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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 28, 1999
U.S. PLASTIC LUMBER CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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Nevada 3080 87-0404343
(State of incorporation (Primary Standard Industrial (I.R.S. Employer
/organization) Classification Code Number) Identification No.)
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2300 W. Glades Road, Suite 440 W, Boca Raton, Florida 33431
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: 561-394-3511
Former Name or Former Address if Changed Since Last Report:
Not Applicable.
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not Applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On January 28, 1999, the Registrant entered into a Stock Purchase
Agreement with Eaglebrook Plastics, Inc. and Eaglebrook Products,
Inc.("EPI"). The consideration under the Stock Purchase Agreements was
$9,000,000 in cash, 1,668,025 shares of non-registered common stock, par
value $.0001, of U.S. Plastic Lumber Corporation, and a Convertible
Debenture in the amount of $4,000,000 at an interest rate of 10% per annum
amortized over a five year period from date of Closing. The Registrant
also executed Leases to use the buildings and property upon which the
business operates from the principal shareholders of EPI for a term of ten
years at an initial monthly rental of $39,181 per month. The building
consists of approximately 260,000 sq. ft. and is located on several acres
within the City of Chicago.
The amount of consideration was determined by a number of factors,
including but not limited to, an appraisal of the business value of EPI
utilizing traditional business valuation formulas, the vertical
integration aspects the Registrant believes will be derived from this
merger, the skill and expertise of the management team being acquired, and
the goodwill of the customer base being acquired. All negotiations
relative to all transactions hereunder were accomplished in an arms length
manner.
The shareholders of EPI were Andrew Stephens, Robert Thompson and Michael
Dahl. None of the individuals had any relationship with the Registrant
prior to this merger, other than as a competitor of the Registrant.
The funding used by the Registrant was derived from cash on hand of the
Registrant, cash available from the Registrant's credit line facility with
its Bank, Coast Business Credit, and cash from a credit line the
Registrant has with one of its shareholders, Stout Partnership.
(b) The business of EPI is the manufacture and sale of plastic lumber made
from 100% recycled materials. The business is operated in a facility in
Chicago, Illinois consisting of approximately 260,000 sq. ft. located on
several acres. The Registrant intends to continue to devote the assets for
the purposes currently used by EPI.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not Applicable.
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not Applicable
ITEM 5. OTHER EVENTS
Not Applicable.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not Applicable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
The financial statements of EPI are not included in this filing and shall
be submitted no later than 60 days from the date of filing this Form 8K.
ITEM 8. CHANGE IN FISCAL YEAR.
Not Applicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not Applicable.
EXHIBITS
10.1. Stock Purchase Agreement with Eaglebrook Plastics, Inc.
10.2. Stock Purchase Agreement with Eaglebrook Products, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned hereunto duly authorized.
U.S. Plastic Lumber Corporation
(Registrant)
Date: February 10, 1999 By: /s/ Bruce C. Rosetto
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Bruce C. Rosetto, Vice President and
General Counsel/Secretary
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Exhibit 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
January 28, 1999 among U.S. Plastic Lumber Ltd., a Delaware corporation (the
"Purchaser"); U.S. Plastic Lumber Corporation, a Nevada corporation ("the
Guarantor"); and Andrew Stephens and Robert Thompson (together, the
"Shareholders" and individually, a "Shareholder").
RECITALS
A. The Shareholders own all of the issued and outstanding capital stock of
Eaglebrook Plastics, Inc. (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.
C. The Guarantor, which is the owner of all the issued and outstanding capital
stock of the Purchaser, wishes to enter into the covenants and agreements set
forth herein, to induce the Shareholders to enter into this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and for 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 in accordance with past practices.
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"ACTION" shall mean any claim, action, suit, arbitration, hearing,
inquiry, proceeding, complaint, charge or investigation, actual or threatened in
writing, 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.
"APPLICABLE TAX LAW" shall mean any Law of any nation, state, region,
province, locality, municipality or other jurisdiction relating to Taxes,
including regulations and other official pronouncements of any governmental
entity or political subdivision of such jurisdiction charged with interpreting
such Laws.
"BALANCE SHEET" and "BALANCE SHEET DATE" shall have the meanings
assigned to such terms in Section 4.4(a).
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall mean the authorized class of common stock of
Guarantor, $.0001 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 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 8
hereof and under Article 8 of the Products SPA).
"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 at 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,
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decontamination, discharge and disposal of Hazardous Substances, including,
without limitation, those statutes, laws, rules and regulations set forth below
in the definition of "Hazardous Material."
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"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 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
Illinois;
(c) those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor thereto) as hazardous
substances (40 CFR Part 302 and any amendments thereto);
(d) such other substances, materials and wastes that are
currently regulated under applicable local, state or federal laws or
regulations, or which are currently 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"
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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
of 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 or other trade or accounts payable incurred in the Ordinary Course.
"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.
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"LIEN" shall mean all liens (including judgment and mechanics liens,
regardless of whether liquidated), mortgages, security interests, pledges,
trusts (constructive or other), deeds of trust, options or other encumbrances.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, financial condition, properties, profitability or operations of the
subject Person.
"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, (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, and (c)
those Liens identified on Exhibit E attached hereto.
"PERSON" shall mean natural persons, corporations, business trusts,
associations, limited liability companies, partnerships, joint ventures,
Governmental Entities and any other entities.
"PRODUCTS" means Eaglebrook Products, Inc., an Illinois corporation.
"PRODUCTS SPA" shall mean the separate Stock Purchase Agreement of even
date herewith among Purchaser, Guarantor, Andrew Stephens and Robert Thompson
relating to Purchaser's purchase of all of the outstanding capital stock of
Products.
"POST-CLOSING PERIOD" shall mean any Tax Period commencing after the
Closing Date and the portion of any Straddle Period commencing after the Closing
Date.
"PRE-CLOSING PERIOD" shall mean any Tax Period ending on or
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before the Closing Date and the portion of any Straddle Period ending on the
Closing Date.
"REAL PROPERTY" shall mean the Owned Real Property and the Leased Real
Property, collectively.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"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 outstanding, 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 Guarantor to
the Shareholders as payment of a portion of the Purchase Price, as contemplated
by Article 2 hereof.
"STRADDLE PERIOD" shall mean any Tax Period that begins before and ends
after the Closing Date.
"STRUCTURE" shall mean any facility, building, plant, factory, office,
warehouse structure or other real estate or real property 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.
"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
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refund or information, or statement relating to Taxes, and any exhibit,
schedule, attachment or amendment thereto.
"TAX AUTHORITY" shall mean, with respect to any Tax, the governmental
entity or political subdivision thereof that imposes such Tax, and the agency
(if any) charged with the collection of such Taxes for such entity or
subdivision.
"TAX BENEFIT" shall mean the amount by which a Person's Tax liability
is reduced (including any related interest received from a Tax Authority in
connection therewith); provided, that (i) in the case of an item for which a
deduction is allowed or allowable in the current period, the Tax Benefit with
respect to such item shall be deemed to equal the amount of such deduction, loss
or expense multiplied by the highest applicable marginal corporate income tax
rate under the Applicable Tax Law, and (ii) in the case of an item for which a
deduction is allowed or allowable (in whole or in part) in a future period, the
Tax Benefit with respect to such item shall be deemed to equal the present value
of the amount obtained by multiplying (x) the deduction, expense or loss allowed
or allowable with respect to such item for each relevant Tax Period by (y) the
highest applicable marginal income tax rate under Applicable Tax Law (provided
further that the present value shall be computed using the interest rate on such
date imposed on deficiencies paid within 30 days of a notice of proposed
deficiency under the Code).
"TAX PERIOD" shall mean, with respect to any Tax, the period for which
the Tax is reported as provided under Applicable Tax Laws.
"TRANSACTION DOCUMENTS" shall mean all the documents executed pursuant
to the transactions contemplated by this Agreement listed on Exhibit F.
2. PURCHASE AND SALE OF SECURITIES
2.1 SALE AND DELIVERY. Each Shareholder hereby sells and delivers to
Purchaser, and Purchaser hereby purchases and accepts from each Shareholder,
free and clear of all Liens, on the terms and conditions set forth in this
Agreement, and for the aggregate purchase price described in Section 2.2 below
(the "Purchase Price"), good and marketable title to the number of Shares set
forth opposite the name of such Shareholder on Exhibit A. The Shares being sold
and purchased pursuant to this Agreement constitute all of the outstanding
capital stock of the Company.
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2.2 PURCHASE PRICE. The aggregate Purchase Price for all of the Shares,
as well as for all the stock of Products acquired by Purchaser pursuant to the
Products SPA, is being paid as follows:
(a) The Shareholders acknowledge previous receipt of a
$250,000 deposit, which is hereby deemed the property of Shareholders without
restriction simultaneous with the execution hereof.
(b) $8,405,000 in cash is being paid to the Shareholders by
the Purchaser simultaneously with the execution hereof.
(c) 1,535,051 shares of the Common Stock of the Guarantor, par
value $.0001, are being issued to the Shareholders, free and clear of all Liens
(except the Stock Escrow Agreement), and are being allocated among the
Shareholders as set forth opposite their respective names on Exhibit A. The
Stock shall not have been registered pursuant to the Securities Act and shall be
subject to the requirements of Rule 145 of the Securities Act and the
Registration Rights Agreement attached hereto and incorporated herein by
reference as Exhibit B.
(d) The Purchaser is issuing to Craig R. Culbertson, Jenner &
Block, as agent for the Shareholders, the $4,000,000 Convertible Secured
Debenture in the form attached hereto as Exhibit C. The Convertible Secured
Debenture is being guaranteed by the Unconditional Guaranty of the Guarantor,
and the Unconditional Guaranty of the Company and Products substantially in the
forms attached hereto as Exhibit D-1 and D-2.
(e) The Purchaser shall pay the Shareholders the amounts set
forth in Section 2.3 below (as well as the amount set forth in Section 2.3 of
the Products Agreement).
2.3 SECTION 338(h)(10) ELECTION. At the request of Purchaser, the
Shareholders shall join the Purchaser in making an election under section
338(h)(10) of the Code (and any comparable election under state, local or
foreign tax law) (the "338(h)(10) Election") with respect to the acquisition of
the Company by Purchaser; PROVIDED, HOWEVER, that Shareholders shall not join in
the 338(h)(10) Election unless and until Purchaser (1) has paid $-0- in
additional cash consideration to the Shareholders on or prior to April 10, 1999,
(2) has paid $316,769.28 in additional cash consideration to the Shareholders on
or before September 10, 1999, and (3) has paid the amount set forth in Section
2.3 of the Products SPA. If Purchaser and the Shareholders join in filing the
338(h)(10) Election, each of Purchaser, the Company, and the Shareholders shall
file all Tax Returns in a manner consistent with the allocation of consideration
set forth at Exhibit A.
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3. REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDERS
Each of the Shareholders hereby jointly and severally represents and
warrants to, and covenants and agrees with, Purchaser that, as of the date
hereof (except as otherwise specifically provided):
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 good and marketable title to such
Shares free and clear of all Liens.
3.2 DELIVERY OF GOOD TITLE. By delivery of the Shares being sold by
such Shareholder hereunder and delivery of the Purchase Price components
therefore, pursuant to this Agreement, Purchaser is receiving good and
marketable title to such Shares free and clear of all Liens.
3.3 EXECUTION AND DELIVERY. Except as set forth on SCHEDULE 3.3, all
consents, approvals, authorizations and orders necessary for the execution,
delivery and performance by such Shareholder of the Transaction Documents
(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 full right, power, authority and capacity to execute, deliver
and perform the Transaction Documents. The Transaction Documents have been duly
executed and delivered by such Shareholder and, assuming the Transaction
Documents constitute the valid and binding agreement of the Purchaser and
Guarantor, constitutes a legal, valid and binding agreement of such Shareholder,
enforceable against such Shareholder in accordance with its terms, except that
the enforcement hereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
3.4 NO CONFLICTS. Except as set forth on SCHEDULE 3.4, the execution,
delivery and performance of the Transaction Documents 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
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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, as of the date hereof (except as
otherwise specifically provided):
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 Illinois 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,
except where the failure to so qualify would not have a Material Adverse Effect.
(b) Except as set forth in SCHEDULE 4.1(b), the Company has no
Subsidiary nor owns or controls, or has any other equity investment or other
interest in, directly or indirectly, any corporation, joint venture,
partnership, association or other entity.
