Stock Purchase Agreement (113K)
Doc #350563: Click preview link for longer preview.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is effective as of
September 1, 2001, by Urecoats Industries Inc., a Delaware corporation
(hereinafter referred to as "Buyer"), and Richard Zegelbone, David S. Ziluck,
Jon Palmisciano, Arlene Storfer, and George Buckhold (hereinafter collectively
referred to as "Sellers").
RECITALS
Sellers own all of the issued and outstanding shares of capital stock
(the "Shares") of Infiniti Paint Co., Inc., a Florida corporation (the
"Company").
Sellers desire to sell, and Buyer desires to purchase, all of the issued
and outstanding Shares of the Company, for the consideration and on the terms
set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITION. For purposes of this Agreement, the following terms have
the meanings specified or referred to in this Section 1:
"ACCOUNTS RECEIVABLE"--as defined in Section 3.8.
"APPLICABLE CONTRACT"--any Contract (a) under which the Company has or
may acquire any rights, (b) under which the Company has or may become subject
to any obligation or liability, or (c) by which the Company or any of the
assets owned or used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
"BUYER"--as defined in the first paragraph of this Agreement.
"BUYER SHARES"--as defined in Section 2.2(c).
"CLOSING"--as defined in Section 2.4.
"CLOSING DATE"--the date and time as of which the Closing actually takes
place, which shall be the date of this Agreement and the time set forth in
Section 2.4.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTRACT"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
1
"DAMAGES"--as defined in Section 5.2.
"EMPLOYEE SELLERS"-David S. Ziluck and Jon Palmisciano.
"EMPLOYMENT AGREEMENTS"--as defined in Section 2.5(a)(iii).
"ENCUMBRANCE"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership,
except restrictions on transfer imposed by Federal securities laws.
"ENVIRONMENTAL LAWS"--as defined in Section 3.18.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGENT"--as defined in Section 2.2(b).
"ESCROW AGREEMENT"--as defined in Section 2.5(c).
"ESCROW AMOUNT"--as defined in Section 2.2(b).
"FACILITIES"--any real property, leaseholds, or other interests currently
or formerly owned or operated by Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by any Company.
"GAAP"--generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity
and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
2
"HAZARDOUS MATERIAL"--as defined in Section 3.18.
"INTELLECTUAL PROPERTY ASSETS"--as defined in Section 3.19.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter;
or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation concerning the existence of such fact
or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at
any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution,
law, ordinance, principle of common law, regulation, statute, or treaty.
"NONCOMPETITION AGREEMENTS"--as defined in Section 2.5(a)(v).
"MANUFACTURING AGREEMENT"--as defined in Section 2.5(a)(iv).
"ORDER"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORGANIZATIONAL DOCUMENTS"--the articles or certificate of incorporation
and the bylaws of a corporation and any amendments thereto.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other
entity or Governmental Body.
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative,
or informal) commenced, brought, conducted, or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"PURCHASE PRICE"--as defined in Section 2.2.
"RELEASE"--as defined in Section 3.18(g)(iii).
3
"REPRESENTATIVE"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SELLERS' RELEASE"--as defined in Section 2.5(a)(ii).
"SHARES"--as defined in the Recitals of this Agreement.
"SUBSIDIARY"--with respect to any Person, any corporation or other Person
of which securities or other interests having the power to elect a majority of
that corporation's or other Person's board of directors or similar governing
body, or otherwise having the power to direct the business and policies of
that corporation or other Person, are held by the Person, either directly or
indirectly.
"TAXES"-- as described in Section 3.10.
"TAX RETURN"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment,
collection, or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"THREATENED"--a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
2. SALE AND TRANSFER OF SHARES; OTHER TRANSACTIONS; CLOSING
2.1 SHARES. Subject to the terms and conditions of this Agreement, at
the Closing, Sellers shall sell and transfer the Shares to Buyer, and Buyer
will purchase the Shares from Sellers, free and clear of all Encumbrances.
