insurance) causing a Material Adverse Effect;
(vii) entered into any material transaction or otherwise committed or
obligated itself to any capital expenditure other than in the Ordinary
Course; (viii) made or suffered any change in, or condition affecting,
its condition (financial or otherwise), properties, profitability,
prospects or operations other than changes, events or conditions in the
Ordinary Course, none of which (individually or in the aggregate) has
had or may have a Material Adverse Effect; (ix) made any change in the
accounting principles, methods, records or practices followed by it or
depreciation or amortization policies or rates theretofore adopted; (x)
other than in the Ordinary Course, made or suffered any amendment or
termination of any material contract, agreement, lease or license to
which it is a party; (xi) paid, or made any accrual or arrangement for
payment of, any severance or termination pay to, or entered into any
employment or loan or loan guarantee agreement with, any current or
former officer, director or employee or consultant; (xii) paid, or made
any accrual or arrangement for payment of, any increase in compensation,
bonuses or special compensation of any kind to any employee other than
pursuant to an agreement disclosed on Schedule 4.21(a) or Schedule
4.21(b) or other than in the Ordinary Course, or paid, or made any
accrual or arrangement for payment of, any increase in compensation,
bonuses or special compensation of any kind to any officer or director
of the Company or any consultant to the Company; (xiii) made or agreed
to make any charitable contributions or incurred any nonbusiness
expenses; (xiv) changed or suffered change in any benefit plan or labor
agreement affecting any employee of the Company otherwise than to
conform to Legal Requirements; or (xv) entered into any agreement or
otherwise obligated itself to do any of the foregoing.
4.21 Employees and Labor Matters.
(a) Schedule 4.21(a) contains a true and complete list of all
contracts, agreements, plans, arrangements, commitments and
understandings (formal and informal) pertaining to terms of employment,
compensation, bonuses, profit sharing, stock purchases, stock
repurchases, stock options, commissions, incentives, loans or loan
guarantees, severance pay or benefits, use of the Company"s property and
related matters of the Company with any current or former officer,
director, employee or consultant, and true and complete copies of all
such contracts, agreements, plans, arrangements and understandings have
been delivered to Purchaser heretofore. Attached to Schedule 4.21(a) is
the most current copy of the employee handbook utilized by the Company
and distributed to each of its employees.
(b) Schedule 4.21(b) contains a true and complete list of all labor,
collective bargaining, union and similar agreements under or by which
the Company is obligated, and true and complete copies of all such
agreements have been delivered to Purchaser heretofore.
(c) Except as set forth on Schedules 4.21(a) and 4.21(b), neither
Purchaser nor the Company will have any responsibility for continuing
any person in the employ (or retaining any person as a consultant) of
the Company from and after the Closing or have any liability for any
severance payments to or similar arrangements with any such Person who
shall cease to be an employee of the Company at or prior to the Closing.
(d) There is not occurring or, to the Majority Shareholders" knowledge,
threatened, any strike, slow down, picket, work stoppage or other
concerted action by any union or other group of employees or other
persons against either Company or its premises or products. Except for
activities by the unions that are parties to any of the agreements
listed on Schedule 4.21(b) with respect to the existing members of such
unions, to the Majority Shareholders" knowledge, no union or other labor
organization has attempted to organize any of the employees of the
Company.
(e) The Company has complied with all Legal Requirements relating to
employment and labor, and, to the Majority Shareholders" knowledge, no
facts or circumstances exist that could provide a reasonable basis for a
claim of wrongful termination by any current or former employee of the
Company against the Company.
4.22 Affiliation. Except as disclosed on Schedule 4.22, none of the
Majority Shareholders, any officer, director or key employee of the
Company or any associate or Affiliate of the Company or any of such
Persons has, directly or indirectly, (i) an interest in any Person that
(A) furnishes or sells, or proposes to furnish or sell, services or
products that are furnished or sold by the Company or (B) purchases from
or sells or furnishes to, or proposes to purchase from or sell or
furnish to, the Company any goods or services or (ii) a beneficial
interest in any contract or agreement to which the Company is a party or
by which the Company or any of the assets of the Company are bound or
affected.
4.23 Principal Customers and Suppliers.
(a) Schedule 4.23(a) contains a true and complete list of the name and
address of each customer that purchased in excess of five percent (5%)
of the Company"s sales of goods or services during the twelve months
ended on the Balance Sheet Date, and since that date no such customer
has terminated its relationship with or adversely curtailed its
purchases from the Company or indicated (for any reason) its intention
so to terminate its relationship or curtail its purchases.
(b) Schedule 4.23(b) contains a true and complete list of each supplier
from whom the Company purchased in excess of five percent (5%) of the
Company"s purchases of goods or services during the twelve months ended
on the balance Sheet Date, and since that date no such supplier has
terminated its relationship with or adversely curtailed its
accommodations, sales or services to the Company or indicated (for any
reason) its intention to terminate such relationship or curtail its
accommodations, sales or services.
4.24 Compliance with Law. Through and including the date hereof, the
Company (i) has not violated or conducted its business or operations in
violation of, and has not used or occupied its properties or assets in
violation of, any Legal Requirement, (ii) to the Majority Shareholders"
knowledge, has not been alleged to be in violation of any Legal
Requirement, and (iii) has not received any notice of any alleged
violation of, or any citation for noncompliance with, any Legal
Requirement.
4.25 Product Returns. Schedule 4.25 contains a true and complete
description of the product return experience of the Company for the
immediately preceding twelve (12) months. The Company has not
experienced any product returns which have had or may have a Material
Adverse Effect.
4.26 Product Liability and Product Warranty. Schedule 4.26 hereto
contains a true and complete description of (i) all warranties granted
or made with respect to products sold, or services rendered, by the
Company and (ii) the Company"s product liability and product warranty
experience for the last three years. The Company has not suffered any
product liability or product warranty claims which have had or may have
a Material Adverse Effect.
4.27 Corporate Records. The copies or originals of the Articles of
Organization, Bylaws, minute books and stock records of the Company
previously delivered to, or made available for inspection by, Purchaser
are true, complete and correct.
4.28 Hazardous Materials. Except as set forth on Schedule 4.28 and
limited only to acts, omissions, or conduct within the control of the
Company:
(a) No Hazardous Material (i) has been released, placed, stored,
generated, used, manufactured, treated, deposited, spilled, discharged,
released or disposed or on or under any real property currently or
previously owned or leased by the Company or is presently located on or
under any Real Property (or, to the Majority Shareholders" knowledge,
any property adjoining any Real Property), (ii) is presently maintained,
used, generated, or permitted to remain in place by the Company in
violation of any Environmental Law, (iii) is required by any
Environmental Law to be eliminated, removed, treated or mitigated by the
company, given the nature of its present condition, location, nature,
material or maintenance, or (iv) is of a type, location, material,
nature or condition which requires special notification to third parties
by the Company under Environmental Law or common law.
(b) No notice, citation, summons or order has been received by the
Company or any Shareholder, no notice has been given by the Company and
no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any Governmental
Entity, with respect to (i) any alleged violation by the Company of any
Environmental Law of (ii) any alleged failure by the Company to have any
environmental permit, certificate, license, approval, registration or
authorization required in connection with its business or properties, or
(iii) any use, possession, generation, treatment, storage, recycling,
transportation, release or disposal by or on behalf of the Company of
any Hazardous Material.
(c) The Company has not received any request for information, notice of
claim, demand or notification that it is or that indicates that it may
be a "potentially responsible party" with respect to any investigation
or remediation of any threatened or actual release of any Hazardous
Material.
(d) No above-ground or underground storage tanks, whether or not in
use, are or have ever been located at any property currently owned or
leased by the Company.
(e) No notice has been received by the Company with respect to the
listing or proposed listing of any property currently or previously
owned, operated or leased by the Company on the National Priorities List
promulgated pursuant to CERCLA, CERCLIS or any similar state list of
sites requiring investigation or cleanup.
(f) There have been no environmental inspections, investigations,
studies, tests, review or other analyses conducted in relation to any
Real Property.
(g) The Company has not yet released, transported, or arranged for the
transportation of any Hazardous Material from any property currently or
previously owned, operated or leased by the Company.
4.29 Brokers" Fees. No broker, finder or similar agent has been
employed by or on behalf of the Company in connection with this
Agreement or the transactions contemplated hereby, and the Company has
not entered into any agreement or understanding of any kind with any
person or entity for the payment of any brokerage commission, finder"s
fee or any similar compensation in connection with this Agreement or the
transactions contemplated hereby.
4.30 Disclosure.
(a) No representation or warranty of any Shareholder in this Agreement
and no information contained in any Schedule or other writing delivered
pursuant to this Agreement or at the Closing contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to make the statements herein or therein not
misleading. There is no fact that the Majority Shareholders have not
disclosed to Purchaser in writing that has had or, insofar as any
Majority Shareholder can now foresee, may have a Material Adverse Effect
on the ability of any Shareholder to perform fully this Agreement.
(b) To the extent that any representation or warranty in this Article 4
is qualified to the Majority Shareholders" "knowledge," the Majority
Shareholders represent and warrant that they have made a reasonable
investigation sufficient to express an informed view concerning the
matters to which such representation or warranty relates, including
diligent inquiries of the Company"s officers, directors and employees.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
U.S. Plastic Lumber Corp. ("USPL"), not of any of its affiliates,
subsidiaries or sister companies, hereby represents and warrants to, and
covenants and agrees with, each of the Shareholders that:
5.1 Organization and Good Standing. USPL has been duly organized and
is existing as a corporation in good standing under the laws of the
State of Nevada with full corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
USPL is duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of the State of Florida.
5.2 Execution and Delivery. This Agreement has been duly authorized
by all necessary corporate action on the part of USPL, has been duly
executed and delivered by USPL and constitutes the legal, valid and
binding agreement of USPL enforceable against USPL in accordance with
its terms.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
will not (a) conflict with or result in a breach or violation of any
term or provision of, or constitute a default under (with or without
notice or passage of time, or both), or otherwise give any Person a
basis for accelerated or increased rights or termination or
nonperformance under, any indenture, mortgage, deed of trust, loan or
credit agreement, lease, license or other agreement or instrument of
which USPL is a party or by which USPL is bound or affected or to which
any of the property or assets of the USPL is bound or affected, (b)
result in the violation of the provisions of the Articles of
Incorporation or Bylaws of the USPL or any Legal Requirement applicable
to or binding upon it, (c) result in the creation or imposition of any
Lien upon any property or asset of USPL or (d) otherwise adversely
affect the contractual or other legal rights or privileges of USPL.
Schedule 5.3 sets forth a list of all agreements requiring the consent
of any party thereto, other than its own Board of Directors, to any of
the transactions contemplated hereby.
5.4 Capitalization. The authorized capital stock of USPL consists of
up to Fifty Million (50,000,000) shares of Common Stock having a par
value of $0.0001 per share, and presently has 14,275,009 shares of
Common Stock issued and outstanding. USPL has reserved from its
authorized capital 950,000 shares of Common Stock for issuance upon
exercise of the Series A Warrants. In addition, USPL also has Series B
and other Warrants or Options outstanding which give the holders thereof
the right, subject to certain conditions, to acquire an additional
2,710,379 shares of Common Stock. USPL is also authorized to issue up to
5,000,000 shares of Preferred Stock in one or more Series with such
rights and preferences as the Board of Directors may designate. The
Board of Directors has designated one series of Preferred Stock (Series
A) and 199,249 Series A Preferred Shares are presently issued and
outstanding, which are convertible into 1,357,790 shares of Common stock
of USPL. The offer, issuance and sale of the shares of Stock will be
(i) exempt from the registration and prospectus delivery requirements of
the Securities Act, (ii) registered or qualified (or exempt from
registration or qualification) under the registration or qualification
requirements of all applicable state securities laws and (iii)
accomplished in conformity with all other Legal Requirements.
5.5 Financial Statements.
(a) Schedule 5.5 hereto contains true and complete copies of (i) the
audited balance sheet (the "Balance Sheet") of USPL at December 31, 1996
and unaudited March 31, 1997 (the "Balance Sheet Date"), and the related
audited statements of income for the twelve (12) months ended December
31, 1996 and the unaudited three months ended March 31, 1997 and the
related reviewed statements of shareholders" equity and cash flow for
the fiscal year then ended (together with the report thereon of Kuntz
Lesher Siegrist & Martini, independent public accountants)(the financial
statements described in clause (i) are collectively referred to as the
"Financial Statements").
(b) The Financial Statements present fairly the financial condition of
USPL as of the dates indicated therein and the results of operations and
changes in financial position of USPL for the periods specified therein,
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis during the periods covered
thereby and prior periods, have been derived from the accounting records
of USPL and represent only actual, bona fide transactions. To USPL"s
knowledge, its Financial Statements are true and correct in all material
respects and do not contain any untrue statement of a material fact or
omit to state a material fact.
5.6 Judgments; Litigation. Except as set forth on Schedule 5.6:
(a) There is no (i) outstanding judgment, order, decree, award,
stipulation or injunction of any Governmental Entity or arbitrator
against or affecting USPL or its properties, assets or business or (ii)
Action pending against or affecting USPL or its properties, assets or
business which would have a material adverse affect on USPL.
(b) To the knowledge of USPL, there is no (i) outstanding judgment,
order, decree, award, stipulation, injunction of any Governmental Entity
or arbitrator against or affecting any officer, director or employee of
USPL relating to USPL or its business, (ii) Action threatened against or
affecting USPL or its properties, assets or business, (iii) Action
pending or threatened against the USPL"s officers, directors or
employees relating to USPL or its business or (iv) basis for the
institution of any Action against USPL or any of its officers,
directors, employees, properties or assets which, if decided adversely,
would have a Material Adverse Effect.
5.7 Income and Other Taxes. Except as set forth on Schedule 5.7:
(a) All Tax Returns required to be filed through and including the date
hereof in connection with the operations of USPL are substantially true,
complete and correct in all respects and have been properly and timely
filed. USPL has disclosed on its Federal Income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of income Taxes for federal income tax purposes within
the meaning of Code Section 6662.
(b) To the knowledge of USPL, all Taxes required to be paid or
withheld and deposited through and including the date hereof in
connection with the operations of USPL have been duly and timely paid or
deposited by USPL. To the knowledge of USPL, USPL has properly
withheld or collected all amounts required by law for income Taxes and
employment Taxes relating to its employees, creditors, independent
contractors and other third parties, and for sales Taxes on sales, and
has properly and timely remitted such withheld or collected amounts to
the appropriate Governmental Entity. To its knowledge, USPL has no
liabilities for any Taxes for any taxable period ending prior to or
coincident with the Closing Date.
(c) USPL has made adequate provision on its book of account for all
Taxes with respect to its business, properties and operations through
the Balance Sheet Date, and to the best of its knowledge the accruals
for Taxes in the Balance Sheet are adequate to cover all liabilities for
Taxes of USPL for all periods ending on or before the Closing Date.
(d) USPL has not received any notice from any Governmental Entity of
any pending examination or any proposed deficiency, addition,
assessment, demand for payment or adjustment relating to or affecting
USPL or its assets or properties and it has reason to believe that any
Governmental Entity may assess (or threaten to assess) any Taxes for any
periods ending on or prior to the Closing Date.
(e) USPL (i) has not filed any consent or agreement pursuant to Code
Section 341(f), and no such consent or agreement will be filed at any
time on or before the Closing Date; (ii) has not made any payments, is
not obligated to make any payments and is not a party to any agreement
that under certain circumstances could obligate USPL to make any
payments that will not be deductible under Code Section 280G, (iii) is
not a United States real property holding corporation within the meaning
of Code Section 897(c)(2); (iv) is not a party to a tax allocation or
sharing agreement; (v) has never been (or does not have any liability
for unpaid Taxes because it was) a member of an affiliated group with
the meaning of Code Section 1504(a); (vi) has never applied for a tax
ruling from a Governmental Entity and (vii) has never filed or been the
subject of an election under Code Section 338(g) or Code Section
338(h)(10) or caused or been the subject of a deemed election under Code
Section 338(e).
5.8 Questionable Payments. USPL has not (a) used any corporate funds
for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (b) made any direct or indirect
unlawful payments to government officials or employees, or foreign
government officials or employees, from corporate funds, (c) established
or maintained any unlawful or unrecorded fund of corporate monies or
other assets, (d) made any false or fictitious entries on the books of
account of USPL, (e) made or received any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment, or (f) made any
other payment, favor or gift not fully deductible for federal income tax
purposes.
5.9 Permits, Licenses, Etc. To its knowledge, USPL possesses, and is
operating in compliance with, all franchises, licenses, permits,
certificates, authorizations, rights and other approvals of Governmental
Entities necessary to (i) occupy, maintain, operate and use the Real
Property as it is currently used and proposed to be used, (ii) conduct
its business as currently conducted and as proposed to be conducted, and
(iii) maintain and operate its Permits (the "Permits"). Each Permit
has been lawfully and validly issued, and no proceeding is pending or,
to USPL"s knowledge, threatened looking toward the revocation,
suspension or limitation of any Permit. The consummation of the
transactions contemplated by this Agreement will not result in the
revocation, suspension or limitation of any Permit and, except as set
forth in Schedule 5.9, no Permit will require the consent of its issuing
authority to or as a result of the consummation of the transaction
contemplated hereby.
5.10 Regulatory Filings. To its knowledge, USPL has made all required
registrations and filings with and submissions to all applicable
Governmental Entities relating to the operations of USPL as currently
conducted and as proposed to be conducted, including, without
limitation, all such applicable Governmental Entities having
jurisdiction over any matters pertaining to conservation or protection
of the environment, and the treatment, discharge, use, handling, storage
or production, or disposal of Hazardous Materials. To the best of its
knowledge, all such registrations, filings and submissions were in
compliance with all Legal Requirements (including all Environmental
Laws) and other requirements when filed, no material deficiencies have
been asserted by any such applicable Governmental Entities with respect
to such registrations, filings or submissions and, to USPL"s knowledge,
no facts or circumstances exist which would indicate that a material
deficiency may be asserted by any such authority with respect to any
such registration, filing or submission.
5.11 Consents. All consents, authorizations and approvals of any
Person to or as a result of the consummation of the transactions
contemplated hereby, that are necessary or advisable in connection with
the operations and business of USPL as currently conducted and as
proposed to be conducted, or for which the failure to obtain the same
might have, individually or in the aggregate, a Material Adverse Effect,
have been lawfully and validly obtained by USPL, except as may be
disclosed on Schedule 5.11 hereto.
5.12 Compliance with Law. Through and including the date hereof, USPL,
to its knowledge, (i) has not violated or conducted its business or
operations in violation of, and has not used or occupied its properties
or assets in violation of, any Legal Requirement, (ii) to the USPL"s
knowledge, has not been alleged to be in violation of any Legal
Requirement, and (iii) has not received any notice of any alleged
violation of, or any citation for noncompliance with, any Legal
Requirement.
5.13 Personal Guarantees of Shareholders. The Purchaser acknowledges
that certain Majority Shareholders have executed personal guaranties on
debt instruments of the Company as set forth and disclosed to Purchaser
on Schedule 4.10 (b). Prior to January 1, 1998, the Purchaser shall take
no action to remove the Shareholders as personal guarantors on said debt
instruments. Subject to Purchaser not exercising its rights to undo this
transaction as provided in Section 9.5, as soon as practical on or after
January 1, 1998, the Purchaser hereby covenants and agrees to either
pay-off in full all debt instruments in which any of the Shareholders
are personal guarantors or to renegotiate the terms of the existing
debt instruments to remove the Shareholders as personal guarantors. For
the period beginning on the Closing Date of this transaction through
January 1, 1998, in the event a default of any of the debt instruments
occurs due to the willful or negligent fault of the Purchaser, then in
such event, the Purchaser hereby agrees to indemnify such Shareholders
and hold them harmless from any claims, damages, or suits which they may
incur due to Purchaser"s default on any of the Notes set forth in
Schedule 4.10(b). Purchaser covenants and agrees that it will take no
action which prohibits the Company from observing all loan covenants or
pay the obligations of the debt instruments disclosed in the Schedule
4.10(b) when due in their Ordinary Course, subject to the rights of
Purchaser under Section 9.5.
5.14 Brokers" Fees. No broker, finder or similar agent has been
employed by or on behalf of USPL in connection with this Agreement or
the transactions contemplated hereby, and the Purchaser has not entered
into any agreement or understanding of any kind with any person or
entity for the payment of any brokerage commission, finder"s fee or any
similar compensation in connection with this Agreement or the
transactions contemplated hereby.
5.15 No Undisclosed Liabilities. Except (i) to the extent set forth or
provided for in the Balance Sheet or the notes thereto, (ii) or as may
be set forth on any Schedules hereto or (iii) for non-material current
liabilities incurred since the Balance Sheet Date in the Ordinary
Course, as of the date hereof USPL has no liabilities, whether accrued,
absolute, contingent or otherwise, whether due or to become due and
whether the amounts thereof are readily ascertainable or not, or any
unrealized or anticipated losses from any commitments of a contractual
nature, including Taxes with respect to or based upon the transactions
or events occurring at or prior to the Closing.
5.16 Disclosure.
(a) No representation or warranty of USPL in this Agreement and no
information contained in any Schedule or other writing delivered
pursuant to this Agreement or at the Closing contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to make the statements herein or therein not
misleading. There is no fact that USPL has not disclosed to
Shareholders in writing that has had or, insofar as USPL can now
foresee, may have a Material Adverse Effect on the ability of USPL to
perform fully this Agreement.
(b) To the extent that any representation or warranty in this Article 5
is qualified to the "knowledge" of USPL, USPL represents and warrants
that it has made a reasonable investigation sufficient to express an
informed view concerning the matters to which such representation or
warranty relates, including diligent inquiries of the officers,
directors and employees of USPL.
6. CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing through
the Closing Date, the Majority Shareholders jointly and severally
covenant and agree (except as expressly contemplated by this Agreement
or to the extent that Purchaser shall otherwise expressly consent in
writing) that:
6.1 Qualification. The Company shall remain in good standing in its
jurisdiction of incorporation.
6.2 Ordinary Course. The Company shall conduct its business in, and
only in, the Ordinary Course and, to the extent consistent with such
business, shall preserve intact its current business organizations, keep
available the services of its current officers and employees and
preserve its relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and going
business value shall be unimpaired at the Closing Date. The Company
shall maintain its properties and assets in good condition and repair.
6.3 Corporate Changes. The Company shall not (a) amend its Articles
of Organization or Bylaws (or equivalent documents), (b) acquire by
merging or consolidating with, or agreeing to merge or consolidate with,
or purchase substantially all of the stock or assets of, or otherwise
acquire, any business or any corporation, partnership, association or
other business organization or division thereof, (c) enter into any
partnership or joint venture, (d) declare, set aside, make or pay any
dividend or other distribution in respect of its capital stock or
purchase or redeem, directly or indirectly, any shares of its capital
stock, (e) issue or sell any shares of its capital stock of any class or
any options, warrants, conversion or other rights to purchase any such
shares or any securities convertible into or exchangeable for such
shares, or (f) liquidate or dissolve or obligate itself to do.
6.4 Indebtedness. The Company shall not incur any Indebtedness, sell
any debt securities or lend money to or guarantee the Indebtedness of
any Person. The Company shall not restructure or refinance its existing
Indebtedness.
6.5 Accounting. The Company shall not make any change in the
accounting principles, methods, records or practices followed by it or
depreciation or amortization policies or rates heretofore adopted by it.
The Company shall maintain its books, records and accounts in accordance
with generally accepted accounting principles applied on a basis
consistent with that of prior periods.
6.6 Compliance with Legal Requirements. The Company shall comply
promptly with all requirements that applicable law may impose upon it
and its operations and with respect to the transactions contemplated by
this Agreement, and shall cooperate promptly with, and furnish
information to, Purchaser in connection with any such requirements
imposed upon Purchaser, or upon any of its affiliates, in connection
therewith or herewith.
6.7 Disposition of Assets. The Company shall not sell, transfer,
license, lease or otherwise dispose of, or suffer or cause the
encumbrance by any Lien upon any of its properties or assets, tangible
or intangible, or any interest therein, except for sales of inventory in
the Ordinary Course.
6.8 Compensation. The Company shall not (a) adopt or amend in any
material respect any collective bargaining, bonus, profit-sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other plan, agreement, trust, fund or arrangement for the
benefit of employees (whether or not legally binding) other than to
comply with any Legal Requirement or (b) pay, or make any accrual or
arrangement for payment of, any increase in compensation, bonuses or
special compensation of any kind, or any severance or termination pay
to, or enter into any employment or loan or loan guarantee agreement
with, any current or former officer, director, employee or consultant of
the Company, except for such bonuses as may be required to offset the
individual income tax liability of each Shareholder relating to the
Company.
6.9 Modification or Breach of Agreement; New Agreements. The Company
shall not terminate or modify, or commit or cause or suffer to be
committed any act that will result in breach or violation of any term of
or (with or without notice or passage of time, or both) constitute a
default under or otherwise give any person a basis for non-performance
under, any indenture, mortgage, deed of trust, loan or credit agreement,
lease, license or other agreement, instrument, arrangement or
understanding, written or oral, disclosed in this Agreement or the
Schedules hereto. The Company shall refrain from becoming a party to
any contract or commitment other than in the Ordinary Course. The
Company shall meet all of its contractual obligations in accordance with
their respective terms.
6.10 Capital Expenditures. Except for capital expenditures or
commitments necessary to maintain its properties and assets in good
condition and repair (the amount of which shall not exceed Five Thousand
Dollars ($5,000.00) in the aggregate), the Company shall not purchase or
enter into any contract to purchase any capital assets.
6.11 Consents. The Company shall use its best efforts to obtain any
consent, authorization or approval of, or exemption by, any Person
required to be obtained or made by any party hereto in connection with
the transactions contemplated hereby or the taking of any action in
connection with the consummation thereof.
6.12 Maintain Insurance. The Company shall maintain its Policies in
full force and effect and shall not do, permit or willingly allow to be
done any act by which any of the Policies may be suspended, impaired or
canceled.
6.13 Discharge. The Company shall not cancel, compromise, release or
discharge any claim of the Company upon or against any person or waive
any right of the Company of material value, and not discharge any Lien
(other than Permitted Liens) upon any asset of the Company or compromise
any debt or other obligation of the Company to any person other than
Liens, debts or obligations with respect to current liabilities of the
Company.
6.14 Actions. The Company shall not institute, settle or agree to
settle any Action before any Governmental Entity.
6.15 Permits. The Company shall maintain in full force and effect, and
comply with, all Permits.
6.16 Tax Assessments and Audits. The Company shall furnish promptly to
Purchaser a copy of all notices of proposed assessment or similar
notices or reports that are received from any taxing authority and which
relate to the Company"s operations for periods ending on or prior to the
Closing Date. The Shareholders shall cause the Company to promptly
inform Purchaser, and permit the participation in and control by
Purchaser, of any investigation, audit or other proceeding by a
Governmental Entity in connection with any Taxes, assessment,
governmental charge or duty and shall not consent to any settlement or
final determination in any proceeding without the prior written consent
of Purchaser.
7. ADDITIONAL COVENANTS
7.1 Covenants of the Shareholders. During the period from the date
hereof through the Closing Date, each Majority Shareholder agrees to:
(a) comply promptly with all requirements that applicable Legal
Requirements may impose upon it with respect to the transactions
contemplated by the Agreement, and shall cooperate promptly with, and
furnish information to, Purchaser in connection with any requirements
imposed upon Purchaser or upon any of its affiliates in connection
therewith or herewith;
(b) use its reasonable best efforts to obtain (and to cooperate with
Purchaser in obtaining) any consent, authorization or approval of, or
exemption by, any Person required to be obtained or made by such
Shareholder in connection with the transactions contemplated by this
Agreement;
(c) use its reasonable best efforts to bring about the satisfaction of
the conditions precedent to Closing set forth in Section 8.1 ;
(d) promptly advise Purchaser orally and, within three (3) business
days thereafter, in writing of any change in such Company"s business or
condition that has had or may have a Material Adverse Effect; and
(e) deliver to Purchaser prior to the Closing a written statement
disclosing any untrue statement in this Agreement or any Schedule hereto
(or supplement thereto) or document furnished pursuant hereto, or any
omission to state any material fact required to make the statements
herein or therein contained complete and not misleading, promptly upon
the discovery of such untrue statement or omission, accompanied by a
written supplement to any Schedule to this Agreement that may be
affected thereby; provided, however, that the disclosure of such untrue
statement or omission shall not prevent Purchaser from terminating this
Agreement pursuant to Section 9.1(b) at any time at or prior to the
Closing in respect of any original untrue or misleading statement.
7.2 Covenants of Purchaser. During the period from the date hereof to
the Closing Date, Purchaser shall:
(a) comply promptly with all requirements that applicable Legal
Requirements may impose upon it with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and
furnish information to, the Shareholders in connection with any such
requirements imposed upon the Shareholders or the Company or upon any of
the Company"s affiliates in connection therewith or herewith;
(b) use its reasonable best efforts to obtain any consent,
authorization or approval of, or exemption by, any Person required to be
obtained or made by Purchaser in connection with the transactions
contemplated by this Agreement; and
(c) use its reasonable best efforts to bring about the satisfaction of
the condition precedent to Closing set forth in Section 8.2 .
(d) promptly advise Shareholders orally and, within three (3) business
days thereafter, in writing of any change in such Purchaser"s business
or condition that has had or may have a Material Adverse Effect; and
(e) deliver to Shareholders prior to the Closing a written statement
disclosing any untrue statement in this Agreement or any Schedule
provided by Purchaser hereto (or supplement thereto) or document
furnished pursuant hereto, or any omission to state any material fact
required to make the statements herein or therein contained complete and
not misleading, promptly upon the discovery of such untrue statement or
omission, accompanied by a written supplement to any Schedule provided
by Purchaser to this Agreement that may be affected thereby; provided,
however, that the disclosure of such untrue statement or omission shall
not prevent Shareholders from terminating this Agreement pursuant to
Section 9.1(c) hereof at any time at or prior to the Closing in respect
of any original untrue or misleading statement.
7.3 Access and Information
(a) During the period commencing on the date hereof and continuing
through the Closing Date, the Shareholders shall continue to cause the
Company to afford to Purchaser and to Purchaser"s accountants, counsel,
investment bankers and other representatives, reasonable access to all
of its properties, books, contracts, commitments, records and personnel
and, during such period, to continue to cause the Company to furnish
promptly to Purchaser all information concerning its business,
properties and personnel as Purchaser may reasonably request.
(b) Except to the extent permitted by the provisions of Section 7.6,
Purchaser shall hold in confidence, and shall use reasonable efforts to
ensure that its employees and representatives hold in confidence, all
such information supplied to it by the Shareholders or the Company
concerning the Company and shall not disclose such information to any
third party except as may be required by any Legal Requirement and
except for information that (i) is or becomes generally available to the
public other than as a result of disclosure by Purchaser or its
representatives, (ii) becomes available to Purchaser or its
representatives from a third party other than the Shareholders or the
Company, and Purchaser or its representatives have no reason to believe
that such third party is not entitled to disclose such information,
(iii) is known to Purchaser or its representatives on a non-confidential
basis prior to is disclosure by any Shareholder or the Company or (iv)
is made available by any Shareholder or the Company to any other Person
on a non-restricted basis. Purchaser"s obligations under the foregoing
sentence shall expire on the Closing Date or, if the Closing does not
occur, three (3) years after the date hereof.
7.4 Expenses. All costs and expenses (including, without limitation,
all legal fees and expenses and fees and expenses of any brokers,
finders or similar agents) incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party
incurring the same, except that the Company may pay up to $5,000 toward
the legal expenses of closing this transaction on behalf of the
Shareholders.
7.5 Certain Notifications. At all times from the date hereof to the
Closing Date, each party shall promptly notify the others in writing of
the occurrence of any event that will or may result in the failure to
satisfy any of the conditions specified in Article 8.
7.6 Publicity; Employee Communications. At all times prior to the
Closing Date, each party shall obtain the consent of all other parties
hereto prior to issuing, or permitting any of its directors, officers,
employees or agents to issue, any press release or other information to
the press, employees of the Company or any third party with respect to
this Agreement or the transactions contemplated hereby; provided,
however, that no party shall be prohibited from supplying any
information to any of its representatives, agents, attorneys, advisors,
financing sources and others to the extent necessary to complete the
transactions contemplated hereby so long as such representatives,
agents, attorneys, advisors, financing sources and others are made aware
of the terms of this Section 5.6. Nothing contained in this Agreement
shall prevent any party to this Agreement at any time from furnishing
any required information to any Governmental Entity or authority
pursuant to a Legal Requirement or from complying with its legal or
contractual obligations.
7.7 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Legal Requirements, to
consummate and make effective the transactions contemplated by this
Agreement.
(b) If at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the Shareholders
and the proper officers or directors of Purchaser, as the case may be,
shall take or cause to be taken all such necessary or convenient action
and execute, and deliver and file, or cause to be executed, delivered
and filed, all necessary or convenient documentation.
7.8 Competing Offers; Merger or Liquidation. The Shareholders agree
that they will not, and will cause the Company not to, directly or
indirectly, through any officer, director, agent, or otherwise, solicit,
initiate or encourage the submissions of bids, offers or proposals by,
any Person with respect to an acquisition of the Company or its assets
or capital stock or a merger or similar transaction, and the
Shareholders will not, and will not permit the Company to, engage any
broker, financial adviser or consultant with an incentive to initiate or
encourage proposals or offers from other parties. Furthermore, the
Shareholders shall not, and shall not permit the Company to, directly or
indirectly, through any officer, director, agent or otherwise, engage in
negotiations concerning any such transaction with, or provide
information to, any Person other than Purchaser and its representatives
with a view to engaging, or preparing to engage, that Person with
respect to any matters in this Section. The Shareholders shall ensure
that the Company shall not commence any proceeding to merge, consolidate
or liquidate or dissolve or obligate itself to do so. Notwithstanding
anything to the contrary in this Section 7.8, it shall not be a
violation of this Section 7.8 if the Shareholders or the Company receive
an unsolicited offer and it would be a breach of the fiduciary duty of
the Board of Directors not to consider the unsolicited offer and make a
decision with respect thereto.
7.9 Inconsistent Action. The Shareholders shall not take or suffer to
be taken, and shall not permit the Company to take or cause or suffer to
be taken, any action that would cause any of the representations or
warranties of any of the Shareholders in this Agreement to be untrue,
incorrect, incomplete or misleading.
7.10 Post-Termination Employment. Except for the employment agreements
to be executed by Bruce A. Fortin and Franco Previd, each Shareholder
acknowledges and agrees that after the Closing (a) neither Purchaser nor
the Company shall be required to employ or retain any employee of the
Company or any other Person, and (b) Purchaser, in its sole and absolute
discretion, may cause the Company to retain all, some, or none of such
employees.
8. CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions of Purchaser. Notwithstanding any other provision of
this Agreement, the obligations of Purchaser to consummate the
transactions contemplated hereby shall be subject to the satisfaction,
at or prior to the Closing Date, of the following conditions:
(a) There shall not be instituted and pending or threatened any Action
before any Governmental Entity (i) challenging the acquisition of the
Shares by Purchaser or otherwise seeking to restrain or prohibit the
consummation of the transactions contemplated hereby or (ii) seeking to
prohibit the direct or indirect ownership or operation by Purchaser of
all or a material portion of the business or assets of the Company, or
to compel Purchaser or the Company to dispose of or hold separate all or
a material portion of the business or assets of the Company or
Purchaser;
(b) The representations and warranties of each of the Shareholders in
this Agreement shall be true and correct in all respects on and as of
the Closing Date with the same effect as if made on the Closing Date and
each of the Shareholders shall have complied with all covenants and
agreements and satisfied all conditions on such Shareholder"s part to be
performed or satisfied on or prior to the Closing Date;
(c) Purchaser shall have received from the Shareholders an
executed copy of the Stock Escrow Agreement substantially in the form as
Exhibit A.
(d) Purchaser shall have received from Bruce A. Fortin and Franco Previd
Employment Agreements substantially in the form attached as Exhibit B.
(e) Purchaser shall have received from Mirick, O"Connell, DeMallie, &
Lougee, LLP., counsel for the Company, a written opinion dated the
Closing Date and addressed to Purchaser, in substantially the form
attached as Exhibit C;
(f) Purchaser shall have received from the President of the Company a
certificate dated the Closing Date in substantially the form attached as
Exhibit D;
(g) Purchaser shall have received from each Shareholder a certificate
dated the Closing Date in substantially the form attached as Exhibit E;
(h) Purchaser shall have received a certificate of the Clerk of the
Company in substantially the form attached as Exhibit F;
(i) Henry P. Lisciotti, Jr. and Thomas W. Whitcomb shall
have entered into a Noncompetition Agreement with Purchaser and the
Company in substantially the form attached as Exhibit G , (collectively,
the "Noncompetition Agreements");
(j) Each Shareholder shall sign a Stock Sale Restriction
Agreement in substantially the form attached as Exhibit H ;
(k) Purchaser shall have concluded (through its representatives,
accountants, counsel and other experts) an investigation of the
business, condition (financial and other), properties, assets,
prospects, operations and affairs of the Company and shall be satisfied,
in its sole discretion, with the results thereof;
(l) All corporate and other proceedings and actions taken in connection
with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced
herein or incident to the transactions contemplated hereby shall be in
form and substance satisfactory to Purchaser and its counsel;
(m) Purchaser shall have received reasonable assurances from those
employees, if any, of the Company that may be identified by Purchaser
in its discretion that they will remain in the employ of the Company for
a reasonable period of time after the consummation of the transactions
contemplated hereby.;
(n) All consents from third parties, including from any Bank or lending
institution which requires consent as part of the covenants of any debt
instruments with the Company, any Governmental Entity, landlord or other
Person, necessary for the consummation of the transactions contemplated
hereby shall have been obtained;
(o) The Board of Directors of Purchaser shall have authorized and
approved this Agreement and the transactions contemplated hereby;
(p) All officers and directors of the Company shall have resigned as
such, effective as of the Closing;
(q) No act, event or condition shall have occurred after the date
hereof which has had or could have had a Material Adverse Effect;
(r) The Lease Agreement made April 17, 1991 by and between the Company
and Consolidated Beverages Realty Trust is valid and enforceable and in
effect as of the date of Closing.
(s). Fleet Bank shall provide a written statement to Purchaser that it
will not call its debt instruments due to the technical default of the
Company"s net worth having decreased below the level set forth within
the Closing. If the covenants of any of the debt instruments contain
cross default provisions, then the Shareholders will take whatever
action is necessary and appropriate to obtain similar written statements
from its other Lenders.
8.2 Conditions of the Shareholders. Notwithstanding any other
provision of this Agreement, and except as set forth below, the
obligations of the Shareholders to consummate the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to
the Closing, of the conditions:
(a) There shall not be instituted and pending or threatened any Action
before any Governmental Entity (i) challenging the distribution of the
Shares to the Shareholders or otherwise seeking to restrain or prohibit
the consummation of the transactions contemplated hereby or (ii) seeking
to prohibit the direct or indirect ownership or operation by Purchaser
of all or a material portion of the business or assets of the Company,
or to compel Purchaser or the Company to dispose of or hold separate all
or a material portion of the business or assets of the Company or
Purchaser;
(b) The representations and warranties of the Purchaser in this
Agreement shall be true and correct in all respects on and as of the
Closing Date with the same effect as if made on the Closing Date and the
Purchaser shall have complied with all covenants and agreements and
satisfied all conditions on the Purchaser part to be performed or
satisfied on or prior to the Closing Date;
(c) Shareholders shall have received from the President of the
Purchaser a certificate dated the Closing Date in substantially the form
attached as Exhibit I ;
(d) Shareholders shall have received a certificate of the
Secretary of the Purchaser in substantially the form attached as Exhibit
J ;
(e) All corporate and other proceedings and actions taken in connection
with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced
herein or incident to the transactions contemplated hereby shall be in
form and substance satisfactory to the Company and its counsel;
(f) All consents from third parties, including from any Bank or lending
institution which requires consent as part of the covenants of any debt
instruments with the Purchaser, any Governmental Entity, landlord or
other Person, necessary for the consummation of the transactions
contemplated hereby shall have been obtained;
(g) The Board of Directors of the Company shall have authorized and
approved this Agreement and the transactions contemplated hereby;
(h) No act, event or condition shall have occurred after the date
hereof which has had or could have had a Material Adverse Effect;
9. TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual consent of the Purchaser and the Shareholders;
(b) by Purchaser if (i) there has been a material misrepresentation,
breach of warranty or breach of covenant by any Shareholder under this
Agreement or (ii) any of the conditions precedent to Closing set forth
in Section 8.1 have not been met on the Closing Date, and, in each case,
Purchaser is not then in material default of its obligations hereunder;
or
(c) by a majority interest of the Shareholders if (i) there has been a
material misrepresentation, breach of warranty or breach of covenant by
Purchaser under this Agreement or (ii) any of the conditions precedent
to Closing set forth in Section 8.2 have not been met on the Closing
Date, and, in each case, no Shareholder is then in material default of
his obligations hereunder.
9.2 Effect of Termination.
(a) In the case of any termination of this Agreement, the provisions of
Section 7.3 and 7.4 shall remain in full force and effect.
(b) Upon termination of this Agreement as provided in Section 9.1(a),
except as stated in subsection (a) above, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
any party hereto or their respective directors, officers, employees,
agents or other representatives.
(c) In the event of termination of this Agreement as provided in
Section 9.1(b) or (c), such termination shall be without prejudice to
any rights that the terminating party or parties may have against the
breaching party or parties or any other person under the terms of this
Agreement or otherwise.
9.3 Amendment. This Agreement may be amended at any time by a written
instrument executed by Purchaser and a majority in interest of the
Shareholders. Any amendment effected pursuant to this Section 9.3 shall
be binding upon all parties hereto.
9.4 Waiver. Any term or provision of this Agreement may be waived in
writing at any time by the Purchaser or a majority in interest of the
Shareholders . Any waiver effected pursuant to this Section 9.4 shall
be binding upon all parties hereto. No failure to exercise and no delay
in exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any other right,
power or privilege. No waiver of any breach of any covenant or
agreement hereunder shall be deemed a waiver of any preceding or
subsequent breach of the same or any other covenant or agreement. The
rights and remedies of each party under this Agreement are in addition
to all other rights and remedies, at law or in equity, that such party
may have against the other parties.
9.5 Termination after Closing. The parties have agreed the Purchaser
shall have the absolute right in its sole discretion to unwind this
entire transaction at any time prior to January 1, 1998 (Purchaser"s
Put) if the Company does not achieve the performance criteria set forth
on Schedule 9.5. If Purchaser exercises its Put, all parties will be
placed into their respective positions as of immediately prior to the
Closing. If the Purchaser exercises its Put the transactions which must
take place will include but not be limited to the following events:
The Purchaser shall return all shares of the Company to the Shareholders
in their respective pro rata portions and the Shareholders of the
Company shall return all shares of Purchaser to Purchaser within ten
days from the date Purchaser provides the Shareholders with notice of
its decision to exercise its Put.
On January 1, 1998, any capital provided to the Company between date of
Closing and January 1, 1998 shall become a Promissory Note secured by
all the assets of the Company as a blanket lien subordinated only to
existing debt instruments. The Promissory Note shall be for a two year
term, interest only payments being due and payable during said term,
with interest accruing as of January 1, 1998 at a rate of 10.5% per
annum.
The Purchaser and the Shareholders will fully cooperate with another to
perform all other tasks which are necessary and appropriate to a
complete unwinding of this transaction.
(d) If the Purchaser terminates this Agreement pursuant to Section 9.5,
the Purchaser shall not utilize the technology, Registered Rights, or
Proprietary Information of the Company for a period of three years.
The Purchaser covenants and agrees that it will not take any action, the
intent of which is to prevent the Company from meeting the performance
criteria set forth on Schedule 9.5.
10. INDEMNIFICATION
10.1 Survival of Representations and Warranties. The representations
and warranties of the parties hereto contained in this Agreement or in
any writing delivered pursuant hereto or at the Closing shall survive
the Closing and the consummation of the transactions contemplated hereby
(and any examination or investigation by or on behalf of any party
hereto) until the first anniversary of the Closing Date subject to
audited financial statements being released which are satisfactory to
both parties; provided, that the representations and warranties
contained in Section 4.12 and Section 4.14 shall not terminate until the
expiration of any applicable statute of limitations; provided, further,
that representations and warranties contained in Article 3, Section
4.17, Section 4.24 and Section 4.28 shall not terminate but shall
continue indefinitely.
10.2 Indemnification.
(a) The Majority Shareholders jointly and severally, covenant and agree
to defend, indemnify and hold harmless Purchaser and the Company and
each Person who controls Purchaser or the Company within the meaning of
the Securities Act from and against any Damages arising out of or
resulting from: (i) any inaccuracy in or breach of any representation or
warranty made by any Shareholder in this Agreement or in any writing
delivered pursuant to this Agreement or at the Closing [unless and
except that such inaccuracy or breach is a direct result of changes made
by the Purchaser in accounting methods or estimates utilized in
financial reporting of the Company]; or (ii) the failure of any
Shareholder to perform or observe fully any covenant, agreement or
provision to be performed or observed by such Shareholder pursuant to
this Agreement or the Noncompetition Agreements.
(b) Purchaser covenants and agrees to defend, indemnify and hold
harmless the Shareholders from and against any Damages arising out of or
resulting from: (i) any inaccuracy in or breach of any representation or
warranty made by Purchaser in this Agreement or in any writing delivered
pursuant to this Agreement or at the Closing; (ii) the failure by
Purchaser to perform or observe any covenant, agreement or condition to
be performed or observed by it pursuant to this Agreement; or (iii) the
Shareholders" liability under the Guaranties.
10.3 Third Party Claims.
(a) If any party entitled to be indemnified pursuant to Section 10.2
(an "Indemnified Party") receives notice of the assertion by any third
party of any claim or of the commencement by any such third person of
any Action (any such claim or Action being referred to herein as an
"Indemnifiable Claim") with respect to which another party hereto (an
"Indemnifying Party") is or may be obligated to provide indemnification,
the Indemnified Party shall promptly notify the Indemnifying Party in
writing (the "Claim Notice") of the Indemnifiable Claim; provided, that
the failure to provide such notice shall not relieve or otherwise affect
the obligation of the Indemnifying Party to provide indemnification
hereunder, except to the extent that any Damages directly resulted or
were caused by such failure.
(b) The Indemnifying Party shall have thirty (30) days after receipt of
the Claim Notice to undertake, conduct and control, through counsel of
its own choosing, and at its expense, the settlement or defense thereof,
and the Indemnified Party shall cooperate with the Indemnifying Party in
connection therewith; provided, that (i) the Indemnifying Party shall
permit the Indemnified Party to participate in such settlement or
defense through counsel chosen by the Indemnified Party (subject to the
consent of the Indemnifying Party, which consent shall not be
unreasonably withheld), provided that the fees and expenses of such
counsel shall not be borne by the Indemnifying Party, and (ii) the
Indemnifying Party shall not settle any Indemnifiable Claim without the
Indemnified Party"sr consent. So long as the Indemnifying Party is
vigorously contesting any such Indemnifiable Claim in good faith, the
Indemnified Party shall not pay or settle such claim without the
Indemnifying Party"s consent, which consent shall not be unreasonably
withheld.
(c) If the Indemnifying Party does not notify the Indemnified Party
within thirty (30) days after receipt of the Claim Notice that it elects
to undertake the defense of the Indemnifiable Claim described therein,
the Indemnified Party shall have the right to contest, settle or
compromise the Indemnifiable Claim in the exercise of its reasonable
discretion; provided, that the Indemnified Party shall notify the
Indemnifying Party of any compromise or settlement of any such
Indemnifiable Claim.
(d) Anything contained in this Section 10.3 to the contrary
notwithstanding, the Shareholders shall not be entitled to assume the
defense for any Indemnifiable Claim (and shall be liable for the
reasonable fees and expenses incurred by the Indemnified Party in
defending such claim) if the Indemnifiable Claim seeks an order,
injunction or other equitable relief or relief for other than money
damages against Purchaser or the Company which Purchaser determines,
after conferring with its counsel, cannot be separated from any related
claim for money damages and which, if successfully, would adversely
affect the business, properties or prospects of the Company.
10.4 Indemnification Non-Exclusive. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common-law remedy any party may have for breach of
representation, warranty, covenant or agreement.