4.2 NO CONFLICTS. Except as set forth on SCHEDULE 4.2 attached hereto,
the execution, delivery and performance of the Transaction Documents by the
Shareholders and the consummation of the transactions contemplated hereby by
them 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
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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 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 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, rights, 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 to the Shareholders were (i) exempt from
the registration and prospectus delivery requirements of the Securities Act,
(ii) 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(a) hereto contains true and complete copies
of (i) the unaudited balance sheet (the "BALANCE SHEET") of the Company at
November 30, 1998 (the "BALANCE SHEET DATE"), and the related unaudited
statements of income for the eleven (11) months then ended, and (ii) the
reviewed balance sheet of the Company at December 31, 1997 and 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 Ernst &
Young, LLP, independent public accountants)(the financial statements described
in clauses (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 (subject to normal year-end adjustments or other adjustments
described in the Financial Statements or notes thereto), have
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been prepared in conformity with generally accepted accounting principles (any
matters not in accordance with GAAP shall be set forth on SCHEDULE 4.4(b)),
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.
4.5 TITLE TO PROPERTY; ENCUMBRANCES.
(a) The Company has 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, 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 as at August 21, 1998 (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, 1997 and December
31, 1996. Except as set forth in SCHEDULE 4.5(c), 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, to the knowledge of the Shareholders, 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 or made available 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.
<PAGE> 13
(d) Except where the failure would not have a Material Adverse
Effect, and except as set forth in SCHEDULE 4.5(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 Shareholders are not aware that the Company
is in violation of, or default under, any Legal Requirement pertaining to any of
the Real Property, except where the violation does not have a Material Adverse
Effect. No written 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 to the
Company or any of the Shareholders;
(ii) To the knowledge of the Shareholders, except as
set forth in SCHEDULE 4.5(e), 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 appropriate
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) To the knowledge of the Shareholders, except as
set forth in SCHEDULE 4.5(e), 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
<PAGE> 14
structure" classifications, or (D) encroaches on any property owned by, or
easement granted in favor of, any Person;
(v) Except as set forth in SCHEDULE 4.5(e), 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) 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 materially 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),
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
or written off by the Company since the Balance Sheet Date) are valid and
enforceable claims, and the goods and services sold and delivered that gave rise
to such accounts were, to the knowledge of the Shareholders, sold and delivered
in conformity with all applicable express and implied warranties, purchase
orders, agreements and specifications. To the knowledge of the Shareholders,
except as set forth in SCHEDULE 4.6, 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 currently carried by the Company in its books and records for
receivables accrued after the Balance Sheet Date. 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
<PAGE> 15
Course, except for slow-moving, damaged or obsolete items and materials of below
standard quality, all of which have, to the knowledge of the Shareholders, 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
(except for write-offs since the Balance Sheet Date) or currently carried by the
Company in its books and records for inventory acquired after the Balance Sheet
Date. 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. The Shareholders are not aware of any specific
circumstance existing under which 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, registered by the Company
(collectively herein, "REGISTERED RIGHTS").
(b) Except as described in SCHEDULE 4.8(b), the Company owns
or has the 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") used by the Company in the design, development, manufacture,
operation, sale and use of all products and services sold or rendered or
currently proposed to be sold or rendered by the Company.
(c) SCHEDULE 4.8(c) contains a true and complete list and
description of all licenses of or rights to Proprietary Information granted in
writing 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.
<PAGE> 16
(d) There is no claim or demand of any Person pertaining to,
or any Action that is pending or, to the Shareholders' knowledge, threatened in
writing, 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 thereon.
(b) SCHEDULE 4.9(b) contains a true and complete list of the
Company's 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) 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 or made available 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
<PAGE> 17
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 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) 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 in writing against or affecting
the Company or its properties, assets or business, (iii) Action pending or
threatened in writing against the Company's officers, directors or employees
relating to the Company or its business or (iv) to the knowledge of the
Shareholders, 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 on the Company.
4.12 INCOME AND OTHER TAXES. Except as set forth on SCHEDULE 4.12:
(a) The Shareholders have duly and timely filed (or have
caused to be duly and timely filed) each Tax Return required to be filed with
any Taxing Authority which includes or is based upon the assets, operations,
ownership or activities of the Company and such Tax Returns were correct and
complete in all material respects. All material Taxes which were shown to be due
on such Tax Returns have been paid prior to their due dates.
<PAGE> 18
(b) The Company has not made any payments, is not obligated to
make any payments and is not a party to any agreement that could obligate it to
make any future payments that will not be deductible under Sections 162(m) or
280G of the Code.
(c) None of the assets of the Company (i) is subject to any
Lien arising in connection with any failure or alleged failure to pay any Tax,
(ii) secures any debt the interest on which is Tax-exempt under Section 103(a)
of the Code, (iii) is required to be or is being depreciated under the
alternative depreciation system under Section 168(g)(2) of the Code, (iv) is
"limited use property" with the meaning of Revenue Procedure 76-30 or (v) will
be treated as owned by any other person pursuant to the provisions of former
Section 168(f)(8) of the Code.
(d) The Company has withheld and paid each material Tax
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other party.
(e) To the knowledge of the Shareholders, there are no
pending, threatened, or proposed audits, assessments or claims from any Tax
Authority for deficiencies, penalties or interest against the Company or any of
its assets, operations or activities.
(f) The Company does not own, directly or indirectly, any
interest in any entity classified as a partnership for United States federal
income Tax purposes.
(g) 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, except for Taxes imposed on the Company as
a result of the transactions contemplated by this Agreement, 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.
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
<PAGE> 19
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. 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 or made available
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 Requirements have been
performed.
(c) Except as set forth on SCHEDULE 4.14, 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, except when the failure to do so would not have a Material
Adverse Effect. With respect to each Plan
<PAGE> 20
which is a welfare plan (as defined in ERISA Section 3(1)), the requirements of
Part 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 the Company 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) Except as set forth in SCHEDULE 4.14, 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 at any time, or contributes to or has contributed to or is or was
required to contribute to, any (i) Plan subject to Title IV of ERISA, including,
without limitation, any multi-employer plan (as defined in ERISA Section 3(37)),
within the past five years, or (ii) except as set forth in SCHEDULE 4.14, 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).
<PAGE> 21
(h) Except as set forth in SCHEDULE 4.14, 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 or
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 Shareholders have no knowledge
that the Company has any 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, excluding Taxes with respect to or based
upon the transactions or events occurring at or prior to the Closing.
4.16 PERMITS, LICENSES, ETC.
Except where the failure to do so would not have a Material
Adverse Effect, the Company possesses, and is operating in compliance with, all
material 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
Shareholders' knowledge, threatened looking toward the revocation, suspension or
limitation of any Permit. Except as set forth in SCHEDULE 4.16, the consummation
of the transactions contemplated by this Agreement will not result in the
revocation, suspension or limitation of any Permit, and no Permit will require
the consent of its issuing authority to or as a result of the consummation of
the transaction
<PAGE> 22
contemplated hereby.
4.17 REGULATORY FILINGS.
Except where the failure to do so would not have a Material
Adverse Effect, 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 material
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 in connection with the operations and business of the Company as
currently 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, 4.16 and 4.18 hereto.
4.19 MATERIAL CONTRACTS; NO DEFAULTS.
(a) 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
<PAGE> 23
covered by such sales order or sales contract.
(b) All outstanding purchase orders and purchase commitments
of the Company have been incurred in the Ordinary Course, and, in the estimation
of the management of the Company, 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. To the best knowledge of the Shareholders, there is no
current or threatened interruption in raw material supplies which will or could
have a material adverse effect on the business of the Company.
(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 or made available 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 or directors or any Shareholder is
obligated or to their knowledge, any key employees, and true and complete copies
of the same have been delivered or made available to Purchaser heretofore.
Except as described in SCHEDULE 4.19(d), the Company is not restricted by any
agreement from carrying on its business anywhere in the world (including
relocating, closing, or terminating any of its operations or facilities), and no
such officer, director, or to their knowledge, any 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 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 or made available to Purchaser heretofore.
(e) SCHEDULE 4.19(e) contains a true and complete list and
description of all contracts and agreements, written or oral, of the Company
with any officer, director, consultant, employee or 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 or agreement, or a true and complete
summary of such oral contract or agreement has been delivered to Purchaser
heretofore.
<PAGE> 24
(f) SCHEDULE 4.19(f) contains a true and complete list and
description of all other material written contracts and agreements of the
Company by which it or its properties, rights or assets are bound that are not
otherwise disclosed in this Agreement or the Schedules hereto. True and complete
copies of such written contracts and agreements have been delivered or made
available to Purchaser heretofore. For the purposes of this subsection (f),
"material" means any contract or agreement (i) that involves payments or
receipts by the Company in excess of ten thousand dollars ($10,000), or (ii)
involves capital expenditures in excess of ten thousand dollars ($10,000).
(g) Except as described in SCHEDULE 4.19(g):
(i) each agreement or contract described above in
this Section 4.19 is legal, binding and enforceable against the Company
and, to the knowledge of the Shareholders, against the other party
thereto and is in full force and effect;
(ii) no event or condition has become known to the
Company or any Shareholder 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 such contract or agreement; and
(iii) to the knowledge of the Shareholders, no person
with whom the Company has such a contract or agreement 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 November 30, 1998, except as disclosed in SCHEDULE 4.20,
the Company has not, to the knowledge of Shareholders: (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
<PAGE> 25
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 its condition (financial
or otherwise), properties, prospects or operations other than changes, events or
conditions in the Ordinary Course or which (individually or in the aggregate)
has not had or may not 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) 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 (xiv) 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 and plans 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 or made available 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
<PAGE> 26
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 in all material respects 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 judgement of wrongful termination relating to 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, Shareholder or Affiliate of the Company
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, except as set forth
<PAGE> 27
on SCHEDULE 4.23(a), since that date no such customer has terminated its
relationship with or materially curtailed its purchases from the Company or
indicated in writing (for any reason) its intention so to terminate its
relationship or materially 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, except as set forth on SCHEDULE 4.23(b), since that
date no such supplier has terminated its relationship with or materially
curtailed its accommodations, sales or services to the Company or indicated in
writing (for any reason) its intention to terminate such relationship or curtail
its accommodations, sales or services.
4.24 COMPLIANCE WITH LAW.
Except as set forth in SCHEDULE 4.24, 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 material Legal Requirement, (ii) to the
Shareholders' knowledge, has not been alleged to be in violation of any material
Legal Requirement, and (iii) has not received any notice of any alleged
violation of, or any citation for noncompliance with, any material 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 is reasonably likely to 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 written 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,
<PAGE> 28
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 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, (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, in a manner different from
that currently conducted by the Company, or (iv) is of a type, location,
material, nature or condition which requires special notification to Government
Entities by the Company under Environmental 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 known to the Shareholders is pending or threatened by any Governmental
Entity, with respect to (i) any alleged violation by the Company of any
Environmental Law (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, to the knowledge of Shareholders, been located at
any Real Property currently owned or leased by the Company, except as set forth
in SCHEDULE 4.28.
<PAGE> 29
(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) To the knowledge of the Shareholders, there have been no
environmental inspections, investigations, studies, tests, review or other
analyses conducted in relation to any Real Property since the Company has
occupied the Real Property, except as set forth in SCHEDULE 4.28.
(g) The Company has not released, transported, or arranged for
the transportation of any Hazardous Material from any property currently or
previously owned, operated or leased by the Company, except in accordance with
applicable laws.
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) 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," such "knowledge" shall
be limited to the actual knowledge of the Shareholders, as well as knowledge, if
any, which could be reasonably expected to be obtained by the Shareholders
assuming they have made a reasonable investigation sufficient to express an
informed view concerning the matters to which such representation or warranty
relates, including reasonable inquiries of the Company's officers, directors and
key employees.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and Guarantor hereby jointly and severally represent and
<PAGE> 30
warrant to, and covenant and agree with, each of the Shareholders that, as of
the date hereof (except as otherwise specifically provided):
5.1 CORPORATE ORGANIZATION AND QUALIFICATION.
Each of Guarantor and its subsidiaries, including Purchaser,
is a corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and is qualified and in
good standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect. Each of Guarantor and its subsidiaries, including
Purchaser, has all requisite power and authority (corporate or otherwise) to own
its properties and to carry on its business as it is now being conducted.
Guarantor and the Purchaser have heretofore made available to the Shareholders
complete and correct copies of their Articles of Incorporation and By-Laws. Set
forth in SCHEDULE 5.1 is a list of all subsidiaries of Guarantor and the
jurisdictions in which Guarantor and each of its subsidiaries are qualified or
otherwise authorized to do business.