2.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares is One Million Five Hundred and Fifty Thousand Dollars ($1,550,000),
payable as follows:
(a) The SUM of Seven Hundred and Seventy Five Thousand ($775,000),
payable at Closing by bank cashier's or certified check payable to the order of,
or by wire transfer to accounts specified by, Sellers, EXCEPT that Forty Five
Thousand Dollars ($45,000) will be held in Escrow as set forth below AND Fifty
Two Thousand Ninety Seven Dollars and Twenty Nine Cents ($52,097.29),
representing Company loans to Sellers, shall be deducted from the Purchase Price
and the loans shall be deemed paid in full by the Sellers;
4
(b) The SUM of Forty Five Thousand Dollars ($45,000) (the "Escrow
Amount"), which shall be deposited with Sader & LeMaire, P.A., an escrow agent
(the "Escrow Agent") as designated by Seller at the Closing and paid to Buyer or
Sellers, as appropriate, as provided in Section 2.3 below; and
(c) Within ten (10) days following the Date of Closing, the issuance
and delivery of a total of 1,550,000 restricted shares of Common Stock of Buyer,
par value $.01 per share (the "Buyer Shares"), which the parties agree and
acknowledge has a value of approximately Seven Hundred and Seventy Five Thousand
Dollars ($ 775,000) as of the Closing Date.
(i) The Buyer's shares are being acquired by Sellers for
investment and not with a view to the unlawful distribution thereof.
(ii) Sellers consent and agree that the certificates for the
Buyer's shares shall contain a legend to the effect that the shares have not
been registered under the United States Securities Act of 1933, as amended (the
"Act") and may not be transferred, sold or hypothecated in the absence of an
effective registration statement with respect to Buyers shares, duly filed with
the Securities and Exchange Commission, or Buyer is provided with an opinion of
counsel, satisfactory to it that registration is not required under the Act.
2.3 ESCROW AMOUNT. The Escrow Amount, as adjusted herein, shall be paid
to Sellers on the first anniversary of the Closing Date, together with any
accrued interest thereon, and less the following amounts under the following
terms:
(a) sums equal to the amount of any unpaid Accounts Receivable
reflected on the Company's Balance Sheet as of August 31, 2001 which remain
unpaid, as of the first anniversary of the Effective Date will be withdrawn from
the Escrow Amount and paid to Buyer with the unpaid Accounts Receivable being
assigned to Sellers for collection, if they so desire;
The parties shall enter into an escrow agreement regarding the Escrow
Amount as contemplated in Section 2.2(b).
2.4 CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the offices of Sader & LeMaire, P.A., 1901 West
Cypress Creek Road, Suite 415, Fort Lauderdale, Florida 33309, at 5:00 PM (local
time) on Tuesday, September 4, 2001 the "Closing Date").
2.5 CLOSING OBLIGATIONS. At the Closing:
(a) Sellers are delivering to Buyer:
(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), for transfer to Buyer;
(ii) releases in the form of Exhibit 2.5(a)(ii) executed by
each Seller (collectively, "Sellers' Releases");
(iii) employment agreements in the form of Exhibit 2.5(a)(iii),
executed by each of the Employee Sellers (collectively, the "Employment
Agreements");
5
(iv) manufacturing agreement in the form of Exhibit 2.5(a)(iv),
executed by Tropical Asphalt Products Corporation;
(v) non-competition agreements in the form of Exhibit
2.5(a)(v), executed by each Seller (collectively, the "Non-Compete Agreements");
(vi) a legal opinion of counsel to Sellers in form acceptable
to Buyer; and
(b) Buyer is delivering to Sellers:
(i) the cash portion of the Purchase Price deliverable at
Closing, by bank cashier's or certified check payable to the order of, or by
wire transfer to accounts specified by, Sellers;
(ii) proof of Buyer's authority and direction to transfer agent
to issue Buyer's Shares together with appropriate opinion of counsel authorizing
same, in the names of Sellers, and certificates representing the Buyer Shares in
the names of Sellers will be delivered within ten (10) days after the Closing
Date;
(iii) the Escrow Amount to the Escrow Agent referred to in
Section 2.5(c) by bank cashier's or certified check;
(iv) properly executed Employment Agreements;
(v) properly executed Manufacturing Agreement; and
(vi) a legal opinion of counsel to Buyer in form acceptable to
Seller.
