EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 9, 1998
BY AND AMONG
HI-RISE RECYCLING SYSTEMS, INC.,
BPI ACQUISITION CORP.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
AND
BES-PAC, INC.
AGREEMENT AND PLAN OF MERGER
INDEX
PAGE
----
ARTICLE I - THE MERGER................................................................1
1.1 Merger and Surviving Corporation...........................................1
1.2 Effective Time.............................................................2
1.3 Subsequent Action..........................................................2
ARTICLE II - ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION........2
2.1 Articles of Incorporation..................................................2
2.2 The Bylaws.................................................................2
2.3 Officers and Directors.....................................................2
ARTICLE III - CONVERSION OR CANCELLATION OF SHARES IN THE MERGER AND OTHER
CONSIDERATION...........................................................3
3.1 Conversion or Cancellation of Shares.......................................3
3.2 Earn-Out Consideration.....................................................3
3.3 Certain Adjustments........................................................4
ARTICLE IV - CLOSING..................................................................5
4.1 The Closing................................................................5
4.2 Deliveries at Closing......................................................5
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND THE COMPANY.........6
5.1 Organization and Corporate Power; Subsidiaries.............................6
5.2 Authorization..............................................................6
5.3 Capital Stock; Title to Shares.............................................7
5.4 Title, Condition to Personal Property......................................7
5.5 Government Approvals.......................................................8
5.6 Financial Information; Indebtedness........................................8
5.7 Events Subsequent to the Date of the Financial Statements..................9
5.8 Litigation................................................................10
5.9 Compliance with Laws......................................................10
5.10 Taxes.....................................................................10
5.11 Real Property.............................................................11
5.12 Assets Comprising the Business............................................11
5.13 Patents, Trademarks, Etc..................................................12
5.14 Employee Matters..........................................................12
5.15 Licenses and Permits......................................................13
5.16 Changes in Third-Party Payors.............................................13
5.17 Contracts and Commitments.................................................13
i
PAGE
----
5.18 Bank Accounts.............................................................14
5.19 Insurance Coverage........................................................14
5.20 ERISA.....................................................................15
5.21 No Brokers or Finders.....................................................15
5.22 Assumptions, Guarantees, Etc. of Indebtedness of Other Persons............16
5.23 No Conflicts or Defaults..................................................16
5.24 Environmental Compliance..................................................16
5.25 Customers and Suppliers...................................................18
5.26 Accounts Payable; Accounts Receivable.....................................18
5.27 Books and Records.........................................................18
5.28 Solvency..................................................................19
5.29 Disclosures...............................................................19
5.30 Restrictions on Shares; Investor Knowledge................................19
5.31 Product Warranty..........................................................20
5.32 Product Liability.........................................................20
5.33 Transferred Assets and Liabilities, Etc...................................21
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB.............21
6.1 Organization and Corporate Power..........................................21
6.2 Authorization.............................................................22
6.3 Absence of Conflicting Agreements.........................................22
6.4 No Brokers or Finders.....................................................22
6.5 Hi-Rise Shares............................................................22
6.6 SEC Reports...............................................................22
6.7 Capitalization of Merger Sub; Continuation of Business....................22
ARTICLE VII - AFFIRMATIVE COVENANTS..................................................23
7.1 Mutual Covenants..........................................................23
7.2 Parent Covenants..........................................................25
ARTICLE VIII - OBLIGATIONS OF PARTIES AFTER CLOSING..................................26
8.1 Survival of Representations and Warranties................................26
8.2 Indemnification...........................................................26
8.3 Restrictions..............................................................29
8.4 Delivery of Records.......................................................29
8.5 Cooperation; Further Assistance...........................................30
ii
PAGE
----
ARTICLE IX - CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND MERGER SUB..............30
9.1 Representations and Warranties............................................30
9.2 Certified Documents, Etc..................................................30
9.3 Consents and Waivers......................................................30
9.4 Litigation................................................................30
9.5 Proceedings...............................................................30
9.6 Employment and Non-Competition Agreement..................................31
9.7 Amendments to Lease Agreements............................................31
9.8 No Material Adverse Change................................................31
ARTICLE X - CONDITIONS OF THE OBLIGATIONS OF THE SHAREHOLDER.........................31
10.1 Representations and Warranties............................................31
10.2 Litigation................................................................32
10.3 Consents and Waivers......................................................32
10.4 Certified Documents, Etc..................................................32
10.5 Employment and Non-Competition Agreement..................................32
10.6 Repayment of Loans........................................................32
10.7 Amendments to Lease Agreements............................................32
ARTICLE XI - NON-COMPETITION AND NON-INTERFERENCE....................................32
11.1 Non-Competition; Non-Interference.........................................32
ARTICLE XII - TERMINATION............................................................34
12.1 Termination...............................................................34
12.2 Effect of Termination.....................................................34
ARTICLE XIII - CERTAIN DEFINITIONS...................................................34
ARTICLE XIV - MISCELLANEOUS..........................................................36
14.1 Amendments and Waivers....................................................36
14.2 Notices...................................................................36
14.3 Expenses..................................................................37
14.4 Indemnification for Broker Fees...........................................37
14.5 Counterparts..............................................................37
14.6 Effect of Headings........................................................37
14.7 Further Assurances........................................................37
14.8 Governing Law; Arbitration................................................37
14.9 Attorneys' Fees...........................................................38
14.10 Publicity.................................................................38
14.11 Entire Agreement..........................................................38
14.12 Severability..............................................................38
14.13 Binding Effect and Assignment.............................................38
14.14 Specific Performance......................................................38
iii
LIST OF EXHIBITS
EXHIBIT A - Articles of Merger
EXHIBIT B - Form of Convertible Promissory Note
EXHIBIT C - Opinion of Counsel to the Shareholder and the Company
EXHIBIT D - Opinion of Counsel to the Parent and Merger Sub
EXHIBIT E - Registration Rights Provisions
EXHIBIT F - Form of Employment and Non-Competition Agreement by and between the
Parent and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
EXHIBIT G - Form of Employment Agreement by and between the Parent and Certain
Bes-Pac Key Sales Employees
EXHIBIT H-1 - Form of Lease Amendment for ▇▇▇▇▇ Street Property
EXHIBIT H-2 - Form of Lease Amendment for ▇▇▇▇▇ ▇▇▇▇▇▇ Property
EXHIBIT I - Form of Lease Amendment for ▇▇▇▇▇▇▇ Property
EXHIBIT J - Form of Shareholder Loan Repayment Agreement
LIST OF SCHEDULES
Schedule 3.2 - Adjustments to Net Earnings
Schedule 5.1 - Qualifications to do Business of the Company
Schedule 5.4(a) - Title to Property; Inventory Locations
Schedule 5.4(b) - Permitted Liens
Schedule 5.6(b) - Liabilities
Schedule 5.6(c) - Indebtedness
Schedule 5.7 - Events Subsequent to the Date of the Financial Statements
Schedule 5.8 - Litigation
Schedule 5.9 - Compliance with Laws
Schedule 5.11 - Real Property
Schedule 5.12 - Assets Comprising the Business
Schedule 5.13 - Patents, Trademarks, Etc.
Schedule 5.14 - Employee Matters
Schedule 5.15 - Licenses and Permits
Schedule 5.17 - Contracts and Commitments
Schedule 5.18 - Bank Accounts
Schedule 5.19 - Insurance Coverage
Schedule 5.20(b) - List of Plans
Schedule 5.20(c) - Employees Subject to COBRA
Schedule 5.21 - Brokers or Finders
Schedule 5.22 - Assumptions; Guaranties
Schedule 5.23 - No Conflicts or Defaults
Schedule 5.24 - Environmental Compliance
Schedule 5.25 - Customers and Suppliers
Schedule 5.30 - Parent SEC Reports
Schedule 5.32 - Product Liability
Schedule 9.6 - Certain Key Company Employees
iv
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of October 9, 1998 (the
"Agreement"), is entered into by and among (i) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the
"Shareholder"), (ii) BES-PAC, INC., a South Carolina corporation (the
"Company"), (iii) HI-RISE RECYCLING SYSTEMS, INC., a Florida corporation (the
"Parent"), and (iv) BPI ACQUISITION CORP., a South Carolina corporation and
wholly-owned subsidiary of the Parent ("Merger Sub"). Merger Sub and the Company
are hereinafter referred to collectively as the "Constituent Corporation."
Certain capitalized terms used herein are defined in Article XIII hereof.