10.5 Set-off. Notwithstanding any provision of this Agreement or of
any other agreement, instrument or undertaking, if the procedures
outlined in Section 10.3 are followed by Purchaser then it is understood
and agreed that Purchaser shall have the right to set-off the amount of
any indemnity under Sections 10.2 or 10.3 hereof to the extent any of
the Shareholders shall be liable therefor against any sums of money or
any shares of the Purchaser at any time payable or deliverable to the
Shareholders, including but not limited to shares held in the Stock
Escrow Agreement. The remedies provided in this Article shall be
cumulative and shall not preclude the assertion by any party of any
other rights or the seeking of any other remedies by it against any
other party.
11. GENERAL PROVISIONS
11.1 Notices. All notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed
given (a) if delivered personally (including by overnight express or
messenger), upon delivery, (b) if delivered by certified mail (return
receipt requested), upon the earlier of actual delivery or three (3)
days after being mailed, or (c) if given by telecopy, upon confirmation
of transmission by telecopy, in each case to the parties at the
following addresses:
(a) If to the Purchaser, addressed to:
U. S. Plastic Lumber Corporation
2300 W. Glades Road
Suite 440W
Boca Raton, Florida 33431
Attention: Mark Alsentzer, President and CEO
Telecopy: (561)394-5335
(b) If to any Shareholder, to the address set forth
below such Shareholder"s name on Schedule "A" hereto:
With a copy to:
Jeffrey Donaldson, Esq.
Mirick, O"Connell, DeMallie & Lougee,LLP.
1700 Bank of Boston Tower
100 Front Street
Worcester, MA 01608
Telecopy: (508) 752-7305
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.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or has caused this Agreement to be executed on its behalf by
a representative duly authorized, all as of the date first above set
forth.
"PURCHASER"
United States Plastic Lumber, Inc.,
a Nevada corporation
By:_________________________
____________________________
Print Name/Title
"COMPANY"
EnviroPlastics
Corporation,
A Massachusetts
corporation
By:_________________________
Franco Previd,
President
SHAREHOLDERS:
________________________ Bruce A. Fortin
________________________
Franco Previd
________________________ Henry P. Lisciotti, Jr.
________________________ Thomas W. Whitcomb
________________________
Richard F. Perry
________________________
Kathleen A. Perry
________________________
Lolita Previd
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Stock Escrow Agreement
Exhibit B Employment Agreements of Bruce Fortin and Franco Previd
Exhibit C Opinion of Counsel
Exhibit D Certificate of President
Exhibit E Certificate of Shareholders
Exhibit F Certificate of Clerk
Exhibit G Non-Competition Agreements
Exhibit H Stock Sale Restriction Agreement
Exhibit I Certificate of President " Purchaser
Exhibit J Certificate of Secretary - Purchaser
SCHEDULES
I List of Shareholders
II Exceptions to Representations and Warranties
3.3 Consents
3.4 Conflicts
4.1(a) Foreign Corp status
4.1(b) Subsidiaries
4.2 No Conflicts
4.3 Capitalization
4.4 Financial Statements
4.5(a) Liens
4.5(b) List of Tangible Property
4.5(c) List of Leases
4.5(e) Realty representations
4.6 Accounts Receivable
4.7 Inventories
4.8(a) List of Patents and Trademarks
4.8(b) Registered Rights
4.8(c) Licenses
4.9(a) List of Banks
4.9(b) Insurance Policies
4.10(a) Indebtedness
4.10(b) Guaranties
4.11 Judgments
4.12 Income Taxes
4.14 Employee Benefit Plans
4.15 Undisclosed Liabilities
4.16 Permits
4.19(a) Sales Orders
4.19(b) Purchase Orders
4.19(c) Sales Reps
4.19(d) Non-Compete Agreements
4.19(e) Contracts (inside)
4.19(f) Contracts (outside)
4.19(g) Legality
4.20 Absence of Changes
4.21(a) List of Employees
4.21(b) Labor Agreements
4.22 Affiliation
4.23(a) Customer Lists
4.23(b) Supplier Lists
4.25 Product Return
4.26 Warranties
4.28 Hazardous Materials
No Conflicts " Purchaser
5.5 Financial Statements - Purchaser
Judgements; Litigation - Purchaser
Income Taxes - Purchaser
5.9 Permits - Purchaser
5.11 Consents - Purchaser
9.5 Put Performance Criteria
JOINT VENTURE AGREEMENT
THIS AGREEMENT entered into this _______th day of ___________, 1997 by
and between Interstate Industrial Corp., with its main office at 348 New
County Road, Secaucus, New Jersey, 07094, U.S.A. (hereafter referred to as
"IIC"), and U.S. Plastic Lumber Corp., with its main office at 2300 Glades
Road, Suite 440W, Boca Raton, Florida 33431 (hereinafter referred to as
(U.S.P.L.)), (referred to herein singularly or collectively as "Party" or
"Parties").
RECITALS
The Parties have agreed to cooperate in a Joint Venture to be called
IIC/U.S.P.L. Joint Venture (hereinafter referred to as the "Joint Venture")
for the purpose of submitting a joint bid (hereinafter referred to as the
"Tender") to the U.S. Army Corps of Engineers, New York District, (hereinafter
referred to as the "Owner") for the Dredging Services Invitation to Bid
#DACASI-97-B-31 (hereinafter referred to as the "Project"), and if successful,
to execute a contract with the Owner for the performance of the Project
(hereinafter referred to as the "Contract").
The Parties hereto desire to enter into a Joint Venture Agreement, in
order to fix and define between themselves their respective interests and
liabilities in connection with the performance of the Contract if and when it
is awarded.
NOW THEREFORE, it is hereby agreed as follows:
ARTICLE 1
Object of Agreement
Formation. The Parties hereby agree to form the Joint Venture and
constitute themselves as Joint Venturers pursuant to the provisions hereof for
the limited purposes and scope set forth in this Agreement.
Purpose. This Joint Venture is entered into solely for the purpose of
bidding the Project and if awarded the bid, performing the contract and for
no other purpose. The Parties shall have the power to do all things
incidental to carrying out the obligations of the Joint Venture in completing
the Project. The Parties agree that the Joint Venture is a temporary
association and that it will not place any limitation or liability on the
Parties beyond the specific undertakings contained in this Agreement nor will
the Joint Venture be entitled to or be used by the Parties to bid on other
projects or contracts except as may be specifically agreed by the Parties in
writing.
No General Agent. To the fullest extent permissible under New Jersey Law,
the Parties agree that their relationship is confined to the limited purpose
set forth in Section 1.2.
Nothing herein contained shall constitute any Party the general agent of the
other Party, or in any way prevent or hinder either Party from carrying on its
respective business or businesses for its own benefit.
Name and Trade Name Certificate. The name of the Joint Venture shall be
IIC/U.S.P.L. J.V.. The Executive Committee (as defined herein) shall file a
trade name certificate in all places required by law indicating that the
Parties are doing business under the name "IIC/U.S.P.L. J.V.."
Contracts With Parties. The Joint Venture may (and the Parties may agree
to) enter into contracts with the Parties or affiliates in connection with the
performance of the Contract. said contracts, if entered into, will only be
entered into by the Parties in their capacity as contractors and not in their
capacity as Parties such that the transactions between the Joint Venture and a
Party will be transactions between a partnership (for tax purposes) and its
partner not acting in a capacity of a partner within the meaning of Section
707(a) of the Code.
ARTICLE 2
Duration
Commencement Term. The Joint Venture shall commence as of the date hereof.
The term of this Joint Venture shall continue until the earlier of: (i) Award
as of the Contract to a third party, (ii) final completion of the Project,
including all distributions of net profits, cash flow and assets have been
made and the Parties conclude that the purposes for which the Joint Venture
was formed have been discharged and completed, (iii) the agreement of all the
Parties to dissolve, (iv) the election of the Non-Defaulter pursuant to
Section 15.3.
Withdrawal of a Party. No Party shall withdraw from the Joint Venture
except upon written approval of the other Party in its sole discretion.
Termination before Contract. In the event this Agreement is terminated
pursuant to Section 2.1(i), each Party shall bear its own costs and
out-of-pocket expenses incurred in the preparation and submission of the Bid
Proposal.
ARTICLE 3
Participation
Interest of the Parties. Except as otherwise provided in this Agreement,
the respective interests of the Parties (the "Percentage Interests") in the
Joint Venture and the Venture's capital, assets, Distributable Cash and Net
Profits (as defined herein) are as follows:
Party Percentage Interest
IIC 50%
U.S.P.L. 50%
Obligations. Each of the parties will be jointly and severally liable to
the Owner or to the other third parties in connection with any liabilities,
damages, expenses or claims under or arising out of this Agreement, the
Contract or the performance of work in connection with the Project. Any such
liability to the Owner or other third parties shall be subject to allocation
between the parties in accordance with their Percentage Interest in the Joint
Venture.
Any capital contribution and distribution shall be made by both Parties in
accordance with pro rata interests set forth in Section 3.1.
ARTICLE 4
The Executive Committee
Executive Committee. The business and affairs of the Joint Venture shall
be managed by an executive committee composed of two persons who shall be
responsible for the overall management of the Joint Venture (the "Executive
Committee"). One representative shall be appointed by each Party. Once
appointed, the names of the representatives shall be appended to this
Agreement as Schedule A.
ARTICLE 5
Duties and Responsibilities of Executive Committee
The Executive Committee shall have total control over the Joint Venture.
It shall supervise Joint Venture activities and may look into all matters and
questions related to the performance of the Contract.
Chairman. The Representative appointed by IIC shall preside as the
Chairman of the Executive Committee (hereinafter referred to as the
"Chairman"). In the absence of the Chairman at any meeting of the Executive
Committee, the Representative appointed by IIC shall act as Chairman.
Schedule and Notice. The Chairman shall call Executive Committee meetings
when necessary in his opinion or when requested in writing, fax or telex, but
in any case at intervals of less than two months during the course of the
Project. If a meeting shall not have been convened by the Chairman so as to
take place within ten (10) days after the request of the other Party's
Representative, such Representative shall have power to call an Executive
Committee meeting on not less than ten (10) days notice, and shall have a
similar right in case a meeting shall not have been called within two (2)
months of the previous meeting. Notice for a meeting may be by registered
mail, telex or fax on ten days notice, and shall always contain the agenda of
the meeting in question.
Quorum. A quorum shall be constituted only when both IIC Representatives
are present at an Executive Committee meeting. Decisions of the Executive
Committee shall be unanimous.
Impasse. Where there is an impasse on any part of the agenda, the issue
shall be resolved by the Managing Partner, which decision shall be final and
binding upon the Joint Venture, except that if the issue to be resolved is a
non-operational issue then such issue will be resolved pursuant to Article 20.
Minutes. The Chairman shall ensure that minutes of meetings be taken and
shall forward the same to the Parties in due time. The minutes of meetings
shall be deemed approved if within a period of 14 days after receipt of such
minutes, no objections are raised.
Written Consent. The Executive Committee may take decisions without a
meeting being held provided both Representatives are in favor of such a
procedure and give their unanimous consent in writing, by telex or by fax. A
decision so taken shall be included in the minutes of the next meeting with
the date on which it was taken.
Implementation. The Chairman shall ensure that all resolutions approved by
the Executive Committee are properly implemented.
ARTICLE 6
The "Managing Partner"
IIC is appointed as the Managing Partner and shall provide and maintain
monthly progress reports for each job performed hereunder.
The Joint Venture shall maintain or cause to be maintained monthly
financial statements. U.S.P.L. shall maintain or cause to be maintained a
complete set of records, statements, and accounts concerning the total
operations of the Joint Venture, in which books shall be entered, on a monthly
basis, fully and accurately, each transaction pertaining to the Joint Venture.
Each party to this venture may inspect such books at any reasonable time.
Periodic audits shall be made of such books at such times and by such persons
as the parties may direct or upon the written request of a party and copies of
the audit reports shall be furnished to each party. Upon completion of the
Construction Contract, a final audit shall be made and copies of such audit
report shall be furnished to each of the parties.
6.3 Fee. The parties agree that the fee from an independent accounting firm
shall be payable by the Joint Venture for its services as defined in the
Agreement.
ARTICLE 7
Project Management
Project Executive. Except as provided otherwise herein, the supervision
and management of the work called for by the Project and any and all matters
relating thereto, including supervision of activities in the field, project
management, purchasing, and, in addition, the processing and checking and
approval of shop drawings, the making of change estimates, and the control of
information for the field, shall be under the general charge and supervision
of a Project Executive nominated by the Executive Committee. The Project
Executive shall not be changed without the consent of the Executive Committee.
The Project Executive shall report to and be subject to the overall control,
management and direction of the Executive Committee.
Duties. Subject to other provisions of this Agreement, the duties of the
Project Executive shall include:
responsibility for the day to day supervision, direction and management of the
Project in accordance with the policies and the procedures established by the
Executive Committee;
coordination of the work for the Project, including that of subcontractors;
enter into, execute, modify and amend subcontracts with respect to the Project
subject to guidelines of the Executive Committee;
execute change orders with subcontractors, approve requisitions, withhold
progress payments for inadequate work, provide releases and make final payment
to subcontractors subject to guidelines of the Executive Committee; and
execute Owner change orders and perform under notices to proceed with the
Owner, subject to guidelines of the Executive Committee.
Reports. The Project Executive shall provide the following reports to the
Executive Committee:
Monthly progress and cost monitoring report showing the status of the Project,
including:
Description of actual progress made during the month compared with scheduled
progress, including plans to correct negative float items;
Status of RFI's, Change Orders, or other modifications to the contract.
Report to be in form approved by the Executive Committee;
Cost performance vis-a-vis budget with commentary on planned approach to
improving negative variances;
Cost to complete and job profitability analysis;
Status of all disputes, claims and update on administrative strategy relative
thereto;
Quality Assurance and Safety Program compliance; and
EEO and DBE requirement compliance.
Information. During the Project, the Project Executive shall also provide
the Executive Committee and Managing Partner periodically, at its request,
with the following which it shall retain for the Venture: (i) a copy of the
change order log, (ii) copies of all contracts, change orders and purchase
orders of the Venture, (iii) copies of monthly requisitions to the Project;
(iv) disputed change orders, (v) a copy of the OSHA log, (vi) evidence of the
payment of all withholding taxes and insurance premiums for all personnel
employed in connection with the Project by any Party, (vii) a daily log book,
and (viii) any other appropriate information required by the Executive
Committee.
It will be the obligation and responsibility of U.S.P.L. to select the port
transfer facility, and the Joint Venture shall use whatever port transfer
facility is selected by U.S.P.L. as long as said facility is competitive in
its pricing.
The obligation of the Joint Venture as set forth in Section 7.5 shall exist on
the current bid which is the subject of this contract or on any future bids or
contracts with which the Joint Venture chooses to pursue.
ARTICLE 8
Working Capital Loan
Working Capital Loan. U.S.P.L. shall provide a working capital loan to
the Joint Venture in the amount of $1.5 million dollars. The Joint Venture
shall issue a promissory note to U.S.P.L. for $1,500,000 and provide a blanket
lien to U.S.P.L. on all assets of the Joint Venture. The principal and
interest on this loan shall be repaid by the Joint Venture at an interest rate
of 5% payable upon completion of the Project, if not otherwise paid off
earlier. The Joint Venture will re-pay the principal of the loan with excess
monthly working capital.
(a) Accelerated Payments of Principal and Interest. The Joint Venture agrees
to make accelerated payments of principal and interest in the event the Cash
account, as stated on the Balance Sheet of the Joint Venture in any period,
exceeds $2,000,000. All cash in excess of $2,000,000 shall be paid to USPL as
a reduction of principal and interest.
Bank Accounts. Bank account(s) (the "Accounts") for and in the name of the
Joint Venture shall be opened by the Managing Partner. Withdrawals from bank
accounts shall be made by parties approved by the Executive Committee, except
as follows: (i) no withdrawals will be made as profit distribution without
the consent of both parties and (ii) monthly withdrawals pursuant to Article
8.1 to pay back the loan of U.S.P.L. shall never require Executive Committee
approval and shall be automatically payable each month by the Controller of
the Joint Venture.
Deposit of Money. All payments received by the Joint Venture under the
Contract or from others in connection with the Project shall be promptly
deposited in the Accounts and all invoices received by the Joint Venture shall
be paid by check drawn on the Accounts.
ARTICLE 9
Construction Equipment
Equipment. All equipment ("Equipment") which the Executive Committee deems
necessary to enable the Joint Venture to complete the Contract, either at the
port transfer facility or at the mine reclamation site, shall be obtained by
the Joint Venture in the manner approved by the Executive Committee.
Equipment may be purchased, or in the event that it is more economical, such
Equipment may be leased (including the leasing of equipment from either Party)
at rates and terms to be approved by the Executive Committee,except that if
equipment is leased from either party it will be done on a cost basis. All
Equipment will be purchased from funds available in the Accounts. The
proceeds of any sale of equipment will be deposited into the Accounts and will
become of the funds of the Joint Venture. IIC will sign as a guarantor on all
equipment which is financed by lease or purchase.
In the event the Joint Venture is terminated for any reason, whether after the
Initial Project or any subsequent Project the Joint Venture may choose to
perform, the Joint Venture shall provide Consolidated Technologies, Inc. (CTI)
with an option to purchase any or all equipment for the fair market value of
such equipment, or if leased, for the remaining payments on the lease.
ARTICLE 10
Staff and Personnel
Project Executive. The site organization shall be headed by the Project
Executive. The Parties shall agree upon the key technical and administrative
staff that shall be made available by the Parties to the Joint Venture. All
other personnel and labor shall be engaged and discharged directly by the
Joint Venture. IIC shall provide the expertise and local support personnel
for operations at the port transfer facility at the sole cost and expense of
the Joint Venture.
Replacements. The Project Executive is entitled to request the replacement
of any senior staff (such level to be determined by the Executive Committee)
provided that Executive Committee approval is obtained. The replacement shall
be effected as soon as is practically possible. Executive Committee approval
is not necessary in the case of the dismissal and replacement of staff other
than senior staff.
ARTICLE 11
Accounting
Joint Venture Accounting. Separate books of account for the Joint Venture
shall be kept and maintained by U.S.P.L. at the Joint Venture's expense for
the entry of all accounts.
Fiscal Year. The fiscal year and all the accounting or tax matters of the
Joint Venture shall be maintained on a fiscal and calendar year basis,
commencing on January 1 and ending December 31.
Selection of Accountants. The accountants ("Accountants") of the Joint
Venture shall be a firm of independent certified public accountants selected
by U.S.P.L.
Accountant's Duties. The Accountants retained by U.S.P.L. shall prepare an
audited balance sheet of the Joint Venture as at the end of each fiscal year,
together with related statements of income and retained earnings and changes
in financial position with respect to such fiscal year, and a calculation of
Distributable Cash and the means used to calculate such items. Within ninety
(90) days after the end of each year, the Joint Venture shall furnish copies
of such financial statement to each Party.
ARTICLE 12
Income Tax Returns; Tax Accounting; Tax Elections
Preparation of Tax Returns. Federal, state and local income tax returns of
the Joint Venture shall be prepared, as required, by the Accountants for the
Joint Venture. Copies of all tax returns of the Joint Venture shall be
furnished for review and approval by the Executive Committee at least thirty
(30) days prior to the statutory date for filing, including extension thereof,
if any. If the Executive Committee shall fail to approve any such return, an
application for extension of time to file shall be timely filed by the
Managing Partner. All tax returns shall be prepared using the % of completion
contract method of accounting, to the extent permissible, except for interest
and miscellaneous income and expenses, which shall be reported currently.
Method of Allocation. The proportionate part of each item of income gain,
deduction or credit earned, realized or available by or to the Joint Venture
shall be allocated to the Parties in accordance with the Percentage Interest
of each Party. Losses shall be allocated as provided in Section 3.2.
Section 754 Election. The Joint Venture shall, if requested by either
Party, make the election under Section 754 of the Internal Revenue Code.
Tax Decision Not Specified. Tax decisions and elections for the Joint
Venture not provided for herein must be approved by the Executive Committee.
Notice of Tax Audit. Prompt written notice shall be given to the Parties
upon receipt of advice that the Internal Revenue Service intends to examine
Joint Venture income tax returns for any year.
Tax Matters Party. The Managing Partner shall be the tax matter partner for
the Joint Venture in accordance with Section 6231 of the Code and shall have
all powers and authority conferred thereunder on a tax matters partner.
ARTICLE 13
Guaranties and Insurance
Joint Venture Insurance. The Executive Committee shall obtain insurance
coverage for the Joint Venture from an agency or agencies selected by the
Executive Committee. The amounts and types of insurance shall be determined
by the Executive Committee in at least the minimum amounts set forth in the
Contract so as to adequately protect the Joint Venture and the Parties from
any accident or claim which may arise in the course of completing the Project.
The cost of insurance attributable to the Joint Venture shall be chargeable
thereto.
Additional Insurance. The Parties shall maintain the levels and kinds of
insurance coverage that they carried prior to entering this Agreement
throughout the term of the Joint Venture. Each Party shall also maintain such
insurance as may be required of it pursuant to any separate contract entered
into between the Joint Venture and the Party.
Bonding. The Joint Venture shall procure payment and performance bonds in
the penal sum of the Contract as required by the Owner. The bonds shall be
procured in the name of the Joint Venture and shall be an expense of the Joint
Venture. IIC and U.S.P.L. shall sign as Guarantors on the bonds, if
necessary. Each of the Parties agrees to execute applications and indemnity
agreements required in connection with bonds, guaranties or other securities
furnished with respect to the Project, provided that all Obligations assumed
by the Parties or any of them as guarantors or indemnitors in connection with
any such bonds or other security shall be shared and limited in accordance
with the Percentage Interests set forth in Section 3.2 herein. If for any
reason, a Party sustains any Obligations (whether in the nature of joint and
several or otherwise) or is required to pay any losses arising out of or
directly connected with the performance of the Contract, or the execution of
its Percentage Interest, the other Party shall promptly reimburse such Party
the amount or amounts of losses paid and/or Obligations assumed by such Party
of such Party's Percentage Interest as set forth in Section 3.2.
ARTICLE 14
Liability
Indemnity. If for any reason a Party sustains any Obligations (whether in
the nature of joint and several or otherwise) or is required to pay any losses
arising out of or directly connected with the performance of the contract or
the execution of any surety bonds or indemnity agreements in connection
therewith which are in excess of its Percentage Interest, as set forth in
Section 3.2, the other Party shall promptly reimburse such Party the amount or
amounts of the losses paid and/or Obligations assumed by such Party in excess
of such Party's Percentage Interest, as set forth in Section 3.2, provided
that any such losses and/or Obligations are not the result of such Party's
gross negligence, reckless acts or omissions or unlawful conduct and, in
furtherance thereof, each of the Parties hereby agrees to indemnify the other
Party against and to hold the other Party harmless from any and all such
losses and provided further, however, that the provisions of this subparagraph
shall be limited to losses or that are directly connected with, or arise out
of the performance of the Contract or the execution of any bonds or indemnity
agreements in connection therewith and shall not relate to or include any
incidental, indirect or consequential losses that may be sustained or suffered
by a Party nor any losses and/or Obligations resulting from a Party's gross
negligence, reckless acts or omissions or unlawful conduct.
ARTICLE 15
Termination
Default. Upon the occurrence of an Event of Default, as defined in this
Section, with respect to a Party ("Defaulter"), the non-defaulting Party
("Non-Defaulter") may seek money damages and/or an equitable remedy in
accordance with Articles 22 and 23 of this Agreement. All such remedies may
be pursued simultaneously by the Non-Defaulter and such remedies may be
cumulatively granted.
Should the Managing Partner default the other Party shall become the Managing
Partner, automatically and immediately upon serving written notice.
Definitions and Cure Period. The occurrence of any of the following events
shall constitute an event of default ("Event of Default") hereunder on the
part of Defaulter if within thirty (30) days following notice of such default
from the Non-Defaulter (ten (10) days if the default results solely from the
nonpayment of monies), the Defaulter fails to pay such monies, or in the case
of non-monetary defaults, fails to commence substantial efforts to cure such
default and thereafter fails within a reasonable time not to exceed an
additional thirty (30) days to prosecute to completion with diligence and
continuity the curing of such default.
the failure by a Non-Contributing Party to make any Capital Contribution to
the Joint Venture'
a material breach or violation by a Party of any of the terms, agreements,
representations, covenants or provisions of this Agreement;
institution by a Party of proceedings of any nature under any laws of the
United States or of any state, whether now existing or subsequently enacted or
amended, for the relief of debtors, including, but not limited to , any
chapter of the Federal Bankruptcy Code wherein such Party is seeking relief as
a debtor;
a general assignment by a Party for the benefit of creditors;
the institution against a Party of a case or other proceeding under any
section or chapter of the Federal Bankruptcy Code as now existing or hereafter
amended or becoming effective, which proceeding is not dismissed, stayed or
discharged within a period of twenty (20) days after the filing thereof, or if
stayed, which stay is thereafter lifted without a contemporaneous discharge or
dismissal of such proceeding;
admission by a Party in writing of its inability to pay its debts as they
mature; or
execution or other judicial seizure of all or any substantial part of a
Party's assets or Joint Venture interest, or any part thereof, or the
appointment of a receiver, custodian, trustee or like officer, to take
possession of assets if such attachment, execution, seizure or appointment:
(a) exceeds $100,000.00; (b) remains undismissed or undischarged for a period
of twenty (20) days after the levy or appointment; or (c) if the occurrence of
such attachment, execution or other judicial seizure or appointment may have a
materially adverse effect upon the performance by said Party of its
obligations under this Agreement as determined by the Non-Defaulter; provided,
however, that said attachment, execution, seizure or appointment shall not
constitute an Event of Default hereunder if said Party posts a bond sufficient
to fully satisfy the amount of such claim or judgment within fifteen (15) days
after the levy thereof or appointment and the Party's assets are thereby
released from the lien of such attachment or the appointment is vacated.
Rights of Non-Defaulting Party.
On occurrence of an Event of Default, the Non-Defaulter shall have the right
(subject to Section 18.3.4) to: (i) exclude the Defaulter from further
participation in the Joint Venture and in the management and control thereof
and may take over its interest under this Agreement without releasing the
Defaulter from its obligation to bear its share of Net Losses, or (ii)
terminate the Joint Venture and do all thing necessary to wind up the affairs
of the Joint Venture, including the completion of the Project. The
Non-Defaulter shall have the opportunity to assume the responsibilities of the
Defaulter under this Agreement without incurring liability of any kind to the
Defaulter for the Net Profit earned after the Event of Default. No share in
any Distributable Cash shall be payable to the Defaulter before completion of
the Project and the collection of all receipts and the payment of all
Obligations.
The Non-Defaulter shall have the right to retain for the completion of the
Project all assets of the Joint Venture and all Equipment and materials
provided by the Parties or hired, purchased or acquired by the Defaulter until
the completion of the Project. The Defaulter shall execute and do all deeds
and documents and things necessary or expedient to facilitate the exercise of
such right and allow the Non-Defaulter to proceed with the performance of the
Contract (including without prejudice to the generality of the foregoing the
operation of any Accounts in the name of the Joint Venture without reference
to the Non-Defaulter). In such event all reference in this Agreement to the
administration and direction of the Joint Venture by the Parties (or the
Executive Committee) shall be deemed to exclude the Defaulter.
Upon completion or sooner termination of the Contract and receipt of all
amounts due under it the Non-Defaulter shall account to the Defaulting Party
(who shall be entitled to receive) an amount equal to its Capital Contribution
together with its share of any Net Profits earned and received as assessed up
to the date when it was excluded from the management of the Joint Venture.
Upon the occurrence of any Event of Default set forth in subparagraphs
(iii), (iv), (v) or (vi) of Section 18.2, the Joint Venture or the Party which
is not subject to the aforesaid provisions (the "Remaining Party"), shall be
entitled to request that the Party which is subject to the aforesaid
provisions (the "Bankrupt Party"), or its successor, provide adequate
assurances of future performance. Failure to provide such adequate assurances
within a thirty (30) day period of request therefore, shall entitle the
Remaining Party to declare that the Bankrupt Party shall cease to have any
voice in the management of the Project, including a loss of its right to a
vote in the Executive Committee or any interest in the performance of the
Contract thereafter, or in the Joint Venture or in any of the Joint Venture's
assets, and its delegation of authority to its representative to the Executive
Committee shall be deemed cancelled. The representative to the Executive
Committee designated by the Remaining Party shall have full power and
authority to proceed, and wherever it is provided in this Agreement that any
act, consent or decision of the Parties or the Executive Committee required,
shall be deemed to mean the act, consent or decision of the solvent Party,
excluding the Insolvent Party.
Dissolution and Liquidation.
Upon the happening of any one of the events set forth in Section 2.1, the
Joint Venture shall be immediately dissolved.
Upon the expiration or termination of the Joint Venture or following the
Parties' decision to terminate the Joint Venture, the Joint Venture shall
immediately commence to wind up its affairs and the Executive Committee shall
proceed with reasonable promptness to liquidate the Joint Venture. During the
period of winding up, the Executive Committee shall continue to act as such
and shall make all decisions relating to the conduct of the business or
operations of the Joint Venture, within the power delegated to it under this
Agreement, during the winding up period. Every reasonable effort shall be
made to dispose of the assets of the Joint Venture so that the distribution
may be made to the Parties in cash. If it becomes necessary to distribute
non-cash assets, such assets shall be distributed according to the Parties'
Percentage Interests, based upon the net fair market value of the distributed
assets.
Liquidation proceeds shall be distributed and applied in the following
order or priority:
To the payment of debts and Obligations of the Joint Venture including the
completion of the Contract and expenses of liquidation.
Repayment of the working capital loan of U.S.P.L. as set forth in Article 8.
To the setting up of any reserves which the Executive Committee may deem
reasonably necessary for any contingent or unforeseen liability or obligations
for the Joint Venture, such reserves to be maintained for a period not longer
than one (1) year except to the extent any claims may have been made or
threatened against the Joint Venture during such period and which are then
unliquidated, and then only until the liquidation of such claims.
To the Parties having balances in their Capital Accounts in the amount
thereof.
If after allocation of any gains or loss on sale or disposition of all or
substantially all of the Joint Venture's property and distribution of all
assets of the Joint Venture, the Capital Account balance of any Party
indicates a debit balance and the Capital Account balance of the other Party
indicates a credit balance, the Party having the debit balance shall be
required to contribute to the Joint Venture sufficient cash to eliminate all
such debit balances. Such cash shall be distributed together with the other
proceeds of liquidation as provided in Section 15.4.3.
ARTICLE 16
Confidential Information
Confidential Information. All documentation, data and information, whether
technical, business, financial or otherwise, acquired by a Party from the
other Party shall be treated as confidential and proprietary by the recipient
and shall not be used other than for the purposes of performing such acquiring
Party's duties as set forth in the Agreement or the Contract without the prior
written consent of the Party from which the information was acquired, unless
such information:
Is, or later becomes, public knowledge other than by breach of
responsibilities in the foregoing paragraph;
Is in the possession of the recipient with the full right to disclose prior to
receipt from another Party; or
Is independently received by the recipient from a third party, with no
restrictions on disclosure.
ARTICLE 17
Publicity
Publicity. Either of the Parties may advertise as it thinks desirable
subject to consultation with the other Party. When the subject matter of any
advertisement involves the other Party or the Project, such advertisements and
relevant publications shall be subject to the prior written approval of the
other Party and where practicable make due reference to and acknowledgment of
the Project performed or to be performed by the other Party under the
Contract.
ARTICLE 18
Assignment
No Assignment. No Party hereto shall sell or assign or otherwise transfer
in any manner its Percentage Interest (including any rights to Net Profits or
Distributable Cash or any other proceeds), or any part thereof, in the Joint
Venture without first obtaining in advance the written consent of the other
Party, which consent may be withheld in the sole and absolute discretion of
the Party. Any purported transfer without such consent shall be void and of
no effect. Upon transfer of a Party's interest, with consent of the other
Party, the transferee shall assume in writing and agree to be bound by all of
the transferring Party's obligations.
Tax Consideration. Notwithstanding any provision to the contrary contained
herein, no Party shall transfer all or part of its Percentage Interest in the
Joint Venture to any person or entity if such transfer would result in a
termination of the Joint Venture under Section 708(b)(1)(B) of the code or any
successor section. The non-transferring Party shall have the power to require
postponement of the transfer of all or any potion of a Party's interest for
such period of time as may be required to prevent the termination of the Joint
Venture. As a condition to the consummation of any transfer, the Party
proposing to transfer all or any part of its Percentage Interest shall, at its
cost, provide an unqualified opinion of counsel, which opinion, and counsel
must be satisfactory to the non-transferring Party. The Party proposes to
transfer all or any part of its interest to any person or entity shall defend,
indemnify and hold harmless the other Party from any loss, cost, damage
(including additional taxes which the Party or the non-transferring Party is
required to pay as a result of such termination), or expenses resulting from a
transfer in violation of this section.
ARTICLE 19
Governing Law
Governing Law. This Agreement shall be construed, interpreted, enforced
and governed by and in accordance with the laws of the State of New Jersey
without giving effect to its choice of laws rules.
ARTICLE 20
Dispute Resolution
All disputes arising in connection with the interpretation and/or
application of this Agreement shall be referred to the Chief Executive
Officers of both Parties for their decision.
If the dispute cannot be settled amicably by the Chief Executive Officers
within thirty (30) days of the reference thereto, then either party shall be
entitled to submit the dispute to a mutually acceptable outside mediator by
written notice to the other. Such mediation shall be concluded within thirty
(30) days of properly being requested. Any such mediation shall be
confidential and non-binding on the parties.
If the mediation fails to resolve the dispute, or if the mediation cannot
be concluded within the aforementioned thirty (30) day period, then either
party may refer to the dispute to a panel of three arbitrators to be resolved
in accordance with the current Construction Industry Arbitration Rules of the
American Arbitration Association. Within thirty (30) days from the date when
either party refers the matter to arbitration, each party shall nominate its
respective arbitrator. The two arbitrators so named shall, within thirty (30)
days from the date of their nomination, nominate the third arbitrator, who
will preside over the arbitration panel. If either party fails to nominate
its arbitrator, or if the two arbitrators fail to agree on the choice of the
third arbitrator within the period provided for above, the American
Arbitration Association shall appoint the said arbitrator or arbitrators at
the request of either party within 10 days.
The parties agree that the decision of the arbitration panel shall be
rendered no later than ninety (90) days from the date of designation of the
third arbitrator.
The place of arbitration shall be in the State of New Jersey.
In the event of proceedings before an arbitration panel, the losing party
in such proceedings agrees to pay the reasonable legal fees and other costs
incurred by the prevailing party.
The decision of the arbitration panel shall be final and binding on both
parties.
Pending resolution of any dispute, both parties agree to continue diligent
performance of this Agreement and the Contract.
ARTICLE 21
Business Address and Language
Address. The business address of the Joint Venture shall be in:
348 New County Road
Secaucus, New Jersey 07094
ARTICLE 22
Validity
Validity. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
instrument. No changes, amendments or Modifications of this Agreement shall
be valid unless reduced to writing and signed by both Parties hereto.
ARTICLE 23
Severability
Severability. The provisions of this Agreement shall be deemed independent
and severable and the invalidity or partial invalidity or enforceability of
any one provisions or portion thereof shall not affect the validity or
enforceability of any other provision hereof.
ARTICLE 24
Offset
Right to Offset. The Joint Venture shall have the right to deduct from
amounts which are due and payable to each Party by the Joint Venture any
amounts which are due and payable by each Party to the Joint Venture.
ARTICLE 25
Soliciting Employees
No Solicitation. Each Party agrees that upon entering into this Agreement
and for a period of not less than two years following the final completion of
the Contract, said Party will refrain from making offers, enticements and/or
inducements to cause employees of the opposite Party to leave the employ of
that Party and enter into employment with the other Party, and/or any
subsidiary of the Party, making such offers, enticements and/or inducements
without the written consent of the appropriate Party. This provision is
limited to employees with whom a Party worked on this Project.
ARTICLE 26
Force Majeure
Excuse of Performance. Neither Party shall be considered in default of its
obligations hereunder to the extent that any such obligation is prevented or
delayed by any cause, existing or future, which is beyond the reasonable
control of such party.
ARTICLE 27
Amendments
Amendment. This Agreement supercedes all prior agreements between the
Party in connection with the Joint Venture, written or oral. Any amendments
or modifications to the terms hereof shall only be effected in writing signed
by both Parties.
IN WITNESS WHEREOF, the Parties hereto have caused this Joint Venture
Agreement to be duly executed as of the date set forth above.
WITNESS EARTH CARE / U.S.P.L. Corp.
_________________________ By: _____________________________
INTERSTATE INDUSTRIAL CORPORATION
_________________________ By: _____________________________
STATE OF NEW JERSEY }
} _________________, 1997
COUNTY OF HUDSON }
Before me, ______________________, the undersigned officer, personally
appeared ____________________and ____________________, know to me, or
satisfactorily proven, to be the persons whose name is subscribed to the
within instrument and acknowledged that he/she executed the same for the
purposes therein contained.
IN WITNESS WHEREOF I hereunto set my hand.
________________________________
Commissioner of the Superior Court
Notary Public
My Commission Expires:
SCHEDULE A
Party Representative
IIC Industrial Corp. Frank DiTommaso
U.S.P.L. Mark Alsentzer
SCHEDULE B
Insurance
Insurance Coverage ...................................Minimum Amount
Coverages to be determined by the Executive Committee.
LICENSE AND OPERATING AGREEMENT
This Operating Agreement is made this day of July, 1997 by and between
Carteret Biocycle Corporation, a Delaware corporation ("Company") and SD & G
Aggregates, Inc., a New Jersey corporation and its affiliates, subsidiaries,
sister companies and shareholders, and any other entity established by SD & G
Aggregates, Inc. or any of its shareholders to perform their covenants
hereunder, whether directly or indirectly involved, and whether as
shareholders, partners, members, owners, principals, or agents of such other
entity (collectively "SD & G").
WHEREAS, the Company is planning to develop, construct, and operate a facility
to do bioremediation of contaminated soils, and
WHEREAS, the Company has entered into several agreements simultaneous herewith
including; a Ground Lease Agreement with 40 Sayerville Realty Company; and a
Consulting Agreement with Windsor Environmental Technologies Corporation
(collectively "Related Agreements"), and
WHEREAS, the Company is desirous of conducting the operations of its
bioremediation facility utilizing the permits and licenses held by SD & G, and
WHEREAS, SD & G is willing to provide exclusive use of its permits and
licenses to Company as specified herein,
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree as follows:
1. License.
SD & G hereby grants to Company a perpetual, exclusive license to use the
Permits and Licenses listed on Schedule A hereto in the State of New Jersey as
set forth in this Agreement.
2. Restrictions.
Company shall not sublicense, transfer or convey any rights hereunder without
the prior written consent of SD & G; except to its parent, subsidiaries, or
affiliated companies, or to any company, person or entity with which the
Company may merge or consolidate or to a purchaser of its assets or to any
company, person or entity under common control with the Company.
SD & G may not sell, assign, or convey any of its rights hereunder to any
company, entity or person without the prior written consent of the Company.
3. Deposit Monies.
Company shall provide $100,000 deposit at the time of the execution of this
Agreement.
4. Fee.
In consideration for the grant of the license and the use of permits and
licenses, Company agrees to pay SD & G upon the following basis: Two percent
of Gross Sales
(i) Notwithstanding anything to the contrary in this Section 4, the parties
agree that a cap shall exist on all fees due hereunder as follow: $1,500,000
or ten years from the date the facility opens for business to third parties,
whichever comes first; thereafter, for an additional ten years or $1,00,000
whichever comes first, at the rate of 0.666% of Gross Sales.
5. Representations and Warranties of SD & G.
SD & G hereby represents and warrants to Company as follows:
(i) it is the owner of the licenses and permits listed on Schedule A hereto,
free and clear of any liens, encumbrances, or claims, and otherwise has the
right to grant to the Company the rights set forth in this Agreement.
(ii) there is no litigation or judgements affecting the aforesaid
licenses and permits
(iii) the licenses and permits are valid and enforceable, and have been
lawfully issued.
(iv) SD & G is in full compliance with all laws and regulations affecting the
aforesaid licenses and permits.
(v) the aforesaid licenses and permits constitute all licenses and permits
necessary to operate the bioremediation process and non-bioremediation process
at this facility of the Company which is envisioned by this Agreement, and the
consummation of this transaction will not result in the revocation,
suspension, or limitation of the licenses and permits in any manner, and the
licenses or permits do not require the consent of its issuing authority to or
as a result of the consummation of the transaction contemplated hereby.
(vi) SD & G shall maintain the aforesaid licenses and permits in good
standing order, valid and enforceable taking whatever action is necessary and
appropriate to operate under these licenses and permits, renew, modify, as may
be requested by the Company, or otherwise maintain their viability at its sole
expense.
(vii) SD & G shall maintain no other licenses or permits which are not the
subject of this transaction or which are not necessary to accomplish and
effectuate the transaction contemplated hereby. In the event SD & G does hold
other licenses or permits which are not subject to this transaction
("non-essential licenses"), SD & G shall immediately divest itself of such
non-essential licenses no later than 90 days subsequent to the signing of this
Agreement, to another entity as owned by the same principals.
(viii) General Counsel for SD & G shall provide a legal opinion
simultaneous with the execution of this Agreement verifying the accuracy of
the representations and warranties set forth in this Section 5(i)-(vii).
(ix) SD & G shall accept all quantities of screened debris from the Company
generated from the facility which is the subject of this Agreement at a cost
of $1.25 per ton. For purposes of this Agreement screened debris shall be
defined as, but not limited to concrete, asphalt, brick, block, and natural
rocks not to exceed 6" in diameter.
(x) The Company shall be allowed to expand its recycling operations to
include any form of recycling allowable under SD & G's permits and licenses,
and if not allowable under their permits and licenses, then the Company, with
the full cooperation and support of SD & G, shall apply to the appropriate
government agency for a modification or amendment to the permit or license to
perform the non-permitted recycling operations. The Company shall bear the
sole cost and expense for such permit or license modification.
6. Right of First Refusal.
SD & G is currently evaluating the potential of obtaining a permit or license
to conduct the remediation of dredge spoils from dredging operations to be
located on a 17 acre parcel adjacent to the premises which are the subject
hereof. For purposes of this Agreement, remediation shall be defined as all
operations and processes appropriate to the performance of remediation,
including but not limited to transportation, loading and unloading material,
conveying material, transferring material on-site or off-site, windrowing,
mixing material, and other such functions involved in the remediation process.
In the event, SD & G is granted a permit or license or otherwise, directly or
indirectly, is allowed to conduct dredge spoils remediation operations on said
premises, the Company is granted a right of first refusal to obtain a
perpetual and exclusive license to operate the dredge spoils remediation
operations. The parties agree to negotiate in good faith the contract terms
necessary and appropriate to consummate such a transaction. Further, in the
event SD & G receives a bona fide offer from a third party to finance and
operate a dredge spoils remediation operation on said premises, the Company
will be provided with 45 days to notify SD & G of its intent to match the bona
fide offer from the third party. This 45 day period shall be measured
beginning with the first day the Company receives notice from SD & G of the
third party bona fide offer. If the Company notifies SD & G of its intent to
match the bona fide offer, the Company shall have 30 days from the date of
such notice to negotiate and execute a contract with SD & G relative to its
offer. Both parties agree to negotiate such terms in good faith. In the event
the Company notifies SD & G of its refusal to match the bona fide offer from
the third party, SD & G shall be free to execute a contract with said third
party but only upon the same terms and conditions as offered to the Company.
In the event these third party negotiations develop terms and conditions
different from what was offered to the Company, SD & G shall provide the
Company with 45 days to accept or reject the revised offer and terms. In the
event SD & G is not successful in Closing a transaction upon the same terms
and conditions as offered to the Company with the third party within 120 days
for whatever reason, then SD & G shall provide the Company with a 30 day
period as a new opportunity to match the offer.
7. Board Representation.
During the term of this Agreement, Eric Fable shall be granted one seat on the
Board of Directors of the Company, and if an Audit Committee is created by the
Board of Directors, Eric Fable shall be entitled to one seat on the Audit
Committee.
9. Indemnification.
9.1 Survival of Representations and Warranties. The representations and
warranties of SD & G hereto as set forth in Sections 5 and 6 of this Agreement
or in any writing delivered pursuant hereto shall survive the execution of
this Agreement and the consummation of the transactions contemplated hereby
(and any examination or investigation by or on behalf of any party hereto) and
shall not terminate but shall continue indefinitely.
9.2 Indemnification.
(a) SD & G covenants and agrees to defend, indemnify and hold harmless the
Company and each Person who controls 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 SD &
G in this Agreement or in any writing delivered pursuant to this Agreement; or
(ii) the failure of SD & G to perform or observe fully any covenant,
agreement or provision to be performed or observed by SD & G pursuant to this
Agreement or any Related Agreements.
9.3 Third Party Claims.
(a) If any party entitled to be indemnified pursuant to Section 9.2 (an
"Indemnified Party") receives notice of the assertion by any third party of
any claim or of the commencement by any such third person of any Action (any
such claim or Action being referred to herein as an "Indemnifiable Claim")
with respect to which another party hereto (an "Indemnifying Party") is or may
be obligated to provide indemnification, the Indemnified Party shall promptly
notify the Indemnifying Party in writing (the "Claim Notice") of the
Indemnifiable Claim; provided, that the failure to provide such notice shall
not relieve or otherwise affect the obligation of the Indemnifying Party to
provide indemnification hereunder, except to the extent that any Damages
directly resulted or were caused by such failure.
(b) The Indemnifying Party shall have thirty (30) days after receipt of the
Claim Notice to undertake, conduct and control, through counsel of its own
choosing, and at its expense, the settlement or defense thereof, and the
Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith; provided, that (i) the Indemnifying Party shall permit the
Indemnified Party to participate in such settlement or defense through counsel
chosen by the Indemnified Party (subject to the consent of the Indemnifying
Party, which consent shall not be unreasonably withheld), provided that the
fees and expenses of such counsel shall not be borne by the Indemnifying
Party, and (ii) the Indemnifying Party shall not settle any Indemnifiable
Claim without the Indemnified Party's consent. So long as the Indemnifying
Party is vigorously contesting any such Indemnifiable Claim in good faith, the
Indemnified Party shall not pay or settle such claim without the Indemnifying
Party's consent, which consent shall not be unreasonably withheld.
(c) If the Indemnifying Party does not notify the Indemnified Party within
thirty (30) days after receipt of the Claim Notice that it elects to undertake
the defense of the Indemnifiable Claim described therein, the Indemnified
Party shall have the right to contest, settle or compromise the Indemnifiable
Claim in the exercise of its reasonable discretion; provided, that the
Indemnified Party shall notify the Indemnifying Party of any compromise or
settlement of any such Indemnifiable Claim.
(d) Anything contained in this Section 9.3 to the contrary notwithstanding,
SD & G 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 the Company which it 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.
9.4 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.
9.5 Set-off. Notwithstanding any provision of this Agreement or of any
other agreement, instrument or undertaking, it is understood and agreed that
Company shall have the right to set-off the amount of any indemnity under
Sections 9.2 or 9.3 hereof to the extent SD & G shall be liable therefor
against any sums of money or any shares of the Company at any time payable or
deliverable to SD & G. 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.
10. Notices.
All notices requests, demands and other communications hereunder must be in
writing and shall be deemed to have been given if delivered by hand or mailed
by first class, registered mail, return receipt requested, postage and
registry fees prepaid and addressed as follows:
(i) If to the Company:
Carteret Biocycle Corp.
2300 Glades Rd., Suite 440W
Boca Raton, FL 33431
Attention: Mr. Mark Alsentzer, President and CEO
Telecopy: (561) 394-5335
(ii) If to SD & G, addressed to:
SD & G Aggregates, Inc.
Attn: Peter Sica
1000 Blair Rd.
Carteret, NJ 07008
Addresses may be changed by notice in writing signed by the addressee.