5.2 CAPITALIZATION.
The authorized capital stock of Guarantor consists of (i) 50
million shares of Common Stock of which, as of December 31, 1998, 18,201,349
shares of Common Stock are issued and outstanding and (ii) 5 million shares of
preferred stock, par value $.001 per share, 382,794 of which are issued or
outstanding. All of the outstanding shares of capital stock of Guarantor have
been duly authorized and validly issued and are fully paid and nonassessable.
Other than as set forth in SCHEDULE 5.2, as of the date hereof all outstanding
shares of capital stock of Guarantor's subsidiaries are owned by Guarantor or a
direct or indirect wholly owned subsidiary of Guarantor, free and clear of all
liens, charges, encumbrances, claims and options of any nature. Other than as
set forth on SCHEDULE 5.2, and as of December 31, 1998, there are not any
outstanding or authorized options, warrants, calls, rights (including preemptive
rights), commitments or any other agreements of any character which Guarantor or
any of its subsidiaries is a party to, or may be bound by, requiring it to
issue, transfer, sell, purchase, redeem or acquire any shares of capital stock
or any securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for, any shares of capital stock of Guarantor or any of
its subsidiaries.
5.3 ISSUANCE OF STOCK.
The issuance of 1,535,051 shares of Stock to the
<PAGE> 31
Shareholders by the Guarantor has been duly authorized and said shares are
validly issued, fully paid and nonassessable and based upon the outstanding
capital stock as of December 31, 1998, said 1,535,051 shares represent
approximately 7.7% of all the outstanding capital stock of the Guarantor
(determined immediately after the issuance).
5.4 AUTHORITY RELATIVE TO THE TRANSACTION DOCUMENTS
Each of the Purchaser and Guarantor has the requisite
corporate power and authority to execute and deliver the Transaction Documents
and to consummate the transactions contemplated hereby. The Transaction
Documents and the consummation by each of the Purchaser and Guarantor of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Purchaser and Guarantor, as the case may be, and no
other corporate proceedings on the part of the Purchaser or Guarantor are
necessary to authorize the Transaction Documents or to consummate the
transactions contemplated hereby. The Transaction Documents have been duly and
validly executed and delivered by the Purchaser and Guarantor and, assuming the
Transaction Documents constitute the valid and binding agreement of the
Shareholders, constitutes a valid and binding agreement of each of the Purchaser
and Guarantor, enforceable against the Purchaser and Guarantor in accordance
with their terms, except that the enforcement hereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
5.5 NO CONFLICTS.
The execution, delivery and performance of the Transaction
Documents and the consummation by Guarantor or the Purchaser of the transactions
contemplated hereby will not (a) conflict with or result in a breach or
violation of any term or provision of the respective Articles of Incorporation
or By-Laws of Guarantor or any of its subsidiaries; (b) 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 Guarantor or
the Purchaser is a party or by which Guarantor or the Purchaser is bound or
affected by; (c) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority; (d)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or
<PAGE> 32
acceleration or lien or other charge or encumbrance) under any of the terms,
conditions or provisions of any material note, license, agreement or other
instrument or obligation to which the Guarantor or any of its subsidiaries or
any of their assets may be bound; or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Guarantor or any of its
subsidiaries or to any of their respective assets.
5.6 SEC REPORTS: FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES.
(a) Prior to and as of the date of this Agreement, Guarantor
has timely filed all forms, reports and documents required to be filed by it
with the SEC pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which, as of their respective dates, complied in
all material respects with all applicable requirements of the Securities Act and
the Exchange Act (collectively, the "GUARANTOR SEC REPORTS"). None of the
Guarantor SEC Reports, including, without limitation, any financial statements
or schedules included therein, as of their respective dates contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) The consolidated balance sheets and the related statements
of consolidated income, shareholders' equity and cash flows (including the
related notes thereto) of Guarantor included in the Guarantor SEC Reports
complied in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with prior periods (except as otherwise noted therein), and
present fairly the consolidated financial position of the Guarantor and its
consolidated subsidiaries as of their respective dates, and the consolidated
results of their operations and their cash flows for the periods presented
therein (subject, in the case of the unaudited interim financial statements, to
normal year-end adjustments).
(c) Except as and to the extent set forth on the consolidated
balance sheet of Guarantor and its subsidiaries at September 30, 1998, including
the notes thereto, contained in the Guarantor SEC Reports (the "Guarantor
September 30 Balance Sheet"), neither the Guarantor nor any of its subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which would be required to be reflected on a balance
sheet or in the notes thereto prepared in accordance with generally accepted
accounting principles, except for liabilities or obligations incurred in the
ordinary course of business since September 30, 1998 or which would not,
individually or in the aggregate, reasonably
<PAGE> 33
be expected to have a Material Adverse Effect.
(d) Except as may be set forth on SCHEDULE 5.6, neither
Guarantor nor any of its subsidiaries has any liabilities or obligations
(whether accrued, absolute, contingent or otherwise) under any contract, order
or commitment expected to be or previously performed at a loss or other
contingent liability except for (i) expected losses and contingent liabilities
known to Guarantor for which adequate reserves are reflected in the Guarantor
September 30 Balance Sheet or (ii) those which would not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.
As of the date of this Agreement, except as disclosed in the
Guarantor SEC Reports, as set forth in SCHEDULE 5.7 or contemplated by this
Agreement and to the best knowledge of Guarantor and Purchaser, since September
30, 1998: (i) the business of Guarantor and the Purchaser has been carried on
only in the ordinary and usual course and in a manner consistent with past
practices (ii) neither Guarantor nor the Purchaser has suffered any Material
Adverse Effect, or any event, occurrence or circumstance having a reasonable
possibility of resulting in a Material Adverse Effect; (iii) there has not been
any revaluation by Guarantor or the Purchaser of any of its material assets,
including but not limited to writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business; (iv)
there has not been any entry by Guarantor or the Purchaser taken as a whole
other than those in the ordinary course of business; (v) there has been no
change by Guarantor or the Purchaser in accounting principles, practices or
methods except as disclosed on SCHEDULE 5.7; and (vi) there has not been any
declaration, setting aside or payment of any dividend or other acquisition by
Guarantor of any of its shares of capital stock or any direct or indirect
redemption, purchase or other acquisition by Guarantor of any of its shares of
capital stock.
5.8 LITIGATION.
As of the date hereof:
(a) there is no (i) outstanding judgement, order, decree,
award, stipulation or injunction of any Governmental Entity or arbitrator
against or affecting Guarantor or any of its subsidiaries or any of their
respective properties, assets or businesses or (ii) Action pending against or
affecting Guarantor or any of its subsidiaries or any of their respective
properties, assets or businesses; and
<PAGE> 34
(b) 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 Guarantor or any of its
subsidiaries relating to Guarantor or any of its subsidiaries or their
respective businesses, (ii) Action threatened against or affecting Guarantor or
any of its subsidiaries or any of their respective properties, assets or
businesses, (iii) Action pending or threatened against Guarantor or its
officers, directors or employees relating to Guarantor or any of its
subsidiaries or its business or (iv) basis for the institution of any Action
against Guarantor or any of its subsidiaries or any of their officers,
directors, employees, properties or assets which, if decided adversely, could
reasonably be expected to have a Material Adverse Effect.
5.9 COMPLIANCE WITH LAWS AND REGULATIONS.
(a) Except as disclosed in SCHEDULE 5.9, Guarantor and each of
its subsidiaries are in compliance in all material respects with all applicable
Legal Requirements.
(b) To the knowledge of Guarantor, there are no pending or
threatened claims nor any reasonable basis for claims against Guarantor or any
of its subsidiaries under any Legal Requirements relating to health, safety or
the environment, except as detailed in SCHEDULE 5.9.
5.10 INVESTMENT PURPOSES.
The Purchaser is acquiring the Shares for its own account and
without a view to the sale or distribution thereof. The Purchaser acknowledges
that the Shares have no trading market, are not freely tradable and have not
been registered under the Securities Act, or under any other federal or state
securities or other Legal Requirement.
6. ADDITIONAL COVENANTS
6.1 EXPENSES.
Except for Taxes (liability for which is allocated pursuant to
Section 6.7 of this Agreement), 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.
The Company may pay any such fees and expenses prior to the Closing.
<PAGE> 35
6.2 PUBLICITY; EMPLOYEE COMMUNICATIONS.
At all times from and after the date hereof, 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 or appropriate so long as
such representatives, agents, attorneys, advisors, financing sources and others
are made aware of the terms of this Section 6.2. 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.
6.3 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, Purchaser and Guarantor, as the case may be, shall take or cause
to be taken all such necessary or appropriate action and execute, and deliver
and file, or cause to be executed, delivered and filed, all necessary or
appropriate documentation.
6.4 POST-TERMINATION EMPLOYMENT.
Except for the employment agreement to be executed by each
Shareholder, 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. Notwithstanding the foregoing, however, the Company, Products and
Guarantor are entering into agreements with certain employees of the Company
and/or Products, which agreements are identified in Exhibit G attached hereto.
Certain of those agreements provide for the issuance of Common Stock to the
subject employees where the employee's right to the Common Stock vests after
designated periods of time. Purchaser and Guarantor covenant and agree
<PAGE> 36
that 50% of the shares of any such Common Stock which, at the end of the subject
vesting period, does not vest in or otherwise become the property of the subject
employee shall instead by immediately reissued to the Shareholders (or their
designees) as the Shareholders may direct.
6.5 ACCESS TO INFORMATION.
The Purchaser and the Guarantor agree that from and after the
Closing, the Shareholders shall, on a reasonable basis, have full and free
access to the books and records of the Company relating to operations through
the date hereof.
6.6 PERSONAL GUARANTEES. Purchaser will utilize its reasonable efforts
to have the Shareholders removed from any personal guarantees they may have
executed to secure loans to the Company.
6.7 TAX COVENANTS.
(a) Liability for Taxes
(i) The Shareholders shall be liable for, and
shall indemnify, defend and hold Purchaser harmless from and against, any and
all Taxes imposed on or with respect to the Company or its assets, operations or
activities for any Pre-Closing Period, other than: (1) Taxes provided for on the
Company's books of account, (2) Taxes accrued on the Balance Sheet, and (3)
Taxes imposed on the Company as a result of the transactions contemplated by
this Agreement (including, but not limited to, liability for Taxes under Section
1374 of the Code or any similar provision of Applicable Tax Law); provided
however, that such indemnity, defense and hold harmless is part of, and is
expressly subject to all the terms and limitations set forth in Article 8 below
applicable to indemnification claims therein.
(ii) Purchaser shall be liable for, and shall
indemnify, defend and hold the Shareholders harmless from and against, any and
all Taxes imposed on or with respect to the Company or its operations,
ownership, assets or activities for any Post-Closing Period, and the following
Taxes of the Company attributable to Pre-Closing Periods: (1) Taxes provided for
on the Company's books of account, (2) Taxes accrued on the Balance Sheet, and
(3) Taxes imposed on the Company (other than matters referred to in Section 6.4
above) as a result of the transactions contemplated by this Agreement
(including, but not limited to, liability for Taxes under Section 1374 of the
Code or any similar provision of Applicable Tax Law).
<PAGE> 37
(iii) Tax items shall be apportioned between
Pre-Closing Periods and Post-Closing Periods based on a closing of the books
and records of the Company as of the Closing Date (provided that (a)
depreciation, amortization and depletion for any Straddle Period shall be
apportioned on a daily PRO RATA basis and (b) any Taxes imposed on a periodic
basis (including real property Taxes, but not including Taxes based on income
and receipts) for any Straddle Period shall be apportioned on a daily PRO RATA
basis).
(b) Preparation of Tax Returns
(i) The Shareholders shall have the right and
obligation to timely prepare and file, and cause to be timely prepared and
filed, when due, any Tax Return that is required to include the operations,
ownership, assets or activities of the Company for Tax Periods ending on or
before the Closing Date. Purchaser shall have the right and obligation to timely
prepare and file, or cause to be timely prepared and filed, when due, all Tax
Returns that are required to include the operations, ownership, assets or
activities of the Company for any Tax Period ending after the Closing Date
(including Straddle Period Returns).
(ii) The Shareholders shall prepare and provide to
Purchaser such Tax information as is reasonably requested by Purchaser with
respect to the operations, ownership, assets or activities of the Company for
Straddle Periods to the extent such information is relevant to any Tax Return
which Purchaser has the right and obligation hereunder to file.
(c) Amended Tax Returns
(i) Any amended Tax Return or claim for Tax refund
with respect to the operations, ownership, assets or activities of the Company
for any Pre-Closing Period other than a Straddle Period shall be filed, or
caused to be filed, only by the Shareholders who shall not be obligated to make
(or cause to be made) such filing. The Shareholders shall not, without the prior
written consent of Purchaser (which consent shall not be unreasonably withheld
or delayed) make or cause to be made, any such filing, to the extent such
filing, if accepted, reasonably might change the Tax liability of Purchaser for
any Tax Period.