(c) Buyer and Sellers will enter into an escrow agreement in the form
of Exhibit 2.5(c) (the "Escrow Agreement") with the Escrow Agent.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers, jointly and severally,
represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING.
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Florida, with full corporate
power and authority to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or use, and to perform
all its obligations under Applicable Contracts. The Company is duly qualified
to do business as a foreign corporation and is in good standing under the laws
of each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification.
(b) Sellers have delivered to Buyer copies of the Organizational
Documents of the Company as currently in effect.
(c) The Company has no Subsidiaries.
6
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its terms.
Upon the execution and delivery by Sellers of the Escrow Agreement, the
Employment Agreements, the Manufacturer's Agreement, the Sellers' Releases, and
the Non-Compete Agreements (collectively, the "Sellers' Closing Documents"), the
Sellers' Closing Documents will constitute the legal, valid, and binding
obligations of Sellers, enforceable against Sellers in accordance with their
respective terms. Sellers have the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and the Sellers'
Closing Documents and to perform their obligations under this Agreement and the
Sellers' Closing Documents.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated herein will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Company, or (B) any
resolution adopted by the board of directors or the shareholders of the Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
transactions contemplated herein or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which the Company or any Seller, or
any of the assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject to, or to
become liable for the payment of, any Tax;
(v) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(vi) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by the Company.
SCHEDULE 3.2 lists each person that Sellers or the Company was required to
give any notice to or obtain any Consent from in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
transactions contemplated herein.
(c) Sellers are acquiring the Buyer Shares for their own account and
not with a view to their distribution within the meaning of Section 2(11) of the
Securities Act.
7
3.3 CAPITALIZATION. The authorized equity securities of the Company
consist of ten million (10,000,000) shares of common stock, $.0001 par value per
share, of which one thousand (1,000) shares are issued and outstanding and
constitute the Shares. Sellers are the record and beneficial owners and holders
of the Shares, free and clear of all Encumbrances. SCHEDULE 3.3 sets forth the
Shares owned by each Seller. No legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of the
Company. All of the Shares have been duly authorized and validly issued and are
fully paid and nonassessable. There are no Contracts relating to the issuance,
sale, or transfer of any equity securities or other securities of the Company.
None of the Shares was issued in violation of the Securities Act or any other
Legal Requirement.
3.4 FINANCIAL STATEMENTS. Sellers will cooperate with best efforts and
due diligence to deliver to Buyer: (a) an audited balance sheet of the Company
as at December 31, 2000 (including the notes thereto, the "Balance Sheet"), and
the related statements of income and retained earnings and cash flows for the
fiscal year then ended, together with the report thereon of Baum & Company,
P.A., 4310 Sheridan Street, Suite 202, Hollywood, Florida 33021, independent
certified public accountants, and (b) an unaudited balance sheet of the Company
as at June 30, 2001 (the "Interim Balance Sheet") and the related unaudited
consolidated statements of income, and retained earnings and cash flows for the
six months then ended, including in each case the notes thereto. Such financial
statements and notes fairly present the financial condition and the results of
operations, changes in shareholders' equity, and cash flows of the Company as at
the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the Balance Sheet); the financial statements referred to in this
Section 3.4 reflect the consistent application of such accounting principles
throughout the periods involved. Company will cause to be prepared financial
statements as of August 31, 2001 to be delivered no later than September 30,
2001, unless extended mutually by Buyer and Sellers.