11. Miscellaneous.
This Agreement embodies the entire understanding between the parties hereto
respecting the subject matter hereof and no change, alteration or modification
hereof may be made except in writing signed by both parties hereto. The
headings in this Agreement are for convenience of reference only and shall not
be considered as part of this Agreement or to limit or otherwise effect the
meaning hereof. If any provisions of this Agreement shall be held invalid,
illegal or unenforceable in whole or in part, neither the validity of the
remaining part of such provisions nor the validity of any other provisions of
this Agreement shall in any way be affected thereby. This agreement shall in
all respects be governed by and construed in accordance with the laws of the
State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
Witnesses: "COMPANY"
_________________________ By: ____________________________
Mark Alsentzer, President
"SD & G"
__________________________ _____________________________
Peter Sica, President
"Shareholders of SD & G"
____________________________ _____________________________
Peter Sica
____________________________ _____________________________
GROUND LEASE
THIS GROUND LEASE (the "Lease") is made as of the day of
July 1997, by and between 40 Sayerville Realty Company, Inc., whose
address is , as lessor
("Landlord"), and Carteret Biocycle Corporation whose address is P.O.
Box 1049, New Castle, Delaware 19720-1049, as lessee ("Tenant").
SECTION 1
THE PREMISES
1.01 Landlord, in consideration of the rents to be paid and
the covenants and agreements to be performed by Tenant, hereby leases to
Tenant a parcel of land (the "Land") located in the City of Carteret,
Middlesex County, New Jersey as described in Exhibit A attached hereto,
and the non-exclusive right to use the utility easements, parking
facilities, driveways, side walks and other common and public areas on
the property adjoining the Land identified on Exhibit B attached hereto
(the "Common Areas"). The Land and the Common Areas are collectively
referred to in this Lease as the "Premises".
SECTION 2
CONSTRUCTION OF IMPROVEMENTS
2.01 Tenant shall have the right to construct the
improvements (the "Improvements") on the Premises as Tenant deems
appropriate for the operation of a recycling facility, including but not
limited to a bioremediation facility to treat contaminated soils, and
all repairs, renovations, alterations, replacements and additions to the
Improvements. The plans and specifications for any material
construction shall be approved by Landlord, whose approval shall not be
unreasonably withheld, prior to commencement of any work.
2.02 Tenant shall have the right to keep and store on the Premises all
building materials, tools, equipment and supplies in connection with the
initial construction of the Improvements and all repairs, renovations,
alterations, replacements and additions to the Improvements. Tenant
shall proceed with such construction so as to avoid, to the extent
reasonably practicable, any unreasonable inconvenience to Landlord.
However, Tenant shall not be liable for any inconvenience, annoyance,
disturbance, loss or interruption of business or service, or other
damage to Landlord by reason of such construction, and the rights of
Tenant hereunder shall not be affected thereby.
2.03 Tenant will keep the Premises free of liens of any sort, excepting
any mortgage or liens Tenant places on the Improvements set forth in
Section 2.01, and will hold Landlord harmless from any liens which may
be placed on the Premises caused by the acts of Tenant. In the event a
construction or other lien shall be filed against all or any part of the
Premises, or Tenant's interest therein, as a result of any work
undertaken by Tenant, or as a result of any maintenance, repairs or
alterations made by Tenant, or any other act of Tenant, Tenant shall,
within ten (10) days after receiving notice of such lien, discharge such
lien either by payment of the indebtedness due the lien claimant or by
filing a bond (as provided by statute) as security for the discharge of
such lien. In the event Tenant shall fail to discharge such lien,
Landlord shall have the right to procure such discharge by filing such
bond, and Tenant shall pay the cost of such bond to Landlord as
additional rent on demand. The obligations of Tenant under this Section
2.03 shall survive the termination of the Lease as to any liens filed
concerning work performed during the term of this Lease.
2.04 The Improvements and all repairs, renovations, alterations,
replacements and additions to the Improvements shall be and remain the
sole and exclusive property of Tenant, subject only Landlord's rights
and Tenant's obligation to surrender the Premises and the Improvements
to Landlord pursuant to Section 18 hereof.
SECTION 3
THE TERM
The term of this Lease shall consist of three periods: the Construction
Term the Initial Term and the Option Term (collectively the "Term").
(a) The Construction Term shall commence as of
(the "Construction Commencement Date")
and shall end thirty (30) days after the Improvements are ready for
occupancy and the bioremediation facility is declared operational and
opened for business of Tenant.
The Initial Term shall commence on the first day after the end of the
Construction Term (the "Commencement Date"), and will terminate thirty
(30) years after Commencement Date. If the Commencement Date is other
than the first day of a calendar month, the Term will be extended to
terminate on the last day of the calendar month in which it would
otherwise terminate under the preceding sentence.
The Option Term, if so elected by Tenant in accordance with Section
3.02, shall commence on the day after the end of the Initial Term and
shall end ten (10) years after the commencement of the Option Term.
(d) The Second Option Term, if so elected by Tenant in accordance with
Section 3.02, shall commence on the day after the end of the Option Term
and shall end ten (10) years after the commencement of the Second Option
Term.
Provided there is no uncured default existing hereunder, Tenant shall
have the option to renew this Lease for the Option Term in 3.01 (c) and
subsequently in 3.01 (d) upon the same terms and conditions set forth
herein. If Tenant desires to renew this Lease for either Option Term,
Tenant shall exercise either option by written notice to Landlord at
least sixty (60) days prior to the date of the applicable Lease Term.
SECTION 4
THE BASE RENT
Commencing with the execution of this Agreement, Tenant agrees to pay to
Landlord, Base Rent of Two Thousand Five Hundred Dollars ($2,500) per
month, payable in arrears, without demand, on the tenth day of each and
every month until the Construction Term comes to an end, plus the first
three (3) months of the Initial Term. Tenant will pay the first month's
rent in advance at the time of the execution of this Agreement.
4.02 Commencing with three months after the beginning of the Initial
Term, Tenant agrees to pay Landlord as follows: Tenant shall pay to
Landlord during the Initial Term rental of Two Hundred and Ten Thousand
Dollars ($210,000) per year, payable in installments of Seventeen
Thousand Five Hundred Dollars ($17,500) per month. Each installment
payment shall be due in arrears on the tenth day of each calendar month
for the immediately preceding month during the Lease Term to Landlord at
[Landlord's Designated Payment Address] or at such other place
designated by written notice from Landlord or Tenant. The rental
payment amount for any partial calendar months included in the Lease
Term shall be prorated on a daily basis.
4.03 The rental for any renewal Lease Term, if created
as permitted under this Lease, shall be the same as set forth in 4.02
per year payable in the same monthly installments as set forth therein.
4.04 Notwithstanding anything to the contrary herein, the
Landlord may request Tenant to pay its pro rata portion of any Real
Estate Tax increases upon the subject Premises during the Term of this
Lease.
SECTION 5
USE OF PREMISES
5.01 The Premises will be used and occupied by Tenant and
its sub-tenants only for lawful purposes permitted under the applicable
zoning ordinance, including but not limited to the operation of a
recycling facility and biotreatment plant for contaminated soils.
Tenant shall be allowed to expand its recycling operations to include
any form of recycling allowable under SD & G's permits and licenses, and
if not allowable under their permits and licenses, then Tenant, with the
full cooperation and support of SD & G shall apply to the appropriate
government agency for a modification or amendment to the permit or
license to perform the non-permitted recycling operations. Tenant shall
bear the sole cost and expense for such permit or license modification.
SECTION 6
RIGHT OF RENTAL TO ADJACENT PARCEL
6.01 The parties acknowledge that the Tenant is
simultaneously entering into a License and Operating Agreement with SD &
G Aggregates, Inc., a New Jersey corporation ("SD & G") and its
affiliates, subsidiaries and shareholders. SD & G is currently
evaluating the potential of obtaining a permit or license to conduct the
remediation of dredge spoils from dredging operations to be located on a
17 acre parcel adjacent to the premises which are the subject hereof.
In the event the Tenant exercises its right of first refusal pursuant to
Section 6 of the License and Operating Agreement being entered into
simultaneously herewith between Tenant and SD & G, the Landlord
covenants and agrees to lease the adjoining 17 acre parcel to the leased
Premises herein to Tenant upon the same terms and conditions set forth
in this Lease with the exception that the parties agree to negotiate in
good faith a new base rent inclusive of the adjoining 17 acre parcel.
The Landlord further agrees that in the event during the term of this
Lease, it receives a bona fide offer from a third party to lease the
adjoining 17 acre parcel, then Tenant will be granted a right of first
refusal and shall be provided with 45 days to notify Landlord of its
intent to exercise its right of first refusal to lease the adjacent 17
acre parcel and match the third party bona fide offer. This 45 day
period shall be measured beginning with the first day the Tenant
receives notice from the Landlord of such third party bona fide offer.
If the Tenant notifies Landlord of its intent to match the bona fide
offer, the parties hereto shall within 30 days of the date of such
notice negotiate and execute a Ground Lease for the adjoining 17 acre
parcel upon the same terms and conditions within this Ground Lease with
the exception that the parties will negotiate in good faith a new base
rent inclusive of the adjoining 17 acre parcel. In the event the Tenant
notifies Landlord of its refusal to exercise its right of first refusal
hereunder, then the Landlord shall be free to execute a Lease contract
with said party.
SECTION 7
INSURANCE
7.01 Commencing on the Construction Commencement Date,
Tenant shall obtain and maintain, or cause to be obtained and
maintained, policies of broad form general liability insurance providing
coverage for the operation of the Premises with policy limits of not
less than $1,000,000 per person and $1,000,000 per occurrence exclusive
of defense costs.
7.02 Commencing on the Commencement Date of the Initial
Term, Tenant shall obtain and maintain, or cause to be obtained and
maintained, insurance covering the Personalty to its full replacement
value without deduction for depreciation. All insurance policies
required pursuant to this Section 7.02 shall be written on a so-called
"all risk" form and shall be carried in sufficient amount so as to avoid
the imposition of any co-insurance penalty in the event of a loss, and
shall not provide for a deductible in excess of $5,000.00.
7.03 Commencing on the Commencement Date of the Initial
Term, Tenant shall obtain and maintain or cause to be obtained and
maintained, insurance covering the Improvements to their full
replacement value without deduction for depreciation. All insurance
policies required pursuant to this Section 7.03 shall be carried in
sufficient amount so as to avoid the imposition of and co-insurance
penalty in the event of a loss.
7.04 Commencing on the date Tenant begins construction of
the Improvements and through the date the Improvements are ready for
occupancy, Tenant shall obtain and maintain builder's risk insurance in
an amount sufficient to cover all construction in place and material on
site.
SECTION 8
DAMAGE BY FIRE OR OTHER CASUALTY
8.01 It is understood and agreed that if during the term
the Improvements shall be damaged or destroyed in whole or in part by
fire or other casualty covered by insurance carried pursuant to
paragraph 7.03 hereof, unless Tenant elects to terminate this Lease as
provided in paragraph 8.02 below, Tenant shall cause the Improvements to
be repaired and restored to good tenantable condition with reasonable
dispatch at its expense; provided, however, Tenant's obligation
hereunder shall be limited to repairing or restoring the Improvements to
substantially the same condition that existed prior to such damage or
destruction, and shall be limited the amount of insurance proceeds
available for such repair or restoration, if any.
8.02 If more than ten percent (10%) of the floor area of
the Improvements shall be damaged or destroyed, Tenant may elect to
either terminate this Lease by giving written notice to Landlord of
Tenant's election to so terminate, such notice to be given within sixty
(60) days after the occurrence of such damage or destruction. If the
Lease is terminated as provided herein, Landlord shall assign to Tenant
the right to the insurance proceeds payable under the insurance policies
as a result of the casualty which caused the termination.
SECTION 9
MAINTENANCE AND REPAIRS
9.01 Commencing on the Commencement Date, Tenant, at its
sole expense, shall keep, maintain and repair, or cause to be kept,
maintained and repaired, the Improvements and every part thereof in good
order, condition and repair, including, without limitation, the roof and
outer walls of the Improvements, all interior walls, doors, door frames,
window glass, window casings, window frames, windows (including all
appliances, appurtenances and attachments thereto), plate glass, and the
electrical, plumbing, heating and air conditioning and other mechanical
systems and equipment located on the Premises. Further, Tenant shall,
at its sole expense, keep in good order, maintain and repair, or cause
to be kept, maintained and repaired, the Land, which shall include,
without limitation, cleaning, weed cutting and removal, ice, snow, water
and rubbish clearance, policing of grounds and upkeep, repair and
replacement of walkways, landscaping, parking facilities, driveways,
drainage facilities and lighting facilities. commencing on the
Construction Commencement Date through the Term hereof, Landlord shall,
at its sole expense, keep in good order, maintain and repair the Common
Areas, which shall include, without limitation, cleaning, weed cutting
and removal, ice, snow, water and rubbish clearance, policing of grounds
and upkeep, repair and replacement of walkways, landscaping, parking
facilities, driveways, drainage facilities and lighting facilities.
SECTION 10
INTENTIONALLY OMITTED
SECTION 11
RECORDING
11.01 Neither Landlord nor Tenant shall record this Lease
without the prior written consent of the other. However, upon the
request of either party hereto, the other party shall join in the
execution of a Memorandum of this Lease for the purposes of recordation.
The Memorandum of Lease shall describe the parties, the Premises, the
Term of this Lease, any special provisions including the option of
Tenant to require Landlord to purchase the Improvements, and any other
terms or conditions hereof which Tenant may require, and shall
incorporate this Lease by reference.
SECTION 12
EMINENT DOMAIN
12.01 If ten percent (10%) or more of the Improvements are
condemned or taken in any manner (including without limitation any
conveyance in lieu thereof) for any public or quasi-public use, Tenant
may terminate this Lease if it determines, in the exercise of its
discretion, that the restoration or continued operation of the
Improvements would not be economic. If a portion of the Land (but not
the Improvements) is condemned or taken resulting in that the use of the
Improvements is significantly and adversely affected thereby, then
Tenant may terminate this Lease. Tenant shall notify Landlord of
Tenant's election to terminate the Lease as provided herein within sixty
(60) days after being notified of such condemnation or taking.
12.02 If this Lease is not terminated following such a
condemnation or taking, Tenant, as soon as reasonably practicable after
such condemnation or taking and the determination and payment to Tenant
of the award on account thereof, shall restore the Improvements to an
architectural unit as nearly like its condition prior to such taking as
shall be practicable.
12.03 The whole of any award or compensation for any
portion of the Improvements taken, condemned or conveyed in lieu of
taking or condemnation, shall be solely the property of and payable to
Tenant, and the whole of any award or compensation for any portion of
the Land taken, condemned or conveyed in lieu of taking or condemnation,
shall be solely the property of and payable to Landlord.
SECTION 13
ASSIGNMENT OR SUBLETTING
13.01 Provided there is no material default under this
Lease beyond any applicable cure period, Tenant shall have the right to
assign this Lease or to sublet the Premises or any part thereof without
the consent of Landlord, provided that Tenant shall remain liable
hereunder to comply with, perform and observe all terms and conditions
hereof unless specifically released in writing. Any assignee or
sublessee hereunder shall be entitled to all the benefits due or
accruing to Tenant under this Lease, and Landlord agrees to accept the
performance of Tenant's obligations hereunder from any such assignee or
sublessee. Notwithstanding the foregoing, any such assignment by Tenant
shall relieve Tenant of its obligations and liabilities arising under
this Lease from and after the date of the assignment (but not those
obligations and liabilities arising prior to such assignment) if and
only if the assignee or sublessee has a minimum net worth of $500,000
and approval of the assignment and release of the Tenant by any
mortgagee of the Landlord's interest in the Premises, which shall not be
unreasonably withheld by the mortgagee. Any assignment of this Lease
shall not become effective (whether or not Tenant is released from its
obligations or liabilities thereafter arising under this Lease) unless
Landlord receives, at least thirty (30) days prior to the effective date
of the assignment, a written agreement executed by the assignee, in a
form reasonably acceptable to Landlord, pursuant to which the assignee
agrees to assume all of the Tenant's obligations and liabilities under
the Lease arising prior to or after such assignment (the "Assumption").
Regardless of any assignment or subletting by Tenant, Landlord shall not
change, modify or amend this Lease without the prior written consent of
Tenant so long as Tenant remains liable hereunder if any such change,
modification or amendment increases the liabilities or obligations of
Tenant after such change, modification or amendment becomes effective.
13.02 Nothing in this Lease shall restrict Tenant from
encumbering Tenant's leasehold estate in the Premises from time to time
by a mortgage and/or collateral assignment of this Lease (collectively,
a "Leasehold Mortgage") to a reputable commercial bank, insurance
company or other financial institution (a "Lienholder"), provided,
however, that no more than one Lienholder shall be permitted to have a
Leasehold Mortgage on the Premises at any one time, and Tenant shall
give written notice to Landlord and its mortgagee of the name and
address of any Lienholder promptly following delivery of a Leasehold
Mortgage to such Lienholder. In no event shall a right granted herein
to Tenant to create a Leasehold Mortgage be deemed or interpreted as a
subordination by Landlord of Landlord's interest in the fee estate in
the Premises to the lien of such Leasehold Mortgage; it being expressly
agreed that under no circumstances shall Tenant have any right to
mortgage or encumber Landlord's fee estate in the Premises or subject or
subordinate such interest to the lien of any Leasehold Mortgage which
Tenant may place against its leasehold estate. It is further understood
and agreed that any Leasehold Mortgage shall be subject and subordinate
to the lien of any present or future mortgage by Landlord of Landlord's
interest in the fee estate in the Premises, provided that the holder of
any future mortgage agrees to be bound by the terms of a certain
Landlord's Release, Waiver and Nondisturbance Agreement substantially in
the form of Exhibit "______" attached hereto (the "Landlord's
Agreement"). Landlord agrees to execute and deliver to Tenant, and
Tenant agrees to execute and deliver and cause the holder of any
Leasehold Mortgage from Tenant to execute and deliver to Landlord, in
recordable form, the Landlord's Agreement, simultaneously with
Landlord's and Tenant's execution and delivery of this Lease and
thereafter simultaneously with the creation of any Leasehold Mortgage by
Tenant.
SECTION 14
FIXTURES AND EQUIPMENT
14.01 All fixtures and equipment paid for by Landlord, and
all fixtures and equipment (the "Personal Property") which may be paid
for and placed on the Premises by Tenant and its sub-tenants from time
to time but which are so incorporated and affixed to Improvements that
their removal would involve damage or structural change to Improvements,
shall be and remain the sole and exclusive property of Tenant, subject
only Landlord's right and Tenant's obligation to surrender the Premises
and the Improvements to Landlord pursuant to Section 18 hereof.
14.02 Except as set forth in Section 15.01, all of Tenant's
and its sub-tenant's furnishings, equipment and fixtures which are paid
for and placed on the Premises by Tenant and its sub-tenants from time
to time (other than those which are replacements for fixtures originally
paid for by Landlord) shall be and remain the sole and exclusive
property of Tenant or its sub-tenants, as the case may be.
SECTION 15
NOTICE OR DEMANDS
15.01 All bills, notices, statements, communications, or
demands (collectively, "notices or demands") upon Landlord or Tenant
desired or required to be given under any of the provisions hereof must
be in writing. Any such notices or demands from Landlord to Tenant will
be deemed to have been duly and sufficiently given if a copy thereof has
been personally delivered, mailed by United States certified mail,
return receipt requested, postage prepaid, or sent via overnight courier
service to Tenant at the address of the Premises with a copy sent to
Tenant at its principal office set forth in the caption of this Lease or
at such other address as Tenant may have last furnished in writing to
the Landlord for such purpose, and any such notices or demands from
Tenant to Landlord will be deemed to have been duly and sufficiently
given if delivered to Landlord in the same manner as provided above at
landlord's principal office set forth in the caption of this Lease. The
effective date of such notice or demand will be deemed to be the time
when personally delivered, mailed or sent via overnight night courier as
herein provided.
SECTION 16
TERMINATION OF LEASE
16.01 This Lease term may be cancelled by Tenant upon 30
days written notice during the term of the Lease or any renewals thereof
upon the occurrence of any of the following events.
(a) (i) The Tenant G loses the permits necessary to perform the
operations intended under this Agreement for any reason whatsoever,
whether through the fault of the Tenant or not; or (ii) SD & G loses the
permits necessary to allow the Tenant to perform the operations intended
under this Agreement for any reason whatsoever, whether through the
fault of SD & G or not.
(b) The business of the Tenant becomes economically unviable in
the sole discretion of the Tenant.
(c) The Tenant is never granted approval by the State of New
Jersey to utilize the permits of SD & G to operate the facility, if such
approval is necessary.
16.02 Consequences Upon Termination. In the event this
Lease is terminated pursuant to 16.01(a)(i) or (b), title and ownership
to the Improvements shall automatically vest in Landlord without the
execution or delivery of any further instrument and without any payment
therefore by the Landlord subject to any mortgages upon said
Improvements. In the event this Lease is terminated pursuant to 16.01
(a)(ii) or (c), title and ownership of the Improvements shall remain
with Tenant, but Tenant shall not be obligated to make any continuing
lease payments due hereunder and Tenant shall further be permitted to
use the Improvements or lease the Improvements as the Tenant in its sole
discretion deems advisable until the Tenant receives the full return of
its Investment as defined in Section 3 of the License and Operating
Agreement being executed simultaneous herewith. Upon the Tenant
receiving the full return of its Investment, title and ownership to the
Improvements shall automatically vest in the Landlord upon the execution
of all appropriate documents by tenant transferring title to the
Improvements to Landlord.
SECTION 17
BREACH; INSOLVENCY; RE-ENTRY
17.01 An Event of Default under this Lease shall constitute
the following: (i) Tenant's failure to pay rent or any sum payable
hereunder within fifteen (15) days after the delivery of written notice
thereof; (ii) Tenant's failure to perform any of the non-monetary terms,
conditions or covenants of this Lease to be observed or performed by
Tenant for more than thirty (30) days after written notice of such
failure shall have been delivered to Tenant unless, with respect to a
failure which Tenant is able to cure but which cannot be cured within
the thirty (30) day period, within the thirty (30) day period Tenant has
begun to pursue performance and continues to diligently pursue
performance of any such term, condition or covenant so as to cure such
default within a reasonable time after such notice; or (iii) if Tenant
shall abandon the Premises (provided, however, the mere vacancy of the
Improvements, in and of itself, shall not constitute an abandonment of
the Premises).
17.02 Upon the occurrence of an Event of Default, Landlord
may obtain possession of the Premises in accordance with its right under
applicable law and, without terminating this Lease, may make such
alterations and repairs as may be necessary in order to relet the
Premises, and relet the Premises or any part thereof for any such term
or terms (which may be for a term extended beyond the term of this
Lease) and at such rental or rentals, and upon such other terms and
conditions as Landlord, in its sole and reasonable discretion, may deem
advisable. No such re-entry or taking possession of the Premises or any
part thereof by Landlord shall be construed as an election on its part
to terminate this Lease unless a written notice of such intention is
given to Tenant or unless the termination thereof is decreed by a court
of competent jurisdiction. An Event of Default by Tenant will not give
Landlord title and ownership right in the building of Tenant.
SECTION 18
SURRENDER OF PREMISES ON TERMINATION
18.01 At the expiration of the Second Option Term, title to
and ownership of the Improvements shall automatically vest in Landlord
without the execution or delivery of any further instrument and without
any payment therefore by Landlord.
18.02 Upon termination of this Agreement for any reason, it
shall be the Tenant's responsibility to remove all soils and recyclable
material from the subject Premises. As security for the Tenant's
performance of this covenant, Tenant shall at all times during the Term
of this Lease maintain a performance or closure bond in sufficient
amount to cover the estimated reasonable costs of removal and clean-up
of said materials from the subject Premises.
SECTION 19
SUBORDINATION; ESTOPPEL CERTIFICATES
19.01 Tenant agrees that this Lease will be subject and subordinate to
any present or future mortgage encumbering the Premises and all renewals
and extensions thereof, subject to the terms of this Section 19.01. The
Landlord agrees to deliver to Tenant simultaneously with the execution
of this Lease and thereafter simultaneously with the creation of any
mortgage by Landlord, as a condition of this Lease, a Subordination,
Nondisturbance and Attornment Agreement substantially in the form of
Exhibit "_____" attached hereto, signed by Landlord and its mortgagee,
which will subordinate Tenant's interest hereunder to the interest of
any mortgagee holding a mortgage lien upon the Premises subject to the
nondisturbance provisions contained therein. Tenant agrees to execute
and deliver the same agreement to Landlord.
19.02 Landlord, within twenty (20) days after request (at any time or
times) by Tenant, will execute and deliver to Tenant, an estoppel
certificate, in form acceptable to Tenant, certifying; (i) to the
Commencement Date and expiration dates of the Term; (ii) that this Lease
is unmodified and in full force and effect, or is in full force and
effect as modified, stating the modifications; (iii) that Landlord does
not claim any right of setoff, or listing such right of setoff; (iv) to
the amount of rent and other sums due hereunder as of the date of the
certificate, the date to which the rent and other sums have bee paid in
advance, and the amount of any prepaid rent; and (v) such other matters
as may be reasonably requested by Tenant, including, but not limited to,
the matters set forth in Section 13. Any such certificate may be relied
on by any prospective purchaser, mortgagee, assignee of sub-tenant of
the Premises or any part thereof.
SECTION 20
QUIET ENJOYMENT
20.01 Landlord agrees that at all times when Tenant is not in default
under the provisions and during the term of this Lease, Tenant's quiet
and peaceable enjoyment of the Premises will not be disturbed or
interfered with by Landlord or any person claiming by, through, or under
the Landlord.
SECTION 21
WAIVER OF SUBROGATION
21.01 Landlord and Tenant hereby release each other and
their respective agents and employees from any and all liability to each
other or anyone claiming through or under them by way of subrogation or
otherwise for any loss or damage to property caused by or resulting from
risks insured against under fire or other extended coverage casualty
insurance carried by the parties hereto and in force at the time of any
such loss or damage; provided, however, that this release shall be
applicable only with respect to loss or damage occurring during such
time as the releasor's policies of insurance contain a clause or
endorsement to the effect that any such release shall not adversely
affect or impair such policies or prejudice the right of the releasor to
recover thereunder. Landlord and Tenant each agrees that it will
request its insurance carriers to include in its policy such a clause or
endorsement, and will include such clause if available at reasonable
cost.
<PAGE>
SECTION 22
ENTIRE AGREEMENT
22.01 This Lease and the Exhibits attached hereto, the
License and Operating Agreement with SD & G, and the Consulting
Agreement with Windsor, and all of the covenants, agreements,
stipulations, promises, conditions and undertakings between Landlord and
Tenant concerning the Premises, and there are no covenants, agreements,
stipulations, promises, conditions or understanding, either oral or
written, between them other than set forth herein or therein.
SECTION 23
ARBITRATION
23.01 Binding Arbitration: Landlord and Tenant agree to the
binding arbitration of all disputes arising under this Lease, whether
arising during or after its termination. Such arbitration will be
conducted under the terms of Exhibit C, attached, which is incorporated
into and made a part of this Lease.
SECTION 24
HEADINGS
24.01 The headings used in this Lease are for convenience
of the parties only and shall not be considered in interpreting the
meaning of any provision of this Lease.
SECTION 25
SUCCESSORS
25.01 The provisions of this Lease shall extend to and be
binding upon Landlord and Tenant and their respective legal
representatives, successors and assigns.
SECTION 26
PERFORMANCE
26.01 If there is a default with respect to any of
Landlord's conenants, warranties or representations under this Lease,
and if the default continues more than fifteen (15) days after notice in
writing from Tenant to Landlord specifying the default, Tenant may, at
its option and without affecting any other remedy hereunder, cure such
default and deduct the cost thereof from the next accruing installment
or installments of rent payable hereunder until Tenant shall have been
fully reimbursed for such expenditures, together with interst thereon at
a rate equal to the lessor of twelve percent (12%) per annum or the then
highest lawful rate. If this Lease terminates prior to Tenant's
receiving full reimbursement, Landlord shall pay the unreimbursed
balance plus accrued interest to Tenant on demand.
<PAGE>
IN WITNESS WHEREOF the Landlord and Tenant have executed
this Lease as of the date and year first above written.
WITNESSES: LANDLORD:
40 Sayerville Realty Company, Inc.
By:
TENANT:
Carteret Biocycle Corporation
Mark Alsentzer, President
LEASE AGREEMENT
AND
OPTION TO PURCHASE
THIS AGREEMENT, made and entered into on this the 13th day of May,
1994, by and between JEANELL SALES CORP., a Tennessee Corporation, Party
of the First Part (hereinafter for convenience designated as "Lessor")
and EARTH CARE PRODUCTS OF TENNESSEE, INC., a Florida corporation, whose
principal office is located at 2300 Glades Road, Suite 440 West, Boca
Raton, Florida 33431, Party of the Second Part (hereinafter for
convenience designated as "Lessee").
WITNESSETH
That for and in consideration of the rental hereinafter reserved and the
conditions, covenants and agreements herein contained on the part of the
Lessee, to be observed and performed by the Lessee, the Lessor does
hereby lease and demise, and the Lessee (in consideration of the
execution hereof by Lessor) does hereby take, the following premises
situated in the Town of Sharon, County of Weakly, State of Tennessee, in
the 8th Civil District of said County, and more particularly described
as follows, to-wit:
BEGINNING at an iron pin in the south margin of the Old
Martin Road, said pin being the northwest corner of said tract conveyed
from Frances Clark to the City of Sharon, said pin also being the
northeast corner of a tract belonging to Thomas and being 25 feet south
of the center of said road; thence, south 87 degrees 49 minutes 38
seconds east with the south margin of said road for a distance of 449.70
feet to a iron pin, said pin being 100 feet west of the center of a
T.V.A. electric transmission line; thence south 00 degrees 08 minutes 56
seconds west, making a new line through the Sharon Industrial property,
and parallel to said electric line, for a distance of 935.61 feet to an
iron pin; thence north 89 degrees 25 minutes 47 seconds west, and
passing an iron pin at the northeast corner of a tract belonging to
Brumley at 36.97 feet, and continuing with a fence on Brumley's north
line, for a total distance of 481.06 feet to an iron pin at Brumley's
northwest corner, said pin also being in the east line of Thomas; thence
north 02 degrees 03 minutes 35 seconds east with a fence on Thomas; east
line, for a distance of 948.48 feet to the point of beginning, and
containing 10.062 acres, according to a survey by Robert L. Nichols, TN
RLS No. 1009, on April 26, 1989, with all bearings based upon Magnetic
North.
BEING the same property conveyed to Jeanell Sales Corp. by
deed of the Town of Sharon, dated May 5, 1989, which deed is of record
in the Register's Office of Weakley County, Tennessee, in Deed Book 297,
page 640.
The term of this lease shall be for three (3) years, commencing May 13,
1994, and terminating on May 12, 1997.
The building located on the property shall be used for purposes of
manufacturing and warehousing.
In consideration whereof, the Lessee agrees to pay unto the Lessor, in
such place in Sharon as the Lessor may designate, as rent for said
premises, the sum of ONE HUNDRED EIGHTY THOUSAND AND NO/100 Dollars
($180,000.00), payable in thirty-six (36) monthly installments of Five
Thousand and No/100 Dollars ($5,000.00) each, the first said installment
to be paid on the same day of each month thereafter until 36
installments have been paid. In addition to said monthly rental, Lessee
agrees to pay the costs of insurance coverage on the building located on
this property (including both replacement cost insurance and premises
liability insurance) and also the real estate taxes (County and City)
levied on this property during the term of this Lease as follows:
Lessor shall, at least sixty (60) days prior to the subject tax payment
and/or insurance premium becoming due and payable, provide to Lessee
copies of all applicable bills, premium statements, invoices, and other
notices for payment pertaining to the subject tax payment and/or
insurance premium. Lessee shall promptly and timely make the
appropriate payment to the taxing authority and/or insurance company
based on the invoices and/or tax bills received from Lessor and shall
simultaneously provide a copy (to Lessor) of the subject check for
payment and transmittal of same to the taxing authority and/or insurance
company.
Should the roof or guttering become defective at any time during said
term, the Lessor will repair the same within a reasonable time after
being requested in writing by the Lessee to do so. The following
provisions shall apply to Lessor's duties:
(a) Lessor will make such repairs in timely fashion, and Lessor
warrants that such repairs will be done on a good and workmanlike
fashion and will remedy any defects of which Lessor has been notified.
(b) Lessor's failure to timely remedy and defects in the roof
will entitle Lessee to seek compensation for consequential damages
suffered by Lessee such as loss of use of the leased premises, lost
revenues, damages to equipment, inventory, furniture and fixtures within
the leased premises which are damaged due to the defective roof and
other similar consequential damages.
(c) In addition to liability for consequential damages, Lessee
will also have the right to terminate the Lease, in the event that
Lessor is unreasonable in the time frames it takes to repair the
defective roof or fails to complete such repair work in a good and
workmanlike fashion.
Should the heating or air-conditioning machinery and equipment require
major repair at any time during the term of this lease, Lessor will make
such repair; but Lessee shall bear the responsibility and expense of
normal and routine up-keep and maintenance of said heating and air-
conditioning machinery and equipment. Except as herein provided, the
Lessor shall not be obligated or required to make any other repairs, and
all other portions of said building shall be kept in good repair by the
Lessee and at the end of the term hereof, the Lessee shall deliver said
premises to the Lessor in good repair and condition, reasonable wear and
tear and damage from fire and other casualty excepted.
Lessee shall have the right to make such alterations to the interior of
the building as it may desire, provided, however, that any repairs or
alterations undertaken by the Lessee shall not impair the structural
safety of the building. Lessor, however, reserves the right to enter
upon said premises and to make such repairs and to do such work as
Lessor may deem reasonably necessary or proper or that the Lessor may
deem reasonably necessary or proper or that the Lessor may be lawfully
required to make, with the least disturbance to Lessee, at Lessor's
expense. Lessor reserves the right to inspect the premises at all
reasonable times.
Lessee will pay all bills for water, light and heat used on said
premises or any other utility bills not herein enumerated, including
sewer service charges if any be levied. Lessee further covenants to
keep and maintain the interior of the premises, including lighting
fixtures, all electric wiring, water pipes, water closets and other
plumbing on said premises in such good repair and order as may be
required by the rules, regulations and ordinances of the governmental
authority having jurisdiction thereof, ordinary wear and tear, defect in
the original installation, and damage by fire or other casualty
excepted.
Except as to the extent provided in Section 5 hereof, Lessor shall not
be liable for any damages caused by, or growing out of, leaks in roof or
any defect in said building, or in said premises, or caused by, or
growing out of, fire, wind, rain, and other cause.
Lessor shall not be liable for any damages caused by, or growing out of,
any breakage, leakage, getting out of order, or defective condition of
said electric wiring, pipes, closets or plumbing, or any of them.
Lessor shall have the right, upon the happening of any one or more of
the events described below, to enter and retake the leased premises
pursuant to applicable Tennessee landlord-tenant law, which shall
include (i) bringing a suit for eviction, (ii) obtaining a final
judgment of eviction, (iii) obtaining a writ of possession from the
court rendering the final judgment of eviction. The events which shall
give rise to the right of Lessor to thus proceed (after giving Lessee
ten (10) days' written notice) are as follows:
In the event the Lessee should fail to pay any one or more of said
monthly installments of rent, as and when the same becomes due, and such
default should continue for thirty (30) days after written demand for
the payment thereof is made by the Lessor upon the Lessee.
<PAGE>
In the event a petition in bankruptcy is filed by or against the Lessee
and such petition is not dismissed within on hundred eighty (180) days
from the filing thereof, or the Lessee is adjudged bankrupt.
In the event an assignment for the benefit of creditors is made by the
Lessee.
In the event of an appointment by any Court of a receiver or other Court
officer of Lessee's property and such receivership is not dismissed
within thirty (30) days from such appointment.
In the event Lessee removes, attempts to remove, or permits to be
removed from said premises, except in the usual course of trade, the
goods, furniture, effects or other property of the Lessee brought
thereon.
In the event the Lessee, before the expiration of said term, and without
the written consent of the Lessor, vacates said premises or abandons the
possession thereof, or uses the same for purposes other than the
purposes for which the same are hereby let, or cease to use said
premises for the purpose herein expressed.
In the event an execution or other legal process is levied upon the
goods, furniture, effects or other property of the Lessee brought on
said premises, or upon the interest of Lessee in this lease, and the
same is not satisfied or dismissed within ten (10) days from such levy.
In the event the Lessee violates any other terms, conditions or
covenants on the part of the Lessee herein contained, and fails to
commence and to proceed with diligence and dispatch to remedy the same
within ten (10) days after written notice thereof is given by Lessor to
Lessee.
<PAGE>
A first lien is expressly reserved by the Lessor and granted by the
Lessee upon the terms of this lease and upon all interest of the Lessee
in this leasehold for the payment of rent and also for the satisfaction
of any cause of action which may accrue to the Lessor by the provisions
of this instrument. A lien is also expressly reserved by the Lessor and
granted by the Lessee upon its interest in all buildings, improvements,
water fixtures and gas fixtures and all other fixtures to be erected and
put in place or that may be erected or put in place upon the premises by
or through the Lessee or other occupants for other rent and also for the
satisfaction of any causes of action which may accrue to Lessor by the
provisions of this instrument. Lessor waives any statutory lessor or
landlord liens it may have which give Lessor any rights other than
described in this paragraph.
In the event the Lessee abandons the leased premises before the
expiration of the term hereof, whether voluntarily or involuntarily, or
violates any of the terms, conditions, or covenants hereof, the Lessor
shall have the right, to enter and retake the leased premises pursuant
to applicable Tennessee landlord-tenant law, which shall include (i)
bringing a suit for eviction, (ii) obtaining a final judgment of
eviction, (iii) obtaining a writ of possession from the court rendering
the final judgment of eviction. After such retaking of the premises,
Lessor shall have the right to lease all or any portion of said premises
for such terms and for such use deemed satisfactory to the Lessor,
applying each month the net proceeds obtained from said leasing to the
credit of the Lessee herein, and said leasing shall not release the
Lessee from liability hereunder for the rents reserved for the residue
of the term hereof. Any rentals collected by the Lessor under the terms
of this section in excess of the rents reserved hereunder shall be paid
to the Lessee.
No re-entry hereunder shall bar the recovery of rent or damages for the
breach of any of the terms, conditions or covenants on the part of the
Lessee herein contained. The receipt of rent after breach or condition
broken, or delay on the part of the Lessor to enforce any right
hereunder, shall not be deemed a waiver or forfeiture of the right of
the Lessor to annul the lease or to re-enter said premises or to re-let
the same. The failure of any party to insist in any instance on strict
performance of any covenant herein, or to exercise any option herein
contained (except the option provided in Section 21 herein) shall not be
construed as a waiver of such covenant or option in an other instance.
All improvements and additions to the leased premises shall adhere to
the leased premises and become the property of the Lessor, with the
exception of such additions as are usually classed as furniture or
fixtures; said furniture and fixtures are to remain the property of the
Lessee and may be removed by the Lessee at the expiration of this lease.
Lessee shall repair any damages to the leased premises by such removal.
Lessee shall not have the right to transfer or assign this lease or to
sublease the whole or any part of the demised premises without the
written consent of the Lessor, which shall not be unreasonably withheld
or delayed. Any such assignment or subleasing if consented to shall not
release the Lessee from liability for the performance of Lessee's
obligations hereunder.
In the event the building located on the demised premises shall be
damaged or destroyed during the term hereof by fire or other casualty,
to the extent that the cost of repairing the same will exceed fifty
percent (50%) of the then replacement cost of said building, in which
event said building shall be deemed and considered to be wholly
untenantable and unfit for use, the Lessor may at its option, within
thirty (30) days after the occurrence of said casualty, either terminate
said lease by giving notice in writing to the Lessee of such election to
terminate, or proceed with due diligence and dispatch to restore said
building to the condition in which it existed immediately prior to such
casualty, upon which later event this lease shall continue in full force
and effect, except that the rent payable hereunder shall abate and cease
during the period required to restore said building, but shall again
become payable as provided herein upon substantial completion of said
restoration. If this right to terminate shall be exercised, the rent
shall cease as of and be apportioned to be the date of such casualty.
If Lessor elects to proceed with restoration of the building as provided
for above, then in the event that Lessor does not timely complete the
replacement or repair of the improvements at the lease premises Lessee
shall have the option to terminate the Lease by delivering written
notice to Lessor.
Lessee covenants, throughout the term of this lease, or any extension
thereof, to protect and same harmless the Lessor, his servants, agents
and employees, from any and all liability for claims for damages to the
property, or injury to the person, or death, sustained by any third
party, in, on or about the leased premises, except that Lessee shall not
be responsible for negligence claims arising out of the negligence of
Lessor and/or Lessor's agents.
Lessor hereby covenants to and with the Lessee that the Lessor has a
good title to the leased premises, and that at the commencement of the
term of this lease, Lessor will put, and will thereafter keep the Lessee
in quiet and peaceful possession thereof during the term of this lease,
subject to the Lessee's complying with the provisions of this lease on
its part to be performed.
In the event a dispute arises in connection with this Lease Agreement
and such dispute results in litigation, the prevailing party in such
litigation shall be entitled to reimbursement from the non-prevailing
party for any attorney's fees.
_PRIVATE __OPTION TO PURCHASE_tc \l 1 "OPTION TO PURCHASE"_
Lessee is hereby given and granted an EXCLUSIVE OPTION TO PURCHASE THE
ABOVE DESCRIBED REAL PROPERTY. The terms of this option shall be as
follows:
<PAGE>
The entire purchase price if this option is exercised during the first
month of this Lease shall be THREE HUNDRED FORTY-FIVE THOUSAND AND
NO/100 DOLLARS ($345,000.00). If this option is exercised during any
subsequent month, the price shall be the amount shown for that month on
the attached schedule. This option may be exercised at any time during
the term of the lease.
To exercise this option, Lessee must give Lessor written notice of such
exercise.
All monthly rental payments must be current at the time the purchase
option is exercised and at the time the transaction is closed.
Lessor will pay for the preparation of the Warranty Deed, Lessee will
pay all other expense for document preparation, recording fees and other
closing costs.
Lessor will obtain, pay for and deliver to Lessee a title insurance
commitment for an owner's title insurance policy, naming Lessee as the
insured. This title commitment is to be issued by a title insurance
underwriter reasonable acceptable to Lessee on and ALTA form of owner's
commitment, insuring that the property to be purchased is free and clear
of all liens, mortgages and encumbrances and title is otherwise good and
marketable. Lessor shall title is otherwise good and marketable.
Lessor shall thereafter be obligated to obtain and pay for the final
title insurance policy upon the closing of the sale of the subject
property, pursuant to the purchase option.
In the event of any breach by Lessor of a representation, warranty,
covenant or any other term or condition of either the Asset Purchase
Agreement (which is being entered into at or near the time of the
execution of this Lease) or this Lease, Lessee shall be entitled to
offset against the option to purchase price an equivalent amount of
damages, both direct, consequential or otherwise, plus attorney's fees
and costs, which were incurred by Lessee due to the subject breach.
<PAGE>
Lessor represents and warrants to Lessee that, to the best of Lessor's
knowledge, neither Lessor nor any prior owner of the leased premises,
nor any owner or prior owner of any real property adjacent to the lease
premises (the "Adjacent Land"), has manufactured or disposed of any
Hazardous Substance (as hereinafter defined) on the leased premises or
on such Adjacent Land, or stored or used any such Hazard Substance on
the leased premises or on such Adjacent Land in such quantities,
concentrations, forms or levels, or otherwise in a manner which is in
violation of any applicable environmental laws. "Hazardous Substance"
means any toxic or hazardous waste, pollutants or substances, including,
without limitation, asbestos, PCBs, petroleum products and by-products,
substances defined or listed as "hazardous substances", "toxic
substance", "toxic pollutant", or similarly identified substance or
mixture, in or pursuant to any environmental law, including, but not
limited to, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended. To the best of Lessor's knowledge,
the leased premises is in compliance with all environmental laws, and
there have been no notices from any federal, state or local governmental
authority having jurisdiction over the leased premises, to the effect
that the leased premises is not in compliance with any of such
environmental laws, or is the subject of any federal, state or local
investigation evaluating whether any remedial action is needed to
respond to a release of any Hazardous Substance into the environment
from the leased premises, and there are no pending actions with respect
to the leased premises under any environmental laws. Lessor shall
indemnify and hold harmless Lessee from and against any and all loss,
cost, damage, expense, claim, charge or liability, including all
attorney's fees and costs, whether at the trial or any appellant level,
that may arise out of, or in any way be connected to, a breach of any
representation or warranty by Lessor with respect to the provisions of
this paragraph.
Lessor shall cause no further encumbrances to attach to the subject
property including any additional mortgages, nor seek any additional
advances under the first mortgage. Lessor agrees to use its best
efforts and good faith and due diligence to require the holder of the
first mortgage to provide Lessee with concurrent notice of any and all
notices given by the holder of the first mortgage, whether in the event
of a default or otherwise, under the first mortgage. In the event of a
default under the first mortgage, Lessee shall have the right, but not
the obligation, to make any and all mortgage payments directly to the
holder of the first mortgage, and, in turn, offset against any rent
payments all amounts expended by the Lessee in curing the default under
the first mortgage and keeping the same in good standing.
At the end of the term of this Lease Agreement, or any renewal or
extensions hereof, or should the Lease Agreement be terminated for any
other reason herein provided, Lessee agrees to surrender said premises
to Lessor in as good condition as received, ordinary wear and tear and
casualty not Lessee's fault excepted.
All notices herein authorized or required to be given to the Lessor
shall be sent by Registered or Certified Mail, addressed to the Lessor
at 500 Fairview (P.O. Box 182) in Greenfield, Tennessee 38230, or to
such other place as the Lessor may from time to time designate in
writing to the Lessee. All notices herein authorized or required to be
given to the Lessee shall be sent by Registered or Certified Mail,
addressed to the Lessee at 2300 Glades Road, Suite 440 Wet in Boca
Raton, Florida 33431, or to such other place as the Lessee may from time
to time designate in writing to the Lessor.
This agreement and all covenants, obligations and conditions hereof
shall inure to the benefit of and be binding upon the successors and
assigns of Lessors and shall inure to the benefit of and be binding upon
the successors and assigns (to the extent permitted) of the Lessee.
Should any provision of this Lease Agreement be held invalid for any
reason, the remaining provisions hereof shall be given effect to the
extent possible absent the invalid provision. To this end, the
provisions of this Agreement are declared to be severable.
IN WITNESS WHEREOF, the Parties above named have hereunto set
their hands and seals on the day and date first above written.
JEANELL SALES CORP.
By: /s/ Thomas P. Brock, President
THOMAS P. BROCK, President
EARTH CARE PRODUCTS OF TENNESSEE, INC.
By: /s/ David A. Farrow, President
DAVID A. FARROW, President
AMENDMENT TO
LEASE AGREEMENT
AND
OPTION TO PURCHASE
WHEREAS, on May 13, 1994, JEANELL SALES CORP., [NOW KNOWN AS BROCK
MANAGEMENT CORP.], a Tennessee Corporation (designated as "Lessor"), and EARTH
CARE PRODUCTS OF TENNESSEE, INC., a Florida Corporation (designated as
"Lessee"), entered into a certain "Lease Agreement And Option To Purchase",
which document has governed the relation of the said Parties since that time,
and
WHEREAS, there is a building located on the industrial site which is the
subject of the aforesaid document, which building is being used by Lessee for
manufacturing and warehousing purposes, and
WHEREAS Lessee has indicated a need and desire that additional space be added
onto or near the said building so that Lessee will be able to expand its
operations at this site and increase its manufacturing process, and
WHEREAS, Lessor has indicated a willingness to construct additional space
provided Lessee increases the amount of rental payments and provided that
certain other provisions of the May 13, 1994, Agreement be changed, and
WHEREAS now the said Parties now desire to change and amend the aforesaid
Agreement of May 13, 1994, so as to provide for construction of additional
space, increased rental payments, extending the term of the Lease, changing
the amount of the purchase price (if the option to purchase is exercised),
permitting an additional encumbrance on the property by Lessor to obtain
financing for the new construction, and provide for reimbursement by Lessee
for increased taxes and insurance costs resulting from the additional
construction, now therefore,
WITNESSETH
That for an in consideration of the mutual promises and covenants made by each
of the Parties, and the mutual advantages and benefits to be enjoyed by each
of the Parties from the execution of this Amendment, the Parties do here and
now agree and contract as follows:
1. Lessor will cause an addition to be constructed at the north end of the
existing building, this addition to be 120 feet by 85 feet, as more
particularly described in the attached "Proposal" prepared by Greenfield
Lumber Company, Inc. This construction will be at the expense of Lessor.
2. The term of the Lease Agreement (and the Option to Purchase) is hereby
extended until October 1, 1999.
3. The rental payments to be paid by Lessee shall be increased from Five
Thousand Dollars ($5,000) per month to Seven Thousand Dollars ($7,000) per
month, starting November 1, 1995, and continuing until the end of the Lease.
