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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.
Date of Report (Date of earliest event reported): May 8, 1998
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Commission File Number 000-23353
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Denali Incorporated
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(Exact Name of Registrant in its Charter)
Delaware 76-0454641
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1360 Post Oak Blvd., Suite 2250, Houston, Texas 77056
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(Address of Principal Executive Officers) (Zip Code)
713-627-0933
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(Registrant's Telephone Number, Including Area Code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 8, 1998, pursuant to the terms of the Stock Purchase Agreement
(the "Agreement") by and among Reinforced Plastic Systems Inc. ("Reinforced
Plastic Systems"), CC&E/RPS, Inc. ("CC&E"), and Specialty Solutions, Inc.
("Specialty Solutions"), Specialty Solutions, a wholly-owned subsidiary of
Denali Incorporated, purchased 100 percent of the outstanding stock of CC&E from
Reinforced Plastic Systems of Mahone Bay, Nova Scotia, Canada for $1,600,000.00
in cash. Reinforced Plastic Systems may also receive contingent payments of up
to $400,000.00 based on an increase in the level of bookings as defined in the
Agreement. The purchase price for this stock was determined by arms length
negotiations between Reinforced Plastic Systems and Specialty Solutions. The
funds used to repay the purchase price in this acquisition were borrowed by
Denali Incorporated under its $29 million revolving credit facility with
NationsBank of Texas, N.A. The stock purchase excludes the European assets of
CC&E. Ershigs Inc., a Denali company, will operate the business. CC&E is a
leading North American field constructor of fiberglass-reinforced plastic
products.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
As of the date of filing this Current Report on Form 8-K, the
financial statements required by this Item 7(a) are not available.
In accordance with Item 7(a)(4) of the Form 8-K, such financial
statements will be filed no later than July 22, 1998.
(b) Pro Forma Financial Information
As of the date of filing this Current Report on Form 8-K, the pro
forma financial information required by this Item 7(b) is not
available. In accordance with Item 7(b)(2) of Form 8-K, such
financial statements will be filed no later than July 22, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DENALI INCORPORATED
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(Registrant)
Date: May 21, 1998 /s/ R. KEVIN ANDREWS
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R. Kevin Andrews
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
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<S> <C>
10.9 Stock Purchase Agreement dated April 8, 1998 between
Reinforced Plastic Systems Inc., CC&E/RPS, Inc., and Specialty
Solutions, Inc.
10.10 Amendment to Stock Purchase Agreement dated May 8, 1998
between Reinforced Plastic Systems Inc., CC&E/RPS, Inc., and
Specialty Solutions, Inc.
</TABLE>
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, made and entered into on the 8th day of April,
1998, by and between Reinforced Plastic Systems Inc., a Nova Scotia corporation
("Seller"), CC&E/RPS, Inc., a Delaware corporation ("Company"), and Specialty
Solutions, Inc., a Delaware corporation, (hereinafter referred to as
"Purchaser");
WITNESSETH
WHEREAS, Seller owns all of the issued and outstanding shares of
capital stock (the "Capital Stock") of the Company;
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, all of the shares of Capital Stock issued and outstanding
on the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, the parties agree as follows:
Definitions
(a) Intellectual Property. Shall be defined as any and all (i) patents
(including, without limitation, design patents, industrial designs and utility
models, utility patents and plant patents) and patent applications (including
docketed patent disclosures awaiting filing, reissues, results of
reexaminations, divisions, continuations and extensions), patent disclosures
awaiting filing determination, inventions and improvements thereto; (ii)
trademarks, service marks, trade names, trade dress, logos, business and product
names, slogans and registrations and applications for registration thereof;
(iii) copyrights and registrations thereof and rights and unpublished works to
the extent such rights are not subsumed by copyright; (iv) inventions,
processes, designs, formulae, trade secrets, know-how, software, industrial
models, confidential and technical information, manufacturing, engineering and
technical drawings, product specifications and confidential business
information; and (v) intellectual property rights (including rights as a
licensee, if any) similar to any of the foregoing; in each case, that are
specific to the business of the Company, and as limited by Section 1(f).
(b) Bookings Level. Shall be defined as the total US dollar value of
all purchase orders received by the Company or Purchaser (or its affiliates) for
field filament winding of large vessels from Closing Date to December 31, 1998.
Customer purchaser order amounts for any filament wound products to be
fabricated at any of the Purchaser's shop facilities are not included in the
Bookings Level calculation.
(b) Liens. Shall be defined as all mortgages, deeds of trust, liens,
security interests, pledges, conditional sales contracts, claims, rights of
first refusal, options, charges, liabilities, obligations, easements,
rights-of-way, limitations, reservations, restrictions and other encumbrances of
any kind.
(c) Net Working Capital. Shall be defined as assets commonly defined as
Current Assets (including but not limited to cash and cash equivalents,
certificates of deposit, accounts receivable, costs and estimated earnings in
excess of billings, inventory, prepaid expense and deferred income taxes) less
liabilities commonly construed as Current Liabilities (including but not limited
to accounts payable, accrued expense, warranty reserve, accrued income taxes,
billings in excess of costs and estimated earnings on uncompleted contracts, and
current deferred income taxes, but excluding intercompany or interest bearing
debt), consistent in all material respects with historical
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Company accounting practices and with GAAP, and to the extent not in accordance
with GAAP, then in accordance with the Company's historical practices
consistently applied.
1. Purchase and Sale of Shares
(a) Purchase and Sale of Shares. Subject to the terms and conditions
set forth herein, at the Closing, Seller will sell, assign and deliver or cause
to be sold, assigned and delivered to Purchaser, and Purchaser will buy and
accept all right, title and interest in and to, the Capital Stock, free and
clear of all preemptive rights, liens, claims and encumbrances (the
"Acquisition").
(b) Working Capital Adjustment. Within 30 days of Closing, the Company
will present to the Seller a balance sheet of CC&E/RPS, Inc.-Redmond prepared in
all material respects in accordance with GAAP and consistent with Company's
prior practices and financial assumptions ("Closing Balance Sheet"). The parties
agree that the Closing Balance Sheet shall be as of April 30, 1998. This Closing
Balance Sheet will be the basis for a purchase price adjustment, to consist of
the difference between Net Working Capital as of Closing and Net Working Capital
as shown on the Company balance sheet dated January 31, 1998 entitled "CC&E/RPS,
Inc. - Redmond". In the event the parties cannot agree upon the Closing Balance
Sheet, they will appoint an independent auditor whose decision shall be binding
on the parties. The parties shall equally share the cost of the auditor's
services. If Net Working Capital shown on the Closing Balance Sheet is greater
than that shown at January 31, 1998, then the Purchaser shall remit, within 15
days of presentation of the balance sheet, the difference to the Seller. If Net
Working Capital shown on the Closing Balance Sheet is less than that shown at
January 31, 1998, then the Seller shall remit, within 15 days of presentation of
the Closing Balance Sheet, the difference to Purchaser.
(c) Purchase Price and Payment. The purchase price for all the shares
of the Capital Stock shall be US$1,600,000 with an additional payment of
$400,000 upon the condition stated below. At the Closing, Purchaser will pay
$1,600,000 to Seller by wire transfer of immediately available Federal Reserve
funds to an account maintained by Seller to be designated in writing by Seller
at least five (5) business days prior to the Closing Date. On or before January
31, 1999, Purchaser shall pay to Seller an additional $400,000 if the Bookings
Level for field filament winding at Purchaser and Company exceed US $7,000,000
for the period between Closing Date and December 31, 1998. In the event the
Bookings Level does not meet the $7,000,000 target by December 31, 1998 but the
total US$ value of purchase orders received from Canadian customers for field
filament winding of large vessels exceeds $7 million in the period from Closing
to June 30, 1999, then an additional payment of $400,000 will be paid within 45
days of the achievement of this Canadian bookings level. In any event, only one
additional payment of $400,000 will be paid. In the event that bookings
necessary to the achievement of Bookings Level sufficient to trigger the
additional payment of $400,000 are later cancelled, Seller shall reimburse
Purchaser the full $400,000 amount.