R E C I T A L S:
WHEREAS, the respective Boards of Directors of the Parent, Merger Sub
and the Company deem it desirable and in the best interests of their respective
corporations and shareholders that the Company merge with and into Merger Sub in
a statutory merger in accordance with the laws of the State of South Carolina;
and
WHEREAS, the Shareholder is the holder of all the outstanding shares of
capital stock of the Company; and
WHEREAS, the Parent, Merger Sub, the Company and the Shareholder desire
to make certain representations, warranties, covenants and agreements in
connection with the merger provided for herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties intending
to be legally bound agree as follows:
ARTICLE I
THE MERGER
1.1 MERGER AND SURVIVING CORPORATION. Subject to the terms and
conditions of this Agreement and pursuant to the applicable laws of the State of
South Carolina, at the Effective Time (as defined in Section 1.2 herein) the
Company shall be merged with and into Merger Sub, and the separate corporate
existence of the Company shall thereupon cease (the "Merger"). Merger Sub shall
be the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation") and shall continue to be governed by the laws of
the State of South Carolina and the separate corporate existence of Merger Sub
with all its rights, privileges, immunities and franchises shall continue
unaffected by the Merger. The Merger shall have the effects specified in Section
▇▇-▇▇-▇▇▇ of the South Carolina Business Corporation Act (the "SCBCA").
1
1.2 EFFECTIVE TIME. At or prior to the Closing Date (as defined below),
Merger Sub and the Company will cause Articles of Merger, in the form attached
hereto as Exhibit A (the "Articles of Merger"), to be executed and filed with
the Secretary of State for the State of South Carolina (the "Secretary of
State") as provided in Section ▇▇-▇▇-▇▇▇ of the SCBCA. The Merger shall become
effective on the date specified in the Articles of Merger as the effective date
of the Merger, and such time, which shall be immediately following the Closing
Date, is hereinafter referred to as the "Effective Time."
1.3 SUBSEQUENT ACTION. If, at any time after the Effective Time, the
Surviving Corporation shall determine or be advised that any bills of sale,
assignments or any other actions or things are necessary or desirable to
perfect, confirm, record or otherwise vest in the Surviving Corporation its
rights, title or interest in, to or under any of the rights, properties or
assets of the Constituent Corporations acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of the Constituent Corporations or otherwise, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title, and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out the
terms and provisions of this Agreement.
ARTICLE II
ARTICLES OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of Merger
Sub shall be the Articles of Incorporation of the Surviving Corporation, until
duly amended in accordance with their terms and the SCBCA, except that Article I
thereof shall be amended to read in its entirety as follows: "The name of the
corporation is Bes-Pac, Inc. (hereinafter called the "Corporation")."
2.2 THE BYLAWS. The Bylaws of Merger Sub shall be the Bylaws of the
Surviving Corporation, until duly amended in accordance with their terms and the
SCBCA.
2.3 OFFICERS AND DIRECTORS. The officers of Merger Sub shall be the
officers of the Surviving Corporation and the directors of Merger Sub shall be
the directors of the Surviving Corporation, until their successors have been
duly elected or appointed and qualified or until their earlier death,
resignation and removal in accordance with the Surviving Corporation's Articles
of Incorporation and Bylaws.
2
ARTICLE III
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
AND OTHER CONSIDERATION
3.1 CONVERSION OR CANCELLATION OF SHARES.
(a) At the Effective Time, each share of common stock, no
par value (the "Company Common Stock"), of the Company held by the Shareholder
which is issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive (i) cash in an amount equal to
the quotient determined by dividing Three Million Dollars ($3,000,000) by the
number of outstanding shares of Company Common Stock, payable by wire transfer
or official bank or cashier's check, (ii) a number of shares (the "Firm Hi-Rise
Shares") of the Parent's common stock, $.01 par value per share (the "Hi-Rise
Common Stock"), equal to the quotient determined by dividing (x) 1,890,500
(which amount represents approximately 19.9% of the number of shares of Hi-Rise
Common Stock anticipated to be outstanding immediately prior to the Effective
Time) by (y) the number of outstanding shares of Company Common Stock, (iii) a
convertible promissory note of the Parent in the principal amount equal to the
quotient determined by dividing (v) $1,219,000 by (w) the number of outstanding
shares of Company Common Stock, in the form attached hereto as Exhibit B (the
"Note"), and (iv) the contingent right to receive additional cash and additional
shares of Hi-Rise Common Stock as set forth in SECTION 3.2 below (the "Per Share
Merger Consideration"). All of the shares of Company Common Stock by virtue of
the Merger and without any action on the part of the holder thereof, shall no
longer be outstanding and shall be cancelled and retired and shall cease to
exist, and the holder of a certificate or certificates representing shares of
Company Common Stock shall thereafter cease to have any rights with respect to
such shares, except to receive from Merger Sub, after surrender of such
certificate or certificates, the Per Share Merger Consideration.
(b) At the Effective Time, each share of Company Common
Stock issued and held in the Company's treasury, if any, shall, by virtue of the
Merger and without any action on the part of the Company, cease to be
outstanding, shall be canceled and retired without payment of any consideration
therefor and shall cease to exist.
(c) At the Effective Time, each share of common stock,
par value $.01 per share (the "Merger Sub Common Stock"), of Merger Sub issued
and outstanding immediately prior to the Effective Time shall by virtue of the
Merger and without any action on the part of Merger Sub or the holder of such
shares, be converted into and thereafter represent one validly issued, fully
paid and nonassessable share of the common stock, par value $.01 per share
(collectively, the "Surviving Shares"), of the Surviving Corporation.
3.2 EARN-OUT CONSIDERATION. The Shareholder shall be entitled to
receive for each share of Company Common Stock held by him immediately prior to
the Effective Time (i) cash in an amount equal to the quotient determined by
dividing one-third (1/3) of the amount of the Earn-Out Payment (as defined
below) by the number of shares of Company Common Stock
3
outstanding immediately prior to the Effective Time, payable by wire transfer or
official bank or cashier's check, and (ii) a number of shares (the "Contingent
Hi-Rise Shares" and, together with the Firm Hi-Rise Shares, the "Hi-Rise
Shares") of Hi-Rise Common Stock equal to the quotient determined by dividing
(x) the number of shares of Hi-Rise Common Stock having a Modified Fair Market
Value, as defined below, equal to two-thirds (2/3) of the amount of the Earn-Out
Payment by (y) the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time. For purposes of this Section 3.2, the
"Earn-Out Payment" shall be equal to the sum of (A) $1,000,000 plus (B) five (5)
times the amount, if any, by which the Surviving Corporation's Adjusted Net
Earnings (as defined below) for the twelve (12) month period following the
Closing Date (the "Earn-Out Period") exceeds One Million Eight Hundred Thousand
Dollars ($1,800,000), provided, however, that in no event shall the total
Earn-Out Payment exceed Two Million Dollars ($2,000,000). The Earn-Out Payment
shall be payable to the Shareholder, as promptly as practicable following the
final determination, as set forth below, of the Surviving Corporation's Adjusted
Net Earnings for the Earn-Out Period. For purposes of this SECTION 3.2, subject
to the provisions of SECTION 3.3, "Modified Fair Market Value" per share of the
Hi-Rise Common Stock shall be the average (the "12-Month Average") of the last
reported sales prices of the Hi-Rise Common Stock as reported on the NASDAQ
Small-Cap Market for the last day of each month during the Earn-Out Period. For
purposes of this Agreement, "Adjusted Net Earnings" shall mean the Surviving
Corporation's net earnings for the Earn-Out Period without regard to taxes,
depreciation and amortization as determined in accordance with GAAP, subject to
the adjustments set forth on Schedule 3.2 attached hereto.
The Surviving Corporation's independent certified public accountants
shall compute Adjusted Net Earnings promptly after the close of the Earn-Out
Period and furnish the same to the Shareholder. The Shareholder and his advisors
shall have a period of thirty (30) days following receipt of such determination
to evaluate the same. During such period, Parent shall afford the Shareholder
and his agents reasonable access to all books, records, work papers and other
items necessary to complete such evaluation, provided, that the Shareholder and
its agents shall hold all such information in confidence. The Shareholder may
object to such determination by giving written notice thereof to Parent within
such 30-day period specifying in reasonable detail the disputed items. If the
Parent and the Shareholder are unable to agree on the determination of Adjusted
Net Earnings within thirty (30) days from Parent's receipt of such objection
notice from Shareholder, Adjusted Net Earnings shall be determined by the Tampa,
Florida office of Ernst & Young, whose determination shall be final, binding and
conclusive on the parties, and their fees and expenses shall be paid equally by
the Parent and the Shareholder. If the Shareholder does not object to the
determination of Adjusted Net Earnings by the Surviving Corporation's
independent certified public accountants within such 30-day period, the
determination of the Surviving Corporation's independent certified public
accountants shall be final, binding and conclusive.