3.5 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of the Company, all of which have been made available
to Buyer, are complete and correct and have been maintained in accordance with
sound business practices. The minute books of the Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
shareholders, the Boards of Directors, and committees of the Boards of Directors
of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. SCHEDULE 3.6 contains a complete
and accurate list of all leaseholds or other interests in real property owned by
the Company. The Company owns all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that it purports to own,
including all of the assets reflected in the Balance Sheet and the Interim
Balance Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in SCHEDULE 3.6 and personal property sold since the
date of the Balance Sheet and the Interim Balance Sheet, as the case may be, in
the ordinary course of business), and all of the properties and assets purchased
or otherwise acquired by the Company since the date of the Balance Sheet (except
8
for personal property acquired and sold since the date of the Balance Sheet in
the ordinary course of business and consistent with past practice). Except as
set forth in SCHEDULE 3.6, all properties and assets owned by the Company are
free and clear of all Encumbrances.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The buildings, plants,
structures, and equipment owned or leased by the Company are structurally sound,
are in good operating condition and repair, and are adequate for the uses to
which they are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The building,
plants, structures, and equipment owned or leased by the Company are sufficient
for the continued conduct of the Company's business after the Closing in
substantially the same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are
reflected on the Balance Sheet or the Interim Balance Sheet or on the accounting
records of the Company as of the Closing Date (collectively, the "Accounts
Receivable") represent valid obligations arising from sales actually made or
services actually performed in the ordinary course of business. The Accounts
Receivable are current and collectible net of the respective reserves shown on
the Balance Sheet or the Interim Balance Sheet or on the accounting records of
the Company as of the Closing Date (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, does not represent a greater percentage of the Accounts Receivable as of
the Closing Date than the reserve reflected in the Balance Sheet represented of
the Accounts Receivable reflected therein and does not represent a material
adverse change in the composition of such Accounts Receivable in terms of
aging). Subject to such reserves, each of the Accounts Receivable either has
been or will be collected in full, without any set-off, within ninety days after
the day on which it first becomes due and payable. There is no contest, claim,
or right of set-off, other than returns in the ordinary course of business,
under any Contract with any obligor of an Accounts Receivable relating to the
amount or validity of such Accounts Receivable. SCHEDULE 3.8 contains a
complete and accurate list of all Accounts Receivable as of August 31, 2001,
which list sets forth the aging of such Accounts Receivable.
3.9 NO UNDISCLOSED LIABILITIES. Except as set forth in SCHEDULE 3.9, the
Company has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet or
the Interim Balance Sheet and current liabilities incurred in the ordinary
course of business since the respective dates thereof.
3.10 TAXES.
(a) The Company has filed or caused to be filed all Tax Returns that
are or were required to be filed by or with respect to it, either separately or
as a member of a group of corporations, pursuant to applicable Legal
Requirements up to and including the fiscal year ending December 31, 2000.
Sellers have delivered to Buyer copies of, and SCHEDULE 3.10(a) contains a
complete and accurate list of, all such Tax Returns relating to income or
franchise taxes filed since the inception of the Company. The Company has paid,
or made provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
9
received by Sellers or the Company, except such Taxes, if any, as are listed in
SCHEDULE 3.10(a) and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in the Balance
Sheet and the Interim Balance Sheet. Any tax liabilities of Company prior to
Closing, are subject to claims against the Escrow Amount and to extent such
taxes exceed the Escrow Amount, Sellers jointly and individually will be liable
for same and will indemnify Company and Buyer from any taxes, penalties and
interest that may accrue.
(b) Except as set forth in SCHEDULE 3.10(b), the Company has never
been the subject of an audit, either at the federal or state level.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of the Company are adequate (determined in accordance with
GAAP) and are at least equal to the Company's liability for Taxes. There exists
no proposed tax assessment against the Company except as disclosed in the
Balance Sheet. All Taxes that the Company is or was required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper Governmental Body or other
Person.