In addition to the said monthly rental payments, Lessee shall also transfer
certain stock as set out in Paragraph 10 below.
4. The purchase price to be paid by Lessee, if it exercises its Option to
Purchase (under the provisions of Paragraph 20 of the May 13, 1994 Agreement)
is to be the amount shown on the attached "Schedule No. 1", which is attached
hereto, if the Option is exercised on or before May 31, 1997.
5. It is agreed that if the Option To Purchase is exercised after May 31,
1997, then the purchase price is to be calculated by applying the monthly
rental payment (of $7,000) to amortize: (a) $238,064.90 using an interest rate
of "New York Prime" as of May 30, 1997, plus 2% [but not less than 8.25%], and
b) $72,608.39 using an interest rate of 10.75%. Therefore, for example, if New
York Prime is 8.5% on May 30, 1997, the purchase price to be paid (if Lessee
exercises its option after May 31, 1997 and before November 1, 1999) will be
the amount shown on the attached "Illustration Schedule No. 1". On the other
hand, if New York Prime is 9% on May 30, 1997, then the purchase price would
be the amount shown on the attached "Illustration Schedule No. 2".
6. Paragraph 22 of the May 13, 1994, Agreement is hereby amended to permit
Lessor to execute and deliver a Deed of Trust to the Bank of Sharon in order
to provide financing in the amount of $96,090.00 to construct the addition
described on the Greenfield Lumber Company, Inc. proposal which is attached
hereto .
7. Lessee will reimburse Lessor for taxes on the property, including increased
taxes caused by the additional construction.
8. Lessee will reimburse Lessor for insurance coverage on the property,
including builders risk coverage and increased premiums caused by the
additional construction.
9. The reimbursements for taxes and insurance are to be made within the same
time limits as provided in the May 14, 1994 Agreement.
10. As part of the consideration for the promises made by Lessor herein,
Lessee agrees that on or before November 15, 1995, (it will transfer or issue
to Lessor Two Thousand Five Hundred (2,500) shares of the common stock of
Earth Care Global Holdings.
11. All provisions of the May 13, 1994, Agreement not amended hereinabove are
to remain in full force and effect.
IN WITNESS WHEREOF, the Parties have hereunto caused this Amendment to be
executed by their duly authorized representatives on this the _____ day of
October, 1995.
BROCK MANAGEMENT CORP.
By: /s/ Thomas P. Brock
Thomas P. Brock, President
EARTH CARE PRODUCTS OF TENNESSEE, INC.
By: /s/ David A. Farrow
David A. Farrow, President
ATTACHMENT TO AMENDED LEASE
PURCHASE AGREEMENT (BROCK
MANAGEMENT CORP. [formerly JEANELL
SALES CORP] / EARTH CARE PRODUCTS
- -----------SCHEDULE NO. 1----------
Date Month Purchase Price
Begins During This
Month
01-Jun-94 345,000.00
01-Ju1-94 342,371.88
01-Aug-94 339,725.69
01-Sep-94 337,061.30
01-Oct-94 334,378.60
01 -Nov-94 331,677.45
01-Dec-94 328,957.73
01 -Jan-95 326,219.31
01-Feb-95 323,462.07
01-Mar-95 320,685.87
01-Apr-95 317,890.59
01-May-95 315,076.09
01-Jun-95 312,242.24
01-Ju1-95 309,388.91
01-Aug-95 306,515.96
01-Sep-95 303,623.26
01 -Oct-95 300,710.67
01-Nov-95 393,868.06 <--Cost of Bldg.
01-Dec-95 389,776.09 Addition Is
01-Jan-96 385,653.61 Added.
01-Feb-96 381,500.39
01-Mar-96 377,316.21
01-Apr-96 373,100.82
01-May-96 368,854.00
ATTACHMENT TO AMENDED LEASE
PURCHASE AGREEMENT (BROCK
MANAGEMENT CORP. [formerly JEANELL
SALES CORP] / EARTH CARE PRODUCTS
- ---ILLUSTRATION SCHEDULE NO. 2---
Date Month Begins
Purchase Price During This Month
01-Jun-94
345,000.00
01-Jul-94
342,371.88
01-Aug-94
339,725.69
01-Sep-94
337,061.30
01-Oct-94
334,378.60
01-Nov-94
331,677.45
01-Dec-94
328,957.73
01-Jan-95
326,219.31
01-Feb-95
323,462.07
01-Mar-95
320,685.87
01-Apr-95
317,890.59
01-May-95
315,076.09
01-Jun-95
312,242.24
01-Jul-95
309,388.91
01-Aug-95
306,515.96
01-Sep-95
303,623.26
01-Oct-95
300,710.67
**
01-Nov-95
393,868.06
_ Cost of Building
01-Dec-95
389,776.09
Addition Is
01-Jan-96
385,653.61
Added
01-Feb-96
381,500.39
01-Mar-96
377,316.21
01-Apr-96
373,100.82
01-May-96
368,854.00
01-Jun-96
364,575.50
01-Jul-96
360,265.08
01-Aug-96
355,922.50
01-Sep-96
351,547.52
01-Oct-96
347,139.88
01-Nov-96
342,699.34
01-Dec-96
338,225.66
01-Jan-97
333,718.58
01-Feb-97
329,177.85
01-Mar-97
324,603.22
01-Apr-97
319,994.42
01-May-97
315,351.20
**
01-Jun-97
310,673.29
_ Int. Rate
01-Jul-97
306,506.00
Adjusted To
01-Aug-97
302,300.79
11.00%
01-Sep-97
298,057.32
01-Oct-97
293,775.24
01-Nov-97
289,454.20
01-Dec-97
285,093.84
01-Jan-98
280,693.80
01-Feb-98
276,253.72
01-Mar-98
271,773.25
01-Apr-98
267,252.00
01-May-98
262,689.61
01-Jun-98
258,085.70
01-Jul-98
253,439.91
01-Aug-98
248,751.84
01-Sep-98
244,021.12
01-Oct-98
239,247.35
01-Nov-98
234,430.14
01-Dec-98
229,569.09
01-Jan-99
224,663.82
01-Feb-99
219,713.91
01-Mar-99
214,718.96
01-Apr-99
209,678.56
01-May-99
204,592.29
01-Jun-99
199,459.74
01-Jul-99
194,280.49
01-Aug-99
189,054.11
01-Sep-99
183,780.17
01-Oct-99
178,458.24
2
SUBLEASE
THIS LEASE is made and executed and becomes effective as of the 19th day of
May, 1997, between AUTOMATED PROCESS EQUIPMENT CORPORATION, a Michigan
corporation of 3978 Laurel Drive, Lake Odessa, Michigan 48849, as "Landlord,"
and EARTHCARE OF THE MIDWEST, INC., a Florida corporation, of P.O. Box 536,
Lake Odessa, Michigan 48849, as "Tenant".
1. Demise. Landlord leases from WSB Company, L.L.C. the improved real property
described as follows (the "Premises"):
PARCEL #1
Lot 79, Lot 82, and the West 12 feet of 81, and Lot 95 of Johnson's addition
to the Village of Bonanza, now in the Village of Lake Odessa, Michigan,
according to the recorded plat thereof; recorded in Liber 1 of Plats on Page
36. Also described as: Beginning at a point Twelve (12) feet East of the
South-West corner of Lot Eighty-one (81) of Johnson's Addition to Bonanza now
Lake Odessa, thence North parallel with the West line of said Lot, to the
North Lot line, thence East Ten (10) feet, thence South parallel with the West
Lot line to the South Lot line, thence West Ten (10) feet to the place of
beginning, ALSO, Beginning at the North-West corner of Lot Eighty-two (82) of
Johnson's Addition to Bonanza now Lake Odessa, Michigan, thence South Ten (10)
feet, thence East parallel with the North Lot line to a point Twelve feet (12)
feet East of the West Lot line of Lot number Eighty-one (81), thence North Ten
(10) feet to the North Lot line, thence West to the place of beginning. First
parties hereby intend to convey a Ten (10) foot strip of land from the East
side and from the North side of their lands in Lots Eighty-one and Eighty-two
of Johnson's Addition to Bonanza now Lake Odessa, Michigan.
PARCEL #2
Lot 83 of Johnson's Addition to the Village of Bonanza, now the Village of
Lake Odessa, Michigan according to the recorded Plat thereof, recorded in
Liber 1 of Plats on Page 36.
PARCEL #3
Lot Twenty-four (24) of Block five (5) Village of Lake Odessa, County of
Ionia, State of Michigan, Subject to right of way of Pere Marquette Railroad.
PARCEL #4
The West Forty-four (44) feet of Lot number Eighty (80) and the East
Forty-four (44) feet of Lot number Eighty-one (81) of Johnson's Addition to
the Village of Bonanza, now included in the Village of Lake Odessa, Ionia
County, Michigan.
PARCEL #5
The East one-third (1/3) of Lot number Eight (80) Johnson's Addition to the
Village of Bonanza, now included in the Village of Lake Odessa, according to
the recorded plat thereof.
Landlord Sublets and Subleases to Tenant that portion of the Premises
consisting of approximately 16,000 square feet, as depicted on the diagram
attached as Exhibit A (the "Leased Premises"), as well as the concrete parking
lot located north of the Leased Premises as depicted on Exhibit A, on the
terms and conditions contained in this Lease.
Landlord, however, retains the nonexclusive right to use the garage area and
loading dock depicted on Exhibit A from time-to-time to load, unload and stage
its equipment prior to loading.
2. Purpose of Occupancy. Tenant shall use and occupy the Leased Premises for
the purpose of conducting its normal business operations and for any other
related purposes; provided, however, the Leased Premises shall not be used for
any illegal purpose, nor in any way to create any nuisance or trespass, nor in
any way to violate the terms of any policy of insurance or increase the rate
of insurance on the Leased Premises.
3. Term of Lease. The initial term of this Lease shall commence as of May 19,
1997, and shall continue from year to year thereafter until terminated as
provided in this Lease. Either party may terminate this lease at the end of
any lease year by providing written notice of termination at least sixty (60)
days prior to the end of the lease year.
4. Rent. Tenant covenants and agrees to pay Landlord as rent for the Leased
Premises during the term of this Lease Three Thousand Three Hundred
Thirty-Three Dollars ($3,333) per month beginning May 19, 1997 and continuing
on the nineteenth day of each month thereafter.
The annual rent paid by Tenant shall be adjusted upward, but never downward,
effective the first day of May, 1998, and on the same day of each year
thereafter during the term of this Lease to reflect the increase, if any, in
the Consumer Price Index (All Cities, Urban Wage Earners and Clerical Workers
Table of 1978, 1967=100) (subsequently referred to as "CPI-W"), or its
successor Consumers Price Index, as published by the United States Bureau of
Labor Statistics. This adjustment shall be computed by dividing the annual
rental rate set forth in this Paragraph 4, by the CPI-W index number for May,
1997 and then multiplying that amount by the CPI-W index number for the month
immediately preceding the effective date of the increase.
The monthly installments of rent and all other sums payable under this Lease
by Tenant shall be paid without set-off, counter-claim, recoupment, abatement,
suspension or deduction, except as specifically provided in this Lease.
5. Taxes and Special Assessments. Landlord shall pay and discharge all real
property taxes and special assessments which may be levied against the Leased
Premises or any part of the Leased Premises during the term of this Lease.
Tenant shall pay and discharge all personal property taxes which may be levied
against its furniture, equipment and other personal property located on the
Leased Premises.
6. Insurance and Indemnity. Landlord, at its own expense, shall keep the
Leased Premises insured against loss or damage by fire and those risks covered
by "extended coverage" as provided in a standard fire insurance policy. Such
policy of insurance shall be payable to Landlord or as Landlord specifies.
Tenant shall indemnify Landlord against and save Landlord harmless from any
liability or claim for damages which may be asserted against Landlord by
reason of any accident or casualty occurring in, on or about the Leased
Premises. In addition, Tenant shall obtain and keep in force public liability
insurance with coverage of at least Five Hundred Thousand Dollars
($500,000.00) to any individual and One Million Dollars ($1,000,000.00) for
each accident, and property damage insurance with coverage of at least Three
Hundred Thousand Dollars ($300,000.00) for each accident. Such policy or
policies of insurance, by loss payable clauses or riders, shall cover both
Landlord and Tenant.
Tenant, at its expense, shall keep all of its furnishings, equipment and other
personal property located on the Leased Premises fully insured against loss or
damage by fire and those risks covered by "extended coverage" as provided in a
standard fire insurance policy. Such policy of insurance shall be payable to
Tenant or as Tenant specifies.
7. Waiver of Subrogation. Each policy of insurance required of Tenant under
this Lease shall contain a clause or endorsement under which the insurer
waives all right of subrogation against the Landlord, its agents and employees
with respect to losses payable under such policy, and Tenant hereby waives all
right of recovery it might otherwise have against the other Landlord, its
agents and employees, for any loss or injury which is covered by such a policy
of insurance, notwithstanding that such loss or injury may result from the
negligence or fault of such other party, its agents and employees.
8. Utilities. Tenant shall pay all charges for all separately metered utility
services provided to the Leased Premises, including, without limitation, gas
and electric. Landlord shall provide and pay for all other utility services
provided to the Leased Premises. Landlord shall not be liable in damages or
otherwise for any interruptions or failure in the supply of any utilities or
utility service to the Leased Premises.
9. Maintenance and Condition of Leased Premises. Maintenance of the common
areas of the building, and the exterior and structural portions of the Leased
Premises shall be the responsibility of Landlord. Tenant shall promptly
forward in writing to Landlord any defective condition known to it which
Landlord is required to replace or repair, any failure to so
report such defect shall make Tenant responsible to Landlord for any
additional loss or aggravation of loss incurred by Landlord by reason of
Tenant's failure to notify Landlord.
Tenant, at its sole cost and expense, shall keep the Leased Premises neat and
clean and in good repair and tenantable condition during the term of this
Lease. Tenant shall not allow refuse to accumulate at the Premises, and shall
conduct its business in such a manner that the risk of fire to the Premises
shall not be increased beyond the hazard normal and usual for its type of
business.
Tenant has inspected the Leased Premises and acknowledges that it is in good
condition and repair as of the effective date of this Lease. Tenant shall, at
the termination of this Lease, by lapse of time or otherwise, return the
Leased Premises to Landlord in as good condition as when received, loss by
fire, casualty and ordinary wear excepted. In addition, Tenant shall remove
all of its personal property from the Leased Premises and shall repair any
damage to the Leased Premises caused by such removal.
10. Sewer System Discharges. Tenant acknowledges that the Leased Premises is
connected to the municipal sewer system, and that Landlord is subject to
certain restrictions on the nature of its discharge to the municipal
wastewater treatment facility. Tenant shall discharge nothing other than
ordinary domestic sewage to the municipal sewer system without the prior
written consent of Landlord. Tenant shall be responsible for paying all fines
and penalties levied against Landlord as a result of Tenant's unauthorized
discharges to the municipal sewer system.
11. Alterations. Tenant shall not make or permit to be made any alterations,
additions or improvements in, upon or to the Leased Premises, or any part of
the Leased Premises, without the prior written consent of Landlord which will
not be unreasonably withheld. In the event such consent is obtained, all such
alterations, additions or improvements shall be performed at the expense of
Tenant and in accordance with all applicable laws and building codes. All
alterations, additions or improvements (except trade fixtures) so made and
installed by Tenant shall become part of the realty, shall become the property
of Landlord and shall remain for the benefit of Landlord upon expiration of
the term or other termination of this Lease in as good condition as they were
when installed, reasonable wear and tear excepted; provided, however, that any
such alteration, addition or improvement remaining upon expiration of the term
or other termination of this Lease, shall upon demand made by Landlord, be
removed by Tenant, at Tenant's expense. Tenant shall repair any damage caused
by such removal or removal of trade fixtures, restoring the Leased Premises to
their condition prior to the making of such alteration, addition or
improvement. Landlord may not unreasonably withhold consent for such
improvements as are reasonably necessary for Tenant's business operations.
12. Performance by Landlord. In the event Tenant fails to perform any of its
covenants and agreements as set forth in this Lease, Landlord shall have the
option to undertake such performance for Tenant, and the costs and expenses
incurred by Landlord by reason of such
undertaking shall be due and payable forthwith by Tenant to Landlord as
additional rent under this Lease.
13. Compliance with Laws and Public Authority Requirements. Tenant agrees, at
its own expense, to promptly comply with all state, federal, and local laws,
and with all requirements of any legally constituted public authority
applicable to Tenant's occupancy of the Leased Premises.
14. Damage to Leased Premises. In the event the Leased Premises are damaged by
fire, the elements, act of God, or other cause to such extent that they are
rendered untenantable by Tenant, and in the event Landlord elects not to
rebuild the Leased Premises as they existed prior to the damage or in some
other manner satisfactory to Tenant, then Landlord, within thirty (30) days of
the date the damage occurred, shall notify Tenant in writing of such election,
and this Lease shall be canceled as of the date the damage occurred, and
Landlord and Tenant shall have no further obligations by reason of its
provisions. In the event Landlord elects to rebuild the Leased Premises as
they existed prior to the damage or in some other manner satisfactory to
Tenant, then Landlord shall commence such rebuilding within thirty (30) days
of the date of such damage and shall continue and complete such rebuilding as
promptly as possible. Upon completion of such rebuilding, this Lease shall be
reinstated in all of its terms; provided, however, the rent shall abate in
full during the period of such rebuilding. Notwithstanding anything contained
in this paragraph to the contrary, in the event the premises are rendered
untenantable by any of the above-mentioned causes, Tenant shall have the
option to terminate this Lease effective as of the date of the damage, by
providing Landlord with written notice within fifteen (15) days of the date
the damage occurred.
In the event the Leased Premises are not damaged to such extent that they are
rendered wholly untenantable by Tenant, then Tenant shall continue to occupy
that portion of the Leased Premises which are tenantable, the rent shall abate
proportionately to the portion occupied, and Landlord shall promptly commence
and complete repairs to the portion damaged.
In no event and under no circumstances shall Landlord be liable to Tenant for
any loss occasioned by damage to the Leased Premises, other than for the
abatement of rent as provided in this Paragraph 14, and under no circumstances
shall there be any abatement of rent under this Paragraph 14 if the damage to
the Leased Premises is caused by the negligence or willful misconduct of
Tenant, its agents or employees.
15. Eminent Domain. In the event that the whole of the Leased Premises shall
be taken or condemned for any public or quasi-public use or purpose by any
competent authority in appropriation proceedings or by any right of eminent
domain, then this Lease shall terminate as of the date title vests in the
condemnor, all rents and other payments shall be paid up to that date, and
Landlord and Tenant shall have no further obligations by reason of the
provisions of this Lease.
In the event that less than the whole of the Leased Premises is so taken or
condemned, then Landlord and Tenant shall each have the right to terminate
this Lease upon written notice to the other given at least thirty (30) days
prior to the date title vests in the condemnor, and this Lease shall terminate
as of the date title vests in the condemnor, all rents and other payments
shall be paid up to date, and Landlord and Tenant shall have no further
obligations by reason of the provisions of this Lease. In the event that
neither party shall elect to so terminate this Lease, Landlord, to the extent
of the condemnation award, shall repair and restore the portion not affected
by the taking so as to constitute the remaining premises a complete
architectural unit. Thereafter, the rent to be paid by Tenant shall be
adjusted proportionately according to the ratio that the floor area remaining
in the Leased Premises bears to the former floor area in the Leased Premises,
and all of the other terms of this Lease shall remain in full force and
effect.
Tenant shall have no interest in any award resulting from any condemnation or
eminent domain or similar proceedings whether such award be for diminution in
value to the leasehold or to the fee of the Leased Premises, except that
Tenant shall be entitled to claim, prove and receive in such proceedings such
award as may be allowed it for loss of business, relocation, and for Tenant's
trade fixtures and personal property which are removable by Tenant at the end
of the term of this Lease provided such award shall be in addition to the
award for land and buildings.
16. Defaults of Tenant. The following occurrences shall be deemed defaults by
Tenant:
(a) Tenant shall fail to pay any rent or other sum payable under this Lease
within ten (10) days of the day the payment is due.
(b) Tenant shall abandon or vacate the Leased Premises before the end of the
term of this Lease, or Tenant shall make a general assignment for the benefit
of creditors or become bankrupt or insolvent, or file or have filed against it
in any court a petition in bankruptcy or insolvency or for reorganization or
for the appointment of a receiver or trustee.
(c) Tenant shall be in breach of any other obligation under this Lease, and
such breach shall continue for fifteen (15) days after Landlord's mailing to
Tenant a written notice of such breach.
17. Remedies of Landlord. In the event of a default by Tenant, Landlord shall
have the following rights and remedies in addition to all other rights and
remedies otherwise available to Landlord:
(a) Landlord shall be entitled to immediately accelerate without further
notice to Tenant the full balance of the rent payable for the remainder of the
term of this Lease.
(b) Landlord shall have the immediate right of re-entry and may remove all
persons and property from the Leased Premises. Such property may be removed
and stored at the cost of Tenant. Should Landlord elect to re-enter as herein
provided, or should Landlord take possession pursuant to legal proceedings,
Landlord may either terminate this Lease or, from time to time, without
terminating this Lease, relet the Leased Premises or any part thereof for such
term or terms (which may be for a term extending beyond the term of this
Lease) and at such rental or rentals and upon such other terms and conditions
as Landlord, in the exercise of its sole discretion, deems advisable, with the
right to make alterations and repairs to the Leased Premises. Upon each such
reletting, (i) Tenant shall be immediately liable to pay to Landlord, in
addition to any indebtedness other than rent due hereunder, the cost and
expense of such reletting and of any such alterations and repairs incurred by
Landlord, and the amount, if any, by which the rent reserved in this Lease for
the period of the reletting as accelerated under subparagraph (a) of this
Paragraph, exceeds the amount agreed to be paid for rent for the Leased
Premises by the reletting Tenant; or (ii) at the option of Landlord, rents
received by Landlord from such reletting shall be applied first, to the
payment of any indebtedness other than rent due hereunder from Tenant to
Landlord, second, to the payment of any costs and expenses of such reletting
and of such alterations and repairs; third, to the payment of rent unpaid
hereunder; and the residue, if any, held by Landlord and applied in payment of
future unaccelerated rent as the same may become due and payable hereunder.
(c) Landlord may immediately sue to recover from Tenant all damages Landlord
may incur by reason of Tenant's default, including the cost of recovering the
Leased Premises, and including the rent reserved and charged in this Lease for
the remainder of the stated term as accelerated under Subparagraph (a), all of
which shall be immediately due and payable along with attorneys fees and
Landlord shall have no obligation to relet.
18. Legal Expenses. In case suit shall be brought by Landlord for recovery of
possession of the Leased Premises, for the recovery of rent or any other
amount due under the provisions of this Lease, or because of the breach of any
other covenant herein contained on the part of Tenant to be kept or performed,
all expenses incurred therefor (including reasonable attorney's fees) shall be
awarded to Landlord if Landlord is the party prevailing in such suit.
19. Right of Access. Tenant agrees to permit Landlord and Landlord's agents,
to inspect or examine the Leased Premises at any reasonable time in a
reasonable manner, for any emergency reason and to permit Landlord to make
such repairs, decorations, alterations, improvements or additions in the
Leased Premises, as Landlord may deem desirable or necessary for its
preservation or which Tenant has covenanted in this Lease to do but has failed
to do, without the same being construed as an eviction of Tenant, in whole or
in part, by reason of loss or interruption of the business of Tenant because
of the prosecution of such work, and the rent due under this Lease shall in no
way abate while such decorations, repairs, alterations, improvements or
additions are being made. Tenant shall have the right to accompany Landlord on
any such inspections and examinations, which shall be scheduled to suit the
reasonable convenience of both parties.
Landlord shall have the right to enter upon the Leased Premises at any
reasonable time during the term, or any renewal term, of this Lease for the
purpose of exhibiting the Leased Premises to prospective tenants or
purchasers, provided advance notice is given to Tenant, and provided such
exhibitions are scheduled to suit the reasonable convenience of both parties.
At any time during the term of this Lease, Landlord may place signs in, or
upon the Leased Premises to indicate that the same are for rent or sale, which
signs shall not be altered, removed, obliterated or hidden by Tenant.
20. Business Signs. Tenant may erect signs on the exterior of the Leased
Premises only with the approval of Landlord, and Tenant agrees to maintain any
such signs in a good state of repair and save Landlord harmless from any loss,
cost or damage as a result of the erection, maintenance, existence or removal
of the same and shall repair any damage which may have been caused by the
erection, existence, maintenance or removal of such signs. Upon vacating the
Leased Premises, Tenant agrees to remove all signs and repair all damage
caused by such removal.
21. Surrender of Leased Premises. Tenant covenants and agrees to surrender
possession of the Leased Premises to Landlord upon the expiration of the term
of this Lease, or upon earlier termination of this Lease, in as good condition
and repair as the same shall be at the commencement of the term of this Lease,
or as the same may have been put by Landlord and Tenant during the continuance
of the Lease, ordinary wear and tear excepted. In addition, Tenant shall
remove all of its property from the Leased Premises and shall repair any
damage to the Leased Premises caused by such removal.
Any personal property of Tenant or of anyone claiming under Tenant which shall
remain on the Leased Premises after the expiration or termination of this
Lease shall be deemed to have been abandoned by Tenant, and either may be
removed by Landlord as its property or may be disposed of in such manner as
Landlord may see fit, and Landlord shall not be in any way responsible for
such property.
22. Holding Over. In the event Tenant shall continue to occupy all or any part
of the Leased Premises after the expiration of the term of this Lease, such
holding over shall be deemed to constitute a tenancy from month to month, upon
the same terms and conditions as are contained in this Lease, except as to
term; provided, however, if such holding over is without Landlord's written
consent, Tenant shall pay to Landlord as rent for each month, or part of a
month, that Tenant remains in possession of the Leased Premises, double the
monthly rental rate in effect immediately prior to the date of termination.
23. Assignment and Sublease. Tenant shall not assign this Lease, or sublease
all, or any part, of the Leased Premises, without the prior written consent of
Landlord.
24. Subordination. This Lease is and shall be subject and subordinate to any
mortgage or mortgages now in force, or which shall at any time be placed upon
the Leased Premises or any part thereof, and to each and every advance made
pursuant to any such mortgage. Tenant agrees that it will upon demand execute
and deliver such instruments as shall be required by any mortgagee or proposed
mortgagee, to confirm or to effect more fully such subordination of this Lease
to the lien of any such mortgage or mortgages, and, in the event of the
failure of Tenant to execute or deliver any such instrument, Tenant hereby
irrevocably nominates and appoints Landlord as Tenant's attorney-in-fact for
the purpose of executing and delivering any such instrument or instruments of
subordination. Tenant's refusal to execute or deliver such instrument shall
also entitle Landlord, its successors and assigns, to elect that this Lease
terminate upon the giving of a written notice as provided for in Paragraph
16(c).
25. Attornment. In the event any proceedings are brought for the foreclosure
of any mortgage covering the Leased Premises, or in the event of the
conveyance by deed in lieu of foreclosure, or in the event of exercise of the
power of sale under any such mortgage, or in the event of the sale or transfer
of the Leased Premises by Landlord (except as provided in Paragraph 25 below),
Tenant hereby attorns to the new owner and covenants and agrees to execute an
instrument in writing reasonably satisfactory to the new owner whereby Tenant
attorns to such successor in interest and recognizes such successor as
Landlord under this Lease.
26. Sale or Transfer by WSB Company, L.L.C.. If WSB Company, L.L.C. shall sell
or transfer the Leased Premises, Tenant and Landlord shall each have the
option to terminate this Lease by providing the other party with written
notice of termination within sixty (60) days following notice to the Tenant of
the sale or transfer.
27. Quiet Enjoyment. On paying the rent and on performing all of the covenants
and agreements on its part to be performed under the provisions of this Lease,
Tenant shall peacefully and quietly have, hold and enjoy the Leased Premises
for the term of this Lease, subject to Landlord's nonexclusive use rights as
described in Paragraph 1 of this Lease.
28. Benefit and Obligation. Except as otherwise provided in this Lease, the
benefits of this Lease shall accrue to, and the burdens of this Lease shall be
the liabilities of, the successors and assigns of Landlord and Tenant.
29. Environmental Covenants. Tenant acknowledges that it has received all
information in Landlord's possession concerning the environmental condition of
the Leased Premises. Tenant has had an opportunity to inspect the Leased
Premises and accepts the condition of the Leased Premises "As-Is." If
environmental contamination exists at the Leased Premises, Tenant agrees not
to disclose to any person the fact that such environmental contamination
exists, except to the extent such disclosure is required by law. Landlord
shall not seek contribution, indemnification or reimbursement either on
statutory, regulatory or common law principals from Tenant for damages to the
Leased Premises or liabilities incurred by landlord, arising out of or
resulting from environmental contamination which exists at the Leased Premises
as of the date of this Lease. Further, Landlord will indemnify and hold Tenant
harmless for claims asserted by WSB Company, L.L.C. against Tenant arising out
of or resulting from environmental contamination which exists at the Leased
Premises as of the date of this Lease. Landlord and its designees shall have
reasonable access to the Leased Premises throughout the term of this Lease as
necessary to respond to existing environmental contamination existing at the
Leased Premises.
30. Security Deposit. Upon execution of this Lease, Tenant has deposited the
sum of $3,333 with Landlord as a security deposit to be held by Landlord. Upon
expiration of the term or renewal term of this Lease, Landlord may apply such
security deposit as follows:
(a) To pay the cost of any repairs to the Leased Premises which Tenant was
required to make under this Lease, but which Tenant failed to make.
(b) To pay any rent or other sums due from Tenant under this Lease.
(c) To pay Landlord for any other expense or damage suffered as a result of
Tenant's failure to perform its obligations under this Lease.
Any amount not so applied will be returned to Tenant within thirty (30) days
after Tenant vacates the Leased Premises.
31. Notices. All notices required under any provision of this Lease shall be
deemed to be properly served if delivered in writing personally, or sent by
registered or certified mail to each party at their address as stated above or
at such other address as each party shall designate in writing delivered to
the other party. All mailed notices shall be effective upon mailing.
32. Waiver. The failure of either party to enforce any covenant or condition
of this Lease shall not be deemed a waiver thereof or of the right of either
party to enforce each and every covenant and condition of this Lease, and no
provision of this Lease shall be deemed to have been waived unless such waiver
is in writing. One or more waivers of any covenant or condition by Landlord or
Tenant shall not be construed as a waiver of a subsequent breach of the same
covenant or condition nor shall the acceptance of rent or other payment by
Landlord at any time when Tenant is in default under any term, covenant or
condition of this Lease constitute a waiver of such default, nor shall any
waiver or indulgence granted by either party be taken as an Estelle against
the party granting the indulgence or waiver.
33. Unenforceability. In the event any covenant, term, provision, obligation,
agreement or condition of this Lease is held to be unenforceable, it is
mutually agreed and understood, by and between the parties hereto, that the
other covenants, terms, provisions, obligations, agreements and conditions
herein contained shall remain in full force and effect.
34. Captions. All headings contained in this Lease are intended for
convenience only and are not to be deemed or taken as a summary of the
provisions to which they pertain or as a construction thereof.
35. Governing Law. This Lease shall be governed by the laws of the State of
Michigan.
WITNESSES: AUTOMATED PROCESS EQUIPMENT
CORPORATION, a Michigan corporation
/s/ Tonya Firovich /s/ Kendall Wilcox
President
LANDLORD
EARTHCARE OF THE MIDWEST, INC.,
a Florida corporation
/s/ Tonya Firovich /s/ Allen L. Cockrum
President
TENANT
Attachment: Exhibit A - Diagram
11
LEASE AGREEMENT
THIS LEASE, made by and between Plastic Properties, LLC, Green Bay,
Wisconsin, a Wisconsin Limited Liability corporation, hereinafter called
"Lessor", and Recycled Plastic Industries, Inc., a Wisconsin corporation,
Green Bay, Wisconsin, hereinafter called "Lessee".
WITNESSETH:
I. PREMISES:
In consideration of the rents, covenants and agreements hereinafter set
forth, Lessor does hereby demise and lease to Lessee, and Lessee does hereby
take and hire from Lessor, the building premises situated in the City of Green
Bay, County of Brown and State of Wisconsin, containing approximately 20,000
square feet, and any and all improvements. Said building premises are located
at 1011 McDonald Street, Green Bay, Wisconsin 54303, and bears the following
legal description:
The building comprised or approximately 20,000 square feet located at
1011 McDonald Street, City of Green Bay, Brown County, Wisconsin, 54303
described as that part of Lots Five (5) and Six (6), Block Four (4), lying
East of Miller Rasmussen Ice Company spur track, as shown on the blueprint
attached to the land contract recorded in the office of the Register of Deeds
for Brown County, Wisconsin in Volume 13 Miscellaneous Records, Page 15,
according to the recorded Plat of McDonald's Addition, in the City of Green
Bay, West side of Fox River, together with a perpetual easement across lots
2,3 and 4, Block 4, according to the recorded Plat of McDonald's Addition, in
the City of Green Bay, West side of Fox River, for the installation, laying,
maintaining and repairing of sufficient sewer and water pipes to service Lots
5 and 6 above. ALSO that part of the vacated Warren Street as described in
Jacket 2639 Records, Image 15-16. AND Lot Three (3), according to the
recorded Plat of A.E. Elmore's Second Addition, in the City of Green Bay,
Brown County, Wisconsin, except the most southerly Seventeen and One-half
(17.5) feet thereof.
II. TERMS:
A. Original Term: The Original lease term shall be for a period of
five (5) years commencing January 27, 1997 and terminating on December 31,
2001.
B. First Renewal Term: Lessee may renew the term of this lease for a
period of five (5) years upon the giving of notice to Lessor. Such notice
must be given at least ninety (90) days prior to the expiration of the
original term. Upon Lessee giving notice of the exercise of this option, this
lease shall be renewed upon the same terms and conditions as are applicable to
the original term.
III. COMMENCEMENT DATE:
The commencement date of this lease shall be January 1, 1997.
IV. RENTAL:
Lessee shall pay to Lessor, in advance, Four Thousand Four Hundred and
Thirty Two Dollars and 42 cents ($4,432.42) per month, due on the first day of
each calendar month. The first monthly payment shall be due on the signing
date of this Lease. Lessee shall also pay to Lessor $4,432.42 upon execution
of this lease which shall serve as security for Lessee's performance as
provided herein, and refunded to Lessee at the expiration or termination of
this Lease, subject to Lessee's satisfactory compliance with the conditions
hereof.
V. TAXES AND ASSESSMENTS:
Lessee agrees to pay to the appropriate governmental agencies all real
property taxes, impositions, or all other claims or charges, specifically not
including special assessments (herein collectively called the "taxes"), which
may constitute or may be reduced to a lien upon the leased premises, including
but not limited to water charges and sewer charges, before the same shall
become delinquent. All such payments for the first and last year of the
original term and any renewal tern shall be prorated between Lessor and
Lessee, so that Lessee shall be responsible for that portion of the taxes
which is attributable to the original term and any renewal term.
Lessee shall have the right in its own name, or in Lessor's name where
appropriate, but at its own cost and expense, to contest the amount or
legality of any taxes which it is obligated to pay hereunder and make
application for the reduction thereof, or any assessment upon which the same
may be based, and the Lessor agrees at the request of the Lessee to execute or
join in the execution of any instruments or documents necessary in connection
with such contest or application. If the Lessee shall contest such tax
assessment or other imposition, the time within which the Lessee shall be
required to pay the same shall be extended until such contest or application
shall have been finally determined, except that Lessee shall be responsible
for any penalty imposed by the taxing authority resulting from late payment of
taxes due to said contest.
VI. INSURANCE
Lessee hereby covenants and agrees at all times during the original term of
this lease and any renewal term to maintain and keep in force for the mutual
benefit of Lessor and Lessee.
(a) Comprehensive general liability insurance against all claims for personal
injury, death or property damage occurring on the leased premises with minimum
limits of liability of $1,000,000.00 per occurrence, property damage or bodily
injury, and $2,000,000.00 general aggregate.
(b) Fire insurance, with extended coverage, in an amount not less than the
replacement value of the improvements located on the leased premises. Such
policy may, at the option of Lessor, contain a loss payable clause in favor of
any mortgagee of the leased premises, as their interests may appear.
(c) All insurance provided by Lessee as required in this section shall be
carried in favor of Lessor and Lessee as their respective interests may
appear, and in case of insurance against damage to the leased premises by fire
or other casualty, shall provide that the loss, if any, shall be adjusted with
the payable to the Lessor. All insurance shall be written with responsible
companies and the policies shall be held by Lessor, or, when appropriate, by
the holder of any mortgage, in which case copies of the policies or
certificates of insurance shall be delivered by Lessee to Lessor. Lessor shall
be listed as an additional named insured and all policies shall require thirty
(30) days notice by registered mail to Lessor of any cancellation or change
affecting any interest of Lessor.
(d) All insurance policies for liability, fire, and casualty shall bear an
endorsement waiving the right of subrogation, first against the Lessor for any
acts or omissions on its part, and secondly, against the Lessee for any acts
or omissions on its part.
VII. UTILITIES
Lessee shall pay all natural gas, oil, electrical utility bills, water,
telephone, and any
and all other utilities for the leased premises and shall pay as and when due
all charges
against the premises for such utility services. All applications and
connections for necessary utility services on the leased premises subsequent
to January 1, 1997, shall be made only in the name of the Lessee.
VIII. ALTERATIONS, ADDITIONS AND IMPROVEMENTS:
A. Subject to the limitation that no substantial portion of the building
premises shall be demolished or removed by Lessee without prior written
consent of Lessor, and if necessary, of any mortgagee, Lessee may, at any time
during the lease term, subject to the conditions set forth below and at its
own expense, make any alterations, additions or improvements in and to the
building premises. Alterations shall be performed in a workmanlike manner and
shall not weaken or impair the structural strength, or lessen the value, of
the building premises, or change the purposes for which the building or any
part thereof, may be used.
B. Conditions with respect to alterations, additions or improvements are as
follows:
(1) Before commencement of any work all plans and specifications shall be
submitted, filed with, and approved by all governmental departments or
authorities having jurisdiction and any public utility company having an
interest therein, and all work shall be done in accordance with requirements
of all applicable governmental regulations. The plans and specifications for
any alternations estimated to cost Twenty-Five Thousand Dollars ($25,000.00)
or more shall be submitted to Lessor. However, all alternations to the
structure walls and roof of the building regardless of cost must be submitted
to Lessor for written approval prior to commencement of work.
(2) Prior to commencement of any work, Lessee shall pay the amount of any
increase in premiums on insurance policies provided for herein because of
endorsements to be made covering the risk during the course of work.
(3) All alterations, additions, and improvements to the leased premises at the
commencement of the term, and that may be erected or installed during the
term, shall become part of the leased premises and the sole property of the
Lessor, except that all movable trade fixtures installed by Lessee shall be
and remain the property of Lessee.
IX. REPAIRS:
Lessee shall, at all times during the Lease and at its own cost and
expense, repair, and maintain in good, safe and substantial condition, all
buildings and any improvements, additions, and alterations thereto, and shall
use all reasonable precaution to prevent waste, damage or injury to the leased
premises.
Lessor Maintenance. Lessor shall keep and maintain the roof and structural
components of the demised premises, except that Lessee shall promptly repair
any damage caused thereto by its act or negligence or that of its employees,
agents, invitees, or contractors. Except as otherwise provided herein, the
Lessor shall not be responsible to maintain or make any improvements or
repairs of any kind, in or upon the demised premises.
Should Lessor, subject to its right of entry to repair and inspect the
leased premises, desire repairs completed subject to this section, and
should Lessee refuse to complete said repairs, the matter shall be submitted
to binding arbitration as set forth below:
Either party may declare a deadlock by written notice to the other
party, naming an arbitrator. The other party shall name an arbitrator within
five (5) working days of receipt of the notice. The two (2) arbitrators
selected shall select a third arbitrator within ten (10) days of the
arbitration notice and a decision shall be rendered within ten (10) days of
the selection of the third arbitrator, unless any of these time periods are
changed by agreement of the parties. The parties agree to be bound by the
majority decision.
Any arbitrator named hereunder shall be a member of the Brown County
Builders Association, regularly involved in commercial construction.
The party against whom a decision is rendered shall pay the cost of all
of the arbitrators.
At the expiration of said lease period, Lessee shall return to Lessor the
leased premises in the same good condition as they were at the commencement of
this lease, subject only to usual and reasonable wear and tear.
X. CASUALTY LOSS:
If the building premises should be damaged by fire or other casualty, Lessee
shall
promptly notify Lessor of such casualty and Lessee shall promptly commence to
repair or
reconstruct such building or other improvements as nearly as may be to their
condition immediately prior to such casualty. In the event of a casualty which
is insured against,
Lessor and/or its mortgagees shall make all insurance proceeds available to
Lessee.
In the event of fire or casualty rendering the premises either partially or
totally untenantable, there shall be an equitable abatement of the rental
until the leased premises are again rendered fully tenantable, provided
that Lessee shall not be relieved from the obligation to pay taxes and other
charges and to keep the premises insured.
In the event of destruction of the building premises occurring during the last
twelve (12) months of the original tern of this lease or any renewal term, to
the extent of fifty percent (50%) or more of the value of the building, Lessee
may, at its option, elect to terminate this lease as of the date of said
damage or destruction, and in such event, Lessor shall receive all of the
proceeds derived from any insurance applicable to said building. Notice of
such election must be sent by Lessee to Lessor in writing within thirty (30)
days after such casualty. In the event of such termination, Lessor shall
refund to Lessee any unearned rents paid in advance of such termination date.
XI. SURRENDER OF PREMISES:
Lessee will deliver up and surrender possession of the leased premises to
Lessor upon the expiration of the lease, any renewal or extension hereof, or
its termination in any way, in a good and substantial state of repair,
reasonable wear and tear and damage by fire or other casualty, or from other
causes beyond Lessee's control, excepted.
XII. DEFAULT OF BREACH:
Each of the following events shall constitute a default or breach of this
lease by Lessee:
(a) If Lessee shall file a petition in bankruptcy or insolvency or for
reorganization under any bankruptcy act, or shall voluntarily take advantage
of any such act by answer or otherwise, or shall make an assignment for the
benefit of creditors.
(b) If involuntary proceedings under any bankruptcy law or insolvency act
shall be instituted against Lessee, or if a receiver or trustee shall be
appointed of all or substantially all of the property of Lessee, and such
proceedings shall not be dismissed or the receivership or trusteeship vacated
within sixty (60) days after the institution or appointment.
(c) If Lessee shall fail to pay Lessor any rent or additional rent when the
rent shall become due and shall not make the payment within thirty (30) days
after notice thereof by Lessor to Lessee.
(d) If Lessee shall fail to perform or comply with any of the conditions of
this lease and if the nonperformance shall continue for a period of thirty
(30) days after notice thereof by Lessor to Lessee or, if the performance
cannot by reasonably had within the thirty (30) day period and shall not in
good faith have commenced performance within the thirty (30) day period and
shall not diligently proceed to completion of performance.
(e) If Lessee shall vacate or abandon the leased premises.
XIII. EFFECT OF DEFAULT:
In the event of any default hereunder, as set forth in Section 12, above, the
rights of Lessor shall be as follows:
(a) Lessor shall have the right to cancel and terminate this lease, as
well as all of the right, title, and interest of Lessee hereunder, by
giving to Lessee not less than thirty (30) days notice of the cancellation and
termination. On expiration of the time fixed in the notice, this lease and the
right, title and interest of Lessee hereunder, shall terminate in the same
manner and with the same force and effect, except as to Lessee's liability, as
if the date fixed in the notice of cancellation and termination were the end
of the term herein originally determined.
(b) Lessor may elect, but shall not be obligated, to make any payment required
of Lessee herein or comply with any agreement, term or condition required
hereby to be performed by Lessee, and Lessor shall have the right to enter the
leased premises for the purpose of correcting or remedying any such default
and to remain until the default has been corrected or remedied, but any
expenditure for the correction by Lessor shall not be deemed to waive or
release the default of Lessee or the right of Lessor to take any action as may
be otherwise permissible hereunder in the case of any default.
(c) Lessor may re-enter the premises immediately and remove the property
and personnel of Lessee, and store the property in a public warehouse or at a
place selected by Lessor, at the expense of Lessee. After re-entry, Lessor may
terminate the lease on giving thirty (30) days written notice of termination
to Lessee. Without the notice, re-entry will not terminate the lease. On
termination, Lessor may recover from Lessee all damages proximately resulting
from the breach, including the cost of recovering the premises, and the worth
of the balance of this lease over the reasonable rental value of the premises
for the remainder of the lease term, which shall be immediately due Lessor
from Lessee.
(d) After re-entry, Lessor may re-let the premises or an part thereof for any
term without terminating the lease, at the rent and on the terms as Lessor may
choose.
(e) After re-entry, Lessor may, procure the appointment of a receiver.
Proceedings for appointment of a receiver by Lessor shall not terminate and
forfeit the lease unless Lessor has given written notice of termination to
Lessee as provided herein.
IV. WARRANTY OF TITLE BY LESSOR:
Lessor hereby warrants, represents and covenants to the Lessee that thc
Lessor has good and marketable fee simple title to the leased premises,
subject only to prior mortgages, and that the Lessor has full authority, right
and power to execute this lease and to lease the premises for the term
provided herein.
XV. QUIET ENJOYMENT
Lessor hereby covenants and agrees that if Lessee shall perform, all the
covenants and agreements herein stipulated to be performed by Lessee, Lessee
shall, at all times during the original term of this lease and any renewal
term, have peaceable and quiet enjoyment and possession of the leased premises
without any manner of let or hindrance from the Lessor or any other person,
firm or corporation.
XVI. SUBORDINATION AND NON-DISTURBANCE:
This lease shall be subject and subordinate to the lien of any mortgage which
the Lessor may place upon the premises to finance the cost of construction of
the improvements and to all terms, conditions and provisions thereof, to all
advances made, and to any renewal, extensions, modifications or replacement
thereof. Provided, however, that if there are no defaults hereunder on the
part of the Lessee, the right of possession of Lessee to the leased premises
and Lessee's rights arising out of this lease shall not be affected or
disturbed by the mortgagee in the exercise of any of its rights under the
mortgage or the note secured thereby, nor shall Lessee be named as a party
defendant to any foreclosure or other proceeding under the mortgage nor in any
other way be deprived of any of its rights under this lease, nor shall this
lease be terminated or affected by any foreclosure or sale or any proceeding
under any mortgage.
XVII. ACCESS TO PREMISES BY LESSOR:
Lessor shall have access to the leased premises at all reasonable hours and
upon reasonable notice during the original term of this lease and any renewal
terms for the purpose of examining the same; provided, however, that Lessor
shall not interfere in any way with the business of Lessee.
XVIII. ASSIGNMENT AND SUBLETTING BY LESSEE:
Lessee shall have the right to assign this lease or let or underlet the whole
or any part of the leased premises with the consent of Lessor, which consent
shall not be unreasonably withheld, provided that Lessee remains liable on
this lease.
XIX. NON-WAIVER:
The failure of the Lessor or Lessee to enforce any of the rights given to
Lessor or Lessee under this lease by reason of the violation of any of the
covenants in this lease to be performed by the Lessee or Lessor shall not be
construed as a waiver of the rights of the Lessor or Lessee to exercise any
such rights as to any subsequent violations of such covenants, or as a waiver
of any of the rights given to the Lessor or Lessee by reason of the violation
of any of the other covenants of this lease.
XX. SNOW REMOVAL:
The removal of all snow and ice from all roadways, all blacktopped surfaces,
access ways and unobstructed parking and loading areas shall be the
responsibility of and the sole expense of Lessee.
XXI. ENVIRONMENT:
Lessee agrees to maintain efficient and effective services for preventing and
eliminating any odors or smells and will so conduct and operate the leased
premises as not to interfere with the use and enjoyment of neighboring
buildings by others by reason of odors, noise, accumulation of garbage or
trash, vermin or other pests or otherwise.
XXII. CONSTRUCTION OF LEASE:
Words of any gender used in this lease shall be held to include any other
gender, and words in the singular number shall be held to include the plural,
when the sense requires. Wherever used herein, the words "Lessor,' and
"Lessee" shall be determined to include the heirs, personal representatives,
successors, subleases and assigns of said parties, unless the context excludes
such construction.