3.3 CERTAIN ADJUSTMENTS. It is the intention of the
parties that the Merger shall qualify as a tax-free reorganization pursuant to
Section 368(a)(2)(D) of the Code. If the fair market value, as determined by
taking the mean between the highest and lowest quoted selling prices of the
Hi-Rise Common Stock as reported on the NASDAQ Small-Cap Market for the
4
trading day immediately preceding the date of payment of the Earn-Out Payment
(the "NASDAQ Value"), of the number of Contingent Hi-Rise Shares to be issued
pursuant to Section 3.2 hereof in payment of a portion of the Earn-Out Payment,
as such number of shares is calculated utilizing the 12-Month Average, is less
than forty-five percent (45%) of the amount of the Earn-Out Payment, then the
"Modified Fair Market Value" per share of the Hi-Rise Common Stock shall be the
NASDAQ Value and the number of Contingent Hi-Rise Shares to be issued pursuant
to Section 3.2 hereof shall be recalculated utilizing the NASDAQ Value.
ARTICLE IV
CLOSING
4.1 THE CLOSING. The closing (the "Closing") of the transactions
contemplated by the Agreement shall be held at the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
P.A., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ on the date which is two (2) business
days following the date on which all of the conditions to each party's
obligations hereunder have been satisfied or waived or such other date as the
parties may agree in writing, but in any event not later than November 30, 1998
(the "Closing Date").
4.2 DELIVERIES AT CLOSING. At the Closing and subject to the terms and
conditions herein contained:
(a) The Company and the Shareholder shall deliver to the
Parent and Merger Sub the following:
(i) a legal opinion of ▇▇▇▇▇▇▇▇, Loop & ▇▇▇▇▇▇▇▇,
LLP, counsel to the Shareholder and the Company, in substantially the
form attached hereto as EXHIBIT C;
(ii) a certificate signed by the Chairman of the
Board or other authorized officer of the Company and by the
Shareholder, dated as of the Closing Date, stating that the conditions
in SECTION 9.1 have been satisfied as of the Closing;
(iii) the certificates representing all of the
outstanding share of Company Common Stock, duly endorsed or accompanied
by stock powers duly endorsed in blank, free and clear of any and all
Liens;
(iv) the Articles of Merger duly executed by an
authorized officer of the Company; and
(v) such other certificates and other evidence as
Parent or its counsel may request as to the satisfaction of the
conditions to Parent's obligations set forth herein.
(b) The Parent and Merger Sub shall deliver to the Shareholder
the following:
5
(i) a legal opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.A.,
counsel for the Parent and Merger Sub, in substantially the form
attached as EXHIBIT D;
(ii) the Per Share Merger Consideration payable at
the Effective Time in accordance with SECTION 3.1 hereof;
(iii) the Articles of Merger duly executed by an
authorized officer of Merger Sub; and
(iv) a certificate signed by the Chief Operating
Officer or other authorized officer of each of the Parent and Merger
Sub, dated as of the Closing Date, stating that the conditions in
SECTION 10.1 have been satisfied as of the Closing.
(c) The Shareholder, the Company, the Parent and Merger
Sub, as applicable, shall deliver the other items contemplated under Articles IX
and X hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDER AND THE COMPANY
In order to induce the Parent and Merger Sub to consummate the
transactions under this Agreement, the Shareholder and the Company, jointly and
severally, make the following representations and warranties:
5.1 ORGANIZATION AND CORPORATE POWER; SUBSIDIARIES. The Company (i) is
a corporation duly organized, validly existing and in good standing under the
laws of the State of South Carolina and (ii) has all requisite corporate power
and authority to own its properties and to carry on its business as presently
conducted. The Company is duly licensed or qualified to do business as a foreign
corporation and in good standing in the jurisdictions set forth on SCHEDULE 5.1,
and in each jurisdiction wherein the character of its property, or the nature of
the activities presently conducted by it, makes such qualification necessary,
except where the failure to so qualify would not have a Material Adverse Effect.
Except as set forth on SCHEDULE 5.1, neither the Company, nor with respect to
the Business, the Shareholder, files franchise, income or other Tax returns in
any jurisdiction based upon the ownership or use of its property therein or its
derivation of income therefrom. No proceeding anticipating or relating to the
dissolution or merger of the Company or the amendment of the Company's articles
of incorporation is pending or has been commenced or is contemplated. The
Company is not in violation of its articles of incorporation or bylaws. A true
and correct copy of each of the articles of incorporation and bylaws of the
Company, as amended to date, has been furnished to the Parent and Merger Sub.
The Company does not have any subsidiaries or participate in any partnership or
joint venture, or own any outstanding capital stock of any other corporation.
6
5.2 AUTHORIZATION. The Company has all necessary corporate power and
authority, and has taken all necessary corporate action, including shareholder
consent, required for the due authorization, execution, delivery and performance
by the Company of this Agreement and the Related Agreements to which the Company
is a party, and the consummation of the transactions contemplated herein or
therein. The Shareholder has all necessary power and authority required for the
execution, delivery and performance by the Shareholder of this Agreement and the
Related Agreements to which the Shareholder is a party, and the consummation of
the transactions contemplated herein and therein. This Agreement is, and upon
execution and delivery, the Related Agreements to which the Shareholder and/or
the Company is a party will be, valid and binding obligations of the Shareholder
and the Company, as the case may be, enforceable in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and by general principles of equity.
5.3 CAPITAL STOCK; TITLE TO SHARES.
(a) The authorized issued and outstanding capital stock
of the Company consists of 6,504 shares of the Company Common Stock. All of the
issued and outstanding shares of the Company Common Stock are owned beneficially
and of record by the Shareholder (the "Shareholder's Shares"). All such issued
and outstanding shares have been duly authorized and validly issued and are
fully paid and nonassessable. There are no outstanding options, warrants, rights
(including preemptive rights), calls, commitments, conversion rights, rights of
exchange, plans or other agreements of any character providing for the purchase,
issuance or sale of any shares of capital stock of the Company, other than as
contemplated by this Agreement.
(b) The Shareholder now has, and on the Closing Date will
have, good and marketable title to and unrestricted power to vote and sell the
Shareholder's Shares, free and clear of any Lien.
5.4 TITLE, CONDITION TO PERSONAL PROPERTY.
(a) Except as set forth on SCHEDULE 5.4(A), the Company
owns, or has good and valid leasehold interests or licenses in, all of the
personal property comprising the Company's assets (the "Assets"), and has good
and valid title to all such personal property (tangible and intangible) (or in
the case of personal property which is leased or licensed to it, the Company has
the right to use such personal property superior in right to all others),
subject to no Liens other than Permitted Liens (as defined below) or Liens which
shall be removed at or prior to Closing. All of such personal property
comprising equipment, improvements, furniture and other tangible personal
property, whether owned or leased, is in reasonably good operating condition and
repair except for normal wear and tear, and is functioning, in all material
respects, in the manner and for the purpose for which it was intended, and is
suitable to enable the Company to operate the Business in accordance with past
practice. Neither the Shareholder nor the Company has granted any option or
other right to acquire any portion of the Assets or the Business, other than
with respect to the sale of inventory in the ordinary course of business.
7
There are no pending or, to the Knowledge of the Shareholder, threatened
condemnation proceedings relating to any leased properties used in connection
with the Business. The Company's inventory is carried on its books of account in
accordance with GAAP, at the lower of cost or market, and the value of obsolete
materials, materials below standard quality and slow-moving materials have been
written down in accordance with GAAP. All inventory of the Company is located at
the locations set forth on SCHEDULE 5.4(A).
(b) "Permitted Liens" means:
(i) each lien set forth on SCHEDULE 5.4(B) hereto;
(ii) carriers', warehouseman's, mechanic's,
materialman's, repairmen's or other like liens arising in the ordinary
course of business which do not exceed $25,000 in the aggregate;
(iii) deposits to secure the performance of bids,
trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of like nature incurred in the ordinary course of business,
PROVIDED that each such deposit shall be included in the Assets;
(iv) pledges or deposits in connection with worker's
compensation, unemployment insurance, and other social security
legislation;
(v) liens for the payment of taxes accrued but not
yet payable; and
(vi) liens that are being contested by the Company in
good faith for which adequate reserves have been established in
accordance with GAAP.
5.5 GOVERNMENT APPROVALS. No consent, approval, license or
authorization of, or designation, declaration or filing with, any Governmental
Authority is or will be required on the part of the Shareholder or the Company
in connection with the execution, delivery and performance by the Shareholder or
the Company of this Agreement or any of the Related Agreements or the
consummation of the transactions contemplated herein or therein, other than the
filing of the Articles of Merger with the Secretary of State.