(d) Liabilities Not Assumed by Purchaser. Except as otherwise provided
at Sections 5(e) and 6(a), Purchaser is not assuming liability for any costs,
expenses, judgments, fines, penalties, attorney's fees, or any other liability
(including incidental or consequential damages) arising from any, action, suit,
proceeding, or investigation, arising out of events relating to Company and
occurring before the Closing Date, exceeding an aggregate total of US $250,000,
and Seller agrees to release, indemnify and defend Purchaser and Company against
any such liability in excess of US $250,000.
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Notwithstanding, Seller agrees to indemnify, release and defend
Purchaser and Company against any costs, expenses, judgments, fines, penalties,
attorney's fees or other liability arising from the Company's business outside
of North America.
Purchaser is not assuming the Agreement between Company and Robert F.
Burns dated August 16, 1994. Seller shall indemnify and defend Purchaser against
any claims relating to the Burns' Agreement. If Robert Burns does not accept an
offer of employment with Purchaser as detailed at Section 1(e) below, Purchaser
will pay one-half of Mr. Burns' termination expense up to the value of the
remainder of his current agreement with Company.
(e) Robert F. Burns' Employment. Purchaser (or one of its subsidiaries)
shall offer an employment contract to Mr. Burns for the same base pay and
remaining term as he currently has with Company, including all standard
Purchaser (or subsidiary) benefits and bonus plan appropriate for the position
that is available to Mr. Burns. This offer is contingent upon Mr. Burns having
no other employment contract.
(f) Intellectual Property. Notwithstanding any other provision of this
Agreement, Purchaser shall not have any right whatsoever to use any Intellectual
Property right of Reinforced Plastic Systems, Inc. ("RPS"), including, without
limitation, any trademark, service mark, trade names, trade dress, logos,
business and product names, slogans, or registrations. Seller shall have a
non-exclusive, royalty free, paid up, perpetual license to market, sell, offer
for sale, distribution, installation, or use the Intellectual Property, except
as otherwise limited or restricted in Section 5(j).
(g) Excluded Assets. All Company assets located in Germany as of
January 31, 1998 shall be transferred from the Company prior to Closing.
2. The Closing.
(a) The closing of the Acquisition (herein called the "Closing") shall
take place on or before May 8, 1998 by mail, to be effective at 11:59 p.m.
Central Time on the date on which Seller receives the funds referred to in
Section 2.b.1(iii) below. The date of the Closing is referred to in this
Agreement as the "Closing Date".
(b) Closing Deliveries.
1. At the Closing, Purchaser will deliver to Seller:
(i) one copy of the resolutions adopted by the Board of
Directors of Purchaser authorizing the transactions
contemplated hereby, certified by the Secretary or
Assistant Secretary of Purchaser;
(ii) certificate to the effect of Section 8(a) executed by
appropriate authorized officers of Purchaser;
(iii) $ 1,600,000 by wire transfer to Seller's account; and
(iv) the opinion of counsel described at Section 8(g).
2. At the Closing, Seller and Company will deliver to Purchaser:
(i) one copy of the resolutions adopted by the Seller,
authorizing the transactions contemplated hereby,
certified by the Seller;
(ii) certificates to the effect of Sections 7(a) and 7(j)
hereof executed by Seller;
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(iii) the duly executed and sealed stock certificates
representing the Capital Stock registered in the name
of Purchaser; and
(iv) resignations of all officers and directors of the
Company serving in office immediately prior to the
Closing.
(v) The opinion of counsel required by Section 7(k).
3. At the Closing, Purchaser and Seller and Company will execute,
deliver and acknowledge, or cause to be executed, delivered and acknowledged, to
the other, such certificates and other documents related to the consummation of
the transactions contemplated hereby, as may be reasonably requested by the
other.
3. Representations and Warranties of the Seller. The Seller represents and
warrants to the Purchaser that:
(a) Organization and Existence. Company is a corporation duly organized
and validly existing and in good standing under the laws of the State of
Delaware and has full power and authority to carry on its business as now
conducted. Complete and correct copies of the Certificate of Incorporation and
Bylaws of the Company as in effect on the date hereof have been delivered to the
Purchaser. The Seller owns all of the Capital Stock of the Company. The Company
is qualified in Washington and such other U.S. states or Canadian provinces as
set forth in Schedule 3(a) hereto, which states or provinces represent every
jurisdiction where such qualification is required except where failure to be so
qualified would not have a material adverse affect on the business, properties
or assets of the Company.
(b) Authority Relative to This Agreement. The transactions contemplated
by this Agreement are subject to approval by the Board of Directors of Seller,
and upon such approval, no further corporate action is necessary on the part of
the Seller to make this Agreement valid and binding upon the Seller in
accordance with its terms. The execution, delivery and performance of this
Agreement by the Seller and Company will not result in a violation or breach of
any term or provision of, or constitute a default or accelerate the performance
required under the Articles and Bylaws of the Company, any indenture, mortgage,
deed of trust or other contract or agreement to which the Seller or Company is a
party or by which it or any of their properties are bound, or violate any order,
writ, injunction, decree of any court, administrative agency or governmental
body.
(c) Validity and Enforceability. This Agreement and all related
documents have been duly executed and delivered by Seller and Company and
constitute legal, valid and binding obligations of Seller and Company
enforceable in accordance with their terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, or the laws affecting the
enforcement of creditors' rights generally, and the application of general
principles of equity.
(d) Financial Statements. The Seller has delivered to Purchaser the
adjusted unaudited financial statements of the Company for the period ending
January 31, 1998, entitled "CC&E/RPS, Inc. - Redmond, attached hereto as
Schedule 3(d) (the "Financial Statements"). The Financial Statements fairly
represent the financial position of the Company as of the date thereof and the
results of operations and changes in financial position for the periods then
ended, provided that such statements are subject to year-end adjustments in
accordance with GAAP, none of which are material; provided however, the parties
acknowledge that the Financial Statements (including the Closing Balance Sheet)
do not include the assets, liabilities and activities set forth in Section
3(e)(i).
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(e) Absence of Certain Changes or Events. With respect to the Company,
except as contemplated hereby and as listed on Schedule 3(e) hereto, and other
than in the ordinary course of business, since January 31, 1998, neither the
Seller nor Company have:
(i) Sold, transferred, or otherwise disposed of, or agreed to
sell, transfer or otherwise dispose of any of the assets of the Company except
in the ordinary course of its business;
(ii) Entered or agreed to enter into any agreement or arrangement
granting any preferential rights to purchase any of the assets, or requiring the
consent of any party to the transfer and assignment of any of such assets,
property or rights;
(iii) Waived any rights of value with respect to the Company;
(iv) Made or permitted any amendment or termination of any
contract, agreement or license to which Company is a party or by which Company
is subject;
(v) To its knowledge, incurred or become subject to any material
claim or liability for any damages or alleged damages for any actual or alleged
negligence or other tort or breach of contract which might in any fashion
adversely affect the value of the Company;
(vi) Made any capital expenditure (or commitments therefor),
aggregating in excess of $25,000.00 and relating to the Company;
(vii) Entered into any other material transaction of which
Purchaser has not been formally notified in writing; or
(viii) Changed its management practices, operations or policies with
respect to (a) the standard terms and conditions of sale of products or
services; (b) the method of accounting for sale of products or services; (c) the
policy regarding maintenance of inventory levels; or (d) the conduct of accounts
receivable collection and accounts payable payment activities.
(f) Consents. The consummation of the Acquisition contemplated herein by
the Seller and Company shall not require the consent, approval or authorization
of any third party or the registration with any agency or governmental body.
(g) Organizational Instruments. Seller has made available to Purchaser
complete and accurate copies of the Certificate of Incorporation and Bylaws of
Company, as amended. Company is not in violation of any provision of its
Certificate of Incorporation or Bylaws. Except for this Agreement, there are no
agreements or commitments which obligate or require Seller or Company to amend
or authorize an amendment of the Certificate of Incorporation or Bylaws of the
Company. Seller has made available or caused to be made available to Purchaser
complete and accurate copies of the minute books and stock books of the Company.
Such minute books contain complete and accurate copies of all records of all
meetings and consents in lieu of meetings of the Board of Directors and Seller
of the Company.
(h) Capital Stock. The authorized, issued and outstanding Capital Stock
consists of 492 shares of common stock at $1.00 par value, fully paid and
non-assessable. There are no outstanding subscriptions, options, warrants,
rights, convertible or exchangeable securities, agreements or commitments which
obligate or require Seller or Company to issue, sell or transfer any shares of
Capital Stock.
