<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
Metal Management, Inc.
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(Name of Issuer)
Common Stock, Par Value $.01 per share
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(Title of Class of Securities)
591097100
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(CUSP Number)
Harold Rubenstein and Beverly Rubenstein, 2390 East Camelback, Suite 216,
Phoenix, AZ 85016, Telephone (602) 468-2700
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(Name, Address and Telephone Number
of Person Authorized to Receive Notices and Communications)
April 11, 1996 and July 31, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. / /
Check the following box if a fee is being paid with the statement /X/ *(A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
of 1934 ("Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
*A fee was paid with the original filing on April 23, 1996, which was
erroneously made in the name of the Rubenstein Family Limited Partnership. No
fee is being paid with this corrective filing in the name of Harold Rubenstein
and Beverly Rubenstein.
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SCHEDULE 13D
<TABLE>
<S> <C>
CUSP No. 591097100 Page 2 of 9 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Harold Rubenstein
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)/ /
(b)/x/
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
PF AND OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
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</TABLE>
<TABLE>
<S> <C>
7 SOLE VOTING POWER
42,500(1)
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NUMBER OF 8 SHARED VOTING POWER
SHARES 2,573,050(2)
BENEFICIALLY -------------------------------------------------------
OWNED BY 9 SOLE DISPOSITIVE POWER
EACH 42,500(1)
REPORTING -------------------------------------------------------
PERSON 10 SHARED DISPOSITIVE POWER
WITH 2,573,050(2)
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</TABLE>
<TABLE>
<S> <C>
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,615,550(3)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.60%
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14 TYPE OF REPORTING PERSON*
IN
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</TABLE>
(1) Includes an option, held of record by Harold Rubenstein, to purchase 10,000
shares of Company Common Stock, exercisable within 60 days, and 32,500
shares directly owned by Harold Rubenstein, which he purchased on July 31,
1996, from Blue Bird Partners. See Items 3 and 5 below.
(2) Includes 2,010,150 shares beneficially owned by Harold Rubenstein and
Beverly Rubenstein, the Reporting Persons, through Empire Metals, Inc., and
warrants to purchase 562,900 shares, beneficially owned by Harold Rubenstein
and Beverly Rubenstein, the Reporting Persons, through Empire Metals, Inc.,
and exercisable within 60 days. See Items 3 and 5 below.
(3) Includes the shares and warrants in Note 2, an option, held of record by
Harold Rubenstein, to purchase 10,000 shares, exercisable within 60 days,
and 32,500 shares directly owned by Harold Rubenstein, which he purchased on
July 31, 1996, from Blue Bird Partners. See Items 3 and 5 below.
2
<PAGE> 3
SCHEDULE 13D
- ---------------------------- -----------------------------
CUSP No. 591097100 Page 3 of 9 Pages
- ---------------------------- -----------------------------
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Beverly Rubenstein
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /x/
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
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NUMBER OF 7 SOLE VOTING POWER
SHARES ---------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 2,573,050(1)
EACH ---------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON ---------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
2,573,050(1)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,573,050(1)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.18%
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14 TYPE OF REPORTING PERSON*
IN
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(1) Includes 2,010,150 shares beneficially owned by Harold Rubenstein and
Beverly Rubenstein, the Reporting Persons, through Empire Metals, Inc.,
and warrants to purchase 562,900 shares, beneficially owned by Harold
Rubenstein and Beverly Rubenstein, the Reporting Persons, through Empire
Metals, Inc., and exercisable within 60 days. See Items 3 and 5 below.
3
<PAGE> 4
Item 1. Security and Issuer
This statement relates to shares of Common Stock, $.01 par value per
share (the "Shares"), of Metal Management, Inc., a Delaware corporation (the
"Company"). The principal executive offices of the Company are located at 500
North Dearborn, Suite 405, Chicago, IL 60610.
Item 2. Identity and Background
This Schedule 13D is filed on behalf of two Reporting Persons, Harold
Rubenstein and Beverly Rubenstein. The name, residence or business address and
principal occupation or employment of each of the Reporting Persons are as
follows:
Harold Rubenstein
2390 East Camelback, Suite 216
Phoenix, AZ 85016
Principal business: consultant/investor.
Beverly Rubenstein
2390 East Camelback, Suite 216
Phoenix, AZ 85016
Principal business: homemaker.
During the past five years, neither of the Reporting Persons (i) has
been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors), or has (ii) been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction or as a result of
such proceeding been or become subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws. The Reporting Persons are United States citizens.
Item 3. Source and Amount of Funds or Other Consideration
The Reporting Persons are majority shareholders of Empire Metals, Inc.,
which holds Common Stock and warrants to purchase Common Stock of the Company.
Beverly Rubenstein does not hold of record any shares or warrants or options to
purchase shares of the Company. Her only interest in the shares of the Company
is by virtue of her holdings, together with her husband, Harold Rubenstein, in
Empire Metals, Inc., and by virtue of Arizona community property law.
The consideration exchanged by Harold Rubenstein and Beverly Rubenstein
for their shares and warrants held through Empire Metals, Inc. was Empire's
stock in EMCO Recycling Corp ("EMCO"). The Company acquired EMCO in a reverse
triangular merger in which GPAR Merger, Inc., a wholly owned subsidiary of the
Company, merged with and into EMCO (the "Merger"), with EMCO remaining as the
surviving corporation. In the Merger, the outstanding shares of EMCO were
converted into the right to receive an aggregate of 3,500,000 shares of Common
Stock of the Company, warrants to purchase an aggregate of an additional
1,000,000 shares of Common Stock of the Company, and $1,150,000 in cash. The
Reporting Persons previously held, through Empire, an aggregate of 5,643 shares
of EMCO common stock. As a result of the Merger, the Reporting Persons
received 2,010,150 shares of Company Common Stock, warrants to purchase 562,900
shares, and $440,000 in cash. The
4
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Merger is further described on pages 26 through 40 of the Definitive Joint
Proxy Statement of the Company and EMCO, dated March 8, 1996, incorporated by
reference herein and filed as Exhibit B hereto.
In connection with the Merger, Harold Rubenstein was named a director
of the Company and received an option to purchase 10,000 shares of Company
Common Stock, fully vested, with a ten-year term, at an exercise price of $4.78
per share. The consideration for the option was his prospective services as a
director of the Company.
Harold Rubenstein also holds of record 32,500 shares purchased from
Blue Bird Partners on July 31, 1996. A Schedule 13D dated July 26, 1995, was
filed with the Securities and Exchange Commission (the "Commission") by Gerard
M. Jacobs, Louis D. Paolino, Jr. and T. Benjamin Jennings, reporting the
beneficial ownership of an aggregate of 1,150,000 Shares by Messrs. Jacobs,
Jennings and Paolino, as a group within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934. Of those aggregate shares, 250,000 were
beneficially held by Mr. Paolino through Blue Bird Partners, a general
partnership of which the two general partners are charitable remainder unit
trusts of which Mr. Paolino is the trustee. On January 4, 1996, Blue Bird
Partners entered into an agreement (the "Share Transfer Agreement") to sell the
250,000 shares held by it (the "Paolino Shares") to several investors,
including Messrs. Jacobs, Chief Executive Officer and President of the Company,
Jennings, Chairman of the Board of Directors and Chief Development Officer of
the Company, and certain shareholders or officers of EMCO, including Mr.
Rubenstein. This sale was completed on July 31, 1996. Pursuant to the Share
Transfer Agreement, Mr. Rubenstein purchased with his personal funds 32,500
shares at a purchase price of $3.20 per share, which was paid in cash. Pursuant
to an Escrow Agreement effective January 4, 1996, the Paolino Shares and the
consideration paid by the purchasers were held in escrow from the date of the
Share Transfer Agreement until the closing of the transaction. Mr. Rubenstein
is not acting together with any of the other purchasers of the Paolino Shares
for purposes of acquiring, holding or voting shares. The Share Transfer
Agreement and Escrow Agreement are filed as exhibits to this Schedule 13D under
Item 7 hereof.
Item 4. Purpose of the Transaction
The purpose of the Merger and related transactions by which the
Reporting Persons acquired their jointly held securities of the Company, and a
statement with respect to any related plans or proposals required to be
disclosed under this Item, are set forth under the captions, "The Merger and
Related Transactions -- General," "-- Background of the Merger," "-- Reasons
for the Transaction," "-- Related Agreements," "-- Interests of Certain Persons
in the Merger," and "-- Related Transactions," contained in pages 26-40 of the
Joint Proxy Statement of the Company, dated March 8, 1996, incorporated by
reference as Exhibit B hereto.
Mr. Rubenstein's purchase of shares from Blue Bird Partners was for
investment purposes.
Except as so disclosed, no person named in Item 2 has any present plans
or proposals that relate to or would result in any of the actions described in
Item 4 of Schedule 13D.
5
<PAGE> 6
Item 5. Interest in Securities of the Issuer
The number of shares, and the percentage thereof of the total
number of shares outstanding as of August 7, 1996, beneficially owned by the
Reporting Persons are as follows:
<TABLE>
<CAPTION>
Name Number of Shares Percentage
- ------------------ ---------------- ----------
<S> <C> <C>
Harold Rubenstein 2,615,550(1) 27.60%
Beverly Rubenstein 2,573,050(2) 27.18%
</TABLE>
(1) Includes 2,010,150 shares beneficially held by Harold Rubenstein and
Beverly Rubenstein through Empire Metals, Inc. (shared voting and
dispositive power), 562,900 shares issuable upon exercise of warrants
within 60 days of the date of this Schedule 13D, beneficially held by
such persons through Empire Metals, Inc. (shared voting and dispositive
power), 10,000 shares issuable upon exercise of a stock option within 60
days of the date of this Schedule 13D held of record by Harold
Rubenstein (sole voting and dispositive power), and 32,500 shares held
of record by Harold Rubenstein (sole voting and dispositive power). The
warrants were issued pursuant to the General Parametrics/EMCO Merger
described in Exhibit B hereto, are fully vested and exercisable, and
have a five-year term. Of the shares subject to the warrants, 337,740
are at an exercise price of $4.48 per share, and 225,160, at an exercise
price of $6.48 per share. The option was granted under the Issuer's 1996
Director Option Plan, is fully vested and exercisable, and has a
ten-year term and an exercise price of $4.78 per share.
(2) Includes 2,010,150 shares beneficially held by Harold Rubenstein and
Beverly Rubenstein through Empire Metals, Inc. (share voting and
dispositive power), and 562,900 shares issuable upon exercise of
warrants within 60 days of the date of this Schedule 13D, beneficially
held by such persons through Empire Metals, Inc. (shared voting and
dispositive power). The warrants were issued pursuant to the General
Parametrics/EMCO Merger described in Exhibit B hereto, are fully vested
and exercisable, and have a five-year term. Of the shares subject to the
warrants, 337,740 are at an exercise price of $4.48 per share, and
225,160, at an exercise price of $6.48 per share.
Except as disclosed above, neither Harold Rubenstein nor Beverly
Rubenstein has engaged in any transaction in the shares of the Company during
the past sixty days.
Item 6. Contracts, Arrangements or Understandings with Respect to
Securities of the Issuer
See the disclosure contained under the captions entitled "The Merger
and Related Transactions--Related Agreements," "--Indemnification and Hold-Back
of GPC Shares," "--Interests of Certain Persons in the Merger," and "--Related
Transactions," contained in pages 33-40 of Exhibit B, which is incorporated
herein by reference. Except for such disclosures, the Share Transfer Agreement
and the transactions contemplated thereby, there are no contracts,
arrangements, understandings or relationships (legal or otherwise) among the
persons named in Item 2 and between such persons and any person with respect to
any securities of the Company, including, but not limited to, transfer or
voting of any of the securities of the Company, finder's fees, joint ventures,
loan or option arrangements, puts or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies, or a pledge or
contingency the occurrence of which would give another person voting power or
investment power over the securities of the Company.
6
<PAGE> 7
Item 7. Material To Be Filed As Exhibits
(a) Merger Agreement dated as of December 1, 1995, and as amended
through March 7, 1996, between the Company, GPAR Merger, Inc., EMCO Recycling
Corp. and the direct and indirect beneficial owners of EMCO's Common Stock,
incorporated by reference from Appendix A to Joint Proxy Statement of the
Company and EMCO, dated March 8, 1996, filed with the Commission.
(b) Pages 26 through 40 of Joint Proxy Statement of the Company and
EMCO Recycling Corp., dated March 8, 1996, filed with the Commission.
(c) Agreement of Harold Rubenstein and Beverly Rubenstein that this
Schedule 13D is filed on behalf of each of them.
(d) Stock Purchase Agreement among Blue Bird Partners, Louis D.
Paolino, Jr., Gerard M. Jacobs and T. Benjamin Jennings dated January 4, 1996,
incorporated by reference from Exhibit C of Schedule 13D/A filed as of
September 5, 1996, by Gerard M. Jacobs and T. Benjamin Jennings, SEC File
No. 005-37978.
(e) Escrow Agreement dated as of January 4, 1996 by and between
Blue Bird Partners, T. Benjamin Jennings, Gerard M. Jacobs, Robert M. Kramer &
Associates P.C. and Wilson, Sonsini, Goodrich & Rosati, incorporated by
reference from Exhibit E of Schedule 13D/A filed as of September 5, 1996, by
Gerard M. Jacobs and T. Benjamin Jennings, SEC File No. 005-37978.
7
<PAGE> 8
SIGNATURES
After reasonable inquiry and to the best knowledge and belief of each
of the undersigned individuals, each of the undersigned individuals certifies
that the information set forth in this Statement is true, complete and correct.
November 12, 1996 /s/ Harold Rubenstein
----------------------------------------
Harold Rubenstein
/s/ Beverly Rubenstein
----------------------------------------
Beverly Rubenstein
8
<PAGE> 9
EXHIBIT INDEX
Exhibit
(a) Merger Agreement dated as of December 1, 1995, and as amended
through March 7, 1996, between the Company, GPAR Merger, Inc., EMCO Recycling
Corp. and the direct and indirect beneficial owners of EMCO's Common Stock,
incorporated by reference from Appendix A to Joint Proxy Statement of the
Company and EMCO, dated March 8, 1996, filed with the Commission.
(b) Pages 26 through 40 of Joint Proxy Statement of the Company and
EMCO Recycling Corp., dated March 8, 1996, filed with the Commission.
(c) Agreement of Harold Rubenstein and Beverly Rubenstein that this
Schedule 13D is filed on behalf of each of them.
(d) Stock Purchase Agreement among Blue Bird Partners, Louis D.
Paolino, Jr., Gerard M. Jacobs and T. Benjamin Jennings dated January 4, 1996,
incorporated by reference from Exhibit C of Schedule 13D/A filed as of
September 5, 1996, by Gerard M. Jacobs and T. Benjamin Jennings, SEC File
No. 005-37978.
(e) Escrow Agreement dated as of January 4, 1996 by and between Blue
Bird Partners, T. Benjamin Jennings, Gerard M. Jacobs, Robert M. Kramer &
Associates P.C. and Wilson, Sonsini, Goodrich & Rosati, incorporated by
reference from Exhibit E of Schedule 13D/A filed as of September 5, 1996, by
Gerard M. Jacobs and T. Benjamin Jennings, SEC File No. 005-37978.
<PAGE> 10
EXHIBIT A
MERGER AGREEMENT
This Merger Agreement (this "Agreement") is entered into effective as of
December 1, 1995 and as amended through March 7, 1996, by and among General
Parametrics Corp., a Delaware corporation ("GPAR"); GPAR Merger, Inc., an
Arizona corporation and wholly-owned subsidiary of GPAR (the "GPAR Merger Sub",
and together with GPAR, the "GPAR Companies"); Copperstate Metals, Inc., an
Arizona corporation ("Copperstate"); Empire Metals, Inc., an Arizona corporation
("Empire"); EMCO Recycling Corp., an Arizona corporation ("EMCO"); Harold
Rubenstein; Gerald Zack; David Zack; Raymond Zack; Donald Moorehead; and George
Moorehead. Empire, Copperstate, Donald Moorehead and George Moorehead constitute
all of the shareholders of EMCO (together, the "EMCO Shareholders"). Gerald
Zack, David Zack, and Rick Zack constitute all of the shareholders of
Copperstate (the "Copperstate Shareholders"). Certain other capitalized terms
used herein are defined in Article XI or elsewhere throughout this Agreement.
RECITALS
The Boards of Directors of the GPAR Companies and EMCO have determined that
it is in the best interests of their respective shareholders for GPAR Merger Sub
to merge into EMCO upon the terms and subject to the conditions set forth in
this Agreement. In order to effectuate the transaction, GPAR will have organized
GPAR Merger Sub as a wholly-owned subsidiary, and the parties have agreed,
subject to the terms and conditions set forth in this Agreement, to merge GPAR
Merger Sub into EMCO with EMCO as the surviving corporation, so that each of the
EMCO Shareholders will receive certain cash and will be issued certain shares of
common stock and warrants of GPAR in exchange for their shares of common stock
of EMCO.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGERS
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined below), and pursuant to the terms and conditions
set forth in the Plan of Merger and Reorganization which will be annexed hereto
as Exhibit A (the "Plan of Merger"), GPAR Merger Sub will be merged into EMCO.
The terms and conditions of the Plan of Merger are incorporated herein by
reference as if fully set forth herein. As a result of the Merger, the separate
corporate existence of GPAR Merger Sub shall cease and EMCO shall continue as a
surviving corporation and wholly-owned subsidiary of GPAR.
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the consummation of the Merger (the "Closing") shall take place as promptly as
practicable (and in any event within five (5) business days) after satisfaction
or waiver of the conditions set forth in Articles VI and VII, at the offices of
EMCO's counsel in Phoenix, Arizona, or such other place as the parties may
otherwise agree.
1.3 Plan of Merger. At the Closing, GPAR shall deliver to the EMCO
shareholders (a) an aggregate of Three Million Five Hundred Thousand (3,500,000)
shares of common stock, $0.01 par value per share, of GPAR ("GPAR Common Stock")
(except for the Held Back Shares pursuant to the provisions of Paragraph 8.4);
(b) warrants of GPAR which entitle the holders to purchase Six Hundred Thousand
(600,000) shares of GPAR at $4.00 per share, the form of which is attached
hereto as Exhibit "B" (the $4.00 Warrants); (c) warrants of GPAR which entitle
the holders to purchase Four Hundred Thousand (400,000) shares of GPAR at $6.00
per share, the form of which is attached hereto as Exhibit "C" (the $6.00
Warrants); and (d) One Million One Hundred Fifty Thousand and No/100 Dollars
($1,150,000.00) in cash or immediately available funds, all in exchange for all
issued and outstanding shares of capital stock of EMCO.
A-1
<PAGE> 11
1.4 Filing of Articles of Merger. At the time of the Closing, the parties
shall cause the Merger to be consummated by filing duly executed Articles of
Merger (with the Plans of Merger respectively annexed thereto) with the
Corporation Commission of the State of Arizona, in such form as GPAR determines
is required by and is in accordance with the relevant provisions of the Arizona
Revised Statutes (the "Act") (the date and time of such filing is referred to
herein as the "Effective Date" or "Effective Time").
1.5 Stock of GPAR Merger Sub. Each share of the capital stock of GPAR
Merger Sub outstanding immediately prior to the Effective Time shall at the
Effective Time be converted into and become one share of common stock of EMCO.
Each share of such common stock shall be fully paid and nonassessable.
1.6 Stock of EMCO. The shares of the common stock of EMCO issued and
outstanding immediately prior to the Effective Time (the "Converted EMCO Stock")
shall upon the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, be exchanged for and converted into shares of
GPAR Common Stock, determined to the nearest whole share, pursuant to the Plan
of Merger.
1.7 Delivery of Certificates. At the Closing, the EMCO Shareholders shall
deliver the certificates representing all of the issued and outstanding shares
of Converted EMCO Stock to GPAR for cancellation, and GPAR shall deliver the
certificates representing the shares of GPAR Common Stock and the Warrants
issued pursuant to Section 1.3.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE GPAR COMPANIES
As a material inducement to each of the EMCO Shareholders to enter into
this Agreement and to consummate the transactions contemplated hereby, GPAR
makes the following representations and warranties to the EMCO Shareholders.
2.1 Corporate Status. GPAR is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. At the
time of Closing, the GPAR Merger Sub will be a corporation duly organized,
validly existing and in good standing under the laws of the State of Arizona.
The GPAR Merger Sub will be a wholly-owned subsidiary of GPAR.
2.2 Corporate Power and Authority. Each of the GPAR Companies has, or will
have at the time of Closing, the corporate power and authority to execute and
deliver this Agreement, to perform its respective obligations hereunder and to
consummate the transactions contemplated hereby. Each of the GPAR Companies has,
or will have at the time of Closing, taken all action necessary to authorize its
execution and delivery of this Agreement, the performance of its respective
obligations hereunder and the consummation of the transactions contemplated
hereby.
2.3 Enforceability. This Agreement has been, or will have been at the time
of Closing, duly executed and delivered by each of the GPAR Companies and
constitutes a legal, valid and binding obligation of each of the GPAR Companies,
enforceable against each of the GPAR Companies in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
2.4 GPAR Common Stock. Upon consummation of the Merger and the issuance
and delivery of certificates representing the GPAR Shares and Warrants to the
EMCO Shareholders, (1) the GPAR Shares will be validly issued, fully paid and
non-assessable shares of GPAR Common Stock, (2) the total number of issued and
outstanding shares of GPAR stock will be 8,800,000, of which the EMCO
Shareholders will own 3,500,000, (3) the total number of outstanding warrants to
buy GPAR Stock will be not more than 1,010,000, of which the EMCO Shareholders
will own 1,000,000, (4) the total number of outstanding options to buy GPAR
stock under the 1995 Option Plan and the terminated 1986 Option Plan will be not
more than 460,000 and 180,000, respectively, of which Gerard M. Jacobs and T.