(ii) Any amended Tax Return or claim for Tax refund
for any Straddle Period shall be filed by the party responsible for filing the
original Tax Return hereunder if either Purchaser or the
<PAGE> 38
Shareholders so request, except that such filing shall not be done without the
consent (which shall not be unreasonably withheld or delayed) of Purchaser (if
the request is made by the Shareholders) or of the Shareholders (if the request
is made by Purchaser).
(iii) Any amended Tax Return or claim for Tax refund
with respect to the operations, ownership, assets or activities of the Company
for any Post-Closing Period other than a Straddle Period shall be filed, or
caused to be filed, only by Purchaser, who shall not be obligated to make (or
cause to be made) such filing. Purchaser shall not, without the prior written
consent of the Shareholders (which consent shall not be unreasonably withheld or
delayed) file, or cause to be filed, any such filing to the extent that such
filing, if accepted, reasonably might change the Tax liability of the
Shareholders for any Tax Period.
(d) Interperiod Adjustments
If, upon examination by any Tax Authority of any Tax Return of
the Company for any Tax Period, an item of deduction, credit or expense is
disallowed in a Pre-Closing Period for which the Shareholders are or may be
liable for Taxes hereunder, (or an item of income is required to be recognized
on a Tax Return with respect to such Pre-Closing Period which was not reported
on the Tax Return), in either such case resulting in a Tax detriment suffered by
the Company and such disallowance (or recognition) results in a Tax Benefit to
the Company or its Affiliates in a Post-Closing Period, then the Company (or
such one or more persons as it shall nominate) shall pay to the Shareholders the
amount of such Tax Benefit. The provisions of this Section 6.7 shall MUTATIS
MUTANDIS apply where an item of deduction, credit or expense is disallowed in a
Post-Closing Period (or an item of income is required to be recognized in a
Post-Closing Period) and such disallowance or (recognition) results in a Tax
Benefit to the Shareholders in a Pre-Closing Period, as they apply where the
Purchaser and its Affiliates receive a Tax Benefit.
(e) Carrybacks and Carryforwards
(i) Unless the Shareholders, in their sole and
absolute discretion, consent, Purchaser shall not and shall not permit the
Company to carry back any losses or credits accruing after the Closing Date to
any Tax Return of the Shareholders or the Company for any Pre-Closing Period.
Purchaser shall and shall cause the Company to make any elections and take all
such actions necessary to avoid any such carry back.
(ii) The Shareholders shall not be liable hereunder
for any decrease to any net operating loss carry forward or any other Tax
attributes available to the Company resulting from adjustments to any item
<PAGE> 39
of income, deduction, credit, or exclusion on Tax Returns for which the
Shareholders are responsible.
(f) Purchaser will cause appropriate employees of the Company
to prepare usual and customary Tax Return packages with respect to the Tax
Period beginning January 1, 1999 and ending as of the Closing Date. Purchaser
will use its commercially reasonable efforts to cause such Tax Return packages
to be delivered to the Shareholders on or before March 15, 1999.
(g) If Purchaser or the Company receives a Tax refund with
respect to Taxes of the Company attributable to a Pre-Closing Period (other than
a Tax refund accrued on the Balance Sheet), Purchaser shall pay, within the
thirty (30) days following the receipt of such Tax refund, the amount of such
Tax refund to the Shareholders. If the Shareholders receive a Tax refund with
respect to Taxes of the Company attributable to any Post-Closing Tax Period, the
Shareholders will pay, within thirty (30) days following the receipt of such Tax
refund, the amount of such Tax refund to Purchaser.
6.8 TAX CONTROVERSIES; COOPERATION
(a) The Shareholders shall control any audit, dispute,
administrative, judicial or other proceeding related to Tax Returns filed for
Pre-Closing Periods and Straddle Periods of the Company and Purchaser shall
control any audit, dispute, administrative, judicial or other proceeding related
to Tax Returns filed for Post-Closing Periods of the Company. Subject to the
preceding sentence, in the event an adverse determination may result in each
party having responsibility for any amount of Taxes, each party shall be
entitled to fully participate in that portion of the proceedings relating to the
Taxes with respect to which it may incur liability hereunder. For purposes of
this Section 6.8, the term "participation" shall include (i) participation in
conferences, meetings or proceedings with any Tax Authority, the subject matter
of which includes an item for which such party may have liability hereunder,
(ii) participation in appearances before any court or tribunal, the subject
matter of which includes an item for which a party may have liability hereunder,
and (iii) with respect to the matters described in the preceding clauses (i) and
(ii), participation in the submission and determination of the content of the
documentation, protests, memorandum of fact and law, briefs, and the conduct of
oral arguments and presentations.
(b) Purchaser and the Shareholders shall not agree to settle
any Tax liability or compromise any claim with respect to Taxes, which
settlement or compromise may affect the liability for Taxes (or right to a Tax
Benefit) hereunder of the other party, without such other party's
<PAGE> 40
consent (which consent shall not be unreasonably withheld or delayed).
(c) Purchaser and the Shareholders shall bear their own
expenses incurred in connection with audits and other administrative judicial
proceedings relating to Taxes for which such party and its Affiliates are
liable.
(d) The Shareholders on the one hand, and Purchaser and the
Company on the other, shall cooperate (and cause their affiliates to cooperate)
with each other and with each other's agents, including accounting firms and
legal counsel, in connection with Tax matters relating to the Company, including
(i) preparation and filing of Tax Returns, (ii) determining the liability and
amount of any Taxes due or the right to and amount of any refund of Taxes, (iii)
examinations of Tax Returns, and (iv) any administrative or judicial proceeding
in respect of Taxes assessed or proposed to be assessed. Such cooperation shall
include each party making all information and documents in its possession
relating to the Company available to the other party. The parties shall retain
all Tax Returns, schedules and work papers, and all material records and other
documents relating thereto, until one year after the expiration of the
applicable statute of limitations (including, to the extent notified by any
party, any extension thereof) of the Tax Period to which such Tax Returns and
other documents and information relate. Each of the parties shall also make
available to the other party, as reasonably requested and available, personnel
(including officers, directors, employees and agents) responsible for preparing,
maintaining, and interpreting information and documents relevant to Taxes, and
personnel reasonably required as witnesses or for purposes of providing
information or documents in connection with any administrative or judicial
proceedings relating to Taxes.
7. AMENDMENT AND WAIVER
7.1 AMENDMENT.
This Agreement may be amended at any time but only by a
written instrument executed by Purchaser and all the Shareholders. Any amendment
effected pursuant to this Section 7.1 shall be binding upon all parties hereto.
7.2 WAIVER.
Any term or provision of this Agreement may be waived in
<PAGE> 41
writing at any time by the party or parties entitled to the benefits thereof.
Any waiver effected pursuant to this Section 7.2 shall be binding upon all
parties hereto. 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.
8. INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the parties hereto
contained in this Agreement shall survive until the first anniversary of the
date hereof.
8.2 INDEMNIFICATION.
(a) The Shareholders, jointly and severally, covenant and
agree, subject to the other terms of this Article 8, to defend, indemnify and
hold harmless Purchaser, the Company, and the Guarantor (collectively the "USPL
Parties") 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 unless and except that such inaccuracy or breach
is a direct result of changes made by any USPL Parties 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.
(b) Purchaser and Guarantor, jointly and severally, covenant
and agree 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 or Guarantor in this
Agreement; (ii) the failure by Purchaser or Guarantor to perform or observe any
covenant, agreement or condition to be performed or observed by it pursuant to
this Agreement; or (iii) any adjustment by a Tax Authority to the Tax liability
of any Shareholder, to the extent such adjustment would not have been made but
for the fact that the Shareholders joined the Purchaser in making the 338(h)(10)
Election.
(c) The amount of any Damages for which indemnification is
provided under this Article 8 and Article 8 of the Products SPA shall be
computed net of any Tax Benefits available to be utilized by the Indemnified
Party in connection with such Damages.
<PAGE> 42
8.3 THIRD PARTY CLAIMS.
(a) If any party entitled to be indemnified pursuant to
Section 8.2 (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 from 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.
8.4 TIME FOR ASSERTING INDEMNIFICATION CLAIM.
Notwithstanding anything in this Agreement to the contrary,
all claims against the Shareholders for indemnification under this Article 8
must be asserted by the USPL Parties by delivery of written notice so as to be
received by the Shareholders on or prior to the first
<PAGE> 43
anniversary of the date hereof. The written notice of a claim for
indemnification shall set forth the basis of the claim and the amount of Damages
incurred. No claim for Damages shall be brought or asserted after the first
anniversary of the date hereof.
8.5 THRESHOLD FOR CLAIM AGAINST SHAREHOLDERS.
No indemnification shall be payable under this Agreement by
the Shareholders unless the aggregate Damages incurred by the USPL Parties
hereunder and under the Products SPA exceeds $50,000.00, and then only to the
extent of such excess but subject to the recourse limitation in Section 8.6
herein and Section 8.6 of the Products SPA.
8.6 RECOVERY AGAINST SHAREHOLDERS LIMITED.
Notwithstanding anything in this Agreement, the Products SPA
or any other document to the contrary, any recourse against the Shareholders
pursuant to this Agreement, the Transaction Documents, the Products SPA, any
documents or instruments pursuant to the Products SPA or at law, equity or
otherwise shall be limited solely to the 200,000 shares of Stock deposited in
escrow pursuant to the Escrow Agreement. There is no recourse directly against
the Shareholders.
8.7 USPL PARTIES' EXCLUSIVE REMEDY AGAINST SHAREHOLDERS; WAIVER.
The USPL Parties' remedy against the Shareholders pursuant to
this Agreement, the Transaction Documents, the Products SPA, any documents or
instruments pursuant to the Products SPA or at law, equity or otherwise is
limited solely to the indemnification provided in this Article 8 and in Article
8 of the Products SPA and is the only remedy of the USPL Parties against the
Shareholders. The Purchaser and Guarantor acknowledge that (i) the Shareholders
have not made any representations or warranties other than as expressly made by
the Shareholders in Articles 3 and 4 hereof and in Articles 3 and 4 of the
Products SPA, (ii) the Purchaser and Guarantor have made their own independent
examination, investigation analysis and evaluation of the Company and have
undertaken such due diligence, including, but not limited to, a review of the
assets, liabilities, books, records and contracts of the Company as the
Purchaser and Guarantor deem adequate, (iii) the USPL Parties' Damages, if any,
may be greater than the liquidation value of the 200,000 shares of Stock
deposited in escrow pursuant to the Escrow Agreement, and (iv) the USPL Parties'
right of indemnification under this Article 8 and Article 8 of the Products SPA
is the USPL Parties' exclusive remedy. The USPL Parties hereby expressly waive
any right to proceed directly against the Shareholders and waive all rights and
remedies
<PAGE> 44
whatsoever, whether by statute, rule, regulation, in tort or otherwise,
against the Shareholders except for the right of indemnification under this
Article 8 and Article 8 of the Products SPA which is limited solely to recourse
against the shares of Stock deposited in escrow pursuant to the Escrow
Agreement.
9. GENERAL PROVISIONS
9.1 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 Guarantor or Purchaser, addressed to:
U. S. Plastic Lumber Corporation
2300 W. Glades Road
Suite 440W
Boca Raton, Florida 33431
Attention: Bruce C. Rosetto, Vice President and
General Counsel
Telecopy: (561)394-5335
(b) If to any Shareholder, to the address set
forth below such Shareholder's name on
Exhibit A hereto:
With a copy to:
Craig R. Culbertson
Jenner & Block
One IBM Plaza
Chicago, IL 60611
Telecopy: 312-923-2637
9.2 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
<PAGE> 45
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.
9.3 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, among the
parties with respect to such subject matter.
9.4 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, heirs and assigns;
provided, however, that no party shall directly or indirectly transfer or assign
any of such parties' respective rights hereunder in whole or in part without the
prior written consent of the other parties, and any such transfer or assignment
without said consent shall be void, AB INITIO. Subject to the immediately
preceding sentence, 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.
9.5 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.
9.6 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.
9.7 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
<PAGE> 46
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.
9.8 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
Illinois.
9.9 GUARANTEE.
The Guarantor hereby fully, completely, unconditionally and
irrevocably guarantees the full and prompt performance by Purchaser of all
Purchaser's covenants, agreements, obligations and liabilities under and
pursuant to this Agreement.