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(i) Subsidiaries. Except as set forth on Schedule 3(i), Company does not
directly or indirectly own or have the power to vote shares of the Capital Stock
or other ownership interests of any corporation or entity such that it has
voting power to elect a majority or a specified number of the directors of such
entity. Company is neither a partner of any partnership nor a member of any
joint venture or other business entity.
(j) Title to Owned Properties. Company has good and valid title to all
of the material properties owned by it, free and clear of all liens, claims and
encumbrances other than:
(i) liens, claims and encumbrances reflected in the Financial
Statements;
(ii) liens for taxes, charges and assessments not yet due and
payable or which are being contested in good faith;
(iii) mechanics', suppliers', installment sales and similar liens
for services rendered or materials furnished, the charges
for which are not yet due and payable or which are being
contested in good faith by appropriate proceedings; and
(iv) easements and restrictions of record and zoning ordinances.
(k) Prepayments and Deposits. There are no prepayments or deposits which
have been received and are being held by the Company and the Company has made no
prepayment or deposit other than those prepayments and deposits set forth in
Schedule 3(k).
(l) Absence of Undisclosed Liabilities. Except as disclosed to the
Purchaser on Schedule 3(l), none of the assets are subject to any liabilities or
obligations (accrued, absolute, contingent or otherwise), or will be subject to
any such liability or obligation arising from the actions of the Seller or
Company on or before the Closing Date, whether or not such liability would
normally be shown or reflected on a balance sheet prepared in a manner
consistent with generally accepted accounting principles. Except as disclosed to
the Purchaser in a Schedule hereto, there are no facts in existence on the date
hereof which, to the knowledge of Seller or Company after due inquiry, might
reasonably serve as the basis for any liabilities or obligations of the Company
and which would adversely affect the value of the Company.
(m) Tax Matters. All federal, state, county, local, foreign and other
taxes, including, without limitation, income taxes, corporate franchise taxes,
payroll taxes, customs fees and duties, sales taxes and ad valorem taxes, due
and payable by the Company on or before the date of this Agreement have been
timely paid, and all tax returns and reports required to be filed by the Company
have been timely filed with all such taxing authorities. No assessments or
deficiencies have been made against the Company and no extensions of time are in
effect for the assessment of deficiencies. Except as set forth on Schedule 3(m),
there is no material dispute or claim concerning any tax liability of the
Company as to which the Seller has knowledge.
(n) Patents, Etc. The Seller has delivered to the Purchaser a true and
complete Schedule (Schedule 3(n)) setting forth all Intellectual Property
patents, inventions, trademarks, tradenames, brand names or copyrights owned or
used by or licensed to or by the Company (if any), and relating to the Company,
together with a summary description and full information in respect of the
filing, registration or issuance and the status thereof, except for rights to
intellectual property arising under common law. Except as disclosed in Schedule
3(n), the operations of the Company do not, to the knowledge of Seller or
Company after due inquiry, infringe upon the patent, trademark or other similar
rights of any other person or entity. Except as disclosed in Schedule 3(n), the
Company has asserted no claim that the operations of any other entity infringe
upon the Intellectual Property of the Company.
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(o) Insurance. Attached hereto as Schedule 3(o) is a Schedule setting
forth a list and brief description of all policies of insurance, held by the
Company or on its behalf. There is no material inaccuracy in any application for
any such policy which would form a basis for termination of any such policy.
(p) Licenses, Permits, Etc. Attached hereto as Schedule 3(p) is a list
and brief description of all licenses and permits held by the Company, copies of
which licenses and permits have been furnished to the Purchaser. Except as noted
on Schedule 3(p), such licenses and permits constitute all licenses and permits
necessary to own the assets or conduct the business of Company as currently
conducted, and each is in full force and effect. Except as set forth on Schedule
3(p), there is no violation that would adversely affect the value of the
Company, and no proceeding is pending or threatened seeking the revocation or
limitation of any such license or permit.
(q) Litigation. Except as set forth on Schedule 3(q) hereto, there are
no claims, actions, suits, proceedings or investigations pending or threatened
against or affecting the Company or any of its properties, at law or in equity
or before or by any court or federal, state, municipal or other governmental
department, commission, board, agency or instrumentality. Neither Seller nor
Company are subject to any court or administrative order, injunction or similar
decree, the enforcement of which would adversely affect the value of the
Company.
(r) Compliance with Laws. Except as disclosed on Schedule 3(r) hereto,
the operations of the Company, either historically or as now conducted, do not
violate any federal, state or local law, ordinance, rule or regulation,
(including, without limitation, any laws or regulations relating to the
environment or the handling, treatment or disposal of wastes or products of
Company) the violation of which would adversely affect the value of the Company.
(s) No Default. Company is not in default in any respect of any
obligation to be performed by the Company under any material contract, lease,
agreement, commitment or undertaking which default would adversely affect the
value of the Company , nor has Company waived any right under any such contract,
lease, agreement, commitment or undertaking.
(t) Product Liability and Warranty. Except as listed on Schedule 3(t),
neither Seller nor Company have knowledge after reasonable inquiry of any state
of facts or the occurrence of any event forming the basis of any present claim
against the Company for product liability or on account of any express or
implied warranty. Warranty work over the last three years has not been material
to the Company.
(u) Disclosure. The representations and warranties contained in the
Articles and the Schedules hereto, do not and shall not, when taken as a whole,
contain any untrue statement of a material fact or omit any material fact
necessary to make the statements contained therein or herein not misleading in
view of the circumstances under which they were made. To the extent that
Purchaser (or its officers or agents) has actual knowledge of any discrepancy,
statement or statement of facts, the applicable representation or warranty known
to be untrue or misleading shall be unenforceable to the extent of the knowledge
of such discrepancy, statement or state of facts. In all other respects, the
representations and warranties of Seller shall remain unaffected. Disclosures
made in any of the Schedules or exhibits to this Agreement are hereby deemed to
be made for purposes of all other schedules or exhibits.
(v) Contracts, Leases, Licenses. Schedule 3(v) lists all contracts,
agreements and commitments having values in excess of $20,000 to which Company
is a party. All are legal, valid and binding obligations of Company and are in
full force and effect.
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(w) Other Agreements. Schedule 3(w) lists all partnership, joint
venture, confidentiality, noncompete, collective bargaining, and guaranty
agreements to which Company is a party. There are no outstanding Powers of
Attorney executed on behalf of Company.
(x) Environmental. Except as disclosed at Schedule 3(x): (i) There are
no hazardous substances on or in the Company's leased real property, whether
contained in barrels, tanks, equipment (movable or fixed) or other containers;
deposited or located in land, waters, sumps or in any other part of the
Company's real property; incorporated into any structure on the Company's leased
real property; or otherwise existing thereon; (ii) The Company's leased real
property (and, to the best of Seller's knowledge, nearby property) has never
been used for industrial or commercial operation involving any hazardous
substance, including but not limited to any sort of manufacturing, processing or
refining; equipment, machinery, part or component, cleaning or degreasing; the
sale, storage or transport of hazardous substances; any aspect of the provision
of services which utilize hazardous substances; drilling, mining or production
of oil, gas, minerals or their naturally occurring products; or any agricultural
activities involving the use or storage of fertilizers or pesticides; (iii) No
spills, discharges, releases, deposits or emplacements of any hazardous
substances have ever occurred on or near the Company's leased property or on any
customer's real property where the Company is deemed to be responsible as a
result of its field operations; (iv) No asbestos-containing materials have been
installed in or affixed to the structures on Company's leased real property at
any time before or during Seller's tenancy thereof. No such materials have been
stored or disposed of anywhere on the Company's leased real property; (vi) No
electrical transformers, fluorescent light fixtures or other electrical
equipment containing PCBs are or have been installed in, affixed to or located
on the Company's leased real property at any time before or during Seller's
tenancy thereof; (vii) No storage tanks for gasoline or any other substance have
been located on the Company's leased real property, whether above ground,
underground or within a structure at any time before or during Seller's
ownership thereof.
(y) Real Property. Company owns no real property.