Benjamin Jennings will each own 200,000; provided, however, (i) GPAR has agreed
to grant to George Moorehead options to purchase 150,000 shares of
A-2
<PAGE> 12
GPAR stock subject to the Closing, shareholder approval of an amendment to the
1995 Stock Option Plan increasing the number of shares authorized to be issued
under such plan, and the execution of an employment agreement with George
Moorehead; (ii) GPAR has approved the issuance of options to buy 100,000 shares
of GPAR stock, subject to Board approval, for several current employees of GPAR
(other than Messrs. Jacobs and Jennings); and (iii) GPAR may grant additional
stock options through the date of the Closing, subject to the express written
consent of Harold Rubenstein and George Moorehead; and (5) to the best of its
knowledge, the shares and warrants will have been issued in compliance with all
applicable state and federal securities laws. Except for the stock option plans
and warrants noted above and 20,000,000 authorized preferred shares, of which
none are issued and outstanding, there are no other rights, options, warrants,
convertible securities, subscription rights, conversion rights, exchange rights
or other agreements or commitments of any kind that could require GPAR to issue
or sell any shares of its capital stock.
2.5 No Commissions. None of the GPAR Companies has incurred any obligation
for any finder's or broker's or agent's fees or commissions or similar
compensation in connection with the transactions contemplated hereby.
2.6 SEC Filings and Financial Information. To the best of its knowledge,
GPAR has made all filings required to be made by it with the Securities and
Exchange Commission. To the best of its knowledge, none of such filings contains
any untrue statement of material fact or omits to state a material fact
necessary to make the statements therein not misleading in light of the
circumstances in which they were made. To the best of its knowledge, the
Financial Statements of GPAR set forth therein present fairly in all material
respects the financial position of GPAR, including the results of operation and
cash flow for the periods indicated in conformity with GAAP. GPAR has written
down or reserved inventory, certain other assets, and lease costs of
approximately $2,153,000 to be reflected on its October 31, 1995 financial
statements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
As a material inducement to each of the GPAR Companies to enter into this
Agreement and to consummate the transactions contemplated hereby, each of the
EMCO Shareholders, jointly and severally, makes the following representations
and warranties to the GPAR Companies:
3.1 Corporate Status. EMCO is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona and has the
requisite power and authority to own or lease its properties and to carry on its
business as now being conducted. EMCO is legally qualified to transact business
as a foreign corporation in all jurisdictions where the nature of its properties
and the conduct of its business requires such qualification (all of which
jurisdictions are listed on Schedule 3.1) and is in good standing in each of the
jurisdictions in which it is so qualified. There is no pending or, to the best
of their knowledge, threatened proceeding for the dissolution, liquidation,
insolvency or rehabilitation of EMCO.
3.2 Power and Authority. EMCO and the EMCO Shareholders each have the
power and authority to execute and deliver this Agreement, to perform its
respective obligations hereunder and to consummate the transactions contemplated
hereby. EMCO, Copperstate and Empire have taken all action necessary to
authorize the execution and delivery of this Agreement, the performance of their
respective obligations hereunder and the consummation of the transactions
contemplated hereby.
3.3 Enforceability. This Agreement has been duly executed and delivered by
EMCO and the EMCO Shareholders and constitutes the legal, valid and binding
obligation of each of them, enforceable against them in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
3.4 Capitalization. Schedule 3.4 sets forth, with respect to EMCO, (a) the
number of authorized shares of each class of its capital stock, (b) the number
of issued and outstanding shares of each class of its
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capital stock, and (c) the number of shares of each class of its capital stock
which are held in treasury. All of the issued and outstanding shares of capital
stock of EMCO (a) have been duly authorized and validly issued and are fully
paid and non-assessable, (b) to the best of their knowledge, were issued in
compliance with all applicable state and federal securities laws, and (c) were
not issued in violation of any preemptive rights or rights of first refusal. No
preemptive rights or rights of first refusal exist with respect to the shares of
capital stock of EMCO, and no such rights arise by virtue of or in connection
with the transactions contemplated hereby. There are no outstanding or
authorized rights, options, warrants, convertible securities, subscription
rights, conversion rights, exchange rights or other agreements or commitments of
any kind that could require EMCO to issue or sell any shares of its capital
stock (or securities convertible into or exchangeable for shares of its capital
stock). There are no outstanding stock appreciation, phantom stock, profit
participation or other similar rights with respect to EMCO. There are no
proxies, voting rights or other agreements or understandings with respect to the
voting or transfer of the capital stock of EMCO. EMCO is not obligated to redeem
or otherwise acquire any of its outstanding shares of capital stock.
3.5 Shareholders of the Company. Schedule 3.5 sets forth, with respect to
EMCO, (a) the name, address and federal taxpayer identification number of, and
the number of outstanding shares of each class of its capital stock owned by,
each shareholder of record as of the close of business on the date of this
Agreement; and (b) the name, address and federal taxpayer identification number
of, and number of shares of each class of its capital stock beneficially owned
by, each beneficial owner of outstanding shares of capital stock (to the extent
that record and beneficial ownership of any such shares are different). The EMCO
Shareholders constitute all of the holders of all issued and outstanding shares
of capital stock of EMCO, and each of the EMCO Shareholders owns such shares as
is set forth on Schedule 3.5, free and clear of all Liens, restrictions and
claims of any kind, except as set forth on Schedule 3.5.
3.6 No Violation. Except as set forth on Schedule 3.6, the execution and
delivery of this Agreement by EMCO and the EMCO Shareholders, the performance by
them of their respective obligations hereunder and the consummation by them of
the transactions contemplated by this Agreement will not (i) contravene any
provision of the articles of incorporation or bylaws of EMCO, Empire or
Copperstate, (ii) violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment or order of any Governmental
Authority or of any arbitration award which is either applicable to, binding
upon or enforceable against EMCO or any of the EMCO Shareholders; (iii) conflict
with, result in any breach of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both, constitute a default)
under, or give rise to a right to terminate, amend, modify, abandon or
accelerate, any Contract which is applicable to, binding upon or enforceable
against EMCO or any of the EMCO Shareholders, (iv) result in or require the
creation or imposition of any Lien upon or with respect to any of the property
or assets of EMCO, or (v) require the consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, any court or
tribunal or any other Person, except any SEC and other filings required to be
made by the GPAR Companies.
3.7 Records of the Company. The copies of the respective articles of
incorporation and bylaws of EMCO which were provided to GPAR are true, accurate
and complete and reflect all amendments made through the date of this Agreement.
The minute books for EMCO provided to GPAR for review were correct and complete
as of the date of such review, no further entries have been made through the
date of this Agreement, such minute books contain the true signatures of the
persons purporting to have signed them, and such minute books contain an
accurate record of all corporate actions of the shareholders and directors (and
any committees thereof) of EMCO taken by written consent or at a meeting since
incorporation. All material corporate actions taken by EMCO have been duly
authorized or ratified. All accounts, books, ledgers and official and other
records of EMCO have been fully, properly and accurately kept and completed in
all material respects, and there are no material inaccuracies or discrepancies
of any kind contained therein. The stock ledgers of EMCO, as previously provided
to GPAR, contain accurate and complete records of all issuances, transfers and
cancellations of shares of the capital stock of the EMCO.
3.8 Subsidiaries. Except for RECYCLE PRESCOTT, INC., EMCO TRADING, INC.
and USA SOUTHWESTERN CARRIER, INC., which are wholly-owned subsidiaries of EMCO,
and as otherwise set
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forth on Schedule 3.8, EMCO does not own, directly or indirectly, any
outstanding voting securities of or other interests in, or control, any other
corporation, partnership, joint venture or other business entity.
3.9 Financial Statements. The EMCO Shareholders have delivered to GPAR (i)
the combined financial statements as of March 31, 1995 and 1994 of EMCO,
including the notes thereto, audited by Arthur Andersen & Co. and (ii) the
October 31, 1995 unaudited financial statements (collectively, the "Financial
Statements"), a copy of which is attached to Schedule 3.9 hereto. The combined
balance sheet dated as of October 31, 1995 included in the Financial Statements
is referred to herein as the "Current Balance Sheet". The Financial Statements
fairly present the combined and consolidated financial position of EMCO at each
of the balance sheet dates and the results of operations for the periods covered
thereby, and have been prepared in accordance with GAAP consistently applied
throughout the periods indicated. The books and records of EMCO fully and fairly
reflect its transactions, properties, assets and liabilities. There are no
material special or non-recurring items of income or expense during the periods
covered by the Financial Statements, and the balance sheets included in the
Financial Statements do not reflect any writeup or revaluation increasing the
book value of any assets, except as specifically disclosed in the notes thereto.
The Financial Statements reflect all adjustments necessary for a fair
presentation of the financial information contained therein.
3.10 Changes Since the Current Balance Sheet Date. Except as disclosed in
Schedule 3.10, since the date of the Current Balance Sheet, EMCO has not (i)
issued any capital stock or other securities; (ii) made any distribution of or
with respect to its capital stock or other securities or purchased or redeemed
any of its securities; (iii) paid any bonus to or increased the rate of
compensation of any of its officers or salaried employees or amended any other
terms of employment of such persons; (iv) sold, leased or transferred any of its
properties or assets other than in the ordinary course of business consistent
with past practice; (v) made or obligated itself to make capital expenditures
out of the ordinary course of business consistent with past practice; (vi) made
any payment in respect of its liabilities other than in the ordinary course of
business consistent with past practice; (vii) incurred any obligations or
liabilities (including any indebtedness) or entered into any transaction or
series of transactions involving in excess of $25,000 in the aggregate out of
the ordinary course of business, except for this Agreement and the transactions
contemplated hereby; (viii) suffered any theft, damage, destruction or casualty
loss, not covered by insurance and for which a timely claim was filed, in excess
of $25,000 in the aggregate; (ix) suffered any extraordinary losses (whether or
not covered by insurance); (x) waived, cancelled, compromised or released any
rights having a value in excess of $25,000 in the aggregate; (xi) made or
adopted any change in its accounting practice or policies; (xii) made any
adjustment to its books and records other than in respect of the conduct of its
business activities in the ordinary course consistent with past practice; (xiii)
entered into any transaction with any Affiliate other than intercompany
transactions in the ordinary course of business consistent with past practice;
(xiv) entered into any employment agreement; (xv) terminated, amended or
modified any agreement involving an amount in excess of $25,000; (xvi) imposed
any security interest or other Lien on any of its assets other than in the
ordinary course of business consistent with past practice; (xvii) delayed paying
any accounts payable which is due and payable except to the extent being
contested in good faith and except in the ordinary course of its business;
(xviii) made or pledged any charitable contribution other than in the ordinary
course of business consistent with past practice; (xix) entered into any other
transaction or been subject to any event which has or may have a Material
Adverse Effect on EMCO; or (xx) agreed to do or authorized any of the foregoing.
3.11 Liabilities of the Company. Except as set forth on Schedule 3.11,
EMCO does not have any liabilities or obligations, whether accrued, absolute,
contingent or otherwise, except (a) to the extent reflected or taken into
account in the Current Balance Sheet and not heretofore paid or discharged, (b)
to the extent specifically set forth in or incorporated by express reference in
any of the Schedules attached hereto, (c) liabilities incurred in the ordinary
course of business consistent with past practice since the date of the Current
Balance Sheet (none of which relates to breach of contract, breach of warranty,
tort, infringement or violation of law, or which arose out of any action, suit,
claim, governmental investigation or arbitration proceeding), (d) normal
accruals, reclassifications, and audit adjustments which would be reflected on
an audited financial statement and which would not be material in the aggregate,
and (e) liabilities incurred in the ordinary course of business prior to the
date of the Current Balance Sheet which, in accordance with GAAP consistently
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applied, were not recorded thereon. EMCO's net worth will be no less than
$3,000,000, as of the Effective Time.
3.12 Litigation. Except as set forth on Schedule 3.12, there is no action,
suit, or other legal or administrative proceeding or governmental investigation
pending or, to the best of their knowledge, threatened, anticipated or
contemplated against, by or affecting EMCO or any of its properties or assets,
or the EMCO Shareholders, or which question the validity or enforceability of
this Agreement or the transactions contemplated hereby, and there is no basis
for any of the foregoing. There are no outstanding orders, decrees or
stipulations issued by any Governmental Authority in any proceeding to which
EMCO is or was a party which have not been complied with in full or which
continue to impose any material obligations on EMCO.
3.13 Environmental Matters. Except as set forth on Schedule 3.13:
(a) To the best of their knowledge, EMCO is and has at all times been in
compliance with all Environmental, Health and Safety Laws (as defined herein)
governing its business, operations, properties and assets, including, without
limitation, Environmental, Health and Safety Laws with respect to discharges
into the ground water, surface water and soil, emissions into the ambient air,
and generation, accumulation, storage, treatment, transportation, transfer,
labeling, handling, manufacturing, use, spilling, leaking, dumping, discharging,
release or disposal of Hazardous Substances (as defined herein), or other Waste
(as described herein). EMCO is not currently liable for any penalties, fines or
forfeitures for failure to comply with any Environmental, Health and Safety
Laws. To the best of their knowledge, EMCO is in full compliance with all
notice, record keeping and reporting requirements of all Environmental, Health
and Safety Laws, and has complied with all informational requests or demands
arising under the Environmental, Health and Safety Laws.
(b) To the best of their knowledge, EMCO has obtained, or caused to be
obtained, and is in full compliance with, all licenses, certificates, permits,
approvals and registrations (collectively "Licenses") required by the
Environmental, Health and Safety Laws for the ownership of its properties and
assets and the operation of its business as presently conducted, including,
without limitation, all air emission, water discharge, water use and solid
waste, hazardous waste and other Waste generation, transportation, transfer,
storage, treatment or disposal Licenses, and EMCO is in full compliance with all
the terms, conditions and requirements of such Licenses, and copies of such
Licenses have been provided to GPAR. There are no administrative or judicial
investigations, notices, claims or other proceedings pending or, to the best of
their knowledge, threatened by any Governmental Authority or third parties
against EMCO, its businesses, operations, properties, or assets, which question
the validity or entitlement of EMCO to any License required by the
Environmental, Health and Safety Laws for the ownership of each of the
properties and assets of EMCO and the operation of its business or wherein an
unfavorable decision, ruling or finding could have a Material Adverse Effect on
EMCO, or which would impose any liability upon the GPAR Companies in the event
that the merger contemplated by this Agreement closes.
(c) EMCO has not received and is not aware of any non-compliance order,
warning letter, notice of violation, claim, suit, action, judgment, or
administrative or judicial proceeding pending against or involving EMCO, its
business, operations, properties, or assets, issued by any Governmental
Authority or third party with respect to any Environmental, Health and Safety
Laws in connection with the ownership by EMCO of its properties or assets or the
operation of its business, which has not been resolved to the satisfaction of
the issuing Governmental Authority or third party in a manner that would not
impose any obligation, burden or continuing liability on the GPAR Companies in
the event that the merger contemplated by this Agreement closes, or which could
have a Material Adverse Effect on EMCO.
(d) To the best of their knowledge, EMCO is in full compliance with, and is
not in breach of or default under any applicable writ, order, judgment,
injunction, governmental communication or decree issued pursuant to the
Environmental, Health and Safety Laws and no event has occurred or is continuing
which, with the passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default thereunder, or affect the
Owned Properties or Leased Premises.
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(e) To the best of their knowledge, EMCO has not generated, manufactured,
used, transported, transferred, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed, nor has it allowed or arranged for any
third parties to generate, manufacture, use, transport, transfer, store, handle,
treat, spill, leak, dump, discharge, release or dispose of, Hazardous Substances
or other waste to or at any location other than a site lawfully permitted to
receive such Hazardous Substances or other waste for such purposes, nor has it
performed, arranged for or allowed by any method or procedure such generation,
manufacture, use, transportation, transfer, storage, treatment, spillage,
leakage, dumping, discharge, release or disposal in contravention of any
Environmental, Health and Safety Laws. To the best of their knowledge, EMCO has
not generated, manufactured, used, stored, handled, treated, spilled, leaked,
dumped, discharged, released or disposed of, or allowed or arranged for any
third parties to generate, manufacture, use, store, handle, treat, spill, leak,
dump, discharge, release or dispose of, Hazardous Substances or other waste upon
property owned or leased by it, except as permitted by law. For purposes of this
Section 3.13, the term "Hazardous Substances" shall be construed broadly to
include any toxic or hazardous substance, material, or waste, and any other
contaminant, pollutant or constituent thereof, whether liquid, solid,
semi-solid, sludge and/or gaseous, including without limitation, chemicals,
compounds, by-products, pesticides, asbestos containing materials, petroleum or
petroleum products, and polychlorinated biphenyls, the presence of which
requires investigation or remediation under any Environmental, Health and Safety
Laws or which are or become regulated, listed or controlled by, under or
pursuant to any Environmental Health and Safety Laws, including, without
limitation, the United States Department of Transportation Table (49 CFR 172,
101) or by the Environmental Protection Agency as hazardous substances (40 CFR
Part 302) and any amendments thereto; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986, 42 U.S.C. sec.9601, et seq. (hereinafter
collectively "CERCLA"); the Solid Waste Disposal Act, as amended by the Resource
Conversation and Recovery Act of 1976 and subsequent Hazardous and Solid Waste
Amendments of 1984, 42 U.S.C. sec.6901 et seq. (hereinafter, collectively
"RCRA"); the Hazardous Materials Transportation Act, as amended, 49 U.S.C.
sec.1801, et seq.; the Clean Water Act, as amended, 33 U.S.C. sec.1311, et seq.;
the Clean Air Act, as amended (42 U.S.C. sec.7401-7642); Toxic Substances
Control Act, as amended, 15 U.S.C. sec.2601 et seq.; the Federal Insecticide,
Fungicide, and Rodenticide Act as amended, 7 U.S.C. sec.136-136y ("FIFRA"); the
Emergency Planning and Community Right-to-Know Act of 1986 as amended, 42 U.S.C.
sec.11001, et seq. (Title III of SARA) ("EPCRA"); the Occupational Safety and
Health Act of 1970, as amended, 29 U.S.C. sec.651, et seq. ("OSHA"); any similar
state statute, or any future amendments to, or regulations implementing such
statutes, laws, ordinances, codes, rules, regulations, orders, rulings, or
decrees, or which has been or shall be determined or interpreted at any time by
any Governmental Authority to be a hazardous or toxic substance regulated under
any other statute, law, regulation, order, code, rule, order, or decree. For
purposes of this Section 3.13, the term "Waste" shall be construed broadly to
include agricultural wastes, biomedical wastes, biological wastes, bulky wastes,
construction and demolition debris, garbage, household wastes, industrial solid
wastes, liquid wastes, recyclable materials, sludge, solid wastes, special
wastes, used oils, white goods, and yard trash.
(f) To the best of their knowledge, EMCO has not caused, or allowed to be
caused or permitted, either by action or inaction, a Release or Discharge, or
threatened Release or Discharge, of any Hazardous Substance on, into or beneath
the surface of any parcel of the Owned Properties or the Leased Premises. To the
best of their knowledge, there has not occurred, nor is there presently
occurring, a Release or Discharge, or threatened Release or Discharge, of any
Hazardous Substance on, into or beneath the surface of any parcel of the Owned
Properties or the Leased Premises. For purposes of this Section, the terms
"Release" and "Discharge" shall have the meanings given them in the
Environmental, Health and Safety Laws.
(g) To the best of their knowledge, EMCO has not generated, handled,
manufactured, treated, stored, used, shipped, transported, transferred, or
disposed of, nor has it allowed or arranged, by contract, agreement or
otherwise, for any third parties to generate, handle, manufacture, treat, store,
use, ship, transport, transfer or dispose of, any Hazardous Substance or other
Waste to or at a site which, pursuant to CERCLA or any similar state law (i) has
been placed on the National Priorities List or its state equivalent; or (ii) the
Environmental Protection Agency or the relevant state agency has notified EMCO
that it has proposed or is proposing to place on the National Priorities List or
its state equivalent. Neither EMCO nor the EMCO
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Shareholders has received notice, and neither EMCO nor the EMCO Shareholders
have knowledge of any facts which could give rise to any notice, that EMCO is a
potentially responsible party for a federal or state environmental cleanup site
or for corrective action under CERCLA, RCRA or any other applicable
Environmental Health and Safety Laws. To the best of their knowledge, EMCO has
not submitted nor was required to submit any notice pursuant to Section 103(c)
of CERCLA with respect to the Leased Premises or the Owned Properties. EMCO has
not received any written or oral request for information in connection with any
federal or state environmental cleanup site, or in connection with any of the
real property or premises where EMCO has transported, transferred or disposed of
other Wastes. EMCO has not been required to and has not undertaken any response
or remedial actions or clean-up actions of any kind at the request of any
Governmental Authorities or at the request of any other third party. To the best
of their knowledge, EMCO has no liability under any Environmental, Health and
Safety Laws for personal injury, property damage, natural resource damage, or
clean up obligations.
(h) Except as set forth on Schedule 3.13, EMCO does not use, nor has it
used, any Aboveground Storage Tanks or Underground Storage Tanks, and, to the
best of their knowledge, there are not now nor have there ever been any
Underground Storage Tanks. For purposes of this Section 3.13, the terms
"Aboveground Storage Tanks" and "Underground Storage Tanks" shall have the
meanings given them in Section 6901 et seq., as amended, of RCRA, or any
applicable state or local statute, law, ordinance, code, rule, regulation, order
ruling, or decree governing Aboveground Storage Tanks or Underground Storage
Tanks.
(i) Schedule 3.13 identifies (i) all environmental audits, assessments or
occupational health studies undertaken by EMCO or its agents or, to the
knowledge of EMCO or the EMCO Shareholders, undertaken by any Governmental
Authority, or any third party, relating to or affecting EMCO or any of the
Leased Premises or the Owned Properties; (ii) the results of any ground, water,
soil, air or asbestos monitoring undertaken by EMCO or its agents or, to the
knowledge of EMCO or the EMCO Shareholders, undertaken by any Governmental
Authority or any third party, relating to or affecting EMCO or any of the Leased
Premises or the Owned Properties; (iii) all written communications between EMCO
and any Governmental Authority arising under or related to Environmental, Health
and Safety Laws; and (iv) all citations issued under OSHA, or similar state or
local statutes, laws, ordinances, codes, rules, regulations, orders, rulings, or
decrees, relating to or affecting either of EMCO or any of the Leased Premises
or the Owned Properties.
(j) To the best of their knowledge, Schedule 3.13 contains a list of the
assets of EMCO which contain "asbestos" or "asbestos-containing material" (as
such terms are identified under the Environmental, Health and Safety Laws).