XXIV. SERVICE OF NOTICE:
If any term or provision of this lease or the application thereof to any
person or circumstances shall, to any extent, be invalid or unenforceable, the
remainder of this lease, or the application of such term or provision to
persons whose circumstances are other than those as to which it is held
invalid or unenforceable, shall not be affected thereby.
XXIV. SERVICE OF NOTICE:
Notices hereunder shall be in writing signed by the party serving the
same and shall be sent by Registered or Certified U.S. Mail, Return Receipt
Requested, postage prepaid, and
(a) if intended for Lessor, shall be addressed to:
Plastic Properties, LLC
1011 McDonald Street
Green Bay, WI 54303
and
(b) if intended for Lessor, shall be addressed to:
Recycled Plastics Industries, Inc.
1011 McDonald Street
Green Bay, WI 54303
and
U.S. Plastic Lumber Corp.
2300 Glades Road, Suite 440W
Boca Raton, FL 33431
or to such other address as either party may have furnished to the other from
time to time as a place for the service of notice. Any notice so mailed shall
be deemed to have been given as of the time said notice is deposited in the
U.S. Mail, unless otherwise provided herein.
XXV. HEADINGS:
It is understood and agreed that the headings are inserted only as a matter of
convenience and for reference, and in no way define, limit or describe the
scope or intent of this lease, nor in any way affect this lease.
XXVI. ENTIRE AGREEMENT:
This lease contains the entire agreement between the parties and any agreement
hereafter made shall be ineffective to change, modify or discharge it in
whole or in part unless such agreement is in writing and signed by the party
against whom enforcement of the change, modification or discharge is sought.
Signed at Green Bay, Wisconsin this 27th day of January, 1997, as of
January 27, 1997.
WITNESS: LESSOR:
PLASTIC PROPERTIES, LLC
/s/ Steve M. Groth
WITNESS: LESSEE:
RPI ACQUISITION CORPORATION
/s/ Lionel A. Marquis /s/ Harold H. Gebert
Chairman
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") made as of the 27th day of August, 1991, by and
between GEORGE DALPHON, SR. ("Lessor") , CLEAN EARTH OF NEW CASTLE, INC., a
Delaware corporation ("Lessee"), and CLEAN EARTH, INC, a Delaware corporation
("Clean Earth").
WITNESSETH
WHEREAS, Lessor is the owner of certain real property consisting of
approximately 7.5 acres of land located at 94 Pyles Lane, New Castle, Delaware
(the "Property"), as more particularly described in Exhibit A attached hereto
and incorporated herein by reference; and
WHEREAS, Lessee desires to lease the property and improvements located thereon
from Lessor subject to the terms and conditions contained herein.
Whereas, Clean Earth is the parent company of Lessee.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which
is hereby acknowledged, and in consideration of the mutual covenants and
promises contained herein, and intending to be legally bound hereby, the
parties agree as follows:
1. Demised Premises. Lessor shall lease to Lessee, and Lessee shall lease
from Lessor, the Property.
2. Term. The term of this Lease is for seven years beginning on August 28,
1991.
3. Use of the Property. Lessee shall use the Property for the business of a
non-hazardous soil remediation facility, as defined as of the date hereof, and
those uses reasonably incidental thereto. Lessee's use shall be in strict
compliance with all applicable laws and permits. No other uses shall be
permitted without the express written consent of Lessor, which consent may be
withheld in Lessor's sole discretion. Other uses which adversely impact the
volume of Lessee's soil remediation business of Tenant shall require a revised
rental formula.
4. Rental. Lessee agrees to pay Lessor monthly at the rate of $1.00 per ton
of contaminated material accepted on the Property for the purpose of
remediation, due within twenty-five (25) days of the last day of each calendar
month (to be accompanied by a computer generated report or other documentation
acceptable to Lessor and certified annually by a public accountant) ("Monthly
Rent Payment"). By way of example, payments for all material accepted during
the month of March, 1992 shall be due on or by April 25, 1992. A minimum
annual rent of 650,000 shall be paid commencing with the first year of the
initial lease term if Lessee is legally able to operate a larger plant for at
least three months of the first year, otherwise the guaranteed minimum rent
shall commence with the second year of the initial lease term. Should the rent
paid during any applicable lease year be less than the said minimum, the
amount of such deficiency shall be paid to Lessor with the first monthly
payment due Lessor in the immediately following lease year (or with the final
payment due upon expiration of this Lease). In addition, Lessee shall pay any
and all real estate taxes attributable to assets owned or improvements made by
Lessee. Lessor shall pay any and all real estate taxes attributable to the
land, and any and all real estate taxes attributable to buildings,
improvements and assets placed on the Property by Lessor during his occupancy
of Parcel "B" and/or Parcel "C". Real estate taxes shall be paid on or before
the due date; provided that the party responsible to pay, may, at its own
expense, contest the imposition or amount of any real estate tax in the manner
provided by law and provided further that such party shall pay the full amount
of any such tax so determined to be due, plus any penalty or interest thereon,
pursuant to the final resolution of any such contest. In addition, Lessee
agrees to pay Lessor upon the execution of this Lease Five Thousand Dollars
($5,000) as a deposit to be refunded without interest upon the expiration or
termination of the Lease or credited with the final lease payment.
5. Records: Net Worth. Lessee and Clean Earth, shall maintain a
consolidated net-worth of $500,000.00 throughout the term of this Lease, as
renewed from time to time Lessee and Clean Earth shall provide Lessor with
copies of their annual balance sheet, certified by a national independent
accounting firm, at such company's expense and Lessee shall provide a
quarterly current internally prepared balance sheet certified by its chief
financial and executive officers.
6. Option to Renew. Provided that Lessee is not in material default under
any terms of this Lease, Lessee shall have the option to renew at the end of
the initial term for an additional term of five years, and shall have a
similar right of renewal for two additional five-year renewal terms. This
right of renewal shall be subject to the right and option of Lessor requiring
Lessee to purchase the Property as Lessor's right is described in the
Paragraph next below. In order to exercise any renewal option, Lessee shall
give written notice to Lessor of Lessee's intention to renew at least six (6)
months prior to the expiration of the then current term.
7. Option to Purchase. Within three (3) months of receipt of notice of
Lessee's intent to renew this Lease for an additional term, as described in
the Paragraph above, Lessor shall have the superior right and option to
require Lessee at the conclusion of the then current term to purchase the
Property or, should Lessee fail to do so, to vacate the premises at the end of
the then existing term, subject to Paragraph 22. The purchase price for the
Property shall be $100,000 per acre during the first year of the first lease
renewal term, and shall escalate each year thereafter in accordance with the
annual percentage increase in the Consumer Price Index (as defined below).
Closing for such purchase shall take place on or before the last day of the
then current lease term. Lessee shall pay for the Property at closing by cash,
certified check or wire transfer (at Lessor's option) to Lessor. At closing,
Lessor shall provide good and marketable title, subject to all existing
easements and restrictions of record, by deed of special warranty such as will
be insured at regular rates by a title insurer duly authorized to issue
insurance in Delaware. In the event Lessor cannot provide such title (for any
reason other than the fault of Lessee), Lessee shall have the option of taking
such title as Lessor can give without reduction in price, declaring this Lease
null and void with no further rights of any kind under this Lease, or
continuing in possession of the Property as Lessee in the same manner as if
Lessor had not exercised its option to require Lessee to purchase the Property
until such time an Lessor can give good and marketable title (except for any
reason the fault of Lessee) in which case, Lessor can exercise its option and
closing shall occur within three months receipt of notice from Lessor to
Lessee that good title can now be given or Lessee shall then vacate the
property subject to Paragraph 22.
"Consumer Price Index" means the Consumer Price Index for Urban Wage Earners
and Clerical Workers (Revised Series) (CPI-W) All Items, (1967 equals 100) of
the United States Bureau of Labor Statistics. If the Consumer Price Index
shall become unavailable to the public because publication is discontinued, or
otherwise, the parties will substitute therefor the closest successor index as
identified by the United States Department of Labor, or if no such successor
exists, a comparable index based upon changes in the cost of living or
purchasing power of the consumer dollar published by any other governmental
agency or, if no such index shall be available, then a comparable index
published by a major bank or other financial institution or by a university or
a recognized financial publisher.
8. Portion of Property Retained by Lessor. Lessor shall retain possession
of a portion of the Property identified as Parcel "B" on the attached Exhibit
B and currently utilized by Lessor's salvage business, "so as to provide
Lessor additional time for the orderly termination or relocation of his
business and the removal of fixtures, equipment, inventory, etc. Lessor will
maintain Parcel "B" in compliance with all laws and regulations during the
period of his occupancy. Lessor shall have six months from the date hereof to
vacate Parcel "B", and the existing single family resident structure on the
Property may either be demolished and removed by Lessee, or left intact for
Lessee's use, at Lessee's option.
Lessor shall retain possession of a portion of the Property identified as
Parcel "C" on the attached Exhibit A. Lessor and Lessee shall execute a
separate sublease with respect to this Parcel "C".
9. Utilities. Lessee shall be responsible to pay for all utilities used or
consumed by Lessee. Lessor shall be responsible to pay for any utilities used
or consumed by Lessor. Lessee shall be responsible for acquiring, and hereby
indemnifies Lessor with respect to the cost of, any changes or improvements to
the utilities and their connections necessary for any expansion of Lessee's
business or any improvements to the Property by Lessee.
10. Improvements. Lessee may make any lawful improvements to the Property
without Lessor's prior written consent, provided that any improvements which
may affect a permanent change to the Property itself (including, but not
limited to, the spreading of dirt or soil other than on a temporary basis or
other than in the course of Lessee's normal business operations) shall not be
made without Lessor's prior written consent, which consent will not be
unreasonably withheld. In those circumstances requiring the consent of Lessor,
Lessee shall provide copies of all improvement plans (i.e., architectural or
construction drawings, appropriate environmental information, site plans,
etc.) to Lessor at least ninety (90) days, or such shorter period as may be
necessitated by any governmental requirements, prior to any actual
construction activity together with the name of the proposed general
contractor and construction manager (if any). Lessee shall also provide an
estimate of construction costs, and a construction schedule (including
proposed starting and ending date). Lessor shall have thirty days, or such
shorter period as may be necessitated by any governmental requirements, in
which to either approve or disapprove the intended improvements; Lessor's
failure to so act constitutes approval. All improvements made shall remain the
property of Lessee at the termination of this Lease. Lessee shall not commit
waste with respect to the Property and any improvements of Lessor thereon.
Lessor's consent is specifically not required for the erection of the larger,
70 ton per hour soil remediation plant and incidental facilities to be placed
on the Property by Lessee. Lessor shall assist Lessee in applying for and
obtaining any zoning changes or variance, use, building or other permits
necessary for the construction and/or operation of buildings or other
improvements on the Property. Lessee shall use good faith efforts to provide
Lessor with notice of any improvement costing in excess of $20,000.
11. Permits. Concurrent with the execution of this Lease, Lessor will
provide Lessee with copies of all existing building, use, occupancy, road, and
other permits relating in any way to Lessee's proposed use or occupancy of the
Property, without regard to Lessor's uses of Panel C. Lessee shall promptly
provide to Lessor copies of all permit applications made and all permits
received relating in any way to the Property or the use thereof as such arise
from time to time. Each party shall also provide the other with copies of any
notice of permit violation, suspension, or revocation or any notice of any
statute or regulation violation relating to the use of the Property (including
parcels B or C) within five (5) days' receipt of such notice. If such notice
is verbal or oral, that party shall provide a written summary of such notice
to the other within five (5) days.
12. Insurance. Lessee shall maintain in full force and effect during the
term of this Lease, or any renewal or extension thereof, general public
liability insurance in an amount not less than $1 million for any one
occurrence and having an annual aggregate not less than $1 million and
pollution liability insurance in an amount not less than $1 million for any
one occurrence and having an annual aggregate of not less than $1 million. The
limits of insurance shall be increased at the end of each term and prior to
each renewal term by an amount not less than the percentage increase in the
CPI (as previously defined) for the preceding term; unless, in the event such
coverage is not generally commercially available at such higher amount, then
the highest amount so available; and, if such insurance is not generally
commercially available, then Lessor shall have the option to accept such
coverage as Lessee can supply or require Lessee to purchase the Property in
accordance with Paragraph 7. For purposes of this Paragraph, insurance
coverage shall be deemed not "generally commercially available" if the premium
exceeds ten percent of the face amount of the coverage for reasons unrelated
to the past history or record of Lessee or any of Lessee's affiliates. The
policy (or policies) shall name Lessor as additional insured, and shall be
carried by an insurer authorized to do business in the State of Delaware.
Appropriate certificates of insurance shall be furnished to Lessor to evidence
the issuance of such policies and their coverage. The policy shall provide
that Lessor shall be notified in the event of any cancellation or non-renewals
of such policy (or policies). Each party shall provide notification to the
other in writing, as soon as possible, but in no case later than thirty days
of any claim, demand or action upon either party arising out of or in, or
occurring on or about the Property.
13. Surrender of Premises. Lessee shall, upon the expiration, termination or
cancellation of this Lease, surrender the Property to Lessor in the same
condition as existed at the time of execution of this Lease, reasonable wear
and tear as related to Lessee's use and changes in condition due to acts of,
or the responsibility of, Lessor and his agents excepted. Lessor may direct
Lessee to remove Lessee's property (including but not limited to personal
property and buildings and improvements) from the property upon the expiration
or termination of the Lease. Any property left on the Property by Lessee shall
be considered abandoned and the costs of such removal, if removed by Lessor
within six months of Lessee's surrender, shall be charged to Lessee.
14. Liability. Lessor, his agents, and employees, shall not be liable for
any damage or injury to Lessee, its officers, agents, or employees, or to any
third party coming upon the Property in connection with Lessee's use of the
premises, or for any damage or injury to any goods, chattels, or other
property of Lessee, its officers, agents, or employees caused other than by
the act or omission of Lessor, his agents, employees, heir. or assigns, or any
breach of this Lease by Lessor, including his warranties and representations
herein.
15. Inspection. Lessor, or his designee, shall have the right to enter the
Property upon prior notice during business hour" to ensure compliance with the
terms of this Lease; provided, however, that such action will not interfere
unreasonably with the conduct of Lessee's business.
16. Fire/Casualty. Lessee's obligation (including minimum rent payments)
shall in no way be abated as the result of fire or other casualty to the
Property, unless caused by any act or omission of Lessor, his agents,
employees, heirs or assigns, or any breach of this Lease by Lessor including
his representations and warranties herein.
17. Cancellation/Termination. This Lease shall be subject to immediate
cancellation by Lessor in the event Lessee shall:
(a) be in arrears in the payment of the whole or any part of any amount due
hereunder for a period of fifteen (15) days after receipt of written notice
from Lessor or its designee that such payments are due;
(b) be in default in the performance of any covenant, term or condition of
this Lease and such default continues for a period of thirty (30) days after
receipt from Lessor, or its designee, of written notice of such default;
however, if it is not reasonably possible to cure such default within thirty
(30) days, then the time period for curing the default shall be extended to
provide that the default is cured as expeditiously as practicable by actions
undertaken diligently and in good faith;
(c) file a voluntary petition in bankruptcy or any petition for relief under
any section of the bankruptcy laws of the United States; make any assignment
for the benefit of creditors; be the subject of an involuntary petition in
bankruptcy which is not dismissed within 120 days of its filing; have
appointed a receiver, custodian or trustee for Lessee by any court, or sell
any of its interests under any execution process or other legal process as
ordered by any court.
In the event of breach of this Lease as enumerated hereinabove by Lessee, but
no sooner than the aforementioned cure periods applicable to any such breach,
Lessor may, in addition to all other remedies available at law or equity,
recover possession of the Property and remove Lessee's effects without being
deemed guilty of trespass. Notwithstanding the recovery of possession by
Lessor as a result of Lessee's breach, Lessee shall remain liable to Lessor
for all amounts owing under this Lease payable to the expiration date of the
then current term, or any subsequent term for which Lessee has exercised any
option it may be granted by Lessor. Failure of Lessor to recover the Property
upon the default of Lessee shall not serve to bar or destroy the right of
Lessor to recover the Property or to otherwise exercise any and all of its
rights at law or equity by reason of any subsequent violation of the terms of
this Lease. Lessor shall use his best efforts to mitigate damages by reletting
the Property.
18. Eminent Domain. If all or any part of the Property shall be taken by any
public authority under the power of eminent domain, the term of this Lease
shall cease as to that portion taken, on the date of possession. If such
condemnation and taking prevents or materially interferes with the continuance
of Lessee's business, then from that day, Lessee shall have the right either
to cancel this Lease and declare it null and void, or to continue in
possession of the remainder of the Property under the terms herein. Lessee
shall notify Lessor within ninety (90) days after receipt of notice of any
taxing, of its intention to cancel this Lease; otherwise, the Lease shall
continue in full force and effect on the same terms and conditions herein
provided as to the portion of the Property not taken. The foregoing provisions
of this Paragraph notwithstanding, Lessee, upon receipt of any notice of
taking, may elect to contest such notice by all appropriate lawful means, at
Lessee's expense, and the commencement of the ninety (90) day period
prescribed in the preceding sentence shall be suspended until the date such
contest is resolved and upholds the power of any such public authority to make
such taking, and the extent of the property taken. Lessor shall provide Lessee
a copy of any notice of taking within ten (10) days of Lessor's receipt
thereof, and cooperate as reasonably necessary with Lessee in any contest of
ouch notice undertaken by Lessee. Lessee shall not have the right to seeing or
receive and portion of any eminent domain award for taking of any portion of
the Property which is not material to the use of Property by Lessee.
19. Notice. Any notice required herein shall be given by registered or
certified mail, postage prepaid, addressed, if to Lessor, at:
George Dalphon, Sr.
261 Blackbird Greenspring Road
Smyrna, DE 19977
with a copy to Lessor's counsel:
David B. Ripsom, Esquire
Duane, Morris & Heckscher
P.O. Box 195
Wilmington, DE 19899
and if to Lessee, at:
Clean Earth of New Castle, Inc.
94 Pyles Lane
New Castle, DE 19720
with a copy to Lessee's counsel:
W. Scott Staruch, Esquire
Laws, Staruch and Piscarick
1604 N. Second St.
Harrisburg, Pa 17102
Notice is considered to have been given upon the date mailed; the time within
which any action must be taken by Lessor or Lessee in response to any notice
shall commence to run on the date such notice in actually received by such
party.
20. Holdover Tenancy. In the event that Lessee continues in possession of
the Property beyond the expiration, cancellation or termination of this Lease,
or any renewals or extensions thereof, without Lessor's consent, such tenancy
shall be presumed to be a tenancy from month-to-month and Lessee shall pay
rent equal to 1/2 times the monthly rent then pertaining plus any charges then
owing, but nothing in this Paragraph shall be construed as consent by Lessor
to such possession of the Property by Lessee beyond the term of this Lease. If
the notice prescribed by Paragraph 6 is not given, and Lessee holds possession
of the premises after the expiration of the initial term of this Lease, or any
renewal or extension thereof, with Lessor's written consent, a month-to-month
tenancy shall be created at a rent equal to the monthly rent and other charges
then payable, until such time as a new contract between the parties has been
executed or negotiations for ouch have ceased.
21. Hazardous Substances and Materials.
(a) Lessor represents and warrants to Lessee that there are no hazardous
substances, on, under or arising from the Property.
(b) During the term of this Lease, neither party shall suffer, allow, permit
or cause:
(i) The installation of any underground storage tanks for the purpose of
holding petroleum products or hazardous substances either on the Property; and
(ii) The accumulation of tires, spent batteries, debris or other solid wastes
on the Property except as may be lawfully permitted in the course of Lessee's
soil remediation business and rubbish placed in designated containers
scheduled for normal, scheduled disposal in accordance with all applicable
law; and
(iii) The generation, accumulation, storage, possession, release or threat of
release of "hazardous substances", "pollutants", "hazardous waste" or "toxic
materials" as those terms are used in Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Sections 9601,
et seq., as amended, the Toxic Substance Control Act (or any regulations
promulgated under the foregoing) or any other present or future federal, state
or local law, ordinance, rule or regulation, including extremely flammable
substances, explosives, radioactive materials and petroleum/petroleum products
(collectively, "Hazardous Substances"); provided, however, the foregoing
prohibition shall not be applicable to (i) normal and reasonable amounts of
cleaning and pest control supplies reasonably necessary for maintenance of the
premises so long as such materials are properly, safely, and lawfully stored
and used by Lessee or (ii) de minimis amounts of leaked or spilled petroleum
products from the normal operation of motor vehicles; and (iii) as may be
lawfully permitted in the course of Lessee's business.
(iv) The use of Property for any industrial, manufacturing or landfill
purposes except as expressly permitted by this Lease.
(c) Each party shall notify the other immediately upon learning that any
duty of either described in subparagraph (b) of this Paragraph has been
violated, that there has been a release, discharge or disposal of any
Hazardous Substance on a part of the Property, that radon gas or urea
formaldehyde has been detected on or in the Property, or that the Property is
subject to any third party claim or action, or threat thereof, because of any
environmental condition in or originating from the Property or arising in
connection with Lessor or Lessee's operations at the Property. Each party
shall promptly provide the other with copies. of all correspondence to or from
third parties regarding such claims or action. or regarding environmental
conditions in or originating from either party's operations on the Property.
In the event of a release, leaking, spilling or deposit (collectively "leak")
of any Hazardous Substance on, in or from the Property caused by Lessor or
Lessee, such party shall immediately cause complete remediation of such leak.
Lessor shall have the right, but not the obligation except as otherwise set
forth in this Paragraph, to enter the Property and remediate any environmental
condition on the Property to comply with all laws, regulations and ordinances
during which time Lessee shall not be entitled to any abatement of rent,
except for abatement for environmental conditions caused by Lessor (Lessor
shall seek to cause minimal disruption to Lessee's business). Lessor and
Lessee shall be responsible to remediate any environmental conditions
occurring on that portion of the Property occupied by each regardless of
whether such conditions are caused by third parties or acts of God, provided,
however, that Lessor shall be responsible to remediate any environmental
conditions caused by acts or conditions off the Property such as but not
limited to off-property ground water seepage or migration.
At the expiration or sooner termination hereof, Lessee shall return the
Property to Lessor in substantially the same condition as existed on the date
of commencement hereof or the date Lessee took possession of the Property,
whichever is earlier, free of any Hazardous Substance in, on, or from the
Property to the extent of Lessee's obligation under this Paragraph.
(d) Lessee shall promptly provide to Lessor copies of all quarterly
monitoring well reports and other environmental monitoring data received or
obtained by Lessee.
22. Security for Environmental Obligations. As security for Lessee's
environmental obligations hereunder, Lessee's agrees that:
(a) Lessee shall not in any event remove its soil remediation plant from the
Property upon the expiration or termination of this Lease until two (2) months
thereafter, except that Lessees will remove same as soon as practical upon
Lessor's request to do so at an earlier time;
(b) If Lessor advises Lessee, by a notice setting forth its full reasons
with supporting detail, at any time prior to expiration of the time in (a)
above that Lessor has reason to believe that Lessee is responsible for either
the cause or remediation of an environmental condition, then Lessee shall not
remove the plant until such time as Lessor advises Lessee, or a court of
competent Jurisdiction determines, that Lessee's responsibility as to such
condition has been satisfied or determined not to exist.
(c) Following Lessee's satisfaction of its remedial or other obligations
under Paragraph (b) above, Lessee shall then have two (2) months to remove its
facilities from the Property. During the periods identified in Paragraphs (a),
(b) and (c) hereof, Lessee may also dismantle but shall not operate the
facilities nor be responsible for rental under the Lease; provided however
this clause does not diminish in any respect any claim for damages that Lessor
may have against Lessee for any environmental condition on the Property.
(d) Prior to one (1) year after expiration or termination of the Lease,
Lessee and Clean Earth shall maintain the net worth requirements set forth in
Paragraph 5 hereof. At the end of such time, such obligation shall expire
unless Lessor advises Lessee, by a notice setting forth its full reasons with
supporting detail, prior to the expiration of such one year time that Lessor
has reason to believe that an environmental condition exists on the Property
caused by Lessee or for which it is responsible to remediate. If Lessor gives
such notice, Lessee and Clean Earth must continue such net worth until Lessor
gives notice, or a court of competent Jurisdiction determines, that Lessee's
responsibility as to such condition has been satisfied or has been determined
not to exist.
(e) Lessee may satisfy its obligations under Paragraph (c) above, and
thereafter remove its plant, by providing a letter of credit in form and
substance satisfactory to Lessor, or cash collateral in the amount of $500,000
pending the resolution of such environmental condition.
(f) Lessee may satisfy its obligations under Paragraph (d) above, and
thereafter diminish its net worth by providing guarantees or indemnities by
parties affiliated with Lessee, with such documents being satisfactory in form
and substance to Lessor and with such guaranteeing and indemnifying parties
being financially responsible to Lessor's reasonable satisfaction.
(g) Lessee acknowledges that the provisions of this Paragraph are important
to Lessor, are not remediable by the award of monetary damages and that Lessor
is entitled to specific performance and injunctive relief to obtain the
benefit of these provisions.
23. Best Efforts And Good Faith. Recognizing that the rental depends upon
the success of Lessee's business, Lessee shall operate its business in good
faith using commercially reasonable best efforts.
24. No Assignment/Sublease. Lessee shall not assign, sublet or otherwise
transfer or encumber all or any portion of its interest in this Lease except
with the prior written consent of Lessor, which consent may be withheld in
Lessor's sole discretion.
25. Miscellaneous.
(a) Entire Agreement. This Lease constitutes the entire agreement between
the parties and may only be modified by a writing signed by all of the
parties.
(b) Attorney's Fees. Subject to the applicable terms of the set-off provisions
of this Lease, in any action brought by either party for the enforcement of
the obligations of the other hereunder, the prevailing party shall be entitled
to recover reasonable attorney's fees to the fullest extent permitted by law.
(c) Authority. Each of the parties represents and warrants to the other that
it is fully authorized to enter into this Lease and has taken all necessary
steps and received all requisite approvals necessary to enter into this Lease.
(d) Binding on Successors. This Lease shall benefit and bind the parties
hereto, their respective heirs, personal representatives, successors and
assigns.
(e) Governing Law. This Lease shall be governed and construed by the laws of
the State of Delaware.
(f) Headings. Paragraph headings are inserted for convenience only and shall
not be considered in interpreting and construing this Lease.
(g) Severability. If any term or provision, or any portion thereof, of this
Lease is declared invalid or unenforceable for any reason, the remainder of
this Lease shall not be affected thereby and shall continue to be valid and
enforceable to the fullest extent permitted by law.
(h) Relationship of Parties. Neither party shall act, represent or attempt to
act or represent itself, directly or indirectly or by implication, as agent of
the other. Nothing in this Lease shall be deemed to create any relationship
of principal and agent between the parties.
(i) Construction of Lease. The parties represent that they have discussed,
bargained and negotiated the terms of this Lease and this Lease shall not be
construed against one party or the other merely because one party may have
initially drafted this Lease.
(j) No Conflicts. Each of the parties represents and warrants to the other
that this Lease and the entry into this Lease by the warranting party does not
conflict with any other agreements to which it is a party or by which it is
bound.
(k) No Waiver. Neither the failure of Lessor to insist upon the strict
performance of any of the terms, conditions and covenants herein, nor the
acceptance of any rent or partial rent, shall be deemed a waiver of any rights
or remedies available to Lessor, and such failure or acceptance shall not be
deemed a waiver of any subsequent or continuing breach or default in the
terms, conditions and covenants herein contained.
26. Representations and Warranties of Lessor. Lessor represents and warrants
that as of the date hereof: he has sole fee simple ownership of the Property;
he has complied with all material laws, rules, regulations, statutes,
ordinances, permits and other instruments affecting the Property or his use
thereof during the period of his ownership, and will continue to do so; there
are no actions, suits, or proceedings pending or threatened against Lessor or
affecting the Property at law or in equity or before any federal, state,
municipal, or other governmental agency or instrumentality, domestic or
foreign, nor is Lessor aware of any facts that might result in any such suit
or proceeding; all documents and records provided to Lessee by Lessor,
heretofore or hereafter, concerning the Property, are true and complete to the
best of Lessor's knowledge with respect to the information contained therein;
Lessor has in all material respects duly filed all federal, state and local
tax returns required to be filed by him and has paid all federal, state and
local taxes required to be paid with respect to the periods covered by such
returns, and Lessor has not had any tax deficiencies proposed or assessed
against him and has not executed any waiver of statute of limitations on the
assessment or collection of any tax; there are currently natural gas,
electricity, public water, and on-site sewage cervices available to the
Property with capacities adequate for the conduct of the soil remediation
business heretofore conducted on the Property by Atlantic Thermal Soil
Remediation, inc., and Lessor has no reason to believe Braid utility services
will be interrupted, curtailed or otherwise not remain available to Lessee
during the term of this Lease and any renewals thereof; and there are no
underground storage tanks on the Property.
27. No Brokers. Lessor and Lessee represent to one another that the
introduction of Lessor and Lessee and all negotiations relative to this Lease
have been effected and carried on directly between the parties without the
intervention of any broker, finder or other person.
28. Mutual Indemnification.
(a) Lessee shall indemnify and hold harmless Lessor (as well as Lessor's
employees, partners, servants, agents, heirs and assigns) (the indemnified
parties) of and from all liability (Joint or several and including strict
liabilities), claims, actions, penalties, demands, costs, damages and expenses
(including without limitation legal fees), remediation and response costs,
remediation plan preparation costs and any continuing monitoring or closure
costs, incurred or suffered by any indemnified party or asserted by a third
party against any indemnified party, resulting from: (1) any materially
inaccurate representation made by Lessee in or under this Lease; (2) material
breach of any of the warranties made by Lessee in or under this Lease; (3)
material breach or default in the performance by Lessee of any of the
covenants to be performed by it under this Lease; (4) any debts, liabilities
or obligations of Lessee, whether accrued, absolute, contingent or otherwise,
due or to become due; (5) the conduct of Lessee's business; (6) Lessee's use
or possession of the Property; (7) any past, present or future act or omission
of Lessee whether or not such act or omission constituted or constitutes a
violation of law, regulation, ordinance, permit, license or otherwise; this
indemnification provision is to be construed liberally in favor of Lessor and
is expressly intended to include all liability (joint or several and including
strict liabilities), claims, actions, penalties, demands, costs, damages and
expenses (including without limitation legal fees), remediation and response
costs, remediation plan preparation costs and any continuing monitoring or
closure costs, incurred or suffered by any indemnified party, resulting from
any act or omission of Lessee.
(b) Lessor shall indemnify and hold harmless Lessee (as well as Lessee's
officers, directors, employees, shareholders, agents, servants, successors and
assigns) (the "indemnified parties") of and from all liability (joint or
several and including strict liabilities), claims, actions, penalties,
demands, costs, damages and expenses (including without limitation legal
fees), remediation and response costs, remediation plan preparation costs and
any continuing monitoring or closure costs, incurred or offered by any
indemnified party or asserted by a third party against any indemnified party,
resulting from: (1) any materially inaccurate representation made by Lessor in
or under this Lease; (2) material breach of any of the warranties made by
Lessor in or under this Lease; (3) material breach or default in the
performance by Lessor of any of the covenants to be performed by it under this
Lease; (4) any debts, liabilities or obligations of Lessor whether accrued,
absolute, contingent or otherwise, due or to become due, except those
obligations specifically assumed by Lessee in this Lease or any documents
executed pursuant hereto; (5) the conduct of Lessor'- business; (6) the
condition of the Property except for conditions caused by Lessee; (7) Lessor's
use or possession of any portion of the Property; (8) any past, present or
future act or omission of Lessor whether or not such act or omission
constituted or constitutes a violation of law, regulation, ordinance, permit,
license or otherwise; this indemnification provision $s to be construed
liberally in favor of Lessee and is expressly intended to include all
liability (joint or several and including strict liabilities), claims,
actions, penalties, demands, costs, damages and expenses (including without
limitation legal fees), remediation and response costs, remediation plan
preparation costs and any continuing monitoring or closure costs incurred or
suffered by any indemnif$ed party or asserted by a third party against any
indemnified party, resulting from any act or omission of Lessor or the
condition of the property, except for conditions caused by Lessee.
(c) Notice and Defense. The indemnified party shall notify the indemnifying
party promptly in writing of any claim for which the indemnified party intends
to seek indemnification hereunder, stating, to the extent known, the nature
and basis of such claim and the amount thereof. The indemnifying party
thereafter shall have the right, by notice to the indemnified party within 15
days after receipt of such notice, to conduct at its own expense, through
counsel of its choosing reasonably approved by the indemnified party, the
defense, settlement and compromise of such claim; provided that, in conducting
such defense, settlement and compromise (i) the indemnifying party shall not
permit to exist any lien, encumbrance or other adverse charge upon any asset
or business of the indemnified party, (ii) the indemnifying party shall cause
its counsel to consult with the indemnified party and its counsel and keep
them fully advised of the progress of the defense, settlement and compromise
and shall take into account the continuing business interests of the
indemnified party, and (iii) the indemnifying party shall promptly reimburse
the indemnified party for the full amount of any liability resulting from such
claim and any defense, settlement or compromise thereof and all related costs
and expenses incurred by the indemnified party, except to the extent otherwise
provided in the next sentence. If the indemnifying party elects to conduct the
defense of such claim, the indemnified party shall cooperate with the
indemnifying party in connection therewith and shall be entitled to
participate in the defense thereof and to appoint counsel for that purpose,
except that the cost of any such participating counsel shall be solely for the
account of the indemnified party and the indemnifying party shall have no
responsibility therefor. So long as the indemnifying party is contesting any
such claim in good faith in accordance with the foregoing requirements, the
indemnified party shall not pay or settle any such claim. Notwithstanding the
foregoing, the indemnified party may pay or settle any such claim at any time,
provided that the indemnified party waives any right to indemnity therefor by
the indemnifying party.
If the indemnifying party does not notify the indemnified party within 15
days; after the receipt of the indemnified party's notice of any such claim
that it elects to undertake the defense of such claim, the indemnified party
shall have the right to defend, settle or compromise the claim in the exercise
of its exclusive discretion; provided, however, that the indemnifying party
shall have the right to participate in the defense of such claim at its own
expense. The indemnifying party shall promptly reimburse the indemnified party
for the full amount of any liability resulting from such claim and any
defense, settlement or compromise thereof and all related costs and expenses
incurred by the indemnified party or, in the alternative, such amounts may be
deducted from any sum under this Lease or otherwise to due the indemnifying
party from the indemnified party.
(d) The mutual indemnification provided by this Paragraph shall survive
expiration or earlier termination of this Lease.
29. Governmental Action. The parties recognize that the business to be
conducted by Lessee on the Property is subject to governmental action over
which the parties have no control (e.g., legislation, regulations, executive
orders, judicial determinations, etc.). Thus the parties agree that the
absence of any adverse governmental action is a condition of Lessee's
obligations under this Lease and any subsequently executed agreements among
them. For purposes of this provision, adverse governmental action shall mean
any governmental action, legislative, executive, judicial or otherwise (but
not including eminent domain which does cause a termination of this Lease), at
any level of government, which would prevent or materially impair Lessee's
ability to legally and economically conduct on the Property its intended soil
remediation business, specifically including the full operation of a 70 ton
per hour soil remediation plant placed thereon by Lessee or any successor
plant approved by Lessor; provided however that this right of termination
shall not apply to matters which Lessee can correct within the above legal and
economic parameters, or are the result of Lessee's own conduct or financial
condition or that of any of its affiliates. In the event of adverse
governmental action, Lessee may terminate this Lease as of that time, or,
alternatively, may propose alternate lawful use(s) of the Property, as to
which Lessor will not unreasonably object, and the rent payable by Lessee to
Lessor shall be adjusted by agreement as necessary to reflect a commercially
reasonable rental for such alternate use(s) on the Property.
30. Contest Of Local Requirements. Lessee shall have the right, after prior
written notice to Lessor, to contest the validity of any legal requirements
imposed or sought to be imposed upon Lessee by any governmental agency, by
appropriate legal proceedings, provided Lessor shall not be subject to any
criminal or civil liability a. a result of any legal contest. Lessee shall
indemnify and hold Lessor harmless from all loss, claims, damages, penalties
and expenses, including attorney's fees, incurred as a result of any such
contest.
31. Quiet Enjoyment. Lessor covenants and agrees that Lessee, on payment of
the rent and other charges provided for in this Lease, and fulfillment of its
obligations under the covenants and conditions of this Lease, shall lawfully
and quietly hold, occupy, and enjoy the Property during the term of this Lease
and all renewals thereof without any interference from anyone claiming through
or under Lessor.
32. Remediation Plants. Lessee agrees that it shall not remove its
Thermotech soil remediation plant currently on the Property until the issuance
of an operating permit by the State of Delaware, Department of Natural
Resources and Environmental Control for a 70 ton per hour soil remediation
plant on the Property. Subject to the terms of Paragraph 23, Lessee will not
remove said larger plant from the Property for at least seven (7) years from
the date of commencement of its operation unless such plant becomes inviable
legally or economically, when such plant is considered on an independent basis
without regard to the operations or location of other facilities of Lessee or
any of its affiliates. Lessee will use its best efforts to extend the larger
plant's manufacturer's warranties to Lessor.
33. Memorandum Of Lease. As soon as practicable after execution of this
Lease, Lessor and Lessee shall execute, in recordable form, a Memorandum of
Lease, which Lessee may record.
34. Remedies Cumulative. All rights, remedies and privileges of either party
under this Lease, and by law, are cumulative.
IN WITNESS WHEREOF, the parties hereto set their hands and seals the day and
year first above mentioned.
/s/ George Dalphon, Jr. /s/ George Dalphon, Sr. (SEAL)
George Dalphon, Sr.
CLEAN EARTH OF NEW CASTLE, INC.
Attest: [corporate seal]
By: /s/ Scott Stavich By: /s/ R. Molleron
Title: Secretary Title: Chairman
By: /s/ Michael Gebner
Title: Director
CLEAN EARTH, INC.
Attest: [corporate seal]
By: /s/ Scott Stavich By: /s/ R. Molleron
Title: Secretary Title: Director
By: /s/ Michael Gebner
Title: Director
15
LEASE MODIFICATION
This LEASE MODIFICATION, made this 1 day of March, 1995 by and between
Glades Twin Plaza Limited, a Florida Limited Partnership, as Landlord
and Earth Care Products of America, Inc., a Florida Corporation, as
Tenant:
WITNESSETH:
WHEREAS, by Lease bearing date October 18, 1993, Landlord let to Tenant
the following premises and appurtenances:
Approximately 2,470 ft rentable square feet located on the fourth floor
of the office building known as Suite 440W located at 2300 Glades Road,
Boca Raton, Palm Beach county, Florida
for a term of five (5) years commencing on December 1,1993 and ending on
November 30, 1998, to which lease reference is made for all and singular
the terms, conditions and provisions thereof; and
WHEREAS, in consideration of the mutual benefits to be derived, the
parties hereto modify said lease as hereinafter set forth;
WHEREAS, Tenant has expanded into adjacent space of 795 rentable square
feet for a total of 3,265 rentable square feet; and
NOW, THEREFORE, it is mutually understood and agreed as follows:
1. Effective March 1, 1995 the Base Rent and CAM shall be as follows
plus applicable Florida sales tax (6%):
03/01/95 3,265 @ $8.92 plus CAM $6.65 & Sales Tax = $4,490.52
12/01/95 3,265 @ $9.37 plus CAM Pro Rata & Sales Tax =
12/01/96 3,265 @ $9.83 plus CAM Pro Rata & Sales Tax =
12/01/97 3,265 @ $10.33 plus CAM Pro Rata & Sales Tax =
2. Security Deposit held shall be in the amount of $4,490.52.
3. Provided this Lease is not otherwise in default and has never been
in default, Tenant shall have the option to renew the within Lease at
the same terms and conditions except as to rental rate, tenant
improvements, Operating Expense cap and renewal option, for an
additional term of five (5) years upon giving one hundred eighty (180)
days prior written notice to Landlord.
4. All other Terms and Conditions of the above referenced Lease shall
remain in full force and effect.
5. Waiver of Defenses and Claims. Tenant does hereby confirm and
ratify, that, as of the date hereof, the Lease Agreement is in good
standing, in full force and effect, and that Tenant has no set-offs,
counter claims or cross claims against Landlord.
Page 1 of 2
_<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease
Modification the day and year first above written.
BY:
Landlord: Glades Twin Plaza Limited,
A Florida Limited Partnership
By: /s/ Walter J. Mackey
Walter J. Mackey
Vice President, General Partner
TENANT: Earth Care Products of
America, Inc., a Florida
Corporation
By: /s/ David Farrow
David Farrow
Title: President
<PAGE>
GLADES TWIN PLAZA
STANDARD OFFICE LEASE
THIS LEASE, dated 10/18/93, for purposes of reference only, is made and
entered into by and between GLADES TWIN PLAZA, a registered fictitious
name ("Landlord"), and Earth Care Products of America, Inc., a Florida
Corporation ("Tenant").
WITNESSETH :
Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord
the Premises described in paragraph l (b) below for the term and subject
to the terms, covenants, agreements and conditions hereinafter set
forth, to each and all of which Landlord and Tenant hereby mutually
agree.
1. DEFINITIONS: Unless the context otherwise specifies or requires,
the following terms shall have the meanings herein specified:
(a) The term "Office Center" shall mean the real property described on
"Exhibit A" attached hereto occupied by two buildings designated as the
"East Building" and the "West Buildings, (collectively, the "Buildings")
known as GLADES TWIN PLAZA, located at 2300 Glades Road, Boca Raton,
Florida.
(b) The Term "Premises" shall mean the portion of the Office Center
located in the East Building or West Building as specified in the Basic
Lease Information which is outlined in red on the floor plan(s) attached
hereto as "Exhibit C."
(c) The term "Operating Expenses" shall mean the amount of all of
Landlord"s costs and expenses incurred in connection with the operation
and maintenance of the Office Center for a particular calendar year as
determined by Landlord in a consistent manner, including by way of
illustration and not limitation: all general real estate taxes and all
special assessments levied against the Office Center (hereinafter called
"real estate taxes"), other than penalties for late payment; costs and
expenses of contesting the validity or amount of real estate taxes;
insurance premiums, water, sewer, electrical and other utility charges
other than the separately billed electrical and other charges paid by
Tenant as provided in this Lease; service and other charges paid in
connection with the operation and maintenance of the elevator and the
heating, ventilation and air conditioning system; cleaning and other
janitorial services; tools and supplies repair costs; landscape
maintenance costs; security services; licensee, permit and inspection
fees; management fees; wages and related employee benefits payable for
the maintenance and operation of the Office Center; and in general all
other costs and expenses which would, under generally accepted
accounting principles, be regarded as operating and maintenance costs
and expenses, including those which would normally be amortized over a
period not to exceed five (5) years. Operating Expenses shall also
include the cost or portion thereof reasonably allocable to the Office
Center, of any capital improvement made to the Office Center by Landlord
after the date of this Lease which is required under any governmental
law or regulation that was not applicable to the Office Center at the
time it was constructed, with such cost being amortized over such period
of time and in such manner as Landlord shall reasonably determine,
together with interest on such cost or the unamortized balance thereof
at the rate of twelve percent (12%) per annum.
(d) The term "Rent" shall mean the sum of the Base Rent, as defined in
Section 3 (a) hereof, "Operating Expense Reimbursement" as defined in
Section 3 (a)(2) hereof, and any other additional rent as specified
herein.
(e) The term "Tenant"s Percentage Share" shall mean the percentage
figure specified in the Basic Lease Information. Landlord and Tenant
acknowledge that Tenant"s Percentage Share has been obtained by dividing
the Rentable Area of the premises, as specified in the Basic Lease
Information, by the total Rentable Area of the Buildings, which Landlord
and Tenant agree is 99,874 square feet, and multiplying such quotient by
100,
- -1-
:
2. TERM; COMPLETION OF IMPROVEMENTS: The term of this Lease shall
commence and, unless terminated as hereinafter provided, shall end on
the dates respectively specified In the Basic Lease Information. If
Landlord, for any reason whatsoever, cannot deliver possession of the
Premises to Tenant at the commencement of said term, as above specified,
this Lease shall not be void or voidable, nor shall Landlord be liable
to Tenant for any loss or damage resulting therefrom, but in that event,
subject to any contrary provisions In "Exhibit B" attached hereto,
rental shall be waived for the period between the commencement of said
term and the time when Landlord can deliver possession.
(b) In the event the Premises are ready for occupancy prior to the date
set forth in the Basic Lease Information for the commencement of the
term of the Lease, Tenant shall have the right to take early occupancy
of the Premises on such date as Landlord and Tenant shall agree, and
Tenant shall occupy the Premises under the terms, conditions and
provisions of this Lease until the term of the Lessee shall commence.
Notwithstanding the foregoing provisions of this paragraph 2 above. the
term of the Lease shall commence on the first day of the month following
that in which possession is given.
3. RENT:
(a) Tenant shall pay in advance on the first day of each month during
the term hereof the following sums:
(i) Base Rent.
(A) Initial Base Rent. The Base Rent payable during the first twelve
(12) month period from the commencement of the term shall be the sum
specified in the Basic Lease Information as the Initial Base Rent. If
Tenant"s possession commences on other than the first day of the month,
Tenant shall occupy the Leased Premises under the terms, conditions and
provisions of this Lease, and the pro rata portion of the monthly rent,
for said month, shall be paid, and the term of this Lease shall commence
on the first day of the month following that in which possession is
given.
<PAGE>
- -2-
(ii) Operating Expense Reimbursement. Tenant agrees to pay as
Operating Expense Reimbursement, prorated {or that part of the term
within the applicable calendar year, Tenant"s Percentage Share of the
total amount of the annual Operating Expenses.
Payment of Tenant"s Percentage Share of Operating Expenses. Tenant"s
Percentage Share of Operating Expenses for each calendar year (herein
referred to as Annual Operating Expense Reimbursement) shall be
estimated annually by Landlord and written notice thereof shall be given
to Tenant prior to the beginning of each calendar year. Tenant shall
additionally pay to Landlord each month at the same time the monthly
installment of Base Rent is due, an amount equal to one-twelfth (1/12th)
of the estimated Annual Operating Expense Reimbursement. The estimated
Annual Operating Expense for the calendar year that includes the Lease
Commencement date and the Tenant"s corresponding estimated Annual
Operating Expense Reimbursement is indicated in the Basic Lease
Information.
Increases in Estimated Annual Operating Expense Reimbursement. If real
estate taxes, the cost of utility or Janitorial services, or other
Operating Expenses increase during a calendar year, Landlord may
increase the estimated Annual Operating Expense Reimbursement during
such year by giving Tenant written notice of that effect, and thereafter
Tenant shall additionally pay to Landlord, in each of the remaining
months of such year, an amount equal to the amount of such Increase in
the estimated Annual Operating Expense Reimbursement divided by the
number of months remaining in such year.
Adjustment to Actual Annual Operating Expense Reimbursement. After the
end of each calendar year, Landlord shall prepare and deliver to Tenant
a statement showing Tenant"s actual Annual Operating Expense
Reimbursement, determined by multiplying Tenant"s Percentage Share by
the actual Operating Expenses for the calendar year just ended. Within
thirty (30) days after receipt of the aforementioned statement, Tenant
shall pay to Landlord, or Landlord will credit against the next rent
payment or payments due from Tenant, as the case may be, the difference
between tenant"s actual Annual Operating Expense Reimbursement for the
preceding calendar year and the estimated amount paid by Tenant during
such year. If this Lease shall commence, expire or be terminated on any
date other than the last day of a calendar year, then Tenant"s Annual
Operating Expense Reimbursement for such partial calendar year shall be
prorated on the basis of the number of days during the year this Lease
was in effect in relation to the total number of days in such year.
Improved Operating Efficiency. If Landlord shall, at any time after the
Commencement Date, install a laborsaving device or other equipment,
which improves the operating efficiency of any system within the
Building (such as an energy management computer system) and thereby
limits Operating Expenses or the cost of electricity to operate the
building, or limits future increases in Operating Expenses or electrical
costs, then Landlord may add to Operating Expenses an annual
amortization allowance equal to the costs of such equipment, together
with interest at the rate of twelve percent (12%) per annum on the
unamortized balance thereof, amortized in equal installments over such
period a. Landlord shall reasonably determine; provided, however, that
the amount of such annual amortization allowance and interest shall not
exceed the annual cost or expense limitation attributed by Landlord to
such installed device or equipment, and in no event shall the sum of
Tenant"s Annual Operating Expense Reimbursement plus the Cost of
electricity paid for by Tenant be increased over what it would have been
if such labor saving device or other equipment had not been installed.