(z) Owned Personal Property. Except as provided in Schedule 3(z), all of
the material tangible personal property (including, without limitation,
furnishings, furniture, office equipment, vehicles, inventories, tools,
machinery, equipment, structures and movable fixtures) which is reflected in the
January 31, 1998 balance sheet included among the Financial Statements is owned
by Company and in reasonable working order and repair for use as presently used
by Company in connection with Company's business.
(aa) Human Resources.
(i) Schedule 3(aa) hereto sets forth a complete and accurate list of (a)
all of the collective bargaining agreements and agreements with labor unions or
associations representing employees to which Company is a party and (b) as of
the dates set forth in the Schedule, the total number of employees of Company
and the number of such employees represented by each such agreement. Such
numbers of employees have not changed since such dates except in the ordinary
course of business. Except as set forth on the Schedule, there are no organizing
efforts, strikes, slowdowns, picketing, work stoppages, labor troubles or other
similar events in which employees of Company are participating.
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(ii) Except as set forth on Schedule 3(aa) hereto, Company (a) is not a
party to any written consulting or employment contract; and (b) has neither made
any commitment to, nor entered into any written agreement obligating it to,
increase the wages or modify the material conditions or terms of employment of
its employees.
(iii) Schedule 3(aa) sets forth all of the employee benefit plans
maintained by Company, and all of the severance, termination and similar
programs either established by Company with respect to the transactions
contemplated hereby or otherwise applicable to Company's employees ("Benefit
Plans").
(iv) Other than as indicated on Schedule 3(aa):
(a) Seller neither maintains, sponsors nor
contributes to any program or arrangement covering employees
of Company that is an "employee pension benefit plan", an
"employee welfare benefit plan", or a "multiemployer plan" as
defined in Sections3(2), 3(1) and 3(37) of ERISA ("ERISA
Plans"), or any other incentive or benefit arrangement
("Non-ERISA Plans").
(b) The present value of the accrued benefits under
any and all ERISA Plans which are defined benefit plans, as
defined in Section 3(35) of ERISA, and which are maintained by
Seller for employees and former employees of Company ("Pension
Plan") did not, as of the last annual valuation date for such
Pension Plan, exceed the value of assets of such Pension Plan
allocable to such benefits;
(c) No ERISA Plan (or any trust created thereunder)
has engaged in a "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), which could
subject Purchaser or Company to any tax penalty on prohibited
transactions and which has not adequately been corrected;
(d) Each ERISA Plan is in compliance with all
material reporting, disclosure and other requirements of the
Code and ERISA as they relate to any such ERISA plan;
(e) Determination letters have been received from the
Internal Revenue Service with respect to each ERISA Plan which
is intended to comply with Code Section 401(a), stating that
such ERISA Plan is qualified thereunder.
(f) No Pension Plan subject to Title IV of ERISA has
been terminated nor has there been any "reportable event" as
such term is defined in Section 4043 of ERISA with respect to
any such Pension Plan;
(g) No Pension Plan has incurred any "accumulated
funding deficiency" as such term is defined in Section 302 of
ERISA and Section 412 of the Code and Seller has made all
contributions on a timely basis;
(h) No liability to the Pension Benefit Guaranty
Corporation ("PBGC"), other than for premiums, has been
incurred with respect to any Pension Plan;
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<PAGE> 10
(i) No proceeding or other action has been initiated
by the PBGC to terminate any Pension Plan, nor has written
notice been given to Seller of an intention to commence or
seek the commencement of any such proceeding or action;
(j) Seller and company have not, within the last six
years before the Closing Date, completely or partially
withdrawn from a "multiemployer plan" covering employees; and
(k) Copies of all documents embodying the ERISA Plans
have been delivered or made reasonably available to Purchaser.
(bb) Health and Safety Conditions. Schedule 3(bb) :
(i) lists all current material safety data sheets relating to
the products currently sold by Company and the chemical substances or
mixtures currently used by Company in the conduct of its business as
presently conducted by Company;
(ii) lists all written internal safety and health audits
conducted since January 1, 1993 by Company; and
(iii) lists all citations, notices of violations, orders and
consent orders issued and administrative or judicial enforcement
proceedings commenced by governmental or agencies, authorities and
instrumentalities (including OSHA, any state occupational safety and
health administration and EPA) with respect to safety and health
matters relating to Company since January 1, 1993.
(cc) Entire Business. Company owns, leases or has licenses or other
contractual rights to use all of the material tangible and intangible assets
used by it in the conduct of the business as presently conducted by it except
for (i) assets used to provide services or goods to Company pursuant to a
contract, agreement or commitment set forth in a Schedule hereto, and (ii)
pension or other funded employee benefit plan assets. The contracts, agreements
and commitments under which such contractual rights have been granted are listed
on Schedules hereto.
(dd) Brokers. The Seller is not a party to or in any way obligated under
any contract or other agreement and there are no outstanding claims against it
for the payment of any broker's or finder's fee in connection with the origin,
negotiation, execution or performance of this Agreement.
(ee) Leased Property. Schedule 3(ee) lists and describes all real property
leased or subleased to or by Company. Company has delivered to Purchaser copies
of all leases and subleases listed at Schedule 3(ee). Each lease is legal,
valid, binding, enforceable and in full force and effect, and will continue to
be following the consummation of the Acquisition. All facilities leased or
subleased have received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation thereof and have
been operated and maintained in accordance with all applicable laws, rules, and
regulations.
(ff) Transfer of Assets. Except as otherwise set forth in Schedule
3(e)(i), neither Seller nor Company have transferred any Company assets from the
US to Germany since January 31, 1998.
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Seller and Company shall exercise their best efforts to furnish and
finalize the Schedules, and all other documents necessary or incident to
performance of this Agreement as soon as possible, but in no event later than
ten (10) days prior to the Closing Date, unless otherwise provided herein.
4. Representations and Warranties of the Purchaser. Purchaser represents and
warrants to the Seller that:
(a) Organization and Existence. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power to enter into and perform this
Agreement.
(b) Authority Relative to This Agreement. The transactions contemplated
by this Agreement are subject to the approval of the Board of Directors of
Purchaser, and upon such approval, no further corporate action is necessary on
the part of the Purchaser to make this Agreement valid and binding upon the
Purchaser in accordance with its terms. The execution, delivery and performance
of this Agreement by the Purchaser will not result in a violation or breach of
any term or provision of, or constitute a default or accelerate the performance
required under its Articles of Incorporation or By-Laws, any indenture,
mortgage, deed of trust or other contract or agreement to which the Purchaser is
a party or by which it or any of its properties is bound, or violate any order,
writ, injunction or decree of any court, administrative agency or governmental
body.
(c) Validity and Enforceability. This Agreement and all related documents
have been duly executed and delivered by Purchaser and constitute legal, valid
and binding obligations of Purchaser enforceable in accordance with their terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, or other laws affecting the enforcement of creditors' rights
generally, and the application of general principles of equity.
(d) Brokers. The Purchaser is not a party to or in any way obligated
under any contract or other agreement and there are no outstanding claims
against it for the payment of any broker's or finder's fee in connection with
the origin, negotiation, execution or performance of this Agreement.
(e) Consents. The consummation of the transactions contemplated herein by
the Purchaser shall not require the consent, approval or authorization of any
third party or the registration with any agency or governmental body.
(f) Compliance with Laws. Except as disclosed in a Schedule hereto,
Purchaser's operations, either historically or as now conducted, do not violate
any federal, state or local law, ordinance, rule or regulation, the violation of
which would adversely affect its ability to perform under this Agreement.
(g) No Default. Purchaser is not in default in any respect of any
obligation to be performed by the Purchaser under any contract, lease,
agreement, commitment or undertaking which default would adversely affect its
ability to perform under this Agreement.
(h) Investment Representation. Purchaser represents that : (i) the
Capital Stock is being acquired for investment and without any present view
toward distribution thereof to any other persons; (ii) Purchaser will not sell
or otherwise dispose of the Capital Stock, except in compliance with the
registration requirements or exemption provisions under the Securities Act of
1933, as amended, the rules and regulations thereunder, and as otherwise adopted
by the Securities and Exchange Commission; (iii) Purchaser has knowledge and
experience in financial matters and that it is capable of evaluating the risks
and merits of an investment in common stock; (iv) Purchaser has
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<PAGE> 12
consulted with counsel, to the extent deemed necessary, as to all matters
covered by this Agreement, and has not relied on Seller or Company for any
explanation of the various federal or state securities laws with regard to the
acquisition of the Capital Stock; (v) Purchaser has investigated and is familiar
with the affairs, financial condition and prospects of Company, and has been
given sufficient access to and has acquired sufficient information about Company
to reach an informed, knowledgeable decision to acquire the Capital Stock; and
(vi) Purchaser is able to bear the economic risks of such an investment.