Schedule 3.13 also identifies (i) the degree of friability of all existing
asbestos and asbestos-containing material and (ii) all actions taken by EMCO,
directly or indirectly, or by any of their agents, employees, representatives or
contractors with respect to asbestos or asbestos-containing materials, including
but not limited to all methods and manner of abatement, removal, containment,
encapsulation, repair, maintenance, renovation, demolition, salvage,
installation, storage, transportation, disposal, monitoring, spill/emergency
clean-up, protective health and safety measures and training of personnel
(whether employees or independent contractors or otherwise). Except as set forth
in Schedule 3.13, to the best of their knowledge, EMCO has operated and
continues to operate in compliance with all Environmental, Health & Safety Laws
governing the handling, use and exposure to and disposal of asbestos or
asbestos-containing materials. Except as set forth in Schedule 3.13, there are
no claims, actions, suits, governmental investigations or proceedings before any
Governmental Authority or third party pending, or, to the best of their
knowledge, threatened against or directly affecting EMCO, or any of its assets
or operations relating to the use, handling or exposure to and disposal of
asbestos or asbestos-containing materials in connection with their assets and
operations.
(k) As used in this Agreement, "Environmental, Health and Safety Laws"
means all federal, state, regional or local statutes, laws, rules, regulations,
codes, orders, plans, injunctions, decrees, rulings, and changes or ordinances
or judicial or administrative interpretations thereof, whether currently in
existence or hereafter enacted or promulgated, any of which govern (or purport
to govern) or relate to pollution, protection of the environment, public health
and safety, air emissions, water discharges, hazardous or toxic substances,
solid or hazardous waste or occupational health and safety, as any of these
terms are or may be defined in such statutes, laws, rules, regulations, codes,
orders, plans, injunctions, decrees, rulings and changes or ordinances,
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or judicial or administrative interpretations thereof, including, without
limitation, RCRA, CERCLA, the Hazardous Materials Transportation Act, the Toxic
Substances Control Act, the Clean Air Act, the Clean Water Act, FIFRA, EPCRA and
OSHA.
(l) Schedule 3.13 identifies the operations and activities, and locations
thereof, which have been conducted and are being conducted by EMCO on any of the
Owned Properties or the Leased Premises which have involved the generation,
accumulation, storage, treatment, transportation, labelling, handling,
manufacturing, use, spilling, leaking, dumping, discharging, release or disposal
of Hazardous Substances.
(m) To the best of their knowledge, Schedule 3.13 identifies the locations
to which EMCO has transferred, transported, hauled, moved, or disposed of Waste
to a SuperFund site.
(n) As used in this Section 3.13, the term "EMCO" is deemed to refer to
EMCO, any of its subsidiaries, and EMCO Recycling, L.L.C. (a
predecessor-in-interest).
3.14 Real Estate.
(a) EMCO does not own any real property or any interest therein except as
set forth on Schedule 3.14(a) (the "Owned Properties"), which Schedule sets
forth the location and size of, and principal improvements and buildings on, the
Owned Properties. Except as set forth on Schedule 3.14(a), with respect to each
such parcel of Owned Property:
(i) EMCO has good and marketable title to the parcel of Owned
Property, free and clear of any Lien other than (x) liens for real estate
taxes not yet due and payable; (y) recorded easements, covenants, and other
restrictions which do not impair the current use, occupancy or value of the
property subject thereto, and (z) encumbrances and restrictions described
in the title insurance policies listed on Schedule 3.14(a), all of which
policies have been previously delivered to GPAR.
(ii) there are no pending or, to the best of their knowledge,
threatened condemnation proceedings, suits or administrative actions
relating to the Owned Properties or other matters affecting adversely the
current use, occupancy or value thereof;
(iii) to the best of their knowledge, the legal descriptions for the
parcels of Owned Property contained in the deeds thereof describe such
parcels fully and adequately; the buildings and improvements are located
within the boundary lines of the described parcels of land, are not in
violation of applicable setback requirements, local comprehensive plan
provisions, zoning laws and ordinances (and none of the properties or
buildings or improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications), building
code requirements, permits, licenses or other forms of approval by any
Governmental Authority, and do not encroach on any easement which may
burden the land; the land does not serve any adjoining property for any
purpose inconsistent with the use of the land; and the Owned Properties are
not located within any flood plain (such that a mortgagee would require a
mortgagor to obtain flood insurance) or subject to any similar type
restriction for which any permits or licenses necessary to the use thereof
have not been obtained;
(iv) to the best of their knowledge, all facilities have received all
approvals of Governmental Authorities (including licenses and permits)
required in connection with the ownership or operation thereof and have
been operated and maintained in accordance with applicable laws,
ordinances, rules and regulations;
(v) there are no Contracts granting to any party or parties the right
of use or occupancy of any portion of the parcels of Owned Property, except
as set forth on Schedule 3.14(a);
(vi) there are no outstanding options or rights of first refusal to
purchase the parcels of Owned Property, or any portion thereof or interest
therein;
(vii) there are no parties (other than EMCO and its subsidiaries) in
possession of the parcels of Owned Property, other than tenants under any
leases disclosed in Schedule 3.14(a) who are in possession of space to
which they are entitled;
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(viii) all facilities located on the parcels of Owned Property are
supplied with utilities and other services necessary for the operation of
such facilities, including gas, electricity, water, telephone, sanitary
sewer and storm sewer, all of which services, to the best of their
knowledge, are adequate in accordance with all applicable laws, ordinances,
rules and regulations, and, to the best of their knowledge, are provided
via public roads or via permanent, irrevocable, appurtenant easements
benefitting the parcels of Owned Property;
(ix) each parcel of Owned Property abuts on and has direct vehicular
access to a public road, or has access to a public road via a permanent,
irrevocable, appurtenant easement benefitting the parcel of Owned Property;
access to the property is provided by paved public right-of-way; and there
is no pending or, to the best of their knowledge, threatened termination of
the foregoing access rights;
(x) to the best of their knowledge, all improvements and buildings on
the Owned Property are in good repair and are safe for occupancy and use,
free from termites or other wood-destroying organisms; the roofs thereof
are watertight; and the structural components and systems (including
plumbing, electrical, air conditioning/heating, and sprinklers) are in good
working order and adequate for the use of such Owned Property in the manner
in which presently used; and
(xi) there are no service contracts, management agreements or similar
agreements which affect the parcels of Owned Property, except as set forth
on Schedule 3.14(a).
(b) Schedule 3.14(b) sets forth a list of all leases, licenses or similar
agreements ("Leases") to which EMCO is a party (copies of which have previously
been furnished to GPAR), in each case, setting forth (A) the lessor and lessee
thereof and the date and term of each of the Leases, (B) the legal description
or street address of each property covered thereby, and (C) a brief description
(including size and function) of the principal improvements and buildings
thereon (the "Leased Premises"), all of which, to the best of their knowledge,
are within the property set-back and building lines of the respective property.
The Leases are in full force and effect and have not been amended except as set
forth on Schedule 3.14(b), and no party thereto is in default or breach under
any such Lease. No event has occurred which, with the passage of time or the
giving of notice or both, would cause a material breach of or default under any
of such Leases. There is no breach or anticipated breach by any other party to
such Leases. Except as set forth on Schedule 3.14(b), with respect to each such
Leased Premises:
(i) EMCO has valid leasehold interests in the Leased Premises, which
leasehold interests are free and clear of any Liens, covenants and
easements or title defects of any nature whatsoever;
(ii) To the best of their knowledge, the portions of the buildings
located on the Leased Premises that are used in the business of EMCO are
each in good repair and condition, normal wear and tear excepted, and are
in the aggregate sufficient to satisfy EMCO's current and reasonably
anticipated normal business activities as conducted thereat;
(iii) Each of the Leased Premises (a) has direct access to public
roads or access to public roads by means of a perpetual access easement,
such access being sufficient to satisfy the current and reasonably
anticipated normal transportation requirements of EMCO's business as
presently conducted at such parcel; and (b) is served by all utilities in
such quantity and quality as are sufficient to satisfy the current normal
business activities as conducted at such parcel; and
(iv) EMCO has not received notice of (a) any condemnation proceeding
with respect to any portion of the Leased Premises or any access thereto,
and no such proceeding is contemplated by any Governmental Authority; or
(b) any special assessment which may affect any of the Leased Premises,
and, to the best of their knowledge, no such special assessment is
contemplated by any Governmental Authority.
3.15 Good Title to and Condition of Assets
(a) Except as set forth on Schedule 3.15, EMCO has good and marketable
title to all of its Assets (as hereinafter defined), free and clear of any Liens
or restrictions on use. For purposes of this Agreement, the
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term "Assets" means all of the properties and assets of EMCO, other than the
Owned Properties and the Leased Premises, whether personal or mixed, tangible or
intangible, wherever located.
(b) To the best of their knowledge, the Fixed Assets (as hereinafter
defined) currently in use or necessary for the business and operations of EMCO
are in good operating condition, normal wear and tear excepted. For purposes of
this Agreement, the term "Fixed Assets" means all vehicles, machinery,
equipment, tools, supplies, leasehold improvements, furniture and fixtures used
by or located on the premises of EMCO or set forth on the Current Balance Sheet
or acquired by EMCO since the date of the Current Balance Sheet. Schedule 3.15
lists the vehicles owned, leased or used by EMCO, setting forth the make, model,
description of body and chassis, vehicle identification number, and year of
manufacture, and for each vehicle, whether it is owned or leased, and if owned,
the name of any lienholder and the amount of the lien, and if leased, the name
of the lessor and the general terms of the lease, and, whether owned or leased,
if it is used to transport, transfer, handle, dispose or haul Waste materials.
3.16 Compliance with Laws.
(a) To the best of their knowledge, EMCO is and has been in compliance with
all laws, regulations and orders applicable to it, its business and operations
(as conducted by it now and in the past), the Assets, the Owned Properties and
the Leased Premises and any other properties and assets (in each case owned or
used by it now or in the past). Except as set forth on Schedule 3.16, EMCO has
not been cited, fined or otherwise notified of any asserted past or present
failure to comply with any laws, regulations or orders and no proceeding with
respect to any such violation is pending or threatened.
(b) EMCO has not made any payment of funds in connection with their
business which is prohibited by law, and no funds have been set aside to be used
in connection with their business for any payment prohibited by law.
(c) To the best of their knowledge, EMCO is and at all times has been in
full compliance with the terms and provisions of the Immigration Reform and
Control Act of 1986, as amended (the "Immigration Act"). To the best of their
knowledge, with respect to each Employee (as defined in 8 C.F.R. 274a.1(f)) of
EMCO for whom compliance with the Immigration Act as employer is required, EMCO
has on file a true, accurate and complete copy of (i) each Employee's Form I-9
(Employment Eligibility Verification Form) and (ii) all other records, documents
or other papers prepared, procured and/or retained by EMCO pursuant to the
Immigration Act. EMCO has not been cited, fined, served with a Notice of Intent
to Fine or with a Cease and Desist Order, nor has any action or administrative
proceeding been initiated or threatened against it, by the Immigration and
Naturalization Service by reason of any actual or alleged failure to comply with
the Immigration Act.
(d) EMCO is not subject to any Contract, decree or injunction which
restricts the continued operation of any business or the expansion thereof to
other geographical areas, customers and suppliers or lines of business.
3.17 Labor and Employment Matters. Schedule 3.17 sets forth the name,
address, social security number and current rate of compensation of each of the
employees of EMCO. EMCO is not a party to or bound by any collective bargaining
agreement or any other agreement with a labor union, and there has been no
effort by any labor union during the 24 months prior to the date hereof to
organize any employees of EMCO into one or more collective bargaining units.
There is no pending or, to the best of their knowledge, threatened labor
dispute, strike or work stoppage which affects or which may affect the business
of EMCO which may interfere with its continued operations. EMCO has not within
the last 24 months committed any unfair labor practice as defined in the
National Labor Relations Act, as amended, and there is no pending or, to the
best of their knowledge, threatened charge or complaint against EMCO by or with
the National Labor Relations Board or any representative thereof. There has been
no strike, walkout or work stoppage involving any of the employees of EMCO
during the 24 months prior to the date hereof. None of the EMCO Shareholders is
aware that any executive or key employee or group of employees has any plans to
terminate his, her or their employment with EMCO as a result of this Agreement
or otherwise. Schedule 3.17 contains detailed information about each contract,
agreement or plan of the following nature, whether formal or
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informal, and whether or not in writing, to which EMCO is a party or under which
it has an obligation: (i) employment agreements, (ii) employee handbooks, policy
statements and similar plans, (iii) noncompetition agreements, and (iv)
consulting agreements. To the best of their knowledge, and except for the
Americans with Disabilities Act, as amended, EMCO has complied with applicable
laws, rules and regulations relating to employment, civil rights and equal
employment opportunities, including but not limited to, the Civil Rights Act of
1964, and the Fair Labor Standards Act.
3.18 Employee Benefit Plans.
(a) Employee Benefit Plans. Schedule 3.18 contains a list setting forth
each employee benefit plan or arrangement of EMCO, including but not limited to
employee pension benefit plans, as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), multiemployer
plans, as defined in Section 3(37) of ERISA, employee welfare benefit plans, as
defined in Section 3(1) of ERISA, deferred compensation plans, stock option
plans, bonus plans, stock purchase plans, hospitalization, disability and other
insurance plans, severance or termination pay plans and policies, whether or not
described in Section 3(3) of ERISA, in which employees, their spouses or
dependents, of EMCO participate ("Employee Benefit Plans") (true and accurate
copies of which, together with the most recent annual reports on Form 5500 and
summary plan descriptions with respect thereto, were furnished to GPAR).
(b) Compliance with Law. To the best of their knowledge, with respect to
each Employee Benefit Plan (i) each has been administered in all material
respects in compliance with its terms and with all applicable laws, including,
but not limited to, ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"); (ii) no actions, suits, claims or disputes are pending, or threatened;
(iii) no audits, inquiries, reviews, proceedings, claims, or demands are pending
with any governmental or regulatory agency; (iv) there are no facts which could
give rise to any material liability in the event of any such investigation,
claim, action, suit, audit, review, or other proceeding; (v) all material
reports, returns, and similar documents required to be filed with any
governmental agency or distributed to any plan participant have been duly or
timely filed or distributed; and (vi) no "prohibited transaction" has occurred
within the meaning of the applicable provisions of ERISA or the Code.
(c) Qualified Plans. With respect to each Employee Benefit Plan intended
to qualify under Code Section 401(a) or 403(a) (i) the Internal Revenue Service
has issued a favorable determination letter, true and correct copies of which
have been furnished to GPAR, that such plans are qualified and exempt from
federal income taxes; (ii) no such determination letter has been revoked nor has
revocation been threatened, nor has any amendment or other action or omission
occurred with respect to any such plan since the date of its most recent
determination letter or application therefor in any respect which would
adversely affect its qualification or materially increase its costs; (iii) no
such plan has been amended in a manner that would require security to be
provided in accordance with Section 401(a)(29) of the Code; (v) no reportable
event (within the meaning of Section 4043 of ERISA) has occurred, other than one
for which the 30-day notice requirement has been waived; and (v) as of the
Effective Date, the present value of all liabilities that would be "benefit
liabilities" under Section 4001(a)(16) of ERISA if benefits described in Code
Section 411(d)(6)(B) were included will not exceed the then current fair market
value of the assets of such plan (determined using the actuarial assumptions
used for the most recent actuarial valuation for such plan); (vi) except as
disclosed on Schedule 3.18, all contributions to, and payments from and with
respect to such plans, which may have been required to be made in accordance
with such plans and, when applicable, Section 302 of ERISA or Section 412 of the
Code, have been timely made; (vii) all such contributions to the plans, and all
payments under the plans (except those to be made from a trust qualified under
Section 401(a) of the Code) and all payments with respect to the plans
(including, without limitation, PBGC and insurance premiums) for any period
ending before the Closing Date that are not yet, but will be, required to be
made are properly accrued and reflected on the Current Balance Sheet or are
disclosed on Schedule 3.18.
(d) Multiemployer Plans. With respect to any multiemployer plan, as
described in Section 4001(a)(3) of ERISA ("MPPA Plan") (i) all contributions
required to be made with respect to employees of EMCO have been timely paid;
(ii) EMCO has not incurred or is expected to incur, directly or indirectly, any
withdrawal liability under ERISA with respect to any such plan (whether by
reason of the transactions
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contemplated by the Agreement or otherwise); (iii) Schedule 3.18 sets forth (A)
the withdrawal liability under ERISA to each MPPA Plan, (B) the date as of which
such amount was calculated, and (C) the method for determining the withdrawal
liability; and (iv) no such plan is (or is expected to be) insolvent or in
reorganization and no accumulated funding deficiency (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not waived, exists or is
expected to exist with respect to any such plan.
(e) Welfare Plans. Other than as disclosed in Schedule 3.18, (i) EMCO is
not obligated under any employee welfare benefit plan as described in Section
3(1) of ERISA ("Welfare Plan"), whether or not disclosed in Schedule 3.18, to
provide medical or death benefits with respect to any employee or former
employee of EMCO or its predecessors after termination of employment; (ii) EMCO
has complied with the notice and continuation coverage requirements of Section
4980B of the Code and the regulations thereunder with respect to each Welfare
Plan that is, or was during any taxable year for which the statute of
limitations on the assessment of federal income taxes remains, open, by consent
or otherwise, a group health plan within the meaning of Section 5000(b)(1) of
the Code, and (iii) there are no reserves, assets, surplus or prepaid premiums
under any Welfare Plan which is an Employee Benefit Plan. The consummation of
the transactions contemplated by this Agreement will not entitle any individual
to severance pay, and, will not accelerate the time of payment or vesting, or
increase the amount of compensation, due to any individual.
(f) Controlled Group Liability. EMCO nor any entity that would be
aggregated with it under Code Section 414(b), (c), (m) or (o): (i) has ever
terminated or withdrawn from an employee benefit plan under circumstances
resulting (or expected to result) in liability to the Pension Benefit Guaranty
Corporation ("PBGC"), the fund by which the employee benefit plan is funded, or
any employee or beneficiary for whose benefit the plan is or was maintained
(other than routine claims for benefits); (ii) has any assets subject to (or
expected to be subject to) a lien for unpaid contributions to any employee
benefit plan; (iii) has failed to pay premiums to the PBGC when due; (iv) is
subject to (or expected to be subject to) an excise tax under Code Section 4971;
(v) has engaged in any transaction which would give rise to liability under
Section 4069 or Section 4212(c) of ERISA; or (vi) has violated Code Section
4980B or Section 601 through 608 of ERISA.
(g) Other Liabilities. Except as set forth on Schedule 3.18, (i) none of
the Employee Benefit Plans obligates EMCO to pay separation, severance,
termination or similar benefits solely as a result of any transaction
contemplated by this Agreement or solely as a result of a "change of control"
(as such term is defined in Section 280G of the Code), (ii) all required or
discretionary (in accordance with historical practices) payments, premiums,
contributions, reimbursements, or accruals for all periods ending prior to or as
of the Effective Date shall have been made or properly accrued on the Current
Balance Sheet or will be properly accrued on the books and records of EMCO as of
the Effective Date, and (iii) none of the Employee Benefit Plans has any
unfunded liabilities which are not reflected on the Current Balance Sheet or the
books and records of EMCO.
3.19 Tax Matters. Except as set forth in Schedule 3.19 hereto, all Tax
Returns required to be filed prior to the date hereof with respect to EMCO or
any of its income, properties, franchises or operations have been filed, to the
best of their knowledge, each such Tax Return has been prepared in compliance
with all applicable laws and regulations, and all such Tax Returns are true and
accurate in all respects. To the best of their knowledge, all Taxes due and
payable by or with respect to EMCO have been paid or accrued on the Current
Balance Sheet or will be accrued on its books and records as of the Closing.
Except as set forth in Schedule 3.19 hereto: (i) with respect to each taxable
period of EMCO, no taxable period has been audited by the relevant taxing
authority; (ii) no deficiency or proposed adjustment which has not been settled
or otherwise resolved for any amount of Taxes has been asserted or assessed by
any taxing authority against EMCO; (iii) EMCO has not consented to extend the
time in which any Taxes may be assessed or collected by any taxing authority;
(iv) EMCO has not requested or been granted an extension of the time for filing
any Tax Return to a date later than the Effective Time; (v) there is no action,
suit, taxing authority proceeding, or audit or claim for refund now in progress,
pending or, to the best of their knowledge, threatened against or with respect
to EMCO regarding Taxes; (vi) EMCO has not made an election or filed a consent
under Section 341(f) of the Code (or any corresponding provision of state, local
or foreign law) on or prior to the Effective Time; (vii) there are no Liens for
Taxes (other than for current Taxes not yet due and payable) upon the assets of
EMCO; (viii) EMCO will not be required (A) as a result of a change in method of
accounting for a
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taxable period ending on or prior to the Effective Date, to include any
adjustment under Section 481(c) of the Code (or any corresponding provision of
state, local or foreign law) in taxable income for any taxable period (or
portion thereof) beginning after the Effective Time or (B) as a result of any
"closing agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign law), to include any item of
income or exclude any item of deduction from any taxable period (or portion
thereof) beginning after the Effective Time; (ix) EMCO is not a party to or
bound by any tax allocation or tax sharing agreement or has any current or
potential contractual obligation to indemnify any other Person with respect to
Taxes; (x) to the best of their knowledge, no taxing authority will claim or
assess any additional Taxes against EMCO for any period for which Tax Returns
have been filed; (xi) to the best of their knowledge, EMCO has not made any
payments, and is or will not become obligated (under any contract entered into
on or before the Effective Date) to make any payments, that will be
non-deductible under Section 280G of the Code (or any corresponding provision of
state, local or foreign law); (xii) EMCO has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
(or any corresponding provision of state, local or foreign law) during the
applicable period specified in Section 897(c)(1)(a)(ii) of the Code (or any
corresponding provision of state, local or foreign law); (xiii) no claim has
ever been made by a taxing authority in a jurisdiction where EMCO does not file
Tax Returns that is or may be subject to Taxes assessed by such jurisdiction;
and (xiv) EMCO does not have any permanent establishment in any foreign country,
as defined in the relevant tax treaty between the United States of America and
such foreign country; (xv) true, correct and complete copies of all income and
sales Tax Returns filed by or with respect to EMCO for the past two years have
been furnished or made available to GPAR; (xvi) to the best of their knowledge,
EMCO will not be subject to any Taxes for the period ending at the Effective
Time for any period for which a Tax Return has not been filed imposed pursuant
to Section 1374 or Section 1375 of the Code (or any corresponding provision of
state, local or foreign law); and (xvii) to the best of their knowledge, no
sales or use tax or property transfer tax (other than sales tax on aircraft,
boats, mobile homes and motor vehicles), non-recurring intangibles tax,
documentary stamp tax or other excise tax (or comparable tax imposed by any
governmental entity) will be payable by EMCO or GPAR by virtue of the
transactions completed in this Agreement.