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:
U. S. Plastic Lumber Ltd.
By:
--------------------------------
Its:
-------------------------------
GUARANTOR:
U.S. Plastic Lumber Corporation
By:
--------------------------------
Its:
-------------------------------
SHAREHOLDERS:
-----------------------------------
Andrew Stephens
-----------------------------------
Robert Thompson
<PAGE> 47
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
- --------
Exhibit A List of Shareholders and allocation of consideration
Exhibit B Registration Rights Agreement
Exhibit C Convertible Secured Debenture
Exhibit D-1 Unconditional Guaranty
Exhibit D-2 Unconditional Guaranty
Exhibit E Permitted Liens
Exhibit F Transaction Documents
Exhibit G Employee Agreements
SCHEDULES
- ---------
3.3 Consents
3.4 Conflicts
4.1(a) Foreign Corporation Status
4.1(b) Subsidiaries
4.2 No Conflicts
4.3 Capitalization
4.4(a) Financial Statements
4.4(b) Non-GAAP Adjustments
4.5(a) Liens
4.5(b) List of Tangible Personal Property
4.5(c) List of Real Property Leases
4.5(d) Condition
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
4.18 Consents
4.19(a) Sales Orders
4.19(c) Sales Representatives
4.19(d) Non-Compete Agreements
<PAGE> 48
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
4.24 Compliance with Law
4.25 Product Return
4.26 Warranties
4.28 Hazardous Materials
5.1 List of Guarantor's Subsidiaries
5.2 Capitalization Table
5.6 Off Balance Sheet Liabilities
5.7 Absence of Changes
5.9 Compliance of Laws
<PAGE> 1
EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
January 28, 1999 among U.S. Plastic Lumber Ltd., a Delaware corporation (the
"Purchaser"); U.S. Plastic Lumber Corporation, a Nevada corporation ("the
Guarantor"); and Andrew Stephens, Robert Thompson and Michael Dahl
(collectively, the "Shareholders" and individually, a "Shareholder").
RECITALS
A. The Shareholders own all of the issued and outstanding capital stock of
Eaglebrook Products, Inc. (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.
C. The Guarantor, which is the owner of all the issued and outstanding capital
stock of the Purchaser, wishes to enter into the covenants and agreements set
forth herein, to induce the Shareholders to enter into this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and for 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 in accordance with past practices.
<PAGE> 2
"ACTION" shall mean any claim, action, suit, arbitration, hearing,
inquiry, proceeding, complaint, charge or investigation, actual or threatened in
writing, 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.
"APPLICABLE TAX LAW" shall mean any Law of any nation, state, region,
province, locality, municipality or other jurisdiction relating to Taxes,
including regulations and other official pronouncements of any governmental
entity or political subdivision of such jurisdiction charged with interpreting
such Laws.
"BALANCE SHEET" and "BALANCE SHEET DATE" shall have the meanings
assigned to such terms in Section 4.4(a).
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall mean the authorized class of common stock of
Guarantor, $.0001 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 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 8
hereof and under Article 8 of the Plastics SPA).
"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 at 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,
<PAGE> 3
decontamination, discharge and disposal of Hazardous Substances, including,
without limitation, those statutes, laws, rules and regulations set forth below
in the definition of "Hazardous Material."
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"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 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
Illinois;
(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
currently regulated under applicable local, state or federal laws or
regulations, or which are currently 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"
<PAGE> 4
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
of 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 or other trade or accounts payable incurred in the Ordinary Course.
"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.
<PAGE> 5
"LIEN" shall mean all liens (including judgment and mechanics liens,
regardless of whether liquidated), mortgages, security interests, pledges,
trusts (constructive or other), deeds of trust, options or other encumbrances.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, financial condition, properties, profitability or operations of the
subject Person.
"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, (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, and (c)
those Liens identified on Exhibit E attached hereto.
"PERSON" shall mean natural persons, corporations, business trusts,
associations, limited liability companies, partnerships, joint ventures,
Governmental Entities and any other entities.
"PLASTICS" means Eaglebrook Plastics, Inc., an Illinois corporation.
"PLASTICS SPA" shall mean the separate Stock Purchase Agreement of even
date herewith among Purchaser, Guarantor, Andrew Stephens and Robert Thompson
relating to Purchaser's purchase of all of the outstanding capital stock of
Plastics.
"POST-CLOSING PERIOD" shall mean any Tax Period commencing after the
Closing Date and the portion of any Straddle Period commencing after the Closing
Date.
"PRE-CLOSING PERIOD" shall mean any Tax Period ending on or before the
Closing Date and the portion of any Straddle Period ending on the Closing Date.
<PAGE> 6
"REAL PROPERTY" shall mean the Owned Real Property and the Leased Real
Property, collectively.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"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 outstanding, 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 Guarantor to
the Shareholders as payment of a portion of the Purchase Price, as contemplated
by Article 2 hereof.
"STRADDLE PERIOD" shall mean any Tax Period that begins before and ends
after the Closing Date.
"STRUCTURE" shall mean any facility, building, plant, factory, office,
warehouse structure or other real estate or real property 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.
"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.
<PAGE> 7
"TAX AUTHORITY" shall mean, with respect to any Tax, the governmental
entity or political subdivision thereof that imposes such Tax, and the agency
(if any) charged with the collection of such Taxes for such entity or
subdivision.
"TAX BENEFIT" shall mean the amount by which a Person's Tax liability
is reduced (including any related interest received from a Tax Authority in
connection therewith); provided, that (i) in the case of an item for which a
deduction is allowed or allowable in the current period, the Tax Benefit with
respect to such item shall be deemed to equal the amount of such deduction, loss
or expense multiplied by the highest applicable marginal corporate income tax
rate under the Applicable Tax Law, and (ii) in the case of an item for which a
deduction is allowed or allowable (in whole or in part) in a future period, the
Tax Benefit with respect to such item shall be deemed to equal the present value
of the amount obtained by multiplying (x) the deduction, expense or loss allowed
or allowable with respect to such item for each relevant Tax Period by (y) the
highest applicable marginal income tax rate under Applicable Tax Law (provided
further that the present value shall be computed using the interest rate on such
date imposed on deficiencies paid within 30 days of a notice of proposed
deficiency under the Code).
"TAX PERIOD" shall mean, with respect to any Tax, the period for which
the Tax is reported as provided under Applicable Tax Laws.
"TRANSACTION DOCUMENTS" shall mean all the documents executed pursuant
to the transactions contemplated by this Agreement listed on Exhibit F.
2. PURCHASE AND SALE OF SECURITIES
2.1 SALE AND DELIVERY. Each Shareholder hereby sells and delivers to
Purchaser, and Purchaser hereby purchases and accepts from each Shareholder,
free and clear of all Liens, on the terms and conditions set forth in this
Agreement, and for the aggregate purchase price described in Section 2.2 below
(the "Purchase Price"), good and marketable title to the number of Shares set
forth opposite the name of such Shareholder on Exhibit A. The Shares being sold
and purchased pursuant to this Agreement constitute all of the outstanding
capital stock of the Company.
2.2 PURCHASE PRICE. The aggregate Purchase Price for all of the Shares,
as well as for all the stock of Plastics acquired by Purchaser pursuant to the
Plastics SPA, is being paid as follows:
<PAGE> 8
(a) The Shareholders acknowledge previous receipt of a
$250,000 deposit, which is hereby deemed the property of Shareholders without
restriction simultaneous with the execution hereof.
(b) $8,405,000 in cash is being paid to the Shareholders by
the Purchaser simultaneously with the execution hereof.
(c) 1,535,051 shares of the Common Stock of the Guarantor, par
value $.0001, are being issued to the Shareholders, free and clear of all Liens
(except the Stock Escrow Agreement), and are being allocated among the
Shareholders as set forth opposite their respective names on Exhibit A. The
Stock shall not have been registered pursuant to the Securities Act and shall be
subject to the requirements of Rule 145 of the Securities Act and the
Registration Rights Agreement attached hereto and incorporated herein by
reference as Exhibit B.
(d) The Purchaser is issuing to Craig R. Culbertson, Jenner &
Block, as agent for the Shareholders, the $4,000,000 Convertible Secured
Debenture in the form attached hereto as Exhibit C. The Convertible Secured
Debenture is being guaranteed by the Unconditional Guaranty of the Guarantor,
and the Unconditional Guaranty of the Company and Plastics substantially in the
forms attached hereto as Exhibit D-1 and D-2.
(e) The Purchaser shall pay the Shareholders the amounts set
forth in Section 2.3 below (as well as the amounts set forth in Section 2.3 of
the Plastics Agreement).
2.3 SECTION 338(h)(10) ELECTION. At the request of Purchaser, the
Shareholders shall join the Purchaser in making an election under section
338(h)(10) of the Code (and any comparable election under state, local or
foreign tax law) (the "338(h)(10) Election") with respect to the acquisition of
the Company by Purchaser; PROVIDED, HOWEVER, that Shareholders shall not join in
the 338(h)(10) Election unless and until Purchaser (1) has paid $121,653 in
additional cash consideration to the Shareholders on or prior to April 10, 1999,
(2) has paid $525,072 in additional cash consideration to the Shareholders on or
before September 10, 1999, and (3) has paid the amount set forth in Section 2.3
of the Plastics SPA. If Purchaser and the Shareholders join in filing the
338(h)(10) Election, each of Purchaser, the Company, and the Shareholders shall
file all Tax Returns in a manner consistent with the allocation of consideration
set forth at Exhibit A.
<PAGE> 9
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE SHAREHOLDERS
Each of the Shareholders hereby jointly and severally represents and
warrants to, and covenants and agrees with, Purchaser that, as of the date
hereof (except as otherwise specifically provided):
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 good and marketable title to such
Shares free and clear of all Liens.
3.2 DELIVERY OF GOOD TITLE. By delivery of the Shares being sold by
such Shareholder hereunder and delivery of the Purchase Price components
therefore, pursuant to this Agreement, Purchaser is receiving good and
marketable title to such Shares free and clear of all Liens.
3.3 EXECUTION AND DELIVERY. Except as set forth on SCHEDULE 3.3, all
consents, approvals, authorizations and orders necessary for the execution,
delivery and performance by such Shareholder of the Transaction Documents
(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 full right, power, authority and capacity to execute, deliver
and perform the Transaction Documents. The Transaction Documents have been duly
executed and delivered by such Shareholder and, assuming the Transaction
Documents constitute the valid and binding agreement of the Purchaser and
Guarantor, constitutes a legal, valid and binding agreement of such Shareholder,
enforceable against such Shareholder in accordance with its terms, except that
the enforcement hereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
3.4 NO CONFLICTS. Except as set forth on SCHEDULE 3.4, the execution,
delivery and performance of the Transaction Documents 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
<PAGE> 10
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, as of the date hereof (except as
otherwise specifically provided):
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 Illinois 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,
except where the failure to so qualify would not have a Material Adverse Effect.
(b) Except as set forth in SCHEDULE 4.1(b), the Company has no
Subsidiary nor owns or controls, or has any other equity investment or other
interest in, directly or indirectly, any corporation, joint venture,
partnership, association or other entity.
4.2 NO CONFLICTS. Except as set forth on SCHEDULE 4.2 attached hereto,
the execution, delivery and performance of the Transaction Documents by the
Shareholders and the consummation of the transactions contemplated hereby by
them 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
<PAGE> 11
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 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 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, rights, 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 to the Shareholders were (i) exempt from
the registration and prospectus delivery requirements of the Securities Act,
(ii) 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(a) hereto contains true and complete copies
of (i) the unaudited balance sheet (the "BALANCE SHEET") of the Company at
November 30, 1998 (the "BALANCE SHEET DATE"), and the related unaudited
statements of income for the eleven (11) months then ended, and (ii) the
reviewed balance sheet of the Company at December 31, 1997 and 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 Ernst &
Young, LLP, independent public accountants)(the financial statements described
in clauses (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 (subject to normal year-end adjustments or other adjustments
described in the Financial Statements or notes thereto), have been prepared in
conformity with generally accepted accounting principles
<PAGE> 12
(any matters not in accordance with GAAP shall be set forth on SCHEDULE 4.4(b)),
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.
4.5 TITLE TO PROPERTY; ENCUMBRANCES.
(a) The Company has 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, 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 as at August 21, 1998 (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, 1997 and December
31, 1996. Except as set forth in SCHEDULE 4.5(c), 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, to the knowledge of the Shareholders, 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 or made available 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.