(i) Disclosure. The representations and warranties contained in the
Articles and the Schedules hereto, do not and shall not, when taken as a whole,
contain any untrue statement of a material fact or omit any material fact
necessary to make the statements contained therein or herein not misleading in
view of the circumstances under which they were made. To the extent that Seller
(or their officers or agents) has actual knowledge of any discrepancy, statement
or statement of facts, the applicable representation or warranty known to be
untrue or misleading shall be unenforceable to the extent of the knowledge of
such discrepancy, statement or state of facts. In all other respects, the
representations and warranties of Purchaser shall remain unaffected. Disclosures
made in any of the Schedules or exhibits to this Agreement are hereby deemed to
be made for purposes of all other schedules or exhibits.
5. Covenants of Seller. The Seller and Company covenant with the Purchaser
that:
(a) Conduct of Business. From the date of this Agreement to the Closing
Date, the business of the Company will be operated only in the ordinary course,
and in particular, without the prior written consent of the Purchaser, the
Seller will not and will not allow Company to:
(i) Cancel or permit any insurance to lapse or terminate,
unless renewed or replaced by like coverage;
(ii) Change the Company's Articles of Incorporation or Bylaws
or the composition of Company;
(iii) Be in default under any material contract, agreement,
commitment or undertaking of any kind or under any local, state or federal
permits;
(iv) Knowingly violate or fail to comply with all laws
applicable to it or its properties or business;
(v) Commit any act or permit the occurrence of any event or
the existence of any condition of the type described in Section 3(e) hereof; or
(vi) Merge, consolidate or agree to merge or consolidate with
or into any other corporation.
(vii) Enter into any new, or amend any existing, Benefit Plans
or any other agreement, program, or arrangement in connection therewith
(including any trust agreement, insurance contract or credit facility) or grant
any increases in compensation.
(viii) Make or revoke any elections with respect to Taxes
other than in the ordinary course of business or as provided in this Agreement.
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(b) Access. From and after the date of this Agreement, Company and Seller
will provide to Purchaser and its respective counsel, accountants, engineers and
other representatives, full and free access to the records of the Company during
normal business hours upon prior reasonable notice. Expenses of providing such
access shall be paid by the party requesting such access.
(c) Preservation of Business Organization. The Seller and Company will
use their best efforts to preserve the business organization of the Company and
to preserve for the Purchaser the Company's good relations with all customers
and others having business relations with the Company.
(d) Trade Secrets. From and after the Closing Date, Seller will not use
or divulge to any competitor or unauthorized person any confidential
information, and it will use all reasonable and proper efforts to insure that
its agents do not use or divulge any confidential information, trade secrets,
processes, formulae or know-how relating to the Company.
(e) Product Warranty and Other Liability. In accordance with Section
6(a), Purchaser shall be responsible for all warranty obligations on product or
services provided by the Company prior to the Closing Date up to an aggregate
total of the warranty reserve shown on the Closing Balance Sheet plus $25,000.
Seller shall reimburse Purchaser for all warranty work costs incurred by
Purchaser in excess of this amount, in accordance with Section 6(a).
All other liability not constituting warranty work of the Company arising
due to events occurring before Closing, shall be dealt with in accordance with
Section 1(d).
Seller agrees to cooperate with Purchaser and Company in resolving
warranty claims and other liabilities assumed by Purchaser under Section 1(d).
(f) Brokers. Seller shall pay all broker's fees or finder's fees (if
employed by Seller) in connection with the origin, negotiation, execution or
performance of this Agreement. Such fees will not be paid out of Company assets.
(g) Confidentiality of Information Furnished by Purchaser. Seller and its
representatives will treat all information related to these transactions as
confidential. Seller agrees not to use any of this information except in
connection with this Agreement. Seller will use its best efforts to keep such
information confidential. If the transactions contemplated by this Agreement are
not consummated, Seller will return to the Purchaser all information relating to
Purchaser (and all copies thereof) then in its possession.
(h) Notification of Untrue Reps and Warranties. Seller will promptly give
written notice to Purchaser upon becoming aware of the occurrence or failure to
occur, or the impending or threatened occurrence or failure to occur, of any
event that would cause or constitute, or would be likely to cause or constitute,
any of the Seller's or Company's representations or warranties being or becoming
untrue.
(i) Payment of Debts. Not later than Closing Date, Seller will pay,
assume or cause the release of liabilities for monies borrowed by Company from
third parties or the Seller. Purchaser will assume all liabilities in the
ordinary course of business, including without limitation, all accounts payable
incurred in the ordinary course of business in North America.
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(j) Non-Competition. SELLER AGREES THAT DURING A TWO-YEAR PERIOD
COMMENCING ON THE CLOSING DATE, THEY WILL NOT DIRECTLY OR INDIRECTLY, FOR THEIR
OWN ACCOUNT OR FOR THE ACCOUNT OF OTHERS, WHETHER AS PRINCIPAL OR AGENT OR
THROUGH THE AGENCY OF ANY CORPORATION, PARTNERSHIP, ASSOCIATION OR OTHER
BUSINESS ENTITY, PROVIDE ANY FIELD FILAMENT WINDING PRODUCTS OR SERVICES IN
NORTH AMERICA . THE FOREGOING AGREEMENT NOT TO COMPETE SHALL NOT BE HELD INVALID
OR UNENFORCEABLE BECAUSE OF THE SCOPE OF THE TERRITORY OR THE ACTIONS RESTRICTED
THEREBY, OR THE PERIOD OF TIME WITHIN WHICH SUCH AGREEMENT IS OPERATIVE; BUT ANY
JUDGMENT OF A COURT OF COMPETENT JURISDICTION MAY DEFINE THE MAXIMUM TERRITORY
AND ACTIONS SUBJECT TO AND RESTRICTED BY THIS PARAGRAPH AND THE PERIOD OF TIME
DURING WHICH SUCH AGREEMENT IS ENFORCEABLE.
(k) Exclusivity. The Sellers and Company will not solicit, initiate or
encourage the submission of any proposal or offer from any other entity relating
to the acquisition of capital stock or a substantial portion of the assets of
the Company, from the date of this Agreement to the Closing Date, unless this
Agreement is terminated sooner as provided in Section 12(b).
(l) Closing. Seller and Company shall exercise their best efforts to
furnish and finalize the Schedules and all other documents necessary or incident
to performance of this Agreement as soon as possible after the execution of this
Agreement, but in no event later than ten (10) days prior to the Closing Date,
unless otherwise provided herein.
6. Covenants of the Purchaser. The Purchaser covenants with the Seller that:
(a) Product Warranty and Other Liability. (i) Purchaser shall
assume warranty obligations for products or services provided by the Company
after the Closing Date; (ii) Pursuant to and limited by the terms of Section
5(e), Purchaser agrees to perform, in accordance with applicable warranties, all
warranty services to repair or replace defective parts or products sold or
manufactured by the Company or defective services performed by the Company prior
to the Closing Date. Warranty services performed by Company or Purchaser on
behalf of Seller will be charged to Seller as a total of all reasonable direct
costs, including materials, subcontracts, travel, subsistence and other
reasonable and customary charges for such work, as well as labor charges to be
billed at an hourly rate to include the employee direct costs plus current
standard overhead charges, exclusive of any allocation for profit. Seller shall
have the right to approve any such work prior to performance by Company or
Purchaser. However, such approval shall not be unreasonably withheld or delayed.
All other liability not constituting warranty work of the Company arising
due to events occurring before Closing, shall be dealt with in accordance with
Section 1(d).
Purchaser agrees to cooperate with Seller in resolving warranty claims
and other liabilities not assumed by Purchaser under Section 1(d).
(b) Notification of Untrue Reps and Warranties. Purchaser will promptly
give written notice to Seller upon becoming aware of the occurrence or failure
to occur, or the impending or threatened occurrence or failure to occur, of any
event that would cause or constitute, or would be likely to cause or constitute,
any of the Purchaser's representations or warranties being or becoming untrue.