5.6 FINANCIAL INFORMATION; INDEBTEDNESS.
(a) The Shareholder and the Company have delivered to the
Parent true and complete copies of the Company's audited financial statements
for the years ended October 31, 1995, 1996 and 1997 and for the nine months
ended July 31, 1998 (collectively, the "Financial Statements"). The Financial
Statements, together with the notes thereto, (i) were prepared in accordance
with the books and records of the Company, which books and records are complete
and accurate in all material respects, (ii) present fairly the financial
condition of the Company as of the dates of the balance sheets included in the
Financial Statements , (iii) present fairly, in accordance with GAAP, the
results of operations of the Company for the periods covered by
8
such statements, (iv) have been prepared on a basis consistent with the
preparation of the Company's previous financial statements, (v) include all
adjustments which are necessary for a fair presentation of the financial
condition of the Company and of the results of operations of the Company for the
periods covered by such statements and (vi) make full and adequate provisions
for all liabilities or obligations of the Company, whether accrued, absolute,
contingent or otherwise, in accordance with GAAP.
(b) Other than as set forth in the Financial Statements
or as set forth on SCHEDULE 5.6(B), the Company has no liabilities or
obligations, contingent or otherwise, which are not reflected in or reserved
against in the Financial Statements in accordance with GAAP, except for
liabilities incurred since the date of the Financial Statements in the ordinary
course of business, consistent with past practices and not materially adverse to
the Company. Since the date of the Financial Statements through the Closing
Date, (i) there has been no change in the business, assets, liabilities,
condition (financial or otherwise) or operations of the Company, except for
changes which, individually or in the aggregate, would not have a Material
Adverse Effect, and (ii) none of the business, condition (financial or
otherwise), operations, property or affairs of the Company has been materially
adversely affected by any occurrence or development, individually or in the
aggregate, whether or not insured against.
(c) SCHEDULE 5.6(C) sets forth (i) the amount of all
Indebtedness of the Company outstanding on the date hereof, (ii) any Lien with
respect to such Indebtedness and (iii) a list of each instrument or agreement
governing such Indebtedness (true and correct copies of which have been provided
to the Parent). Except as set forth on SCHEDULE 5.6(C), no default (or event
which with the giving of notice or passage or time would constitute a default)
exists with respect to or under any such Indebtedness or any instrument or
agreement relating thereto.
5.7 EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS. Except
as disclosed in SCHEDULE 5.7, the Financial Statements, or as expressly
contemplated by this Agreement, since the date of the Financial Statements,
neither the Company, nor the Shareholder with respect to the Company, has (i)
declared, set aside or paid any dividends, or made any distributions or
payments, in respect of its equity securities, or repurchased, redeemed or
otherwise acquired any equity or other securities or issued any shares or other
units of any equity or other securities; (ii) merged into or with or
consolidated with, any other corporation or acquired the business or assets of
any Person; (iii) purchased any securities of any Person; (iv) amended its
articles of incorporation or bylaws; (v) issued any securities relating to its
shares of capital stock, or granted, or entered into any agreement to grant, any
options, convertibility rights, other rights, warrants, calls or agreements
relating to its shares of capital stock, or redeemed, repurchased or otherwise
reacquired any of its shares; (vi) created, incurred, assumed, guaranteed or
otherwise become liable or obligated with respect to any Indebtedness, or made
any loan or advance to, or any investment in, any Person, except in each case in
the ordinary course of business and consistent with past practices; (vii) made
any change in any existing election, or made any new election, with respect to
any tax law in any jurisdiction which change or election could have a Material
Adverse Effect on the tax treatment of the Company or its business operations
before or after the Closing Date; (viii) entered into, amended or terminated any
material agreement;
9
(ix) sold, transferred, leased, mortgaged, encumbered or otherwise disposed of,
or agreed to sell, transfer, lease, mortgage, encumber or otherwise dispose of,
any material properties or assets except (a) inventory sold in the ordinary
course of business or (b) pursuant to any agreement specified in SCHEDULE 5.17;
(x) settled any claim or litigation, or filed any motions, orders, briefs or
settlement agreements in any proceeding before any Governmental Authority or any
arbitrator; (xi) incurred or approved, or entered into any agreement or
commitment to make, any expenditure in excess of $25,000 in the aggregate (other
than those required pursuant to any agreement set forth on SCHEDULE 5.17 or in
the ordinary course of business consistent with past practices); (xii)
maintained its books of account other than in the usual, regular and ordinary
manner in accordance with GAAP and on a basis consistent with prior periods or
made any material change in any of its accounting methods or practices; (xiii)
engaged in one or more activities or transactions outside the ordinary course of
business; (xiv) made any increase in (a) the rate of compensation payable or to
become payable to its directors, officers, agents or employees or (b) the
payment of any bonus, payment or arrangement made to, for or with any of its
directors, officers, agents or employees, except as required pursuant to an
agreement set forth in SCHEDULE 5.17 or by any benefit plan set forth on
SCHEDULE 5.14 or otherwise in the ordinary course of business consistent with
past practice; (xv) sold, assigned, transferred or granted any license with
respect to any patent, trademark, trade name, service ▇▇▇▇, copyright, trade
secret or other intangible asset, except pursuant to licenses or other
agreements set forth on SCHEDULE 5.13; (xvi) suffered any material loss of
property or waived any right of substantial value whether or not in the ordinary
course of business; (xvii) made any change in the manner of business or
operations of the Company which could have a Material Adverse Effect; or (xviii)
committed to do any of the foregoing.
5.8 LITIGATION. Except as disclosed on SCHEDULE 5.8, there are no
claims, actions, suits, investigations or proceedings against the Company or the
Shareholder with respect to the Business in any court or before any Governmental
Authority, or before any arbitrator (whether covered by insurance or not)
pending or, to the Knowledge of the Shareholder, threatened, against the Company
or the Shareholder with respect to the Business; nor, to the Knowledge of the
Shareholder, except as set forth on SCHEDULE 5.8, has there occurred any event
or does there exist any condition on the basis of which it is reasonably
foreseeable that any such litigation, proceeding or investigation might properly
be instituted. Except as disclosed on SCHEDULE 5.8, neither the Shareholder nor
the Company is in default with respect to any order, writ, injunction, decree,
ruling or decision of any court, commission, board or other government agency.
5.9 COMPLIANCE WITH LAWS. Each of the Shareholder, with respect to the
Business, and the Company is and has been in compliance in all respects with any
and all Legal Requirements. Except as set forth on SCHEDULE 5.9, (a) neither the
Shareholder nor the Company has received or entered into any citations,
complaints, consent orders, compliance schedules, or other similar enforcement
orders or received any written notice from any Governmental Authority or any
other written notice that would indicate that there is not currently compliance
with all such Legal Requirements, and (b) there are no adverse orders,
judgments, writs,
10
injunctions, decrees or demands of any Governmental Authority, outstanding
against any of the Company, the Shareholder's Shares, the Assets or the
Shareholder with respect to the Business.
5.10 TAXES. The Company has filed all Tax returns (including statements
of estimated Taxes owed) and reports required to be filed within the applicable
periods for such filings and has timely paid all Taxes (including any foreign,
federal, state or local Taxes) required to be paid, and has established adequate
reserves (net of estimated tax payments already made) for the payment of all
Taxes payable in respect to the period subsequent to the last periods covered by
such returns. No deficiency for any Tax has been proposed or assessed against
the Company (or the Shareholder with respect to the Company), and no Tax return
of the Company has ever been audited, and there is no such audit pending or, to
the Knowledge of the Shareholder, contemplated. There is no Tax lien, whether
imposed by any federal, state, local or foreign taxing authority, outstanding
against the Assets, the Shareholder's Shares, the real property of the Company
or the Business. The total amounts set up as liabilities for Taxes in the
Financial Statements are sufficient to cover the payment of all Taxes, including
any penalties, additions or interest thereon and whether or not assessed or
disputed, which are, or are hereafter found to be, or to have been, due with
respect to the conduct of the business of the Company for the taxable periods
covered thereby.
5.11 REAL PROPERTY.
(a) The Company does not own any real property. SCHEDULE
5.11 sets forth the addresses of all real property that the Company leases or
subleases, and any Lien, other than Permitted Liens, on any such leasehold
interest, specifying in the case of each such lease or sublease, the name of the
lessor or sublessor, as the case may be, and the lease term. For purposes of
this SECTION 5.11, Permitted Liens include (i) liens for real estate taxes and
assessments due and payable on or after (but not before) the Closing Date and
(ii) easements, agreements and restrictions, whether or not of record, that do
not and will not materially hinder or interfere with the intended use of such
real property.
(b) Except as disclosed on SCHEDULE 5.24, there is no
violation by the Company or the Shareholder, or to the Knowledge of the
Shareholder, any other party of any law, regulation or ordinance (including
without limitation laws, regulations or ordinances relating to zoning,
environmental, city planning or similar matters) relating to any real property
leased or subleased by the Company that could have a Material Adverse Effect.
