<PAGE> 1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
<TABLE>
<C> <S>
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
COMMISSION FILE NUMBER 000-23855
U.S. PLASTIC LUMBER CORP.
(Name of issuer in its charter)
---------------------
<TABLE>
<S> <C>
NEVADA 87-0404343
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
---------------------
2300 W. GLADES ROAD, SUITE 440 W, BOCA RATON, FLORIDA 33431
(561) 394-3511
(Address and telephone number of principal executive offices and place of
business)
Check here whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's common stock as of
April 30, 2000 is 33,821,545 shares.
- - --------------------------------------------------------------------------------
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<PAGE> 2
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. UNAUDITED FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999.................................. 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2000 and 1999............. 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999............. 5
Notes to Condensed Consolidated Financial Statements...... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................... 13
Item 2. Changes in Securities and Use of Proceeds........... 14
Item 6. Exhibits and Reports on Form 8-K.................... 14
SIGNATURES.................................................. 15
</TABLE>
FORWARD LOOKING STATEMENTS
When used in this Form 10-Q, the words or phrases "will likely result",
"are expected to", "will continue", "is anticipated", "estimate", "projected",
"intends to" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties,
including but not limited to economic conditions, changes in laws or
regulations, exposure on providing extended warranties on products, access to
capital, demand for products and services of the Company, dilution, expertise,
newly developing technologies, loss of permits, conflicts of interest in related
party transactions, regulatory matters, environmental liability, the occurrence
of events not covered by insurance, a substantial increase in interest rates,
protection of technology, lack of industry standards, raw material commodity
pricing, the ability to receive bid awards, the inability to implement our
growth strategy, operating hazards, seasonality, inability to retain key
employees, the effects of competition and the ability of the Company to obtain
additional financing. Such factors, which are discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the notes to condensed consolidated financial statements, could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements expressed
with undue reliance on any such forward-looking statements, which speak only as
of the date made. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
2
<PAGE> 3
PART I. UNAUDITED FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
UNAUDITED
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,685,154 $ 1,807,588
Accounts receivable, net of allowance for doubtful
accounts of $1,379,088 and $1,139,870 in 2000 and 1999,
respectively........................................... 33,127,687 32,915,420
Inventories............................................... 10,211,528 7,339,543
Prepaid expenses and other assets......................... 2,860,965 2,636,812
------------ ------------
Total current assets.............................. 47,885,334 44,699,363
Property, plant and equipment (net)......................... 93,154,534 80,423,952
Acquired intangibles (net).................................. 37,312,677 35,837,568
Other assets................................................ 4,987,125 5,350,549
------------ ------------
Total assets...................................... $183,339,670 $166,311,432
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 16,253,290 $ 20,180,807
Notes and capital leases payable, current portion......... 7,748,994 5,867,779
Accrued expenses.......................................... 4,204,532 4,111,309
Restructuring reserves.................................... 518,079 734,661
Other liabilities......................................... 1,275,102 1,615,800
------------ ------------
Total current liabilities......................... 29,999,997 32,510,356
Notes and capital leases payable, net of current portion.... 46,497,088 36,322,452
Notes payable, affiliates-long term......................... 7,000,000 6,000,000
Deferred income taxes and other liabilities................. 1,189,309 1,718,061
Minority interest........................................... 250,165 250,165
Convertible subordinated debentures, net of unamortized
discount.................................................. 10,000,000 6,500,000
------------ ------------
Total liabilities................................. 94,936,559 83,301,034
------------ ------------
STOCKHOLDERS' EQUITY:
10% Convertible preferred stock, par value $.001;
authorized 5,000,000 shares; issued and outstanding
none................................................... -- --
Common stock par value $.0001, authorized 50,000,000
shares; issued and outstanding 33,823,545 and
32,077,632 shares, respectively........................ 3,382 3,208
Additional paid-in capital................................ 87,043,957 81,171,322
Retained earnings......................................... 1,355,772 1,835,868
------------ ------------
Total stockholders' equity........................ 88,403,111 83,010,398
------------ ------------
Total liabilities and stockholders' equity........ $183,339,670 $166,311,432
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
RESTATED
2000 1999
----------- -----------
<S> <C> <C>
Sales, net.................................................. $30,404,061 $24,971,430
Cost of goods sold.......................................... 24,886,713 18,096,582
Inventory revaluation charge................................ -- 2,025,000
----------- -----------
Gross profit.............................................. 5,517,348 4,849,848
Selling, general and administrative expenses................ 5,313,159 4,733,877
Restructuring and equipment revaluation charges............. -- 3,720,000
----------- -----------
Operating income (loss)................................... 204,189 (3,604,029)
Interest and other income................................... 3,852 72,952
Interest expense............................................ (982,388) (1,695,796)
----------- -----------
Loss before income taxes.................................. (774,347) (5,226,873)
Provision for (benefit from) income taxes................... (294,252) 118,495
----------- -----------
Net loss.................................................. (480,095) (5,345,368)
Preferred stock dividend earned............................. -- (169,612)
----------- -----------
Net loss attributable to common stockholders.............. $ (480,095) $(5,514,980)
=========== ===========
Net loss per share -- basic and diluted..................... $ (.01) $ (.23)
=========== ===========
Weighted average common shares outstanding -- basic and
diluted................................................... 33,150,849 23,480,377
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
RESTATED
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss.................................................. $ (480,095) (5,345,368)
------------ ------------
Adjustments to reconcile net loss to net cash (used in)
operating activities:
Depreciation........................................... 1,026,207 918,354
Amortization........................................... 458,414 204,629
Amortization of deferred financing and debenture
discount costs........................................ 120,169 914,124
Restructuring charge-inventory revaluation............. -- 2,025,000
Restructuring charge above (below) payments-other...... (216,582) 3,226,623
Income taxes paid (above) below provision in statement
of operations......................................... (299,362) --
Expense related to common shares issued to employees
and nonemployees...................................... 25,827 --
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable.................................. 962,934 (1,484,830)
Inventories.......................................... (2,394,555) 413,461
Prepaid expenses and other current assets............ (407,368) (234,542)
Other assets......................................... 33,444 (8,338)
Accounts payable..................................... 72,485 1,630,143
Other liabilities.................................... (340,699) 609,959
Accrued expenses..................................... (299,562) (1 ,077,721)
------------ ------------
Net cash provided by (used in) operating
activities..................................... (1,738,744) 1,791,494
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (14,660,012) (2,368,082)
Cash paid for acquisitions, net of cash received.......... (38,940) (8,892,314)
Payments of deferred dredging costs....................... (420,304) --
------------ ------------
Net cash used in investing activities............. (15,119,256) (11,260,396)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants and options, net of
costs................................................. 621,730 100,000
Proceeds from sale of debentures....................... 7,500,000 2,500,000
Advances (repayment of) due to affiliates.............. 1,000,000 6,330,999
Proceeds from notes payable............................ 12,476,069 7,561,731
Payment of deferred financing costs.................... (190,018) (413,363)
Payments of notes payable.............................. (4,672,215) (6,226,937)
------------ ------------
Net cash provided by financing activities......... 16,735,566 9,852,430
------------ ------------
Net change in cash and cash equivalents................... (122,434) 383,528
Cash and cash equivalents, beginning of period............ 1,807,588 3,052,518
------------ ------------
Cash and cash equivalents, end of period.................. $ 1,685,154 $ 3,436,046
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
NATURE OF OPERATIONS
U.S. Plastic Lumber Corp. and its subsidiaries (the "Company") are engaged
in the manufacturing of plastic lumber from recycled plastic waste and provide
environmental recycling services including the recycling of soils which have
been exposed to hydrocarbons. The Company's plastic lumber customers are located
throughout the United States. The Company's environmental recycling services'
customers are located primarily in the Northeastern United States.
BASIS OF PRESENTATION
The Company's condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and the regulations of the Securities and Exchange
Commission (SEC) for quarterly reporting. Accordingly, they do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements. The interim condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-KSB as filed with the SEC for the year ended December 31, 1999.
In the opinion of the Company, the interim statements include all
adjustments, consisting only of normal recurring adjustments, which are
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods. Operating results for the
three month period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000.
After March 31, 1999 the Company acquired four companies that were
accounted for under the pooling of interests accounting method. Accordingly, the
1999 financial statements have been restated to include the applicable amounts
for the pooled companies as if the acquisitions had taken place on January 1,
1999.
2. ACQUISITION OF BARON ENTERPRISES, INC.
On February 10, 2000, the Company acquired certain assets and assumed
certain liablities of Baron Enterprises, Inc. ("Baron"), a manufacturer of
plastic slip and tier sheets used in handling freight. Baron operates facilities
in Denver, CO and Reidsville, NC. Both plants manufacture tier and slip sheets
that are. Baron's products are s similar products in its Chicago facility. The
acquisition was accounted for as a purchase. Accordingly the $1,635,147 excess
of the purchase price over the value of the net tangible assets acquired is
included in acquired intangibles as of March 31, 2000 and is being amortized
over 40 years.
A summary of the allocation of the $2,105,000 aggregate purchase price of
the Baron acquisition to the net assets acquired follows:
<TABLE>
<S> <C>
Working capital............................................. $ 1,540,072
Long-term assets.......................................... 3,096,778
Long-term debt............................................ (4,166,997)
Acquired intangibles...................................... 1,635,147
-----------
Aggregate purchase price.................................. $ 2,105,000
===========
</TABLE>
3. CAPITAL STOCK AND EARNOUT AGREEMENT
In January 2000, the Company issued 632,833 shares to certain shareholders
who accepted the Company's offer to settle certain earnout agreements related to
the Company's merger with Clean Earth, Inc. in 1996. The Company has included
the $5,166,005 value of the shares issued in acquired intangibles and additional
paid in capital on the balance sheet as of December 31, 1999. The Company is
amortizing the
6
<PAGE> 7
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$5,166,005 over 17 years as additional cost of the merger of the Company with
Clean Earth, Inc. Amortization expense relating to the settlement was
approximately $76,000 in the first quarter of 2000 (none in first quarter of
1999).
4. CONTINGENCIES
A lawsuit was filed against the Company's former Chairman in a matter
entitled, Waste Management, Inc. vs. Paolino, et al, U.S. District Court,
District of Delaware. Mr. Paolino and others have filed a lawsuit against Waste
Management, Inc. The parties to these lawsuits have dismissed their pending
claims without prejudice in Federal court and agreed to submit all claims to
non-binding mediation. This dispute between Waste Management, Inc. and Mr.
Paolino and others may continue for a long period of time.
Although the Company was not a named party in either of these lawsuits, it
is not possible to predict the implications of these disputes upon the Company.
The effects of this dispute may have wide ranging implications on the Company
which may result in material adverse effects upon the business, financial
condition and/or operating results which cannot be reasonably foreseen at the
current time.The Company has not established reserves on its Balance Sheet for
any pending or threatened litigation.
5. CONVERTIBLE SUBORDINATED DEBENTURES
On February 2, 2000 the Company issued an additional $7,500,000 of 5%
convertible subordinated debentures to the holder of 61.54% of the debentures
outstanding at December 31, 1999. The debentures have substantially the same
terms as the existing debentures with the following differences:
- The conversion price is the lower of $9.65 or the current market price
but not less than $8.25.
- The debenture holder can force the company to redeem the debentures at a
10% premium after one year if the market price stays below $8.25 for 10
consecutive trading days
- The Company can force conversion of the debentures if the market price
stays above $16.84 for 20 consecutive trading days
In conjunction with the issuance of the debentures, the Company issued
200,000 warrants to purchase Common stock at $10.09 per share. The Company has
filed a Registration statement with the SEC to register the shares underlying
the debenture and warrant agreements.
On March 1, 2000 this same debenture holder converted all $4,000,000 of its
old debentures and $33,440 of unpaid interest from January 1 2000 to March 1,
2000 into 762,465 shares of common stock at the $5.29 conversion price. The
$614,792 pro rata portion of unamortized debenture issue costs was charged to
additional paid-in-capital on March 1, 2000. (See note 8 Subsequent Event for
conversion of the remaining old debentures outstanding as of March 31, 2000.)
6. RESTRUCTURING RESERVES
As of December 31, 1999 the Company had approximately $378,000 in severance
reserves and $357,000 in exit costs reserves remaining from the $5,745,000
restructuring charge recorded in the first quarter of 1999. In the first quarter
of 2000 the Company paid approximately $154,000 of severance costs and
approximately $63,000 of exit costs. As of March 31, 2000 the Company has
approximately $224,000 remaining in severance reserves and approximately
$294,000 remaining in exit cost reserves.
7. SEGMENT REPORTING
The Company's sales generating operations are conducted through its Plastic
Lumber Division and its Environmental Recycling Division. A $4,365,000
restructuring charge was recorded by the Plastic division in
7
<PAGE> 8
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the first quarter of 1999 and a $1,380,000 restructuring charge was recorded by
the Environmental Recycling Division. The operating results of the two segments
excluding the aforementioned restructuring charges are as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------------
2000 1999
--------- --------
<S> <C> <C>
Sales:
Environmental recycling................................... $ 13,763 $ 15,279
Plastic lumber............................................ 16,641 9,692
-------- --------
Total Sales....................................... $ 30,404 $ 24,971
======== ========
Operating Income (Loss) by Segment:
Environmental recycling................................... $ (299) $ 1,560
Plastic lumber............................................ 1,188 1,046
Corporate................................................. (685) (465)
-------- --------
Total............................................. $ 204 $ 2,141
======== ========
Depreciation and amortization:
Environmental recycling................................... $ 664 $ 512
Plastic lumber............................................ 706 572
Corporate................................................. 114 47
-------- --------
Total............................................. $ 1,484 $ 1,131
======== ========
</TABLE>
The identifiable assets of the respective segments is set forth below (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, DEC. 31,
2000 1999
--------- --------
<S> <C> <C>
Identifiable assets:
Environmental recycling................................... $ 69,547 $ 72,234
Plastic lumber............................................ 109,836 90,181
Corporate................................................. 3,442 3,796
-------- --------
Total............................................. $182,825 $166,311
======== ========
</TABLE>
The capital expenditures of the respective segments are set forth below (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------------
2000 1999
--------- --------
<S> <C> <C>
Capital Expenditures:
Environmental recycling................................... $ 1,254 $ 1,574
Plastic lumber............................................ 12,438 751
Corporate................................................. 3 --
-------- --------
Total............................................. $ 13,695 $ 1,776
======== ========
</TABLE>
8. SUBSEQUENT EVENT
On May 5, 2000 the holder of the remaining 38.46% of debentures outstanding
at December 31, 1999 converted its $2,500,000 debentures and $12,671 of unpaid
interest from April 1, 2000 through May 4, 2000 into 930,620 shares of common
stock at 90% of $3 per share, the lowest trading price in the 5 trading days
before the conversion. The $373,000 of unamortized debenture issue costs related
to the converted debentures will be charged to additional paid-in-capital on May
5, 2000.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is intended to assist in the understanding of the
Company's financial position and results of operations for each of the three
month periods ended March 31, 2000 and 1999. This discussion should be read in
conjunction with the condensed consolidated financial statements and notes
thereto which are included elsewhere herein.