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(c) Company Name Change. Within 30 days of Closing, Purchaser shall
change the name of the Company to one which has no reference to "RPS",
"Reinforced Plastic Systems Inc." or "RPS, Inc.".
(d) Leases. Purchaser shall release and discharge Seller from any lease
or sublease, or any guarantee, letter of comfort or other commitment regarding
such leases and subleases set forth on Schedule 3(ee), to the extent permitted
by the Lessor of any such lease or sublease. Purchaser and Seller shall use
their best efforts to obtain such releases and, in the event unsuccessful,
Purchaser shall indemnify Seller from and against any liability occurring under
any such lease or sublease, or any guarantee, letter of comfort or other
commitment after Closing.
(e) Closing. Purchaser shall exercise its best efforts to furnish and
finalize all documents necessary or incident to performance of this Agreement as
soon as possible after the execution of this Agreement, but in no event later
than ten (10) days prior to the Closing Date, unless otherwise provided herein.
(f) Confidentiality of Information Furnished by Seller. Purchaser and its
representatives will treat all information related to these transactions as
confidential. Purchaser agrees not to use any of this information except in
connection with this Agreement. Purchaser will use its best efforts to keep such
information confidential. If the transactions contemplated by this Agreement are
not consummated, Purchaser will return to the Seller all information relating to
Seller (and all copies thereof) then in its possession.
(g) Employees. Purchaser shall comply with the WARN Act, and indemnify
Seller from any alleged or actual violations by Purchaser of same.
7. Conditions to Obligations of the Purchaser. The obligations of the
Purchaser under this Agreement shall be subject to the satisfaction of the
following conditions:
(a) Representations and Warranties of Seller and Company True at Closing.
(i) The Purchaser shall not have discovered any material error, misstatement or
omission in the representations and warranties made by the Seller or Company in
Article 3 hereof; (ii) the representations and warranties made by the Seller and
Company shall be deemed to have been made again at and as of the time of Closing
and shall then be true in all material respects, except to the extent that such
representations and warranties shall have been made as of a specified date;
(iii) Seller shall provide Purchaser with a Certificate from Seller's President
dated as of Closing that the above conditions have been fulfilled.
(b) Seller shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by it at
or prior to Closing.
(c) Seller shall provide Purchaser with all certificates and other
documents, in form and substance reasonably satisfactory to Purchaser, required
to be delivered to Purchaser at or before the Closing pursuant to this
Agreement, duly executed by all necessary persons.
(d) Company will be relieved of liabilities related to monies borrowed
from third parties or the Seller as set forth in Article 5(i) hereof.
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(e) Approval of Counsel. All actions, proceedings, instruments and
documents reasonably required to carry out the transactions contemplated by this
Agreement or incidental thereto, the completed Schedules and all other related
matters shall have been approved by counsel for the Purchaser, which approval
shall not be unreasonably withheld or delayed, and such counsel shall have been
furnished with such certified copies of actions and proceedings and other such
instruments and documents as such counsel shall have reasonably requested.
(f) Changes in Business. Prior to the Closing, there shall have been no
changes in the business, properties or operations of the Company since the date
of this Agreement which would have a material adverse effect on the value of the
Company.
(g) Absence of Restraint. No order to restrain, enjoin or otherwise
prevent the consummation of this Agreement or transactions in connection
herewith shall have been entered and, on the Closing Date, there shall not be
any pending or threatened litigation in any court, or any proceeding by or
before any governmental commission, board or agency, seeking to restrain or
prohibit consummation of the transactions contemplated hereby or in which
divestiture, rescission or significant damages are sought in connection with the
transactions contemplated hereby, and no investigation by any governmental
agency shall be pending or threatened which might result in any such litigation
or other proceeding.
(h) Approval. The Seller shall have approved the transactions
contemplated by this Agreement and such approval shall not have been rescinded.
(i) Governmental Consents. Any and all necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated by this Agreement shall have been obtained or
accomplished, and no action, proceeding, inquiry or investigation by any private
or governmental agency shall have been brought or threatened which questions the
validity or legality of the transactions contemplated by this Agreement.
(j) Charter; Good Standing; Incumbency. There shall have been delivered
to Purchaser (i) a certificate dated within ten (10) days of Closing Date from
the Secretary of State of Delaware with respect to the incorporation and good
standing of, and the payment of franchise taxes by Company, (ii), copies of
Articles, Bylaws and all amendments and the resolutions of the Board of
Directors of Company approving these transactions, and (iii) a certificate dated
Closing Date with respect to the incumbency and signatures of all officers of
Company signing this Agreement and any certificate, agreement or instrument
delivered on behalf of Seller in connection with this Agreement.
(k) Opinion of Counsel. The Purchaser shall have received an opinion of
counsel for Seller, dated the Closing Date, to the effect that:
(i) The Company is a corporation duly organized and
validly existing and in good standing under the laws
of the State of Delaware and has all requisite power
and authority to carry on its business as now
conducted;
(ii) This Agreement has been duly authorized by all
necessary action on the part of the Seller and
Company and has been duly executed and delivered by
Seller and Company and constitutes a valid and
binding obligation of Seller and Company enforceable
in accordance with its terms;
(iii) The consummation of the transactions contemplated by
this Agreement will not result in a breach of or
constitute a default under the Certificate of
Incorporation or Bylaws of the Company; and
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<PAGE> 17
(iv) Such counsel does not know of any litigation or other
proceeding or governmental investigation pending or
threatened against the Company or affecting the
Company or the transactions contemplated by this
Agreement which, if adversely determined would have a
materially adverse effect on the value of the
Company.
Such opinion may contain such exceptions, qualifications and
explanations as shall be reasonably acceptable to Purchaser
and its counsel.
8. Conditions to Obligations of the Seller. The obligations of the Seller
under this Agreement shall be subject to the satisfaction of the following
conditions:
(a) Representations and Warranties of Purchaser True at Closing. (i) The
Seller has not discovered any material error, misstatement or omission in the
representations and warranties made by Purchaser in Section 4 hereof; (ii) the
representations and warranties made by the Purchaser shall be deemed to have
been made again at and as of the time of Closing and shall then be true in all
material respects, except to the extent that such representations and warranties
shall have been made as of a specified date; (iii) Purchaser shall provide
Seller with a Certificate from Purchaser's President dated as of Closing that
the above conditions have been fulfilled; and (iv) Purchaser shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it at or prior to Closing;
(b) Approval of Counsel. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
or incidental thereto and all other related legal matters shall have been
approved by counsel for the Seller, which approval shall not be unreasonably
withheld or delayed.
(c) Absence of Restraint. No order to restrain, enjoin or otherwise
prevent the consummation of this Agreement or transactions in connection
herewith shall have been entered and, on the Closing Date, there shall not be
any pending or threatened litigation in any court, or any proceeding by or
before any governmental commission, board or agency, with a view to seeking to
restrain or prohibit consummation of the transactions contemplated hereby or in
which divestiture, rescission or significant damages are sought in connection
with the transactions contemplated hereby, and no investigations by any
governmental agency shall be pending or threatened with might result in any such
litigation or other proceeding.
(d) Government Consents. Any and all necessary consents of and filings
with any governmental authority or agency relating to the consummation of the
transactions contemplated by this Agreement shall have been obtained or
accomplished, and no action, proceeding, inquiry or investigation by any private
or governmental agency shall have been brought or threatened which questions the
validity or legality of the transactions contemplated by this Agreement.
(e) Seller will have received all certificates and other documents, in
form and substance reasonably satisfactory to Seller, required to be delivered
to Seller at or before Closing pursuant to this Agreement, duly executed by all
necessary persons.
(f) Seller will have received payment of the Purchase Price in accordance
with this Agreement.
(g) Opinion of Counsel. Seller shall have received an opinion of counsel
from Purchaser, dated the Closing Date, to the effect that:
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<PAGE> 18
(i) Purchaser is a corporation duly organized and validly
existing and in good standing under the laws of the
State of Delaware and has all requisite power and
authority to carry on its business as now conducted;
(ii) The Agreement has been duly authorized by all
necessary action on the part of Purchaser and has
been executed and delivered by Purchaser and
constitutes a valid and binding obligation of
Purchaser enforceable in accordance with its terms;
and
(iii) The consummation of these transactions will not
result in a breach of or constitute a default under
the Certificate of Incorporation or Bylaws of
Purchaser.