(c) All the leases listed on SCHEDULE 5.11 are valid and
enforceable and are in full force and effect, and except as disclosed on
SCHEDULE 5.11, there are no defaults by the Company under any of such leases or,
to the Knowledge of the Shareholder, by any other party thereto, which might
have a Material Adverse Effect on the present use by the Company of the property
listed on SCHEDULE 5.11. Except as set forth on SCHEDULE 5.11, no consent or
approval of the lessor or sublessor of any of the leases listed on SCHEDULE 5.11
is required for the consummation of the transactions contemplated hereby nor
will consummation of such
11
transactions result in any material increase of any amounts payable under, any
lease listed on SCHEDULE 5.11.
5.12 ASSETS COMPRISING THE BUSINESS. The Assets represent all of the
real and personal property, licenses, intellectual property, permits and
authorizations, contracts, leases and other agreements that are used in the
operation of the Business as now operated. Except as set forth in SCHEDULE 5.12,
or as otherwise expressly set forth in this Agreement, neither the Shareholder
(as opposed to the Company) nor any other Person (i) owns any personal property,
licenses, intellectual property, permits or authorizations or (ii) has entered
into any contracts, leases or other agreements that are necessary to the
operation of the Business as now operated. The quantities of inventory items
included in the Assets are reasonable in light of the present and anticipated
volume of the Business and, except as set forth on SCHEDULE 5.12, the inventory
is good, usable, merchantable and saleable in the ordinary course, in each case,
as determined by the Shareholder in good faith and consistent with past
practice.
5.13 PATENTS, TRADEMARKS, ETC. Set forth on SCHEDULE 5.13 is a list and
brief description of all patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service ▇▇▇▇ applications,
trade names and copyrights and all applications for such that are in the process
of being prepared, owned by or registered in the name of the Company (or the
Shareholder with respect to the Business), or of which the Company is a licensor
or licensee or in which the Company has any right which relates and is material
to the Business, and in each case a brief description of the nature of such
right. The Company owns or possesses adequate licenses or other rights to use
all patents, patent applications, trademarks, trademark applications, service
marks, service ▇▇▇▇ applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets and know how (collectively, "Intellectual
Property") necessary or desirable to the conduct of the Business as presently
conducted. To the Knowledge of the Shareholder, the Company is not violating the
Intellectual Property rights of any Person and, no claim is pending or, to the
Knowledge of the Shareholder, threatened, to the effect that the operations of
the Company infringe upon or conflict with the asserted rights of any other
person under any Intellectual Property, and the Shareholder has no knowledge of
any such claim (whether or not pending or threatened). No claim is pending or,
to the Knowledge of the Shareholder, threatened to the effect that any such
material Intellectual Property owned or licensed by the Shareholder, or which
the Company or the Shareholder otherwise has the right to use and is material to
the Business, is invalid or unenforceable by the Company or the Shareholder, and
the Shareholder has no knowledge of any such claim (whether or not pending or
threatened).
5.14 EMPLOYEE MATTERS. No employees of the Company (the "Employees")
are represented by any labor union or similar organization and there are no
pending or, to the Knowledge of the Shareholder, threatened activities the
purpose of which is to achieve such representation of all or some of the
Employees. Except as set forth on SCHEDULE 5.14, to the Knowledge of the
Shareholder, (a) the Business is operating and has been operated in compliance
in all respects with all Legal Requirements covering employment and employment
practices, terms and conditions of employment and wages and hours, including the
Immigration Reform
12
and Control Act, the Worker Adjustment and Retraining Notification Act of 1988
(the "Warn Act"), any Legal Requirements respecting employment discrimination,
equal opportunity, affirmative action, employee privacy, wrongful or unlawful
termination, workers' compensation, occupational safety and health requirements,
labor/management relations and unemployment insurance, or related matters and
there are no threatened or pending claims relating thereto; (b) there is no
labor strike, dispute, slowdown or stoppage pending or, to the Knowledge of the
Shareholder, threatened against or affecting the Business, and the Company has
not experienced any work stoppage or other labor difficulty; and (c) except as
set forth on SCHEDULE 5.14, or as accrued on the Financial Statements, in the
event of termination of the employment of any Employee, none of the Parent,
Merger Sub or the Company will, pursuant to any agreement with the Shareholder
or the Company or by reason of any representation made or plan adopted by the
Shareholder or the Company prior to the Closing, be liable to any employee for
so-called "severance pay," parachute payments or any other similar payments or
benefits, including, without limitation, post-employment healthcare (other than
pursuant to COBRA) or insurance benefits. None of the officers or other key
employees of the Company has notified the Shareholder or the Company of his or
her present intention to terminate his or her employment with the Company. To
the Knowledge of the Shareholder, no director, officer or employee of or
consultant to the Company is in violation of any terms of any employment
contract, non-competition agreement, non-disclosure agreement or other contract
or agreement containing restrictive covenants relating to the right of any such
director, officer, employee or consultant to be employed or engaged by the
Company. Attached hereto as SCHEDULE 5.14 is the most recent payroll of the
Company, indicating the names and compensation of its employees. All information
is correct as of such date.
5.15 LICENSES AND PERMITS. To the Knowledge of the Shareholder, the
Company has all permits, licenses, orders, certifications, franchises and other
rights and privileges of all federal, state, local or foreign governmental or
regulatory bodies necessary for the Company to conduct the Business as presently
conducted (collectively, the "Permits"). All of the Permits are listed on
SCHEDULE 5.15. With respect to the Permits listed on SCHEDULE 5.15 (or that are
required to be listed on SCHEDULE 5.15), (a) such Permits are in full force and
effect, (b) to the Knowledge of the Shareholder, no suspension or cancellation
of any of such Permits is threatened, (c) except as set forth on SCHEDULE 5.15,
none of such Permits will be affected by the consummation of the transactions
contemplated in this Agreement and the Related Agreements and (d) the Company is
not in default under any of such Permits.
5.16 CHANGES IN THIRD-PARTY PAYORS. Neither the Shareholder nor the
Company has received notice that any health plan insuring the Company, employer
or other third-party payor, which is currently doing business with the Company,
intends to terminate, limit or restrict its relationship with the Company.
5.17 CONTRACTS AND COMMITMENTS. Except as set forth on SCHEDULE 5.11 or
SCHEDULE 5.17 attached hereto, the Company is not a party (nor is the
Shareholder a party, with respect to the Business) to any oral or written (i)
consulting agreement not terminable on thirty (30) days or less notice, (ii)
joint venture agreement, (iii) noncompetition or similar agreements that
restrict
13
the Company from engaging in a line of business either in total or in a
particular territory or for a particular period, (iv) agreement with any officer
or other employee of the Company, the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction of
the nature contemplated by this Agreement, (v) agreement with respect to any
Employee of the Company, (vi) agreement or plan, including any stock option
plan, stock appreciation right plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement, (vii) contract or agreement that cannot by its terms be
terminated by the Company with thirty (30) days or less notice without penalty
and involves annual payments in excess of $10,000 for any one agreement or
$50,000 in the aggregate for all such agreements, (viii) contract or agreement
for capital expenditures involving payments in excess of $10,000 for any one
agreement or $50,000 in the aggregate for all such agreements, (ix) any
agreement for the sale of assets other than the sale of inventory in the
ordinary course of business, or (x) any other contract or agreement that is
material to the Company or the Business. True and correct copies of each of such
agreements have been provided to the Parent. Except as set forth in SCHEDULE
5.17, neither the Shareholder nor the Company has received notice that any party
to any agreement or any customer of the Company intends to terminate, limit or
restrict its relationship with the Company.
5.18 BANK ACCOUNTS. SCHEDULE 5.18 sets forth a complete and accurate
list of each deposit account or asset maintained with any bank, brokerage house
or other financial institution, specifying with respect to each, the name and
address of the institution, the name under which the account is maintained, the
account number and the name and title or capacity of each Person authorized to
have access thereto.
5.19 INSURANCE COVERAGE. The Company has in full force and effect
policies of insurance of the types and in amounts providing protection for the
Company consistent with sound business practices and prudent risk management
applicable to businesses of the size and nature of the Company. SCHEDULE 5.19
sets forth a true and complete description of (i) all of the insurance policies
in force and effect in respect of the Company (the "Policies"); (ii) the
coverage and limits on the Policies; (iii) all current and open or known claims
under any of the Policies; and (iv) all written claims in excess of $5,000
individually, or $10,000 in the aggregate, made against the Company during the
past three years whether or not covered by insurance. Neither the Shareholder
nor the Company has received any notice of cancellation in respect of insurance
coverage under the Policies. All premiums due and payable in respect of the
Policies have been paid. There are no pending or, to the Knowledge of the
Shareholder, threatened terminations or material premium increases with respect
to any of the Policies and the Company is in compliance with all conditions
contained therein.