3.20 Insurance. EMCO is covered by valid, outstanding and enforceable
policies of insurance issued to it by reputable insurers covering its
properties, assets and businesses against risks of the nature normally insured
against by corporations in the same or similar lines of business and in coverage
amounts typically and reasonably carried by such corporations (the "Insurance
Policies"). Such Insurance Policies are in full force and effect, and all
premiums due thereon have been paid. As of the Effective Time, each of the
Insurance Policies will be in full force and effect. None of the Insurance
Policies will lapse or terminate as a result of the transactions contemplated by
this Agreement. EMCO has complied with the provisions of such Insurance
Policies. Schedule 3.20 contains (i) a complete and correct list of all
Insurance Policies and all amendments and riders thereto (copies of which have
been provided to GPAR) and (ii) a detailed description of each pending claim
under any of the Insurance Policies for an amount in excess of $50,000 that
relates to loss or damage to the properties, assets or businesses of EMCO. EMCO
has not failed to give, in a timely manner, any notice required under any of the
Insurance Policies to preserve its rights thereunder.
3.21 Receivables. To the best of their knowledge, all of the Receivables
(as hereinafter defined) are valid and legally binding, represent bona fide
transactions and arose in the ordinary course of business of EMCO. To the best
of their knowledge, all of the Receivables are good and collectible receivables,
and will be collected in full in accordance with the terms of such receivables
(and in any event within six months following the Closing), without setoff or
counterclaims, subject to the allowance for doubtful accounts, if any, set forth
on the Current Balance Sheet as reasonably adjusted since the date of the
Current Balance Sheet in the ordinary course of business consistent with past
practice. For purposes of this Agreement, the term "Receivables" means all
receivables of EMCO, including all trade account receivables arising from the
provision of services or sale of inventory, notes receivable (including the note
from Copperstate), and insurance proceeds receivable.
3.22 Licenses and Permits. EMCO possesses all material licenses and
required governmental or official approvals, permits or authorizations
(collectively, the "Permits") for its businesses and operations, including the
operation of the Owned Properties and Leased Premises, which Permits are listed
on Schedule 3.22. All
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such Permits are valid and in full force and effect, EMCO is in substantial
compliance with the requirements thereof, and no proceeding is pending or, to
the best of their knowledge, threatened to revoke or amend any of them. None of
such Permits is or will be impaired or in any way affected by the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
3.23 Adequacy of the Assets; Relationships with Customers and Suppliers;
Affiliated Transactions. The Assets, Owned Properties and Leased Premises
constitute, in the aggregate, all of the assets and properties necessary for the
conduct of the business of EMCO in the manner in which and to the extent to
which such business is currently being conducted. To the best of their
knowledge, no current supplier to EMCO of items essential to the conduct of its
business will or has threatened to terminate its business relationship with it
for any reason. Except as set forth on Schedule 3.23, EMCO does not have any
direct or indirect interest in any customer, supplier or competitor of EMCO, or
in any person from whom or to whom EMCO leases real or personal property. Except
as set forth on Schedule 3.23, no officer, director or shareholder of EMCO, nor
any person related by blood or marriage to any such person, nor any entity in
which any such person owns any beneficial interest, is a party to any Contract
or transaction with EMCO or has any interest in any property used by EMCO.
3.24 Intellectual Property. To the best of their knowledge, EMCO has full
legal right, title and interest in and to all trademarks, servicemarks,
tradenames, copyrights, know-how, patents, trade secrets, licenses (including
licenses for the use of computer software programs), and other intellectual
property used in the conduct of its business (the "Intellectual Property"). To
the best of their knowledge, the conduct of the business of EMCO as presently
conducted, and the unrestricted conduct and the unrestricted use and
exploitation of the Intellectual Property, does not infringe or misappropriate
any rights held or asserted by any Person, and no Person is infringing on the
Intellectual Property. To the best of their knowledge, no payments are required
for the continued use of the Intellectual Property. To the best of their
knowledge, none of the Intellectual Property has ever been declared invalid or
unenforceable, or is the subject of any pending or threatened action for
opposition, cancellation, declaration, infringement, or invalidity,
unenforceability or misappropriation or like claim, action or proceeding.
3.25 Contracts. Schedule 3.25 sets forth a list of each Contract to which
EMCO is a party or by which its properties and assets are bound and which is
material to its business, assets, properties or prospects (the "Designated
Contracts"), true and correct copies of which have been provided to GPAR. The
copy of each Designated Contract furnished to GPAR is a true and complete copy
of the document it purports to represent and reflects all amendments thereto
made through the date of this Agreement. To the best of their knowledge, except
as set forth on Schedule 3.25, EMCO has not violated any of the material terms
or conditions of any Designated Contract or any term or condition which would
permit termination or material modification of any Designated Contract, and all
of the covenants to be performed by any other party thereto have been fully
performed and there are no claims for breach or indemnification or notice of
default or termination under any Designated Contract. Except as set forth on
Schedule 3.25, no event has occurred which constitutes, or after notice or the
passage of time, or both, would constitute, a material default by EMCO under any
Designated Contract, and no such event has occurred which constitutes or would
constitute a material default by any other party. EMCO is not subject to any
liability or payment resulting from renegotiation of amounts paid it under any
Designated Contract. As used in this Section, Designated Contracts shall
include, without limitation, (a) loan agreements, indentures, mortgages,
pledges, hypothecations, deeds of trust, conditional sale or title retention
agreements, security agreements, equipment financing obligations or guaranties,
or other sources of contingent liability in respect of any indebtedness or
obligations to any other Person, or letters of intent or commitment letters with
respect to same; (b) contracts obligating EMCO to purchase or sell products or
services, excluding standard scrap metal purchase or sale contracts entered into
in the ordinary course of business which are less than six months in duration or
amount to less than $50,000.00; (c) leases of real property, and leases of
personal property not cancelable without penalty on notice of sixty (60) days or
less or calling for payment of an annual gross rental exceeding Twenty-Five
Thousand Dollars ($25,000.00); (d) distribution, sales agency or franchise or
similar agreements, or agreements providing for an independent contractor's
services, or letters of intent with respect to same; (e) employment agreements,
management service agreements, consulting agreements, confidentiality
agreements, noncompetition agreements and any
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other agreements relating to any employee, officer or director of EMCO; (f)
licenses, assignments or transfers of trademarks, trade names, service marks,
patents, copyrights, trade secrets or know how, or other agreements regarding
proprietary rights or intellectual property; (g) any Contract relating to
pending capital expenditures by EMCO; and (h) other material Contracts or
understandings, irrespective of subject matter and whether or not in writing,
not entered into in the ordinary course of business by EMCO and not otherwise
disclosed on the Schedules.
3.26 Customer Lists and Recurring Revenue. Schedule 3.26 is a true,
correct and complete list of EMCO's ten largest customers ("Material Customers")
and suppliers together with the applicable percentage of total sales or
purchases, as applicable. True, correct and complete copies of any agreements
with such customers or suppliers which are anticipated to endure beyond the
Closing have been furnished by the EMCO Shareholders to GPAR. Schedule 3.26 sets
forth each Material Customer's name, address, account number, term of franchise
or agreement, billing cycle, type of service and rates charged.
3.27 Accuracy of Information Furnished by the Shareholders. To the best of
their knowledge, no representation, statement or information made or furnished
by the EMCO Shareholders to GPAR or any of GPAR's representatives, including
those contained in this Agreement and the various Schedules attached hereto and
the other information and statements referred to herein and previously furnished
by EMCO and EMCO Shareholders, contains or shall contain any untrue statement of
a material fact or omits or shall omit any material fact necessary to make the
information contained therein not misleading. The EMCO Shareholders have
provided GPAR with true, accurate and complete copies of all documents listed or
described in the various Schedules attached hereto.
3.28 Investment Intent; Accredited Investor Status; Securities
Documents. Each of the EMCO Shareholders is acquiring the GPAR Shares hereunder
for his, her or its own account for investment and not with a view to, or for
the sale in connection with, any distribution of any of the GPAR Shares, except
in compliance with applicable state and federal securities laws. Each of the
EMCO Shareholders has been provided, to its or his satisfaction, the opportunity
to discuss the transactions contemplated hereby with GPAR and has had the
opportunity to obtain such information pertaining to the GPAR Companies as has
been requested, including but not limited to filings made by GPAR with the SEC
under the Exchange Act. Each of the EMCO Shareholders (except Copperstate) is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act. Each EMCO Shareholder has such knowledge and experience in
business and financial matters that he, she or it is capable of evaluating the
merits and risks of an investment in the GPAR Shares, and is capable of bearing
the economic risks of such investment and is able to bear a complete loss of his
or its investment in the GPAR Shares. The EMCO Shareholders acknowledge that the
GPAR Shares have not been registered under the Securities Act and understand
that the GPAR Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or such sale is permitted pursuant to an
available exemption from such registration requirement.
3.29 Business Locations. As of the date hereof, EMCO has no office or
place of business other than as identified on Schedules 3.14(a) and 3.14(b) and
EMCO's principal place of business and chief executive office (as such terms are
used in subsection 9-401 of the Uniform Commercial Code as enacted in the State
of Arizona as of the date hereof) are indicated on Schedule 3.14(a) or 3.14(b),
and, all locations where the equipment, inventory, chattel paper and books and
records of EMCO are located as of the date hereof are fully identified on
Schedules 3.14(a) and 3.14(b).
3.30 Names; Prior Acquisitions. All names under which EMCO does business
as of the date hereof are specified on Schedule 3.30. Except as set forth on
Schedule 3.30, EMCO has not changed its name or used any assumed or fictitious
name, or been the surviving entity in a merger, acquired any business or changed
its principal place of business or chief executive office, within the past three
years.
3.31 No Commissions. Neither EMCO nor the EMCO Shareholders have incurred
any obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
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3.32 Inventory. To the best of their knowledge, all Assets that consist of
inventory (including raw materials and work-in-progress) (a) were acquired in
the ordinary course of business consistent with past practice; (b) are of a
quality, quantity, and condition useable or saleable in the ordinary course of
business within EMCO's normal inventory turnover experience; and (c) are valued
at the lower of cost or net realizable market value. EMCO has no material
liability with respect to the return or repurchase of any goods in the
possession of any customer.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by EMCO Pending the Merger. Except as set forth on
Schedule 4.1, EMCO covenants and agrees that, between the date of this Agreement
and the Effective Time, the business of EMCO shall be conducted only in, and
EMCO shall not take any action except in, the ordinary course of business,
consistent with past practice. EMCO shall use its best efforts to preserve
intact its business organization, to keep available the services of its current
officers, employees and consultants, and to preserve its present relationships
with customers, suppliers and other persons with which it has significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement, EMCO shall not, between the date of this
Agreement and the Effective Time, directly or indirectly, do or propose or agree
to do any of the following without the prior written consent of GPAR:
(a) amend or otherwise change its articles of incorporation or bylaws;
(b) issue, sell, pledge, dispose of, encumber, or, authorize the
issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares
of its capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest, of it or (ii) any of its
assets, tangible or intangible, except in the ordinary course of business
consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, for cash or shares of
stock, by merger, consolidation, or acquisition of stock or assets) any
interest in any corporation, partnership or other business organization or
division thereof or any assets, or make any investment either by purchase
of stock or securities, contributions of capital or property transfer, or,
except in the ordinary course of business, consistent with past practice,
purchase any property or assets of any other Person, (ii) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse or otherwise as an accommodation become responsible
for, the obligations of any Person, or make any loans or advances, or (iii)
enter into any Contract other than in the ordinary course of business,
consistent with past practice;
(f) increase the compensation payable or to become payable to its
officers or directors, or, except as presently bound to do, grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any of its directors or officers, or establish, adopt,
enter into or amend or take any action to accelerate any rights or benefits
under any collective bargaining, bonus, profit sharing, trust,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors or
officers;
(g) take any action other than in the ordinary course of business and
in a manner consistent with past practice with respect to accounting
policies or procedures;
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(h) pay, discharge or satisfy any existing claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of due and
payable liabilities reflected or reserved against in its financial
statements, as appropriate, or liabilities incurred after the date hereof
in the ordinary course of business and consistent with past practice;
(i) increase or decrease prices charged to its customers, except for
previously announced price changes or except in the ordinary course of
business, or take any other action which might reasonably result in any
material increase in the loss of customers through non-renewal or
termination of contracts or other causes; or
(j) agree, in writing or otherwise, to take or authorize any of the
foregoing actions.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
5.2 Compliance with Covenants. The EMCO Shareholders shall cause EMCO to
comply with all of the respective covenants of EMCO under this Agreement.
5.3 Cooperation. Each of the parties agrees to cooperate with the other in
the preparation and filing of all forms, notifications, reports and information,
if any, required or reasonably deemed advisable pursuant to any law, rule or
regulation or the rules of any exchange on which the GPAR Common Stock is listed
(the Nasdaq Stock Market) in connection with the transactions contemplated by
this Agreement and to use their respective best efforts to agree jointly on a
method to overcome any objections by any Governmental Authority to any such
transactions.
5.4 Access to Information. From the date hereof to the Effective Time,
EMCO and GPAR shall (and shall cause its directors, officers, employees,
auditors, counsel and agents to) afford each other and their officers,
employees, auditors, counsel and agents reasonable access at all reasonable
times to its properties, offices, and other facilities, to its officers and
employees and to all books and records, and shall furnish such persons with all
financial, operating and other data and information as may be requested. No
information provided to or obtained by GPAR or EMCO shall affect any
representation or warranty in this Agreement.
5.5 Notification of Certain Matters. The EMCO Shareholders and GPAR shall
give prompt notice to the other of the occurrence or non-occurrence of any event
which would likely cause any representation or warranty contained herein to be
untrue or inaccurate, or any covenant, condition, or agreement contained herein
not to be complied with or satisfied.
5.6 Tax Treatment. GPAR, EMCO, and the EMCO Shareholders will use their
respective best efforts to cause the Merger to qualify as a reorganization under
the provisions of Section 368(a) of the Code and will not take any action after
the Merger is effected to cause the Merger to lose its tax-free status. All
parties hereto agree to file the Plan of Merger with their respective federal
income tax returns for the year in which the Merger is effective, and to comply
with the reporting requirements of Treasury Regulation 1.368-3.
5.7 Confidentiality; Publicity. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement or the subject matter or terms hereof without the
prior consent of the other parties hereto. No press release or other public
announcement related to this Agreement or the transactions contemplated hereby
shall be issued by any party hereto without the prior approval of the other
parties, except that GPAR may make such public disclosure which it believes in
good faith to be required by law or by the terms of any listing agreement with
or requirements of a securities exchange (in which case GPAR will consult with
George Moorehead prior to making such disclosure).
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5.8 No Other Discussions. EMCO, the EMCO Shareholders, and their
respective Affiliates, employees, agents and representatives will not (i)
initiate, encourage the initiation by others of discussions or negotiations with
third parties or respond to solicitations by third persons relating to any
merger, sale or other disposition of any substantial part of the assets,
business or properties of EMCO (whether by merger, consolidation, sale of stock
or otherwise) or (ii) enter into any agreement or commitment (whether or not
binding) with respect to any of the foregoing transactions. The EMCO
Shareholders will immediately notify GPAR if any third party attempts to
initiate any solicitation, discussion or negotiation with respect to any of the
foregoing transactions.
5.9 Environmental Assessment. GPAR shall be entitled to have conducted
prior to Closing an environmental assessment of the Owned Properties and Leased
Premises (hereinafter referred to as "Environmental Assessment"). The
Environmental Assessment may include, but not be limited to, a physical
examination of the Owned Property or Leased Premises, and any structures,
facilities, or equipment located thereon, soil samples, ground and surface water
samples, storage tank testing, review of pertinent records, documents, and
Licenses of EMCO. The EMCO Shareholders shall provide GPAR or its designated
agents or consultants with the access to such property which GPAR, its agents or
consultants require to conduct the Environmental Assessment. If the
Environmental Assessment identifies environmental contamination which requires
remediation or further evaluation under the Environmental, Health, and Safety
Laws or if the results of the Environmental Assessment are otherwise not
satisfactory to GPAR in its sole discretion, and if EMCO elects not to remediate
or otherwise satisfy GPAR in its sole discretion, then GPAR may elect not to
close the transactions contemplated by this Agreement.
5.10 Trading in GPAR Common Stock. Except as otherwise expressly consented
to by GPAR, from the date of this Agreement until the Effective Time, neither
EMCO nor the EMCO Shareholders (nor any Affiliates thereof) will directly or
indirectly purchase or sell (including short sales) any shares of GPAR Common
Stock in any transactions effected on the Nasdaq Stock Market or otherwise.
5.11 Election of Directors. Prior to Closing, GPAR shall cause to be held
a meeting of the shareholders of GPAR for the purpose of amending its bylaws to
allow the Board of Directors to fix by resolution the number of the Board of
Directors on such Board. Immediately following the Closing, Donald Moorehead,
Ben Jennings and Gerard Jacobs shall cause the number of the Board of Directors
to be seven and shall appoint George Moorehead, Raymond Zack and Harold
Rubenstein to the Board of Directors of GPAR.
5.12 Registration Rights. If at any time during the period ending two
years after the Effective Time, GPAR shall determine to file a registration
statement under the Securities Act on Form S-3 (or other appropriate form for
the general registration of securities) for the registration of GPAR shares,
GPAR will provide written notice of such determination to the EMCO Shareholders,
which notice shall specify the number of GPAR common shares GPAR intends to
register. Upon the written request of any EMCO Shareholder given to GPAR within
ten days after the mailing of any such notice by GPAR, GPAR will cause the GPAR
Shares (including, without limitation, any shares of GPAR issued to the EMCO
Shareholders upon the exercise of the $4.00 Warrants or $6.00 Warrants) to be
included in such registration statement, subject to the limitations set forth
below. If the number of such GPAR Shares requested to be registered by the EMCO
Shareholders exceeds twenty percent (20%) of the number of total shares of GPAR
proposed to be registered, GPAR will reduce such GPAR Shares for which
registration was requested by EMCO Shareholders by the amount by which the GPAR
Shares exceed twenty percent (20%) of the total number of Shares to be
registered, on a pro rata basis according to the relation the number of GPAR
Shares held by each requesting EMCO Shareholder bears to the total number of
shares held by all such requesting EMCO Shareholders. Each EMCO Shareholder
registering GPAR Shares pursuant to this provision agrees to execute such other
agreements, documents and instruments and to take such other and further action
in connection with the registration of such shares as GPAR or the underwriters
may reasonably request. Notwithstanding the foregoing, GPAR may delay, withdraw
or suspend the preparation or filing of any registration statement as to which
it has provided notice to the EMCO Shareholders. The GPAR Board of Directors
shall determine who shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the disposition of GPAR Shares pursuant to
this sec. 5.12. The EMCO Shareholders agree to pay the fees and expenses of
counsel to the EMCO Shareholders.
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5.13 Directors and Officers Insurance. As soon as possible following the
Closing, GPAR shall either (i) obtain director and officer insurance in such
amount and such coverage as is reasonably satisfactory to its then existing
board of directors and officers; or (ii) shall indemnify its then existing board
of directors and officers pursuant to an indemnity agreement reasonably
satisfactory to such officers and directors.
5.14 Demand Registration Rights. At any time within two (2) years after
the Effective Time, on not more than one occasion, Copperstate may issue a
written demand to GPAR that it register up to 300,000 shares of the GPAR Shares
held by the Copperstate pursuant to a registration statement filed under the
Securities Act, which notice shall specify the number of GPAR Shares Copperstate
wishes to register. GPAR will use its best efforts to cause such shares to be
registered, subject to the limitations set forth below. In no event whatsoever
shall Copperstate have the right pursuant to this Section to registration of
more than 300,000 GPAR Shares in the aggregate. Furthermore, GPAR shall not be
required to register such shares if, in the reasonable opinion of GPAR or its
underwriter, such registration would be materially detrimental to GPAR and/or
its shareholders as a whole; provided, however, that in this event,
notwithstanding the first sentence of this Section 5.14, Copperstate shall be
entitled to another occasion to register such shares. Copperstate agrees to
execute such other agreements, documents, and instruments and to take such other
and further action in connection with the registration of such shares as GPAR or
the underwriters may reasonably request. GPAR shall pay and be responsible for
reasonable legal and accounting fees, filing and registration fees, incurred in
order to register Copperstate's Shares pursuant to this Section. Notwithstanding
the foregoing, Copperstate agrees to pay (i) all underwriting discounts and
commissions and transfer taxes, if any, relating to the disposition of GPAR
Shares pursuant to this Section 5.14, and (ii) the fees and expenses of counsel
to Copperstate.
5.15 Other Agreements. Upon the Closing, each party hereto that is a
signatory to any of Exhibits "A" through "K" agrees to execute and deliver such
Exhibit, as appropriate, to the other parties to such Exhibit, and each party
who is a married individual shall cause his spouse to execute all consents
requested by GPAR to consummate the transactions set forth herein.
5.16 Loan to EMCO. Prior to Closing, GPAR shall loan EMCO up to
$1,000,000, on terms and conditions mutually acceptable to Ben Jennings and
George Moorehead, provided that GPAR shall have no obligation to make any loan
to EMCO if GPAR's legal counsel advises GPAR that the making of such loan would
or might delay the Closing.