BUSINESS
The Company has two distinct business lines-manufacturing plastic lumber
and environmental recycling. The Plastic Lumber Division manufactures structural
and non-structural plastic lumber and a variety of accessory products such as
park and site amenities, made from 100% recycled high density polyethylene. The
structural plastic lumber is manufactured under processes that are protected by
patents.
The Environmental Recycling Division provides environmental recycling
services including environmental construction services, upland disposal of
dredge materials, beneficial re-use of industrial wastes, and on-site recycling
services. The Division also operates four plants providing various methods to
remediate soil brought to the plants by third parties as well as its sister
environmental service companies.
ACQUISITION COMPLETED DURING THE THREE MONTHS ENDED MARCH 31, 2000
On February 10, 2000, the Company acquired certain assets and assumed
certain liabilities of Baron Enterprises, Inc. ("Baron"), a manufacturer of
plastic slip and tier sheets, for 209,447 shares of common stock. Baron operates
facilities in Denver, CO and Reidsville, NC. Both plants manufacture tier and
slip sheets that are used in handling freight. The Company manufactures similar
products in its Chicago facility. The acquisition was accounted for as a
purchase. Accordingly, the February and March 2000 results of operations of
Baron are included in the consolidated results of operations for the three
months ended March 31, 2000.
NON RECURRING RESTRUCTURING CHARGE IN 1999
In conjunction with the aforementioned significant acquisitions in each
division in the first quarter of 1999, the Company restructured and consolidated
its two operating divisions and facilities. A restructuring charge totaling
$5,745,000 was recorded in the first quarter of 1999 including $4,365,000 by the
plastic lumber division and $1,380,000 by the environmental recycling division.
In addition to consolidating several plants, the Company discontinued the
labor intensive flow mold process and converted entirely to a continuous
extrusion method of manufacturing plastic lumber. As a result, the Company
recorded the following charges during the first quarter of 1999:
<TABLE>
<S> <C>
Write-down of flow mold inventory to its raw material
value..................................................... $2,025,000
Write-down of flow mold equipment to its salvage value...... 1,315,000
Severance costs in connection with the restructuring........ 1,075,000
Exit costs in connection with the restructuring............. 1,330,000
----------
$5,745,000
==========
</TABLE>
9
<PAGE> 10
COMPARISON OF THE FIRST QUARTERS ENDED MARCH 31, 2000 AND 1999
The following table sets forth revenue, with percentages of total revenue,
and costs of sales, depreciation, selling, general and administrative expenses
and amortization, along with percentages of the applicable segment revenue, for
each of the Company's two business segments. The following amounts do not
include aforementioned non-recurring restructuring, inventory and equipment
revaluation charges. The amounts for 1999 have been restated to reflect the
pooled results of mergers subsequent to March 31, 1999 as if the mergers had
taken place on January 1, 1999 (see note 2 to Condensed Consolidated Financial
Statements.
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31,
------------------------------------
2000 % 1999 %
------- ----- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Sales:
Plastic Lumber........................................ $16,641 54.7% $ 9,692 38.8%
Environmental Recycling............................... 13,763 45.3 15,279 61.2
------- ----- ------- -----
Total sales................................... 30,404 100.0 24,971 100.0
Cost of Sales (excluding depreciation):
Plastic Lumber........................................ 12,313 74.0 6,116 63.1
Environmental Recycling............................... 11,609 84.3 11,117 72.8
Depreciation:
Plastic Lumber........................................ 581 3.5 466 4.8
Environmental Recycling............................... 437 3.2 455 3.0
Corporate............................................. 8 0.0 8 0.0
Selling, General and Administrative (excluding
amortization):
Plastic Lumber........................................ 2,434 14.6 1,958 20.2
Environmental Recycling............................... 1,789 13.0 2,090 13.7
Corporate............................................. 571 1.9 418 1.7
Amortization:
Plastic Lumber........................................ 125 .8 106 1.1
Environmental Recycling............................... 227 1.6 57 .4
Corporate............................................. 106 .3 39 .2
------- ----- ------- -----
Total Operating Expenses...................... 30,200 99.2 22,830 91.4
------- ----- ------- -----
Total Operating Income........................ $ 204 .7% $ 2,141 8.6%
======= ===== ======= =====
Operating Income (Loss) by Segment:
Plastic Lumber........................................ $ 1,188 7.1 1,046 10.8
Environmental Recycling............................... (299) (2.2) 1,560 10.2
Corporate............................................. (685) (2.3) (465) (1.9)
------- ----- ------- -----
Total Operating Income........................ $ 204 .7% $ 2,141 8.6%
======= ===== ======= =====
</TABLE>
CONSOLIDATED SALES AND OPERATING INCOME
Consolidated sales increased 22% to $30,404,000 for 2000 from $24,971,000
in 1999. The 72% increase in sales in the Plastic Lumber Division more than
offset the 10% decline in sales in the Environmental Recycling Division. Almost
all of the Plastic Lumber Division sales increase was from internal growth.
Consolidated operating income declined by $ 1,937,000 to $204,000 for 2000
compared to $ 2,141,000 in 1999. The decline in operating income was almost
entirely in the Environmental Recycling Division. The abnormally wet winter
weather in the northeastern states and delay in starting dredging contracts
combined with lower profit margin replacement work negatively impacted the
Environmental Recycling Division results. As the new Plastic Lumber Division
equipment in Illinois, Florida and California come on stream and the large
dredging contract start up, the Company expects operating income to improve in
the remainder of 2000.
10
<PAGE> 11
SALES BY SEGMENT
Plastic Lumber Division sales increased 72% to $16,641,000 in 2000 compared
to $9,692,000 in 1999. All but $2,027,000 of the $6,949,000 increase in sales
was attributable to internal growth.
Environmental Recycling Division sales for 2000 were $13,763,000, a decline
of $1,516,000 or 10% from the $15,279,000 for the first quarter of 1999. The
abnormally wet weather affected all of the soil recycling plants. Also, the Soil
Remediation of Philadelphia (SRP) facility was shutdown to retrofit it to
process additional waste streams under its expanded permit.
GROSS PROFIT (BEFORE DEPRECIATION) BY SEGMENT
Plastic Lumber Division gross profit increased by $752,000 with most of the
increase coming from the acquisition of the net assets of Baron in February 10,
2000. The gross profit margin declined from 37% of sales to 26% of Plastic
Lumber Sales primarily due to the increase in raw material costs. The new
equipment coming on stream produces higher profit margin products. The gross
profit margins should improve in the remainder of 2000 as the mix of sales
shifts to higher gross margin products and more of the raw material cost
increases are passed through to customers.
Environmental Recycling Division gross profit declined $2,008,000 from
$4,162,000 in 1999 to $2,154,000 in 2000. The gross margin as a percent of sales
declined from 27% in 1999 to 16% in 2000. The unusually wet winter reduced the
soil coming to the Clean Earth New Castle, Clean Rock and SRP facilities. Also
the SRP facility was down for an extended period to retrofit it for new waste
streams. The wet weather also impacted the Company's construction services
sales. The replacement revenues for the construction services were for lower
profit margin business. The Company expects improvement in profit margins with
the new dredging work commencing in the second quarter and all soil processing
plants operating near full capacity to spread fixed costs over a much larger
revenue base.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("S,G&A")
Consolidated SG&A expenses excluding depreciation and amortization
increased $328,000 to $4,794,000 for 2000 from $4,466,000 in 1999. However, as a
percentage of consolidated sales, SG&A expenses improved from 17.9% for 1999 to
15.8% in 2000 due to increased sales in the Plastic Lumber Division. The
Environmental Recycling Division S,G& A expenses improved slightly from 13.7% of
revenues in 1999 to 13.0% of revenues in 2000. The lower fixed S,G&A expenses in
2000 as a result of the 1999 restructuring more than offset the effect of
reduced revenues in the Environmental Recycling Division.
INTEREST EXPENSE
Interest expense was essentially unchanged in 2000 compared to 1999 after
excluding the $722,000 write off in 1999 of discount assigned to the $6,500,000
convertible subordinated debentures proceeds in December 1998 and January 1999.
The $722,000 was assigned to the favorable conversion feature of the debentures
and was included in interest expense on January 27, 1999, the earliest date the
debentures could be converted. There was no similar charge on the $7,500,000 of
debenture proceeds in 2000 because the new debentures do not contain a favorable
conversion feature .
DEPRECIATION AND AMORTIZATION
Depreciation expense increased $97,000 or 10% in 2000 compared to 1999.
Most of the plant equipment purchases have not been placed in service as of
March 31, 2000. Amortization expense increased $256,000 in 2000 over 1999 due to
non compete agreements on pooled companies, additional goodwill from the
historical shareholder settlement and permit amortization on the Brass
acquisition.
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LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $1,685,000 at March 31, 2000, a decrease
of $122,000 from the $1,807,000 at December 31, 1999. Cash used in operating
activities was $1,739,000. The Company built inventories for the spring building
season during the first quarter of 2000 and used its revolving credit agreements
to finance the increase in inventories.
Cash used in investing activities was primarily for equipment in the
Plastic Lumber Division. The Environmental Recycling Division made capital
expenditures in 2000 for plant and equipment totaling $1,316,000 and incurred
deferred dredging costs totaling $420,000. The Plastic Lumber Division made
machinery and equipment purchases totaling $13,341,000 primarily to expand
capacity at the California, Illinois and Florida manufacturing facilities. The
Company also used $39,000 of cash to acquire certain net assets of Baron which
had plant and equipment valued at $3,097,000 and finance equipment leases
thereon totaling $4,166,000.
Cash provided by financing activities totaled $16,736,000 including
$10,000,000 of equipment financing through GE Capital, $7,500,000 of net
proceeds from the issuance of 5% convertible subordinated debentures (see Note 5
to Condensed Consolidated Financial Statements), $2,476,000 of additional bank
and equipment financing loans and $622,000 net proceeds from exercise of options
and warrants. In addition, the Company assumed the aforementioned $4,166,000 of
debt owed by Baron on equipment leases. The Company used proceeds of these
financings to make principal payments due on debt totaling $4,672,000 in the
first quarter of 2000.
The Company will require additional working capital for the environmental
recycling operations, especially for the dredging opportunities being pursued by
the Company. The Company anticipates it will need an additional $7,000,000 to
finish the expansion of its plastic lumber manufacturing facilities.
SEASONALITY
The Company experiences a seasonal slow down during the winter months
because its environmental operations are located in the Northeast United States
where adverse weather and normal ground freezing can impact the Company's
performance. Additionally, sales of certain plastic lumber products slow
significantly in the winter months.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is involved as plaintiff or defendant in
various legal proceedings arising in the normal course of its business. While
the ultimate outcome of these various legal proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of these legal
actions should not have a material effect on the Company's financial position,
results of operations or liquidity.
In December 1999 a lawsuit was filed against the Company's former Chairman
in a matter entitled, Waste Management, Inc. vs. Paolino, et al, U.S. District
Court, District of Delaware. Mr. Paolino and others have filed a lawsuit against
Waste Management, Inc. All parties to these lawsuits have dismissed their
pending claims without prejudice in Federal court and agreed to submit all
claims to non-binding mediation. This dispute between Waste Management, Inc. and
Mr. Paolino and others may continue for a long period of time. The effects of
this dispute may have wide ranging implications on the Company which may result
in material adverse effects upon the business, financial condition and/or
operating results which cannot be reasonably foreseen at the current time.
Although the Company was not a named party in either of these lawsuits, it is
not possible to predict the implications of these disputes upon the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Issuances of common shares during the three months ended March 31, 2000 are
listed in the following paragraphs.
209,181 shares of Common Stock were issued as a result of acquisitions.
137,000 shares of Common Stock were issued as a result of the exercise of
stock options and warrants.
2,734 shares of Common Stock were issued as a result of bonuses and earn
outs achieved by employees.
1,700 shares of Common Stock were issued to outside directors as board
compensation for 1999.
632,833 shares were issued to the Historical Shareholders pursuant to the
Settlement Agreements discussed in note 3 of the Condensed Consolidated
Financial Statements.
762,465 shares of Common Stock were issued as a result of a conversion of
debentures into equity.
The Common Stock underlying the stock options was previously registered
with the SEC. Some of the stock issued as a result of the acquisitions was
previously registered on a Form 4 filed with the SEC that was declared effective
on September 3, 1999. The Common Stock issued pursuant to the conversion of
debentures has been registered through the filing of a Form S-3 that was deemed
effective by the SEC on May 14, 1999.
All of the other transactions were not registered under the Securities Act
of 1933 in reliance on the exemption from registration in Section 4(2) of the
Act, as transactions not involving any public offering. These offerings were
completed without any general or public solicitation. In each case the offering
was made to a very limited number of officers, directors and shareholders of the
companies being acquired or to independent consultants or employees of the
Company. The independent consultants, officers, directors and shareholders who
participated in the private placements had strong knowledge and experience in
business matters as well as pre-existing business relationships with the
Company. The knowledge and experience of these individuals enabled them to
evaluate the risks and merits of the investment. The securities issued in all of
the foregoing transactions were issued as restricted securities and the
certificates were stamped with restrictive legends to prevent any resale without
registration under the Act or in compliance with an exemption from registration.
The cash proceeds from the exercise of stock options and warrants were used
for general corporate purposes.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.44 -- Asset Purchase Agreement -- Baron Enterprises, Inc.
10.45 -- Master Security Agreement -- GE Capital.