14
5.20 ERISA.
(a) Neither the Shareholder (with respect to the Employees)
nor the Company maintains, or makes contributions to, and neither the
Shareholder (with respect to the Employees) nor the Company has at any time in
the past two years maintained or made contributions to, any employee benefit
plan which is subject to the minimum funding standards of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or subject to the
terms of the Multi-Employer Pension Plan Amendment Act of 1980.
(b) SCHEDULE 5.20(B) sets forth each severance agreement, and
each plan, agreement, bonus plan, deferred compensation agreement, employee
pension, profit sharing, savings or retirement plan, group life, health, or
accident insurance or other employee benefit plan, agreement, arrangement or
commitment maintained by the Company. SCHEDULE 5.20(B) also sets forth any
commitment arising under severance, holiday, vacation, Christmas or other bonus
plans (including, but not limited to, "employee benefit plans," as defined in
SECTION 3(3) of ERISA) maintained by the Shareholder or the Company for any
Employees or with respect to which the Shareholder or the Company have liability
with respect to any Employees, or make or have an obligation to make
contributions on behalf of any Employees (collectively the "Plans").
(c) SCHEDULE 5.20(C) identifies all Employees on leave of
absence eligible to receive health benefits, as required by the continuation
health care coverage provisions of Section 4980B of the Code or Section 601
through 608 of ERISA ("COBRA"). Notice of the availability of COBRA coverage has
been provided to all Employees on leave of absence entitled thereto, and all
persons electing such coverage are being (or have been, if applicable) provided
such coverage.
(d) No Plan has engaged in any "prohibited transaction" as
defined in Section 4975 of the Code, or has incurred any "accumulated funding
deficiency" as defined in Section 302 of ERISA, nor has any reportable event as
defined in Section 4043(b) of ERISA occurred with respect to any such Plan.
(e) With respect to each Plan, all required filings, including
all filings required to be made with the United States Department of Labor and
Internal Revenue Service, have been timely filed, and the present value of all
accrued benefits under each such Plan does not, as of the date hereof, and will
not, as of the Closing Date, exceed the value of the respective net assets of
each such Plan applicable to such benefits.
(f) Each of the Plans intended to qualify under Section 401 of
the Code satisfies the requirements of such Section and has received a favorable
determination letter from the Internal Revenue Service.
5.21 NO BROKERS OR FINDERS. To the Knowledge of the Shareholder, no
Person has or will have, as a result of the transactions contemplated by this
Agreement, any right, interest or claim against or upon the Parent, Merger Sub,
the Shareholder or the Company for any
15
commission, fee or other compensation as a finder or broker as a result of the
consummation of this Agreement, except as disclosed on SCHEDULE 5.21.
5.22 ASSUMPTIONS, GUARANTEES, ETC. OF INDEBTEDNESS OF OTHER PERSONS.
Except as set forth on SCHEDULE 5.22, the Company has not assumed, guaranteed,
endorsed or otherwise become directly or contingently liable on or for any
Indebtedness of any other Person, except guarantees by endorsement of negotiable
instruments for deposit or collection or similar transactions.
5.23 NO CONFLICTS OR DEFAULTS. Except as set forth on SCHEDULE 5.23,
the execution, delivery and performance by each of the Shareholder and the
Company of this Agreement and the Related Documents to which he or it is or will
be a party and the consummation of any of the transactions contemplated hereby
or thereby does not and will not (i) violate or conflict with, or constitute a
breach or default under with or without the giving of notice or the passage of
time or both, any provision of (A) the articles of incorporation or bylaws of
the Company, (B) any agreement, indenture or other instrument applicable to the
Shareholder, the Company or their respective properties or (C) any law, rule,
regulation, order, judgment, writ, injunction or decree applicable to the
Shareholder, the Company or any of their respective properties; (ii) result in
the creation of any Lien, upon the properties, assets or revenues of the
Shareholder or the Company; (iii) require the consent, waiver, approval, order
or authorization of, or declaration, registration, qualification or filing with,
any Person; (iv) cause the Company to lose the benefit of any right or privilege
it presently enjoys or, to the Knowledge of the Shareholder, cause any Person
who is expected to normally do business with the Company to discontinue to do so
on the same basis; or (v) result in the acceleration of any payments due
pursuant to any indebtedness of the Company. Neither the Company (nor the
Shareholder with respect to the Business) is in default under, and no condition
exists (whether covered by insurance or not) that with or without notice or
lapse of time or both would (i) constitute a default under, or breach or
violation of, any Legal Requirement, indenture, agreement or instrument
applicable to the Shareholder, the Company or the Business or (ii) accelerate or
permit the acceleration of the performance required under, or give any other
party the right to terminate, any indenture, agreement or instrument applicable
to the Company or the Business, in any case which could have a Material Adverse
Effect. All the contracts listed on SCHEDULES 5.11 and 5.17 are valid and
enforceable and are in full force and effect, and there are no defaults by
either the Shareholder or the Company under any of such contracts or, to the
Knowledge of the Shareholder, by any other party thereto, in any case which
could have a Material Adverse Effect. Except as disclosed on SCHEDULE 5.23, the
consummation of the transactions contemplated by this Agreement and the Related
Agreements will not result in the termination of, or in any increase of any
amounts payable under, any contract listed on SCHEDULES 5.11 or 5.17.
5.24 ENVIRONMENTAL COMPLIANCE.
(a) Except as set forth on SCHEDULE 5.24, the Company has
obtained all permits, licenses, and other authorizations (collectively, the
"Licenses") which are required in connection with the conduct of the Business
under all applicable Environmental Laws (as
16
defined below) and regulations relating to pollution or protection of the
environment, including Environmental Laws and regulations relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including without limitation, ambient air, surface water,
groundwater, or land) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
(b) Except as set forth on SCHEDULE 5.24, the Company is in
substantial compliance in the conduct of the Business with all terms and
conditions of the Licenses and is in substantial compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws or
contained in any regulation, code, plan, order, decree, judgment, injunction,
notice (written or verbal) or demand letter issued, entered, promulgated or
approved thereunder. All machinery and equipment owned or used by the Company
meets or exceeds all standards promulgated under the Environmental Laws.
(c) Except as set forth on SCHEDULE 5.24, neither the
Shareholder nor the Company is aware of, nor has any of them received any
written or verbal notice of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which
interfere or may interfere with or prevent compliance or continued compliance
with any Environmental Laws or any regulations, code, order, decree, judgment,
injunction, notice (written or verbal) or demand letter issued, entered,
promulgated or approved thereunder, or which may give rise to any common law or
legal liability, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study or investigation, based on or related to the
manufacture, processing, storage, distribution, use, treatment, disposal,
transport, or handling, or the emission, discharge, release or threatened
release into the environment, of any pollutant, contaminant, chemical, or
industrial, toxic or hazardous substance or waste.
(d) There is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice or demand letter, notice of violation,
investigation, or proceeding pending or, to the Knowledge of the Shareholder,
threatened against the Company or the Shareholder relating in any way to any
Environmental Laws or injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
(e) For purposes of this Agreement, "Environmental Laws" means
collectively, all federal, state and local environmental laws, common law,
statutes, rules and regulations including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sec. 9061 et
seq.), as amended, the Hazardous Materials Transportation Act (49 U.S.C. Sec.
1801 et seq.), as amended, the Resource Conservation and Recovery Act (42 U.S.C.
Sec. 6901 et seq.), as amended, the Federal Water Pollution Control Act (33
U.S.C. Sec. 1251 et seq.), as amended, the Safe Drinking Water Act (42 U.S.C.
Sec. 300f et seq.), as amended, the Clean Air Act (42 U.S.C. Sec. 7401 et seq.),
as amended, the Toxic Substances Control Act (15 U.S.C. Sec. 2601 et seq.), as
amended, the
17
Federal Emergency Planning and Community Right-to-Know Act ((42 U.S.C. Sec.
11001 et seq.), as amended, any so-called "superfund" or "super-lien" law and
such statutes and ordinances as may be enacted by state and local governments
with jurisdiction over any real property now owned or leased by the Company or
any real property upon which the Company now conducts its Business and any
permits, licenses, authorizations, variances, consents, approvals, directives or
requirements of, and any agreements with, any governments, departments,
commissions, boards, courts, authorities, agencies, officials and officers
applicable to such real property or the use thereof and regulating, relating to,
or imposing liability or standards of conduct concerning any pollutant,
contaminant, chemical, or industrial, toxic or hazardous substance or waste.