5.17 Ellis Metals, Inc. Ellis Metals, Inc. and EMCO have entered into a
Pricing Agreement (the "Pricing Agreement") dated July 15, 1995. EMCO also loans
money to Ellis Metals, Inc. from time to time; the outstanding balance of such
loan (principal and all accrued interest) at any given time is herein referred
to as the "Ellis Metals Debt." Harold Rubenstein, Beverly Rubenstein, The
Rubenstein Family Trust, and H&S Broadway (collectively, "Seller") and GPAR have
entered into a Contract of Sale (the "Contract of Sale") dated February 16, 1996
to purchase the "Stone Parcel" and the "Euclid Parcel" (as defined in the
Contract of Sale) from Seller. On a quarterly basis for a period of sixty (60)
months following the Closing, Harold Rubenstein shall cause Ellis Metals, Inc.
to meet with EMCO and GPAR, and to agree with EMCO and GPAR upon modifications
and extensions of the Pricing Agreement that shall provide GPAR with
commercially reasonable rentals paid by Ellis Metals, Inc. on the Stone Parcel
and the Euclid Parcel, and that shall provide EMCO with commercially reasonable
profits on the Ellis Metals Debt and on its other business transactions with
Ellis Metals, Inc.; provided, that EMCO and GPAR shall have the option,
exercisable unilaterally by them in their discretion, to extend the Pricing
Agreement and the foregoing arrangements for an additional sixty (60) months by
giving written notice thereof to Harold Rubenstein and Ellis Metals, Inc.;
provided further that on and after June 1, 1999, so long as the Pricing
Agreement and the foregoing arrangements are in effect, EMCO and GPAR shall have
the option (the "Ellis Metals Purchase Option"), exercisable unilaterally in
their discretion, to purchase certain assets of Ellis Metals, Inc. pursuant to a
contract which shall be substantially in the form of the draft Purchase
Agreement dated February 2, 1996, attached hereto as Exhibit "L"; provided
further, that the net purchase price payable by EMCO and GPAR under said
Purchase Agreement shall be reduced, dollar-for-dollar, by the outstanding
principal balance of the Ellis Metals Debt on the date of the purchase; and
provided further, that if EMCO and GPAR for any reason
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do not exercise the Ellis Metals Purchase Option, then the then outstanding
balance of the Ellis Metals Debt shall be due and payable upon the termination
of the Pricing Agreement.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE GPAR COMPANIES
The obligations of the GPAR Companies hereunder shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
or all of which may be waived in whole or in part by the GPAR Companies:
6.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the EMCO Shareholders
contained in this Agreement shall be true and correct at and as of the Effective
Time with the same force and effect as though made at and as of that time except
(i) for changes specifically permitted by or disclosed pursuant to this
Agreement, and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date. Each of EMCO and the EMCO Shareholders shall have performed and complied
with all of their respective obligations required by this Agreement to be
performed or complied with at or prior to the Effective Time. Each of EMCO and
the EMCO Shareholders shall have delivered to GPAR a certificate, dated as of
the Effective Time, duly signed (in the case of EMCO, Copperstate and Empire by
its President), stating that such representations and warranties are true and
correct and that all such obligations have been performed and complied with.
6.2 No Material Adverse Change or Destruction of Property. Between the
date hereof and the Effective Time, (i) there shall have been no Material
Adverse Change to EMCO, (ii) there shall have been no adverse federal, state or
local legislative or regulatory change affecting in any material respect the
services, products or business of EMCO, and (iii) none of the properties and
assets of EMCO shall have been damaged by fire, flood, casualty, act of God or
the public enemy or other cause (regardless of insurance coverage for such
damage) which damages may have a Material Adverse Effect thereon, and there
shall have been delivered to GPAR a certificate to that effect, dated the
Effective Time and signed by or on behalf of EMCO.
6.3 Corporate Certificate. The EMCO Shareholders shall have delivered to
GPAR (i) copies of the articles of incorporation and bylaws of EMCO as in effect
immediately prior to the Effective Time, (ii) copies of resolutions adopted by
the Board of Directors and shareholders of EMCO authorizing the transactions
contemplated by this Agreement, and (iii) a certificate of good standing of EMCO
issued by the Corporation Commission of the State of Arizona and each other
state in which it is qualified to do business as of a date not more than thirty
days prior to the Effective Time, certified in each case as of the Effective
Time by the Secretary as being true, correct and complete.
6.4 Opinion of Counsel. GPAR shall have received an opinion dated as of
the Effective Time from counsel for EMCO and the EMCO Shareholders, in form and
substance acceptable to GPAR, to the effect that:
(i) EMCO is a corporation duly organized and existing and in good
standing under the laws of the State of Arizona and is authorized to carry
on the business now conducted by it and to own or lease the properties now
owned or leased by it;
(ii) EMCO has obtained all necessary authorizations and consents of
its Board of Directors and the Shareholders to effect the transactions
contemplated in this Agreement, including the merger of the GPAR Merger Sub
into EMCO;
(iii) All issued and outstanding shares of capital stock of EMCO are
owned as set forth on Schedule 3.5 hereto;
(iv) Except as set forth in Schedule 3.12, such counsel has no actual
knowledge (without any independent investigation of any sort) of any
litigation, proceeding or investigation pending or threatened
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which might result in any material adverse change in the properties,
business or prospects or in the condition of EMCO, or which questions the
validity of this Agreement;
(v) Such counsel has no actual knowledge (without any independent
investigation of any sort) of any event has occurred or state of facts
exists which would constitute a breach of any of the representations and
warranties made by the EMCO Shareholders pursuant to Article III of this
Agreement;
(vi) This Agreement is a valid and binding obligation of EMCO and the
EMCO Shareholders, and enforceable against each of them in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of
creditors' rights generally.
6.5 Consents. EMCO shall have received consents to the transactions
contemplated hereby and waivers of rights to terminate or modify any material
rights or obligations of EMCO from any person from whom such consent or waiver
is required under any Designated Contract or instrument as of a date not more
than ten days prior to the Effective Time, or who, as a result of the
transactions contemplated hereby, would have such rights to terminate or modify
such Contracts or instruments, either by the terms thereof or as a matter of
law.
6.6 Securities Laws. GPAR shall have received all necessary consents and
otherwise complied with any state Blue Sky or securities laws applicable to the
issuance of the GPAR Shares, in connection with the transactions contemplated
hereby.
6.7 EMCO Stock. At the Closing, each of the EMCO Shareholders shall have
delivered all certificates evidencing the shares of capital stock of EMCO held
by him, her or it, together with stock powers for the Held Back Shares.
6.8 No Adverse Litigation. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the Agreement or Merger or any other transaction contemplated hereby, and which,
in the judgment of GPAR, makes it inadvisable to proceed with the Agreement and
Merger and other transactions contemplated hereby.
6.9 Board Approval. The Board of Directors of the GPAR Companies shall
have authorized and approved this Agreement, the Merger and transactions
contemplated hereby.
6.10 Shareholder Approval. The Shareholders of GPAR shall have authorized
and approved this Agreement, the Merger and the transactions contemplated
thereby.
6.11 Employment Agreements. At or prior to the Closing, EMCO shall have
entered into employment agreements (the form of which is attached hereto as
Exhibit "D") with each of Raymond Zack, Gerald Zack, and David Zack.
6.12 Ellis Metals, Inc. At or prior to the Closing, a wholly-owned
subsidiary of GPAR shall have purchased or leased all or substantially all of
the assets of Ellis Metals, Inc., an Arizona corporation, on terms mutually
agreeable to the GPAR subsidiary and Ellis Metals, Inc.
6.13 Fairness Opinion. GPAR shall have received from First Southwest
Securities or other investment advisor a written opinion that this Agreement and
the transactions set forth herein are fair to GPAR and its shareholders.
6.14 Purchase Review. GPAR's independent public accountants shall have
reviewed the assets, liabilities, and net worth of EMCO and the results of such
review shall not materially adversely differ from the unaudited October 31, 1995
Financial Statements delivered to GPAR by EMCO.
6.15 Other Closing Transactions. Prior to or at Closing, (i) Copperstate
and Empire shall have transferred to EMCO all of their interest in any assets
currently reflected on EMCO's unaudited balance sheet dated September 30, 1995,
including the execution of any certificates of title, as appropriate, to reflect
EMCO's ownership of vehicles; (ii) EMCO and each other party to such contract
shall have canceled that
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certain Operating Agreement, Shareholders Agreement, the Lease from EMCO, L.L.C.
to Copperstate, Reimbursement Agreement, February 15, 1995 letter agreement
whereby Don and/or George Moorehead receive "Bonus Interest," and EMCO's
Employment Agreements with Raymond Zack, David Zack and Gerald Zack; (iii) GPAR
shall have received a title policy insuring its title to the real property owned
by EMCO as set forth on Schedule 3.14 which shows no Liens other than Liens
disclosed therein; (iv) EMCO and the Mooreheads shall restructure the Security
Agreement upon terms satisfactory to all parties; (v) EMCO shall have entered
into an employment agreement with George Moorehead which is acceptable to GPAR,
the terms of which shall include the issuance to George Moorehead of stock
options entitling him to purchase 150,000 shares of GPAR Common Stock at $4.00
per share, the options being exercisable within 10 years of the date of grant,
all of which options shall be fully vested at the time of grant (on the
condition that GPAR's shareholders approve an amendment to GPAR's 1995 Stock
Option Plan increasing the number of shares authorized to be issued under such
plan); (vi) Ellis Waste, Inc. and Empire shall have repaid to EMCO all
indebtedness (if any) owing to EMCO; (vii) Copperstate shall have executed and
delivered to EMCO that certain Indemnity Agreement attached hereto as Exhibit
"E" and that certain Stock Pledge and Security Agreement attached hereto as
Exhibit "F"; (viii) Empire and Harold Rubenstein shall have executed and
delivered to GPAR and/or EMCO that certain Indemnity Agreement attached hereto
as Exhibit "G"; (ix) Empire shall have executed and delivered to GPAR and/or
EMCO that certain Stock Pledge and Security Agreement attached hereto as Exhibit
"H"; (x) Harold Rubenstein and George Moorehead shall have executed and
delivered to EMCO a noncompetition agreement in the form of Exhibit "I" attached
hereto; (xi) Empire and Empire CAN dba C.A.N.S. Recycling, Inc. shall have
assigned to EMCO all of their respective interests in certain leaseholds
currently possessed by EMCO; (xii) Harold Rubenstein shall have entered into a
consulting agreement with EMCO in the form of Exhibit "J" attached hereto; and
(xiii) GPAR shall have entered into employment agreements with T. Benjamin
Jennings and Gerard M. Jacobs which are acceptable to such parties and the EMCO
Shareholders.
6.16 Extension of Due Diligence Period. As of the date of this Agreement,
GPAR has not completed its due diligence review of EMCO. Prior to Closing, (i)
GPAR shall have received and had a reasonable opportunity to review all
documents and information requested by GPAR under Section 5.4, and (ii) such
documents and information shall not, in GPAR's reasonable judgment, disclose a
Material Adverse Effect as to EMCO.
6.17 Extension for Disclosure Schedules. As of the date of this Agreement,
EMCO has not completed the disclosure schedules referred to in Article III of
this Agreement. EMCO shall have seven business days to deliver such disclosure
schedules to GPAR. Within seven (7) business days thereafter, GPAR shall review
the disclosure schedules, and such disclosure schedules must be satisfactory to
GPAR as determined in its sole discretion.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
EMCO AND THE EMCO SHAREHOLDERS
The obligations of EMCO and the EMCO Shareholders to effect the Merger and
sale shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions, any or all of which may be waived in whole or in part
by EMCO and the EMCO Shareholders:
7.1 Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the GPAR Companies contained
in this Agreement shall be true and correct at and as of the Effective Time with
the same force and effect as though made at and as of that time except (i) for
changes specifically permitted by or disclosed pursuant to this Agreement, and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date. Each of the
GPAR Companies shall have performed and complied with all of its obligations
required by this Agreement to be performed or complied with at or prior to the
Effective Time. Each of the GPAR Companies shall have delivered to the EMCO
Shareholders a certificate, dated as of the Effective Time, and signed by an
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executive officer, certifying that such representations and warranties are true
and correct and that all such obligations have been performed and complied with.
7.2 GPAR Shares. At the Closing, GPAR shall have issued all of the GPAR
Shares and shall have delivered to the EMCO Shareholders (i) certificates
representing the GPAR Shares issued to them hereunder (except for the Held Back
Shares); (ii) the $4.00 Warrants, (iii) the $6.00 Warrants, and (iv) One Million
One Hundred Fifty Thousand and No/100 Dollars ($1,150,000.00) in cash or
immediately available funds.
7.3 No Adverse Litigation. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the Agreement or Merger or any other transaction contemplated hereby, and which
in the judgment of the EMCO Shareholders makes it inadvisable to proceed with
the Agreement or Merger and other transactions.
7.4 No Material Adverse Change or Destruction of Property. Between the
date hereof and the Effective Time, (i) there shall have been no Material
Adverse Change to GPAR, (ii) there shall have been no adverse federal, state or
local legislative or regulatory change affecting in any material respect the
services, products or business of GPAR, and (iii) none of the properties and
assets of GPAR shall have been damaged by fire, flood, casualty, act of God or
the public enemy or other cause (regardless of insurance coverage for such
damage) which damages may have a Material Adverse Effect thereon, and there
shall have been delivered to the EMCO Shareholders a certificate to that effect,
dated the Effective Time and signed by or on behalf of GPAR.
7.5 Corporate Certificate. GPAR shall have delivered to the EMCO
Shareholders (i) copies of resolutions adopted by the Board of Directors and
shareholders of GPAR authorizing the transactions contemplated by this
Agreement, and (iii) a certificate of good standing of GPAR issued by the
Corporation Commission of the State of Delaware as of a date not more than
thirty days prior to the Effective Time, certified in each case as of the
Effective Time by the Secretary as being true, correct and complete.
7.6 Opinion of Counsel. The EMCO Shareholders shall have received an
opinion dated as of the Effective Time from counsel for GPAR, in form and
substance acceptable to the EMCO Shareholders, to the effect that:
(i) GPAR is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware and is authorized to carry
on the business now conducted by it and to own or lease the properties now
owned or leased by it;
(ii) GPAR has obtained all necessary authorizations and consents of
its Board of Directors and the Shareholders to effect the transactions
contemplated in this Agreement hereto;
(iii) All issued and outstanding shares of capital stock of GPAR are
owned as set forth In Section 2.4;
(iv) Such counsel has no actual knowledge (without any independent
investigation of any sort) of any litigation, proceeding or investigation
pending or threatened which might result in any material adverse change in
the properties, business or prospects or in the condition of GPAR, or which
questions the validity of this Agreement;
(v) Such counsel has no actual knowledge (without any independent
investigation of any sort) of any event has occurred or state of facts
exists which would constitute a breach of any of the representations and
warranties made by GPAR pursuant to Article II of this Agreement;
(vi) This Agreement is a valid and binding obligation of GPAR, and
enforceable against it in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally.
7.7 No Adverse Litigation. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit, invalidate or collect damages arising out of
the Agreement or Merger or any other transaction contemplated hereby, and which,
in
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the judgment of the EMCO Shareholders, makes it inadvisable to proceed with the
Agreement and Merger and other transactions contemplated hereby.
7.8 Employment Agreements. At or prior to the Closing, EMCO shall have
entered into employment agreements (the form of which is attached hereto as
Exhibit "D") with each of Raymond Zack, Gerald Zack, and David Zack.
ARTICLE VIII
INDEMNIFICATION
8.1 Agreement by the Shareholders to Indemnify. Each of the EMCO
Shareholders, jointly and severally, agrees to indemnify and hold the GPAR
Companies harmless from and against the aggregate of all Indemnifiable Damages
(as defined below).
(a) For purposes of this Agreement, "Indemnifiable Damages" means,
without duplication, the aggregate of all expenses, losses, costs,
deficiencies, liabilities and damages (including, without limitation,
related counsel and paralegal fees and expenses) incurred or suffered by
GPAR, on a pre-tax consolidated basis, to the extent (i) resulting from any
breach of a representation or warranty made by the EMCO Shareholders in or
pursuant to this Agreement, (ii) resulting from any breach of the covenants
or agreements made by any party pursuant to this Agreement, or (iii)
resulting from any inaccuracy in any certificate delivered by EMCO or any
EMCO Shareholder pursuant to this Agreement.
(b) Without limiting the generality of the foregoing, with respect to
the measurement of Indemnifiable Damages, GPAR shall have the right to be
put in the same pre-tax consolidated financial position as it would have
been in had each of the representations and warranties of the EMCO
Shareholders hereunder been true and correct and had the covenants and
agreements of EMCO, and the EMCO Shareholders hereunder been performed in
full.
(c) Each of the representations and warranties made by the EMCO
Shareholders in this Agreement or pursuant hereto shall survive for a
period of one year after the Effective Time except the representations and
warranties of the EMCO Shareholders contained in Sections 3.1, 3.2, 3.3,
3.4, and 3.5 shall not expire, but shall continue indefinitely. No claim
for the recovery of Indemnifiable Damages may be asserted by the GPAR
Companies against the EMCO Shareholders after such representations and
warranties shall thus expire, provided, however, that claims for
Indemnifiable Damages first asserted within the applicable period shall not
thereafter be barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the right
to fully rely on the representations, warranties, covenants and agreements
of the other parties contained in this Agreement or in any other documents
or papers delivered in connection herewith. Each representation, warranty,
covenant and agreement of the parties contained in this Agreement is
independent of each other representation, warranty, covenant and agreement.
(d) In the event that the GPAR Companies believe they are entitled to
a claim for any Indemnifiable Damages hereunder, the GPAR Companies shall
promptly give written notice to the EMCO Shareholders of such claim and the
amount or the estimated amount of such claim, and the basis for such claim.
If the EMCO Shareholders do not pay the amount of the claim for
Indemnifiable Damages to GPAR within ten (10) days, then GPAR may exercise
its rights under Paragraph 8.4; or, if GPAR believes it is entitled to a
claim for Indemnifiable Damages due to a breach of a representation and/or
warranty under Sections 3.1, 3.2, 3.3, 3.4 or 3.5, or breach of a covenant
pursuant to Article V, then GPAR may take any action or exercise any remedy
available to it by appropriate legal proceedings to collect the
Indemnifiable Damages.
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8.2 Agreement by the GPAR Companies to Indemnify. The GPAR Companies agree
to indemnify and hold the EMCO Shareholders harmless from and against the
aggregate of all EMCO Indemnifiable Damages (as defined below).
(a) For purposes of this Agreement, "EMCO Indemnifiable Damages"
means, without duplication, the aggregate of all expenses, losses, costs,
deficiencies, liabilities and damages (including, without limitation,
related counsel and paralegal fees and expenses) incurred or suffered by
the EMCO Shareholders, on a pre-tax consolidated basis, to the extent (i)
resulting from any breach of a representation or warranty made by the GPAR
in or pursuant to this Agreement, (ii) resulting from any breach of the
covenants or agreements made by GPAR in or pursuant to this Agreement, or
(iii) resulting from any inaccuracy in any certificate delivered by GPAR
pursuant to this Agreement.
(b) Without limiting the generality of the foregoing, with respect to
the measurement of EMCO Indemnifiable Damages, each EMCO Shareholder shall
have the right to be put in the same pre-tax consolidated financial
position as he, she or it would have been in had each of the
representations and warranties of GPAR hereunder been true and correct and
had the covenants and agreements of GPAR hereunder been performed in full.
(c) Each of the representations and warranties made by the GPAR in
this Agreement or pursuant hereto shall survive for a period of one year
after the Effective Time, notwithstanding any investigation at any time
made by or on behalf of the EMCO Shareholders, and upon expiration of such
one year period, such representations and warranties shall expire, except
for the representations contained in Sections 2.1, 2.2, 2.3 and 2.4. No
claim for the recovery of EMCO Indemnifiable Damages may be asserted by the
EMCO Shareholder against the GPAR Companies after such representations and
warranties shall thus expire, provided, however, that claims for
Indemnifiable Damages first asserted within the applicable period shall not
thereafter be barred. Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall have the right
to fully rely on the representations, warranties, covenants and agreements
of the other parties contained in this Agreement or in any other documents
or papers delivered in connection herewith. Each representation, warranty,
covenant and agreement of the parties contained in this Agreement is
independent of each other representation, warranty, covenant and agreement.
(d) In the event that the EMCO Shareholders believe they are entitled
to a claim for any Indemnifiable Damages hereunder, the EMCO Shareholders
shall promptly give written notice to the GPAR Companies of such claim and
the amount or the estimated amount of such claim, and the basis for such
claim.
8.3 Conditions of Indemnification. The obligations and liabilities of
EMCO, the EMCO Shareholders and the GPAR Companies hereunder with respect to
their respective indemnities pursuant to this Article VIII resulting from any
claim or other assertion of liabilities by third parties (hereinafter called
collectively "Claims"), shall be subject to the following terms and conditions:
(a) the party seeking indemnification (the "Indemnified Party") must
give the other party or parties, as the case may be (the "Indemnifying
Party"), notice of any such Claim twenty (20) days after the Indemnified
Party receives notice thereof;
(b) the Indemnifying Party shall have the right to undertake, by
counsel or other representatives of its own choosing, the defense of such
Claim; provided, however, if a Claim is made against GPAR which exceeds the
value of the Held Back Shares at such time, GPAR shall have the right to
control the defense of the Claim;
(c) in the event that the Indemnifying Party shall elect not to
undertake such defense, or within a reasonable time after notice of any
such Claim from the Indemnified Party shall fail to defend, the Indemnified
Party (upon further written notice to the Indemnifying Party) shall have
the right to undertake the defense, compromise or settlement of such Claim,
by counsel or other representatives of its own choosing, on behalf of and
for the account and risk of the Indemnifying Party (subject to the right of
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the Indemnifying Party to assume defense of such Claim at any time prior to
settlement, compromise or final determination thereof);
(d) Anything in this Section 8.3 to the contrary notwithstanding, (A)
the Indemnified Party shall have the right, at its own cost and expense, to
have its own counsel to protect its own interests and participate in the
defense, compromise or settlement of the Claim, (B) the Indemnifying Party
shall not, without the Indemnified Party's written consent, settle or
compromise any Claim or consent to entry of any judgement which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in
respect of such Claim, and (C) the Indemnified Party, by counsel or other
representatives of its own choosing and at its sole cost and expense, shall
have the right to consult with the Indemnifying Party and its counsel or
other representatives concerning such Claim, and the Indemnifying Party and
the Indemnified Party and their respective counsel shall cooperate with
respect to such Claim.
8.4 Security for the Shareholders' Indemnification Obligation. As security
for the agreement by the EMCO Shareholders to indemnify and hold GPAR harmless
as described in Section 8.1 and (with regard to Empire only) as security for
Empire's obligations pursuant to the Indemnity Agreement attached hereto as
Exhibit "G," at the Closing, Empire, Copperstate, Donald Moorehead and George
Moorehead shall assign and deliver to GPAR certificates representing 250,000,
103,496, 31,451, and 34,202 shares, respectively, of the GPAR Shares (the "Held
Back Shares") issued pursuant to this Agreement, which Held Back Shares shall be
issued in the name of and owned by such EMCO Shareholders, as appropriate, but
in which GPAR shall hold and possess a security interest.