27.1 -- Financial Data Schedule for the three months ended March 31,
2000
(b) Reports on Form 8-K
On February 4, 2000 the Company filed an 8K to report a change in
Independent Certified Public Accountants.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
<TABLE>
<S> <C>
May 15, 2000 /s/ MARK S. ALSENTZER
- - ------------------------------------ -----------------------------------------------------
Date Mark S. Alsentzer,
Chairman, President and CEO
May 15, 2000 /s/ JOHN W. POLING
- - ------------------------------------ -----------------------------------------------------
Date John W. Poling,
Chief Financial Officer
</TABLE>
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<PAGE> 1
Exhibit 10.44
ASSET PURCHASE AGREEMENT
AGREEMENT dated the 13th day of January, 2000 by and between U.S.
Plastic Lumber Ltd., a Delaware corporation, any of its affiliates,
subsidiaries, or other entities established for the purposes of this transaction
(hereinafter referred to as "Buyer"), and Baron Enterprises, Inc., a Colorado
corporation (the "Seller"), and Baron Holdings, Inc. and Joseph Schuchert
(hereinafter jointly and severally referred to as "Shareholders").
BACKGROUND
The Seller is in the business of manufacturing alternative plastic
shipping platforms. Shareholders constitute 96.53% of the shareholders of the
Seller. The Shareholders who have not been made a party to this Agreement are
April Morris and Bain & Company, Inc.
Buyer desires to acquire substantially all of the assets owned by the
Seller, and to assume none of the liabilities in connection therewith, and the
Seller desires to sell such assets to Buyer, all upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. TERMS OF PURCHASE AND SALE OF ASSETS.
1.1. PURCHASE OF ASSETS. On the Closing Date (as hereinafter
defined), the Seller will sell, transfer, convey, assign and deliver to Buyer
and Buyer will purchase and acquire from the Seller all right, title and
interest in and to the Seller's assets, whether tangible or intangible, as set
forth on Schedule "1.1" (collectively, the "Assets").
1.2. ASSUMPTION, PAYMENT, AND RELEASE OF LIABILITIES. On the
Closing Date, Buyer does not assume, does not purchase the Assets subject to,
and shall in no event be liable for any liabilities or obligations or
responsibilities of the Seller, all of which shall remain the obligations of the
Seller (collectively, the "Retained Obligations"), except for trade accounts
payable and accrued expenses in the normal course of business as listed on
Schedule 1.2. In addition, all contracts, loans and other relationships of any
kind between Seller and FCR, Inc., and all contracts with Coors Brewing Co.,
shall be considered a Retained Obligation. The Seller shall pay and/or perform
all of the Retained Obligations. With respect to any issues between Seller and
FCR, Inc., as stated throughout this Agreement, the resolution of such issues on
terms acceptable to Seller, so long as said terms in no way adversely affects
the title to all Assets being transferred hereunder to Buyer, shall be a
condition precedent to the consummation of this
<PAGE> 2
transaction. After the Closing, Buyer shall be entitled to the benefit of any
insurance policies maintained by the Seller which cover assets purchased by
Buyer.
1.3. PURCHASE PRICE. In consideration of the sale, transfer,
conveyance, assignment and delivery of the Assets to Buyer and in reliance upon
the representations and warranties made herein by the Seller and Shareholders,
Buyer will, in full payment thereof, subject to the adjustments, if any, pay to
the Seller $12,600,000.00 (collectively, the "Purchase Price"), payable as
follows:
(i) 300,000 shares of non-registered Common stock,
par value $.0001, fully paid and non-assesssable of U.S. Plastic Lumber Corp.,
the parent of Buyer ("Common Stock") equal to a value of $3,000,000 on the
Closing Date at a price equal to $10 per share.
(ii) Assumption and satisfaction of Debt consisting
of capital leases and equipment loans as shown on the November 30, 1999 Balance
Sheet not to exceed $4,600,000.
(iii) Earn Out consideration due and payable post
Closing as follows: For the twelve month period commencing with the Closing
Date, the Seller shall be entitled to earn additional Purchase Consideration
equal to a maximum of $5,000,000. The amount of earn-out consideration to be
earned will be based upon the sales contribution, defined as Net Sales less Raw
Material costs using generally accepted accounting principles, being comprised
of only the following business categories:
o PP Tier Business to the extent it exceeds a sales contribution of
$270,000 in fiscal year 2000;
o New Customer "X", being big PE customer;
o Internal Slip Sheet Growth from existing customer base only. To
the extent there are common customers between Acquirer and Seller,
any increase in the business of said common customers will be pro
rated between Seller and Acquirer in a manner equal to the ratio
of Acquirer's total sales pounds volume with common customers to
the Seller's total sales pounds volume as of the Closing Date
hereunder. To that end, Schedule 1.3 shall represent Buyer's and
Seller's listing of their respective slip sheet customers and
dollar volume of product delivered by each party to their
respective customers for the twelve months ending December 31,
1999 from which a pro rata calculation shall be undertaken.
Notwithstanding anything to the contrary in this paragraph, the
parties acknowledge that any increase in the sales contribution
obtained from Coors Brewing Company resulting from any increase in
the price charged to Coors Brewing Company shall not be included
in the Earn Out Consideration.
For purposes of this transaction, Net Sales shall be defined as Gross Sales less
freight charges, taxes, sales discounts, allowances, customer returns, credits
and rebates to the extent such items are reasonable and customary and provided
in the ordinary course of business. Raw Material shall be defined as all resin
and additives inclusive of yield loss on a delivered basis.
The amount of earn out consideration to be paid to Seller shall be equal to the
ratio of total
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<PAGE> 3
aggregate sales contribution from the three business categories set forth above
divided by $3,820,000 as a percentage against $5,000,000 ("Earn Out
Consideration"). For example purposes only, if the total aggregate sales
contribution from the three business categories for twelve month period
subsequent to Closing equals $2,500,000, the earn out consideration to be paid
to Seller shall be as follows: $2,500,000 divided by $3,820,000 = 65.4%.
$5,000,000 times 65.4% = $3,270,000. Attached hereto and made a part hereof is
Exhibit H which sets forth the additional detail regarding the mechanism and
manner in which the Earn Out will apply.
1.3.1 COVENANTS REGARDING EARN OUT CONSIDERATION. Any Earn Out Consideration
earned by Seller, shall be paid to Seller no later than 60 days after the close
of the twelve month period subsequent to Closing. The Earn Out Consideration
shall be payable in the form of Common Stock in an amount equal to$11 per share.
The Common Stock shall be fully paid non-assessable and registered. Seller shall
have the ability to audit the financial results of Acquirer upon reasonable
notice to Acquirer and at Seller's sole expense.
The base production capacity of Baron's Reidsville NC plant is estimated to be
700,000 pounds per month of slip sheet. It is the intent of the Acquirer to have
the option to shut down the Reidsville, NC facility and potentially move the
equipment to another facility. Prior to shutting down Reidsville, NC and losing
the 700,000 pounds per month production capacity on an interim basis the
Acquirer plans to bring on new capacity in Chicago, IL to replace this lost
capacity of 700,000 pounds per month. If in the event, the capacity in
Reidsville is shut down and the Acquirer is unable to replace the capacity in
Chicago or at another location then in such event the Earn Out Period shall be
extended in an amount equal to the total number of days necessary to make up for
the loss in the base production (the "Extended Days") of Reidsville, NC. The
production on the Extended Days shall be added to the production numbers for the
twelve month period in which the Earn Out is applicable to determine the Earn
Out Consideration to be issued.
The Buyer shall utilize its best efforts and exercise reasonable care to deliver
product and balance the needs of all customers, inclusive of the customers to
which the Earn-Out Consideration applies, in a timely manner and in accordance
with the known specifications of the customer, subject to normal variations
within the ordinary course of business. The parties also acknowledge that Buyer
must operate its business, and the assets acquired herein, in a commercially
reasonable manner in accordance with accepted industry practice and to maximize
value for all shareholders of U.S. Plastic Lumber Corp. Therefore, Buyer is not
obligated to pursue any business which negatively impacts or poses unjustifiable
risks to its overall margins or its operations, even if it would otherwise
benefit the Earn Out Consideration being paid to the Shareholders hereunder.
Therefore, to the extent Seller or Shareholders reasonably believe that Buyer,
either intentionally or through negligence, acted or failed to act with
resulting negative impact on the business categories to which the Earn Out
Consideration applies. within the parameters set forth in this Section 1.3.1,
Seller and Shareholders may direct a letter to Buyer within 90 days after their
receipt of the Earn Out Quarterly Report, as defined below, outlining the
alleged conduct or inaction by Buyer and its impact on the Earn-Out
Consideration ("Seller's letter"). If the parties are unable to resolve the
Seller's claims within 60 days of Seller's letter, an independent mediator shall
be appointed, through mutual agreement of the parties, to meet with the parties
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<PAGE> 4
and/or their representatives in an attempt to resolve issues regarding the
Earn-Out Consideration. In the event the parties are unable to mutually agree
upon an independent mediator within ten days of the expiration of the 60 day
period following the Seller's letter, the parties will each pick one attorney
who together will select one independent mediator on behalf of the parties. The
parties acknowledge that in connection with any such mediation time is of the
essence and agree to exercise their best efforts to complete any mediation
within 150 days following Seller's letter. The parties further acknowledge that
each party shall bear its own mediation costs and expenses of whatever kind,
except that the parties shall equally split the mediator's fee. Seller and
Shareholders agree not to invoke the provisions of this paragraph in the absence
of a material event or events with a resulting negative impact on sales in the
business categories included within the Earn Out Consideration of at least
$100,000.
The Buyer shall provide to each Shareholder within 30 days after the close of
each fiscal quarter a quarterly report in a format substantially similar to
Exhibit J outlining the sales contributions, and its components as defined
previously, in the specific business categories falling within the Earn-Out
Consideration ("Earn Out Quarterly Report"). In the event the Buyer has actual
knowledge of any events during the quarter that might materially impact the
ultimate Earn-Out Consideration, Buyer shall utilize reasonable efforts to
provide notice of such material adverse event to Shareholders.
In the event the parties cannot resolve Seller's claims regarding Earn-Out
Consideration through mediation, either party may commence an arbitration
proceeding against the other within 12 months of the expiration of the Earn-Out
Period in accordance with the arbitration provisions set forth herein.
If a dispute arises out of or relates to this contract, or the breach thereof,
and if said dispute cannot be settled through direct discussions, the parties
agree to first endeavor to settle the dispute in an amicable manner by mediation
under the Commercial Mediation Rules of the Judicial Arbitration Mediation
Service (JAMS) before resorting to arbitration. Thereafter any end result
controversy or claim arising out of or relating to this contract, or breach
thereof, shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of JAMS, and judgment upon the award rendered by a single
arbitrator may be entered in any court having jurisdiction thereof.
To the extent the subject matter of the arbitration relates to certain shares of
USPL stock, pending the outcome of the arbitration USPL shall place in escrow
with Blank Rome Comisky & McCauley, as escrow agent, the shares of stock in
dispute. The escrow agent shall be entitled to release such shares as directed
by the arbitrator in the award, unless the parties agree otherwise in writing.
The arbitration shall be held in Chicago, IL or such other place as may be
selected by mutual agreement.
The parties acknowledge that Shareholders shall have the right to enforce any
provisions of this Section 1.3.1 and to seek their legal remedies through the
mediation and arbitration provisions contained within this Agreement as may be
appropriate in the event Buyer breaches or
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<PAGE> 5
Shareholders believe that Buyer has breached any of the covenants contained
within this Section 1.3.1.
1.4. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Assets as set forth on Schedule "1.4." The Seller and Buyer
shall each file all required forms (and any amendments thereto) with the
Internal Revenue Service on a timely basis and neither the Seller nor Buyer
shall take any position on their respective tax returns that is inconsistent
with the amount of consideration which is allocated among the Assets as set
forth on Schedule "1.4".
1.5. CORPORATE Name. The Seller shall transfer its rights to
the corporate name "Baron Enterprises, Inc." or any derivative thereof to Buyer
as one of the Assets being transferred hereunder.
1.6 BULK SALE LAWS. Buyer and Seller agree to waive compliance
of any applicable provisions of the Bulk Sales Act. In consideration of such
waiver, each party hereto hereby agrees to indemnify the other for any and all
cost and expense associated therewith.
2. CLOSING DATE. For purposes of this Agreement, the closing
("Closing") of the transactions contemplated hereby shall take place on the
"Closing Date". The term "Closing Date" shall mean five business days from the
date in which all conditions to Closing (other than those requiring the delivery
of a certificate or other action at Closing) have been satisfied or waived, or
such other date as the parties may agree in writing, but in no event shall it be
later than January 30, 2000. The Closing shall take place simultaneously at the
offices of Buyer and the General Counsel of Seller, at or about 10:00 a.m., on
the Closing Date, or at such other time or place as may be mutually agreed upon
by the parties.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDERS.
The Seller and Shareholders, jointly and severally as between the Shareholders
only, represent and warrant to Buyer as to all sections of this Article 3 as
established below. Notwithstanding anything to the contrary herein, Buyer
acknowledges that all representations and warranties made by the Shareholders
herein are made to the best of their actual knowledge.
3.1. POWER AND AUTHORITY. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado and is duly qualified as a foreign corporation in each jurisdiction
(such jurisdictions being listed on Schedule "3. 1 ") in which the Seller is
required to be so qualified, except where the failure to be so qualified, would
not have a material adverse effect on the Assets. Except as stated on Schedule
"3.1-2", the Seller has the full power and authority to own, lease and operate
the Assets and to carry on its business as and where the business is now
conducted, and to execute, deliver and perform this Agreement and all documents,
agreements and transactions contemplated hereby. The execution, delivery and
performance of all documents, agreements and transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of the Seller
and Shareholders. Except as stated on Schedule "3.1-2", Shareholders have the
full power, authority, and legal capacity to execute, deliver and perform this
Agreement and all documents, agreements, and transactions contemplated hereby.
This Agreement is the valid and legally binding obligation of the Seller
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<PAGE> 6
and Shareholders enforceable against the Seller and Shareholders in accordance
with its terms, and each document and agreement contemplated by this Agreement,
when executed and delivered in accordance with its terms, will be the valid and
legally binding obligation of the Seller and Shareholders enforceable against
the Seller and Shareholders in accordance with their terms. Except as set forth
on Schedule "3.1-3", no consent of, or filing with, any governmental or
regulatory authority (federal, state or local) or any other person or entity is
required to be obtained by the Seller and/or Shareholder in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
3.2 TAX MATTERS. Except as stated on Schedule "3.2", the Seller
has duly and timely filed all Tax Returns (as hereinafter defined) which the
Seller is required to file prior to the date hereof (including Tax Returns for
the jurisdictions set forth on Schedule "3.2 "), and has paid all Taxes (as
hereinafter defined), deficiencies or other assessments of Taxes owed or claimed
to be owed by the Seller which are due and payable prior to the date hereof.