(b) Tenant Verification. Tenant or its accountants after giving
Landlord no less than five (5) business days advance written notice
shall have the right to inspect and copy, at reasonable times and in a
reasonable manner
________________________________________________________________________
________________________________________________________________________
_________________________-"3_ _-_
_ _
_<PAGE>
_
_a_t_ _L_a_n_d_l_o_r_d__ s_ _o_f_f_i_c_e_,_ _d_u_r_i_n_g_ _t_h_e_
_t_h_r_e_e_ _(_3_)_ _m_o_n_t_h_ _p_e_r_i_o_d_ _f_o_l_l_o_w_i_n_g_
_t_h_e_ _d_e_l_i_v_e_r_y_ _o_f_ _L_a_n_d_l_o_r_d__ s_
_s_t_a_t_e_m_e_n_t_ _o_f_ _t_h_e_ _a_c_t_u_a_l_ _a_m_o_u_n_t_ _o_f_
_O_p_e_r_a_t_i_n_g_ _E_x_p_e_n_s_e_s_ _s_u_c_h_ _o_f_ _L_a_n_d_l_o_r_d__
s_ _b_o_o_k_s_ _o_f_ _a_c_c_o_u_n_t_ _a_n_d_ _r_e_c_o_r_d_s_ _a_s_
_p_e_r_t_a_i_n_ _t_o_ _a_n_d_ _c_o_n_t_a_i_n_ _I_n_f_o_r_m_a_t_i_o_n_
_c_o_n_c_e_r_n_i_n_g_ _s_u_c_h_ costs and expenses in order to verify
the amounts thereof. If Tenant shall dispute any item or items included
in the determination of Operating Expenses for a particular fiscal year,
and such dispute is not resolved by the parties hereto within seven (7)
months after the statement for such year was delivered to Tenant, then
Landlord or Tenant, provided Tenant has first paid its Annual Operating
Expense Reimbursement including such disputed item or items, may, within
thirty (30) days thereafter, request that a firm of independent
certified public accountants selected by Landlord and reasonably
acceptable to Tenant render an opinion as to whether or not the disputed
item or items may properly be included in the determination of Operating
Expenses for such year; and the opinion of such firm on the matter shall
be conclusive and binding upon the parties hereto. The fees and expenses
incurred in obtaining such an opinion shall be borne by the party
adversely affected thereby; and if more than one item is disputed and
the opinion adversely affects both parties, the fees and expenses shall
be apportioned accordingly. If Tenant shall not dispute any item or
items included in the determination of Operating Expenses for a
particular fiscal year within three months (3) after the statement for
such year was delivered to it, Tenant shall be deemed to have approved
such statement.
(c) Service Charge. If any installment of Base Rent or additional rent
provided for in this Lease, or any part thereof, is not paid by the due
date, it shall be subject to a service charge of one and one-half
percent (1 1/2%) of the unpaid rent due for each month or fraction thereof
(or such lesser percentage a. may be the maximum amount permitted by
law) until paid.
(d) Application of Payments. All sums due and payable pursuant to the
terms and provisions of this Lease shall be payable only in lawful money
of the United States of America which shall be legal tender in payment
of all debts and dues, public and private, at the time of payment, and
shall be applied in the following order of priority:
(i) Charges and expenses resulting from Tenant"s failure to timely
perform its obligations hereunder.
(ii) Operating Expense Reimbursement.
(iii) Additional rent and charges.
(iv) Base Rent including adjustments thereto.
4. USE: The Premises shall be used for general office purposes and no
other. Tenant shall not do or permit to be done in or about the
Premises, nor bring, keep or permit to be brought or kept therein,
anything which is prohibited by or will in any way conflict with any
law, statute, ordinance or governmental rule or regulation now in force
or which may hereafter be enacted or promulgated, or which is prohibited
by the standard form of fire insurance policy, or will in any way
increase the existing rate of or affect any fire or other insurance upon
the Office Center or any of its contents, or cause a cancellation of any
insurance policy covering the Office Center, or any part thereof or any
of its contents. Tenant shall not do or permit anything to be done in or
about the Premises which will in any way obstruct or interfere with the
rights of other tenants of the Office Center, or injure or annoy them,
or use or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises or commit or suffer to
be committed any waste in, on, or about the Premises. At no time during
any given work day will the number of tenants, employees, agents or
contract services personnel (collectively "Staff Personnel") on the
Premises exceed on a continuing day to day basis the number of Staff
Personnel specified in the basic Lease Information. A breach of this
limitation of Staff Personnel is a basis for Landlord"s termination of
this Lease.
5. SERVICES :
(a) Landlord shall use good faith efforts to maintain the public and
common areas of the Office Center, including lobbies, stairs, elevators,
corridors and restrooms, the windows in the Buildings, the mechanical,
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plumbing and electrical equipment serving the buildings, and the
structure itself in reasonably good order and condition except for
damage occasioned by the act of the Tenant, which damage occasioned by
the act of the Tenant, which damage shall be repaired by Landlord at
Tenant"s expense.
and Sat. 8:00 AM to 12:00 Noon
(b) Landlord shall use good faith efforts to furnish the Premises with
(1) electricity for lighting and the operation of office machines, (2)
heat and air conditioning to the extent reasonably required for the
comfortable occupancy by Tenant in its use of the Premises during the
period from 8:00 AM to 6:30 PM Monday thru Friday except for Office
Center Holidays or such shorter period and such temperature settings as
may be prescribed by any applicable policies or regulations adopted by
any utility or governmental agency, (3) elevator service, (4) lighting
replacement (for building standard lights), (5) restroom supplies and
(6) janitor service Monday through Friday except Holidays Landlord shall
not be in default hereunder or be liable for any damage directly or
indirectly resulting from (i) the installation, use or interruption of
use of any equipment in connection with the furnishing of any of the
foregoing services (ii) failures to furnish or delay in furnishing any
such services when such failure or delay is caused by accident or any
condition beyond the reasonable control of Landlord or by the making of
necessary repairs or improvements to the Premises or to the Office
Center, or (iii) the limitation, curtailment, rationing or restrictions
on use of water, electricity, gas or any other form of energy serving
the Premises or the Office Center. Landlord shall use reasonable
efforts diligently to remedy any interruption in the furnishing of such
services.
(c) Whenever heat generating equipment or lighting other than
building standard lights are used in the Premises by Tenant which affect
the temperature otherwise maintained by the air conditioning system,
Landlord shall have the right, after notice to the Tenant, to install
supplementary air conditioning facilities to the Premises, and the cost
of such facilities and modifications shall be borne by Tenant. Tenant
shall also pay as additional rent the cost of providing all cooling
energy to the Premises in excess of that required for normal office use
or during hours requested by Tenant when air conditioning is not
otherwise furnished by Landlord. If office use in the Office Building,
or if Tenant installs equipment requiring power in excess of that
required for normal desk-top office equipment or normal copying
equipment, Tenant shall pay for the cost of such excess power as
additional rent together with the cost of installing any additional
risers or other facilities that may be necessary to furnish such excess
power to the Premises.
(d) Electricity for lighting and the operation of office
machines, and heat and air conditioning at times not specified above
shall be furnished only at the request of Tenant, who shall request such
service at least twenty-four (24) hours in advance and who shall bear
the entire cost thereof. The cost of such additional service shall be
reimbursed monthly with Base Rent.
(e) In the event Tenant requires such excess electricity, Landlord may
require such electrical usage to be separately metered and Tenant shall
be billed directly by the utility company or by the Landlord applying
the average cost for the Building each month. The cost of installing
such separate meters shall be paid by Tenant.
6. TAXES PAYABLE BY THE TENANT. In addition to the monthly rental
and other charges to be paid by Tenant hereunder; (a) Tenant shall
reimburse Landlord upon demand for any and all taxes paid (other than
net income taxes) whether or not now customary or within the
contemplation of the parties hereto upon, measured by or reasonably
attributable to the cost or value of Tenant"s equipment, furniture,
fixtures and other personal property located in the Premises or by the
cost or value of any leasehold improvement made in or to the Premises by
or for the Tenant, other than building standard tenant improvements made
by Landlord, regardless of whether title to such improvements shall be
in Tenant or Landlord; (b) Tenant agrees to pay monthly to the Landlord
any sales, use or other tax, excluding State and/or Federal Income Tax,
now or hereafter imposed upon any and all rents or other sums due and
payable hereunder by the United States of America, the State, or any
political subdivision thereof, notwithstanding the fact that such
statute,
- -5-
ordinance or enactment imposing the same may endeavor to impose the tax
on the Landlord.
7. MAINTENANCE, ALTERATIONS, MECHANIC"S LIENS:
(a) Tenant, by its occupancy hereunder, accepts the Premises as being
in good repair and condition. Tenant has no obligation to construct any
improvements. Tenant shall maintain the Premises and every part there of
in good repair and condition, damages by causes beyond the control of
the Tenant, reasonable use, ordinary wear and tear excepted. Tenant,
shall, at its own cost and expense, repair or replace any damage or
injury to all or any part of the Premises caused by Tenant or Tenant"s
agents, employees, invitees, licensees or visitors; provided, however,
If Tenant fails to make the repairs or replacements promptly, Landlord
may, at its option, make the repair or replacements and Tenant shall
reimburse the cost to Landlord on demand.
(b) Tenant shall make no changes in or to the Premises of a material
nature without Landlord"s prior written consent. Subject to the prior
written consent of Landlord, and to the provisions of this paragraph,
Tenant, at Tenant"s expense, and for Landlord"s benefit, may make
alterations, installations, additions or improvements which are
non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the Premises by using
contractors or mechanics first approved by Landlord. All fixtures,
paneling, partitions, railings and like installations, installed in the
Premises at any time, either by Tenant or by Landlord In Tenant"s
behalf, shall become the property of Landlord and shall remain upon and
be surrendered with the Premises unless Landlord, by notice to Tenant no
later than twenty (20) days prior to the date fixed as the termination
of this Lease, elects to have them removed by Tenant, in which event,
the same shall be removed from the Premises by Tenant forthwith, at
Tenant"s expense. Nothing in this paragraph shall be construed to
prevent Tenant"s removal of trade fixtures, but upon removal of any such
trade fixtures from the Premises, or upon removal of other installations
as may be required by Landlord, Tenant shall immediately, and at its
expense, repair and restore the Premises to the condition existing prior
to installation and repair any damage to the Premises or the Office
Building due to such removal. All property permitted or required to be
removed by Tenant at the end of the term remaining in the Premises,
after Tenant"s removal, shall be deemed abandoned and may, at the
election of Landlord, either be retained as Landlord"s property, or may
be removed from the Premises by Landlord at Tenant"s expense. Tenant
shall, before making alterations, additions. installation~ or
improvements, at its expense, obtain all permits, approval and
certificates required by any governmental or quasi-governmental bodies
and (upon completion) certificates of final approval thereof and shall
deliver promptly duplicates of all such permits, approvals and
certificates to Landlord and Tenant agrees to carry workman"s
compensation, general liability, personal and property damage insurance
as Landlord may require. Tenant agrees to obtain and deliver to
Landlord, written and unconditional waivers of mechanic"s liens upon
Tenant"s interest in the Premises and real property, and any mechanic"s
liens filed in contravention of this agreement upon the interest of
Landlord, for all work, labor and services to be performed and materials
to be furnished in connection with such work, signed by all contractors,
subcontractors, materialman and laborers to become involved in such
work. Nothing herein shall be construed to give Tenant or any
contractor, subcontractor, materialmen or laborer any right to a
mechanic"s lien upon Landlord"s interest in the real property. Tenant
shall at the and of the term hereof, surrender to Landlord the Premises
and all alterations, additions and improvements thereto in the same
condition as when received, ordinary wear and tear and damage by fire,
Act of God or the elements excepted. Landlord has no obligation and has
made no promise to alter, remodel, improve, repair, decorate or paint
the Premises or any part thereof, except as specifically herein set
forth. No representations respecting the condition of the Premises, or
the Buildings have been made by Landlord to Tenant, except as
specifically herein set forth.
8. DAMAGE OR DESTRUCTION:
(a) If by fire, or other casualty, the Premises are totally destroyed,
or the building in which the Premises is located is partially damaged or
destroyed to the extent of fifty percent (50%) or more of the
replacement cost thereof, even though the Premises may not be damaged,
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Landlord shall have the option of terminating this Lease, or any renewal
thereof, by serving written notice upon the Tenant within thirty (30)
days from the date of the casualty, and any prepaid rent shall be
prorated as of time of destruction, and unearned rent refunded without
interest.
(b) If by fire, or other casualty, the Premises are damaged or
partially destroyed to the extent of twenty-five percent (25%) or more
of the replacement cost thereof, and the provisions of (a) above are not
applicable, then (1) if the unexpired term of the Lease is less than one
(1) year, excluding any unexercised renewal option, Landlord may either
terminate this Lease by serving written notice upon Tenant within thirty
(30) days of the date of destruction, or Landlord shall restore the
Premises, or (2) if the unexpired term of the Lease is more than one (1)
year, including any exercised renewal option, Landlord shall restore the
Premises.
(c) If by fire, or other casualty, the Premises are damaged, or
partially destroyed to the extent of less than twenty-five percent (25%)
of the replacement cost thereof, and the provisions of (a) above are not
applicable, Landlord shall restore the Premises.
(d) In the event of restoration by Landlord, all rents paid in advance
shall be proportioned as of the date of damage or destruction, and all
rent thereafter accruing shall be equitably and proportionately adjusted
according to the nature and extent of the destruction or damage, pending
completion of rebuilding, restoration or repair. In the event the
destruction or damage is so extensive as to make it unfeasible for the
Tenant to conduct Tenant"s business on the Premises, the rent shall be
completely abated until the Premises are restored by the Landlord, or
until the Tenant resumes use and occupancy of the Premises, whichever
shall first occur. The Landlord shall not be liable for any damage to,
or any inconvenience or interruption of business of the Tenant, or any
of its employees, agents or invitees occasioned by fire or other
casualty.
(e) If the Premises are to be repaired under this section, Landlord
shall repair at its cost, any injury or damage to the building in which
the Premises is located and building standard tenant improvements in the
Premises. Tenant shall pay the cost of repairing any other tenant
improvements in the Premises, and shall be responsible for carrying such
casualty insurance as it deems appropriate with respect to such other
tenant improvements.
SUBROGATION: Landlord and Tenant shall each obtain from their respective
insurers under all policies of fire, theft, public liability, workman"s
compensation and other insurance maintained by either of them at any
time, during the term hereof, insuring or covering the Office Center, or
any portion thereof, or operations therein, a waiver of all rights of
subrogation which the insurer of one party might have against the other
party, and Landlord and Tenant shall each indemnify the other against
any loss or expense, including reasonable attorneys" fees, resulting
from the failure to obtain such waiver.
10. INDEMNIFICATION: Tenant hereby waives all claims against Landlord
for damage to any property, or injury, or death of any person in, upon
or about the Premises arising at any time and from any cause other than
by reason of negligence, or willful act of Landlord, its employees or
contractors, and Tenant shall hold Landlord harmless from any damage to
any property, or injury to, or death of any person arising from the use
of the Premises by Tenant, except such as is caused by negligence or
willful act of Landlord, its contractors or employees. The foregoing
indemnity obligation of Tenant shall include reasonable attorneys" fees,
investigation costs and all other reasonable costs and expenses incurred
by Landlord from the first notice that any claim or demand is to be made
or may be made. The provisions of this section 10 shall survive the
termination of this Lease with respect to any damage, injury or death
the cause of which occurred prior to such termination.
11. COMPLIANCE WITH LEGAL REQUIREMENTS: Tenant shall at its sole cost
and expense promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force, or which,
may hereafter be in force, with the requirements of any board of fire
underwriters or other similar body now, or hereafter constituted, with
any direction or occupancy certificate issued pursuant to any law by any
public officer or officers, as well as thee provisions of all recorded
documents affecting the
Premises, insofar as any thereof relate to or affect the condition, use
or occupancy of the Premises, excluding requirements of structural
changes not related to or affected by improvements made by or for Tenant
or by Tenant"s acts.
Assignment and Subletting: Tenant shall have no right to assign or
sublet this lease without the prior consent of Landlord, such consent
not to be unreasonably withheld if the written request for such consent
complies with the provisions of this paragraph. Tenant"s request for
consent to the assignment or subletting shall be accompanied, in a form
acceptable to Landlord, by (a) an unconditional written offer by Tenant
to Landlord to terminate this lease as of the commencement date of the
proposed assignment or sublease, (b) a recent audited financial
statement for the proposed assignee or sub tenant, (c) a written
statement form the assignee or subtenant stating with particularity the
nature of the business intended to be conducted on the Premises, and (d)
the number of officers and employees expected to be located on the
Premises and, (e) an unequivocal assumption of liability by the assignee
or subtenant of the lease with the rental adjusted as follows: Upon such
assignment (or upon subletting any of the Premises covered by this
lease) the then base rent shall be automatically increased to reflect
the then current fair market rental value of the Premises, but in no
event shall the then Base Rent be decreased. Landlord shall have
fifteen (15) days form receipt of (a) through (e) in which to notify
Tenant of Landlord"s consent or refusal to give its consent give notice
of its refusal to give such consent or accept Tenant"s offer to
terminate within said fifteen (15) days, such consent shall be deemed
granted by Landlord.
The terms assignment or subletting, as used in this Lease, shall
include any and all transfers of Tenant"s interest in this lease,
whether voluntary or involuntary, including any lien upon Tenant"s
interest, or any transfer by Tenant, any assignee or subtenant of
Tenant, or by any receiver or trustee with jurisdiction over Tenant, a
subsequent assignee or subtenant or its property.
Any sums or other economic consideration received by Tenant as a result
of such subletting, whether denominated rentals under the sublease or
otherwise, which exceed, in the aggregate, the total sums which Tenant
is obligated to pay landlord under this lease (prorated to reflect
obligations allocable to that portion of the premises subject to such
subtenant) shall be payable to the Landlord as additional rental under
this Lease without affecting or reducing any other obligation of Tenant
hereunder..
Rules. Tenant shall faithfully observe and comply with the rules and
regulations annexed to this lease and, after notice thereof, all
reasonable modifications thereof and additions thereto, form time to
time promulgated in writing by Landlord. Landlord shall not be
responsible to Tenant for the nonperformance by other tenants or
occupants of the Building or any of said rules and regulations, however,
landlord will use its diligent efforts to enforce such rules and
regulations.
14. Entry by Landlord: Landlord may enter the Premises at reasonable
hours to (a) inspect the same, (b) exhibit the same to prospective
purchasers, (c) determine whether Tenant is complying with all its
obligations hereunder, (d) supply janitor service and any other service
to be provided by Landlord to Tenant hereunder, (e) post notices of
nonresponsibility, and (f) make repairs required of Landlord under the
terms hereof or repairs to any adjoining space or utility services or
make repairs, alterations, or improvements to any other portion of the
Office Building; provided, however, that all such work shall be done as
promptly as reasonably possible and so as to cause as little
interference to tenant as reasonably possible. Tenant hereby waives any
claim for damages for any injury or inconvenience to or interference
with Tenant"s business, any loss of occupancy or quiet enjoyment of the
Premises or any other loss occasioned by such entry. Landlord shall at
all times have and retain a key with which to unlock all of the doors
in, on or about the Premises (excluding Tenant"s vaults, safes, and
similar areas designated in writing by Tenant in advance); and Landlord
shall have the right to use any and all means which Landlord may deem
proper to open said doors in an emergency in order to obtain entry to
the premises, and any entry to the Premises obtained by Landlord by any
of said means, or otherwise, shall not under any circumstances be
construed or deemed to be a forcible or
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unlawful entry into or a detainer of the Premises or an eviction, actual
or constructive, of Tenant from the Premises, or any portion thereof.
15. EVENTS OF DEFAULT AND LANDLORD"S REMEDIES: All rights and remedies
of the Landlord herein enumerated in the event of a default, shall be
cumulative and nothing herein shall exclude any other right or remedy
allowed by law,
(a) If any voluntary or involuntary petition or similar proceeding
under any section or sections of any bankruptcy act shall be filed by or
against Tenant, or any voluntary or involuntary proceeding in any court
or tribunal shall be instituted to declare Tenant insolvent or unable to
pay Tenant"s debts, then and in any such event Landlord may, if,
Landlord elects, but not otherwise, and with or without notice of
election, forthwith terminate this Lease, and, notwithstanding any other
provisions of this Lease, Landlord shall forthwith, upon such
termination, be entitled to recover damages in an amount equal to the
present value of the rent, specified in Section 3 of this Lease, for the
remainder of the stated term hereof, less the fair rental value of the
Premises for the residue of the stated term.
(b) If the Tenant defaults in the payment of rent or in the prompt and
full performance of any provision of this Lease (including rules and
regulations) or if the leasehold interest of the Tenant be levied upon
under execution or be attached by process of law, or if the Tenant makes
an assignment for the benefit of creditors, or if a receiver be
appointed for any property of the Tenant, or if the Tenant abandons the
Premises, then and in any such event the Landlord may, if the Landlord
so elects, but not otherwise. upon three (3) days" written notice of
such election, either forthwith terminate this Lease and the Tenant"s
right to possession of the Premises, or without terminating this Lease,
forthwith terminate the Tenant"s right to possession of the Premises,
but the Tenant shall remain liable for damages as permitted by law, and
as provided for herein.
(c) Upon any termination of this Lease whether by lapse of time or
otherwise, or upon any termination of the Tenant"s right to possession
Without termination of the Lease, the Tenant shall surrender possession
and vacate the Premise immediately, and deliver possession thereof to
the Landlord and, without prejudice to any other remedy which Landlord
may have, Tenant does hereby grant to the Landlord in such event, full
and free license to enter into and upon the Premises (by picking locks
and changing locks is deemed necessary by Landlord) with or without
process of law to repossess the Premises, and to expel or remove the
Tenant and any others who may be occupying or within the Premises and to
remove any and all property therefrom, using such force as may be
necessary, without being deemed in any manner guilty of trespass,
eviction or forcible entry or detainer, without relinquishing the
Landlord". rights to rent or any other right given to the Landlord
hereunder, or by operation of law. Except for the three (3) day notice
set forth in (b) above, the Tenant expressly waives the service of any
other demand for the payment of rent or for possession and the service
of any notice of the Landlord"s election to terminate this Lease or to
re-enter the Premises, including any and every form of demand and notice
prescribed by any statute or other law, and agrees that the simple
breach of any covenant or provisions of this Lease, by the Tenant,
shall, of itself, without the service of any notice or demand
whatsoever, permit the exercise by Landlord of any of the remedies
provided to Landlord hereunder.
If the Tenant abandons the Premises, or otherwise entitles the Landlord
to so elect, and the Landlord elects to terminate the Tenant"s right to
possession only, without terminating the Lease, the Landlord may a: the
Landlord"s option enter into the Premises, remove the Tenant"s signs and
other evidences of tenancy, and take and hold possession thereof as in
Paragraph 15" provided, without such entry and possession terminating
the Lease, or release the Tenant, in whole or in part, from the Tenant"s
obligation to pay the rent hereunder {or the full term, and in any such
case the Tenant shall pay forthwith to the Landlord, a sum equal to the
entire amount of the rent specified In Section 3 of this Lease, for the
remainder of the stated term, plus any other sums then due hereunder.
Upon and after entry into possession without termination of the Lease,
the Landlord shall use good faith efforts to relet the Premises, or any
part thereof for the account of the Tenant to any person, firm or
corporation other than the Tenant for such rent, for such time, and upon
such terms as the Landlord, in the Landlord"s sole discretion,
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shall determine, and the Landlord shall not be required to accept any
tenant offered by the Tenant, or to observe any instructions given by
Tenant about such reletting. In the event Landlord has other vacant or
available office space in the Office Building, it shall not be deemed a
breach of good faith for Landlord to favor or give preference to leasing
its other vacant or available office space over the reletting of the
Premises. In any such case, the Landlord may make repairs, alterations
and additions in or to the Premises, and redecorate the same to the
extent deemed by the Landlord necessary, or desirable, and the Tenant
shall upon demand, pay the cost thereof, together with Landlord"s
expenses of the reletting. If the consideration collected by the
Landlord upon any such reletting for the Tenant"s account is not
sufficient to pay monthly the full amount of the rent reserved in this
Lease, together with the cost of repair, alterations, additions,
redecorating and the Landlord"s expenses, the Tenant shall pay to the
Landlord the amount of each monthly deficiency upon demand; and if the
consideration so collected from any such reletting is more than
sufficient to pay the full amount of the rent reserved herein, together
with the costs and expenses of the Landlord, the Landlord, at the end of
the stated term of the Lease, shall account for the surplus to the
Tenant.
(e) The Tenant shall pay upon demand all the Landlord"s costs, charges
and expenses, including the fees of counsel, leasing agents and others
retained by the Landlord, incurred in enforcing the Tenant"s obligations
hereunder as incurred by the Landlord in any litigation, negotiation or
transaction in which the Tenant causes the Landlord to become involved
or concerned.
(f) Tenant hereby irrevocably appoints Landlord as agent and
attorney-in-fact of Tenant, to enter upon the Premises, in the event of
default by Tenant in the payment of any rent herein reserved, or in the
performance of any term, covenant or condition herein contained to be
kept or performed by Tenant, and to remove any and all furniture and
personal property whatsoever situated upon the Premises. Any property of
the Tenant not removed from the Premises after the end of the term,
however terminated, and any and all property which may be removed from
the Premises by the Landlord pursuant to the authority of this Lease or
of law, and to which the Tenant is or may be entitled, may be handled,
removed or stored by Landlord at the risk, cost and expense of Tenant,
and Landlord shall in no event be responsible for the value,
preservation or safekeeping thereof. Tenant shall pay to Landlord, upon
demand, all expenses incurred in such removal and all storage charges
against such property so long as the same shall be in Landlord"s
possession or under Landlord"s control. Landlord shall place such
property in storage for the account of, and at the expense of Tenant,
and if Tenant fails to pay the cost of storing such property after it
has been stored for a period of thirty (30) days or more, Landlord may
sell any or all of such property, at public or, private sale, In such
manner and at such times and places as Landlord in its sole discretion
may deem proper, without notice to or demand upon Tenant for the payment
of any port of such charges or the removal of any of such property, and
shall apply the proceeds of such sale first to the cost and expense. of
such sale, including reasonable attorney"s fees; second. to the payment
of the costs and charges of storing any property; third, to the payment
of any other sums of money which may then or thereafter be due to
Landlord from Tenant under any of the terms hereof; and, fourth, the
balance, if any, to Tenant. The removal and storage of Tenant"s
property, as above provided, shall not constitute a waiver of Landlord"s
lien thereon.
(g) If the term of any lease, other than this Lease, made by the Tenant
for any premises in the Buildings shall be terminated or terminable
after the making of this Lease because of any default by the Tenant
under such, other lease, such fact shall empower the Landlord, at the
Landlord"s sole option, to terminate this Lease by notice to the Tenant.
(h) The Landlord may resort to Any one or more of such remedies or
rights, and adoption of one or more such remedies or rights shall not
necessarily prevent the enforcement as others concurrently or
thereafter.
LANDLORD"S RIGHT TO CURE DEFAULTS: All agreements and provisions to be
performed by Tenant under any of the terms of this Lease shall be at its
sole cost and expense and without any abatement of rental. If Tenant
shall fail to pay any sum of money, other than rental, required to be
paid by it hereunder or shall fail to perform any other act on its part
to be performed
- -10-
hereunder and such failure shall continue for thirty (30) days after
notice thereof by Landlord, Landlord may, but shall not be obligated so
to do, and without waiving or releasing Tenant from any obligations of
Tenant, make any such payment or perform any such other act on Tenant"s
part to be made or performed as in this Lease provided. All sums so paid
by Landlord and all necessary incidental costs shall be deemed
additional rent hereunder and shall be payable to Landlord on demand,
and Landlord shall have (in addition to any other right or remedy of
Landlord) the same rights and remedies in the event of the nonpayment
thereof by Tenant as in the case of default by Tenant in the payment of
rental.
1?, ATTORNEY"S FEES. If, as a result of any breach or default in the
performance of any of the provisions of this Lease, Landlord or Tenant
uses the services of an attorney in order to secure compliance with such
provisions or recover damages therefor, or to terminate this Lease, or
relet Tenant, the prevailing party shall be reimbursed by the other
parry upon demand for any and all reasonable attorney"s foes and
expenses so incurred by the prevailing party.
16. EMINENT DOMAIN: If the whole or any part of the Premises shall be
acquired or condemned by Eminent Domain for any public or quasi-public
use or purposes, then and in that event the term of this Lease shall
cease and terminate from the date of title vesting in such proceeding
and Tenant shall have no claim against Landlord or against the total
award for the value of any unexpired portion of the Lease term. Tenant
shall not be entitled to any part of any award that may be made for such
taking, nor to any damages therefor except that the rent shall be
adjusted as of the date of such termination of this Lease.
19, SUBORDINATION: This Lease, and all of the rights of the Tenant
hereto, are hereby made subject and subordinate at all times to all
ground or underlying leases, including any ground leases entered into by
the Landlord as Tenant thereunder, and to all mortgages which may now or
hereafter affect the real property of which the Premises form a part,
and to all renewals, modifications, consolidations, replacements and
extensions thereof. This clause shall be self-operative and no further
instrument of subordination shall be required by any ground or
underlying lease, Landlord, or mortgagee. Tenant shell execute within
fifteen (15) days from receipt of written request from Landlord any
certificate confirming such subordination that the Landlord may request.
Tenant hereby constitutes and appoints Landlord the Tenant"s
attorney-in-fact, Irrevocably, to execute and deliver such certificate
or certificates for and on behalf of the Tenant. In the event such
ground or underlying lease is terminated or such mortgage is foreclosed
or title conveyed to the mortgagee $n lieu of foreclosure, then at the
sole option of the then fee owner, Tenant will attorn to the then fee
owner.
20. NO MERGER: The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of Landlord terminate all or any existing subleases
or subtenancies, or may at the option of Landlord, operate as an
assignment to it of any or all such subleases or subtenancies.
21. SALE: In the event the original Landlord hereunder, or any
successor owner of the Office Center, shall sell or convey the Office
Center, all liabilities and obligations on the part of the original
Landlord, or such successor owner, under this Lease accruing thereafter
shall terminate, and thereupon all such liabilities and obligations
shall be binding upon the new owner. Tenant agree to attain to such new
owner.
22. SECURITY DEPOSIT: Tenant has deposited with Landlord the sum as
specified in the Basic Lease Information which is an amount equal to
seven months Base Rent together with sales tax thereon, as security for
the faithful performance and observance by Tenant, of the terms,
provisions and conditions of this tease. It is agreed that in the event
Tenant defaults in respect of any of the terms, provisions and
conditions of this Lease, including, but not limited to, the payment of
rent and additional rent, Landlord may use, apply or retain the whole or
any part of the security so deposited to the extent required for the
payment of any rent and additional rent, or any other sum as to which
Tenant is in default`, or for any sum which Landlord may expend or may
be required to expend by reason of Tenant"s default in respect of any of
the terms, covenants and conditions of this Lease, including but not
limited to,
<PAGE>
- -11-
any damages or deficiency in the reletting of the Premises, whether such
damages or deficiency accrued before or after summary proceedings, or
other re-entry by Landlord. In the event that Tenant shall fully and
faithfully comply with all of the terms, provisions, covenants and
conditions of this amount equal to one seventh of the security shall be
applied against the rent due for the last six months of the lease term
and the balance of six (6) months the security shall be returned to
Tenant, without interest, after the date fixed as the end of the Lease,
after delivery of entire possession of the Premises to Landlord. In the
event of a sale of the land and building, of which the Premises form a
part, hereinafter referred to as the Building, or leasing of the
Building, Landlord shall have the right to transfer the security to the
vendee or lessee, and Landlord shall thereupon be released by Tenant
from all liability for the return of such security and Tenant agrees to
look to the new Landlord solely for the return of said security; and it
is agreed that the provisions hereof shall apply to every transfer or
assignment made of the security to a new Landlord. Tenant further
covenants that it will not assign or encumber, or attempt to assign or
encumber, the moneys deposited herein as security, and that neither
Landlord, nor its successors or assigns, shall be bound by any such
assignment, encumbrance, attempted assignment, or attempted encumbrance.
In the event of any bankruptcy or other proceeding against Tenant, it is
agreed that all such security deposit held hereunder shall be deemed to
be applied by Landlord to rent, sales tax and other charges due to
Landlord, for the last month of the lease term, and each preceding
month, until such security deposit is fully applied. No trust
relationship is created herein between Landlord and Tenant with respect
to the deposit.
23. WAIVER: The waiver by Landlord of any agreement, condition or
provision herein contained, shall not be deemed to be a waiver Of any
subsequent breach of the same, or any other agreement, condition or
provision herein contained, nor shall any custom or practice which may
develop between the parties in the administration of the terms hereof
be construed to waive or to lessen the right of Landlord to insist upon
the performance by Tenant in strict accordance with said terms. The
subsequent acceptance of rental hereunder by Landlord shall not be
deemed to be a waiver of any preceding breach by Tenant of an agreement,
condition or provision of this Lease, other than the failure of Tenant
to pay the particular rental so accepted, regardless of Landlord"s
knowledge of such preceding breach at the time of acceptance of such
rental.
24. NOTICES: All notices and demands which may or are required to be
given by either party to the other hereunder, shall be in writing and
shall be deemed to have been fully given when hand delivered or
deposited in the United States mail, certified or registered, return
receipt requested, postage prepaid, and addressed as follows: to
Landlord at the address specified in the Basic Lease Information, or to
such other place as Landlord may from time to time designate in a notice
to Tenant; in the case of Tenant, at the address specified in the Basic
Lease Information or to such other place as Tenant may from time to time
designate in a notice to Landlord. Tenant hereby appoints as its agent
to receive the service of all dispossessory or distraint proceedings and
notices thereunder, the person in charge of or occupying the Premises at
the time, and, if no person shall be in charge or occupying the same,
then such service may be made by attaching the same on the main entrance
of the Premises.
25. ESTOPPEL CERTIFICATE: At any time and from time to time, upon
written request by Landlord, Tenant will no later than fifteen (15) days
from receipt of such request, execute, acknowledge and deliver to
Landlord, a certificate certifying (a) that this Lease is unmodified and
in full force and effect (or, if there have been modifications, that
this Lease is in full Force and effect, as modified, and stating the
date and nature of each modification), (b) the date, if any, to which
rental and other sums payable hereunder have been paid, that no notice
has been received by Tenant of any default which has not been cured,
except as to defaults specified in said certificate, and (d) such other
matters as may be reasonably requested by Landlord. Any such certificate
may be relied upon by a prospective purchaser/mortgagee of the Office
Center or any part thereof.
26. NO LIGHT, AIR OR VIEW EASEMENT: Any diminution or shutting off of
light, air or view by any structure which may be erected on lands
adjacent to
- -12-
the Buildings shall in no way affect this Lease or impose any liability
on Landlord.
27. OTHER EASEMENTS: It is expressly agreed that Tenant does not acquire
any right or easement of the use of any door or passageway in any
portion of the Office Center, or in any area adjoining such Office
Center, except the easement o! necessity for ingress and egress, if any,
in the doors and passageway directly connecting with Premises, provided
however, it is
expressly agreed that the Landlord shall have the right to close or
obstruct any door or passageway into or from or connecting with the
Premises and to interfere with the use thereof, whenever Landlord deems
it necessary to affect alterations or repairs thereto or in and about
any Preemies adjoining such doors or passageways. Landlord reserves the
right to use, install, maintain and repair pipes, ducts and conduits
within the walls, columns and ceilings of the Premises.
28. HOLDING OVER: It, without prior written consent of Landlord, Tenant
or any approved assignee or sublessee holds possession of the Premises
after expiration of the term of this Lease such shall be a Tenancy at
sufferance. Acceptance by Landlord of rent after such termination shall
not constitute a renewal of this Lease or a consent to such Tenancy nor
shall it waive Landlord"s right of re-entry, any other right contained
herein or any rights provided by the Laws of Florida.
29. LANDLORD"S LIEN: As security for Tenant"s payment of rent, damages
and all other payments required to be made by this Lease, Tenant hereby
grants to Landlord a lien upon all property of Tenant now or
subsequently located upon the Premises. If Tenant abandons or vacates
any substantial portion of the Premises, or is in default in the payment
of any rentals, damages or other payments require to be made by this
Lessee,
Landlord may toke any action it deems necessary, and may be available to
it in the Stare of Florida. The proceeds of the sale of the personal
property shall be applied by Landlord toward the cost of the sale and
then toward the payment of all sums then due by Tenant to Landlord under
the terms of this Lease.
UNIFORM COMMERCIAL CODE: To the extent, if any, this Lease grants
Landlord any lien or lien rights greater than provided by the laws Of
the State of Florida pertaining to "Landlord"s Liens," this Lease is
intended AS and constitutes a security agreement within the meaning of
the Uniform Commercial Code. Landlord, in addition to the rights
prescribed in this Lease, shall have a lien upon and interest in
Tenant"s property now or hereafter located upon the Premises which
grants Landlord a Security interest, as that term Is defined, under this
state"s Uniform Commercial Code to secure the payment to Landlord of the
various amounts provided in this Lease. The Tenant agrees to and shall
execute and deliver to Landlord such "Financing Statements" and such
further assurances as Landlord may, from time to time consider necessary
to create, perfect and preserve the lien described and all additions,
substitutions, replacement and accessions thereto, and all proceeds of
its or their sale or other disposition. The Landlord, at the expense of
Tenant, may cause such Financing Statements and assurances to be
recorded and re-recorded, filed and re-filed, ant renewed or continued,
at such times and places as may be required or permitted by law to
create, perfect and preserve such liens. In the event Tenant fails to
promptly execute and return to Landlord such Financing Statements as
Landlord may require to create, preserve and perfect its lien, Tenant
shall and does hereby designate Landlord to act as Tenant"s agent for
the sole and limited purpose of executing such Financing Statements and
any such execution by Landlord pursuant to this Lease shall be effective
and binding upon Tenant as though executed originally by Tenant.
Tenant"s designation of Landlord as agent hereunder shall not be subject
to revocation until this Lease is terminated.
31. INSURANCE. Tenant hereby agrees to maintain in full force and
effect at all times during the term of this Lease, at its own expense,
for the protection of Tenant and Landlord, as their interest may appear,
policies of insurance issued by a responsible carrier or carriers
acceptable to Landlord which afford the following coverage"s:
(a) Comprehensive General Liability Insurance - Not less than
S$1,000,000.00. Combined Single Limit for both bodily injury and
property damage.
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Fire and Extended Coverage, Vandalism and Malicious Mischief, Sprinkler
Leakage (where applicable) insurance, to cover all of Tenant"s stock in
trade, fixtures, furniture, Furnishings, removable floor coverings,
trade equipment, signs and all other decorations placed by Tenant in or
upon the Premises.
Worker"s Compensation if required by Florida statutes.
(d) Employer"s Liability - Not less than $100,000.00.
Tenant shall deliver to Landlord at least thirty (30) days prior to the
time such insurance is first required to be carried by Tenant, and
thereafter, at least thirty (30) days prior to expiration of such
policy, Certificates of Insurance evidencing the above coverage with
limits not less than those specified above. Such Certificates shall name
Landlord, its subsidiaries, directors, agents and employees as
additional insureds and shall expressly provide that the interest of
same therein shall not be affected by any breach by tenant of any policy
provision for which such Certificates evidence coverage. Further, all
Certificates shall expressly provide that no less than thirty (30) days
prior written notice shall be given Landlord in the event of material
alteration to, or cancellation of, the coverages evidenced by such
Certificates. At the time of delivery of the Certificates of Insurance,
certified copies of policy endorsements showing Landlord as an
additional insured shall also be delivered.
A FAILURE TO PROVIDE SUCH INSURANCE COVERAGE
SHALL DE DEEMED A DEFAULT IN THIS LEASE
If, on account of the failure of Tenant to comply with the foregoing
provisions, Landlord is adjudged a co-insurer by it's insurance carrier,
then any loss or damage Landlord shall sustain by reason thereof, shall
be borne by Tenant and shall be immediate!" paid by Tenant upon receipt
of a bill thereof and evidence of such loss.
Landlord makes no representation that the limits of liability specified
to be carried by Tenant, under the terms of this Lease, are adequate to
protect Tenant, and in the event Tenant believes that any such insurance
coverage called for under this Lease is insufficient, Tenant shall
provide at Its own expense, such additional insurance as Tenant deems
adequate.
Landlord shall at all times during the term of this Lessee, maintain a
policy or policies of insurance, issued by and binding upon some solvent
insurance company, insuring the Office Center against loss or damage by
fire, explosion or other hazards and contingencies for the full
insurable value, provided that Landlord shall not be obligated to insure
any furniture, equipment, machinery, goods or supplies not covered by
this Lease which Tenant may bring or obtain upon Premises, or any
additional improvements which Tenant may construct on the Premises.
Landlord reserves the right to self-insure such Office Building, The
premium cost of such policy, or policies, or the equivalent in the event
of self-insurance, shall be an Operating Expense.
Anything in the Lease to the contrary notwithstanding, Landlord and
Tenant hereby waive and release each other of and from any and all
rights of recovery, claim, action or cause of action, against each
other, their agents, officers and employees, for any loss or damage that
may occur to the Premises, the Office Center, improvements to the Office
Center, of which the Premises are a part, personal property (building
contents) within the Office Center, any furniture, equipment, machinery,
goods or supplies not covered by this Lessee which Tenant may bring or
obtain upon the Premises, or any additional improvements which Tenant
may construct on the Premises, by reason of fire, the elements or any
other cause which could be insured against, under the terms of standard
fire and extended coverage insurance policies, regardless of cause or
origin, including negligence of Landlord or Tenant and their agents,
officers and employees. Because this paragraph will preclude the
assignment of any claim mentioned in it by way of subrogation (or
otherwise) to an insurance company (or any other person), each party to
this Lease agrees immediately to give to each insurance company, written
notice of the terms of the mutual waivers contained in this paragraph,
and to have the insurance policies properly endorsed, {f necessary, to
prevent the invalidation of the insurance coverage by reason of the
mutual waivers contained in this para-
- -14-
graph Tenant also waives and releases Landlord, its agents, officers and
employees, of and from any and all rights of recovery, claim, action or
cause of action which Tenant has against Landlord for any lose or damage
insured against under any other policies of insurance carried by Tenant.
1
32, QUIET ENJOYMENT: Tenant shall and may peaceably have, hold and enjoy
the Premises subject to the terms of this Lease, provided Tenant pays
the rentals herein reserved and performs all of the covenants and
agreements herein contained.
33. COMPLETE AGREEMENT: There are no oral agreements between Landlord
and Tenant affecting this Lease, and this Lease supersedes and cancels
any and all previous negotiations, arrangements, brochures, agreements
and understandings, if any, between Landlord and Tenant or displayed by
Landlord to Tenant with respect to the subject matter of this Lease.
There are no representations between Landlord and Tenant other than
those contained in this Lease and all reliance with respect to any
representations is solely upon such representations.
34. Revisions OF LEASE AND BUILDING: This Lease shall not be altered,
changed or amended except by an instrument in writing signed by both
parties hereto. No alterations, changes or amendments by Landlord shall
be valid or binding unless executed by an authorized signatory. Landlord
may at any time change the name or number of the Office Center, remodel
or alter the same, or the location of any entrance thereto, or any other
portion thereof not occupied by Tenant, And the same shall not
constitute a constructive or actual, total or partial eviction.
35. BROKERAGE INDEMNITY: Tenant warrants that it has had no dealings
with any broker or agent in connection with this Lease other than THE
ALLEN MORRIS COMMERCIAL REAL ESTATE SERVICES COMPANY and the Co-Broker
(if any) set forth in the Basic Lease Information and covenants to pay,
hold harmless and indemnify Landlord from and against any and all costs,
expenses or liability for any compensation, commissions, and charges
claimed by any other broker or agent (other than the broker(s)
identified above) with respect to this Lease,or the negotiation thereof
with whom Tenant had dealings.
36. RELOCATION OF TENANT: Landlord reserves the right after the
execution, or during the term of this Lease, at its sole cost and
expense, to remove the Tenant from the Premises and relocate Tenant in
some other space of Landlord"s choosing of approximately the same
dimensions and size within the office Center which other space shall be
decorated by Landlord at Landlord"s expense and in its direction to use
such decorations and materials from the existing Premises, or other
materials, so that the space in which Tenant is relocating shall be
comparable in its interior design and decoration to the Premises from
which Tenant Is removed; provided however, that the Landlord exercises
its election to remove and relocate the Tenant in other space within the
Office Center, which is at that time leasing for a higher rental rate,
then Tenant shall not be required to pay the difference between the then
rent of the Premises and the higher rental rate of the space in which
Tenant is relocated; provided further, that if Tenant is removed and
relocated in other space within the Office Center which is then leasing
at a rental rate less than the rental rate of the Premises at that time,
Tenant"s rent shall be reduced to the rental rate then being charged for
the space in which Tenant has been relocated. Tenant, by the execution
of this Lease, acknowledges the foregoing right of Landlord, and no
rights herein granted to Tenant, including, but not limited to, the
right of peaceful and quiet enjoyment, shall be deemed or construed to
have been breached or interfered with by reason of Landlord"s exercise
of the right herein reserved in this Section 36. In the event of the
removal and relocation of Tenant, Landlord"s sole obligation shall be
the actual cost of relocating and decorating the space in which Tenant
is relocated, and Tenant agrees that Landlord"s exercise of its election
to remove and relocate Tenant shall not terminate the Lease, or release
the Tenant in whole or in part from Tenant"s obligation to pay rents ant
perform the covenants and agreements hereunder for the full term of this
Lease.
37. ADMINISTRATIVE CHARGES: In the event any check, bank draft or
negotiable instrument given for any money payment hereunder shall be
dishonored at any time and from time to time, for any reason whatsoever
not attributable to Landlord, Landlord shall be entitled, in addition to
any other remedy that may be available, to make an administrative charge
of $25.00.
- -15-
CORPORATE AUTHORITY: If Tenant signs as a corporation, each of the
persons executing this Lease, on behalf of Tenant, does hereby covenant
and warrant that Tenant is a duly authorized and existing corporation,
that Tenant has and is qualified, to do business in Florida, that the
corporation has full rights and authority to enter into this Lease, and
that each and both of the persons signing on behalf of the corporation
were authorized to do so.
PARKING: Tenant is hereby granted the non-exclusive privilege to use the
parking spaces in the parking lot of the building in which the Premises
is located for itself and its employees and business clients. Tenant
shall abide by all rules and regulations as concerns the use of the
aforementioned parking area as may now exist or as may hereinafter be
promulgated by the Landlord, and a violation of this clause and/or the
rules referred to above shall constitute, upon reasonable notice to
Tenant, at the option of Landlord, a default by the Tenant in the terms,
conditions and covenants of this Lease or Landlord shall have the right
to revoke Tenant"s parking privileges provided by this paragraph and
such revocation shall not affect any other rights, duties or obligations
as provided for in this Lease.
MECHANICS" LIENS PROHIBITED: Notwithstanding any contrary provision
herein, any provision which might be interpreted to be to the contrary
or any consents given by Landlord to Tenant, Tenant is prohibited from
creating any liens against Landlord"s interest in the Office Center. THE
INTEREST OF THE LANDLORD SHALL NOT BE SUBJECT TO LIENS FOR IMPROVEMENTS
MADE BY THE TENANT.
LIMITATION OF LANDLORD"S LIABILITY: If Landlord shall fail to perform or
observe any form, condition, covenant or obligation required to be
performed or observed by it under this Lease and if Tenant shall, as a
consequence thereof, recover a money Judgment against Landlord, Tenant
agrees that it shall Look solely to Landlord"s right, title and interest
in and to the Office Center for the collection of such Judgment: and
Tenant further agrees that no other assets of Landlord shall be subject
to levy, execution or other process for the satisfaction of Tenant"s
judgment and the: Landlord shall not be liable for any deficiency. Upon
the transfer of the title to the fee of the leased Premises the Landlord
shall be automatically freed and relieved from all personal liability
with respect to the breach of any covenant or obligation on the part of
Landlord to be kept which breach occurs subsequent to the transfer of
such fee ownership.