9. Tax Matters
9.1.1 Records Retained By Seller. Seller will deliver to Company within
sixty days after the Closing Date, all books, records and files which pertain
(i) to the business conducted by Company; (ii) to the Company; or (iii) to any
of the properties owned, leased or used by Company, to the extent such books and
records relate solely to the Company and do not contain any information
pertaining to Seller ("Business Records"). Business Records which contain
information relating to Seller may be retained by Seller and copies of such
Business Records will be delivered to Company.
9.1.2 Audit Cooperation. Seller will assist Purchaser and Company in
obtaining prior year audits, if necessary, to comply with SEC rules and
regulations, including but not limited to timely access to key personnel and the
appropriate documentation of management representations.
9.2 Tax Representation
a) All Tax Returns of the Company filed after the date hereof and on
or prior to Closing shall, in each case, be prepared and filed in a manner
consistent with the Tax Returns most recently filed in the relevant jurisdiction
prior to the date hereof. All such Tax Returns (other than sales, payroll,
property and similar tax returns) shall be subject to the prior review of
Purchaser and shall be submitted by Seller to Purchaser for review at least
twenty days prior to the filing date. Seller shall cause Company to take into
account all reasonable comments of Purchaser. Notwithstanding, Purchaser shall
file the tax return for the period beginning October 1, 1997 through Closing
Date, subject to prior review by Seller if requested, to be submitted to Seller
for review at least twenty days prior to the filing date. In no event shall
Purchaser amend any returns for periods prior to Closing without Seller's prior
consent. Purchaser shall be entitled to any NOL carryforward of the Company as
well as any other tax credits that apply to the Company.
9.3 Cooperation. After Closing, Seller and Purchaser shall cooperate,
and shall cause their respective subsidiaries to cooperate, with each other in
connection with the filing of any Tax Return which is required to be filed by
Seller, Company or their respective subsidiaries and which covers a period that
ends prior to or on the Closing Date, and all such information shall be treated
as confidential by the parties. Seller and Purchaser shall also cooperate fully
in connection with any audit, litigation or other proceeding with respect to
taxes, however, the primary responsibility and total cost of defending such
actions arising out of periods ending before or up to the Closing shall be
Seller's.
9.4 Tax Sharing Agreements. Any and all tax sharing agreements between
or among Company and Seller shall be terminated as of the Closing and, from and
after the Closing, neither Company nor Seller or its subsidiaries shall have any
further rights or liabilities thereunder.
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9.5 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration, excise and other taxes and fees incurred in connection with this
Agreement shall be paid by Seller when due, and Seller will, at its own expense,
file all necessary returns and other documentation with respect to all such
taxes.
9.6 Records. Purchaser shall maintain for seven (7) years from the
Closing Date, all tax records relating to the Company for the period prior to
Closing.
10. Nature and Survival of Representations and Warranties.
(a) Nature of Statements. All statements contained in any Schedule
hereto or in any certificate delivered by or on behalf of the Seller or the
Purchaser pursuant to this Agreement shall be deemed representations and
warranties by the Seller or the Purchaser, as the case may be.
(b) Survival of Representations and Warranties. Except with respect to
matters addressed at Article 11(b), all covenants, agreements, representations
and warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing and remain effective
for a period of three years from the Closing Date; provided, however, that any
bona fide claim shall continue in effect until such time as such claim has been
resolved or settled and the covenants in Sections 11(a) and (c) shall survive in
accordance with their term.
11. Indemnification.
(a) General Indemnity by Seller. Subject to the conditions hereinafter
set forth, for a 2 year period, the Seller shall indemnify and hold harmless the
Purchaser and Company against any loss, damage or expense (including reasonable
attorneys' fees) incurred by the Purchaser and Company and caused by or arising
out of (i) any claim made against the Purchaser or Company by a third party in
respect of any liabilities or obligations of the Company not assumed by the
Purchaser or Company pursuant to provisions of this Agreement; (ii) any breach
or default in the performance by Seller of any covenant or agreement of Seller
contained in this Agreement; (iii) any breach of a warranty or representation
made by Seller pursuant to this Agreement, or in any certificate required to be
delivered pursuant to this Agreement, or any material misstatement or omission
in any Schedule attached or to be delivered pursuant to this Agreement; and (iv)
all costs and liabilities associated with the cleanup of any contaminated soil
or materials spilled, disposed of or buried by Company or located on the
property operated by Company or on any customer property where Company is deemed
to be responsible as a result of its field operations, prior to Closing Date.
(b) Tax Indemnity by Seller. Upon the terms and subject to the
conditions set forth in this Section 11(b), Seller shall indemnify and hold
harmless the Purchaser and Company against and will reimburse Purchaser or
Company for:
(i) any and all tax deficiencies in respect of federal, state,
and local and foreign sales, use, income or franchise tax or taxes
based on or measured by income, including any interest or penalties
thereon, and legal fees and expenses incurred by Company or Purchaser
with respect to September 30, 1997 and all prior taxable years; and
(ii) any and all such taxes, penalties, interest and legal
fees and expenses in respect of the period from September 30, 1997, up
to and including the Closing Date.
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<PAGE> 20
This indemnity for taxes, penalty and interest and legal fees and
expenses shall be independent of and in addition to any other indemnity
provision of this Agreement and shall survive until the expiration of the
applicable statute of limitations for assessment for the taxes referred to
herein. The above tax indemnity provisions shall apply regardless of any
investigation at any time made by or on behalf of Purchaser or any information
Purchaser may have in respect thereof.
(c) Procedure for Making Claims. If and when the Purchaser or Company
desires to claim indemnification by the Seller pursuant to the provisions of
this Section, the Purchaser shall deliver to the Seller within 30 days of its
receipt of a claim, a certificate signed by the President or any Vice President
of the Purchaser (the "Notice of Claim") (i) stating that the Purchaser or
Company has paid or properly accrued or anticipated that it may be required to
accrue losses, damages or expenses to which the Purchaser is entitled to
indemnification pursuant to this Section, and (ii) specifying the individual
items of loss, damage or expense included in the amount so stated, the date each
such item was paid or properly accrued, if any, and the nature of the
misrepresentation, breach of warranty or claim to which such item is related. If
Seller objects to such claim or needs more information, it may deliver written
notice of objection (the "Notice of Objection") to the Purchaser within thirty
(30) days after the Purchaser's delivery of the Notice of Claim to Seller. The
Notice of Objection shall set forth the grounds upon which the objection is
based. If no Notice of Objection shall have been so delivered within such thirty
(30) day period, the Seller shall be deemed to have acknowledged the correctness
of the claim or claims specified in the Notice of Claim for the full amount
thereof, and shall thereupon pay to the Purchaser, on demand, in cash, an amount
equal to the amount of such claim or claims.
If any third party shall assert any claim or bring any action against
the Purchaser or Company which, if successful, might result in a right of
indemnification hereunder, the Seller shall be given written notice thereof in
accordance with the provisions of this Section 11(c). Thereafter, the Seller
shall have the right to defend such claim or action at its own expense, and
through counsel of its own choice (which counsel shall be reasonably
satisfactory to Purchaser). If Seller fails or refuses to provide a defense to
any third party claim, the Purchaser shall have the right to undertake the
defense, compromise or settlement of such claims, through counsel of its own
choice, on behalf of and for the account and at the risk of Seller and Seller
shall be obligated to pay the costs, expenses, and attorneys' fees incurred by
Purchaser in connection with such third party claim. Purchaser agrees that it
will not compromise or settle any claim without the consent of Seller, which
consent shall not be unreasonably withheld. In any event, Purchaser, Company and
Seller shall fully cooperate with each other and their respective counsel in
connection with any such litigation, defense, settlement, or other attempted
resolution.
The above provisions shall be reciprocal with respect to claims for
indemnification made by Seller against Purchaser.
(d) Seller's Indemnification Limits. Seller shall have no obligation to
indemnify Purchaser with respect to any claim described in Section 11(a) or (b)
if (i) Purchaser fails to give the notice of claim for general claims described
in Section 11(a) within three years; or (ii) Purchaser fails to give the notice
of claim for tax related claims described in Section 11(b) within the applicable
statute of limitations for assessment for the taxes described Section 11(b).