There are no deficiencies or other assessments of Taxes owed or claimed to be
owed by the Seller. Shareholders know of no unassessed Tax deficiency proposed
or threatened or any basis therefor which may occur in the future. There is no
dispute or claim concerning any Tax liability of the Seller either (i) claimed
or raised by any taxing authority in writing, or (ii) as to which Shareholders
have knowledge based on personal contact with any agent of such authority.
No Tax Returns are currently the subject of an audit. Except as stated on
Schedule "3.2", no extensions of time on which any Tax Return was or is to be
filed by the Seller are in force, and no waiver or agreement by the Seller is in
force for the extension of time for the assessment or payment of any Tax. No
claim has ever been made by a taxing authority in a jurisdiction where the
Seller does not file a Tax Return that it is, or may be, subject to taxation by
that jurisdiction. The Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party. All Taxes
which are called for by the Tax Returns, or claimed to be owed by a taxing
authority from the Seller, and all other Taxes owed or claimed to be owed by the
Seller which are due and payable prior to the date hereof, and all Taxes upon or
required by the Seller's properties, assets, or income, have properly accrued in
accordance with generally accepted accounting principles. For purposes of this
Agreement, the term "Tax" and the term "Tax Return" shall mean:
(i) "Tax" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Internal Revenue Code of 1986, as amended (the "Code")),
customs, duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
(ii) "Tax Return" means any return, declaration,
report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof
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<PAGE> 7
3.3. COMPLIANCE WITH LAWS. Except as stated on Schedule "3.3",
the Seller has complied in all material respects with all federal, state,
county, and local laws, ordinances, rules, regulations, and orders
(collectively, "Laws") relating in any respect to its business or operations. A
list of all permits and licenses of any governmental or regulatory body
(federal, state or local) (collectively the "Permits") held by the Seller is set
forth on Schedule "3.3". Except as stated on Schedule "3.3", the Permits are in
full force and effect and the Seller has not received any notice of violation
with respect to the Permits.
3.4. NO BREACH. Except as stated on Schedule "3.4", the
execution, delivery and consummation of this Agreement and the transactions
herein contemplated (i) do not conflict with any term or provision of the
certificate of incorporation or by-laws of the Seller, (ii) do not constitute or
will not constitute a violation of or a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, or do not or will
not conflict with, any term or provision of any contract, commitment, indenture,
lease or other agreement, arrangement or understanding to which the Seller or
Shareholders are a party, (iii) do not constitute a violation of, or conflict
with, any judgment or order known to Shareholders, or, any Law, and (iv) do not
result in the creation of any lien or other encumbrance on any of the Seller's
assets or give to any person or entity any interest in the Seller.
3.5. FINANCIAL STATEMENTS. Schedule "3.5" contains the
financial statements and notes thereto of the Seller as at and for the years
ended December 31, 1998, and 1997, and the interim period as of November 30,
1999 (the "Financial Statements"). The Financial Statements are substantially
true and correct, and fairly present the financial position of the Seller as at
such dates and the results of its operations and a statement of its cash flow
for the periods then ended. Shareholders are not aware of any material
modification that should be made to the year-end Financial Statements in order
for them to be in conformity with generally accepted accounting principles.
Also, as to any interim statement provided herewith, it was prepared in
conformity with generally accepted accounting principles, and is based on
recorded transactions and management's best estimates and judgments. During the
period December 1, 1999 through the Closing Date, the Seller and the
Shareholders will not pay off any debt to affiliates, distribute any profits in
the form of dividends, bonuses, management fees, or other forms of proceeds,
other than in the ordinary course of business.
3.6. LIABILITIES. Except as disclosed in the Financial
Statements or on any other Schedule attached hereto, the Seller has no other
liabilities. The Seller and Shareholders acknowledge that the Buyer is not
assuming any liabilities set forth on the Balance Sheet except as has been set
forth on Schedule 1.2. Seller specifically acknowledges that Buyer shall not
assume any liabilities or claims of any kind arising from any relationship
between Seller and FCR, Inc., including, but not limited to, equipment, raw
material and lease contracts. Moreover, as part of this Agreement, Buyer shall
not assume the Coors Brewing Company contract.
3.7. LITIGATION AND JUDGMENTS. Except as disclosed on Schedule
"3.7", the Seller is not a party to, or threatened with, any claim, litigation,
arbitration, proceeding or governmental investigation and the Seller has not
received notice of any claim, litigation, arbitration, proceeding or
governmental investigation. Additionally, except as disclosed on
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<PAGE> 8
Schedule "3.7", there are no judgments, orders, writs, decrees, fines,
citations, penalties, injunctions or other legal, administrative or arbitration
actions affecting the Seller.
3.8. AGREEMENTS. Schedule "3.8" sets forth a list of all
material contracts, leases, and agreements (whether written or oral) under which
the Seller is bound including, but not limited to, lease agreements
(collectively, the "Contracts"). Except as disclosed in Schedule "3.8", each of
the Contracts is in full force and effect and enforceable in accordance with its
terms and no notice of default, defense, offset, counterclaim termination or
acceleration has been given or received by the Seller with respect to any of the
Contracts. Seller further represents and warrants that it will terminate all of
its contract relationships with FCR, Inc. prior to the Closing Date.
3.9. ACCOUNTS RECEIVABLE.
(a) The accounts receivable are an asset being included in this sale
transaction. All accounts receivable of the Company reflected in the Balance
Sheet and all accounts receivable of the Company that have arisen since the
Balance Sheet Date (except such accounts receivable as have been collected since
such dates) are valid and enforceable claims, and the goods and services sold
and delivered that gave rise to such accounts were sold and delivered in
conformity with all applicable express and implied warranties, purchase orders,
agreements and specifications, except to the extent of the allowance for
doubtful accounts reflected on the Balance Sheet, except as set forth on
Schedule 3.9. SCHEDULE 3.9 contains a true and complete aging of the Company's
accounts receivable as of the Balance Sheet Date.
3.10. TRADE NAME. The Seller has the valid right to use its
corporate name as a trade name, without any known conflict with the rights of
others. The Seller has not conducted business under any other name.
3.11. PROPERTY.
(i) TANGIBLE PROPERTY. Schedule "3.11-1" sets forth a
list of all interests owned, used by or leased by or to the Seller in machinery,
equipment, vehicles and other tangible property (collectively the "Tangible
Property"). Except as set forth in Schedule 3.11-1, all Tangible Property being
sold hereunder is structurally sound and has no material defects which are known
to Seller and are in good operating condition, repair, and are adequate for the
uses to which they are being put, ordinary wear and tear excepted.
(ii) REAL PROPERTY.
(a) The Seller owns no real property except
as set forth on Schedule "3.11-2". Seller has good and marketable title to any
real estate being transferred hereunder and shall convey good and marketable
title to any real estate free and clear of any liens, encumbrances, security
interests, liabilities, assessments, mortgages or other claims.
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(iii) SOFTWARE. Schedule "3.11-3" sets forth a list
of all software and/or software rights (including any computer programs) owned
by or licensed to the Seller (the "Software"). Software is being transferred "as
is, where is".
3.12. LIENS.
(i) Except as set forth on Schedule "3.12", the
Seller owns outright and has good and absolute legal, equitable and marketable
title to all of the Assets, free and clear of any lien, debt, pledge,
obligation, liability, charge, encumbrance, security interest, commitment or
option (any of the foregoing, an "Encumbrance") of any kind, nature or
description, and the Seller has the full power and authority to convey the
Assets to Buyer free and clear of any Encumbrance and, upon delivery of and
payment for such Assets as herein provided, Buyer will acquire good, valid and
marketable title thereto, free and clear of any Encumbrance set forth on
Schedule 3.12. Seller represents and warrants that on or before the Closing Date
it will pay off any and all loans, settle any disputes on any claims or other
unresolved issues or disputed amounts between itself and FCR, Inc. upon terms
and conditions that in no way adversely affects the title to all assets being
delivered to Buyer pursuant to this Agreement.
(ii) Shareholders own, both of record and
beneficially, 96.53% of the issued and outstanding shares of capital stock of
the Seller. There are no outstanding options, warrants or agreements under which
the Seller or Shareholders would be obligated to issue or sell any stock of the
Seller. The Seller has no subsidiaries (wholly-owned or otherwise).
3.13. EMPLOYEES. Schedule "3.13 " is a complete list of the
Seller 's employees, their job titles and their current wages and benefits.
Except as set forth on Schedule "3.13-1", the Seller is not and has not been a
party to any written agreement with any of its employees presently employed by
the Seller, there is no employee whose employment is not terminable at will. The
Seller has no personnel manual or handbook covering any of its employees, except
as disclosed on Schedule "3.13". The Seller has no formal severance pay policy.
If Buyer determines to offer employment to any employee of the Seller, the
Seller shall immediately provide copies of such employee's employment records.
Except as set forth on Schedule "3.13-2", the Seller is in compliance with all
Laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice; no unfair labor practice complaint against the Seller is pending
before the National Labor Relations Board; there is no labor strike, dispute,
slowdown or stoppage actually pending or threatened against or involving the
Seller; no representation question exists respecting the employees of the
Seller; no grievance which might have an adverse effect upon the Seller or the
conduct of its business exists, no arbitration proceeding arising out of or
under any collective bargaining agreement is pending and no claim therefor has
been asserted; no collective bargaining agreement is currently being negotiated
by the Seller and the Seller has not experienced any material labor difficulty
during the last three years. Schedule "3.13-3" sets forth a true and correct
list of all loans made by the Seller to employees of the Seller. Prior to the
Closing, the Seller shall (i) make no such further loans and (ii) continue to
collect such debts in accordance with its current policy.
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3.14. EMPLOYEE BENEFIT PLANS. Schedule "3.14" is a complete list
of the Seller's "Employee Benefit Plans" which term as used herein means (i) any
employee benefit plan, as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA'), or (ii) any other plan, trust
agreement or arrangement for any bonus, severance, hospitalization, vacation,
deferred compensation, pension or profit sharing, retirement, payroll savings,
stock option, group insurance, death benefit, fringe benefit arrangement of any
nature whatsoever, including those benefiting former employees. On or before the
Closing Date, the Seller, if applicable, shall apply to the Internal Revenue
Service for a determination letter requesting approval of the termination of its
Profit Sharing Plan (the "Plan") and shall fully vest all participants in the
Plan and arrange for payment of all amounts held in the Plan for such
participants as soon as practicable after receipt of a favorable letter from the
IRS approving of the termination. Buyer assumes no responsibility for the Plan's
termination or for the payment of any Plan participant's account balances as
described in the preceding sentence. With respect to prior plan years and the
current plan year of the Seller's Health Plan: (i) the Seller has made on or
prior to the date hereof and will have made on or prior to the Closing Date all
payments (including, without limitation, contributions, premiums, benefit
payments, administrative costs and liabilities) required to be made by it on or
prior to the date hereof and the Closing Date, and has accrued (in accordance
with generally accepted accounting principles consistently applied) as of the
date hereof and will have accrued on or prior to the Closing Date all payments
(including, without limitation, contributions, premiums, benefit payments,
administrative costs and liabilities) due but not yet payable as of the date
hereof and the Closing Date, and (ii) the Seller has operated, currently
operates, and will continue to operate such plans in full compliance with the
plan documents and all applicable laws,
3.15. INSURANCE. Schedule "3.15" sets forth all policies of
insurance ("Insurance Policies") held by or on behalf of the Seller specifying
the insurer, the policy number (or covering note number with respect to
binders), the risks covered, the premium, the deductibles and the amount of
coverage provided and describing any pending claim against the Insurance
Policies.
Except as set forth in Schedule "3.15", the Seller has not received a notice of
cancellation, non-renewal or audit of any such Insurance Policy. Except as set
forth in Schedule "3.15", the Shareholders have no knowledge of any failure to
pay premiums when due. Such policies are sufficient for compliance with all
requirements of law and of all agreements to which either Seller is a party; are
valid, outstanding, and enforceable policies; provide adequate insurance
coverage for the assets and operations of Seller's business; and with respect to
the periods prior to Closing will not in any way be affected by or terminate or
lapse by reason of the transactions contemplated by this Agreement.
3.16. NO BROKER. No broker or similar intermediary has acted
for or on behalf of the Seller or Shareholder in connection with the
transactions contemplated hereby.
3.17. ENVIRONMENTAL MATTERS. Except as disclosed on Schedule
"3.17" and to the knowledge of the Seller and Shareholders and only in
connection with the time frame the Seller operated on the premises, no hazardous
wastes, hazardous substances, hazardous materials, asbestos, infectious wastes,
petroleum, petroleum products or pollutants, all as defined
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by environmental laws existing as of the date of this Agreement (collectively,
"Hazardous Waste") or solid waste has been discharged, spilled, released or
disposed of by or at the direction of the Seller which would provide a basis for
liability for personal damage, property damage, environmental cleanup or natural
resources damage, except for such occasional emissions, discharge, spills and
releases occurring in and incidental to the regular operation of the business of
the Seller, e.g., oil leaks from vehicles which would not cause any significant
environmental problems ("Ordinary Emissions"); and no Ordinary Emission is the
subject of any threatened or pending claim, assessment, administrative
proceeding or penalty. In addition, the Seller has not spilled or discharged or
caused to be spilled or discharged any Hazardous Waste on any of the property it
has leased in the past or is currently leasing ("Leased Property"), and has only
used these properties as administrative and office facilities in the normal
course of its business. USPL acknowledges it has the right to conduct a Phase I
environmental study on any real estate upon which the Seller's business is
currently being operated.
3.18. FULL DISCLOSURE. The information furnished by or on behalf
of the Seller or Shareholders to Buyer in connection with this Agreement and the
transactions contemplated hereby does not and will not contain any untrue
statement of a material fact and does not and will not omit to state any
material fact necessary to make the statements made, in the context in which
made, not false or misleading. There is no fact known to the Shareholders which
materially and adversely affects the business, prospects or financial condition
of the Seller, which has not been set forth in this Agreement or the Schedules
or certificates furnished in connection with the transactions contemplated by
this Agreement.