42. MISCELLANEOUS: The words "Landlord" and "Tenant" as used herein
shall include the plural as well as the singular. If there be more than
one Tenant, the obligations hereunder imposed upon Tenant shall be joint
and several. Time Is of the essence of this Lease, and each and all of
its provisions. Submission of this instrument for examination or
signature by" Tenant does not constitute a reservation of or option for
Lease, and is not effective as a Lease, or otherwise, until execution
and delivery by both Landlord and Tenant. the agreements, conditions and
provisions herein contained shall, subject to the provisions as to
assignment, apply to and bind the heirs, executors, administrators,
successors and assigns of the parties hereto. Tenant shall not, without
the written consent of Landlord, use the words "Glades Twin Plaza or the
name of the Buildings for any purpose other than as the address of the
business to be conducted by Tenant in the Premises. If any provision of
this Lease shall be determined to be illegal or unenforceable, such
determination shall not affect any other provision of this Lease, and
all such other provisions shall remain in full force and effect. This
Lease shall be governed by and construed pursuant to the laws of the
State of Florida. The captions used herein are provided only as a matter
of convenience and for reference and in no way define, limit or describe
the scope of this Lease nor the intent of any provisions thereof.
EXHIBITS: The exhibit(s) and addendum, if any, specified in the Basic
Lease Information are attached to this Lease, and by this reference made
part hereof.
43. RADON NOTICE: As required by section 406.056 of Florida Statutes
the following warning is given:
RADON GAS: Radon Is a naturally occurring radioactive gas, that, when it
has accumulated in a building in sufficient quantities, may present
health risks to persons who are
- -16 -
exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional
information regardIng radon and radon testing may be obtained from your
county public health unit.
IN WITNESS WHEREOF, the parties have executed this Lease on the
respective dates indicated below:
WITNESSES: LANDLORD - GLADES TWIN PLAZA
By: The Allen Morris Commercial Real Estate Services Company, not
individually, but solely as Management and Leasing Broker for Landlord
/S/ Lorraine H. Mongeon /S/ Paul L.
White
/S/ Everest Parish Paul L. White,
President
Attest:/S/ Mary E. McEwen
Mary E. McEwen
Assistant Secretary
(Corporate Seal)
Date of Execution /by Landlord: 11/16/93
TENANT: Earth Care Products of America, Inc., a Florida Corporation
Nancy K Farrow By: /S/ David A. Farrow
K. Praul David A.Farrow
Its: President
(Corporate Seal)
Date of Execution 10/18/93
- -17-
EXHIBIT "A".
Legal Description
That portion of the Southeast one-quarter of Section 14, Township 47
South, Range 42 East, Palm Beach County, Florida, described as follows:
Commencing at the Southeast corner of said Section 14; thence South 88*
44"00" West, along the South boundary of Section 14, a distance of
2503.16 feet to the East right-of-way line of State Road 808 (a 100 foot
right-of-way; thence North 00"04"00" East along said right-of-way, a
distance of 496.66 feet to the Point of beginning of land herein to be
described; thence continuing along the last mentioned course, & distance
of 350.00 feet; thence South 87*50"24" East, a distance of 200 feet;
thence North 00* 604"00" East, a distance of 196.40 feet to the South
right-of-way of Boca Raton West Road (State Road 808) as shown on
Department. of Transportation Map, Sheet 4 of 4, dated 4/8/75 thence
South 80* 40"40" East, along said South right-of-~way line, a distance
of 399.72 feet; thence South 00*04"00" West, a distance of 553.18 feet;
thence North 87*50"24" West, a distance of 599.51 feet, to the Point of
Beginning.
TOGETHER WITH
Those two, portions of said Southeast Quarter of Section 14 that lie
between the West line of the above described premises fronting on State
Road 808 (66 feet wide) and the present right-of-way line and between
the North line of the above described premises fronting on Boca Raton
West Road (80 feet wide) and the present right-of-way line, EXCEPT,
HOWEVER, that portion of the Southeast Quarter of said Section 14 that
lies between the North line of the property excepted and reserved to the
Grantor hereof fronting on Boca Raton West Road (80 feet wide) and the
present right-of-way line.
LESS AND EXCEPT the following described property:
Commencing, at the Southeast corner of said Section 14; thence South
88*44"00"" West, along the South boundary of said Section 14, a measured
distance of 1905.22 feet to a point, thence North 00* 04"00" East, a
distance of 794.73 feet to thee Point of Beginning; thence North 88*
35"39" West, a distance of 199.98 feet to a point; thence North 00*04"00"
East, a distance of 218.48 feet to a poinT, said point being on the
South right-of-way line of State Road 808 thence South 87*50"24" East
along the South right-of-way line of State Road 808, a distance of 13.85
feet to a point of curvature of a circular curve to the left; thence
continue along the arc of said curve which has a radius of 6,782.96
feet, a distance of 76.12 feet to a point of tangency: Thence South
88*35"39" East along the South right-of-way line of said State Road
808, a distance of 110.03 feet; thence South 00*04"00" West, a distance
of 217.8 feet to thee Point of Beginning of this description.
<PAGE>
ADDENDUM
ATTACHED TO and made a part of the Lease Agreement dated 10/18, 1993, by
and between Glades Twin Plaza, a registered fictitious name, as LANDLORD
and Earth Care Products of America, Inc., a Florida Corporation, as
TENANT, covering approximately 2,470 rentable square feet of office
space known as Suite 440 of the west Tower of the building known as
Glades Twin Plaza located at 2300 Glades Road, Boca Raton, Florida.
45.. Section 3, Paragraph (a), Subparagraph (i) (Base Rent) of the
within Lease shall be amended by adding the following:
TENANT agrees to pay LANDLORD a total "Base Rent" of One Hundred Sixteen
Thousand Ten Dollars and 48/100 ($116,010.48) without any offset or
deduction whatsoever, in lawful (legal tender for public or private
debts) money of the United State of America, at the management office of
the building or elsewhere as designated from time to time by LANDLORD"S
written notice to TENANT. Said Base Rent for the 2,470 square feet shall
be paid in accordance with the following schedule:
Dates Monthly Base Rent Total Base Rent
12/01/93 - $1,749.58 $ 20,994.96
11/30/94
12/01/94 - $ 1,837.06 $ 22,044.72
11/30/95
12/01/95 - $1,928.91 $ 23,146.92
11/30/96
12/01/96 - $2,025.36 $ 24,304.32
11/30/97
12/01/97_ $ 2,196.63 $ 25,519.56
_____________
$ 116,030.48
46. HAZARDOUS SUBSTANCES
(a) Prohibition on Placement or Disposal. Tenant shall not permit to
remain in, incorporate into, use, or otherwise place or dispose of at
the Premises or in the Building or Office center any toxic or hazardous
materials unless (i) such materials are in small quantities, properly
labeled and contained; (ii) such materials are handled and disposed of
in accordance with the highest accepted industry standards for safety,
storage, use and disposal; (iii) such materials are for use in the
ordinary course of business (i.e., as with office or cleaning supplies):
(iv) notice of and a copy of the current material safety data sheet is
provided to Landlord for each such hazardous or toxic material; and (v)
such materials are handled and disposed of in accordance with all
applicable governmental laws, rules, and regulations. If Tenant ever has
knowledge of the presence in the Premises or the Building or the office
Center of toxic or hazardous materials, Tenant shall . notify Landlord
thereof in writing promptly after obtaining such knowledge. For purposes
of this Lease, hazardous or toxic materials shall mean hazardous or
toxic chemicals or any materials containing hazardous or toxic chemicals
at levels or concentrations which cause such materials to be classified
as hazardous or toxic as then prescribed by the prevalent industry
practice and standards, or as set from time to time by EPA or OSHA, or
as defined under 29 CFR 1910 or 29 CFR 1925, or other applicable
federal, state, local, or other governmental laws, rules or regulations,
Page 1 of 2
(b) Tenant"s Covenants to Remove. If Tenant or its employees, agents,
or contractors shall ever violate the provisions of Paragraph (a) above,
or if Tenants acts, negligence, breach of this provision, or business
operations directly and materially expand the scope of any contamination
of the Premises, the Building, or the Office Center from toxic or
hazardous materials
then Tenant shall clean up, remove, and dispose of the material causing
the violation, in compliance with all applicable governmental standards,
laws, rules, and regulations, and repair any damage to the Premises or
Building or Office Center within such period of time as may be
reasonable under the circumstances after written notice by Landlord,
provided that such work shall commence not later than thirty (30) days
from such notice and be diligently and continuously carried to
completion by Tenant or Tenant"s designated contractors. Tenant shall
notify Landlord of its method, time, and procedure for any clean-up or
removal of toxic or hazardous materials under this provision; and
Landlord shall have the right to require reasonable changes in such
method, time or procedure, or to require the same to be done after
normal business hours or when the Building or Office Center is otherwise
closed i.e., weekends or holidays).
WITNESSES: LANDLORD GLADES TWIN PLAZA, a registered
fictitious name
By: The Allen Morris Commercial Real Estate Services Company, not
individually, but solely as a Management and Leasing Broker for
Landlord.
/S/ Lorraine Mongeon By: /S/ Paul L. White
/S/ Everest Parish Paul L. White,
President
Attest: /S/ Mary E McEwen
Mary E. McEwen
Assistant Secretary
(Corporate Seal)
Date of Execution 11/16/93
TENANT: Earth Care Products of America, Inc., a Florida
By: /S/ David A. Farrow
/S/ Nancy K. Farrow David A. Farrow
/S/ K. Praul Title:
President_
(Corporate Seal)
Date of Execution 10/18/93
LEASE TO
ENVIROPLASTICS CORPORATION
TABLE OF CONTENTS
Page No.
ARTICLE 1 REFERENCE DATA AND DEFINITIONS:
1.01 Terms and Titles Referred To 1
1.02 General Provisions 3
1.03 Definitions 3
ARTICLE 2 PREMISES
2.01 Premises 7
ARTICLE 3 TERM
3.01 Term Commencement 7
3.02 Termination 7
3.03 Estoppel Certificate 7
3.04 Option to Extend 7
ARTICLE 4 RENT
4.01 Basic Rent 8
4.02 Adjustment of Basic Rent 8
ARTICLE 5 USE OF PREMISES
5.01 Use Restricted 8
ARTICLE 6 OPERATING EXPENSES; TAXES
6.01 Operating Expenses and Taxes 8
6.02 Monthly Payments of Additional Rent 9
6.03 Annual Statements 9
6.04 Accounting Periods 9
6.05 Abatement of Taxes 10
TABLE OF CONTENTS
(continued)
Page No.
ARTICLE 7 IMPROVEMENTS, ALTERATIONS AND ADDITIONS
7.01 Preparation of the Premises 10
7.02 Time for Completion 10
7.03 Tenant's Access to the Premises 10
7.04 Alterations and Additions 11
ARTICLE 8 BUILDING SERVICES
8.01 Basic Services 12
8.02 Additional Services 12
8.03 Limitations on Landlord's Liability 12
8.04 Utilities, etc 12
ARTICLE 9 TENANT'S COVENANTS
9.01 Pay Rent 12
9.02 Occupancy of the Premises 12
9.03 Safety 13
9.04 Equipment 13
9.05 Pay Taxes 13
9.06 Maintenance 13
9.07 Redelivery 13
ARTICLE 10 COMPLIANCE WITH REQUIREMENTS
10.01 Legal Requirements 14
10.02 Contests 14
10.03 Environmental Legal Requirements 14
ARTICLE 11 COVENANT AGAINST LIENS
11.01 No Liens 14
11.02 Discharge 15
ARTICLE 12 ACCESS TO PREMISES
12.01 Access 15
ARTICLE 13 ASSIGNMENT AND SUBLETTING: OCCUPANCY ARRANGEMENTS
13.01 Assignment and Subletting 15
13.02 Procedure 16
TABLE OF CONTENTS
(continued)
Page No.
ARTICLE 14 INDEMNITY
14.01 Tenant's Indemnity 16
14.02 Cla~ims by Landlord 17
14.03 Landlord's Liability 17
ARTICLE 15 INSURANCE
15.01 Tenant~s Insurance 18
15.02 General Insurance Provisions 18
15.03 Landlord~s Insurance 19
ARTICLE 16 WAIVER OF SUBROGATION
16.01 Waiver of Subrogation 20
16.02 Waiver of Rights 20
ARTICLE 17 DAMAGE OR DESTRUCTION
17.01 Substantial Damage 20
17.02 Restoration 20
ARTICLE 18 EMINENT DOMAIN
18.01 Total Taking 21
18.02 Partial Taking 21
18.03 Awards and Proceeds 21
ARTICLE 19 QUIET ENJOYMENT
19.01 Landlord's Covenant 22
19.02 Subordination 22
19.03 Notice to Mortgagee 22
19.04 Other Provisions Regarding Mortgagees 23
ARTICLE 20 DEFAULTS; EVENTS OF DEFAULT
20.01 Defaults 23
20.02 Tenant's Best Efforts 24
20.03 Elimination of Default 24
ARTICLE 21 LANDLORD'S REMEDIES; DAMAGES ON DEFAULT
21.01 Landlord's Remedies 24
21.02 Possession 24
21.03 Right to Relet 25
TABLE OF CONTENTS
(continued)
Page No.
21.04 Survival of Covenants, Etc 25
21.05 Right to Equitable Relief 26
21.06 Right to Self Help; Interest on Overdue Rent 26
ARTICLE 22 NOTICES
22.01 Notices and Communications 26
ARTICLE 23 WAIVERS
23.01 No Waivers 27
ARTICLE 24 SECURITY DEPOSIT
24.01 Security Deposit 27
ARTICLE 25 GENERAL PROVISIONS
25.01 Unavoidable Delays 28
25.02 Estoppel Certificates 28
25.03 Time of the Essence 28
25.04 Holding Over 28
25.05 Governing Law 28
25.06 Partial Invalidity 28
25.07 Notice of Lease 28
25.08 Interpretation 29
25.09 Consents 29
25.10 Entire Agreement; Changes 29
25.11 Binding Effect 29
25.12 Table of Contents 30
EXHIBIT A DESCRIPTION OF THE LAND AND PERMITTED
EXCEPTIONS OF RECORD
EXHIBIT B LANDLORD'S WORK AND TENANT IMPROVEMENTS
EXHIBIT C RENT RIDER
EXHIBIT D RIDER AND ADDENDUM
CONSOLIDATED REALTY TRUST
LEASE TO
ENVIROPLASTICS CORPORATION
THIS LEASE is made in Auburn, Massachusetts effective on the Date of Lease
stated in Article 1 between the Landlord and the Tenant named in Article 1.
In consideration of the Rent payable by Tenant and of the agreements to be
performed and observed by Tenant, Landlord hereby leases the Premises to
Tenant, and Tenant hereby takes the Premises from Landlord, subject to the
provisions and for the term stated below:
ARTICLE 1
Reference Data and Definitions
Section 1.01 - Terms and Titles Referred To. Each reference in this lease to
any of the following terms and titles incorporates the data stated for that
term or title in this Section 1.01:
DATE OF LEASE: April 17, 1991
LANDLORD: John L. O'Shaughnessy and Ronald I. Fields, Trustees of CONSOLIDATED
REALTY TRUST, under Declaration of Trust dated August 22, 1990, recorded with
the Norcester District Registry of Deeds in Book 13026, Page 19, their
successors and assigns.
LANDLORD'S ADDRESS: P.O. Box C
Auburn, Massachusetts 01501
TENANT: ENVIROPLASTICS CORPORATION, a Massachusetts corporation
TENANT'S ADDRESS: After the Term Commencement Date, Tenant's address will be
the Premises; before the Term Commencement Date, Tenant s address will be:
22 James Road
Sterling, Massachusetts 01564
TERM COMMENCEMENT DATE: July 1, 1991, or as defined in Section 1.03, if
different.
STATED EXPIRATION DATE: June 30, 1996, or as defined in Section 1.03, if
different.
LAND: The parcel of land on the southeasterly side of St. Mark Street in
Auburn, Worcester County, Massachusetts, described in Exhibit A and shown on
the plan recorded with the Worcester District Registry of Deeds in Plan Book
314, Plan 71, containing a total area of 94,167 square feet, more or less,
according to said plan, plus or minus any additions or deletions resulting
from the change of any abutting street line, and the parcel of land containing
apprsoximately 30 acres leased by Landlord from Crucible Materials Corporation
under lease dated November 15, 1989, which parcel is designated as "Leased
Property" on the lease plan attached as Exhibit A-1.
PREMISES: The Land and all structures and improvements on the Land, including
the Building.
RENTABLE AREA OF TEE BUILDING: 33,494 square feet
LEASE TERM: Five (5) Lease Years
EXTENDED TERM: One term of five (5) Lease Years
BASIC RENT: $ 4.50 per square foot of Rentable Area of the Building during the
first Lease Year.
$150,723.00 per Lease Year during the first Lease Year.
$ 12,560.25 per month during the first Lease Year.
ESTIMATED OPERATING EXPENSES: $11,500 for the calendar year in which the Lease
Term begins.
ESTIMATED TAXES: $25,307 for the calendar year in which the Lease Term begins.
INITIAL MONTHLY PAYMENT: $3,067.25
SECURITY DEPOSIT: See Rider and Addendum
GUARANTORS: Henry P. Lisciotti, Jr.
Bruce A. Fortin
Thomas Whitcomb
Franco Previd
PERMITTED USE: Manufacture of plastic resins from post-consumer waste and
accessory general office and warehousing.
Section 1.02 - General Provisions. For all purposes of this Lease, unless the
context otherwise requires:
(a) A pronoun in one gender includes and applies to the other genders as well.
(b) Each definition stated in Section 1.01 or 1.03 of this Lease applies
equally to the singular and the plural forms of the word or term defined.
(c) Any reference to a document defined in Section 1.03 of this Lease is to
the document as originally executed, or, if amended or supplemented as
provided in this Lease, to the document as amended or supplemented and in
effect at the relevant time of reference.
(d) All accounting terms not otherwise defined in this Lease have the meanings
assigned to them under generally accepted accounting principles.
(e) All references in Section 1.01 are subject to the specific definitions (if
any) in Section 1.03.
Section 1.03 - Definitions. Each underlined word or term in this Section 1.03
has the meaning stated immediately after it.
Additional Rent. All Taxes, Operating Expenses, costs, expenses and other
charges (other than Basic Rent) due from Tenant to Landlord or incurred by
Landlord as the result of a Default.
Additional Services. Services provided to Tenant or in respect of the Premises
which are not Basic Services.
Authorizations. All franchises, licenses, permits and other governmental
consents issued by Governmental Authorities under Legal Requirements which are
or may be required for the occupancy of the Premises and the conduct of a
Permitted Use on the Premises.
Basic Services. The Landlord's services described in Section 8.01.
Building. The building on or to be constructed or under construction on the
Land.
Business Day. A day which is not a Saturday, Sunday or other day on which
banks in Worcester, Massachusetts, are authorized or required by law or
executive order to remain closed.
Default. Any event or condition specified in Article 20 so long as any
applicab'e requirements for the giving of notice or lapse of time or both have
not been fulfilled.
Event of Default. Any event or condition specified in Article 20 if all
applicable requirements for the giving of notice or lapse of time or both have
been fulfilled.
Governmental Authority. United States of America, Commonwealth of
Massachusetts, Town of Auburn, County of Worcester, and any political
subdivision, agency, department, commission, boa~d, bureau or instrumentality
of any of them.
Hazardous Substances. "Oil", "hazardous materials", hazardous wastes and
"hazardous substances" as those terms are defined under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section
9601, et seq., as amended, the Resource Conservation and Recovery Act of 1976,
42 U.S.C. Section 6901, et seq., as amended, Massachusetts General Laws,
Chapters 21C and 21E, as amended, and the regulations from time to time
adopted under those laws.
Insurance Requirements. All terms of any policy of insurance maintained by
Landlord or Tenant and applicable to the Premises; all requirements of the
issuer of any such policy; and all orders, rules, regulations and other
requirements of the National Fire Protection Association (or any other body
exercising similar functions) applicable to any condition, operation, use or
occupancy of all or any part of the Premises.
Landlord's Work. The work described in the Exhibit B to be done by Landlord
with respect to the Premises.
Lease. This document, all exhibits and riders attached and referred to in
this document and all amendments to this document, the exhibits and riders.
Lease Term. The period stated in Section 1.01 beginning on the Term
Commencement Date. The Lease Term includes the period of any extension
exercised by Tenant as provided in this Lease.
Lease Termination Date. The earliest to occur of (a) the Stated Expiration
Date, (b) the termination of this Lease by Landlord as the result of an Event
of Default or (c) the termination of this Lease under Article 17 t Damage or
Destruction) or Article 18 (Eminent Domain).
Lease Year. Each twelve consecutive calendar month period ending on the day
before an anniversary of (i) the Term Commencement Date, or (ii) the first day
of the next succeeding calendar month if the Term Commencement Date occurs
other than on the first day of a month; provided that (a) the first Lease Year
includes the partial month, if any, between the Term Commencement Date and the
first day of the next calendar month and (b) the last Lease Year will end on
the Lease Termination Date.
Legal Requirements. (a) All statutes, codes, ordinances (and rules and
regulations under them) and all executive, judicial and administrative orders,
judgments, decrees and injunctions of or by any Governmental Authority which
are applicable to any condition or use of all or any part of the Premises and
(b) the provisionS of all Authorizations.
Occupancy Arrangement. With respect to all or any part of the Premises or this
Lease, and whether (a) written or unwritten or (b) for all or any portion of
the Lease Term, an assignment, a sublease, a tenancy at will, a tenancy at
sufferance or any other arrangement (including but not limited to a license or
concession) under which a Person occupies the Premises for any purpose.
Operatinq Expenses. All expenses of every kind which Landlord pays or becomes
obligated to pay in connection with the operation, management, repair,
cleaning and maintenance of the Land and the Building, including, but not
limited to the cost of (i) supplies and materials, electricity and lighting,
(ii) water, heat, air conditioning, and ventilating for the Building, (iii)
maintenance, janitorial and service agreements, (iv) snow removal and
maintenance of parking and landscaped areas, (v) insurance, including the cost
of casualty and liability insurance applicable to the Building, (vi) repairs
and general maintenance, excluding repairs for which Landlord is responsible
under Basic Services and (vii) pursuing an application for an abatement of
Taxes to the extent not deducted from the abatement, if any, received.
Operating expenses do not include (i) costs of maintenance and repairs
included in Basic Services; (ii) Taxes, any sales tax, gross receipt tax or
similar tax based on Rent, and any income, profits or similar tax imposed on
Landlord; (iii) expenditures for capital improvements to the Building; (iv)
expenditures for correcting construction defects in the Building; (v) cost of
any curative action required to remedy damage caused by or resulting from the
negligence or willful act of Landlord, its agents, servants or employees; and
(vi) costs of any type relating to the development or leasing of the Building.
Permitted Exceptions. Any liens or encumbrances on the Premises of the
following character:
(a) Present and future zoning laws, ordinances, resolutions and regulations of
the Town of Auburn
(b) The lien of any Taxes assessed but not yet due and payable;
(c) Mortgages of record; and
(d) All declarations, covenants, conditions, restrictions, reservations,
rights, rights-of-way, easements and other matters of record or apparent
affecting the Land or the use of the Land listed in Exhibit A.
Person. An individual, a corporation, a company, a voluntary association, a
partnership, a trust, an unincorporated organization or a Governmental
Authority.
Rent. Basic Rent and all Additional Rent.
Rentable Area of the Building. The number of square feet in the Building
stated in Section 1.01, irrespective of whether the number should be more or
less as a result of minor variations resulting from actual construction of the
Building.
Stated Expiration Date. The later to occur of (i) date as stated in Section
1.01, or (ii) last day of the final Lease Year of the Lease Term.
Taking. The taking or condemnation of title to all or any part of the Premises
or of possession or use of all or any part of the Premises by a Governmental
Authority for any public use or purpose, or any proceeding or negotiations
which might result in such a taking, or any sale or lease in lieu of such a
taking.
Taxes. All (i) taxes (or payments in lieu of taxes), special or general
assessments, water and sewer charges, and other charges of every nature
imposed by Governmental Authorities which are assessed, become due or become
liens upon or with respect to the Land, the Building, equipment owned by
Landlord on the Land or in the Building, or this Lease under all p~esent or
future Legal Requirements, and (ii) taxes based on a percentage fraction or
capitalized value of the Rent (whether in lieu of or in addition to the taxes
described above) computed as if the Land and ~he Building were the only
property of Landlord subject to such tax. Taxes do not include (a)
inheritance, estate, excise, succession, transfer, gift, franchise, income,
gross receipt, or profit taxes except to the extent they are in substitution
for Taxes now imposed on the Premises or this Lease, or (b) assessments for
streets, water or sewer installations or other municipal improvements made in
connection with the initial development of the Building.
Term Commencement Date. The earlier to occur of (a) the date specified in
Section 1.01, or (b)-the date on which Tenant first occupies the Building for
the Permitted Use.
Total Takinq. A Taking of: (a) the fee interest in all or substantially all of
the Land or the Building or (b) such title to or easement in, over, under or
such rights to occupy and use any part of the Land or the Building to the
exclusion of Tenant as, in
the good faith judgment of Landlord, unreasonably restricts access to the
Building by vehicle or renders the portion of the Building remaining after
such Taking (even if restoration were made) unsuitable or uneconomical for the
continued use and occupancy of the Building for the Permitted Use.
Unavoidable Delays. Acts of God, strikes, lock outs, labor troubles, inability
to procure materials, failure of power, riots and insurrection, acts of the
public enemy, wars, earthquakes, hurricanes and other natural disasters,
fires, explosions, any act, failure to act or default of the other party to
this Lease or any other reason (except lack of money) beyond the control of
any party to this Lease.
ARTICLE 2
Premises
Section 2.01 Premises.* Landlord hereby leases the Premises to Tenant, and
Tenant hereby takes the Premises from Landlord, subject to the provisions of
this Lease and the Permitted Exceptions. The Premises are demised together
with all rights appurtenant to the Land.
ARTICLE 3
Term
Section 3.01 - Term Commencement. The Lease Term will begin on the Term
Commencement Date.
Section 3.02 - Termination. The Lease Term will end on the Lease Termination
Date.
Section 3.03 - Estoppel Certificate. If either the Term Commencement Date or
the Stated Expiration-Date occurs on a date other than as stated in Section
1.01, Landlord and Tenant agree to execute a certificate in the form of the
estoppel certificate referred to in Section 25.02 or such other form as either
may request, establishing the Term Commencement Date and the Stated Expiration
Date.
Section 3.04 - Option to Extend. Tenant has the option to extend the original
Lease Term for the additional period or periods, if any, indicated in Section
1.01 as the Extended Term by giving Landlord notice of its exercise at least
six (6) months before the expiration of the original Lease Term. If no Event
of Default exists when the notice is given and does not occur during the
remainder of the original Lease Term, this Lease, without the
~See Rider and Addendum
necessity of any further writing, will be extended and the Premises considered
to have been leased by Landlord to Tenant for an additional period equal to
the Extended Term beginning immediately after the expiration of the original
Lease Term upon the same terms except that (a) the Basic Rent will be an
amount determined as provided in the Rent Rider attached as Exhibit C, and (b)
this option to extend will not apply during the Lease Term as extended.
ARTICLE 4
Rent
Section 4.01 - Basic Rent. Tenant agrees to pay Landlord the Basic Rent as
annual rent for the Premises for each lease Year without offset or deduction
and without demand. Tenant agrees to pay Basic Rent in equal monthly
installments in advance on the first day of each calendar month during the
Lease Term, except that the first installment of Basic Rent, pro-rated for the
partial month, if any, at the beginning of the Lease Term, will be paid on the
Term Commencement Date.
Section 4.02 - Adjustment of Basic Rent. The Basic Rent for the first Lease
Year will be as stated in Article 1.01. The Basic Rent for each succeeding
Lease Year will be as stated in Exhibit C, the Rent Rider.
ARTICLE 5
Use of Premises
Section 5.01 - Use Restricted. The Premises may be used for the Permitted Use
and for no other purpose. No improvements may be made on the Land or in or
to the Building except as provided in this Lease.
ARTICLE 6
Operating Expenses: Taxes
Section 6.01 - Operating Expenses and Taxes. Tenant agrees to pay Landlord, as
Additional Rent, all Operating Expenses and Taxes paid or incurred by Landlord
with respect to any period falling within the Lease Term. Tenant agrees to pay
Operating Expenses and Taxes as provided in this Article 6, pro-rated for any
partial calendar year falling within the Lease Term.
Section 6.02 - Monthly Payments of Additional Rent. Tenant agrees to pay to
Landlord in advance for each calendar month of the Lease Term, as Additional
Rent, Operating Expenses and Taxes in an amount equal to the sum of (a) 1/12th
of Estimated Operating Expenses for the then current calendar year, plus
1/12th of Estimated Taxes for the then current calendar year. Tenant agrees to
pay the amount payable under this Section 6.02 with Tenant s monthly payments
of Basic Rent. The amounts paid will be credited by Landlord to Tenant's
obligations under Section 6.01. For the balance of the first calendar year at
the beginning of the Lease Term the amount payable by Tenant each month with
respect to Estimated Operating Expenses and Estimated Taxes will be the
Initial Monthly Payment stated in Section 1.01, which amount will be pro-rated
for the partial month, if any, at the beginning of the Lease Term and paid
beginning on the Term Commencement Date.
Section 6.03 - Annual Statements. Within sixty (60) days after the end of each
calendar year, Landlord agrees to render to Tenant a statement, prepared in
accordance with generally accepted accounting practices, showing in reasonable
detail (i) for the calendar year just ended (if any) (a) the amount of Taxes
and (b) the amount of Operating Expenses, and (ii) for the then current
calendar year, the amount of Estimated Operating Expenses and Estimated Taxes
determined by Landlord in the reasonable exercise of its judgment. Estimated
Operating Expenses and Estimated Taxes for the calendar year in which the
Lease Term begins are the sums set forth in Section 1.01. If the total amount
paid by Tenant on account of Operating Expenses or Taxes or both in any
calendar year exceeds the actual amount of Operating Expenses or Taxes for the
the year, then the excess will be credited by Landlord against the monthly
installments of Additional Rent next falling due or refunded to Tenant upon
the expiration or termination of this Lease (unless such expiration or
termination is the result of an Event of Default). If the total amount of
Operating Expenses or Taxes or both paid by Tenant in any calendar year is
less than the actual amount of Operating Expenses or Taxes for the year, then
Tenant agrees to pay the difference to Landlord within thirty (30) days after
receipt by Tenant of Landlord's statement.
Section 6.04 - Accountinq Periods. Landlord may from time to time change the
periods of accounting under this Lease to any annual period other than a
calendar year. Upon any such change, all items referred to in this Article 6
will be appropriately apportioned. In all statements rendered under Section
6.03, amounts for periods partially within and partially outside of the
accounting periods will be appropriately apportioned. Any items which are not
determinable at the time of a statement will be included on the basis of
Landlord s estimate. Promptl~y after determination, Landlord will render a
supplemental statement in which appropriate adjustment will be made.
Section 6.05 - Abatement of Taxes. Landlord may at any time and from time to
time make application to the appropriate Governmental Authority for an
abatement of Taxes. If (i) an application is successful and (ii) Tenant has
made any payment in respect of Taxes under this Article 6 for the period with
respect to which the abatement was granted, Landlord agrees (a) to deduct from
the amount of the abatement all expenses incurred by it in connection with the
application (b) within thirty (30) days after receipt of the abatement amount,
to pay the amount of the abatement to Tenant (adjusted for any period for
which Tenant had made a partial payment) with interest, if any, paid by the
Governmental Authority on such abatement, and (c) retain the balance, if any.
ARTICLE 7
Improvements, Alterations and Additions
Section 7.01 - Preparation of the Premises. Landlord agrees to perform and to
pay for Landlord's Work in connection with the preparation of the Premises for
Tenant's use and occupancy. Landlord agrees to do Landlord~s Work in a good
and workmanlike manner and in compliance with all Legal Requirements and
Insurance Requirements. Tenant is authorized to make those improvements to the
Building designated as t'Tenant~s Improvements" on Exhibit B, provided the
improvements are made in compliance with the provisions of Section 7.04.
Section 7.02 - Time for Completion. Landlord agrees to use due diligence in
completing Landlord's Work in order to have the Premises ready for occupancy
on or before the Term Commencement Date referred to in Section 1.01.
Section 7.03 - Tenant's Access to the Premises. Tenant and Tenant's agents, at
Tenant's sole risk, may, with Landlord's prior consent, enter the Premises
before the Term Commencement Date in order to (a) install its furniture,
furnishings and equipment and (b) perform or inspect work necessary to make
the Premises ready for Tenant's use and occupancy. If Landlord permits entry
before the Term Commencement Date, the permission is conditioned upon (i)
Tenant delivering to Landlord evidence of the insurance required under Section
15.01 and (ii) Tenant and Tenant's agents, contractors, workmen, mechanics,
suppliers and invitees, working in harmony with Landlord and contractors
working for Landlord. If at any time Tenant's entry causes or threatens to
cause disharmony or interfere with the orderly completion or operation of the
Building, Landlord may withdraw the permission upon notice to Tenant. Any
entry by Tenant will be deemed to be under all of the provisions of this Lease
except the covenant to pay Rent. Except for negligence of Landlord and its
employees, Landlord will not be
liable for and Tenant agrees to assume the entire risk for any loss or damage
which may occur to any of Tenant's work and installations made in the Premises
or to property placed in the Premises before the Term Commencement Date.
Section 7.04 - Alterations and Additions. Tenant agrees not to make
alterations or additions to the Premises except according to plans and
specifications first approved by Landlord. Under any circumstances, tenant
agrees not to make any alterations or additions which would (a) require
unusual expense to readapt the Premises to normal use upon termination of this
Lease or (b) increase the cost of insurance or Taxes. All alterations and
additions will become part of the Premises except to the extent that Landlord
specifies that they must be removed at Tenant~s expense on the Lease
Termination Date as an express condition to Landlord's approval of their
initial construction. All of Tenant's alterations and additions and the
installation of furnishings will be performed in such manner as to maintain
harmonious labor relations and not to damage the Premises and, except for
installation of furnishings, will be performed by contractors or workmen first
approved by Landlord. Except for work done by or through Landlord, Tenant,
before its work is started, will: secure all necessary Authorizations; deliver
to Landlord a statement of the names of all its contractors and subcontractors
and the estimated cost of all labor and material to be furnished by them;
cause each contractor to carry (1) worker's compensation insurance in
statutory amounts covering all the contractor's and subcontractor~s employees,
(2) comprehensive public liability insurance with such limits as Landlord may
reasonably require, but in no event less than $1,000,000, and (3) property
damage insurance with limits of not less than $300,000 (all such insurance to
be written by companies approved by Landlord and insuring Landlord and Tenant
as well as the contractors), and to deliver to Landlord certificates of all
such insurance; and secure casualty insurance against loss or damage to Tenant
's~work pending completion and deliver evidence of such insurance to Landlord.
Tenant agrees to pay promptly when due the entire cost of any work done in the
Premises by Tenant, its agents, employees, or independent contractors, and not
to cause or permit any liens for labor or materials performed or furnished in
connection with its work to attach to the Premises and immediately to
discharge any such liens which may attach. All construction work done by
Tenant, its agents, employees or independent contractors will be done in a
good and workmanlike manner and in compliance with all Legal Requirements and
Insurance Requirements. Landlord may inspect the work at any time and will
promptly give notice to Tenant of any observed defects.
ARTICLE 8
Building Services
Section 8.01 - Basic Services. At its expense, Landlord agrees to furnish, or
cause to be furnished, during the Lease Term as Basic Services maintenance and
repair of the structural components, roof exterior and foundation of the
Building, and the parking areas, sidewalks and access areas on the Land.
Section 8.02 - Additional Services. Landlord agrees to provide as Additional
Services snow removal from parking areas and sidewalks on the Land and
maintenance of landscaped areas of the Land, as necessary. The cost of
Additional Services will be paid by Tenant as part of Operating Expenses.
Section 8.03 - Limitations on Landlord's Liability. Landlord will not be
liable in damages nor in default under this Lease for any failure or delay in
furnishing Basic Services or Additional Services when the failure or delay is
caused by Unavoidable Delays. No failure or delay by Landlord in furnishing
Basic Services or Additional Services caused by Unavoidable Delays may be
claimed or pleaded as an eviction or disturbance of Tenant ts possession or
give Tenant any right to terminate this Lease or give rise to any claim for
set-off or abatement of Rent or excuse Tenant from the performance of any of
its obligations under this Lease.
Section 8.04 - Utilities etc.. Landlord has no obligation under this Lease to
furnish any heat, water, gas, electricity, communications facilities or other
utility or service to Tenant or the Premises. Tenant agrees to make its own
arrangements for the provision of any utility or service to the Premises and
to pay the full cost directly to the utility company or other provider.
ARTICLE 9
Tenant's Covenants
Section 9.01 - Pay Rent. Tenant agrees to pay when due all Rent and all
charges for utility services rendered to the Premises not included in Rent
and, as Additional Rent, all charges of Landlord for Additional Services.
Section 9.02 - Occupancy of the Premises. Tenant agrees to occupy the Premises
continuously from the Term Commencement Date for the Permitted Use only.
Tenant agrees that it will not (i) injure or deface the Premises, (ii) install
any sign on any part of the Premises without the prior approval of Landlord,
(iii) permit in the Premises any inflammable fluids or chemicals not
reasonably related to the Permitted Use, nor (iv) permit any nuisance or use
of the Premises which is improper, offensive, contrary to any Legal
Requirement or InsuranCe Requirement orliable to render necessary any
alteration or addition to the Building.
Section 9.03 - Safety. Tenant agrees to keep the Premises equipped with aI1
safety appliances required by Legal Requirements or Insurance Requirements
because of any use made by Tenant. Tenant agrees to procure all Authorizations
required because of Tenant's use of the Premises and to do any work required
under any Authorization because of such use, it being understood that the
provisions of this Section may not be construed to broaden in any way the
Permitted Use.
Section 9.04 - Equipment.* Tenant agrees not to place a load upon the floor of
the Premises exceeding the live load for which the floor has been designed.
Tenant agrees not to move any safe or other heavy equipment into, about or out
of the Premises except in the manner and at the time authorized by Landlord in
each instance. Tenant agrees to isolate and maintain all of Tenant's equipment
which causes or may cause airborne or structure-borne vibration or noise,
whether or not it may be transmitted to any other part of the Building, so as
to eliminate such vibration or noise.
Section 9.05 - Pay Taxes. Tenant agrees to pay promptly when due all Taxes
upon personal property (including, without limitation, fixtures and equipment)
in the Premises irrespective of the Person to whom the Taxes may be assessed.
Section 9.06 - Maintenance. Tenant agrees, at all times during the term of
this Lease, and at its own expense, (i) to maintain the Premises in good
repair and condition (except for (a) ordinary wear and tear, (b) damage by
fire or casualty, (c) repairs which Landlord is obligated to make as part of
Basic Services and (d) any defect in material or workmanship performed by
Landlord in connection with initial preparation of the Premises for Tenant's
use and occupancy), (ii) to use all reasonable precautions to prevent waste,
damage or injury to the Premises and (iii) to repair all damage to any part of
the Premises caused by Tenant or any of Tenant ts agents, employees or
invitees, to the extent that such damage is not covered by Landlord's
insurance.
Section 9.07 - Redelivery.* On the Lease Termination Date, Tenant agrees to
quit and surrender the Premises free of all tenants, occupants, liens, and
encumbrances except (i) Permitted Exceptions in effect on the date of this
Lease and (ii) encumbrances, restrictions or reservations caused by or
consented to by Landlord. Tenant agrees, subject to the provisions of Articles
17 and 18, to surrender the Premises to Landlord broom
~See Rider and Addendum
clean and in good condition and repair (ordinary wear and tear, damage by fire
or casualty and repairs required to be made by Landlord only excepted) with
all damages occasioned by Tenant's removal of Tenant s alterations, additions,
fixtures or equipmentrepaired at Tenant's expense to Landlord's reasonable
satisfaction.
ARTICLE 10
Compliance With Requirements
Section 10.01 - Legal Requirements. Tenant agrees, at its own expense,
promptly to observe and comply with all Legal Requirements relating to it or
the Premises. Tenant agrees to pay all costs, liabilities, losses, damages,
fines, penalties, claims and demands, that may arise out of or be imposed
because of the failure of Tenant to comply with the covenants of this Article
10.
Section 10.02 - Contests. Tenant has the right to contest by appropriate legal
proceedings diligently conducted in good faith, in the name of Tenant or
Landlord (if legally required) or both (if legally required), without expense
or liability to Landlord, the validity or application of any Legal
Requirement. If compliance with the terms of any Legal Requirement may legally
be delayed pending the prosecution of any such proceeding, Tenant may delay
compliance until the final determination of the proceeding.
Section 10.03 Environmental Legal Requirements. Except to the extent
permitted under applicable Legal Requirements, Tenant agrees not to cause or
permit any Hazardous Substances to be released on the Land or in the Building
or into the air, or to be introduced into the sewage or other waste disposal
system serving the Premises. Tenant agrees to generate, store or dispose of
Hazardous Substances in the Premises or dispose of Hazardous Substances from
the Premises to any other location only in compliance with all applicable
Legal Requirements and to notify Landlord of any incident which would require
the filing of a notice under any Legal Requirement. Tenant agrees to provide
Landlord with such information required by Governmental Authorities as
Landlord may reasonably request from time to time with respect to compliance
with this Section.
ARTICLE ll
Covenant Against Liens
Section 11.01 - No Liens. Tenant agrees not to create any lien on the
Premises, and to discharge any lien on the Premises, arising out of any act or
omission by Tenant, including but not
limited to any tax, mechanic's, laborer's or materialman's lien or lien
arising under Massachusetts General Laws, Chapter 21E.
Section 11.02 - Discharge. If any lien is filed against the Premises as a
result of any act or omission by Tenant, Tenant agrees to cause the lien to be
discharged of record by payment, deposit, bond, order of a court of competent
jurisdiction or otherwise, within sixty (60) days after (i) it is filed, or
(ii) final judgment In favor of the holder of the lien. If Tenant fails to
cause the lien to be discharged, then, in addition to any remedies available
to Landlord in case of an Event of Default, Landlord may, but is not obligated
to, discharge the lien either by paying the amount claimed to be due or by
procuring the discharge of the lien by deposit or by bonding proceedings. Any
amount paid by Landlord and all costs incurred by Landlord in connection the
removal of any lien will constitute Additional Rent and will be paid by Tenant
to Landlord on demand wit~ interest as provided in Section 21.06.
ARTICLE 12
Access to Premises
Section 12.01 - Access. Landlord or Landlord's agents and designees will have
the right, but not the obligation, to enter the Premises at all reasonable
times during ordinary business hours, after reasonable notice except in the
case of an emergency, to examine the Premises, to make necessary repairs and
replacements and to exhibit the Premises to prospective purchasers,
mortgagees, and, during the last six (6) months of the Lease Term, prospective
tenants. Except in the case of an emergency, any Person entering the Premises
under this Section 12.01 will be accompanied by a Person designated by Tenant,
if Tenant requires.
ARTICLE 13
Assignment and Subletting: Occupancy Arrangements
Section 13.01 - Assignment and Subletting. Tenant agrees not to enter into any
Occupancy Arrangement, either voluntarily or by operation of law, (other than
with a Person who is affiliated with Tenant and for a period ending when and
if such Person ceases to be affiliated with Tenant) without the prior written
consent of Landlord. For purposes of this Article 13, a Person will be
considered to be affiliated with Tenant if such Person, directly or
indirectly, controls, is controlled by or is under~rommon control with Tenant.
Section 13.02 - Procedure. If Tenant intends to enter into an Occupancy
Arrangement which reguires Landlord's consent, Tenant agrees to give Landlord
notice of the name of (and a financial statement with respect to) the proposed
occupant, the exact termS of the Arrangement and a precise description of the
portion of the Premises intended to be subject to the Occupancy Arrangement.
Within thirty (30) days after receipt of the notice, Landlord will (i) consent
to the Occupancy Arrangement, or (ii) refuse to consent to the ~ccupancy
Arrangement, or (iii) notify Tenant of Landlord's election to terminate this
Lease with respect to so much of the Premises as is intended to be subject to
the Occupancy Arrangement. If Landlord consents to the Occupancy Arrangement,
Tenant agrees (i) to enter into the Arrangement on the exact terms described
to Landlord within thirty (30) days after Landlord~s consent and to deliver to
Landlord and to the holder of any first mortgage on the Building an executed
original counterpart of the Occupancy Arrangement and (ii) to remain liable
for the payment and performance of the provisions of this Lease. If Tenant
enters into an Occupancy Arrangement, Tenant agrees to pay to Landlord when
received the excess, if any, of amounts received in respect of the Occupancy
Arrangement over the Rent. Any Occupancy Arrangement will expressly
incorporate and be subject to the terms of this Lease, which terms will be
binding on all parties to the Occupancy Arrangement. If Landlord consents to
and Tenant does not enter into the Arrangement within the thirty (30) day
period, such consent will be deemed revoked and Tenant will again comply with
the terms of this Section. If Landlord elects to terminate this Lease with
respect to that portion of the Premises to be subject to the Occupancy
Arrangement, this Lease will terminate as of the date specified in the
election, which date will be not less than thirty (30) days nor more than
sixty (60) days after the date of the election; provided that Tenant may, at
any time before the date of termination, withdraw its request for Landlord's
consent to an Occupancy Arrangement. Such withdrawal by Tenant will nullify
Landlord s election to terminate, and this Lease will remain in effect as if
no election by Landlord had been made. If Landlord terminates this Lease, all
Rent due will be ad~usted as of the day the Premises (or the portion affected
by the termination) are redelivered to Landlord. Any portion of the Premises
redelivered to Landlord will be in_the condition - specified in Section 9.07.
ARTICLE 14
Indemnity
Section 14.01 - Tenant's Indemnity. Tenant agree~s to indemnify Landlord
against all claims, losses and expenses, including reasonable attorneys fees,
which may be imposed upon or incurred by Landlord by reason of any of the
following occurrences:
(a) any act or omission on the Premises by Tenant or any Person other than
Landlord, its agents, contractors, licensees or invitees;
(b) any use, non-use, possession, occupation, condition, operation,
maintenance or management of the Premises; -
(c) any act or omission on the part of Tenant, or any of its agents,
contractors, licensees or invitees, whether or not occurring on the Premises;
(d) any accident, injury or damage to any Person or property occurring in the
Premises, not due to any act or omission of Landlord, its agents, contractors
or licensees;
(e) any failure on the part of Tenant to -comply with any of its obligations
under this Lease, whether or not such failure constitutes a Default or Event
of Default;
(f) any untrue or misleading statement of a material fact or any
misrepresentati~n of a material fact made in connection with the negotiation
of this Lease; or
(g) any release or threat of release of Hazardous Substances by Tenant, or
any of its agents, contractors, licensees or invitees, whether or not
occurring on the Premises.
Section 14.02 - Claims by Landlord. If any proceeding is brought against
Landlord arising out of any occurrence described in Section 14.01, upon notice
from Landlord Tenant agrees, at its expense, to defend the proceeding using
legal counsel reasonably satisfactory to Landlord or, if applicable, Tenant s
insurer, provided that Tenant has not been prejudiced in any way by failure or
delay on the part of Landlord to give Tenant prompt notice of the proceeding.
If Tenant has supplied Landlord with insurance covering any of the risks
described in Section 14.01, no claim may be made against Tenant unless the
insurer fails or refuses to defend and/or pay all claims, losses and expenses
incurred by Landlord. Notwithstanding the foregoing,landlord has the right to
make claims, institute legal proceedings, or otherwise seek redress against
Tenant before the expiration of any statute of limitations or other limitation
on the time or manner in which Landlord may seek redress regardless of whether
or not any insurer is responding.
Section 14.03 - Landlord's Liability. Except for its intentional acts or
negligence or the intentional acts or negligence of its agents, contractors or
licensees, Landlord will not be responsible or liable for any loss, damage or
injury to the Premises or to any Person or property at any time on the
Premises.
ARTICLE 15
Insurance
Section 15.01 - Tenant's Insurance. Tenant agrees to provide, at its expense,
and to keep in force:
(a) Comprehensive general liability insurance against claims for personal
injury, death and property damage occurring with respect to Tenant's occupancy
of the Premises having primary combined single limit coverage of at least
$1,000,000.00 for bodily injury and property damage.