(a) At Closing, Copperstate, Donald Moorehead, and George Moorehead
shall execute and deliver to GPAR a Collateral Agreement in the form of
Exhibit "K" attached hereto to evidence the agreements in this Section 8.4.
(b) Empire shall also grant GPAR a security interest in certain
warrants issued to Empire hereunder. At Closing, Empire shall execute and
deliver to GPAR a Stock Pledge and Security Agreement in the form of
Exhibit "H" to evidence the agreements in this Section 8.4.
(c) Within fifteen (15) days following the end of each three-month
period subsequent to the Effective Date, GPAR shall deliver to Copperstate,
Donald Moorehead and George Moorehead one-fourth of the Held Back Shares
owned by them; provided, however, that GPAR need not deliver such Shares if
GPAR has asserted a claim against such Held Back Shares in connection with
the indemnification provisions set forth herein.
(d) Except as set forth in subparagraph (e) below and except for any
breach of a representation and/or warranty under Section 3.1, 3.2, 3.3, 3.4
or 3.5, (i) the liability of the EMCO Shareholders for any Indemnifiable
Damage due to a breach of Article III shall be limited to the Held Back
Shares; (ii) the obligations of the EMCO Shareholders hereunder for a
breach of Article III shall be nonrecourse, and (iii) GPAR shall not seek
from any of the EMCO Shareholders personally any claim for any
Indemnifiable Damage due to a breach of Article III.
(e) Empire and Harold Rubenstein shall be liable for all obligations
set forth in the Indemnity Agreement attached hereto as Exhibit "G."
ARTICLE IX
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other disposition
after Effective Time of the GPAR Shares:
9.1 Disposition of Shares. The EMCO Shareholders represent and warrant
that the shares of GPAR Common Stock being acquired by them hereunder are being
acquired and will be acquired for their own respective accounts and will not be
sold or otherwise disposed of, except pursuant to (a) an exemption from
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the registration requirements under the Securities Act, which does not require
the filing by the GPAR Companies with the SEC of any registration statement,
offering circular or other document, in which case the EMCO Shareholders shall
first supply to the GPAR Companies an opinion of counsel (which counsel and
opinions shall be satisfactory to the GPAR Companies) that such exception is
available, or (ii) an effective registration statement filed by GPAR with the
SEC under the Securities Act.
9.2 Legend. The certificates representing the GPAR Shares shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF RULE
145(D) PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE ACT WITH RESPECT
THERETO OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE, AND ALSO MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE
HOLDER WITHOUT COMPLIANCE WITH THE SECURITIES AND EXCHANGE COMMISSION'S
ACCOUNTING SERIES RELEASES 130 AND 135.
GPAR may, unless a registration statement is in effect covering such shares,
place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
ARTICLE X
DEFINITIONS
10.1 Defined Terms. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date
hereof.
"Contract" means any indenture, lease, sublease, license, loan agreement,
mortgage, note, indenture, restriction, will, trust, commitment, obligation or
other contract, agreement or instrument, whether written or oral.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GPAR Shares" means the shares of GPAR Common Stock which the EMCO
Shareholders will receive in connection with the Merger.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, but not limited to, any conditional sale or other
title retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
comparable law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge).
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"Material Adverse Change (or Effect)" means a change (or effect), in the
condition (financial or otherwise), properties, assets, liabilities, rights,
obligations, operations, business or prospects which change (or effect)
individually or in the aggregate, is materially adverse to such condition,
properties, assets, liabilities, rights, obligations, operations, business or
prospects.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, estate, trust, unincorporated association, joint venture,
Governmental Authority or other entity, of whatever nature.
"Register", "registered" and "registration" refer to a registration of the
offering and sale of securities effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or ordering
of the effectiveness of such registration statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Tax Return" means any tax return, filing or information statement required
to be filed in connection with or with respect to any Taxes; and
"Taxes" means all taxes, fees or other assessments, including, but not
limited to, income, excise, property, sales, franchise, intangible, withholding,
social security and unemployment taxes imposed by any federal, state, local or
foreign governmental agency, and any interest or penalties related thereto.
"Warrants" means the stock warrants described in Section 1.3.
10.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificates, reports or other documents made or delivered
pursuant hereto or thereto, unless the context otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning when used
in the plural, and vice versa.
(c) All matters of an accounting nature in connection with this Agreement
and the transactions contemplated hereby shall be determined in accordance with
GAAP applied on a basis consistent with prior periods, where applicable.
(d) As used herein, the neuter gender shall also denote the masculine and
feminine, and the masculine gender shall also denote the neuter and feminine,
where the context so permits.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of all of the parties hereto at any time
prior to the Closing; or
(b) by GPAR in the event of a material breach by EMCO or any of the EMCO
Shareholders of any provision of this Agreement; or
(c) if the Closing shall not have occurred by June 30, 1996.
11.2 Effect of Termination. Except as provided in Article VI, in the event
of termination of this Agreement pursuant to Section 11.1, this Agreement and
the Plan of Merger shall forthwith become void; provided, however, that nothing
herein shall relieve any party from liability for the willful breach of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
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ARTICLE XII
GENERAL PROVISIONS
12.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage prepaid), guaranteed overnight delivery,
or facsimile transmission if such transmission is confirmed by delivery by
certified or registered mail (first class postage pre-paid) or guaranteed
overnight delivery, to the following addresses and telecopy numbers (or to such
other addresses or telecopy numbers which such party shall designate in writing
to the other party):
(a) IF TO ANY OF THE GPAR COMPANIES TO:
General Parametrics Corp.
12 Country Lane
Northfield, IL 60093
Attn: T. Benjamin Jennings, Chairman
Telecopy No.: (708) 446-9108
General Parametrics Corp.
7600 Augusta Street
River Forest, IL 60305
Attn: Mr. Gerard Jacobs, President
Telecopy No.: (708) 366-0891
WITH A COPY TO:
Meadows, Owens, Collier, Reed,
Cousins & Blau, L.L.P.
901 Main Street, Suite 3700
Dallas, Texas 75202
Attn: Fielder F. Nelms, Esq.
Telecopy No.: (214) 747-3732
(b) IF TO EMCO OR THE EMCO SHAREHOLDERS TO:
EMCO Recycling Corp.
3700 W. Lower Buckeye
Phoenix, Arizona 85009
Attn: Mr. George Moorehead, President
Telecopy No.: (602) 447-3020
WITH A COPY TO:
Sacks Tierney P.A.
2929 N. Central Avenue
Fourteenth Floor
Phoenix, Arizona 85012-2742
Attn: Rob Kimball
Telecopy No.: (602) 279-2027
12.2 Entire Agreement. This Agreement (including the Exhibits and
Schedules attached hereto) and other documents delivered at the Closing pursuant
hereto, contains the entire understanding of the parties in respect of its
subject matter and supersedes all prior agreements and understandings (oral or
written) between or among the parties with respect to such subject matter. The
Exhibits and Schedules constitute a part hereof as though set forth in full
above.
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12.3 Expenses. Except as otherwise provided herein, the parties shall pay
their own fees and expenses, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby.
12.4 Amendment; Waiver. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
12.5 Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by EMCO or any EMCO Shareholders without the prior
written consent of GPAR.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
12.7 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Time shall be of the essence in this Agreement.
12.8 Governing Law; Interpretation. This Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
Arizona applicable to contracts executed and to be wholly performed within such
State.
12.9 Arm's Length Negotiations. Each party herein expressly represents and
warrants to all other parties hereto that (a) before executing this Agreement,
said party has fully informed itself of the terms, contents, conditions and
effects of this Agreement; (b) said party has relied solely and completely upon
its own judgment in executing this Agreement; (c) said party has had the
opportunity to seek and has obtained the advice of counsel before executing this
Agreement; (d) said party has acted voluntarily and of its own free will in
executing this Agreement; (e) said party is not acting under duress, whether
economic or physical, in executing this Agreement; and (f) this Agreement is the
result of arm's length negotiations conducted by and among the parties and their
respective counsel.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
<TABLE>
<S> <C>
GENERAL PARAMETRICS CORP.,
a Delaware corporation
Date: March 7, 1996 By: /s/ T. BENJAMIN JENNINGS
----------------------------------------
Name: T. Benjamin Jennings
Title: Co-Chairman of the Board,
Co-President and Co-Chief Executive Officer
</TABLE>
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<PAGE> 41
<TABLE>
<S> <C>
GPAR MERGER, INC.,
an Arizona corporation
Date: March 7, 1996 By: /s/ T. BENJAMIN JENNINGS
--------------------------------------------
Name: T. Benjamin Jennings
Title: President
EMCO RECYCLING CORP.,
an Arizona corporation
Date: March 7, 1996 By: /s/ GEORGE O. MOOREHEAD
----------------------------------------
Name: George O. Moorehead
Title: President
COPPERSTATE METALS, INC.,
an Arizona corporation
Date: March 7, 1996 By: /s/ DAVID M. ZACK
--------------------------------------------
Name: David M. Zack
Title: President
EMPIRE METALS, INC.,
an Arizona corporation
Date: March 7, 1996 By: /s/ HAROLD RUBENSTEIN
----------------------------------------
Name: Harold Rubenstein
Title: President
Date: March 7, 1996 /s/ HAROLD RUBENSTEIN
--------------------------------------------
Harold Rubenstein
Date: March 7, 1996 /s/ GERALD ZACK
--------------------------------------------
Gerald Zack
Date: March 7, 1996 /s/ DAVID ZACK
--------------------------------------------
David Zack
Date: March 7, 1996 /s/ RAYMOND ZACK
--------------------------------------------
Raymond Zack
</TABLE>
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<TABLE>
<S> <C>
Date: March 7, 1996 /s/ DONALD MOOREHEAD
--------------------------------------------
Donald Moorehead
Date: March 7, 1996 /s/ GEORGE MOOREHEAD
--------------------------------------------
George Moorehead
</TABLE>
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EXHIBIT B
THE MERGER AND RELATED TRANSACTIONS
GENERAL
The Agreements provide for the merger of a newly formed, wholly-owned
subsidiary of GPC with and into EMCO, with EMCO to be the surviving corporation
of the Merger and a wholly-owned subsidiary of GPC. The discussion in this Joint
Proxy Statement of the Merger and the description of the principal terms of the
Agreements are subject to and qualified in their entirety by reference to the
Merger Agreement and the Agreement of Merger, copies of which are attached to
this Joint Proxy Statement as Appendices A and B, respectively and incorporated
herein by reference.
Following the Merger, the GPC Board intends to appoint three additional
persons to the Board of Directors, consisting of George O. Moorehead, Harold
Rubenstein and Raymond Zack, for a Board of seven members. The current board of
directors of EMCO will be replaced by a new slate of directors which will
consist of the Board of GPC. The executive officers of GPC and EMCO following
the Merger will be as set forth below in "Management -- Management of GPC
following the Merger."
BACKGROUND OF THE MERGER
In May 1993, Donald F. Moorehead, together with his brother George O.
Moorehead, acquired an aggregate of 10% of the issued and outstanding shares of
EMCO. Additionally, in February 1995 Messrs. Moorehead entered into agreements
with Empire Metals, Inc. to purchase 2,000 shares of EMCO Common Stock over a
70-month period. As a result, Messrs. Moorehead currently hold an aggregate of
13% of the Common Stock of EMCO.
On or about March 3, 1994, T. Benjamin Jennings, then a director of First
Southwest Company, a private investment banking firm in Dallas, Texas was
invited by Donald F. Moorehead to attend a meeting of the Board of Directors of
EMCO for the purpose of discussing various methods of raising capital to be used
for acquisitions of equipment and/or other existing scrap operations. At the
Board meeting, Mr. Jennings discussed with the EMCO directors various methods of
raising capital including private debt financings, institutional financing, an
initial public offering and merger with public companies. The EMCO Board
discussed retaining First Southwest to act as a financial advisor should any of
the mentioned activities be undertaken. However, due to the Board's conclusion
that any such transaction would be premature at such time, the Board determined
not to retain First Southwest.
On July 17, 1995, Herbert B. Baskin, formerly the President, Chief
Executive Officer and Chairman of the Board of Directors of GPC sold an
aggregate of 1,400,000 shares of Common Stock of GPC to Gerard M. Jacobs, T.
Benjamin Jennings, Donald F. Moorehead and Blue Bird Partners, a general
partnership of which the two general partners are charitable remainder unit
trusts of which Louis D. Paolino serves as trustee (the "Purchasers") at a
purchase price of $2.00 per share for a total purchase price of $2,800,000
pursuant to a Common Stock Purchase Agreement between Mr. Baskin and the
Purchasers dated July 7, 1995. The allocation of the shares was as follows:
Gerard M. Jacobs, 450,000 shares; T. Benjamin Jennings, 450,000 shares; Donald
F. Moorehead, 250,000 shares; and Blue Bird Partners, 250,000 shares. The amount
of funds used to purchase the 1,150,000 shares purchased by Messrs. Jennings and
Jacobs and Blue Bird Partners was a total of $2,300,000. Each of Messrs. Jacobs
and Jennings used his own personal funds and funds that he obtained as a result
of borrowing through a margin account with a brokerage firm. Blue Bird Partners
used funds of the trusts of which Louis D. Paolino is trustee. Donald F.
Moorehead used his own personal funds and funds that he obtained as a result of
borrowing through a margin account with a brokerage in purchasing his shares.
Following the purchase of the shares, the Purchasers held an aggregate of
approximately 27.4% of the outstanding common stock of GPC.
On July 24, 1995, a group consisting of all of the Purchasers except Donald
F. Moorehead, who disclaimed membership in such group (the "Group") delivered a
written request to GPC to hold a special meeting of stockholders on August 30,
1995 in order to propose the removal of four out of five of GPC's then directors
and to elect four replacement directors nominated by the Group. As required by
GPC's bylaws, GPC called a special meeting on such date and for such purpose. At
a board meeting on July 27, 1995, two
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members of GPC's board, J. Thomas Bentley and Luther J. Nussbaum, resigned as
directors. On July 31, 1995, Messrs. Jacobs and Jennings initiated a meeting
with Harold Rubenstein, the Chairman of the Board of EMCO, in the Chicago
metropolitan area in order to hold preliminary discussions regarding a possible
merger of EMCO with GPC. Based on such meeting, the parties determined to
schedule an additional meeting in order to discuss a possible merger at a later
time. Mr. Jennings did not participate in such meeting in a financial advisor
capacity and no other financial advisor was present at such meeting. At the
stockholders' meeting on August 30, 1995, then directors Herbert B. Baskin and
Victor D. Poor were removed by the stockholders and the slate proposed by the
Group was elected to the Board to fill the vacancies created by such
resignations and removals. Eugene T. Sanders, a previously elected director,
remained on the board after the August 30, 1995 stockholders' meeting. Messrs.
Sanders and Paolino subsequently resigned on October 11, 1995 and January 4,
1996, respectively.
Blue Bird Partners has entered into an agreement to sell 250,000 of its
shares of GPC Common Stock to a group of investors, including Messrs. Jennings
and Jacobs, Harold Rubenstein, Donald F. Moorehead, George O. Moorehead and
Charles R. McCurdy at a purchase price of $3.20 per share and in connection
therewith has granted Messrs. Jennings and Jacobs a proxy to vote Blue Bird
Partners' shares in favor of the Merger and the other items being acted upon at
the GPC Meeting. See "Additional Matters for Consideration by GPC
Stockholders -- Election of Directors -- Security Ownership of Certain
Beneficial Owners and Management."
In both SEC filings and at the stockholders' meeting, Messrs. Jennings and
Jacobs advised the GPC stockholders that the newly elected Board would cause GPC
to actively pursue acquisitions and mergers in unrelated fields, including, but
not limited to scrap metal recycling and/or telecommunications. Messrs. Jennings
and Jacobs also advised stockholders at the stockholders' meeting that, although
the new Board had not developed any plans with regard to GPC's then current
business, the new Board would attempt to improve GPC's marketing activities and
review GPC's then current dividend policy in order to consider whether or not
the amount thereof should remain the same or be reduced or eliminated.
On October 16, 1995, George O. Moorehead, the President of EMCO, Harold
Rubenstein, the Chairman of the Board of EMCO, Donald F. Moorehead, a Director
of EMCO, and Raymond Zack, a Vice President of EMCO, met with Messrs. Jennings
and Jacobs in Chicago in order to discuss a proposed acquisition of EMCO by GPC.
Following such meeting, the parties agreed to resume negotiations in Phoenix.
Messrs. Jennings and Jacobs met with the EMCO shareholders in Phoenix, Arizona
on October 20 and 21, 1995, to discuss the possible acquisition of all of EMCO's
common stock by GPC. Prior to this meeting, GPC's management determined a range
of possible values of EMCO, which range was initially determined to be between
2.5 million and 5 million shares of GPC Common Stock and was provided to and
reviewed with the shareholders of EMCO. Such range was intended to commence the
process of detailed negotiations. EMCO's Board did not separately undertake to
determine a range of possible values of EMCO. These discussions led to the
execution of a preliminary "Merger Term Sheet" on October 21, 1995, whereby all
shareholders of EMCO agreed to sell their outstanding shares to GPC. Messrs.
Jacobs and Jennings met with the EMCO shareholders again on November 28, 1995
through December 1, 1995 in Phoenix, Arizona, to negotiate the terms of a
definitive agreement. On December 1, 1995, the Merger Agreement was executed and
delivered by GPC and the EMCO stockholders. The Merger Agreement was later
amended effective March 7, 1996.
During the course of negotiations with EMCO, GPC became aware that Ellis
Metals, Inc., a company controlled by Harold Rubenstein, served as a significant
feeder yard for metal to EMCO. As a result, GPC concluded that it would be
beneficial to GPC to purchase Ellis Metals' inventory and equipment or a
controlling stake in Ellis Metals in order to assure continued supply to EMCO
from Ellis Metals. Messrs. Jennings and Jacobs held negotiations with Harold
Rubenstein and his son, Ellis, during the meetings held in Phoenix between
November 28, 1995 and December 1, 1995. Such negotiations continued following
execution of the Merger Agreement while GPC considered a purchase of all or
substantially all of the assets of Ellis Metals, it ultimately determined it
would be more beneficial to acquire two of the sites on which Ellis Metals
conducts its business and to negotiate certain changes to the Pricing Agreement
currently in effect between Ellis Metals and EMCO.
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REASONS FOR THE TRANSACTION
GPC's Reasons for the Transaction
GPC has traditionally been in the business of designing, manufacturing and
marketing electronic presentation products and color printers and consumables.
Following a period of declining sales and profitability, Messrs. Jennings and
Jacobs negotiated with GPC's former Chairman, President and Chief Executive
Officer to acquire his shares. Messrs. Jennings and Jacobs had been most
recently in the waste management business where they found its fragmented nature
to be ideal for consolidation. After examining the scrap metal industry and its
participants, Messrs. Jennings and Jacobs concluded that such industry was
similarly fragmented and might be profitably consolidated. At the same time, the
new Board of Directors of GPC decided that a portion of the electronic
presentation business of GPC should be terminated, with the remaining focus on
color printers and related consumables, including ribbons, transparencies and
paper and, potentially, a new line of business. Specifically, GPC elected to
discontinue a portion of its electronic presentation products.
GPC believes that the acquisition of a strong participant in the scrap
metal processing business could lead to a number of other acquisitions of scrap
metal processing facilities both in Arizona and out-of-state. GPC's Board
considered a number of other lines of business other than scrap metal processing
in light of its overall goal of making acquisitions in other areas, including
telecommunications. After further review, the GPC Board determined that as a
result of the fragmented nature of the business and the Board's knowledge of
some of the participants in the industry, that the scrap metal business would be
a favorable new business to begin its strategy of pursuing acquisitions. The
Board is actively investigating other potential acquisition prospects, but has
not entered into any agreements, arrangements or understandings with respect to
any material acquisitions.
GPC believes that strengthening EMCO's relationship with Ellis Metals would
further GPC's overall business strategy of consolidating scrap metal processing
operations by providing a stronger guarantee of supply by Ellis Metals to EMCO.
GPC believes that these goals are accomplished by the purchase of two Ellis
Metals sites from Harold Rubenstein or his affiliates, by the negotiation of
extensions and modifications to the Pricing Agreement between Ellis Metals and
EMCO, and by the grant of an option from Ellis Metals to EMCO and GPC to
purchase certain assets of Ellis Metals. See "-- Related Transactions."
The Board of Directors of GPC also considered a number of potentially
negative factors in its deliberations concerning the Merger, including, but not
limited to: (i) the risk that the benefits sought to be achieved in the Merger
will not be achieved; and (ii) the other risks described above under "Risk
Factors." The Board of Directors of GPC discussed with management the prospects
for combinations with companies other than EMCO and the possibility that the
benefits described above could be achieved through any such combination.
After considering the foregoing factors, the Board of Directors unanimously
approved the Agreements and the transactions contemplated thereby, including the
Merger, and recommended that the shareholders of GPC approve and adopt the
Agreements and the Merger. In view of the wide variety of factors considered,
both positive and negative, GPC's Board of Directors did not find it practicable
to, and did not, quantify or otherwise assign relative weights to the specific
factors considered.
EMCO's Reasons for the Merger
EMCO's Board considered the advisability of seeking a merger partner that
would permit EMCO to continue its business, but that would provide ongoing
capital support. The EMCO Board believed that the fact that GPC is a publicly
traded company provides more market visibility for the combined company and
easier access to the public trading markets for the purpose of raising debt or
equity capital for future expansion. In addition to increased liquidity to
operate the business, the EMCO Board of Directors believes that the Merger will
provide EMCO shareholders with potential liquidity and with the potential for a
more attractive return on their investment compared to possible alternatives,
including that of remaining a separate company, as a result of the limited
registration rights that are applicable to the shares received in the Merger.
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<PAGE> 46
The Board of Directors of EMCO also considered a number of potentially
negative factors in its deliberations concerning the Merger, including, but not
limited to: (i) the risk that the benefits sought to be achieved in the Merger
will not be achieved; and (ii) the other risks described above under "Risk
Factors." The Board of Directors of EMCO discussed with management the prospects
for combinations with companies other than GPC and the possibility that the
benefits described above could be achieved through any other combinations, as
well as the risks and benefits of a stand-alone strategy.