3.19. PROCEEDS. The proceeds to be received by each Seller in
connection with the transactions contemplated by this Agreement are sufficient
for, and will be used by, such Seller to meet all of its current financial and
administrative requirements, including without limitation, legal expenses and
any items set forth in any of the Schedules attached hereto.
4 . REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Shareholders and the Seller as follows:
4.1. AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified as a foreign corporation in each
jurisdiction in which the Buyer is required to be so qualified, except where the
failure to be so qualified, would not have a material adverse effect on the
Assets. Except as stated on Schedule 4.1, the Buyer has the full corporate power
and authority to execute, deliver and perform this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by, and is the valid and legally binding obligation of, Buyer
enforceable in accordance with its terms, and each document contemplated by this
Agreement, when executed and delivered in accordance with the provisions hereof,
shall be valid and legally binding upon Buyer in accordance with its terms. The
execution, delivery and performance of all documents, agreements and
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Buyer and its parent. Except as stated on Schedule
"4.1", Buyer has the full power, authority, and legal capacity to execute,
deliver and perform this Agreement and all documents, agreements, and
transactions contemplated hereby. Except as set forth on Schedule "4. 1 ", no
consent of any
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governmental or regulatory authority (federal, state or local) or any other
person or entity is required to be obtained by Buyer in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
4.2. NO BROKER. No broker or similar intermediary has acted
for or on behalf of Buyer in connection with the transactions contemplated
hereby.
4.3 SECURITIES REPRESENTATION. The parent of Buyer, U.S.
Plastic Lumber Corp. ("USPL") is subject to the reporting requirements of
Section 13 of the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and has delivered to Shareholders copies of all reports, registration
statements, and other filings filed by USPL with the Securities and Exchange
Commission (the "SEC") since December 31, 1998 under the 1934 Act and any
filings with the SEC under the Securities Act of 1933, as amended (the "1933
Act"), including, but not limited to, the USPL's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998; USPL's 1998 Annual Report to
Shareholders; and USPL's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999, June 30, 1999, and September 30, 1999 (herein collectively
called the "SEC Reports"). As of the date of this Agreement, USPL has filed all
regular and periodic reports and proxy statements required to be filed by it
with the SEC. The SEC Reports taken together in the order filed correctly
describe, among other things, the business, operations, and principal properties
of USPL and its subsidiaries in accordance with the requirements of the
respective applicable report form. As of their respective dates of filing, none
of the SEC Reports contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited consolidated financial statements included in the SEC Reports were
prepared in accordance with generally accepted accounting principles (as in
effect from time to time) applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto) and fairly present, as
of the dates thereof, the results of USPL's and its consolidated subsidiaries'
operations and changes in financial position for the periods specified, subject,
in the case of the unaudited interim financial statements, to normal year-end
audited adjustments and any other adjustments described therein or in the notes
and schedules thereto.
4.4. FULL DISCLOSURE. To the best of Buyer's knowledge, the
information furnished by or on behalf of Buyer to Shareholders or the Seller in
connection with this Agreement and the transactions contemplated hereby does not
and will not contain any untrue statement of a material fact and does not and
will not omit to state any material fact necessary to make the statements made,
in the context in which made, not false or misleading.
5. OBLIGATIONS OF THE SELLER AND SHAREHOLDERS FROM THE DATE OF THIS
AGREEMENT UNTIL THE CLOSING DATE. From the date hereof until the Closing Date,
the Seller will, and the Shareholders will cause the Seller to, as applicable:
5.1. Allow, during normal business hours and on reasonable
notice to, and pre-approval by, Shareholders, which approval shall not be
unreasonably withheld; and provided that the Seller's business is not
unreasonably interrupted: (i) the employees, attorneys, accountants, engineers,
inspectors and any other representatives of Buyer free and full access to the
assets, the
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books and records of the Seller; and (ii) the employees of Buyer to interview
and meet with the employees of the Seller; such contact to be limited to the
employees listed in Schedule "5. 1" attached hereto. Shareholders shall fully
cooperate with Buyer in the Buyer's review of the business of the Seller.
5.2. Use its best efforts to: (i) preserve the Seller's
business organizations intact and to conduct its business in the Ordinary
Course; (ii) to the extent requested by Buyer, keep available the Seller's
present employees; (iii) preserve the present relationships with the Seller's
customers and others having business relationships with the Seller, and in
connection therewith, Shareholder will allow the Buyer to have access to, and
meet with, the Seller's customers and others having business relationships with
the Seller; and (iv) perform all obligations under contracts and other
agreements.
5.3. Use its best efforts to cause all of the conditions
precedent to Closing to be satisfied as soon as practicable after the date
hereof.
5.4. Observe all applicable Laws in the conduct of the
Seller's business, duly and timely file all reports, registrations and returns
to be filed with any governmental entity, and promptly pay all Taxes, fees and
other charges when due and keep full and accurate records of all transactions
entered into and conducted.
5.5. Promptly, by written notice, keep Buyer fully informed of
all material events and occurrences relevant to the Seller's business and
operations.
5.6. Cooperate fully with Buyer in making application for any
necessary approvals, including application for assignments of assignable
Contracts and Permits as determined and requested by Buyer.
5.7. Hold in confidence and cause the Shareholders' and the
Seller's Representatives (as defined below) to hold in confidence all
Confidential Information (as defined below) and not disclose the same to any
third person without the prior consent of Buyer, except to the Shareholder's and
the Seller's Representatives who need such information for the purpose of
evaluating the transactions contemplated by this Agreement (such person shall be
informed by the Shareholders or the Seller of the confidential nature of the
material and shall be subject to all the terms of this Agreement; the
Shareholders and the Seller shall be responsible for any breach of such terms by
any such Representatives). If this Agreement is terminated or dissolved for any
reason, Shareholders and the Seller will promptly return to Buyer all
Confidential Information furnished by Buyer and held by Shareholders or the
Seller, including all copies and summaries thereof and will not make use of such
Confidential Information. As used herein, "Confidential Information" means all
information concerning Buyer and its business obtained by Shareholders, the
Seller, or their directors, officers, employees, attorneys, agents or other
representatives (collectively, "Representatives") from Buyer in connection with
the transactions contemplated by this Agreement except information which (i) was
available to the public prior to the time of such disclosure, (ii) becomes
available to the public through no act or omission of the Shareholders or the
Seller or their Representatives, or (iii) has been given to the Shareholders or
the Seller prior to such disclosure, or is given to the Shareholders or the
Seller thereafter, in either case by a third
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party not known by the Shareholders or the Seller to be under any obligation of
confidentiality to the Buyer with respect thereto. "Confidential Information"
includes this Agreement.
5.8. Promptly, by written notice, advise Buyer of any
information that indicates that any representation or warranty of Buyer
contained in this Agreement is not true and correct or that Buyer has breached
any of its obligations under this Agreement.
5.9. Promptly, by written notice, advise Buyer of any event,
condition or circumstance (an "Event") occurring after the date hereof through
the Closing Date which causes any of the representations and warranties of the
Seller or Shareholders not to be true and correct in all material respects as of
the date hereof or as of the date such Event occurred (as if Shareholders and
the Seller had made such representation or warranty on the date such Event
occurred). Buyer's closing under this Agreement after its receipt of information
furnished by the Seller or Shareholders pursuant hereto shall not operate as a
waiver of any of Buyer's rights for any misrepresentation or breach of any
representation or warranty which is disclosed by such information.
6. OBLIGATIONS OF BUYER FROM THE DATE OF THIS AGREEMENT. From the date
hereof until the Closing Date, Buyer will:
6.1. Cooperate fully with Shareholders and the Seller in
making application for any necessary approvals, if applicable,
6.2. Hold in confidence and cause its Representatives (as
defined below) to hold in confidence all Confidential information (as defined
below) and not disclose the same to any third person without the prior consent
of Shareholders, except to Buyer's Representatives who need such information for
the purpose of evaluating the transactions contemplated by this Agreement (such
person shall be informed by Buyer of the confidential nature of the material and
shall be subject to all the terms of this Agreement; Buyer shall be responsible
for any breach of such terms by any of the Buyer's Representatives). If this
Agreement is terminated or dissolved for any reason, Buyer will promptly return
to Shareholders all Confidential Information furnished by Shareholders or the
Seller including all copies and summaries thereof and will not make use of such
Confidential Information. As used herein, "Confidential Information" means all
information concerning the Seller obtained by Buyer or its directors, officers,
employees, attorneys, agents or other representatives (collectively,
"Representatives") from Shareholders or the Seller in connection with the
transactions contemplated by this Agreement except information which (i) was
available to the public prior to the time of such disclosure, (ii) becomes
available to the public through no act or omission of Buyer or Buyer's
Representatives, or (iii) has been given to Buyer prior to such disclosure, or
is given to Buyer thereafter, in either case by a third party not known by Buyer
to be under any obligation of confidentiality to the Seller or Shareholders with
respect thereto. "Confidential Information" includes this Agreement.
6.3. Promptly, by written notice, advise Shareholders and the
Seller of any information that indicates that any representation or warranty of
Shareholders or the Seller
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contained in this Agreement is not true and correct or that Shareholders or the
Seller has breached any of its obligations under this Agreement.
6.4. Promptly, by written notice, advise Shareholders and the
Seller of any event, condition or circumstance (an "Event") occurring after the
date hereof through the Closing Date which causes any of the representations and
warranties of Buyer not to be true and correct in all material respects as of
the date hereof or as of the date such Event occurred (as if Buyer had made such
representation or warranty on the date such Event occurred). The Seller's and
Shareholders' closing under this Agreement after their receipt of information
furnished by Buyer pursuant hereto shall not operate as a waiver of any of the
Seller 's or Shareholders' rights for any misrepresentation or breach of any
representation or warranty which is disclosed by such information.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The obligations of
Buyer to be performed by it at the Closing are subject to the satisfaction, at
or prior to the Closing of each of the following conditions, each of which may
be waived in whole or part by Buyer:
7.1. The representations and warranties made by the Seller and
Shareholders in Sections 3.1, 3.11 and 3.12 of this Agreement, to the extent
made, shall each be true and correct in all material respects on the Closing
Date with the same force and effect as though they had been made on the Closing
Date (the truth and correctness of the remaining representations and warranties
in Section 3 of this Agreement on the Closing Date with the same force and
effect as if made on the Closing Date not being conditions precedent to the
obligations of Buyer to be performed at Closing), and Shareholders and the
Seller shall have performed in all material respects their obligations under
this Agreement which are to be performed or complied with prior to or on the
Closing Date, as the case may be.
7.2. Buyer shall have received a certificate, dated the
Closing Date, from the Seller and Shareholders certifying to the fulfillment of
the conditions set forth in Section 7. 1.
7.3 Buyer shall have received the opinion of counsel to the
Seller and Shareholders, dated the Closing Date and addressed to Buyer
substantially in the form of Exhibit "E" attached hereto.
7.4 At least three days prior to Closing, the Seller shall
deliver to Buyer Uniform Commercial Code certified searches and searches with
respect to the Seller for liens, encumbrances, judgments and federal tax liens
in Colorado and North Carolina (collectively, "Searches"), all such Searches to
be dated no earlier than ten business days prior to the Closing Date and
attached hereto as Exhibit B. Buyer shall remit directly to Seller's counsel all
such costs associated with the generation and transmission of such searches.
7.5. On the Closing Date, the Seller shall have delivered to
Buyer the following:
(i) documents and instruments of transfer for the Assets
substantially in the forms attached as Exhibit "F" including, without
limitation, bills of sale for tangible property, transfers
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of certificates of title for all Assets where applicable, all keys for vehicles
and the Real Property, and, to the extent assignable by the Seller, assignments
of Contracts and Permits; (ii) to the extent available, the original invoices,
if available, together with the manufacturer's or dealer's guarantees and/or
warranties covering the Assets; (iii) to the extent available, copies or
originals of all files, papers, books and records, Permits, applications,
correspondence and other documents relative to the Assets (including a full
customer list); (iv) a certificate, dated no earlier than ten business days
prior to the Closing Date, from the Colorado and North Carolina Secretary of
State that the Seller is in good standing and a certificate also dated no
earlier than ten business days prior to the Closing Date from the Colorado and
North Carolina Department of Revenue showing there are no liens for corporate
taxes against the Seller; (v) a certificate, dated no earlier than ten business
days prior to the Closing Date, from the State of Colorado and North Carolina
that the Seller is in good standing and a certificate from the Colorado and
North Carolina Department of Revenue showing that there are no liens or claims
for taxes against the Seller; (vi) termination statements terminating the liens
or pay-off letters with respect to the liens set forth on Schedule "7.5"; (vii)
copies of the Board of Directors' unanimous written consents authorizing the
execution, delivery and performance of this Agreement with the Seller, and if
obtainable prior to Closing, unanimous written consent of all Shareholders; and
(vii) receipts acknowledging Buyer's payment to the Seller of the Purchase
Price.
7.6. There shall not be any governmental suit or proceeding
pending before any court or other governmental agency in which the government
seeks to prevent the consummation of this Agreement or the transactions
contemplated hereby. There shall not be any order or judgment issued by any
court of competent jurisdiction or other governmental agency which prohibits the
consummation of this Agreement or the transactions contemplated hereby.
7.7. Shareholders and the Seller shall have executed the Stock
Sale Restriction Agreement, Non-Compete Agreements, all instruments necessary to
transfer title to all assets, and any and all other documents as may be required
under this Agreement.
7.8. Buyer shall have received a certificate, dated the
Closing Date, from the Secretary of Seller certifying to the minutes of the
meetings of the Board of Directors of Seller authorizing the execution, delivery
and performance of this Agreement by Seller and the transactions contemplated
hereby in the form of Exhibit I attached hereto.
7.9 Buyer's review of the representations and warranties
contained herein and the Schedules which are a part of this Agreement and a
determination that the information contained in the representations and
warranties and the Schedules is substantially true and correct in all material
respects determined as of the date of this Agreement.
7.10 Seller shall provide Buyer with evidence of release of
all liens and encumbrances of any kind, other than those disclosed on Schedule
3.12, on all assets being purchased pursuant to this Agreement, including but
not limited to equipment with liens from FCR, Inc., upon terms and conditions
that in no way adversely affects the title to all assets being delivered to
Buyer pursuant to this Agreement.