5.25 CUSTOMERS AND SUPPLIERS. SCHEDULE 5.25 contains a complete and
accurate list of the names of the 10 largest customers and suppliers of the
Company during the year ended December 31, 1997 and the six months ended June
30, 1998. The Company maintains good relations with each of such customers and,
except as set forth in SCHEDULE 5.25, since June 30, 1998, no event has occurred
that has materially adversely affected the Company's relations with such
customers. Except as set forth in SCHEDULE 5.25, since June 30, 1998, no
customer which accounted for more than 5% of the Company's aggregate sales
revenues during the prior twelve months has canceled, terminated (or, to the
Knowledge of the Shareholder, made any threat to the Company to cancel or
terminate), or materially decreased its usage of the Company's services or
products.
5.26 ACCOUNTS PAYABLE; ACCOUNTS RECEIVABLE.
(a) The Company's Financial Statements fairly present the
Company's accounts payable and accrued expenses (collectively, the "Accounts
Payable") in accordance with GAAP as of the date or dates thereof. At the time
of the Closing, the Accounts Payable shall not exceed $2,000,000.
(b) The accounts receivable of the Company reflected on the
Financial Statements, and all receivables incurred since the date of the
Financial Statements, arose from bona fide transactions in the ordinary course
of business, and the goods and services involved have been sold, delivered and
performed. No such account has been assigned or pledged to any other Person,
firm or corporation and no defense or set-off to any such account has been
asserted by the account obligor or exists. The allowance for doubtful accounts
set forth in the balance sheet as of the most recent balance sheet date
delivered to the Parent is adequate from a historical perspective for the
nonpayment of claims previously submitted and for which revenues have been
accrued.
5.27 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 the Parent, are complete and correct. At Closing, all of such books
and records will be in the possession of the Company.
18
5.28 SOLVENCY. Based on the financial condition of the Company as of
the date hereof, the Company is, and on the Closing Date shall be, solvent and
able to pay its debts as they become due in the ordinary course of business.
5.29 DISCLOSURES. No representation or warranty by the Shareholder or
the Company contained in this Agreement, the Financial Statements, or any
schedule, exhibit or certificate delivered in accordance therewith and no
written statement or document furnished by the Shareholder or the Company to the
Parent in connection with this Agreement or any transaction contemplated hereby,
contains, as of the date on which made or reaffirmed, any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which such statements were made, not misleading.
5.30 RESTRICTIONS ON SHARES; INVESTOR KNOWLEDGE.
(a) The Shareholder acknowledges that he has been given access
to all information relating to the business and assets of the Parent which he
has requested, including the Parent's Prospectus dated July 22, 1993, the
Parent's Annual Report on Form 10-KSB for the year ended December 31, 1997, the
Parent's Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1998
and June 30, 1998 and the Parent's proxy materials for its most recently held
annual meeting of shareholders (collectively the "SEC Reports"), copies of which
Prospectus, Annual Report, Quarterly Reports and proxy materials are attached
hereto as SCHEDULE 5.30.
(b) The Shareholder understands that the Hi-Rise Shares, the
Note and the shares of Hi-Rise Common Stock issuable upon conversion of the Note
(the "Conversion Shares," and together with the Hi-Rise Shares and the Note, the
"Securities") to be issued and delivered in accordance with SECTION 3.1 and
SECTION 3.2 hereof shall be issued and delivered pursuant to an exemption from
the registration requirements of the Securities Act; that for such purpose the
Parent will rely upon the representations, warranties, covenants and agreements
contained herein; and that such exemption may not be available unless such
representations and warranties are correct and such covenants and agreements
performed.
(c) The Shareholder understands that, except as expressly
agreed to pursuant to the terms of this Agreement, the Parent is under no
obligation to effect a registration under the Securities Act of the Securities
to be issued in accordance with this Agreement.
(d) The Shareholder understands that, under existing rules of
the Securities and Exchange Commission (the "SEC"), there are substantial
restrictions on the transferability of the Securities to be issued in accordance
with this Agreement; such Securities will not be, and, except as expressly
agreed to pursuant to the terms of this Agreement, the Shareholder will have no
rights to require that such Securities be, registered under the Securities Act;
such Securities may be transferred only if registered under the Securities Act
or if an exemption from such registration is available; the Shareholder may not
be able to avail himself of the provisions of
19
Rule 144 promulgated by the SEC under the Securities Act with respect to the
transfer of such Securities; and, accordingly, the Shareholder may have to hold
such Securities issued to him pursuant to this Agreement indefinitely.
(e) The Shareholder is a sophisticated investor familiar with
the type of risks inherent in the acquisition of securities such as the
Securities to be issued in accordance with this Agreement and the financial
position of the Shareholder is such that he can afford to retain such Securities
for an indefinite period of time without realizing any direct or indirect cash
return on its investment.
(f) The Shareholder had an individual income in excess of
$200,000 (or joint income of $300,000 with the Shareholder's spouse) for each of
1996 and 1997 and reasonably expects an income in excess of $200,000 (or joint
income of $300,000 with the Shareholder's spouse) for 1998 or the Shareholder
(either individually or with the Shareholder's spouse) has a net worth in excess
of $1,000,000 and as such is an "Accredited Investor" as defined in Rule 501 of
Regulation D promulgated under the Securities Act.
(g) The Shareholder is acquiring or will acquire the
Securities to be issued in accordance with this Agreement for his own account
and not with a view to, or for sale in connection with, the distribution thereof
within the meaning of the Securities Act.
(h) The Shareholder understands that the certificates
evidencing the Hi-Rise Shares and the Conversion Shares to be issued in
accordance with this Agreement will bear appropriate restrictive legends.
5.31 PRODUCT WARRANTY. Each of the products manufactured, sold, and
delivered by the Company have conformed in all material respects with all
applicable contractual commitments and all express and implied warranties, and
the Company has no material liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due)
for replacement thereof or other damages in connection therewith, subject only
to the reserve for product warranty claims set forth on the face of the most
recent balance sheet included in the Financial Statements (rather than in any
notes thereto) as adjusted for operations and transactions through the Closing
Date in accordance with the past custom and practice of the Company.
Substantially all of the products manufactured, sold, and delivered by the
Company are subject to standard terms and conditions of sale. For purposes of
this SECTION 5.31, a single product warranty claim is material if it exceeds
$7,500.
5.32 PRODUCT LIABILITY. The Company has no liability which is not
presently covered by insurance (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due) arising
out of any bodily injury to individuals or property damage as a result of the
ownership, possession, or use of any product manufactured, sold or delivered by
any of the
20
Company. SCHEDULE 5.32 sets forth a true and correct list and brief description
of all product liability claims that have been filed against the Company since
December 31, 1993.
5.33 TRANSFERRED ASSETS AND LIABILITIES, ETC.
(a) Merger Sub will acquire at least ninety percent (90%) of
the fair market value of the net assets and at least seventy percent (70%) of
the fair market value of the gross assets held by the Company immediately prior
to the Merger. For purposes of this representation, amounts paid by the Company
to dissenters, amounts paid by the Company to shareholders who receive cash or
other property, Company assets used to pay its reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made by the
Company immediately preceding the transfer will be included as assets of the
Company held immediately prior to the Merger.
(b) The liabilities of the Company assumed by Merger Sub and
the liabilities to which the transferred assets of the Company are subject were
incurred by the Company in the ordinary course of its business.
(c) At the time of the Merger, substantially all of the
Company's assets will be used by the Company in an historic business of the
Company within the meaning of Treasury Regulation Section 1.368-1(d).
(d) The Company is not an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(e) The Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB
The Parent and Merger Sub, jointly and severally, hereby represent and
warrant to the Shareholder as follows:
6.1 ORGANIZATION AND CORPORATE POWER. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of South Carolina. Each of the Parent
and Merger Sub has all requisite corporate power and authority to own its
properties and to carry on its business as presently conducted. Each of the
Parent and Merger Sub is duly licensed or qualified to do business as a foreign
corporation in each jurisdiction wherein the character of its properties, or the
nature of the activities presently conducted by it, makes such qualification
necessary, except where the failure to so qualify would not have a Material
Adverse Effect on the Parent or Merger Sub.
21
6.2 AUTHORIZATION. Each of the Parent and Merger Sub has all necessary
corporate power and authority, and has taken all necessary corporate action
required for the due authorization, execution, delivery and performance by the
Parent and Merger Sub of this Agreement and the Related Agreements to which the
Parent is a party, and the consummation of the transactions contemplated herein
or therein. This Agreement is, and upon execution and delivery, the Related
Agreements to which the Parent and Merger Sub is a party will be, valid and
binding obligations of the Parent and Merger Sub enforceable in accordance with
their respective terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and by general principles of equity.
6.3 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement or of any of the Related Agreements by the Parent or
Merger Sub nor the performance by the Parent or Merger Sub of the transactions
contemplated hereby or thereby, conflicts with, or constitutes a breach of or a
default under (a) the articles of incorporation or bylaws of the Parent or
Merger Sub; (b) any agreement, indenture or other instrument applicable to the
Parent or Merger Sub or any of their respective properties (other than any such
breach or default which shall have been waived or which would not have a
Material Adverse Effect on the Parent or Merger Sub); or (c) any law, rule,
regulation, judgment, order, writ, injunction or decree applicable to the Parent
or Merger Sub.