The Board also evaluated the effect of the proposed Merger on EMCO
shareholders and concluded that the proposed Merger offered many advantages to
them as well, including the following:
- The conversion of a currently illiquid investment into a potentially
liquid investment;
- The potential for an attractive return for EMCO's investors on their
investment in EMCO;
- The opportunity for EMCO's shareholders to realize a future return based
on potential appreciation in GPC's stock after the Merger; and
- The opportunity for a tax-free exchange of EMCO Stock for GPC Common
Stock.
After considering the foregoing factors, the Board of Directors unanimously
approved the Agreements and the transactions contemplated thereby, including the
Merger, and recommended that the shareholders of EMCO approve and adopt the
Agreements and the Merger. In view of the wide variety of factors considered,
both positive and negative, EMCO's Board of Directors did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered.
OPINION OF FINANCIAL ADVISOR
First Southwest Company ("First Southwest") is an investment banking firm
headquartered in Dallas, Texas, engaged in, among other things, the valuation of
businesses and their securities in connection with mergers and acquisitions,
strategic alliances, restructurings, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate tax, corporate and other purposes. From April 1993 until
October 1995, T. Benjamin Jennings, currently the Co-Chairman of the Board, Co-
Chief Executive Officer and Co-President of GPC, served as a Director of First
Southwest.
GPC retained First Southwest to act as its financial advisor in connection
with the Merger. The GPC Board determined to retain First Southwest based on
interviews with representatives of First Southwest and upon the favorable
recommendation of T. Benjamin Jennings who, as stated above, had previously
served as a Director of First Southwest. On January 5, 1996 at the meeting at
which the Board of Directors of the GPC approved the Merger Agreement, First
Southwest delivered its written opinion (the "Opinion") that, based upon and
subject to the factors and assumptions set forth therein, the consideration
proposed to be paid to the shareholders of EMCO in the Merger was fair from a
financial point of view to the public shareholders of GPC. At such Board
meeting, First Southwest also made an oral and written presentation to the
Board. No limitations were imposed by GPC with respect to the investigations
made or the procedures followed by First Southwest in rendering the Opinion. GPC
has agreed to pay First Southwest an aggregate of $100,000 for its services in
rendering an opinion in the Merger. Such amount is payable upon the Opinion
being delivered to the GPC Board and is not contingent upon the successful
consummation of the Merger.
The full text of the Opinion, which sets forth assumptions made, matters
considered and limits on the review undertaken, is attached hereto as Exhibit C
to this Joint Proxy Statement. GPC shareholders are urged to read the Opinion in
its entirety. First Southwest's Opinion is addressed only to GPC and does not
constitute a recommendation to any GPC shareholder as to how such shareholder
should vote at the GPC Meeting. The summary of the Opinion set forth in this
Joint Proxy Statement is qualified in its entirety by reference to the full text
of the Opinion.
In rendering the Opinion, First Southwest (i) reviewed GPC's Annual Reports
on Form 10-K for the years ended October 31, 1993 through 1995 and the audited
financial statements contained therein, the Quarterly Reports on Form 10-Q and
the unaudited financial statements contained therein for the first nine months
ended July 31, 1995, and certain other publicly available information, (ii)
reviewed EMCO's audited
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<PAGE> 47
consolidated financial statements for the years ended March 31, 1994 and 1995,
(iii) analyzed certain internal financial information, including financial
projections and certain reports on sales, profitability and accounts receivable
aging, concerning each of GPC and EMCO prepared by their respective managements;
(iv) discussed the past and current operations, the financial condition and the
prospects of GPC and EMCO with senior executives of the respective companies;
(v) reviewed the results of the due diligence performed on EMCO by GPC and Price
Waterhouse LLP with the senior management of GPC; (vi) discussed with senior
executives of EMCO the prices and dates of recent sale transactions of EMCO
common stock of which they had knowledge; (vii) reviewed the reported prices and
trading activity for the common stock of GPC and compared them to the prices for
the S&P 500 Index and NASDAQ Composite Index; (viii) compared the financial
performance and condition of EMCO with that of certain comparable publicly
traded resource recovery companies; (ix) reviewed the financial terms to the
extent publicly available, of certain comparable resource recovery company
merger and acquisition transactions; (x) reviewed three-year stand-alone
projected operating statement, cash flow statement and balance sheet data of GPC
and five-year stand-alone projected operating statement, cash flow statement and
balance sheet data of EMCO prepared by the respective managements of GPC and
EMCO; (xi) analyzed the pro forma impact of the Merger on the earnings per
share, book value per share, and certain other balance sheet and profitability
ratios of GPC; (xii) reviewed the Agreement; (xiii) reviewed a draft of the
Joint Proxy Statement of GPC and EMCO substantially in the form to be mailed to
their respective shareholders; and (xiv) performed such other analyses as First
Southwest has deemed appropriate.
First Southwest assumed and relied without independent verification upon
the accuracy and completeness of all of the financial and other information
reviewed by them for purposes of their Opinion. First Southwest also relied upon
the managements of GPC and EMCO as to the reasonableness and achievability of
the financial and operating forecasts (and the assumptions and bases therefor)
provided to First Southwest and assumed that such forecasts reflected the best
currently available estimates and judgments of such respective managements and
that such projections and forecasts will be realized in the amounts and in the
time periods currently estimated by the managements of GPC and EMCO. First
Southwest did not make an independent evaluation or appraisal of the assets and
liabilities of GPC and EMCO or any of their subsidiaries nor has it been
furnished with such valuations and appraisals. As stated above, GPC's management
arrived at a range of possible values for EMCO. First Southwest did not
determine a range itself, but instead evaluated the fairness of the point on
such range that was agreed upon by GPC and EMCO. The projections reviewed by
First Southwest assumed a modest increase in revenues for EMCO over a five-year
period. First Southwest made no material adjustments to such projections, nor
did First Southwest assume that there would be any cost savings benefits as a
result of the Merger. THE SECOND PRECEDING SENTENCE IS A FORWARD-LOOKING
STATEMENT WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. EMCO'S ACTUAL REVENUES AND
RESULTS OF OPERATIONS COULD DIFFER MATERIALLY FROM PROJECTIONS AS A RESULT OF
THE RISK FACTORS SET FORTH ABOVE IN "RISK FACTORS."
In connection with rendering its Opinion and preparing its various written
and oral presentations to the Board of Directors of GPC, First Southwest
performed a variety of financial analyses, including those summarized below. The
summary set forth below does not purport to be a complete description of the
analyses performed by First Southwest. The preparation of a fairness opinion is
not necessarily susceptible to partial analysis or summary description.
Accordingly, notwithstanding the separate factors summarized below, First
Southwest believes that its analyses must be considered as a whole and that
selecting portions of its analyses and of the factors considered by it, without
considering all analyses and factors, would create an incomplete view of the
process underlying its Opinion. In addition, First Southwest may have given
various analyses more or less weight than other analyses, and may have deemed
various assumptions more or less probable than other assumptions. In performing
its analyses, First Southwest made numerous assumptions with respect to
economic, market and other conditions many of which are beyond EMCO's or GPC's
control. The analyses performed by First Southwest are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses. Additionally, analyses
relating to the values of businesses do not purport to be appraisals or to
reflect the prices at which businesses actually may be sold.
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<PAGE> 48
In addition, as described above, First Southwest's Opinion and
presentations to the GPC Board of Directors were only some of the many factors
taken into consideration by the GPC Board in making its determination to approve
the Agreements. Consequently, the First Southwest analyses described below
should not be viewed as determinative of the GPC Board's or GPC management's
opinion with respect to the value of EMCO or of whether the GPC Board or GPC
management would have been willing to agree to a different consideration other
than those contemplated in this merger transaction.
The following is a brief summary of the analyses performed by First
Southwest in connection with rendering the Opinion as to the fairness of the
consideration proposed to be paid in the Merger and such analyses that First
Southwest discussed with the GPC Board of Directors on January 5, 1996.
The Opinion is necessarily based on economic, market and other conditions
in effect on and the information made available to First Southwest as of
December 1, 1995.
Overview of GPC and EMCO. First Southwest evaluated the position and
strengths of EMCO in certain areas of business, certain financial and operating
information of EMCO (including historical sales, operating income, net income,
total assets and net worth). First Southwest also performed similar analyses on
GPC which included a trading history of GPC common stock.
Comparable Company Analysis. Comparable company analysis analyzes a
company's operating performance relative to a group of publicly traded peers.
Based on relative performance and outlook for a company versus its peers, this
analysis enables an implied unaffected market trading value to be determined.
First Southwest compared certain financial and market information of EMCO with a
group of eight publicly traded resource recovery companies that it believed to
be appropriate for comparison: Appliance Recycling Centers of America;
Commercial Metals; Envirosource Inc.; Horsehead Resource; IMCO Recycling; Proler
International; Schnitzer Steel and Tetra Technologies. Such information included
market valuation, historical income statement and balance sheet figures, and
financial ratios. The ratios of market capitalization to historical revenues for
the eight comparable companies range from 0.90 to 2.49. The ratios of market
capitalization to earnings before interest, taxes, depreciation and amortization
("EBITDA") for such companies range from 4.76 to 10.35. The ratios of market
capitalization to earnings before interest and taxes ("EBIT") for such companies
range from 8.13 to 14.39. The ratios of market value of Common Equity to net
income for such companies range from 8.74 to 26.19. This analysis indicated that
the selected companies had average multiples of market capitalization to
historical revenues; EBITDA; EBIT; and average multiples of market value of
Common Equity to net income of 1.55, 7.03, 10.60, and 15.36, respectively. The
comparable company analysis indicated that such multiples for EMCO were 0.21,
2.25, 2.59 and 3.87, respectively. Based upon the average multiples, the implied
market trading value for the common stock of EMCO would have been between $37
million and $99 million. Based on the foregoing, First Southwest believes that
the Comparable Company Analysis supports First Southwest's Opinion that the
consideration to be paid to the public shareholders of GPC in the Merger is fair
from a financial point of view. However, notwithstanding the foregoing, First
Southwest believes that its analyses must be considered as a whole and that
relying solely on the Comparable Company Analysis without considering the other
analyses performed would create an incomplete view of the process underlying its
Opinion.
No comparable company is identical to GPC or EMCO. Accordingly, an analysis
of the results involves complex considerations and judgments concerning
differences in financial and operating characteristics.
Analysis of Selected Mergers and Acquisitions. First Southwest also
reviewed available public information on certain merger and acquisition
transactions involving the acquisition of all or part of certain resource
recovery companies. The analysis included 5 transactions dating back to 1990.
These acquisitions included the acquisition of REI Distributors Inc. by Pure
Tech International Inc., the acquisition of Sacramento Valley Environment by
Envirofil Inc., the acquisition of Phoenix Smelting by IMCO Recycling Inc., the
acquisition of Woodworth & Co-Soil Recycling by Thermo Remediation Inc. and the
acquisition of Resource Recycling Techs Inc. by Waste Management, Inc. First
Southwest deemed the targets in such acquisitions to be comparable due to the
fact that all of such companies were in the business of recovering, processing
and reselling used materials. In examining these transactions, First Southwest
analyzed certain income statement and balance sheet parameters of the acquired
company relative to the consideration offered. The ratios of the transaction
value of each of the five acquisitions to net sales of the target companies
range from 0.68 to 3.54.
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The ratios of the transaction value of each of such acquisitions to EBITDA of
the target companies range from 2.76 to 18.26. The ratios of the transaction
value of each of such acquisitions to EBIT of the target companies range from
3.13 to 34.7. The ratios of the transaction value of each of such acquisitions
to net income of the target companies range from 5.22 to 49.0. This analysis
indicated average multiples of transaction value to historical revenues, EBITDA,
EBIT and net income of 1.47, 9.14, 23.08 and 30.93, respectively. The analysis
of selected mergers and acquisitions indicated that such multiples for EMCO were
0.27, 2.93, 3.36 and 7.75, respectively. Based on an analysis of the
consideration being paid by GPC in the Merger, the enterprise value of EMCO is
approximately $18.8 million, which includes post-Merger debt of the consolidated
entity that includes $9.4 million in debt of EMCO.
No company or transaction used in the comparable transaction is identical
to GPC, EMCO or the contemplated transaction. Again, an analysis of the results
involves complex considerations and judgments concerning differences in
financial and operating characteristics that could affect the acquisition value
of the companies to which they are being compared. Based on the foregoing, First
Southwest believes that the Analysis of Selected Merger and Acquisitions
supports First Southwest's Opinion that the consideration to be paid to the
public shareholders of GPC in the Merger is fair from a financial point of view.
However, notwithstanding the foregoing, First Southwest believes that its
analyses must be considered as a whole and that relying solely on the Analysis
of Selected Mergers and Acquisitions without considering the other analyses
performed would create an incomplete view of the process underlying its opinion.
First Southwest also undertook the following analyses in order to project
the performance of the combined company and the respective contributions of GPC
and EMCO.
Contribution Analysis. First Southwest analyzed the contribution of GPC
and EMCO to certain balance sheet and income statement items of the combined
company. The analysis is based upon assumptions and projections made by the
managements of GPC and EMCO for stand alone operations of their respective
companies. As of September 30, 1995, EMCO would provide 88.0% of revenues,
237.7% of operating income, 54.6% of total assets, 100.0% of total debt and
18.5% of shareholders' equity. Based on the consideration contemplated in the
merger transaction, EMCO shareholders would on the aggregate own 43.6% of the
fully diluted common shares of the combined company. Based on the foregoing,
First Southwest believes that the Contribution Analysis supports First
Southwest's Opinion that the consideration to be paid to the public shareholders
of GPC in the Merger is fair from a financial point of view. However,
notwithstanding the foregoing, First Southwest believes that its analyses must
be considered as a whole and that relying solely on the Contribution Analysis
without considering the other analyses performed would create an incomplete view
of the process underlying its Opinion.
Pro Forma Merger Analysis. First Southwest analyzed certain pro forma
results for the combined company based on the assumptions and projections of the
management of each company for stand alone operations. This analysis, based upon
assumptions described above, showed that GPC shareholders would have a
comparative accretion in fully diluted earnings per share in the years 1995
through 1998 due to the Merger. These projections do not take into account any
possible savings or synergies which might result from the Merger. Based on the
foregoing, First Southwest believes that the Pro Forma Merger Analysis supports
First Southwest's Opinion that the consideration to be paid to the public
shareholders of GPC in the Merger is fair from a financial point of view.
However, notwithstanding the foregoing, First Southwest believes that its
analyses must be considered as a whole and that relying solely on the Pro Forma
Merger Analysis without considering the other analyses performed would create an
incomplete view of the process underlying its Opinion.
The actual results achieved by the Company will vary from the projected
results and such variations may be material.
Discounted Cash Flow Analysis. First Southwest performed a discounted cash
flow analysis for the purpose of determining a theoretical value per share for
the EMCO Common Stock. The analysis included a terminal value based upon EMCO's
estimated fiscal year 2000 free cash flow, as supplied by the management of both
companies, multiplied by discount rates ranging from 12.5% to 17.5%. This
analysis indicated a range of equity value between $17.1 million and $29.8
million, excluding the value of any tax savings from net operating loss
carry-forwards from GPC. Based on the foregoing, First Southwest believes that
the Discounted
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Cash Flow Analysis supports First Southwest's Opinion that the consideration to
be paid to the public shareholders of GPC in the Merger is fair from a financial
point of view. However, notwithstanding the foregoing, First Southwest believes
that its analyses must be considered as a whole and that relying solely on the
Discounted Cash Flow Analysis without considering the other analyses performed
would create an incomplete view of the process underlying its Opinion.
Pursuant to the terms of an engagement letter dated November 10, 1995, GPC
agreed to pay First Southwest an aggregate of $100,000 for its financial
advisory role and for delivery of the Opinion. GPC has agreed to indemnify First
Southwest and certain related persons against certain liabilities relating to or
arising out of their engagement, including certain liabilities under Federal
Securities laws.
CONVERSION OF EMCO SHARES
Upon consummation of the Merger, (i) each then outstanding share of Sub
stock will automatically be converted into and become one share of Common Stock
of EMCO and (ii) all of the outstanding shares of Common Stock of EMCO shall be
converted into 3,500,000 shares of GPC Common Stock, warrants to purchase an
additional 1,000,000 shares of GPC Common Stock and $1,150,000 in cash, to be
distributed to the EMCO shareholders in accordance with the schedule as is set
forth in the Agreement of Merger to be filed with the Arizona Secretary of State
following GPC and EMCO shareholder approval of the Merger in substantially the
form included herewith as Appendix B. Warrants to purchase in the aggregate
600,000 shares of GPC Common Stock will be at an exercise price of $4.00 per
share and warrants to purchase in the aggregate 400,000 shares of GPC Common
Stock will be at an exercise price of $6.00 per share. The warrants shall be
exercisable for a period of five years from the closing of the Merger and can be
exercised in full at any time until expiration. The exercise prices of the
warrants are payable in cash or by check. In the event of a merger of GPC in
which GPC is not the surviving entity, the warrants will be exercisable for
shares of the successor corporation. The warrants are subject to adjustment in
the event of stock splits, stock dividends and the like.
RELATED AGREEMENTS
Employment Agreements
Upon the closing of the Merger Agreement, Raymond Zack, Gerald Zack and
David Zack, currently employees and directors of EMCO, will enter into
employment agreements with EMCO (the "Employment Agreements"). Pursuant to the
Employment Agreements, each of the Zacks shall be employed for a period of not
less than five years, shall receive a base salary of $120,000 per year for the
first year, with such salary to increase by not less than 7% per year for each
succeeding year, and shall be entitled to such annual bonuses and stock options
as determined by the GPC board of directors in its discretion. Each of the Zacks
shall also be entitled to certain other fringe benefits. GPC may terminate the
Employment Agreements for cause. Pursuant to the Employment Agreements, each of
the Zacks agrees that he will not compete, directly or indirectly, with EMCO in
Arizona for a period of five years from the date he ceases to be an employee,
officer, director or consultant of EMCO. Additionally, Gerard M. Jacobs and T.
Benjamin Jennings will enter into employment agreements with GPC and George O.
Moorehead will enter into an employment agreement with EMCO prior to the
completion of the Merger. Messrs. Jacobs and Jennings' employment agreements
shall be for a term of five years, shall provide for a base salary of $168,000
per year and for bonuses to be determined by the GPC Board of Directors. Mr.
Moorehead's employment agreement shall be for a term of five years, shall
provide for a base salary of $168,000 per year and for bonuses to be determined
by the EMCO Board of Directors. Such agreements provide for certain payments to
be made to Messrs. Jacobs, Jennings and Moorehead in the event of a
change-of-control of the combined company. Additionally, Mr. Moorehead's
employment agreement provides that GPC shall recommend that the GPC Board of
Directors grant Mr. Moorehead stock options under GPC's Stock Plan to purchase
150,000 shares of GPC Common Stock at an exercise price of $4.00 per share. It
is expected that the agreements with Messrs. Jacobs, Jennings and Moorehead will
provide for a substantial cash payment to be made to such persons in the event
that such persons are terminated from their employment with GPC or EMCO, as the
case may be, at any time during the term of their agreement for any reason other
than cause or in the event of certain change-in-control events involving the
combined company. Harold Rubenstein will enter into a consulting agreement with
EMCO whereby he will receive $6,000 per month for five years plus $1,000 per
month to maintain certain
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communications equipment to obtain commodity quotations. The parties contemplate
that each of GPC's employment agreements with Messrs. Jacobs and Jennings will
provide that such parties will not compete with the combined company in Arizona,
California, New Mexico, Nevada, Texas, and Utah for a period of five years after
the date each such person ceases to be an employee, officer, director, or
consultant of the combined company.
Noncompetition Agreements
As a condition to the Merger, George O. Moorehead and Harold Rubenstein
agreed to execute noncompetition agreements whereby each of such persons agrees
not to compete with the combined company in Arizona, California, New Mexico,
Nevada, Texas and Utah for a period of five years after the date each such
person ceases to be an employee, officer, director or consultant of GPC or EMCO,
as the case may be. The parties contemplate that the employment agreements with
Messrs. Jacobs and Jennings will contain similar noncompetition provisions. As
mentioned above, the Employment Agreements with each of the Zacks contain
noncompetition clauses as well.
REPRESENTATIONS AND COVENANTS
Pursuant to the Merger Agreement, GPC made representations regarding its
corporate existence and good standing, capital structure, filings with the
Securities and Exchange Commission, and other matters, including its authority
to enter into the Merger Agreement and to consummate the Merger. The EMCO
shareholders made a number of representations to GPC regarding EMCO's corporate
status, capital structure, operations, financial condition, and other matters,
including its authority to enter into the Merger Agreement and to consummate the
Merger.
EMCO has covenanted in the Merger Agreement that, until the consummation of
the Merger, it will preserve its business and not take certain actions outside
the ordinary course of business without GPC's consent. EMCO agreed not to
initiate or respond to any proposals relating to the possible acquisition of its
assets or stock by any person other than GPC and has further agreed not to enter
into any agreement providing for such acquisition. Additionally, GPC is entitled
to have conducted an environmental assessment of the properties to be acquired
in the Merger. In the event that such assessment identifies environmental
contamination which requires remediation or further evaluation or if the results
of such assessment are not otherwise satisfactory to GPC in its sole discretion
and EMCO does not remediate or otherwise satisfy GPC, then GPC may elect not to
close the Merger. As of the date of this Joint Proxy Statement, such assessment
has not yet been completed. However, under the Merger Agreement, GPC has the
ability to waive any failure to complete the assessment. All parties agree to
use their best efforts to cause the Merger to qualify as a tax-free
reorganization. GPC agreed to recommend the addition to the GPC Board following
the Merger of George O. Moorehead, Raymond Zack and Harold Rubenstein. GPC also
agreed to use its best efforts to either obtain director and officer insurance
or execute and deliver indemnity agreements reasonably satisfactory to its new
board of directors and officers. Finally, each party to any of the employment,
noncompetition, indemnity and consulting agreements contemplated by the Merger
Agreement agreed to execute and deliver such agreements upon the Closing. GPC
has agreed to loan EMCO up to $1 million on terms mutually acceptable to T.
Benjamin Jennings and George O. Moorehead (provided, however, that GPC has no
obligation to extend the loan if in the opinion of its counsel the making of the
loan might delay the closing of the Merger).