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7.11 Seller shall pay off any and all loans, settle any
disputes on any claims or other unresolved issues or disputed amounts between
itself and FCR, Inc. upon terms and conditions that adversely affects the title
to all assets being delivered to Buyer pursuant to this Agreement. Buyer must
also accept any timing issues associated with the resolution of the FCR, Inc.
issues as described throughout this Agreement.
7.12 Shareholders shall execute a Stock Escrow Agreement in
the form attached hereto as Exhibit D.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER AND
SHAREHOLDERS TO EFFECT THE CLOSING. The obligations of the Seller and
Shareholders to be performed by them at the Closing are subject to the
satisfaction, at or prior to the Closing, of the following conditions, each of
which may be waived in whole or in part by the Seller and Shareholders:
8.1. The agreements, representations and warranties made by
Buyer in Section 4.1 of this Agreement shall each be true and correct in all
material respects on the Closing Date with the same force and effect as though
they had been made on the Closing Date, and Buyer shall have performed all of
its obligations under this Agreement which are to be performed or complied with
by it prior to or on the Closing Date, as the case may be.
8.2. Shareholders and the Seller shall have received a
certificate, dated the Closing Date, from the Buyer certifying to the
fulfillment of the conditions specified in Section 8.1 in the form attached as
Exhibit I hereto.
8.3. Shareholders and the Seller shall have received a
certificate, dated the Closing Date, from the Secretary of Buyer certifying to
the minutes of the meetings of the Board of Directors of Buyer authorizing the
execution, delivery and performance of this Agreement by Buyer and the
transactions contemplated hereby.
8.4. Buyer shall have executed any and all other documents as
may be required under this Agreement.
8.5. There shall not be in effect any order issued by a court
of competent jurisdiction which restricts the payment of the Purchase Price to
the Seller or the distribution of the Purchase Price by the Seller.
8.6 CIT shall release a Certificate of Deposit of Joseph
Schuchert in the amount of $1,300,000 upon terms and conditions that are
acceptable to Acquirer and Joseph Schuchert.
8.7 Seller shall pay off any and all loans, settle any
disputes on any claims or other unresolved issues or disputed amounts between
itself and FCR, Inc. upon terms and conditions that in no way adversely affects
the title to all assets being delivered to Buyer pursuant to this Agreement.
Buyer must also accept any timing issues associated with the resolution of the
FCR, Inc. issues as described throughout this Agreement.
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9. TERMINATION AND EFFECT OF TERMINATION.
9.1. Termination. This Agreement may be terminated:
(i) at any time on or prior to the Closing Date, by
the mutual consent in writing of the parties hereto;
(ii) at any time on or prior to the Closing Date, by
either Buyer, or Shareholders and the Seller, as the case may be, if the other
party has breached, in any material respect, any representation or warranty
contained in Sections 3.1, 3.11 or 3.12 (as to Shareholders and the Seller), or
any representation or warranty in Section 4.1 (as to Buyer), or any covenant or
undertaking contained herein, and any such breach has not been cured by the
close of business on the 10th day after the date on which notice of such breach
is given to the party committing such breach, unless the party in breach has
notified the other party, in writing, that the breach cannot be cured within the
ten day period and the party in breach is diligently and in good faith working
to cure the breach, in which case the cure period may be extended by the
breaching party as necessary to cure the breach;
(iii) by Buyer at any time after the date on which
the Seller shall no longer be in operation as an on-going business or if Seller
files a petition in bankruptcy.
(iv) by either party in the event, in the sole
discretion of the respective parties, the party determines during its due
diligence that the transaction is not acceptable to it.
9.2. EFFECT OF TERMINATION.
(i) Upon termination of this Agreement as provided in
Section 9. 1 (i), this Agreement shall forthwith become void and there shall be
no liability or obligation on the part of any party hereto or their respective
directors, officers, employees, agents or other representatives.
(ii) In the event of termination of this Agreement as
provided in Section 9.1 (ii) or (iii) hereof, such termination shall be without
prejudice to any rights that the terminating party or parties may have against
the breaching party or parties or any other person under the terms of this
Agreement or otherwise.
10. DAMAGE TO TANGIBLE PROPERTY. If, between the date of this Agreement
and the Closing Date, any of the Seller's assets are damaged, the transactions
contemplated by this Agreement shall proceed, provided that, at Buyer's option
either (A) the amount of Cash being issued hereunder shall be decreased by the
fair market value of the affected Property (herein, the "Affected Property") or
(B) the proceeds from the Insurance Policies (together with a reimbursement to
Buyer of the amount of any deductible thereon), shall be assigned and/or paid to
Buyer. Buyer shall have the right to participate in the negotiation and
settlement of any insurance claim or condemnation award, as the case may be. If
the parties are unable in good faith to agree upon the fair market value of the
Affected Property, the Closing Date shall be extended to the fifth business day
after the date the appraisal procedure set forth in this Section
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<PAGE> 19
10 shall be completed. Within 10 days after such damage or condemnation, the
parties shall attempt to agree upon the selection of a disinterested independent
qualified appraiser to determine the fair market value of the Affected Property.
If the parties are able to agree upon an appraiser, such appraiser shall be
instructed to furnish a written appraisal within 30 days of its or his
selection. If the parties are unable to agree upon the selection of an appraiser
within such 10-day period, the Shareholders and Buyer shall, within five days
thereafter, each select an appraiser to determine the fair market value of the
Affected Property. Each appraiser so selected shall furnish the parties with a
written appraisal within 30 days of its or his selection. If the two appraisals
are within 10% of each other, the fair market value of the Affected Property
shall be the average of the two appraisals. If the two appraisals are not within
10% of each other, the appraisers shall, within 10 days after the issuance of
their respective reports, select a third appraiser to determine the fair market
value of the Affected Property. The third appraiser shall issue a written
appraisal within 30 days of its or his selection. The third appraisal shall be
averaged with the other two and the appraisal furthest from the average of all
three appraisals shall be disregarded. The average of the remaining two
appraisals shall be the fair market value of the Affected Property. The Seller
and Buyer shall each pay 50% of the total cost of the appraisal(s). The
determination of the fair market value of the Affected Property pursuant to the
appraisal procedure set forth in this Section 10 shall be final, conclusive and
binding upon the parties, absent a showing of fraud. If, subsequent to the
Closing Date, all or a portion of the Affected Property that is the subject of a
pending condemnation procedure is not ultimately taken, the fair market value of
such Property shall promptly upon settlement or final resolution of such
proceeding, be paid to the Seller.
11. ARBITRATION. In any dispute arising out of this Agreement or the
transaction contemplated herein, the parties agree that all such disputes,
except as may otherwise be specifically provided for in Section 1.3 in Section
1.3 relative to mediating any disputes regarding Earn Out Consideration, shall
be resolved through binding arbitration pursuant to the terms set forth in
Section 1.3. In any arbitration matter between the parties arising out of or
relating to this Agreement, the costs of investigation, interest, and reasonable
attorney's fees shall be paid as ordered by the arbitrator.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants and agreements shall survive the execution and delivery
hereof and the Closing Date for a period of 13 months from the Closing Date. Any
action or claim brought against any party based upon an alleged breach of any
representation or warranty herein must be brought within 18 months from the
Closing Date.
13. INDEMNIFICATION.
13.1. INDEMNIFICATION.
(i) The Seller and the Shareholders, jointly and
severally as between the Shareholders only, covenant and agree to defend,
indemnify and hold harmless Buyer from and against any Damages arising out of or
resulting from: (i) any inaccuracy in or breach of any representation or
warranty, to the extent made by the Seller or any Shareholder in this Agreement
or in any writing delivered pursuant to this Agreement or at the closing [unless
and except that
19
<PAGE> 20
such inaccuracy or breach is a direct result of changes made by the Buyer in
accounting methods or estimates utilized in financial reporting of the Seller];
(ii) the failure of the Seller or any Shareholder to perform or observe fully
any covenant, agreement or provision to be performed by the Seller or such
Shareholder pursuant to this Agreement or any of the Related Agreements required
to be executed pursuant to the terms of this Agreement and not otherwise waived
by Buyer; (iii) any claims arising out of any relationships between Seller and
FCR, Inc.; or (iv) any claims made by minority shareholders of Seller regarding
this transaction.
(ii) Buyer covenants and agrees to defend, indemnify
and hold harmless the Shareholders from and against any Damages arising out of
or resulting from: (i) any inaccuracy in or breach of any representation or
warranty made by Buyer in this Agreement or in any writing delivered pursuant to
this Agreement or at the Closing; (ii) the failure by Buyer to perform or
observe any covenant, agreement or condition to be performed or observed by it
pursuant to this Agreement; or (iii) any claims arising from Coors Brewing
Company resulting from Buyer's failure to assume that contract as part of this
Agreement.
13.2. THIRD PARTY CLAIMS.
(i) If any party entitled to be indemnified pursuant
to Section 13.1 (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 "INDEMNIFABLE
CLAIM") with respect to which another party hereto (an "INDEMNIFYING PARTY") is
or may be obligated to provide indemnification, the Indemnified Party shall
promptly notify the Indemnifying Party in writing (the "CLAIM NOTICE") of the
Indemnifiable Claim; PROVIDED, that the failure to provide such notice shall not
relieve or otherwise affect the obligation of the Indemnifying Party to provide
indemnification hereunder, except to the extent that any Damages directly
resulted or were caused by such failure.
(ii) The Indemnifying Party shall have thirty (30)
days after receipt of the Claim Notice to undertake, conduct and control,
through counsel of its own choosing, and at its expense, the settlement or
defense thereof, and the Indemnified Party shall cooperate with the Indemnifying
Party in connection therewith, PROVIDED, that (i) the Indemnifying Party shall
permit the Indemnified Party to participate in such settlement or defense
through counsel chosen by the Indemnified Party (subject to the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld), provided
that the fees and expenses of such counsel shall not be borne by the
Indemnifying Party, and (ii) the Indemnifying Party shall not settle any
Indemnifiable Claim without the Indemnified Party Shareholder consent. So long
as the Indemnifying Party is vigorously contesting any such Indemnifiable Claim
in good faith, the Indemnified Party shall not pay or settle such claim without
the Indemnifying Party's consent, which consent shall not be unreasonably
withheld.
(iii) 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;
20
<PAGE> 21
PROVIDED, that the Indemnified Party shall notify the Indemnifying Party of any
compromise or settlement of any such Indemnifiable Claim.
(iv) Anything contained in this Section 13.2 to the
contrary notwithstanding, the Seller and the Shareholders shall not be entitled
to assume the defense for any Indemnifiable Claim (and shall be liable for the
reasonable fees and expenses incurred by the Indemnified Party in defending such
claim) if the Indemnifiable Claim seeks an order, injunction or other equitable
relief or relief for other than money damages against Buyer or the Seller which
Buyer determines, after conferring with its counsel, cannot be separated from
any related claim for money damages and which, if successfully, would adversely
affect the business, properties or prospects of the Seller.
13.3. INDEMNIFICATION NON-EXCLUSIVE. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common-law remedy any party may have for breach of representation,
warranty, covenant or agreement.
13.4. SET-OFF. Notwithstanding any provision of this Agreement or of
any other agreement, instrument or undertaking, it is understood and agreed that
Buyer shall have the right to set-off the amount of any indemnity under Sections
13.1 or 13.2 hereof to the extent the Seller or any of the Shareholders shall be
liable therefor against any sums of money or any shares of the Buyer at any time
payable or deliverable to the Shareholders, including any earn out shares due
Shareholders pursuant to the terms of the Stock Escrow Agreement. Buyer's rights
under this paragraph are not unilateral. To invoke the provisions of this
paragraph, Buyer must initiate an arbitration proceeding seeking a determination
of Seller or Shareholders indemnity liability hereunder. The remedies provided
in this Article shall be cumulative and shall not preclude the assertion by any
party of any other rights or the seeking of any other remedies by it against any
other party. The remedies hereunder shall survive the Closing of this
transaction.
14. EXPENSES. Except as otherwise provided in this Agreement, whether
or not the transactions contemplated by this Agreement shall be consummated,
each party shall pay its or their own expenses incident to preparing for,
entering into and carrying into effect this Agreement and the transactions
contemplated hereby.
15. FURTHER ASSURANCES AFTER THE CLOSING DATE. At any time and from
time to time after the Closing Date, at Buyer's request and without further
consideration, Shareholders and the Seller will promptly execute and deliver all
such further documents or perform such acts as Buyer may reasonably request in
order to more fully consummate the transactions contemplated herein. After the
Closing Date, Shareholders and the Seller shall promptly deliver to Buyer all
notices, correspondence and other items relating to the Assets which are from
time to time received by it or are in its possession. Buyer shall retain any
documents and records delivered to it by Shareholders or the Seller for all
periods required by any Laws.
16. MISCELLANEOUS.
16.1. Notices. Any notice or other communication required or
which
21
<PAGE> 22
may be given hereunder shall be in writing and either delivered personally or
mailed, certified, registered or express mail, or courier service, postage
prepaid, and shall be deemed given when so delivered personally or if by
certified or registered mail, four days after the date of mailing or if express
mailed or sent by courier service, two days after the date of mailing or
sending, as follows:
(i) If to Shareholder and/or the Seller, to:
Joseph Schuchert
c/o Eaglestone Capital Services, Inc.
400 Oceangate
Suite 1125
Long Beach, CA 90802
Telecopy: 562-590-6382
(ii) If to Buyer, to:
U.S. Plastic Lumber Corp.
2300 W. Glades Rd. Suite 440W
Boca Raton, FL 33431
Attn: Bruce C. Rosetto, Vice President
and General Counsel
Telecopy: 561-394-5335
or to such other address as any party may designate to the others by notice as
set forth above.
16.2. ENTIRE AGREEMENT. This Agreement (including the menu of
Exhibits and Schedules hereto) contains the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior agreements,
written or oral, with respect thereto.
16.3. WAIVERS AND AMENDMENTS. This Agreement may be amended or
modified only by a written instrument signed by all the parties. No delay on the
part of any party in exercising any right hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any right hereunder,
or any single or partial exercise of any right hereunder, preclude any other or
further exercise thereof or the exercise of any other right hereunder.
16.4. BINDING AGREEMENT. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by each of the parties hereto and
their respective legal representatives, successors and assigns.