<PAGE> 13
(d) Except where the failure would not have a Material Adverse
Effect, and except as set forth in SCHEDULE 4.5(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 Shareholders are not aware that the Company
is in violation of, or default under, any Legal Requirement pertaining to any of
the Real Property, except where the violation does not have a Material Adverse
Effect. No written 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 to the
Company or any of the Shareholders;
(ii) To the knowledge of the Shareholders, except as
set forth in SCHEDULE 4.5 (e), 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 appropriate
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) To the knowledge of the Shareholders, except as
set forth in SCHEDULE 4.5 (e), 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;
<PAGE> 14
(v) Except as set forth in SCHEDULE 4.5(e), 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) 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 materially 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),
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
or written off by the Company since the Balance Sheet Date) are valid and
enforceable claims, and the goods and services sold and delivered that gave rise
to such accounts were, to the knowledge of the Shareholders, sold and delivered
in conformity with all applicable express and implied warranties, purchase
orders, agreements and specifications. To the knowledge of the Shareholders,
except as set forth in SCHEDULE 4.6, 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 currently carried by the Company in its books and records for
receivables accrued after the Balance Sheet Date. 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
<PAGE> 15
of below standard quality, all of which have, to the knowledge of the
Shareholders, 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 (except for write-offs since the Balance Sheet Date) or currently
carried by the Company in its books and records for inventory acquired after the
Balance Sheet Date. 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. The Shareholders are not aware of any specific
circumstance existing under which 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, registered by the Company
(collectively herein, "REGISTERED RIGHTS").
(b) Except as described in SCHEDULE 4.8(b), the Company owns
or has the 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") used by the Company in the design, development, manufacture,
operation, sale and use of all products and services sold or rendered or
currently proposed to be sold or rendered by the Company.
(c) SCHEDULE 4.8(c) contains a true and complete list and
description of all licenses of or rights to Proprietary Information granted in
writing 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.
<PAGE> 16
(d) There is no claim or demand of any Person pertaining to,
or any Action that is pending or, to the Shareholders' knowledge, threatened in
writing, 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 thereon.
(b) SCHEDULE 4.9(b) contains a true and complete list of the
Company's 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) 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 or made available 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
<PAGE> 17
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 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) 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 in writing against or affecting
the Company or its properties, assets or business, (iii) Action pending or
threatened in writing against the Company's officers, directors or employees
relating to the Company or its business or (iv) to the knowledge of the
Shareholders, 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 on the Company.
4.12 INCOME AND OTHER TAXES. Except as set forth on SCHEDULE 4.12:
(a) The Shareholders have duly and timely filed (or have
caused to be duly and timely filed) each Tax Return required to be filed with
any Taxing Authority which includes or is based upon the assets, operations,
ownership or activities of the Company and such Tax Returns were correct and
complete in all material respects. All material Taxes which were shown to be due
on such Tax Returns have been paid prior to their due dates.
<PAGE> 18
(b) The Company has not made any payments, is not obligated to
make any payments and is not a party to any agreement that could obligate it to
make any future payments that will not be deductible under Sections 162(m) or
280G of the Code.
(c) None of the assets of the Company (i) is subject to any
Lien arising in connection with any failure or alleged failure to pay any Tax,
(ii) secures any debt the interest on which is Tax- exempt under Section 103(a)
of the Code, (iii) is required to be or is being depreciated under the
alternative depreciation system under Section 168(g)(2) of the Code, (iv) is
"limited use property" with the meaning of Revenue Procedure 76-30 or (v) will
be treated as owned by any other person pursuant to the provisions of former
Section 168(f)(8) of the Code.
(d) The Company has withheld and paid each material Tax
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other party.
(e) To the knowledge of the Shareholders, there are no
pending, threatened, or proposed audits, assessments or claims from any Tax
Authority for deficiencies, penalties or interest against the Company or any of
its assets, operations or activities.
(f) The Company does not own, directly or indirectly, any
interest in any entity classified as a partnership for United States federal
income Tax purposes.
(g) 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, except for Taxes imposed on the Company as
a result of the transactions contemplated by this Agreement, 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.
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,
<PAGE> 19
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. 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 or made available
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 Requirements have been
performed.
(c) Except as set forth on SCHEDULE 4.14, 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, except when the failure to do so would not have a Material
Adverse Effect. With respect to each Plan which is a welfare plan (as defined in
ERISA Section 3(1)), the
<PAGE> 20
requirements of Part 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 the Company 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) Except as set forth in SCHEDULE 4.14, 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 at any time, or contributes to or has contributed to or is or was
required to contribute to, any (i) Plan subject to Title IV of ERISA, including,
without limitation, any multi-employer plan (as defined in ERISA Section 3(37)),
within the past five years, or (ii) except as set forth in SCHEDULE 4.14, 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) Except as set forth in SCHEDULE 4.14, neither the
<PAGE> 21
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 or
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 Shareholders have no knowledge
that the Company has any 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, excluding Taxes with respect to or based
upon the transactions or events occurring at or prior to the Closing.
4.16 PERMITS, LICENSES, ETC.
Except where the failure to do so would not have a Material
Adverse Effect, the Company possesses, and is operating in compliance with, all
material 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
Shareholders' knowledge, threatened looking toward the revocation, suspension or
limitation of any Permit. Except as set forth in SCHEDULE 4.16, the consummation
of the transactions contemplated by this Agreement will not result in the
revocation,
<PAGE> 22
suspension or limitation of any Permit, and 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.
Except where the failure to do so would not have a Material
Adverse Effect, 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 material
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 in connection with the operations and business of the Company as
currently 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, 4.16 and 4.18 hereto.
4.19 MATERIAL CONTRACTS; NO DEFAULTS.
(a) 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) All outstanding purchase orders and purchase commitments
of the Company have been incurred in the Ordinary Course,
<PAGE> 23
and, in the estimation of the management of the Company, 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. To the best knowledge of the
Shareholders, there is no current or threatened interruption in raw material
supplies which will or could have a material adverse effect on the business of
the Company.
(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 or made available 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 or directors or any Shareholder is
obligated or to their knowledge, any key employees, and true and complete copies
of the same have been delivered or made available to Purchaser heretofore.
Except as described in SCHEDULE 4.19(d), the Company is not restricted by any
agreement from carrying on its business anywhere in the world (including
relocating, closing, or terminating any of its operations or facilities), and no
such officer, director, or to their knowledge, any 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 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 or made available to Purchaser heretofore.
(e) SCHEDULE 4.19(e) contains a true and complete list and
description of all contracts and agreements, written or oral, of the Company
with any officer, director, consultant, employee or 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 or agreement, or a true and complete
summary of such oral contract or agreement has been delivered to Purchaser
heretofore.
(f) SCHEDULE 4.19(f) contains a true and complete list and
description of all other material written contracts and agreements of the
Company by which it or its properties, rights or assets are bound that are
<PAGE> 24
not otherwise disclosed in this Agreement or the Schedules hereto. True and
complete copies of such written contracts and agreements have been delivered or
made available to Purchaser heretofore. For the purposes of this subsection (f),
"material" means any contract or agreement (i) that involves payments or
receipts by the Company in excess of ten thousand dollars ($10,000), or (ii)
involves capital expenditures in excess of ten thousand dollars ($10,000).
(g) Except as described in SCHEDULE 4.19(g):
(i) each agreement or contract described above in
this Section 4.19 is legal, binding and enforceable against the Company
and, to the knowledge of the Shareholders, against the other party
thereto and is in full force and effect;
(ii) no event or condition has become known to the
Company or any Shareholder 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 such contract or agreement; and
(iii) to the knowledge of the Shareholders, no person
with whom the Company has such a contract or agreement 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 November 30, 1998, except as disclosed in SCHEDULE 4.20,
the Company has not, to the knowledge of Shareholders: (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
<PAGE> 25
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 its condition
(financial or otherwise), properties, prospects or operations other than
changes, events or conditions in the Ordinary Course or which (individually or
in the aggregate) has not had or may not 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) 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 (xiv) 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 and plans 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 or made available 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.
<PAGE> 26
(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 in all material respects 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 judgement of wrongful termination relating to 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, Shareholder or Affiliate of the Company
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, except as set forth on SCHEDULE 4.23(a), since that
date no such customer has terminated its relationship with or materially
curtailed its purchases from the Company or indicated in writing (for any
reason) its intention so to terminate its relationship or materially curtail its
purchases.
<PAGE> 27
(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, except as set forth on SCHEDULE 4.23(b), since that
date no such supplier has terminated its relationship with or materially
curtailed its accommodations, sales or services to the Company or indicated in
writing (for any reason) its intention to terminate such relationship or curtail
its accommodations, sales or services.
4.24 COMPLIANCE WITH LAW.
Except as set forth in SCHEDULE 4.24, 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 material Legal Requirement, (ii) to the
Shareholders' knowledge, has not been alleged to be in violation of any material
Legal Requirement, and (iii) has not received any notice of any alleged
violation of, or any citation for noncompliance with, any material 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 is reasonably likely to 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 written 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.
<PAGE> 28
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 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, (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, in a manner different from
that currently conducted by the Company, or (iv) is of a type, location,
material, nature or condition which requires special notification to Government
Entities by the Company under Environmental 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 known to the Shareholders is pending or threatened by any Governmental
Entity, with respect to (i) any alleged violation by the Company of any
Environmental Law (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, to the knowledge of Shareholders, been located at
any Real Property currently owned or leased by the Company, except as set forth
in SCHEDULE 4.28.
(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.
<PAGE> 29
(f) To the knowledge of the Shareholders, there have been no
environmental inspections, investigations, studies, tests, review or other
analyses conducted in relation to any Real Property since the Company has
occupied the Real Property, except as set forth in SCHEDULE 4.28.
(g) The Company has not released, transported, or arranged for
the transportation of any Hazardous Material from any property currently or
previously owned, operated or leased by the Company, except in accordance with
applicable laws.
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) 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," such "knowledge" shall
be limited to the actual knowledge of the Shareholders, as well as knowledge, if
any, which could be reasonably expected to be obtained by the Shareholders
assuming they have made a reasonable investigation sufficient to express an
informed view concerning the matters to which such representation or warranty
relates, including reasonable inquiries of the Company's officers, directors and
key employees.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and Guarantor hereby jointly and severally represent and
warrant to, and covenant and agree with, each of the Shareholders that, as of
the date hereof (except as otherwise specifically provided):
<PAGE> 30
5.1 CORPORATE ORGANIZATION AND QUALIFICATION.
Each of Guarantor and its subsidiaries, including Purchaser,
is a corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and is qualified and in
good standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect. Each of Guarantor and its subsidiaries, including
Purchaser, has all requisite power and authority (corporate or otherwise) to own
its properties and to carry on its business as it is now being conducted.
Guarantor and the Purchaser have heretofore made available to the Shareholders
complete and correct copies of their Articles of Incorporation and By-Laws. Set
forth in SCHEDULE 5.1 is a list of all subsidiaries of Guarantor and the
jurisdictions in which Guarantor and each of its subsidiaries are qualified or
otherwise authorized to do business.
5.2 CAPITALIZATION.
The authorized capital stock of Guarantor consists of (i) 50
million shares of Common Stock of which, as of December 31, 1998, 18,201,349
shares of Common Stock are issued and outstanding and (ii) 5 million shares of
preferred stock, par value $.001 per share, 382,794 of which are issued or
outstanding. All of the outstanding shares of capital stock of Guarantor have
been duly authorized and validly issued and are fully paid and nonassessable.
Other than as set forth in SCHEDULE 5.2, as of the date hereof all outstanding
shares of capital stock of Guarantor's subsidiaries are owned by Guarantor or a
direct or indirect wholly owned subsidiary of Guarantor, free and clear of all
liens, charges, encumbrances, claims and options of any nature. Other than as
set forth on SCHEDULE 5.2, and as of December 31, 1998, there are not any
outstanding or authorized options, warrants, calls, rights (including preemptive
rights), commitments or any other agreements of any character which Guarantor or
any of its subsidiaries is a party to, or may be bound by, requiring it to
issue, transfer, sell, purchase, redeem or acquire any shares of capital stock
or any securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for, any shares of capital stock of Guarantor or any of
its subsidiaries.
5.3 ISSUANCE OF STOCK.
The issuance of 1,535,051 shares of Stock to the Shareholders
by the Guarantor has been duly authorized and said shares are validly issued,
fully paid and nonassessable and based upon the outstanding capital stock as of
December 31, 1998, said 1,535,051 shares represent approximately 7.7% of all the
outstanding capital stock of the Guarantor (determined immediately after the
issuance).