CONDITIONS TO THE MERGER
The obligations of GPC to consummate the Merger will be subject to the
satisfaction of a number of conditions, including (i) GPC Board and stockholder
approval of the Merger and the transactions contemplated thereby, (ii) no
material adverse change in the business of EMCO, (iii) a satisfactory review by
GPC's independent public accountants of EMCO's assets, liabilities, and net
worth, (iv) GPC's receipt of a fairness opinion from First Southwest Company
with respect to the Merger, (v) the execution of certain bills of sale from
Copperstate and Empire to EMCO, (vi) the termination of certain contracts
between EMCO and certain related parties, (vii) receipt by GPC of a title
insurance policy with respect to the real property owned
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by EMCO, (viii) an indemnity and pledge by Copperstate of certain of its shares
of GPC Common Stock acquired in the Merger to indemnify EMCO from certain
liabilities of Copperstate, (ix) an amendment to the security agreement among
EMCO, Donald F. Moorehead and George O. Moorehead to the satisfaction of such
parties, (x) the execution and delivery by GPC of employment agreements with T.
Benjamin Jennings, Gerard M. Jacobs and the execution and delivery by EMCO of an
employment agreement with George O. Moorehead, (xi) receipt by EMCO of any third
party consents required to consummate the Merger, (xii) satisfactory completion
of due diligence by GPC of EMCO, (xiii) execution and delivery by Empire Metals,
Inc. and Harold Rubenstein of an indemnification agreement with respect to the
action brought by EMCO against Ellis Rubenstein, his spouse and certain other
parties and (xiv) George O. Moorehead and Harold Rubenstein shall have executed
and delivered to EMCO noncompetition agreements. EMCO's obligations to
consummate the Merger are conditioned, among other things, upon EMCO entering
into an employment agreement with the Zacks and GPC's delivery of the shares,
warrants and cash to be delivered at the closing. Each party's obligations under
the Merger Agreement will also be conditioned upon the accuracy of the
representations made by the other party at the time of closing of the Merger,
the performance by the other party of the covenants required to be performed by
it under the Merger Agreement, the absence of a material adverse change with
respect to the other party, the delivery by each party of board resolutions,
articles, bylaws and good standing certificates, the receipt of certain legal
opinions and the absence of any pending or threatened action or proceeding
before any governmental body seeking to restrain or invalidate the Merger
Agreement.
TERMINATION OR AMENDMENT
The Merger Agreement may be terminated (i) by mutual agreement of the
parties, (ii) by GPC in the event of a material breach by EMCO or any of the
EMCO shareholders of any provision of the Merger Agreement, or (iii) by either
party if the closing shall not have occurred by June 30, 1996.
INDEMNIFICATION AND HOLD-BACK OF GPC SHARES
The Merger Agreement provides that GPC shall retain possession of and hold
a security interest in 669,149 shares (including 250,000 shares issuable upon
exercise of warrants) (the "Held-Back Shares") of the GPC Common Stock issuable
to the EMCO shareholders. The Held Back Shares shall secure certain
representations and warranties made by the EMCO shareholders to GPC in the
Merger Agreement. So long as GPC does not assert a claim against the former EMCO
shareholders in accordance with the terms of the Merger Agreement, each quarter
GPC will release 100,000 Held-Back Shares to the former EMCO shareholders
commencing 90 days after the Merger is consummated, except for Empire Metals'
shares and warrants which shall remain subject to the security interest until
Ellis Rubenstein (who is the son of Harold Rubenstein) and his spouse have
released GPC and EMCO from all claims resulting from the action brought against
Ellis Rubenstein, his spouse and certain other parties by EMCO (the "Action") or
a final non-appealable judgment in favor of EMCO and GPC has been entered and no
other claim is pending against GPC or EMCO and Ellis Rubenstein has released
EMCO and GPC from any and all claims related to such action. GPC shall be able
to foreclose upon or set off the Held-Back Shares as necessary to compensate it
for any losses resulting from breaches of the representations and warranties or
covenants and agreements of the EMCO shareholders contained in the Merger
Agreement that occur within one year after the closing of the Merger (except
with respect to certain warranties relating to EMCO's corporate status,
authority to enter into the Merger Agreement, enforceability of the Merger
Agreement and capitalization, as to which EMCO shareholders' liability for
breach is indefinite). In the event that GPC suffers a covered loss, it is
obligated to give written notice to the former EMCO shareholders of the claim.
In the event that the former EMCO shareholders contest the claim, no foreclosure
or set off against the Held-Back Shares may be made by GPC until the dispute is
resolved by the parties or a court of competent jurisdiction.
In the event the EMCO shareholders suffer any loss due to a breach of
representation or warranty or covenant or agreement of GPC contained in the
Merger Agreement that occurs within one year of the closing of the Merger
(except with respect to certain representations of GPC relating to GPC's
corporate status, authority to enter into the Merger Agreement, enforceability
of the Merger Agreement and capitalization, as
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to which GPC's liability for breach is indefinite), GPC must compensate the EMCO
shareholders for such loss.
Additionally, Empire Metals, Inc. and Harold Rubenstein, the President and
substantial shareholder of Empire, have agreed to indemnify GPC and EMCO for any
damages or costs resulting from claims made against GPC or EMCO relating to the
Action. As mentioned above, such indemnification obligations shall continue
until Ellis Rubenstein and his spouse have released GPC and EMCO from all claims
resulting from the Action or a final non-appealable judgment in favor of EMCO
and GPC has been entered and no other claim is pending against GPC or EMCO and
Ellis Rubenstein has released EMCO and GPC from any and all claims related to
the Action. In order to secure such indemnification obligations, Empire and Mr.
Rubenstein will grant to GPC a security interest in an aggregate of 500,000 of
the shares of GPC Common Stock that Empire would receive or would be entitled to
receive upon exercise of warrants in the Merger. See "Business of EMCO -- Legal
Proceedings."
REGULATORY MATTERS
GPC and EMCO are not aware of any governmental or regulatory approvals
required for consummation of the Merger, other than compliance with the federal
securities laws and applicable securities and "blue sky" laws of the various
states.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain of the principal federal income
tax considerations of the Merger that are generally applicable to holders of
EMCO Common Stock. This discussion does not deal with all income tax
considerations that may be relevant to particular EMCO shareholders in light of
their particular circumstances, such as shareholders who are dealers in
securities, foreign persons or shareholders who acquired their shares in
connection with stock option or stock purchase plans or in other compensatory
transactions. In addition, the following discussion does not address the tax
consequences of transactions effectuated prior to or after the Merger (whether
or not such transactions are in connection with the Merger), including without
limitation transactions in which shares of EMCO Common Stock were or are
acquired or shares of GPC Common Stock were or are disposed of. Furthermore, no
foreign, state or local tax considerations are addressed herein. ACCORDINGLY,
EMCO SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER.
The parties anticipate reporting the Merger as a "reorganization" under
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended (the "Code"). Provided it so qualifies and as discussed more fully
below, (i) none of GPC, EMCO or Sub will recognize gain or loss as a result of
the Merger and (ii) holders of EMCO Common Stock that exchange their shares for
GPC Common Stock, cash and warrants should recognize gain (but not loss) in the
Merger but not in excess of the amount of cash and the value of the warrants
(collectively "boot") received. HOWEVER, THE PARTIES ARE NOT REQUESTING A RULING
FROM THE IRS OR AN OPINION OF COUNSEL IN CONNECTION WITH THE MERGER. One of the
requirements of Section 368(a)(2)(E) of the Code is that stock constituting
"control" (for this purpose at least 80% of the voting power of EMCO), as
determined before the Merger, be exchanged for GPC Common Stock. However, the
consideration to be received by the present EMCO shareholders pursuant to the
terms of the Merger Agreement includes cash and warrants. Under applicable
Treasury Regulations, warrants as well as cash are treated as taxable boot.
Accordingly, if shares representing more than 20 percent of the EMCO Stock
voting power, in the aggregate, are exchanged for cash and warrants pursuant to
the Merger, the control requirement of Section 368(a)(2)(E) will not be
satisfied. A successful IRS challenge to the "reorganization" status of the
Merger, for example, by reason of the failure to meet the 80% "control" test
described above, would generally result in an EMCO shareholder recognizing the
full amount of his or her gain or loss with respect to each share of EMCO Common
Stock surrendered equal to the difference between the shareholder's basis in
such share and the fair market value, as of the
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Effective Time of the Merger, of the GPC Common Stock received in exchange
therefor plus the cash and warrants received.
The remainder of this discussion assumes that the Merger will qualify as a
reorganization, in which case the following tax consequences will result:
General. An EMCO shareholder will not recognize any loss upon the receipt
of GPC Common Stock and boot. An EMCO shareholder receiving both GPC Common
Stock and boot in exchange for EMCO Common Stock will recognize gain (measured
by the sum of the fair market value of the GPC Common Stock received plus the
amount of any boot received minus the tax basis of the shares of EMCO Common
Stock exchanged), if any, but only to the extent of the amount of any boot
received. Under applicable U.S. Supreme Court precedent, such gain will
generally be capital gain, subject to recharacterization as a dividend as
described more fully below, and should generally be long-term capital gain if
the shares of EMCO Common Stock exchanged for boot have been held for more than
one year.
The tax basis of the GPC Common Stock received (including the Held-Back
Shares ultimately received -- see "The Merger and Related Transactions of the
Merger -- Indemnification and Hold-Back of GPC Shares") will be the same as the
tax basis of the EMCO Common Stock exchanged, decreased by the amount of boot
received at the Effective Time and increased by the amount of gain recognized on
the exchange.
In certain circumstances, an EMCO shareholder that actually or
constructively owns shares of EMCO Common Stock that are exchanged for GPC
Common Stock in the Merger or that actually or constructively owns GPC Common
Stock after the Merger will be required to treat any gain recognized as dividend
income (rather than capital gain, if any) up to the amount of boot received in
the Merger if the receipt of boot by such shareholder has the effect of a
distribution of a dividend. Whether the receipt of boot has the effect of the
distribution of a dividend would depend upon the shareholder's particular
circumstances.
In general, the determination of whether a shareholder who exchanges EMCO
Common Stock and receives GPC Common Stock and boot recognizes capital gain or
dividend income is made under Sections 356(a)(2) and 302 of the Code. Under
Section 356(a)(2) of the Code, each shareholder of EMCO Common Stock will be
treated for tax purposes as if such shareholder had received only GPC Common
Stock in the Merger, and immediately thereafter GPC had redeemed appropriate
portions of such GPC Common Stock in exchange for the boot actually distributed
to such shareholder in the Merger. Under Section 302 of the Code, the gain
recognized by a shareholder on the exchange will be taxed as capital gain if the
deemed redemption from such shareholder (i) is a "substantially disproportionate
redemption" of stock with respect to such shareholder, or (ii) is "not
essentially equivalent to a dividend" with respect to such shareholder. In
making this determination, shareholders should be aware that, under Section 318
of the Code, a shareholder may be considered to own, after the Merger, GPC
Common Stock owned (and in some cases constructively owned) by certain related
individuals and entities and GPC Common Stock which the shareholder (or such
related individuals or entities) has the right to acquire upon the exercise or
conversion of options.
The deemed redemption of an EMCO shareholder's GPC Common Stock will be a
"substantially disproportionate redemption" if, as a result of the deemed
redemption, the ratio determined by dividing the number of shares of GPC Common
Stock owned by such shareholder immediately after the Merger by the total number
of outstanding shares of GPC Common Stock is less than 80% of the same ratio
calculated as if only GPC Common Stock, and not boot, were issued to the EMCO
shareholder in the Merger.
The deemed redemption of a shareholder's GPC Common Stock will be "not
essentially equivalent to a dividend" if the shareholder experiences a
"meaningful reduction" in his or her proportionate equity interest in GPC by
reason of the deemed redemption. Although there are no fixed rules for
determining when a meaningful reduction has occurred, the Internal Revenue
Service (the "IRS") has indicated in a published ruling that the receipt of cash
in the Merger would not be characterized as a dividend if the shareholder's
percentage ownership interest in GPC and EMCO prior to the Merger was minimal,
the shareholder exercises no control over the affairs of GPC or EMCO, and the
shareholder's percentage ownership interest in GPC is reduced in the deemed
redemption by any extent. If neither of the redemption tests set forth above are
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satisfied, the shareholder will be treated as having received a dividend equal
to the amount of such shareholder's recognized gain, assuming that such
shareholder's ratable share of the earnings and profits of EMCO (and, possibly,
GPC) equals or exceeds such recognized gain.
Dissenting Shareholders. An EMCO shareholder that exercises such
shareholder's right to seek an appraisal of such shareholder's shares of EMCO
Common Stock generally will recognize capital gain or loss measured by the
difference between the amount of cash received and the tax basis of the shares
of EMCO Common Stock exchanged therefor. Such capital gain or loss will be
long-term capital gain or loss if the shares of EMCO Common Stock exchanged by
such dissenting shareholder have been held for more than one year. In addition,
the amount of cash received may be treated as dividend income if the dissenting
shareholder actually or constructively owns GPC Common Stock after the Merger as
discussed above.
Backup Withholding. In order to avoid "backup withholding" of federal
income tax on payments of cash to EMCO shareholders, each EMCO shareholder must,
unless an exception applies, provide the payor of such cash with the
shareholder's correct taxpayer identification number ("TIN") on Form W-9 and
certify under penalties of perjury that such number is correct and that such
shareholder is not subject to backup withholding. A Form W-9 is attached to this
proxy statement. If a shareholder fails to provide the correct TIN or
certification, the cash received in the Merger may be subject to backup
withholding at a 31% rate.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. THUS, EMCO
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS,
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER APPLICABLE TAX
LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase transaction with GPC as the
acquiring company. GPC will allocate the purchase price based on the fair value
of the assets acquired and the liabilities assumed. Goodwill arising from the
Merger will be amortized over 15 years.
RESALE RESTRICTIONS ON SALE OF GPC COMMON STOCK
Holders of EMCO capital stock will receive unregistered shares of GPC
Common Stock in the Merger and warrants to purchase unregistered shares. Such
shares, including the shares issuable upon exercise of the warrants issued to
EMCO shareholders in the Merger, may not be resold under federal securities laws
absent an exemption from registration under the Securities Act of 1933 or
registration of such shares thereunder. Under the terms of the Merger Agreement,
the former EMCO shareholders shall have "piggyback" registration rights for a
two-year period following the closing of the Merger pursuant to which they may
include their shares in a registration statement filed by GPC, up to a maximum
of 20% of the shares being registered by GPC. GPC is entitled to delay, withdraw
or suspend any registration as to which it permits participation. Additionally,
Copperstate Metals, Inc. shall have the right on one occasion to demand that GPC
register up to 300,000 shares under the Securities Act. Such right expires two
years after the closing of the Merger. GPC is not required to undertake such
registration if in its or its underwriters' reasonable opinion, such
registration would be materially detrimental to GPC. GPC has been advised that
Copperstate intends to exercise its demand registration rights with respect to
300,000 of the shares of GPC Common Stock that it will receive in the Merger
immediately after the Merger. Absent registration or an exemption from
registration for the resale of the shares, the Securities Act of 1933 and the
rules promulgated thereunder prohibit the resale of the unregistered GPC common
stock issued to the EMCO shareholders. Rule 144 provides an exemption for the
sale of shares that have been held for a period of at least two years after the
Merger. Rule 144 imposes restrictions on the number of shares of unregistered
GPC common stock that may be sold within any three-month period.
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APPRAISAL AND DISSENTERS' RIGHTS
Under the Arizona Law, any shareholder of a corporation has the right to
dissent from (i) any plan of merger or consolidation to which the corporation is
a party, if either: (a) the corporation is a subsidiary that is merged with its
parent without the approval of the shareholders, as provided by the Arizona Law,
or (b) the shareholder's approval of the merger is required by the Arizona Law
or by the articles of incorporation; (ii) any plan of share exchange to which
the corporation is a party as the corporation whose shares will be acquired, if
the shareholder is entitled to vote on the plan; or (iii) any sale or exchange
of all or substantially all of the property and assets of the corporation not
made in the usual and regular course of its business, if the shareholder is
entitled to vote on the sale or exchange. Each of the EMCO shareholders has
executed the Merger Agreement. This discussion is a summary only. As a result,
reference is made to the full text of the applicable provisions of the Arizona
Business Corporation Act, a copy of which is included as Appendix D to this
Joint Proxy Statement.
This right does not apply to the shareholders of the surviving corporation
in a merger, if a vote of the shareholders of the surviving corporation is not
required to authorize the merger; except as otherwise provided in the articles
of incorporation, this right also does not apply to the holders of shares
registered on a national securities exchange, or held of record by not less than
two thousand shareholders.
The Arizona Law also provides that a dissenting shareholder must file
written objection to, and not vote in favor of, the proposed merger or
consolidation, and must make a demand for compensation as provided in the
Arizona Law.
Dissenting shareholders are entitled to notice that the transaction has
been approved within 10 days after the merger is approved, including information
concerning where the payment demand must be sent and where and when shares must
be deposited, a form for demanding payment and setting a date for demanding
payment between 30 and 60 days after delivery of the notice.
If the dissenting shareholder makes a timely demand for payment and
deposits shares in accordance with the notice, the surviving corporation is
required to make payment for the shares in the amount of the corporation's
estimate of the fair value of the dissenter's shares, plus interest. The payment
must be accompanied by certain financial information, a copy of the dissenters'
rights statutes, and a statement of the shareholder's right to demand additional
payment for the shares. If the shareholder demands more compensation than is
offered by the corporation, the shareholder and the corporation may negotiate
the fair value within the time prescribed by the Arizona Law.
If the dissenting shareholder and the corporation cannot agree upon the
value of the shares, the corporation may either pay the amount demanded by the
shareholder, or file an action in the Arizona Superior Court, to determine the
fair value of the stock of the dissenting shareholders within sixty days of the
shareholder's demand for additional payment.
Under the Delaware Law, GPC stockholders are not entitled to dissenters' or
appraisal rights with respect to the proposed Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The following are interests, either direct or indirect, in the Merger of
the GPC and EMCO executive officers and directors who will continue to serve as
such following the Merger.
Pursuant to the Merger Agreement each of Raymond Zack and David Zack, who
are currently directors of EMCO, and Gerald Zack will enter into employment
agreements with EMCO following the Merger. Additionally, T. Benjamin Jennings
and Gerard M. Jacobs, currently the Co-Chairmen of the Board, Co-Chief Executive
Officers and Co-Presidents of GPC, will enter into employment agreements with
GPC prior to the Merger. George O. Moorehead, currently the President and Chief
Executive Officer of EMCO, will enter into an employment agreement with EMCO
prior to the Merger. See "-- Employment Agreements," above.
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Harold Rubenstein is a substantial shareholder of Empire Metals, Inc.
("Empire Metals"), the owner of approximately 57% of the outstanding Common
Stock of EMCO. Following the Merger, Mr. Rubenstein will serve as a director of
both GPC and EMCO. Following the Merger, EMCO will purchase Empire Metals'
remaining scrap metal inventory. Following the Merger, Harold Rubenstein shall
cause Ellis Metals to enter into such extensions or modifications to the pricing
agreement currently in place between Ellis Metals and EMCO (the "Pricing
Agreement") so as to cause Ellis Metals to make commercially reasonable rental
payments to GPC on the parcels purchased from Harold Rubenstein and to provide
EMCO with commercially reasonable profits on any amounts of debt owed by Ellis
Metals to EMCO under the Pricing Agreement. Harold Rubenstein is also a 9.91%
shareholder of Waste Manufacturing and Leasing, a company that leases equipment
to EMCO and from which EMCO purchases manufactured containers. Such relationship
between EMCO and Waste Manufacturing and Leasing is expected to continue after
the Merger. Additionally, Harold Rubenstein, currently Chairman of the Board of
EMCO, will sell certain parcels of real estate owned by him, the Rubenstein
Family Trust or H&S Broadway to a subsidiary of GPC. Harold Rubenstein is also a
substantial shareholder of Ellis Metals, Inc. ("Ellis Metals"). See "-- Related
Transactions." Under the consulting agreement, Harold Rubenstein will be paid
$72,000 per year for a five-year term and will continue to participate in EMCO's
health plan. Additionally, Harold Rubenstein will receive up to $1,000 per month
for the costs of acquiring and maintaining a system to retrieve commodity prices
at his office. Mr. Rubenstein is also a substantial shareholder of Ellis Waste
and Recycling Services, Inc., which currently leases a portion of one of the
parcels of real property to be purchased by GPC or its subsidiary. Such
relationship may continue following the Merger.
RELATED TRANSACTIONS
Pursuant to the Merger Agreement, Harold Rubenstein, Beverly Rubenstein and
certain affiliates have agreed to sell to GPC two parcels of real estate on
which certain operations of Ellis Metals, Inc. are located. In connection
therewith, Harold Rubenstein has agreed to cause Ellis Metals to meet with EMCO
and GPC on a quarterly basis to agree to such extensions or modifications to the
pricing agreement currently in place between Ellis Metals and EMCO (the "Pricing
Agreement") so as to cause Ellis Metals to make commercially reasonable rental
payments to GPC on the parcels purchased from Harold Rubenstein and to provide
EMCO with commercially reasonable profits on debt owed by Ellis Metals to EMCO
under the Pricing Agreement and commercially reasonable profits on other
business transactions between EMCO and Ellis Metals. In addition, as long as the
Pricing Agreement is in effect, EMCO and GPC shall have a five-year option
beginning June 1, 1999 to purchase certain assets of Ellis Metals. In such a
case, the purchase price of the assets would be determined in accordance with a
formula which includes a reduction of the purchase price dollar for dollar by
the amount of debt, if any, owing to EMCO by Ellis Metals under the Pricing
Agreement at such time. See "The Merger and Related Transactions -- Interests of
Certain Persons in the Merger."
BOARD RECOMMENDATIONS
THE BOARD OF DIRECTORS OF GPC HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF GPC AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY RECOMMENDED A VOTE FOR
APPROVAL AND ADOPTION OF THE AGREEMENTS AND THE MERGER.
THE BOARD OF DIRECTORS OF EMCO HAS DETERMINED THAT THE MERGER IS IN THE
BEST INTERESTS OF EMCO AND ITS SHAREHOLDERS AND HAS UNANIMOUSLY RECOMMENDED A
VOTE FOR APPROVAL AND ADOPTION OF THE AGREEMENTS AND THE MERGER.
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EXHIBIT C
AGREEMENT
The undersigned individuals hereby agree that the Schedule 13D of which
this Exhibit is a part is filed on behalf of each of them.
/s/ Harold Rubenstein
-----------------------------
Harold Rubenstein
/s/ Beverly Rubenstein
-----------------------------
Beverly Rubenstein
Dated: November 12, 1996