16.5. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware applicable to
agreements made, delivered and to be performed entirely therein.
16.6. ASSIGNMENT. This Agreement may not be assigned by any
party, except with the written consent of the other party hereto provided that,
at Closing, Buyer may, without the consent of Shareholders or the Company,
assign some or all its rights to a subsidiary or
22
<PAGE> 23
subsidiaries or an affiliate or affiliates. Any such assignment shall not
relieve Buyer of any obligations under this Agreement. Nothing in this Agreement
is intended to confer upon any person or entity, other than the parties hereto
and their legal representatives, successors and permitted assigns, any rights
under this Agreement.
16.7. VARIATIONS IN PRONOUNS. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
16.8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Except
for the binding arbitration process described in Section 1.3.1, any action
arising out of this Agreement or the transactions contemplated hereby may be
instituted in any state or federal court located in the State of Delaware and
each party waives any objection which such party may have to the laying of the
venue of any such action, and irrevocably submits to the jurisdiction of any
such court in any such action.
16.9. INTERPRETATION. Notwithstanding any right of Buyer to
investigate fully the affairs of Shareholders and the Seller (and vice versa)
and notwithstanding any knowledge of facts determined or determinable by Buyer
pursuant to such investigation or right of investigation (and vice versa), Buyer
and Shareholders and the Seller have the right to rely fully upon the
representations, warranties, covenants and agreements contained in this
Agreement.
16.10. SEVERABILITY. If any provision of this Agreement is
construed to be invalid or unenforceable, such determination shall not affect
the remaining provisions of this Agreement, all of which shall remain in full
force and effect, unless the absence of the invalid, illegal or unenforceable
provision or provisions materially reduces the value to be given or received by
any party at the Closing or materially alters the obligations and liabilities of
any party after the Closing. To the extent permitted by law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable.
16.11. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
16.12. EXHIBITS AND SCHEDULES. The Exhibits and Schedules to
this Agreement are part of this Agreement as if set forth in full herein, and
any information disclosed on any Schedule shall be deemed to have been disclosed
on all applicable Schedules,
16.13. HEADINGS. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
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<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ATTEST: BUYER:
/s/ Bruce C. Rosetto
------------------------------------
Bruce C. Rosetto, Vice President
And General Counsel
SELLER:
/s/ Larry Umstadter
------------------------------------
Larry Umstadter, President
SHAREHOLDERS:
Baron Holdings, Inc.
/s/ Joseph Schuchert
------------------------------------
Joseph Schuchert, President
/s/ Joseph Schuchert
------------------------------------
Joseph Schuchert
24
<PAGE> 25
LIST OF EXHIBITS
EXHIBIT DESCRIPTION
- - ------- -----------
A List of Shareholders
B UCC/Tax Searches
C Non-Compete Agreement for Joseph Schuchert, Baron Holdings,
Inc. and Baron Enterprises, Inc.
D Stock Escrow Agreement
E Opinion of Counsel of Seller/Shareholder
F Stock Sale Restriction Agreement of each Shareholder
G Instruments for Transfer of Assets/Bill of Sale
H Earn Out Schedule
I Certificates of Buyer and Seller
J Earn Out Quarterly Report form
TAB SCHEDULE DESCRIPTION
- - --- -------- -----------
1 1.1 List of Assets
2 1.2 List of Assumption of Liabilities and Debts
3 1.3 1999 Slip Sheet Sales Analysis
4 3.1 Organization and Good Standing
5 3.1-2 Limits on Authority
6 3.1-3 Consents
7 3.2 Tax Matters
8 3.3 Compliance; Permits
9 3.4 No Breach
10 3.5 Financial Statements
11 3.7 Litigation and Judgments
12 3.8 Contracts
13 3.9 Accounts Receivable
14 3.11 Tangible Property
15 3.11-2 Real Property
16 3.11-3 Software
17 3.12 Liens
18 3.13 List of Employees
19 3.13-1 Employment Agreements
20 3.13-2 Employment Compliance Matters
21 3.13-3 Loans made to Company Employees
22 3.14 Employee Benefit Plans
23 3.15 Insurance Policies
24 3.17 Environmental Matters
25 4.1 Consents of Buyer
26 5.1 Certain Employees
27 7.5 Liens to be Terminated
25
<PAGE> 26
EXHIBIT A
List of Shareholders of Baron Enterprises, Inc.
Baron Holdings, Inc. 80.12%
Joseph Schuchert 16.41%
Bain & Company, Inc. 3.37%
April Morris .10%
26
<PAGE> 1
Exhibit 10.45
MASTER SECURITY AGREEMENT
THIS MASTER SECURITY AGREEMENT, made as of February _, 2000
("Agreement"), by and between GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation with an address at 4 North Park Drive, Suite 500, Hunt Valley,
Maryland 21030, and its assigns (together with its successors and assigns, if
any, "Secured Party"), and U.S. Plastic Lumber Ltd., a corporation organized and
existing under the laws of the State of Delaware with its chief executive
offices located at 2300 W. Glades Road, Suite 440, Boca Raton, Florida 33431 and
The Eaglebrook Group, Inc., a corporation organized and existing, under the
laws of the State of Delaware with its chief executive offices located at 2600
W. Roosevelt Road, Chicago, Illinois 60608 (jointly, severally and collectively,
"Debtor").
In consideration of the promises herein contained and of certain other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor and Secured Party hereby agree as follows:
1. CREATION OF SECURITY INTEREST.
Debtor hereby gives, grants and assigns to Secured Party, its
successors and assigns forever, a security interest in and against any and all
property listed on any collateral schedule now or hereafter annexed hereto or
made a part hereof ("Collateral Schedule"), and in and against any and all
additions, attachments, accessories and accessions thereto, any and all
substitutions, replacements or exchanges therefor, and any and all insurance
and/or other proceeds thereof (all of the foregoing being hereinafter
individually and collectively referred to as the "Collateral"). The foregoing
security interest is given to secure the payment and performance of any and all
debts, obligations and liabilities of any kind, nature or description whatsoever
(whether primary, secondary, direct, contingent, sole, joint or several, or
otherwise, and whether due or to become due) of Debtor to Secured Party, now
existing or hereafter arising, including but not limited to the payment and
performance of certain Promissory Notes from time to time identified on any
Collateral Schedule (collectively "Notes" and each a "Note"), and any renewals,
extensions and modifications of such debts, obligations and liabilities (all of
the foregoing being hereinafter referred to as the "Indebtedness").
Notwithstanding the foregoing, and notwithstanding anything to the contrary
contained elsewhere in this Agreement, to the extent that Secured Party asserts
a purchase money security interest in any items of Collateral ("PMSI
Collateral"): (i) the PMSI Collateral shall secure only that portion of the
Indebtedness which has been advanced by Secured Party to enable Debtor to
purchase, or acquire rights in or the use of such PMSI Collateral (the "PMSI
Indebtedness"), and (ii) no other Collateral shall secure the PMSI Indebtedness.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.
Debtor hereby represents, warrants and covenants as of the date hereof
and as of the date of execution of each Collateral Schedule hereto that:
(a) Debtor is, and will remain, duly organized, existing and in good
standing under the laws of the State set forth in the first paragraph of this
Agreement, has its chief executive offices at the location set forth in such
paragraph, and is, and will remain, duly qualified and licensed in every
jurisdiction wherever necessary to carry on its business and operations;
(b) Debtor has adequate power and capacity to enter into, and to
perform its obligations, under this Agreement, each Note and any other documents
evidencing, or given in connection with, any of the Indebtedness (all of the
foregoing being hereinafter referred to as the "DEBT DOCUMENTS");
(c) This Agreement and the other Debt Documents have been duly
authorized, executed and delivered by Debtor and constitute legal, valid and
binding agreements enforceable under all applicable
<PAGE> 2
laws in accordance with their terms, except to the extent that the enforcement
of remedies may be limited under applicable bankruptcy and insolvency laws;
(d) No approval, consent or withholding of objections is required from
any governmental authority or instrumentality with respect to the entry into, or
performance by, Debtor of any of the Debt Documents, except such as may have
already been obtained;
(e) The entry into, and performance by, Debtor of the Debt Documents
will not (i) violate any of the organizational documents of Debtor or any
judgment, order, law or regulation applicable to Debtor, or (ii) result in any
breach of, constitute a default under, or result in the creation of any lien,
claim or encumbrance on any of Debtor's property (except for liens in favor of
Secured Party) pursuant to, any indenture mortgage, deed of trust, bank loan,
credit agreement, or other agreement or instrument to which Debtor is a party;
(f) There are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or affecting
Debtor which could, in the aggregate, have a material adverse effect on Debtor,
its business or operations, or its ability to perform its obligations under the
Debt Documents except as may have been otherwise disclosed by Debtor in any
public filing with the Securities and Exchange Commission;
(g) All financial statements delivered to Secured Party in connection
with the Indebtedness have been prepared in accordance with generally accepted
accounting principles, and since the date of the most recent financial
statement, there has been no material adverse change;
(h) The Collateral is not, and will not be, used by Debtor for
personal, family or household purposes;
(i) The Collateral is, and will remain, in good condition and repair
and Debtor will not be negligent in the care and use thereof;
(j) Debtor is, and will remain, the sole and lawful owner and in
possession of, the Collateral, and has the sole right and lawful authority to
grant the security interest described in this Agreement; and
(k) The Collateral is, and will remain, free and clear of all liens,
claims and encumbrances of every kind, nature and description, except for (i)
liens in favor of Secured Party, (ii) liens for taxes not yet due or for taxes
being contested in good faith and which do not involve, in the reasonable
judgment of Secured Party, any risk of the sale, forfeiture or loss of any of
the Collateral, and (iii) inchoate materialmen's, mechanic's, repairmen's and
similar liens arising by operation of law in the normal course of business for
amounts which are not delinquent (all of such permitted liens being hereinafter
referred to as "PERMITTED LIENS").
3. COLLATERAL.
(a) Until the declaration of any default hereunder, Debtor shall remain
in possession of the Collateral; provided, however, that Secured Party shall
have the right to possess (i) any chattel paper or instrument that constitutes a
part of the Collateral, and (ii) any other Collateral which because of its
nature may require that Secured Party's security interest therein be perfected
by possession. Secured Party, its successors and assigns, and their respective
agents, shall have the right to examine and inspect any of the Collateral at any
time during normal business hours. Upon any request from Secured Party, Debtor
shall provide Secured Party with notice of the then current location of the
Collateral.
(b) Debtor shall (i) use the Collateral only in its trade or business,
(ii) maintain all of the Collateral in good condition and working order, (iii)
use and maintain the Collateral only in compliance
2
<PAGE> 3
with all applicable laws, and (iv) keep all of the Collateral free and clear of
all liens, claims and encumbrances (except for Permitted Liens).
(c) Debtor shall not, without the prior written consent of Secured
Party, (i) part with possession of any of the Collateral (except to Secured
Party or for maintenance and repair), (ii) remove any of the Collateral from the
continental United States, or (iii) sell, rent, lease, mortgage, grant a
security interest in or otherwise transfer or encumber (except for Permitted
Liens) any of the Collateral.
(d) Debtor shall pay promptly when due all taxes, license fees,
assessments and public and private charges levied or assessed on any of the
Collateral, on the use thereof, or on this Agreement or any of the other Debt
Documents. At its option, Secured Party may discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and may pay for the maintenance, insurance and preservation of the Collateral or
to effect compliance with the terms of this Agreement or any of the other Debt
Documents. Debtor shall reimburse Secured Party, on demand, for any and all
costs and expenses incurred by Secured Party in connection therewith and agrees
that such reimbursement obligation shall be secured hereby.
(e) Debtor shall, at all times, keep accurate and complete records of
the Collateral, and Secured Party, its successors and assigns, and their
respective agents, shall have the right to examine, inspect, and make extracts
from all of Debtor's books and records specifically relating to the Collateral
at any time during normal business hours.
(f) If agreed by the parties, Secured Party may, but shall in no event
be obligated to, accept substitutions and exchanges of property for property,
and additions to the property, constituting all or any part of the Collateral.
Such substitutions, exchanges and additions shall be accomplished at any time
and from time to time, by the substitution of a revised Collateral Schedule for
the Collateral Schedule now or hereafter annexed. Any property which may be
substituted, exchanged or added as aforesaid shall constitute a portion of the
Collateral and shall be subject to the security interest granted herein.
Additions to, reductions or exchanges of, or substitutions for, the Collateral,
payments on account of any obligation or liability secured hereby, increases in
the obligations and liabilities secured hereby, or the creation of additional
obligations and liabilities secured hereby, may from time to time be made or
occur without affecting the provisions of this Agreement or the provisions of
any obligation or liability which this Agreement secures.
(g) Any third person at any time and from time to time holding all or
any portion of the Collateral shall be deemed to, and shall, hold the Collateral
as the agent of, and as pledge holder for, Secured Party. At any time and from
time to time, Secured Party may give notice to any third person holding all or
any portion of the Collateral that such third person is holding the Collateral
as the agent of, and as pledge holder for, the Secured Party.
4. INSURANCE.
The Collateral shall at all times be held at Debtor's risk, and Debtor
shall keep it insured against loss or damage by fire and extended coverage
perils, theft, burglary, and for any or all Collateral which are vehicles, for
risk of loss by collision, and where requested by Secured Party, against other
risks as required thereby, for the full replacement value thereof, with
companies, in amounts and under policies acceptable to Secured Party. Debtor
shall, if Secured Party so requires, deliver to Secured Party policies or
certificates of insurance evidencing such coverage. Each policy shall name
Secured Party as loss payee thereunder, shall provide for coverage to Secured
Party regardless of the breach by Debtor of any warranty or representation made
therein, shall not be subject to co-insurance, and shall provide for thirty (30)
days written notice to Secured Party of the cancellation or material
modification thereof. Debtor hereby appoints Secured Party as its attorney in
fact to make proof of loss, claim for insurance and adjustments with insurers,
and to execute or endorse all documents, checks or drafts in connection with
payments made as a result of any such insurance policies. Proceeds of insurance
shall be applied, at the option of Secured Party, to repair or replace the
Collateral or to reduce any of the Indebtedness secured hereby.
3
<PAGE> 4
5. REPORTS.
(a) Debtor shall promptly notify Secured Party in the event of (i) any
change in the name of Debtor, (ii) any relocation of its chief executive
offices, (iii) any relocation of any of the Collateral, (iv) any of the
Collateral being lost, stolen, missing, destroyed, materially damaged or worn
out, or (v) any lien, claim or encumbrance attaching or being made against any
of the Collateral other than Permitted Liens.