<PAGE> 31
5.4 AUTHORITY RELATIVE TO THE TRANSACTION DOCUMENTS
Each of the Purchaser and Guarantor has the requisite
corporate power and authority to execute and deliver the Transaction Documents
and to consummate the transactions contemplated hereby. The Transaction
Documents and the consummation by each of the Purchaser and Guarantor of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Purchaser and Guarantor, as the case may be, and no
other corporate proceedings on the part of the Purchaser or Guarantor are
necessary to authorize the Transaction Documents or to consummate the
transactions contemplated hereby. The Transaction Documents have been duly and
validly executed and delivered by the Purchaser and Guarantor and, assuming the
Transaction Documents constitute the valid and binding agreement of the
Shareholders, constitutes a valid and binding agreement of each of the Purchaser
and Guarantor, enforceable against the Purchaser and Guarantor in accordance
with their terms, except that the enforcement hereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
5.5 NO CONFLICTS.
The execution, delivery and performance of the Transaction
Documents and the consummation by Guarantor or the Purchaser of the transactions
contemplated hereby will not (a) conflict with or result in a breach or
violation of any term or provision of the respective Articles of Incorporation
or By-Laws of Guarantor or any of its subsidiaries; (b) 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 Guarantor or
the Purchaser is a party or by which Guarantor or the Purchaser is bound or
affected by; (c) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority; (d)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration or lien or other charge or encumbrance) under any
of the terms, conditions or provisions of any material note, license, agreement
or other instrument or obligation to which the Guarantor or any of its
subsidiaries or any of their assets may be bound; or (e) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Guarantor
<PAGE> 32
or any of its subsidiaries or to any of their respective assets.
5.6 SEC REPORTS: FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES.
(a) Prior to and as of the date of this Agreement, Guarantor
has timely filed all forms, reports and documents required to be filed by it
with the SEC pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which, as of their respective dates, complied in
all material respects with all applicable requirements of the Securities Act and
the Exchange Act (collectively, the "GUARANTOR SEC REPORTS"). None of the
Guarantor SEC Reports, including, without limitation, any financial statements
or schedules included therein, as of their respective dates contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) The consolidated balance sheets and the related statements
of consolidated income, shareholders' equity and cash flows (including the
related notes thereto) of Guarantor included in the Guarantor SEC Reports
complied in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with prior periods (except as otherwise noted therein), and
present fairly the consolidated financial position of the Guarantor and its
consolidated subsidiaries as of their respective dates, and the consolidated
results of their operations and their cash flows for the periods presented
therein (subject, in the case of the unaudited interim financial statements, to
normal year-end adjustments).
(c) Except as and to the extent set forth on the consolidated
balance sheet of Guarantor and its subsidiaries at September 30, 1998, including
the notes thereto, contained in the Guarantor SEC Reports (the "Guarantor
September 30 Balance Sheet"), neither the Guarantor nor any of its subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which would be required to be reflected on a balance
sheet or in the notes thereto prepared in accordance with generally accepted
accounting principles, except for liabilities or obligations incurred in the
ordinary course of business since September 30, 1998 or which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(d) Except as may be set forth on SCHEDULE 5.6, neither
Guarantor nor any of its subsidiaries has any liabilities or obligations
(whether accrued, absolute, contingent or otherwise) under any contract,
<PAGE> 33
order or commitment expected to be or previously performed at a loss or other
contingent liability except for (i) expected losses and contingent liabilities
known to Guarantor for which adequate reserves are reflected in the Guarantor
September 30 Balance Sheet or (ii) those which would not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS.
As of the date of this Agreement, except as disclosed in the
Guarantor SEC Reports, as set forth in SCHEDULE 5.7 or contemplated by this
Agreement and to the best knowledge of Guarantor and Purchaser, since September
30, 1998: (i) the business of Guarantor and the Purchaser has been carried on
only in the ordinary and usual course and in a manner consistent with past
practices (ii) neither Guarantor nor the Purchaser has suffered any Material
Adverse Effect, or any event, occurrence or circumstance having a reasonable
possibility of resulting in a Material Adverse Effect; (iii) there has not been
any revaluation by Guarantor or the Purchaser of any of its material assets,
including but not limited to writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business; (iv)
there has not been any entry by Guarantor or the Purchaser taken as a whole
other than those in the ordinary course of business; (v) there has been no
change by Guarantor or the Purchaser in accounting principles, practices or
methods except as disclosed on SCHEDULE 5.7; and (vi) there has not been any
declaration, setting aside or payment of any dividend or other acquisition by
Guarantor of any of its shares of capital stock or any direct or indirect
redemption, purchase or other acquisition by Guarantor of any of its shares of
capital stock.
5.8 LITIGATION.
As of the date hereof:
(a) there is no (i) outstanding judgement, order, decree,
award, stipulation or injunction of any Governmental Entity or arbitrator
against or affecting Guarantor or any of its subsidiaries or any of their
respective properties, assets or businesses or (ii) Action pending against or
affecting Guarantor or any of its subsidiaries or any of their respective
properties, assets or businesses; and
(b) 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 Guarantor or any of its
subsidiaries relating to Guarantor or any of its subsidiaries or their
respective businesses, (ii) Action threatened against or affecting Guarantor
<PAGE> 34
or any of its subsidiaries or any of their respective properties, assets or
businesses, (iii) Action pending or threatened against Guarantor or its
officers, directors or employees relating to Guarantor or any of its
subsidiaries or its business or (iv) basis for the institution of any Action
against Guarantor or any of its subsidiaries or any of their officers,
directors, employees, properties or assets which, if decided adversely, could
reasonably be expected to have a Material Adverse Effect.
5.9 COMPLIANCE WITH LAWS AND REGULATIONS.
(a) Except as disclosed in SCHEDULE 5.9, Guarantor and each of
its subsidiaries are in compliance in all material respects with all applicable
Legal Requirements.
(b) To the knowledge of Guarantor, there are no pending or
threatened claims nor any reasonable basis for claims against Guarantor or any
of its subsidiaries under any Legal Requirements relating to health, safety or
the environment, except as detailed in SCHEDULE 5.9.
5.10 INVESTMENT PURPOSES.
The Purchaser is acquiring the Shares for its own account and
without a view to the sale or distribution thereof. The Purchaser acknowledges
that the Shares have no trading market, are not freely tradable and have not
been registered under the Securities Act, or under any other federal or state
securities or other Legal Requirement.
6. ADDITIONAL COVENANTS
6.1 EXPENSES.
Except for Taxes (liability for which is allocated pursuant to
Section 6.7 of this Agreement), 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.
The Company may pay any such fees and expenses prior to the Closing.
6.2 PUBLICITY; EMPLOYEE COMMUNICATIONS.
At all times from and after the date hereof, 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
<PAGE> 35
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 or appropriate so long as
such representatives, agents, attorneys, advisors, financing sources and others
are made aware of the terms of this Section 6.2. 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.
6.3 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, Purchaser and Guarantor, as the case may be, shall take or cause
to be taken all such necessary or appropriate action and execute, and deliver
and file, or cause to be executed, delivered and filed, all necessary or
appropriate documentation.
6.4 POST-TERMINATION EMPLOYMENT.
Except for the employment agreement to be executed by each
Shareholder, 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. Notwithstanding the foregoing, however, the Company, Plastics and
Guarantor are entering into agreements with certain employees of the Company
and/or Plastics, which agreements are identified in Exhibit G attached hereto.
Certain of those agreements provide for the issuance of Common Stock to the
subject employees where the employee's right to the Common Stock vests after
designated periods of time. Purchaser and Guarantor covenant and agree that 50
percent of the shares of any such Common Stock which, at the end of the subject
vesting period, does not vest in or otherwise become the property of the subject
employee shall instead be immediately reissued to the Shareholders (or their
designees) as the Shareholders may direct.
<PAGE> 36
6.5 ACCESS TO INFORMATION.
The Purchaser and the Guarantor agree that from and after the
Closing, the Shareholders shall, on a reasonable basis, have full and free
access to the books and records of the Company relating to operations through
the date hereof.
6.6 PERSONAL GUARANTEES. Purchaser will utilize its reasonable efforts
to have the Shareholders removed from any personal guarantees they may have
executed to secure loans to the Company.
6.7 TAX COVENANTS.
(a) Liability for Taxes
(i) The Shareholders shall be liable for, and shall
indemnify, defend and hold Purchaser harmless from and against, any and all
Taxes imposed on or with respect to the Company or its assets, operations or
activities for any Pre-Closing Period, other than: (1) Taxes provided for on the
Company's books of account, (2) Taxes accrued on the Balance Sheet, and (3)
Taxes imposed on the Company as a result of the transactions contemplated by
this Agreement (including, but not limited to, liability for Taxes under Section
1374 of the Code or any similar provision of Applicable Tax Law); provided
however, that such indemnity, defense and hold harmless is part of, and is
expressly subject to all the terms and limitations set forth in Article 8 below
applicable to indemnification claims therein.
(ii) Purchaser shall be liable for, and shall
indemnify, defend and hold the Shareholders harmless from and against, any and
all Taxes imposed on or with respect to the Company or its operations,
ownership, assets or activities for any Post-Closing Period, and the following
Taxes of the Company attributable to Pre-Closing Periods: (1) Taxes provided for
on the Company's books of account, (2) Taxes accrued on the Balance Sheet, and
(3) Taxes imposed on the Company (other than relating to matters referred to in
Section 6.4 above) as a result of the transactions contemplated by this
Agreement (including, but not limited to, liability for Taxes under Section 1374
of the Code or any similar provision of Applicable Tax Law).
(iii) Tax items shall be apportioned between
Pre-Closing Periods and Post- Closing Periods based on a closing of the books
and records of the Company as of the Closing Date (provided that (a)
depreciation, amortization and depletion for any Straddle Period shall be
apportioned on a daily PRO RATA basis and (b) any Taxes imposed on a
<PAGE> 37
periodic basis (including real property Taxes, but not including Taxes based on
income and receipts) for any Straddle Period shall be apportioned on a daily PRO
RATA basis).
(b) Preparation of Tax Returns
(i) The Shareholders shall have the right and
obligation to timely prepare and file, and cause to be timely prepared and
filed, when due, any Tax Return that is required to include the operations,
ownership, assets or activities of the Company for Tax Periods ending on or
before the Closing Date. Purchaser shall have the right and obligation to timely
prepare and file, or cause to be timely prepared and filed, when due, all Tax
Returns that are required to include the operations, ownership, assets or
activities of the Company for any Tax Period ending after the Closing Date
(including Straddle Period Returns).
(ii) The Shareholders shall prepare and provide to
Purchaser such Tax information as is reasonably requested by Purchaser with
respect to the operations, ownership, assets or activities of the Company for
Straddle Periods to the extent such information is relevant to any Tax Return
which Purchaser has the right and obligation hereunder to file.
(c) Amended Tax Returns
(i) Any amended Tax Return or claim for Tax refund
with respect to the operations, ownership, assets or activities of the Company
for any Pre-Closing Period other than a Straddle Period shall be filed, or
caused to be filed, only by the Shareholders who shall not be obligated to make
(or cause to be made) such filing. The Shareholders shall not, without the prior
written consent of Purchaser (which consent shall not be unreasonably withheld
or delayed) make or cause to be made, any such filing, to the extent such
filing, if accepted, reasonably might change the Tax liability of Purchaser for
any Tax Period.
(ii) Any amended Tax Return or claim for Tax refund
for any Straddle Period shall be filed by the party responsible for filing the
original Tax Return hereunder if either Purchaser or the Shareholders so
request, except that such filing shall not be done without the consent (which
shall not be unreasonably withheld or delayed) of Purchaser (if the request is
made by the Shareholders) or of the Shareholders (if the request is made by
Purchaser).
<PAGE> 38
(iii) Any amended Tax Return or claim for Tax refund
with respect to the operations, ownership, assets or activities of the Company
for any Post-Closing Period other than a Straddle Period shall be filed, or
caused to be filed, only by Purchaser, who shall not be obligated to make (or
cause to be made) such filing. Purchaser shall not, without the prior written
consent of the Shareholders (which consent shall not be unreasonably withheld or
delayed) file, or cause to be filed, any such filing to the extent that such
filing, if accepted, reasonably might change the Tax liability of the
Shareholders for any Tax Period.