(b) Casualty insurance against loss or damage to (i) all trade fixtures,
inventory, furniture and equipment owned, controlled or in use by Tenant and
situated on t~e Premises, (ii) all alterations and additions made by Tenant
under Section 7.04 pending completion and (iii) all alterations and additions
made by Tenant under Section 7.04 which Tenant is required to remove on the
Lease Termination Date, under a socalled "All Risk'. policy in- an amount
sufficient to replace the same without allowance for depreciation, if
available, and if not, in the amount necessary to avoid the effect of
co-insurance provisions under the applicable policies.
(c) Worker ts compensation insurance for all Tenantis employees working in the
Premises in an amount sufficient to comply with Legal Requirements.
(d) Such greater limits and such other insurance and in such amounts as may
from time to time be reasonably required by Landlord against other insurable
hazards which at the time are customarily insured against in the case of
buildings similarly situated and used.
Section 15.02 - General Insurance Provisions.
(a) All insurance provided for in Section 15.01 will be written as primary
policies (without "contribution" or "solely in excess of coverage carried~by
Lessort' provisions) and will be effected under valid and enforceable
policies, issued by insurers of recognized responsibility authorized to write
such insurance in Massachusetts and having a Best's financial rating of B or
better. Not less than five (5) days before the Term Commencement Date, and
thereafter not less than ten (10) days before the expiration dates of the
expiring policies furnished under to Section 15.01, Tenant agrees to deliver
to Landlord binders, certifica~es or other evidence of such insurance
satisfactory to Landlord bearing notations evidencing the payment of premiums
or accompanied by other evidence satisfactory to Landlord of such payment.
(b) Nothing in this Article 15 will prevent Tenant from taking out insurance
of the kind and in the amounts provided for under this Article under a blanket
insurance policy or policies covering other properties as well as the
Premises. Any policy or policies of blanket insurance (i) will specify, or
Tenant will furnish Landlord with a writt~n statement from the insurers
specifying, the amounts of the total insurance allocated to the Premises,
which amounts will not be less than the amounts required by Section 15.01 and
will be sufficient to prevent any of the insureds from becoming a co
insurer within the terms of the applicable policy or policies, (ii) will
contain an "Agreed Amount" clause as to the Premises and (iii) will otherwise
comply as to endorsements and coverage with the provisions of this Article.
(c) All policies of insurance provided for in Section 15.01 will name
Landlord and Tenant as the insured, as their respective interests may appear,
and also any mortgagee, when requested, as its interest may appear, except
that Landlord and any such mortgagee will have no interest in the insurance on
Tenant's personal property. Each such policy or certificate issued by the
insurer will, to the extent obtainable, contain an agreement by the insurer
that the insurance will not be cancelled without at least twenty (20) days
prior written notice to Landlord and to any other named insureds. Landlord
agrees not to carry any insurance concurrent in coverage and contributing in
the event of loss with any insurance required to be furnished by Tenant if the
effect of such separate insurance would be to reduce the protection or the
payment to be made under Tenant's insurance.
Section 15.03 - Landlord's Insurance. Landlord agrees to cause the Building to
be insured for the benefit of Landlord and any mortgagee of Landlord, as their
respective interests may appear, against loss or damage under a so-called "All
Risk'. Policy in an amount equal to (i) the replacement value or (ii) the
Amount necessary to avoid the effect of co-insurance provisions of the
applicable policies. Landlord also agrees to maintain comprehensive form
boiler insurance, rental value insurance and such other insurance against such
perils and in such amounts as may be required by any mortgagee of Landlord or
as Landlord may consider prudent. The cost of such insurance will be part of
the Operating Expenses.
ARTICLE 16
Waiver of Subrogation
Section 16.01 - Waiver of Subrogation. If available, all insurance policies
carried by either party covering the Premises will contain a clause or
endorsement expressly waiving any right on the part of the insurer to make any
claim against the other party. The parties agree to use their best efforts to
insure that their policies will include such waiver clause or endorsement.
Section 16.02 - Waiver of Rights. Landlord and Tenant each waive all claims,
causes of action and rights of recovery against the other and their respective
partners, agents, officers and employees, for any damage to or destruction of
persons, property or business which occurs on or about the Premises
ana~results from any of the perils insured under any and all policies of
insurance maintained by Landlord and Tenant, regardless of cause. This waiver
includes the negligence and intentional wrongdoing of either party and their
respective agents, officers and employees but only to the extent of recovery,
if any, under such policy or policies. This waiver will be void to the extent
that any such insurance is invalidated by reason of this waiver.
ARTICLE 17
Damage or Destruction
Section 17.01 - Substantial Damage. If the Building is damaged by fire or
other casualty, Tenant agrees to give prompt written notice to Landlord. If as
a result of fire or other casualty, (i) the Building is so damaged that
substantial alteration or reconstruction of the Building is, in Landlord's
sole opinion, required, or (ii) any mortgagee of the Building requires that
all or a substantial portion of insurance proceeds payable be used to retire
the mortgage debt, Landlord may, at its option, terminate this Lease by giving
notice to Tenant within sixty (60) days after the date of the damage. If,
within sixty (60) days after the date of the damage, Landlord does not begin
to restore the Building as provided in Section 17.02 or notify Tenant of its
election to terminate this Lease, Tenant may terminate this Lease by giving
notice to Landlord within ten (10) days after the expiration of the sixty (60)
day period. If this Lease is terminated by Landlord or Tenant as provided in
this Section 17.01, Rent will be abated as of the date of the damage.
Section 17.02 - Restoration. If Landlord does not terminate this Lease, as
provided in Section 17.01, within sixty (60) days after the date of the
damage, Landlord agrees to begin to restore the Building to substantially the
same condition in which it was immediately before the damage, and, subject to
Unavoidable Delays,
to continue the restoration with reasonable diligence. Landlord will not be
required to rebuild, repair, or replace (i) any part of Tenant's furniture,
furnishings, fixtures or equipment, or (ii) any alterations and additions made
by Tenant under - Section 7.04 which Tenant is required to remove on the Lease
Termination Date. Landlord will not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting from the
damage to or the repair of the Building, except that Landlord will allow
Tenant a fair reduction of Rent to the extent the Premises are unfit for
occupancy from the date of the occurrence of the damage to a date thirty (30)
days after completion of Landlord's repairs.
ARTICLE 18
Eminent Domain
Section 18.01 - Total Takinq. If there is a Total Taking, then this Lease will
terminate as of the earlier to occur of (i) the date when physical possession
of the Land or the Building is taken by the condemning authority or (ii) the
date when title vests in the condemning authority.
Section 18.02 - Partial Taking. If there is a Taking of the Premises which is
not a Total Taking, Landlord may terminate this Lease by giving notice to
Tenant within sixty (60) days after receiving notice of the Taking, in which
event this Lease will terminate as of the earlier to occur of (i) the date
when physical possession of such portion of the Premises is taken by the
condemning authority or (ii) the date when title vests in the condemning
authority. If this Lease is not terminated, Basic Rent will be abated from the
date the Premises are rendered unfit for occupancy by an amount representing
that part of the Basic Rent properly allocable to the portion of the Premises
taken, and Landlord will, at Landlord's expense, restore the Premises to
substantially their former condition to the extent that restoration, in
Landlord~s judgment, may be feasible. Landlord's restoration work will not
include any alterations and additions made by Tenant under the provisions of
Section 7.04 which Tenant is required to remove on the Lease Termination Date.
Section 18.03 - Awards and Proceeds. All proceeds payable in respect of a
Taking will be the property of Landlord. Tenant hereby assigns to Landlord all
rights of Tenant in or to such awards and proceeds, provided that Tenant will
be entitled to separately petition the condemning authority for a separate
award for its moving expenses and trade fixtures but only iF such a separate
award will not diminish the amount of award or proceeds payable to Landlord.
ARTICLE 19
Quiet Enjoyment
Section 19.01 - Landlord's Covenant. Landlord covenants that it has good title
to the Premises, subject to the Permitted Exceptions, and_that it has
sufficient authority to enter into this Lease. Landlord also covenants that if
Tenant pays the Rent and performs all of its obligations under this Lease,
subject to the Permitted Exceptions, it will quietly have and enjoy the
Premises during the Lease Term, without interference from any Person lawfully
claiming under Landlord or by paramount title.
Section 19.02 - Subordination. This Lease is subordinate to any mortgage now
or in the future on the Building and to each advance made under any such
mortgage, and to all renewals, modifications, consolidations, replacements and
extensions of such mortgage. This Section 19.02 is self-operative and no
further instrument of subordination will be required, provided that before a
future subordination is effective Landlord will cause the mortgagee to deliver
to Tenant an agreement, binding upon itself and any successor in interest, to
the effect that no foreclosure of the mortgage will disturb the possession of
Tenant under this Lease so long as no Event of Default exists. In confirmation
of such subordination, Tenant agrees to execute and deliver promptly any
certificate that Landlord or any mortgagee may request. If any mortgagee
succeeds to the interest of Landlord and agrees to recognize the interest of
Tenant under this Lease, Tenant agrees to attorn to such mortgagee and to
recognize such mortgagee as its Landlord.
Section 19.03 - Notice to Mortgagee. No act or failure to act on the part of
Landlord which would entitle Tenant under the terms of this Lease, or by law,
to be relieved of Tenant ts obligations under or to terminate this Lease, will
result in a release or termination of such obligations or a termination of
this Lease unless (i) Tenant first gives written notice of Landlord's act or
failure to act to Landlord's first mortgagee of record, if any, specifying the
act or failure to act on the part of Landlord which could or would give basis
to Tenant's rights; and (ii) the mortgagee, after receipt of such notice,
fails or refuses to correct or cure the condition complained of within a
reasonable time. Nothing contained in this Section 19.03 will be deemed to
impose any obligation on any mortgagee to correct or cure any condition.
''Reasonable time" means a period of not less than thirty (30) Business Days
and includes (but is not limited to) a reasonable time to obtain possession of
the Building if the mortgagee elects to do so and a reasonable time to correct
or cure the condition if the condition is determined to exist. Tenant has no
obligation to give notice under this Section 19.03 until the mortgagee has
given Tenant notice of its interest as such and the address to which notices
under this Section 19.03 are to be sent.
Section 19.04 - Other Provisions Regarding Mortgagees. If this Lease or the
Rent is assigned to a mortgagee as collateral security for any obligation, the
mortgagee will not be deemed to have assumed any of Landlord~s obligations
under this Lease solely as a result of the assignment. A mortgagee to whom
this Lease has been assigned will be deemed to have assumed such obligations
only if (i) by the terms of the assignment the mortgagee specifically elects
to assum' the obligations, or (ii) the mortgagee has (a) foreclosed its
mortgage, (b) accepted a deed in substitution of foreclosure, or (c) taken
possession of the Premises. Even if the mortgagee assumes the obligations of
Landlord, the mortgagee will be liable for breaches of any of Landlord's
obligations only to the extent the breaches occur during the period of
ownership by the mortgagee after foreclosure (or any conveyance by a deed in
substitution of foreclosure) or after entry, and the mortgagee will have no
liability for any act or omission or for any obligations incurred by any prior
Landlord, including liability with respect to any Security Deposit except to
the extent actually received by such mortgagee.
ARTICLE 20
Defaults: Events of Default
Section 20.01 - Defaults. The following will (i) if any requirement for notice
or lapse of time or both has not been met, constitute Defaults, and (ii) if
there are no such requirements or if such requirements have been met,
constitute Events of Default:
(1) The failure of Tenant to pay Rent when due, and the continuation of such
failure for a period of ten (10) days after notice from Landlord specifying
the failure;
(2) The failure of Tenant to perform any of its obligations under this Lease,
other than its obligation to pay Rent, and the continuation of such failure
for a period of twenty (20) days after notice from Landlord specifying in
reasonable detail the nature of such failure;
(3) The occurrence with respect to Tenant or any Guarantor of one or more of
the following events: the death, dissolution, termination of existence (other
than by merger or consolidation), insolvency, appointment of a receiver for
all or substantially all of its property, the making of a fraudulent
conveyance or the execution of an assignment or trust mortgage for the benefit
of creditors by i$, or the filing of a petition of bankruptcy or the
commencement of any proceedings by or against it under a bankruptcy,
insolvency or other law relating to the relief or the adjustment of
indebtedness, rehabilitation or reorganization of debtors;
provided that if such petition or commencement is involuntarily made against
it and is dismissed within sixty (60) days of the date of such filing or
commencement, such events will not constitute an Event of Default; and
(4) The issuance of any execution or attachment against Tenant or any other
occupant of the Premises as a result of which the ~remises are taken or
occupied by a Person other than Tenant.
Section 20.02 - Tenant's Best Efforts. If the Default of which Landlord gives
notice is of such a nature that it cannot be cured within twenty (20) days,
then the Default will not be deemed to continue so long as Tenant, after
receiving notice of the Default, begins to cure the Default as soon as
reasonably possible and continues to take all steps necessary to complete the
curing of the Default within a period of time which, under al1 prevailing
circumstances, is reasonable. No Default will be deemed to continue so long as
Tenant is acting to cure the Default in good faith or is delayed in or
prevented from curing the Default by reason of Unavoidable Delays.
Section 20.03 - Elimination of Default. If any Default is cured as provided in
this Lease, the Default will be deemed never to have occurred and Tenant's
rights under this Lease will continue unaffected by the Default.
ARTICLE 21
Landlord's Remedies: Damages on Default
Section 21.01 - Landlord's Remedies. Landlord may, at its option:
(a) Whenever an Event of Default exists, give Tenant a notice terminating
this Lease on a date specified in the notice, which date will be not less than
three (3) Business Days after the date of receipt by Tenant of the notice. On
the date specified in the notice, thi-s Lease and all rights of Tenant under
this Lease will end without further notice or lapse of time, but Tenant will
continue to be liable to Landlord as provided below.
(b) If an Event of Default results from Tenant's failure to pay a charge for
Additional Services, without further notice to Tenant, discontinue any or all
additional Services.
Section 21.02 - Possession. Upon any termination of this Lease as the result
of an Event of Default, Tenant will quit and peacefully surrender the Premises
to Landlord. Landlord may, at
any time after any termination of this Lease and without further notice, enter
the Premises and recover possession by summary proceedings or any other manner
permitted by law, and may remove Tenant and all other Persons and property
from the Premises and may hold the Premises and the right to receive all
rental income from the Premises.
Section 21.03 - Right to Relet. At any time after termination of this Lease as
a result of an Event of Default, Landlord may relet all or any part of the
Premises in the name of Landlord or otherwise, for such term (which may be
greater or less than the period which would otherwise have constituted the
balance of the Lease Term) and on such conditions (which may include
concessions or free rent) as Landlord, in its reasonable discretion, may
determine. Landlord will not be liable for failure to relet the Premises or
for failure to collect any rent due upon any such reletting.
Section 21.04 - Survival of Covenants. Etc. If this Lease is terminated as
provided in Section 21.01:
(a) The termination will not relieve Tenant of its obligations under this
Lease which obligations will survive the termination. Tenant agrees to
indemnify Landlord against all claims, losses and expenses arising out of the
termination.
(b) At the time of the termination, Tenant agrees to pay to Landlord the Rent
up to the date of termination. Tenant also agrees to pay to Landlord, on
demand, as liquidated damages for Tenant's Default, the difference between
(1) the total Rent that would have been payable under this Lease by Tenant
from the date of the termination until the Stated Expiration Date, less
(2) the fair and reasonable rental value of the Premises for the same period
reduced by Landlord~s reasonable estimate of expenses to be incurred in
connection with reletting the Premises, including, without limitation, all
repossession costs, brokerage commissions, legal expenses, reasonable
attorneys fees, alteration costs, and expenses of preparation for such
reletting.
(c) If all or any part of the Premises are relet by Landlord for any portion
of the unexpired Lease Term, before presentation of proof of such liquidated
damages to any court, commission or tribunal, the amount of rent reserved upon
the reletting will be, prima facie, the fair and reasonable rental value for
the part or the whole of the Premises relet during the term of the reletting.
(d) Nothing contained in this Section 21.04 will limit or prejudice the right
of Landlord to prove and obtain as liquidated damages by reason of the
termination, an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount is greater, equal to, or
less than the amount of the difference referred to in clause (b) above.
Section 21.05 - Right to Equitable Relief. If a Default occurs, Landlord will
be entitled to enjoin the Default and may invoke any remedy allowed at law or
in equity or by statute or otherwise as though re-entry, summary proceedings
and other remedies were not provided for in this Lease.
Section 21.06 - Right to Self Help: Interest On Overdue Rent. If an Event of
Default occurs, Landlord has the righ~, but not the obligation, to enter the
Premises and to perform any obligation of Tenant under this Lease
notwithstanding the fact that no specific provision for such substituted
performance by Landlord is made in this Lease. In performing such obligation,
Landlord may make any payment of money or perform any other act. The total of
(i) all sums paid by Landlord (ii) interest (at the rate of 1-1/2% per month
or the highest rate permitted by law, whichever is less) on such sums plus all
Rent not paid when due and (iii) all expenses in connection with the
performance of the obligation by Landlord, will be deemed to be Rent under
this Lease and payable to Landlord on demand. Landlord may exercise the
foregoing rights without waiving any other of its rights or releasing Tenant
from any of its obligations under this Lease.
ARTICLE 22
Notices
Section 22.01 - Notices and Communications. All notices, demands, requests and
other communications provided for or permitted under this Lease must be in
writing, either delivered by hand or sent by courier or first class mail,
postage prepaid, to the following addresses:
(a) if to Landlord at the address stated in Section 1.01, (or at such other
address as Landlord designates in writing to Tenant) with a copy to such
Persons as Landlord designates in writing to Tenant, or
(b) if to Tenant at the address stated in Section 1.01, (or at such other
address as Tenant designates in writing to Landlord) with a copy to such
Persons as Tenant designates in writing to Landlord.
Any communication provided for in this Lease will become effective only upon
receipt by the Person to whom it is given, unless mailed by first-class,
registered or certified mail, in which case it will be deemed to be received
on (i) the third Business Day after being mailed or (ii) the day of its
receipt, if a Business Day, or the next succeeding Business Day, whichever of
(i) or (ii) is the earlier.
ARTICLE 23
Waivers
Section 23.01 - No Waivers. Failure of Landlord or Tenant to complain of any
act or omission on the part of the other no matter how long the act or
omission may continue, will not be deemed to be a waiver by either Landlord or
Tenant of any of its rights under this Lease. No waiver by Landlord or Tenant
at any time, expressed or implied, of the breach of any provision of this
Lease will be deemed a waiver of a breach of any other provision of this Lease
or a consent to any subsequent breach of the same or any other provision. No
acceptance by Landlord of any partial payment will constitute an accord or
satisfaction but will only be deemed a partial payment on account. None of
Tenant's obligations under this Lease and no Default or Event of Default may
be waived or modified except in writing by Landlord.
ARTICLE 24
Security Deposit
Section 24.01 - Security Deposit. Tenant has deposited with Landlord the
Security Deposit in the amount, if any, stated in Section 1.01. Landlord will
hold the Security Deposit as security for the payment or performance by Tenant
of its obligations under this Lease and not as a prepayment of Rent. Landlord
may commingle the Security Deposit with other funds of Landlord. Landlord will
not be liable to Tenant for the payment of-interest. Landlord may expend such
amounts from the Security Deposit as may be necessary to cure any Default or
Event of Default and, in such case, Tenant agrees to pay to Landlord the
amount expended, on demand. Landlord may assign the Security Deposit to any
subsequent owner of the Building and thereafter Landlord will have no
liability to Tenant with respect to the Security Deposit. As soon as
reasonably practicable after the Lease Termination Date, Landlord agrees (i)
to inspect the Premises, (ii) to make such payments from the Security Deposit
as may be required to cure any Default or Event of Default and (iii) if no
Default or Event of Default exists, pay the balance of the Security Deposit to
Tenant.
ARTICLE 25
General Provisions
Section 25.01 - Unavoidable Delays. If Landlord or Tenant is delayed, hindered
in or prevented from the performance of any act required under this Lease by
reason of Unavoidable Delays, then performance of the act will be excused for
the period of the delay and the period for the performance of the act will be
extended for a period equivalent to the period of the delay.
Section 25.02 - Estoppel Certificates. Within five (5) Business Days after
receipt of a request from Landlord, Tenant agrees to deliver to any
prospective purchaser, mortgagee or other Person specified in the request an
estoppel certificate in such form as the purchaser, mortgagee or other Person
may ~easonably prescribe. Each estoppel certificate will be (i) signed by a
duly authorized representative of Tenant, (ii) delivered without charge to the
party requesting it and (iii) binding as to its contents on Tenant.
Section 25.03 - Time of the Essence. Any provision of law or equity to the
contrary notwithstanding, it is agreed that time is of the essence of this
Lease.
Section 25.04 - Holding Over. If Tenant occupies the Premises after the Lease
Termination Date without having entered into a new lease of the Premises with
Landlord, Tenant will be a tenant-at-sufferance only, subject to all of the
terms and provisions of this Lease at twice the then effective Basic Rent.
Such a holding over, even if with the consent of Landlord, will not constitute
an extension or renewal of this Lease.
Section 25.05 - Governinq Law. This Lease and the performance of its
provisions will be governed and construed under the laws of the Commonwealth
of Massachusetts.
Section 25.06 - Partial Invalidity. If any provision of this Lease or its
application to any Person or circumstance is held to be invalid or
unenforceable, the remainder~of this Lease, or the application of the
provision to Persons or circumstances other than those as to which it is held
invalid or unenforceable, will not be affected, and each provision of this
Lease will be enforced to the fullest extent permitted by law.
Section 25.07 - Notice of Lease. The parties will at any time, at the request
of either one, promptly execute duplicate originals of a statutory notice of
lease, in recordable form, setting forth a description of the Premises, the
Lease Term and any other terms of this Lease, excepting the rental provisions,
as may be required by law or as either party may request.
Section 25.08 - Interpretation. The section headings used in this Lease are
for reference and convenience only, and do not enter into the interpretation
of this Lease. This Lease may be signed in several counterparts, each of which
is an original, but all of which constitute a single instrument. The term
''Landlord'' means only the owner at the time of the Premises. Upon any sale
of the Premises or the Building or any assignment (other than as collateral
security for an obligation) of the interest of Landlord in this Lease,
Landlord will be relieved of all liability under this Lease and its successor
in interest and/or assign will be deemed to be Landlord so long as it owns the
Building. The liability of Landlord under this Lease is limited to Landlord~s
interest in the Premises.
Section 25.09 - Consents. Except for the consents of Landlord required under
Section 7.04 and Article 13, consents or approvals required or requested of
either Landlord or Tenant shall not be unreasonably withheld or delayed.
Section 25.10 - Entire Agreement: Changes. All prior agreements between the
parties are merged within this Lease, which alone fully states the entire
understanding and agreement of the parties. This lease may not be changed or
terminated orally or in any manner other than by an agreement in writing and
signed by the party against whom enforcement of the change or termination is
sought.
Section 25.11 - Binding Effect. The provisions of this Lease are binding on
and inure to the benefit of Landlord, its successors and assigns, and Tenant,
its successors and assigns and any Person claiming under Tenant.
Section 25.12 - Table of Contents. The table of contents preceding this lease
but under the same cover is for the purpose of convenience and reference only
and is not to be deemed or construed in any way as part of this lease.
EXECUTED as a sealed instrument as of the Date of Lease specified in Section
1.01.
LANDLORD:
By:
John L. Shaunessy, Trustee of
Consolidated Realty Trust
By:
Ronald I. Fields, Trustee of
Consolidated Realty Trust
TENANT:
ENVIROPLASTICS CORPORATION
By:
President
By:
Treasurer
EXHIBIT A
Description of the Land and Permitted Exceptions of Record
This Exhibit A is attached to and incorporated by reference into the Lease
between Consolidated Realty Trust and EnviroPlastics Corporation.
A certain parcel of land in Auburn, Worcester County, Massachusetts, as shown
on a plan recorded with the Worcester District Registry of Deeds in Plan Book
314, Plan 71, bounded and described as follows:
BEGINNING-at a point on the southeasterly side line of St. Mark Street at the
most northerly corner of the-parcel to be described, said point being at the
most westerly corner of land now or formerly of Crucible Center Co.;
THENCE S 49( 28' 30" E by land now or formerly of Crucible Center Co.,
two hundred twenty-one and 8/100 (221.08) feet to a point;
THENCE S 30( 05' 37" W by land now or formerly of Crucible Center Co.,
one hundred seventy-nine (179) feet to a point;
THENCE S 39( 25' 11" E by land now or formerly of Crucible Center Co.,
forty (40) feet to a point;
THENCE S 50( 34' 49" W by land now or formerly of King, two hundred
fifty-six and 40/100 (256.40) feet to an iron pipe;
THENCE S 50( 34' 27" W by land now or formerly of Steel Sales
Realty Corp., sixty-five and 70/100 (65.70) feet to a point;
THENCE N 00( 30' 17" W by land now or formerly of United Structural
Steel, three hundred thirty-six and 85/100 (336.85) feet to a point on the
s~utheasterly side line of St. Mark Street;
THENCE by St. Mark Street in a northerly direction by a curve to the left
with a radius of 60 feet, one hundred twenty-eight and 55/100 (128.55) feet to
a point;
THENCE by St. Mark Street in a northeasterly direction by a curve to the
right with a radius of 20 feet, twentyeight and 93/100 (28.93) feet to a
point;
THENCE N 50( 22 40" E St. Mark Street, ninety and 33/100 (90.33) feet to
a point;
THENCE by St. Mark Street in a northeasterly direction by a curve to the
left with a radius of 343.03 feet, thirty-one and 61/100 (31.61) feet to the
point of beginning.
Containing 94,167 square feet, more or less.
SUBJECT to protective covenants recorded at Worcester District Registry of
Deeds in Book 4852, Page 101.
SUBJECT to a ten (10) foot wide easement for the purpose of parking motor
vehicles as recited in deed recorded in Book 10275, Page 179.
SUBJECT to a railroad right of way.
EXHIBIT B
LANDLORD' S WORK AND TENANT IMPROVEMENTS
This Exhibit B is attached to and incorporated by reference into the Lease
between Consolidated Realty Trust and EnviroPlastics Corporation.
1. Landlord's Work. Landlord's Work referred to in Section 7.01 and the budget
cost for each item includes all of the following:
(a) Bring in 480-volt, 2000-amp electrical service to a distribution panel in
the Building. Budget Cost: $30,000.
(b) Install dock levelers and bumpers on five (5) loading docks. Budget Cost:
$8,750.
(c) Install dock covers on three (3) loading docks in the rear of the
Building. Budget Cost: $5,000.
(d) Construct concrete silo pad (15'x45'x8") in the rear of the Building.
Budget Cost: $2,329.
(e) Install energy efficient lighting in warehouse and manufacturing area.
Budget Cost: $28,800.
(f) Install HVAC for laboratory, office and cafeteria and build out two
vestibule air locks, office and cafeteria space according to Tenant's plans.
Budget Cost: $46,031.25.
Tenant agrees to pay, or reimburse Landlord for, the amount by which the
actual cost exceeds the budget cost for each item of Landlord's Work.
2. Tenant's Improvements. Landlord acknowledges approval of Tenant's plans for
construction of the following Tenant Improvements which will be a part of the
Building excluding "c" and "d" below.
(a) Floor drainage system
(b) Soundproof walls
(c) Water tower on roof of the Building
(d) Up to four silos on silo pad
(e) Internal separating walls
EXHIBIT C
RENT RIDER
This Exhibit C is attached to and incorporated by reference into the Lease
between Consolidated Realty Trust and EnviroPlastics Corporation.
1. Basic Rent During Original Lease Term. Basic Rent during each Lease Year of
the original Lease Term will be that amount determined by multiplying the
Rentable Area of the Building (33,494 square feet) by the appropriate
applicable rate per square foot, as follows:
First Lease Year - $4.50 per square foot
Second Lease Year - 35.00 per square foot
Third Lease Year - $5.50 per square foot
Fourth Lease Year - $6.00 per square foot
Fifth Lease Year - $6.50 per square foot
2. Basic Rent During Extended Term. Basic Rent for each Lease Year of the
Extended Term, if any, will be an amount determined by multiplying Basic Rent
for the previous Lease Year by a fraction, the numerator of which is the
C.P.I. for the last month or other reporting period of the previous Lease Year
and the denominator of which is the C.P.I. for the last month or other
reporting period immediately preceding the Term Commencement Date. Basic Rent
determined as provided in this paragraph 2 will in no event be less than Basic
Rent for the preceding Lease Year and will be exclusive of (and in addition
to) amounts due for Taxes and Operating Expenses. Landlord agrees to calculate
adjustments to Basic Rent promptly after the appropriate C.P.I. is published
and to give Tenant notice of the adjustment. If the adjustment to Basic Rent
has not been calculated before the date on which Basic Rent is due, Tenant
agrees to continue paying Basic Rent at the rate for the previous Lease Year
and to pay the difference, if any, to Landlord on demand after receiving
notice of the adjustment to Basic Rent. -
3. Change in C.P.I.: Substituted Index. As used in this Rent Rider, the term
C.P.I." means "Consumer Price Index - All Urban Consumers (CPI-U)-U.S. City
Average--All Items (1982-84 = 100) as published by the U.S. Department of
Labor.
If the U.S. Department of Labor changes the base reference period for
determining the C.P.I., the adjustment of Basic Rent will continue to be
calculated with 1982-84 as the base reference period using such figures or
conversion formulas as the U.S. Department of Labor may publish at the time
the base reference period is changed. If publication of the C.P.I. is
discontinued,
Landlord and Tenant agrees to accept comparable statistics on the cost of
living as they are computed and published by a Governmental Authority or if
such statistics are not published by a Governmental Authority, comparable
statistics published by a responsible financial periodical of recognized
authority selected by Landlord. If comparable statistics are used in place of
the C.P.I., Landlord will make such reasonable revisions in the method of
computation of Basic Rent as the circumstances may require to carry out the
intent of this Rent Rider and will give Tenant notice of the revisions before
using them.
EXHIBIT D
RIDER AND ADDENDUM
The Lease between Consolidated Realty Trust and EnviroPlastics Corporation to
which this Rider and Addendum is attached is modified by incorporation of the
following additional provisions:
1. Lessee's Deposits. Tenant agrees to pay to Landlord the sum of $12,560.25
upon the signing of this Lease and the same amount on or beYore June 1, 1991
as non-refundable consideration for Landlord's agreement to hold the Premises
available for Tenant until July 1, 1991. If, without giving Landlord notice of
its election to terminate this Lease, (i) Tenant fails to make the payment due
on June 1, 1991, or (ii) Tenant fails to take occupancy of the Premises on or
before July 1, 1991, or (iii) Tenant fails to begin performing its obligations
under this Lease on or before July 1, 1991, Landlord may retain all amounts
~aid by Tenant and exercise any of its remedies contained in Article 21 of
this Lease. Nothing will relieve Tenant of its obligations to make the
payments due on signing this Lease and on June 1, 1991. However, if before
July 1, 1991, Tenant, after making reasonable good faith efforts, does not
have a commitment from outside sources for debt and/or equity investment in
its capital of at least $675,000, Tenant may terminate this Lease by notice to
Landlord given at any time before July 1, 1991. If Tenant occupies the
Premises for the Permitted Use and begins performing its obligations under
this Lease on or before July 1, 1991, on July 1, 1991, Tenant agrees to pay
Landlord the Basic Rent and Additional Rent due for July plus an additional
deposit of $14,879.50, which together with the amounts paid on signing this
Lease and on June 1, 1991 will be held by Landlord as a Security Deposit under
the provisions of Section 24.01.
2. Tenant's Rights in Premises. Tenant's rights in the Premises include the
right to use the railroad spur track so long as that right has not been
revoked by the owner of the track. Tenant agrees to pay all costs associated
with the activation and use of the track.
3. Sale of Premises. Before making any agreement to sell the Premises,
Landlord agrees to give Tenant notice and an opportunity to make an offer to
purchase the Premises. The provisions of this paragraph are not to be
construed as granting to Tenant any option, right of first refusal or right
with respect to the Premises other than an opportunity to make an offer which
Landlord is free to accept or reject.
4. Damage to Floor. If Tenant complies with the provisions of Section 9.04 by
making reasonable efforts to dampen vibration from Tenant's machinery, upon
redelivery as provided in Section 9.07, Tenant will not be obligated to repair
damage to the floor of the building caused by the normal operation of Tenant's
machinery.
GUARANTY OF LEASE
IN CONSIDERATION of One Dollar ($1.00) and other valuable consideration paid
to FRANCO PREVID (''Guarantor.) by the Trustees of Consolidated Realty Trust
("Landlord'.), the receipt and sufficiency of which is acknowledged, the
Guarantor unconditionally guaranties to Landlord (a) payment of the Rent, as
that term is defined in the lease (the "Lease") from Landlord to
EnviroPlastics Corporation ("Tenant") and (b) the performance of all
obligations to be performed or observed by Tenant under the Lease, provided
that the liability of the Guarantor is limited to obligations of Tenant
arising before January 1, 1992 and will not apply with respect to any Rent or
other obligations under the Lease arising after December 31, 1991. The
Guarantor waives notice of all Defaults and Events of Default (as defined in
the Lease) and of all extensions and indulgences granted by Landlord to
Tenant. The Guarantor agrees (i) that a waiver by Landlord at any time of any
of its rights against Tenant arising out of a Default under the Lease, (ii)
that any extensions or indulgences granted by Landlord to Tenant, (iii) that
any subletting, assignment or other transfer of the Lease or any interest in
the Lease and (iv) that subordination of the Lease to any-mortgage, will not
modify or release the obligations of the Guarantor under this Guaranty. The
Guarantor's liability under this Guaranty will not be affected or impaired by
the acceptance by Landlord of any security for or other guarantors of the
obligations under the Lease, or by any failure or neglect on the part of
Landlord to enforce against Tenant, any other Guarantor or any collateral, any
of the obligations guarantied by the Guarantor. Landlord has the exclusive
right to determine how, when and what application of payments and credits, if
any, is to be made with respect to the obligations guarantied by this
Guaranty. In order to hold the Guarantor liable under this Guaranty, Landlord
will have no obligation to proceed against Tenant or any other Guarantor,
their respective property or assets, or to resort to any collateral, security,
property or other rights or remedies, provided that the liability of the
Guarantor under this Guaranty will not exceed twenty-five percent (25%) of the
total obligations under the Lease which are covered by this Guaranty.
No act or omission on the part of Landlord will impair the rights of Landlord
or the obligations of the Guarantor under this guaranty.
This Guaranty is binding upon the Guarantor, his executors, administrators,
heirs and assigns, and is for the benefit of Landlord, its successors and
assigns.
EXECUTED under seal this 28th day of May, 1991.
//S/
____________________________________
Franco Previd
COMMONWEALTH OF NASSACHUSETTS
Worcester, SS May 28, 1991
Then personally appeared the above-named Franco Previd and acknowledged the
foregoing instrument to be his free act and deed, before
//S/
__________________________________
Notary Public
My Commission Expires:
Nancy W. Reifenstein, Justice of the Peace
My Commission Expires February 22, 1996
GUARANTY OF LEASE
IN CONSIDERATION of One Dollar ($1.00) and other valuable consideration paid
to BRUCE A. FORTIN (''Guarantor.) by the Trustees of Consolidated Realty Trust
("Landlord'.), the receipt and sufficiency of which is acknowledged, the
Guarantor unconditionally guaranties to Landlord (a) payment of the Rent, as
that term is defined in the lease (the "Lease") from Landlord to
EnviroPlastics Corporation ("Tenant") and (b) the performance of all
obligations to be performed or observed by Tenant under the Lease, provided
that the liability of the Guarantor is limited to obligations of Tenant
arising before January 1, 1992 and will not apply with respect to any Rent or
other obligations under the Lease arising after December 31, 1991. The
Guarantor waives notice of all Defaults and Events of Default (as defined in
the Lease) and of all extensions and indulgences granted by Landlord to
Tenant. The Guarantor agrees (i) that a waiver by Landlord at any time of any
of its rights against Tenant arising out of a Default under the Lease, (ii)
that any extensions or indulgences granted by Landlord to Tenant, (iii) that
any subletting, assignment or other transfer of the Lease or any interest in
the Lease and (iv) that subordination of the Lease to any-mortgage, will not
modify or release the obligations of the Guarantor under this Guaranty. The
Guarantor's liability under this Guaranty will not be affected or impaired by
the acceptance by Landlord of any security for or other guarantors of the
obligations under the Lease, or by any failure or neglect on the part of
Landlord to enforce against Tenant, any other Guarantor or any collateral, any
of the obligations guarantied by the Guarantor. Landlord has the exclusive
right to determine how, when and what application of payments and credits, if
any, is to be made with respect to the obligations guarantied by this
Guaranty. In order to hold the Guarantor liable under this Guaranty, Landlord
will have no obligation to proceed against Tenant or any other Guarantor,
their respective property or assets, or to resort to any collateral, security,
property or other rights or remedies, provided that the liability of the
Guarantor under this Guaranty will not exceed twenty-five percent (25%) of the
total obligations under the Lease which are covered by this Guaranty.
No act or omission on the part of Landlord will impair the rights of Landlord
or the obligations of the Guarantor under this guaranty.
This Guaranty is binding upon the Guarantor, his executors, administrators,
heirs and assigns, and is for the benefit of Landlord, its successors and
assigns.
EXECUTED under seal this 24th day of May, 1991.
//S/
____________________________________
Bruce A. Fortin
COMMONWEALTH OF NASSACHUSETTS
Worcester, SS May 24, 1991
Then personally appeared the above-named Bruce A. Fortin and acknowledged the
foregoing instrument to be his free act and deed, before
//S/John J. Geblin
__________________________________
Notary Public
My Commission Expires: 4-04-97
GUARANTY OF LEASE
IN CONSIDERATION of One Dollar ($1.00) and other valuable consideration paid
to THOMAS WHITCOMB (''Guarantor.) by the Trustees of Consolidated Realty Trust
("Landlord'.), the receipt and sufficiency of which is acknowledged, the
Guarantor unconditionally guaranties to Landlord (a) payment of the Rent, as
that term is defined in the lease (the "Lease") from Landlord to
EnviroPlastics Corporation ("Tenant") and (b) the performance of all
obligations to be performed or observed by Tenant under the Lease, provided
that the liability of the Guarantor is limited to obligations of Tenant
arising before January 1, 1992 and will not apply with respect to any Rent or
other obligations under the Lease arising after December 31, 1991. The
Guarantor waives notice of all Defaults and Events of Default (as defined in
the Lease) and of all extensions and indulgences granted by Landlord to
Tenant. The Guarantor agrees (i) that a waiver by Landlord at any time of any
of its rights against Tenant arising out of a Default under the Lease, (ii)
that any extensions or indulgences granted by Landlord to Tenant, (iii) that
any subletting, assignment or other transfer of the Lease or any interest in
the Lease and (iv) that subordination of the Lease to any-mortgage, will not
modify or release the obligations of the Guarantor under this Guaranty. The
Guarantor's liability under this Guaranty will not be affected or impaired by
the acceptance by Landlord of any security for or other guarantors of the
obligations under the Lease, or by any failure or neglect on the part of
Landlord to enforce against Tenant, any other Guarantor or any collateral, any
of the obligations guarantied by the Guarantor. Landlord has the exclusive
right to determine how, when and what application of payments and credits, if
any, is to be made with respect to the obligations guarantied by this
Guaranty. In order to hold the Guarantor liable under this Guaranty, Landlord
will have no obligation to proceed against Tenant or any other Guarantor,
their respective property or assets, or to resort to any collateral, security,
property or other rights or remedies, provided that the liability of the
Guarantor under this Guaranty will not exceed twenty-five percent (25%) of the
total obligations under the Lease which are covered by this Guaranty.
No act or omission on the part of Landlord will impair the rights of Landlord
or the obligations of the Guarantor under this guaranty.
This Guaranty is binding upon the Guarantor, his executors, administrators,
heirs and assigns, and is for the benefit of Landlord, its successors and
assigns.
EXECUTED under seal this 24th day of May, 1991.
//S/
____________________________________
Thomas Whitcomb
COMMONWEALTH OF NASSACHUSETTS
Worcester, SS May 24, 1991
Then personally appeared the above-named Franco Previd and acknowledged the
foregoing instrument to be his free act and deed, before
//S/John J. Geblin
__________________________________
Notary Public
My Commission Expires: 4-04-97
GUARANTY OF LEASE
IN CONSIDERATION of One Dollar ($1.00) and other valuable consideration paid
to HENRY P. LISCIOTTI, JR. (''Guarantor.) by the Trustees of Consolidated
Realty Trust ("Landlord'.), the receipt and sufficiency of which is
acknowledged, the Guarantor unconditionally guaranties to Landlord (a) payment
of the Rent, as that term is defined in the lease (the "Lease") from Landlord
to EnviroPlastics Corporation ("Tenant") and (b) the performance of all
obligations to be performed or observed by Tenant under the Lease, provided
that the liability of the Guarantor is limited to obligations of Tenant
arising before January 1, 1992 and will not apply with respect to any Rent or
other obligations under the Lease arising after December 31, 1991. The
Guarantor waives notice of all Defaults and Events of Default (as defined in
the Lease) and of all extensions and indulgences granted by Landlord to
Tenant. The Guarantor agrees (i) that a waiver by Landlord at any time of any
of its rights against Tenant arising out of a Default under the Lease, (ii)
that any extensions or indulgences granted by Landlord to Tenant, (iii) that
any subletting, assignment or other transfer of the Lease or any interest in
the Lease and (iv) that subordination of the Lease to any-mortgage, will not
modify or release the obligations of the Guarantor under this Guaranty. The
Guarantor's liability under this Guaranty will not be affected or impaired by
the acceptance by Landlord of any security for or other guarantors of the
obligations under the Lease, or by any failure or neglect on the part of
Landlord to enforce against Tenant, any other Guarantor or any collateral, any
of the obligations guarantied by the Guarantor. Landlord has the exclusive
right to determine how, when and what application of payments and credits, if
any, is to be made with respect to the obligations guarantied by this
Guaranty. In order to hold the Guarantor liable under this Guaranty, Landlord
will have no obligation to proceed against Tenant or any other Guarantor,
their respective property or assets, or to resort to any collateral, security,
property or other rights or remedies, provided that the liability of the
Guarantor under this Guaranty will not exceed twenty-five percent (25%) of the
total obligations under the Lease which are covered by this Guaranty.
No act or omission on the part of Landlord will impair the rights of Landlord
or the obligations of the Guarantor under this guaranty.
This Guaranty is binding upon the Guarantor, his executors, administrators,
heirs and assigns, and is for the benefit of Landlord, its successors and
assigns.
EXECUTED under seal this 28th day of May, 1991.
//S/
____________________________________
Henry P. Lisciotti, Jr.
COMMONWEALTH OF NASSACHUSETTS
Worcester, SS May 24, 1991
Then personally appeared the above-named Franco Previd and acknowledged the
foregoing instrument to be his free act and deed, before
//S/
__________________________________
Notary Public Cheryl D. L'Homme
My Commission Expires:My Commission Expires July 27, 2015
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Primary earnings (loss) per share is computed based on the weighted-
average number of shares actually outstanding during the years ended
December 31, 1996 and 1995 and the six months ended June 30, 1997 and
1996. Common stock equivalents have been excluded as they are anti-
dilutive for the years ended December 31,1996 and 1995 and the six
months ended June 30, 1996, and not materially dilutive for the six
months ended June 30, 1997. The income (loss) before extraordinary item
and net income (loss) have been adjusted for dividends on convertible
preferred stock. Fully diluted earnings (loss) per share amounts are
not presented as they are anti-dilutive for the years ended December 31,
1996 and 1995 and the six months ended June 30, 1996, and not materially
dilutive for the six months ended June 30, 1997.
EXHIBIT 21 - SUBSIDIARIES
SUBSIDIARY - DOING BUSINESS AS STATE OF INCORPORATION
Earth Care Products of America, Inc. (inactive) Florida
Earth Care Products of Tennessee, Inc. Florida
Earth Care Products of the Midwest, Inc. Florida
Earth Care Products of New Jersey, Inc. (inactive) Florida
Clean Earth, Inc. Delaware
Clean Earth of New Castle, Inc. Delaware
Delaware Improvement Corp. (inactive) Delaware
Clean Earth In-Situ (inactive) Delaware
Recycled Plastics Industries, Inc. Wisconsin
Advanced Remediation and Disposal Technologies, Inc. Pennsylvania
Environmental Specialty Products, Inc. California
Integrated Technical Services, Inc. New Jersey
Enviroplastics Corporation Massachusetts
Mixed Design Methods, Inc. Pennsylvania
Carteret Biocycle Corporation Delaware
Interstate Industrial Corp./ USPL Joint Venture New Jersey
KUNTZ LESHER SIEGRIST & MARTINI LLP
CERTIFIED PUBLIC ACCOUNTANTS
215 S. CENTERVILLE ROAD
P. O. BOX 8408
LANCASTER, PA 17604
(717)394-5666
FAX (717)394-0693
CONSENT OF INDEPENDENT ACCOUNTANTS'
We consent to the inclusion in this registration statement on Form SB-2
of our report dated February 10, 1997 (except as to Note 15 which is as of
February 24, 1997), on our audit of the consolidated financial statements of
U.S. Plastic Lumber Corp. and Subsidiaries. We also consent to the reference
to our firm under the caption "Experts".
/s/ KUNTZ LESHER SIEGRIST & MARTINI LLP
KUNTZ LESHER SIEGRIST & MARTINI LLP
CERTIFIED PUBLIC ACCOUNTANTS
Lancaster, Pennsylvania
August 20, 1997
KUNTZ LESHER SIEGRIST & MARTINI LLP
CERTIFIED PUBLIC ACCOUNTANTS
215 S. CENTERVILLE ROAD
P. O. BOX 8408
LANCASTER, PA 17604
(717)394-5666
FAX (717)394-0693
CONSENT OF INDEPENDENT ACCOUNTANTS'
We consent to the inclusion in this registration statement on Form SB-2 of
our report dated August 7, 1997, on our audit of the financial statements of
Integrated Technical Services, Inc. We also consent to the reference to our
firm under the caption "Experts".
/s/KUNTZ LESHER SIEGRIST & MARTINI LLP
KUNTZ LESHER SIEGRIST & MARTINI LLP
CERTIFIED PUBLIC ACCOUNTANTS
Lancaster, Pennsylvania
August 20, 1997
LOVE, BOLLUS, LYNCH & ROGERS
Certified Public Accountants and Consultants
10 Mechanic Street, Worcester, Massachusetts 01608
Telephone 508-755-7107 Facsimile 508-755-3896
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to use in this Registration Statement on Form SB-2 of our
report, dated July 25, 1997, relating to the financial statements of
EnviroPlastics Corporation. We also consent to the reference to our Firm under
the captions "Expert" and "Selected Financial Data" in the Prospectus.
/s/ Love, Bollus, Lynch & Rogers
Worcester, Massachusetts
August 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF U.S. PLASTIC LUMBER CORP. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 854,290 3,474,799
<SECURITIES> 0 0
<RECEIVABLES> 1,821,742 4,922,895
<ALLOWANCES> 262,279 685,519
<INVENTORY> 574,381 1,053,055
<CURRENT-ASSETS> 3,087,596 9,432,752
<PP&E> 4,741,752 7,795,646
<DEPRECIATION> 3,543,520 3,705,311
<TOTAL-ASSETS> 4,510,682 16,655,364
<CURRENT-LIABILITIES> 2,376,035 6,551,159
<BONDS> 714,312 3,347,980
0 0
75 200
<COMMON> 1,167 1,496
<OTHER-SE> 2,126,675 8,117,852
<TOTAL-LIABILITY-AND-EQUITY> 4,510,682 16,655,364
<SALES> 6,627,242 7,440,597
<TOTAL-REVENUES> 6,627,242 7,440,597
<CGS> 6,356,786 5,286,679
<TOTAL-COSTS> 6,356,786 5,286,679
<OTHER-EXPENSES> 3,928,875 1,938,369
<LOSS-PROVISION> 160,227 0
<INTEREST-EXPENSE> 77,372 63,535
<INCOME-PRETAX> (3,679,519) 173,636
<INCOME-TAX> (61,516) 0
<INCOME-CONTINUING> (3,618,003) 173,636
<DISCONTINUED> 0 0
<EXTRAORDINARY> 66,859 0
<CHANGES> 0 0
<NET-INCOME> (3,551,144) 173,636
<EPS-PRIMARY> (0.32) 0.01
<EPS-DILUTED> 0.00 0.00
</TABLE>