(d) All Tax Returns filed by the Company are true, correct, and
complete. There is no tax sharing agreement that will require any payment by the
Company after the date of this Agreement.
3.11 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet,
there has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of the Company, and no event has
occurred or circumstance exists that may result in such a material adverse
change.
3.12 EMPLOYEE MATTERS.
(a) CASH COMPENSATION. SCHEDULE 3.12(a) contains a complete and
accurate list of the names, titles and cash compensation, including without
limitation wages, salaries, bonuses (discretionary and formula) and other cash
compensation (the "Cash Compensation") of all employees of the Company. In
addition, SCHEDULE 3.12(a) contains a complete and accurate description of any
promised increases in Cash Compensation of employees of the Company that have
not yet been effected.
(b) COMPENSATION PLANS. SCHEDULE 3.12(b) contains a complete and
accurate list of all employee benefit plans, compensation plans, arrangements
or practices (the "Compensation Plans") sponsored by the Company or to which
the Company contributes on behalf of its employees. The Compensation Plans
include without limitation, plans, arrangements or practices that provide for
severance pay, deferred compensation, incentive, bonus or performance awards,
and stock ownership or stock options. The Company has provided Buyer a copy of
each written Compensation Plan and a written description of each unwritten
Compensation Plan. Each of the Compensation Plans can be terminated or amended
at will by the Company. Each Compensation Plan has been administered and
maintained in compliance with all applicable Legal Requirements, including
ERISA. No threatened or pending claims, suits or other proceedings exist with
respect to any Compensation Plan other than normal benefit claims filed by
participants or beneficiaries.
10
(c) EMPLOYEE POLICIES AND PROCEDURES. SCHEDULE 3.12(c) contains a
complete and accurate list of all employee manuals, policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to
employees of the Company. The Company has provided Buyer a copy of all written
Employee Policies and Procedures and a written description of all unwritten
Employee Policies and Procedures. Each of the Employee Policies and Procedures
can be amended or terminated at will by the Company.
(d) LABOR COMPLIANCE. The Company
(i) has been and is in compliance with all laws, rules,
regulations and ordinances respecting employment and employment practices, terms
and conditions of employment and wages and hours, and
(ii) is not liable for any arrears of wages or penalties for
failure to comply with any of the foregoing.
The Company has not engaged in any unfair labor practice or discriminated
on the basis of race, color, religion, sex, national origin, age or handicap in
its employment conditions or practices.
There are no
(i) unfair labor practice charges or complaints or racial,
color, religious, sex, national origin, age or handicap discrimination charges
or complaints pending or threatened against the Company before any federal,
state or local court, board, department, commission or agency nor does any basis
therefor exist or
(ii) existing or threatened labor strikes, disputes,
grievances, controversies or other labor troubles affecting the Company, nor
does any basis therefor exist.
(e) UNIONS. No employees of the Company are represented by any
union, labor organization or collective bargaining unit. To the best knowledge
of Sellers, the employees of the Company have no intention to and have not
threatened to organize or join a union, labor organization or collective
bargaining unit.
(f) ALIENS. All employees of the Company are citizens of, or are
authorized to be employed in, the United States.
3.13 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth in SCHEDULE 3.13:
(i) the Company is, and has been at all times in full
compliance with each Legal Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or use of any of its
assets; and
11
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
the Company of, or a failure on the part of the Company to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
(b) SCHEDULE 3.13 contains a complete and accurate list of each
Governmental Authorization, including permits, that is held by the Company or
that otherwise relates to the business of, or to any of the assets owned or used
by, the Company. Each Governmental Authorization listed or required to be listed
in SCHEDULE 3.13 is valid and in full force and effect. Except as set forth in
SCHEDULE 3.13:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in SCHEDULE 3.13; and
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed
in SCHEDULE 3.13, or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or any modification
to, any Governmental Authorization listed or required to be listed in SCHEDULE
3.13.