(d) Interperiod Adjustments
If, upon examination by any Tax Authority of any Tax Return of
the Company for any Tax Period, an item of deduction, credit or expense is
disallowed in a Pre-Closing Period for which the Shareholders are or may be
liable for Taxes hereunder, (or an item of income is required to be recognized
on a Tax Return with respect to such Pre-Closing Period which was not reported
on the Tax Return), in either such case resulting in a Tax detriment suffered by
the Company and such disallowance (or recognition) results in a Tax Benefit to
the Company or its Affiliates in a Post- Closing Period, then the Company (or
such one or more persons as it shall nominate) shall pay to the Shareholders the
amount of such Tax Benefit. The provisions of this Section 6.7 shall MUTATIS
MUTANDIS apply where an item of deduction, credit or expense is disallowed in a
Post-Closing Period (or an item of income is required to be recognized in a
Post-Closing Period) and such disallowance or (recognition) results in a Tax
Benefit to the Shareholders in a Pre-Closing Period, as they apply where the
Purchaser and its Affiliates receive a Tax Benefit.
(e) Carrybacks and Carryforwards
(i) Unless the Shareholders, in their sole and
absolute discretion, consent, Purchaser shall not and shall not permit the
Company to carry back any losses or credits accruing after the Closing Date to
any Tax Return of the Shareholders or the Company for any Pre-Closing Period.
Purchaser shall and shall cause the Company to make any elections and take all
such actions necessary to avoid any such carry back.
(ii) The Shareholders shall not be liable hereunder
for any decrease to any net operating loss carry forward or any other Tax
attributes available to the Company resulting from adjustments to any item of
income, deduction, credit, or exclusion on Tax Returns for which the
Shareholders are responsible.
(f) Purchaser will cause appropriate employees of the Company
to prepare usual and customary Tax Return packages with
<PAGE> 39
respect to the Tax Period beginning January 1, 1999 and ending as of the Closing
Date. Purchaser will use its commercially reasonable efforts to cause such Tax
Return packages to be delivered to the Shareholders on or before March 15, 1999.
(g) If Purchaser or the Company receives a Tax refund with
respect to Taxes of the Company attributable to a Pre-Closing Period (other than
a Tax refund accrued on the Balance Sheet), Purchaser shall pay, within the
thirty (30) days following the receipt of such Tax refund, the amount of such
Tax refund to the Shareholders. If the Shareholders receive a Tax refund with
respect to Taxes of the Company attributable to any Post-Closing Tax Period, the
Shareholders will pay, within thirty (30) days following the receipt of such Tax
refund, the amount of such Tax refund to Purchaser.
6.8 TAX CONTROVERSIES; COOPERATION
(a) The Shareholders shall control any audit, dispute,
administrative, judicial or other proceeding related to Tax Returns filed for
Pre-Closing Periods and Straddle Periods of the Company and Purchaser shall
control any audit, dispute, administrative, judicial or other proceeding related
to Tax Returns filed for Post-Closing Periods of the Company. Subject to the
preceding sentence, in the event an adverse determination may result in each
party having responsibility for any amount of Taxes, each party shall be
entitled to fully participate in that portion of the proceedings relating to the
Taxes with respect to which it may incur liability hereunder. For purposes of
this Section 6.8, the term "participation" shall include (i) participation in
conferences, meetings or proceedings with any Tax Authority, the subject matter
of which includes an item for which such party may have liability hereunder,
(ii) participation in appearances before any court or tribunal, the subject
matter of which includes an item for which a party may have liability hereunder,
and (iii) with respect to the matters described in the preceding clauses (i) and
(ii), participation in the submission and determination of the content of the
documentation, protests, memorandum of fact and law, briefs, and the conduct of
oral arguments and presentations.
(b) Purchaser and the Shareholders shall not agree to settle
any Tax liability or compromise any claim with respect to Taxes, which
settlement or compromise may affect the liability for Taxes (or right to a Tax
Benefit) hereunder of the other party, without such other party's consent (which
consent shall not be unreasonably withheld or delayed).
(c) Purchaser and the Shareholders shall bear their own
expenses incurred in connection with audits and other administrative judicial
proceedings relating to Taxes for which such party and its Affiliates are
liable.
<PAGE> 40
(d) The Shareholders on the one hand, and Purchaser and the
Company on the other, shall cooperate (and cause their affiliates to cooperate)
with each other and with each other's agents, including accounting firms and
legal counsel, in connection with Tax matters relating to the Company, including
(i) preparation and filing of Tax Returns, (ii) determining the liability and
amount of any Taxes due or the right to and amount of any refund of Taxes, (iii)
examinations of Tax Returns, and (iv) any administrative or judicial proceeding
in respect of Taxes assessed or proposed to be assessed. Such cooperation shall
include each party making all information and documents in its possession
relating to the Company available to the other party. The parties shall retain
all Tax Returns, schedules and work papers, and all material records and other
documents relating thereto, until one year after the expiration of the
applicable statute of limitations (including, to the extent notified by any
party, any extension thereof) of the Tax Period to which such Tax Returns and
other documents and information relate. Each of the parties shall also make
available to the other party, as reasonably requested and available, personnel
(including officers, directors, employees and agents) responsible for preparing,
maintaining, and interpreting information and documents relevant to Taxes, and
personnel reasonably required as witnesses or for purposes of providing
information or documents in connection with any administrative or judicial
proceedings relating to Taxes.
7. AMENDMENT AND WAIVER
7.1 AMENDMENT.
This Agreement may be amended at any time but only by a
written instrument executed by Purchaser and all the Shareholders. Any amendment
effected pursuant to this Section 7.1 shall be binding upon all parties hereto.
7.2 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 7.2 shall be binding upon all
parties hereto. 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.
8. INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the parties hereto
contained in this Agreement shall survive until the first anniversary of the
date hereof.
<PAGE> 41
8.2 INDEMNIFICATION.
(a) The Shareholders, jointly and severally, covenant and
agree, subject to the other terms of this Article 8, to defend, indemnify and
hold harmless Purchaser, the Company, and the Guarantor (collectively the "USPL
Parties") 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 unless and except that such inaccuracy or breach
is a direct result of changes made by any USPL Parties 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.
(b) Purchaser and Guarantor, jointly and severally, covenant
and agree 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 or Guarantor in this
Agreement; (ii) the failure by Purchaser or Guarantor to perform or observe any
covenant, agreement or condition to be performed or observed by it pursuant to
this Agreement; or (iii) any adjustment by a Tax Authority to the Tax liability
of any Shareholder, to the extent such adjustment would not have been made but
for the fact that the Shareholders joined the Purchaser in making the 338(h)(10)
Election.
(c) The amount of any Damages for which indemnification is
provided under this Article 8 and Article 8 of the Plastics SPA shall be
computed net of any Tax Benefits available to be utilized by the Indemnified
Party in connection with such Damages.
8.3 THIRD PARTY CLAIMS.
(a) If any party entitled to be indemnified pursuant to
Section 8.2 (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
<PAGE> 42
obligation of the Indemnifying Party to provide indemnification hereunder,
except to the extent that any Damages directly resulted from 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.
8.4 TIME FOR ASSERTING INDEMNIFICATION CLAIM.
Notwithstanding anything in this Agreement to the contrary,
all claims against the Shareholders for indemnification under this Article 8
must be asserted by the USPL Parties by delivery of written notice so as to be
received by the Shareholders on or prior to the first anniversary of the date
hereof. The written notice of a claim for indemnification shall set forth the
basis of the claim and the amount of Damages incurred. No claim for Damages
shall be brought or asserted after the first anniversary of the date hereof.
8.5 THRESHOLD FOR CLAIM AGAINST SHAREHOLDERS.
No indemnification shall be payable under this Agreement by
the Shareholders unless the aggregate Damages incurred by the USPL Parties
hereunder and under the Plastics SPA exceeds $50,000.00, and
<PAGE> 43
then only to the extent of such excess but subject to the recourse limitation in
Section 8.6 herein and Section 8.6 of the Plastics SPA.
8.6 RECOVERY AGAINST SHAREHOLDERS LIMITED.
Notwithstanding anything in this Agreement, the Plastics SPA
or any other document to the contrary, any recourse against the Shareholders
pursuant to this Agreement, the Transaction Documents, the Plastics SPA, any
documents or instruments pursuant to the Plastics SPA or at law, equity or
otherwise shall be limited solely to the 200,000 shares of Stock deposited in
escrow pursuant to the Escrow Agreement. There is no recourse directly against
the Shareholders.
8.7 USPL PARTIES' EXCLUSIVE REMEDY AGAINST SHAREHOLDERS; WAIVER.
The USPL Parties' remedy against the Shareholders pursuant to
this Agreement, the Transaction Documents, the Plastics SPA, any documents or
instruments pursuant to the Plastics SPA or at law, equity or otherwise is
limited solely to the indemnification provided in this Article 8 and in Article
8 of the Plastics SPA and is the only remedy of the USPL Parties against the
Shareholders. The Purchaser and Guarantor acknowledge that (i) the Shareholders
have not made any representations or warranties other than as expressly made by
the Shareholders in Articles 3 and 4 hereof and in Articles 3 and 4 of the
Plastics SPA, (ii) the Purchaser and Guarantor have made their own independent
examination, investigation analysis and evaluation of the Company and have
undertaken such due diligence, including, but not limited to, a review of the
assets, liabilities, books, records and contracts of the Company as the
Purchaser and Guarantor deem adequate, (iii) the USPL Parties' Damages, if any,
may be greater than the liquidation value of the 200,000 shares of Stock
deposited in escrow pursuant to the Escrow Agreement, and (iv) the USPL Parties'
right of indemnification under this Article 8 and Article 8 of the Plastics SPA
is the USPL Parties' exclusive remedy. The USPL Parties hereby expressly waive
any right to proceed directly against the Shareholders and waive all rights and
remedies whatsoever, whether by statute, rule, regulation, in tort or otherwise,
against the Shareholders except for the right of indemnification under this
Article 8 and Article 8 of the Plastics SPA which is limited solely to recourse
against the shares of Stock deposited in escrow pursuant to the Escrow
Agreement.
9. GENERAL PROVISIONS
9.1 NOTICES.
All notices and other communications under or in
<PAGE> 44
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 Guarantor or Purchaser,
addressed to:
U. S. Plastic Lumber Corporation
2300 W. Glades Road
Suite 440W
Boca Raton, Florida 33431
Attention: Bruce C. Rosetto, Vice President
and General
Counsel
Telecopy: (561)394-5335
(b) If to any Shareholder, to the address set
forth below such Shareholder's name on
Exhibit A hereto:
With a copy to:
Craig R. Culbertson
Jenner & Block
One IBM Plaza
Chicago, IL 60611
Telecopy: 312-923-2637
9.2 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.
9.3 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, among the
parties with respect to such subject matter.
<PAGE> 45
9.4 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, heirs and assigns;
provided, however, that no party shall directly or indirectly transfer or assign
any of such parties' respective rights hereunder in whole or in part without the
prior written consent of the other parties, and any such transfer or assignment
without said consent shall be void, AB INITIO. Subject to the immediately
preceding sentence, 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.
9.5 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.
9.6 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.
9.7 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.
9.8 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
Illinois.
<PAGE> 46
9.9 GUARANTEE.
The Guarantor hereby fully, completely, unconditionally and
irrevocably guarantees the full and prompt performance by Purchaser of all
Purchaser's covenants, agreements, obligations and liabilities under and
pursuant to this Agreement.
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:
U. S. Plastic Lumber Ltd.
By:
--------------------------------
Its:
-------------------------------
GUARANTOR:
U.S. Plastic Lumber Corporation
By:
---------------------------------
Its:
--------------------------------
SHAREHOLDERS:
---------------------------------
Andrew Stephens
---------------------------------
Robert Thompson
----------------------------------
Michael Dahl
<PAGE> 47
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
- --------
Exhibit A List of Shareholders and allocation of consideration
Exhibit B Registration Rights Agreement
Exhibit C Convertible Secured Debenture
Exhibit D-1 Unconditional Guaranty
Exhibit D-2 Unconditional Guaranty
Exhibit E Permitted Liens
Exhibit F Transaction Documents
Exhibit G Employee Agreements
SCHEDULES
- ---------
3.3 Consents
3.4 Conflicts
4.1(a) Foreign Corporation Status
4.1(b) Subsidiaries
4.2 No Conflicts
4.3 Capitalization
4.4(a) Financial Statements
4.4(b) Non-GAAP Adjustments
4.5(a) Liens
4.5(b) List of Tangible Personal Property
4.5(c) List of Real Property Leases
4.5(d) Condition
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
4.18 Consents
4.19(a) Sales Orders
4.19(c) Sales Representatives
4.19(d) Non-Compete Agreements
<PAGE> 48
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
4.24 Compliance with Law
4.25 Product Return
4.26 Warranties
4.28 Hazardous Materials
5.1 List of Guarantor's Subsidiaries
5.2 Capitalization Table
5.6 Off Balance Sheet Liabilities
5.7 Absence of Changes
5.9 Compliance of Laws