(b) Debtor will (or will cause U.S. Plastic Lumber Corp. ("Guarantor")
to) within ninety (90) days of the close of each fiscal year of Guarantor,
deliver to Secured Party, Guarantor's complete financial statements, certified
by a recognized firm of certified public accountants. Debtor will (or will cause
Guarantor to), within thirty (30) days after the date on which they are filed,
deliver to Secured Party all Forms 10-K and 10-Q filed by Debtor or Guarantor
with the Securities and Exchange Commission. Upon request debtor will (or will
cause Guarantor to) deliver to Secured Party quarterly, within ninety (90) days
of the close of each fiscal quarter of Guarantor, in reasonable detail, copies
of Guarantor's quarterly financial report certified by the chief financial
officer of Guarantor. Upon request, Debtor will (or will cause Guarantor to)
deliver to Secured Party one copy of each financial statement, report, notice or
proxy statement sent by Debtor and Guarantor to shareholders generally and one
copy of each regular or periodic report, registration statement or prospectus
filed by Debtor and Guarantor with any securities exchange or the Securities and
Exchange Commission or any successor agency, such copies to be delivered to
Secured Party within thirty (30) days after they become available or are
otherwise filed. Any and all financial statements submitted and to be submitted
to Secured Party have and will have been prepared on a basis of generally
accepted accounting principles, and are and will be complete and correct and
fairly present Debtor's and/or Guarantor's financial condition as at the date
thereof. Secured Party may at any reasonable time examine the books and records
of Debtor which are specific to the Collateral and make copies thereof.
(c) Within thirty (30) days after any request by Secured Party, Debtor
will furnish a certificate of an authorized officer of Debtor stating that he
has reviewed the activities of Debtor and that, to the best of his knowledge,
there exists no Event of Default (as described in Section 7) or event which with
notice or lapse of time (or both) would become an Event of Default.
(d) Within ninety (90) days after the end of each fiscal quarter of
Guarantor, Debtor will furnish a certificate of an authorized officer of
Guarantor stating that there exists no Event of Default under Section 7 (n) and
setting forth the computations in reasonable detail and satisfactory to Secured
Party demonstrating compliance with the Minimum Tangible Net Worth requirements
described in such Section 7 (n).
6. FURTHER ASSURANCES.
(a) Debtor shall, upon request of Secured Party, furnish to Secured
Party such further information, execute and deliver to Secured Party such
documents and instruments (including, without limitation, Uniform Commercial
Code financing statements) and do such other acts and things, as Secured Party
may at any time reasonably request relating to the perfection or protection of
the security interest created by this Agreement or for the purpose of carrying
out the intent of this Agreement. Without limiting the foregoing, Debtor shall
cooperate and do all acts deemed necessary or advisable by Secured Party to
continue in Secured Party a perfected first security interest in the Collateral,
and shall obtain and furnish to Secured Party any subordinations, releases,
landlord, lessor, or mortgagee waivers, and similar documents as may be from
time to time requested by, and which are in form and substance satisfactory to,
Secured Party.
(b) Debtor hereby grants to Secured Party the power to sign Debtor's
name and generally to act on behalf of Debtor to execute and file applications
for title, transfers of title, financing statements, notices of lien and other
documents pertaining to any or all of the Collateral. Debtor shall, if any
certificate of title be required or permitted by law for any of the Collateral,
obtain such certificate showing the lien hereof with respect to the Collateral
and promptly deliver same to Secured Party.
4
<PAGE> 5
(c) Debtor shall indemnify and defend the Secured Party, its successors
and assigns, and their respective directors, officers and employees, from and
against any and all claims, actions and suits (including, without limitation,
related attorneys' fees) of any kind, nature or description whatsoever arising,
directly or indirectly, in connection with any of the Collateral.
7. EVENTS OF DEFAULT.
Debtor shall be in default under this Agreement and each of the other
Debt Documents upon the occurrence of any of the following "Event(s) of Default"
(subject to any cure or grace periods as hereinafter defined):
(a) Debtor fails to pay any installment or other amount due or coming
due under any of the Debt Documents within ten (10) days after its due date;
(b) Any attempt by Debtor, without the prior written consent of Secured
Party, to sell, rent, lease, mortgage, grant a security interest in, or
otherwise transfer or encumber (except for Permitted Liens) any of the
Collateral;
(c) Debtor fails to procure, or maintain in effect at all times, any of
the insurance on the Collateral in accordance with Section 4 of this Agreement;
(d) Debtor breaches any of its other obligations under any of the Debt
Documents and fails to cure the same within thirty (30) days after written
notice thereof,
(e) Any warranty, representation or statement made by Debtor in any of
the Debt Documents or otherwise in connection with any of the Indebtedness shall
be false or misleading in any material respect;
(f) Any of the Collateral being subjected to, or being threatened with,
attachment, execution, levy, seizure or confiscation in any legal proceeding or
otherwise;
(g) Any default by Debtor under any other agreement between Debtor and
Secured Party;
(h) Any insolvency or business failure of Debtor or Guarantor;
(i) The appointment of a receiver for all or of any part of the
property of Debtor or Guarantor, or any assignment for the benefit of creditors
by Debtor or Guarantor;
(j) The filing of a petition by Debtor or Guarantor under any
bankruptcy, insolvency or similar law, or the filing of any such petition
against Debtor or Guarantor if the same is not dismissed within thirty (30) days
of such filing;
(k) Any uncured default by Debtor under any obligation for borrowed
money, for the deferred purchase price of property or any lease if such default
allows for the acceleration of such obligations or repossession of the
collateral;
(1) Any dissolution, termination of existence, merger or consolidation
of Debtor or Guarantor (such action being referred to as an "Event"), unless not
less than sixty (60) days prior to such Event: (x) such person is organized and
existing under the laws of the United States or any state, and executes and
delivers to Secured Party an agreement containing an effective assumption by
such person of the due and punctual performance of this Agreement or the
Guaranty, as applicable; and (y) Secured Party is reasonably satisfied as to the
credit worthiness of such person;
(m) If Debtor or Guarantor is a privately held corporation and
effective control of Debtor's or Guarantor's voting capital stock, issued and
outstanding from time to time, is not retained by the present
5
<PAGE> 6
stockholders (unless Debtor shall have provided sixty (60) days' prior written
notice to Secured Party of the proposed disposition of stock and Secured Party
shall have consented thereto in writing); or
(n) If Guarantor fails to maintain at all times during the term of this
Agreement and any Schedule, a Minimum Tangible Net Worth equal to or greater
than the sum of Fifty-Two Million Five Hundred Thousand Dollars ($52,500,000.00)
plus seventy-five percent (75%) of the after tax gain recognized by Guarantor
on the sale of any businesses or divisions of Guarantor plus fifty percent (50%)
of Guarantor's after tax Net Income. For the purposes of this Section 7(n),
"Minimum Tangible Net Worth" shall mean Stockholders Equity minus Intangible
Assets. Capitalized terms used in this Section 7 (n) shall be defined and
calculated in accordance with generally accepted accounting principles.
8. REMEDIES ON DEFAULT.
(a) Upon the occurrence of an Event of Default under this Agreement,
the Secured Party, at its option, may declare any or all of the Indebtedness,
including without limitation the Notes, to be immediately due and payable,
without demand or notice to Debtor or any Guarantor. The obligations and
liabilities accelerated thereby shall bear interest (both before and after any
judgment) until paid in full at the lower of eighteen percent (18%) per annum or
the maximum rate not prohibited by applicable law.
(b) Upon such declaration of default, Secured Party shall have all of
the rights and remedies of a Secured Party under the Uniform Commercial Code,
and under any other applicable law. Without limiting the foregoing, Secured
Party shall have the right to (i) notify any account debtor of Debtor or any
obligor on any instrument which constitutes part of the Collateral to make
payment to the Secured Party, (ii) with or without legal process, enter any
premises where the Collateral may be and take possession and/or remove said
Collateral from said premises, (iii) sell the Collateral at public or private
sale, in whole or in part, and have the right to bid and purchase at said sale,
and/or (iv) lease or otherwise dispose of all or part of the Collateral,
applying proceeds therefrom to the obligations then in default. If requested by
Secured Party, Debtor shall promptly assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party which is
reasonably convenient to both parties. Secured Party may also render any or all
of the Collateral unusable at the Debtor's premises and may dispose of such
Collateral on such premises without liability for rent or costs. Any notice
which Secured Party is required to give to Debtor under the Uniform Commercial
Code of the time and place of any public sale or the time after which any
private sale or other intended disposition of the Collateral is to be made shall
be deemed to constitute reasonable notice if such notice is given to the last
known address of Debtor at least five (5) days prior to such action.
(c) Proceeds from any sale or lease or other disposition shall be
applied: first, to all costs of repossession, storage, and disposition including
without limitation attorneys', appraisers', and auctioneers' fees; second, to
discharge the obligations then in default; third, to discharge any other
Indebtedness of Debtor to Secured Party, whether as obligor, endorser,
guarantor, surety or indemnitor; fourth, to expenses incurred in paying or
settling liens and claims against the Collateral; and lastly, to Debtor, if
there exists any surplus. Debtor shall remain fully liable for any deficiency.
(d) In the event this Agreement, any Note or any other Debt Documents
are placed in the hands of an attorney for collection of money due or to become
due or to obtain performance of any provision hereof, Debtor agrees to pay all
reasonable attorneys' fees incurred by Secured Party, and further agrees that
payment of such fees is secured hereunder.
(e) Secured Party's rights and remedies hereunder or otherwise arising
are cumulative and may be exercised singularly or concurrently. Neither the
failure nor any delay on the part of the Secured Party to exercise any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. Secured Party shall not be deemed to have waived any of its rights
hereunder or under any other agreement, instrument or paper signed by Debtor
unless such waiver be in writing and signed by Secured Party. A waiver on any
one occasion shall not be construed as a bar to or waiver of any right or remedy
on any future occasion.
6
<PAGE> 7
(f) DEBTOR HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, THIS AGREEMENT, ANY OF THE OTHER DEBT DOCUMENTS, ANY OF THE
INDEBTEDNESS SECURED HEREBY, ANY DEALINGS BETWEEN DEBTOR AND SECURED PARTY
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN DEBTOR AND SECURED
PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT,
ANY OTHER DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO
THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
9. MISCELLANEOUS.
(a) This Agreement, any Collateral Schedules, any Note and/or any of
the other Debt Documents may be assigned, in whole or in part, by Secured Party
without notice to Debtor, and Debtor hereby waives any defense, counterclaim or
cross-complaint by Debtor against any assignee, agreeing that Secured Party
shall be solely responsible therefor. Debtor agrees that if Debtor receives
written notice of an assignment from Secured Party, Debtor shall pay all
payments and other amounts due under the assigned Note and Collateral Schedule
to such assignee or as instructed by Secured Party. Debtor further agrees to
confirm in writing receipt of the notice of assignment as may be reasonably
requested by Assignee.
(b) All notices to be given in connection with this Agreement shall be
in writing, shall be addressed to the parties at their respective addresses set
forth hereinabove (unless and until a different address may be specified in a
written notice to the other party), and shall be deemed given (i) on the date of
receipt if delivered in hand or by facsimile transmission, (ii) on the next
business day after being sent by express mail, and (iii) on the fourth business
day after being sent by regular, registered or certified mail. As used herein,
the term "business day" shall mean and include any day other than Saturdays,
Sundays, or other days on which commercial banks in New York, New York are
required or authorized to be closed.
(c) Secured Party may correct patent errors herein and fill in all
blanks herein or in any Collateral Schedule consistent with the agreement of the
parties.
(d) Time is of the essence hereof. This Agreement shall be binding,
jointly and severally, upon all parties described as the "Debtor" and their
respective heirs, executors, representatives, successors and assigns, and shall
inure to the benefit of Secured Party, its successors and assigns.
(e) This Agreement and its Collateral Schedules constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior understandings (whether written, verbal or implied) with
respect thereto. This Agreement and its Collateral Schedules shall not be
changed or terminated orally or by course of conduct, but only by a writing
signed by both parties hereto. Section headings contained in this Agreement have
been included for convenience only, and shall not affect the construction or
interpretation hereof.
(f) This Agreement shall continue in full force and effect until all of
the Indebtedness has been indefeasibly paid in full to Secured Party. The
surrender, upon payment or otherwise, of any Note or any of the other documents
evidencing any of the Indebtedness shall not affect the right of Secured Party
to retain the Collateral for such other Indebtedness as may then exist or as it
may be reasonably contemplated will exist in the future. This Agreement shall
automatically be reinstated in the event that Secured Party is
7
<PAGE> 8
ever required to return or restore the payment of all or any portion of the
Indebtedness (all as though such payment had never been made).
IN WITNESS WHEREOF, Debtor and Secured Party, intending to be legally
bound hereby, have duly executed this Agreement in one or more counterparts,
each of which shall be deemed to be an original, as of the day and year first
aforesaid,
SECURED PARTY: DEBTOR
General Electric Capital Corporation U.S. Plastic Lumber Ltd.
By: By: /s/
----------------------------------- -------------------------------
Title: Title: Secretary
------------------------------- ----------------------------
The Eaglebrook Group, Inc.
By: /s/
-------------------------------
Title: Secretary
----------------------------
8
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,685,154
<SECURITIES> 0
<RECEIVABLES> 34,506,755
<ALLOWANCES> 1,379,088
<INVENTORY> 10,211,528
<CURRENT-ASSETS> 47,885,334
<PP&E> 105,646,636
<DEPRECIATION> 12,492,101
<TOTAL-ASSETS> 183,339,671
<CURRENT-LIABILITIES> 29,999,997
<BONDS> 0
0
0
<COMMON> 3,382
<OTHER-SE> 88,399,729
<TOTAL-LIABILITY-AND-EQUITY> 88,403,111
<SALES> 30,404,061
<TOTAL-REVENUES> 30,404,061
<CGS> 24,886,713
<TOTAL-COSTS> 24,886,713
<OTHER-EXPENSES> 5,313,159
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 982,388
<INCOME-PRETAX> (774,347)
<INCOME-TAX> (294,252)
<INCOME-CONTINUING> (480,095)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (480,095)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