The Governmental Authorizations listed in SCHEDULE 3.13 collectively
constitute all of the Governmental Authorizations necessary to permit the
Company to lawfully conduct and operate its businesses in the manner it
currently conducts and operates such business and to permit the Company to own
and use its assets in the manner in which it currently owns and uses such
assets.
3.14 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in SCHEDULE 3.14, there is no pending
Proceeding:
(i) that has been commenced by or against the Company or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated herein.
To the Knowledge of Sellers and the Company, (1) no such Proceeding has
been Threatened, and (2) no event has occurred or circumstance exists that may
give rise to or serve as a basis for the commencement of any such Proceeding.
Sellers have delivered to Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in SCHEDULE 3.14. The
Proceedings listed in SCHEDULE 3.14 will not have a material adverse effect on
the business, operations, assets, condition, or prospects of the Company.
12
(b) Except as set forth in SCHEDULE 3.14:
(i) there is no Order to which the Company, any Seller or
any of the assets owned or used by the Company, is subject;
(ii) no officer, director, agent, or employee of the Company
is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Company;
(iii) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Order to which it,
or any of the assets owned or used by it, is or has been subject; and
(iv) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation
of or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject.
3.15 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
SCHEDULE 3.15, since the date of the Balance Sheet, the Company has conducted
its business only in the ordinary course of business and there has not been
any:
(a) change in the Company's authorized or issued capital stock of
the Company; grant of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
ordinary course of business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or property of
the Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects
of the Company;
(f) entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any transaction involving a
total remaining commitment by or to the Company of at least $5,000;
13
(g) sale (other than sales of inventory in the ordinary course of
business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the Company, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a value to
the Company in excess of $5,000;
(i) material change in the accounting methods used by the Company;
or
(j) agreement, whether oral or written, by the Company to do any
of the foregoing.
3.16 CONTRACTS; NO DEFAULTS.
(a) SCHEDULE 3.16(a) contains a complete and accurate list, and
Sellers have delivered to Buyer true and complete copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an amount or
value in excess of $5,000;
(iii) each Applicable Contract that was not entered into in
the ordinary course of business and that involves or could involve
expenditures or receipts of the Company in excess of $5,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $5,000 and with terms of less than one year);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(vi) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(vii) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of the Company or limit the
freedom of the Company to engage in any line of business or to compete with any
Person;
(viii) each power of attorney that is currently effective and
outstanding;
14
(ix) each Applicable Contract for capital expenditures in
excess of $5,000; and
(x) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in SCHEDULE 3.16(b):
(i) no Seller (or any person related to Seller) has or may
acquire any rights under, and neither Seller has or may become subject to any
obligation or liability under, any Contract that relates to the business of, or
any of the assets owned or used by, the Company; and
(ii) no officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person any
rights to any invention, improvement, or discovery.
(c) Except as set forth in SCHEDULE 3.16(c), each Contract
identified or required to be identified in SCHEDULE 3.16(a) is in full force and
effect and is valid and enforceable in accordance with its terms.
(d) Except as set forth in SCHEDULE 3.16(d):
(i) the Company is, and at all times has been, in full
compliance with all applicable terms and requirements of each Contract under
which the Company has or had any obligation or liability or by which the Company
or any of the assets owned or used by the Company is or was bound;
(ii) each other Person that has or had any obligation or
liability under any Contract under which the Company has or had any rights is,
and at all times has been, in full compliance with all applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) may contravene, conflict with, or result in
a violation or breach of, or give the Company or other Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract;
and
(iv) the Company has not given to or received from any other
Person, at any time, any notice or other communication (whether oral or written)
regarding any actual, alleged, possible, or potential violation or breach of, or
default under, any Contract.