(e) General Indemnification by Purchaser. For a two (2) year period,
the Purchaser agrees to indemnify and hold the Seller harmless against and in
respect of any damage, claim, liability, deficiency, loss, cost or expense
(including reasonable attorney's fees) caused by or arising out of (a) any
claims made against Seller by a third party in respect of any liabilities or
obligations of Company assumed by Purchaser under the provisions of this
Agreement, (b) any misrepresentation
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<PAGE> 21
or omission by the Purchaser contained in this Agreement (or any collateral
documents), in any schedules attached hereto or thereto or in a certificate to
be delivered at the Closing, (c) the breach of or default under any warranty or
representation, or the nonfulfillment of or default under any agreement or
covenant, of the Purchaser contained in this Agreement (or collateral
documents), schedules or certificates hereto, (d) the failure, after the Closing
Date, of Purchaser or Company to pay or otherwise discharge when due any
contractual or other obligation relating to the Company, or (e) Taxes for which
Purchaser or Company is responsible.
(f) Any indemnity obligation of either party under this Article 11
shall extend to and include the indemnified party, its parents, subsidiaries and
affiliates, and all of their respective shareholders, directors, officers,
agents, employees, successors and assigns.
12. Termination.
(a) Best Efforts to Satisfy Conditions. The Seller agrees to use all
reasonable and proper efforts to bring about the satisfaction of the conditions
specified in Article 7 hereof and the Purchaser agrees to use its best efforts
to bring about the satisfaction of the conditions specified in Article 8 hereof.
(b) Termination. This Agreement may be terminated by:
(i) The mutual consent of the Seller and the Purchaser;
(ii) The Purchaser if a material default shall be made by the
Seller in the observance of or in the due and timely performance by the Seller
or Company of any of the covenants of the Seller or Company herein contained, or
if there has been a material breach by Seller of any of the warranties and
representations of the Seller herein contained, or if the conditions of this
Agreement to be complied with or performed by the Seller at or before the
Closing shall not have been complied with or performed at the time required for
such compliance or performance and such noncompliance or nonperformance shall
not have been waived by the Purchaser; or
(iii) The Seller if a material default shall be made by the
Purchaser in the observance of or in the due and timely performance by the
Purchaser of any of the covenants of the Purchaser herein contained, or if there
shall have been a material breach by the Purchaser of any of the warranties and
representations of the Purchaser herein contained, or if the conditions of this
Agreement to be complied with or performed by the Purchaser at or before the
Closing shall not have been complied with or performed at the time required for
such compliance or performance and such noncompliance or nonperformance shall
not have been waived by the Seller.
(iv) Purchaser or Seller if Closing shall not occur on or
before May 31, 1998.
In the event of termination of this Agreement as provided above,
written notice thereof shall be given to the party within five (5) business
days. No termination pursuant to paragraphs (ii) and (iii) hereunder shall
relieve any party hereto from any liability in respect of such party's breach or
indemnification obligations hereunder.
13. Schedules. If any Schedule recited to be attached hereto is not so attached
at the time of the execution hereof, the same may be prepared after execution of
this Agreement and, upon approval by notation of said Schedule by Seller and a
representative of the Purchaser, shall become a part of this Agreement.
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<PAGE> 22
14. Miscellaneous.
(a) Expenses. Whether or not the transactions contemplated hereby shall
be consummated, each of the parties will pay all costs and expenses (including
Closing costs) of its performance of and compliance with this Agreement.
(b) Notices. All notices, requests and other communications hereunder
shall be in writing and shall be deemed to have been given if personally
delivered or mailed, first class, registered or certified mail, postage prepaid:
If to Seller: Reinforced Plastic Systems Inc.
2695 Dutch Village Road
Suite 502
Halifax, Nova Scotia, Canada B3L 4T9
Attn: President
With a copy to: Michael L. Smit
Pruessag North America
55 Railroad Ave.
Greenwich, CT 06830
If to Purchaser: Specialty Solutions, Inc.
1360 Post Oak Blvd. Suite 2250
Houston, TX 77056
Attention: President
With a copy to: Cathy L. Smith, Esq.
Or at such other address as shall be given in writing by any person identified
above to each of the other such persons.
(c) Assignment. This Agreement may not be assigned by any party hereto
without the prior written consent of the other parties.
(d) Successors Bound. Subject to the provisions of Paragraph 15(c),
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
(e) Section and Paragraph Headings. The section and paragraph headings
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
(f) Amendment. This Agreement may be amended only by an instrument in
writing executed by the parties hereto.
(g) Entire Agreement. This Agreement, the Schedules hereto, and the
documents specifically referred to herein constitute the final and entire
agreement, understanding, representations and warranties of the parties hereto.
This Agreement supercedes any and all prior negotiations, discussions,
understandings or agreements, whether written or oral, and Purchaser is not
relying on any statements or representations by Seller or Company in entering
into the
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<PAGE> 23
transactions contemplated by this Agreement other than those expressly set forth
in this Agreement or any Schedules or attachments hereto.
(h) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which shall constitute one of
the same instrument.
(i) Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Washington.
(j) Publicity. No party will or will permit its affiliates or
subsidiaries to issue any publicity, release or announcement concerning the
execution and delivery of this Agreement, the provisions hereof or the
transaction contemplated hereby without the prior written approval of the form,
mode and content of such publicity, release or announcement by the other party.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the date first above written.
AGREED TO BY SELLER:
REINFORCED PLASTIC SYSTEMS INC.
/s/ MANFRED SCHAPER
---------------------------------
By: Manfred Schaper
Title: President
AGREED TO BY COMPANY:
CC&E
/s/ R.A. MCCULLOCH
---------------------------------
By: R.A. McCulloch
Title: Secretary
AGREED TO BY PURCHASER:
SPECIALTY SOLUTIONS, INC.
/s/ LEE ORR
---------------------------------
By: Lee Orr
Title: President
27
<PAGE> 1
AMENDMENT TO STOCK PURCHASE AGREEMENT
This Amendment to Stock Purchase Agreement ("the Amendment") is between
Reinforced Plastic Systems Inc. ("Seller"), CC&E/RPS, Inc. ("Company"), and
Specialty Solutions, Inc. ("Purchaser"), effective as of May 8, 1998.
WHEREAS, the Seller, Company and Purchaser entered into that certain Stock
Purchase Agreement dated April 8, 1998 ("the Agreement");
WHEREAS, since that date the parties have agreed to amend certain provisions of
the Agreement as set forth herein;
NOW, THEREFORE, the parties agree as follows:
1. The second paragraph of Section 1(d) of the Agreement shall be amended to
add to the end of the sentence a new clause: ", including the following
jobs: Amsdorf, Absorbers Schwedt, Ductwork Schwedt, Megalopolis (original
and local contracts -- 2), Mumsdorf, and Deuben)."
2. Section 3(h) shall be amended to replace "492" with "1000".
3. Section 1(d) shall be amended to add the following new paragraph:
"Purchaser shall not be assuming the Asset Purchase Agreement dated April
29, 1998 between Seller and Company or any liability thereunder, except as
any terms relate to the obligations and responsibilities of Company to
deliver, assign and transfer the German assets. Seller will release and
hold harmless Company and Purchaser from any and all liability under the
Asset Purchase Agreement, except with respect to the obligations and
responsibilities of the Company to deliver, assign and transfer the German
assets.
4. Section 9.1.2 shall be amended to add the following new sentence: "If
Purchaser receives notice of any audit or proceedings related to tax
matters arising prior to the Closing, Purchaser shall promptly notify
Seller of same and provide opportunity for Seller to attend and participate
in such proceedings."
5. Section 11 (b) shall be amended to add the following sentence immediately
following the first sentence in the last paragraph: "This indemnity shall
be net of any tax benefit relating to the expense or tax which gave rise to
the indemnification obligation."
The Agreement, except as amended above, shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been duly executed by the parties as of
the date first above written.
Specialty Solutions, Inc. Reinforced Plastic Systems, Inc.
/s/ LEE ORR /s/ MANFRED SCHAPER
- ---------------------------- ----------------------------
By: Lee Orr By: Manfred Schaper
CC&E/RPS, Inc.
/s/ R.A. MCCULLOCH
----------------------------
By: R.A. McCulloch
28