3.17 INSURANCE.
(a) Sellers have delivered to Buyer:
15
(i) true and complete copies of all policies of insurance to
which the Company is a party or under which the Company, or any director of the
Company, is or has been covered at any time within the three years preceding the
date of this Agreement; and
(ii) true and complete copies of all pending applications for
policies of insurance.
(b) SCHEDULE 3.17(b) describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) SCHEDULE 3.17(c) sets forth, by year, for the current policy
year and each of the two preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $5,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of such claims.
(d) All policies to which the Company is a party:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound
and reputable;
(C) taken together, provide adequate insurance coverage
for the assets and the operations of the Company;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or by it is bound;
(E) will continue in full force and effect following the
consummation of the transactions contemplated herein; and
16
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of the Company.
No Seller or the Company has received (A) any refusal of coverage or
any notice that a defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations thereunder.
The Company has paid all premiums due, and has otherwise performed
all of its respective obligations, under each policy to which the Company is a
party or that provides coverage to the Company or director thereof.
The Company has given notice to the insurer of all claims that may be
insured thereby.
3.18 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.18:
(a) ENVIRONMENTAL LAWS. Neither the Company nor any of its assets
is currently in violation of, or subject to any existing, pending or threatened
investigation or inquiry by, any governmental authority, or subject to any
remedial obligations under, any Environmental Laws, and this representation and
warranty would continue to be true and correct following disclosure to the
applicable governmental authorities of all relevant facts, conditions and
circumstances, if any, pertaining to the Company.
(b) USE OF ASSETS. The assets of the Company have never been used
in a manner that would be in violation of any of the Environmental Laws.
(c) PERMITS. The Company has not obtained and is not required to
obtain, and Sellers have no knowledge of any reason Buyer will be required to
obtain, any permits, licenses or similar authorizations to construct, occupy,
operate or use any buildings, improvements, fixtures and equipment owned by the
Company by reason of any Environmental Laws.
(d) SUPERFUND LIST. None of the former or present assets of the
Company are or have been listed on any federal or state list of sites for which
investigation or remediation under Environmental Laws has occurred or is
anticipated, nor are any of the Company's assets subject to any liens arising
under Environmental Laws.
(e) HAZARDOUS MATERIALS. There are no aboveground or underground
storage tanks, PCB-containing equipment, or asbestos-containing materials at,
on, or under any of the Company's Facilities which contain Hazardous Materials.
There is no radon or other Hazardous Material present in the ambient air at the
Facilities in excess of permissible limits established by Environmental Law or
for which redemption or control is anticipated or ongoing.
The Company does not have any liability, whether contingent or actual,
with respect to Hazardous Materials that have been released at any property
adjacent to or geologically or hydrologically connected with the Company's
Facilities.
17
There are no Hazardous Materials present on or in the environment at the
Company's Facilities or at a geologically or hydrologically adjoining property,
including any Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether movable or
fixed) or other container, either temporary or permanent, and deposited or
located in land, water, sumps, or any other part of the Company's assets, or
incorporated in to any structure therein or thereon.
There has been no Release or, to the knowledge of Sellers, threat of
Release, of any Hazardous Materials at or from the Company's Facilities or at
any other location where any Hazardous Materials generated at the Company's
Facilities have been treated, stored, transferred, recycled, or disposed, and
the Company has not received, and has no basis to expect, any actual or
threatened order, notice, or other communication from any governmental authority
or private citizen, of any actual or potential violation or failure to comply
with any Environmental Law, or of any actual or threatened obligation to
undertake or bear the cost of any investigation, remediation, or payment of
penalties with respect to any of the Company's Facilities or any other
properties or assets at which Hazardous Materials were transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(f) REPORTS. The Company has delivered to Buyer true and complete
copies and results of all reports, studies, analyses, tests, and monitoring
results possessed or commissioned by the Company or its predecessors pertaining
to Hazardous Materials or compliance with Environmental Laws.