6.4 NO BROKERS OR FINDERS. No person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or claim
against or upon the Parent, Merger Sub, the Shareholder or the Company for any
commission, fee or other compensation as a finder or broker because of any act
or omission by the Parent or Merger Sub.
6.5 HI-RISE SHARES. The Hi-Rise Shares to be issued in accordance with
this Agreement have been duly authorized and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable.
6.6 SEC REPORTS. The Parent has furnished to the Shareholder true and
complete copies of the SEC Reports, as such reports were filed with the SEC,
copies of which are attached hereto as SCHEDULE 5.30. The SEC Reports, at the
time they were filed, did not contain any untrue statement of material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and, subsequent to the date of the most recent
of such SEC Reports, no event has occurred that has had a Material Adverse
Effect on the Purchaser or its subsidiaries.
6.7 CAPITALIZATION OF MERGER SUB; CONTINUATION OF BUSINESS. Prior to
the Effective Time, the Parent will be in control of Merger Sub within the
meaning of Section 368(c) of the Code. At the time of the Merger, neither the
Parent nor Merger Sub will have any plan or intention to issue any additional
shares of stock of Merger Sub that would result in Parent losing control of
Merger Sub within the meaning of Section 368(c) of the Code. At the time of the
Merger, the Parent will have no plan or intention to reacquire any of the
Hi-Rise Shares issued
22
pursuant to this Agreement. At the time of the Merger, the Parent will have no
plan or intention (i) to liquidate Merger Sub, (ii) to merge Merger Sub with and
into another corporation other than the Company, (iii) to sell or otherwise
dispose of the stock of Merger Sub or (iv) to cause Merger Sub to sell or
otherwise dispose of any of the assets of the Company acquired in the Merger,
except for dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C) of the Code. At the time of the Merger, the
Parent will have the plan and intention to continue the historic business of the
Company or use a significant portion of the Company's business assets in Merger
Sub's Business.
ARTICLE VII
AFFIRMATIVE COVENANTS
7.1 MUTUAL COVENANTS. Without limiting any other covenants or
provisions contained herein, each of the Shareholder and the Company covenants
and agrees that he or it will observe the following covenants from the date of
this Agreement until the Closing (or until this Agreement is terminated pursuant
to Article XII hereof).
(a) GENERAL. Subject to the terms and conditions of this
Agreement, the Shareholder will use commercially reasonable efforts to take all
action and to do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, (i) obtaining all permits, authorizations,
consents and approvals of any Person which are required for or in connection
with the consummation of the transactions contemplated hereby, and (ii)
executing and delivering all agreements and documents required by the terms
hereof to be executed and delivered by the Shareholder on or prior to the
Closing.
(b) ACCOUNTS AND REPORTS. The Company will maintain a system
of accounts in accordance with GAAP and will keep full and complete financial
records consistent with past practice.
(c) COMPLIANCE WITH LAWS, ETC. The Company will comply with
all applicable laws, rules, regulations and orders of any Governmental
Authority.
(d) PAYMENT OF TAXES. The Company will pay and discharge when
due all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits, or upon any properties belonging to it, prior to the
date on which interest or penalties attach thereto, and all lawful claims which,
if not paid when due, might become a Lien or charge upon any properties of the
Company, PROVIDED that the Company shall not be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith and by
proper proceedings if the Company shall have set aside on its books adequate
reserves with respect thereto.
23
(e) INSPECTION. Subject to advance notice by the Parent to the
Shareholder, the Shareholder and the Company shall (i) permit the Parent and its
authorized employees who are specifically identified by the Parent and
reasonably acceptable to the Shareholder, agents, accountants, legal counsel,
lenders and other representatives to have reasonable access to the books,
records, employees, counsel, accountants, engineers and other representatives of
the Company at all times reasonably requested by the Parent for the purpose of
conducting an investigation of the assets, liabilities, financial condition,
corporate status, operations, business and properties of the Company
(collectively, "Operations"); and (ii) make available to the Parent for
examination and reproduction all documents and data of every kind and character
relating to the Company in possession or control of, or subject to reasonable
access by, the Company or the Shareholder, including, without limitation, all
files, records, data and information relating to the Operations (whether stored
in paper, magnetic or other storage media) and all agreements, instruments,
contracts, assignments, certificates, orders, and amendments thereto.
(f) REGULAR COURSE OF BUSINESS. The Company shall operate the
Business in substantially the same manner as presently conducted and only in the
ordinary and usual course and substantially consistent with past practice and in
substantial compliance with (i) all Legal Requirements and (ii) all leases,
contracts, commitments and other agreements, and all licenses, permits and other
instruments, relating to the operation of the Business, and will use reasonable
efforts to preserve intact its present business organization and to keep
available the services of all employees, representatives and agents. The Company
shall use its reasonable efforts, consistent with past practices, to promote the
Business and to maintain the goodwill and reputation associated with the
Business, and shall not take or omit to take any action which causes, or which
is likely to cause, any material deterioration of the Business or the
relationships of the Company with suppliers or customers. Without limiting the
generality of the foregoing, (A) the Company shall maintain all of its equipment
in the same condition and repair as such equipment is maintained as of the date
hereof, ordinary wear and tear excepted; (B) the Company shall not sell,
transfer, pledge, lease or otherwise dispose of any of the Assets, other than
the sale of inventory in the ordinary course of business; (C) the Company shall
not amend, terminate or waive any material right in respect of the Assets or the
Business, or do any act, or omit to do any act, which will cause a material
breach of any contract, agreement, commitment or obligation by it; (D) the
Company shall not engage in any activities or transactions outside the ordinary
course of business; (E) the Company shall not declare or pay any dividend or
make any other distribution or payment of any kind in cash or property to its
sole shareholder or other affiliates; (F) the Company shall not incur any
Indebtedness, other than in the ordinary course of business; (G) the Company
shall not permit any liens on the Assets, other than in the ordinary course of
business; and (H) the Company shall not increase any existing employee benefits,
establish any new employee plan or amend or modify any existing Plans, or
otherwise incur any obligation or liability under any employee plan materially
different in nature or amount from obligations or liabilities incurred in
connection with the Plans. The Shareholder and the Company shall promptly notify
the Parent if either of them (i) engages in any transaction which is likely to
have a Material Adverse Effect on the Company, (ii) incurs any debt on behalf of
the Company for
24
borrowed money (other than trade debt in the ordinary course), or (iii) enters
into any agreements or transactions on behalf of the Company not in the ordinary
course of business.
(g) NOTIFICATION OF CHANGES. The Shareholder and the Company
shall advise the Parent of any change or event having, or which, insofar as can
reasonably be foreseen, is likely to have, a Material Adverse Effect or which
would cause or constitute a material breach of any of the representations,
warranties or covenants of the Shareholder or the Company contained herein.
(h) GENERAL RESTRICTIONS. Except as otherwise expressly
permitted in or contemplated by this Agreement, without the prior written
consent of the Parent, the Company will not, and the Shareholder will not permit
the Company to take any of the actions set forth in SECTION 5.7.
(i) SUPPLEMENTARY FINANCIAL INFORMATION. Within twenty-five
(25) days after the end of each calendar month between the date of this
Agreement and the Closing Date, the Company shall provide to Parent unaudited
financial statements (including at the minimum income statement and balance
sheet) for such month then ended that shall present fairly the consolidated
results of the operations of the Company at such date and for the period covered
thereby, all in accordance with GAAP applied on a basis consistent with prior
periods, in each case, certified as true and correct by the chief financial
officer of the Company.
(j) EXCLUSIVITY. Each of the Shareholder and the Company will
not, and will cause its respective directors, officers, employees, financial
advisors, legal counsel, accountants and other agents and representatives (for
purpose of this SECTION 7.1(J) only, being referred to as "affiliates") not to
initiate, solicit or encourage, directly or indirectly, or take any other action
to facilitate any inquiries or the making of any proposal with respect to,
engage or participate in negotiations concerning, provide any nonpublic
information or data to or have any discussions with any person other than the
Parent relating to, any acquisition, exchange offer, merger, consolidation,
acquisition of beneficial ownership of or the right to vote securities of the
Company, dissolution, business combination, purchase of all or any significant
portion of the assets or any division of, or any equity interest in, the
Company, or any similar transaction, other than the transactions contemplated
under this Agreement (such proposals, disclosures, negotiations, or transactions
being referred to as "Acquisition Proposals"). The provisions of this SECTION
7.1(J) shall remain in effect until the earlier of (x) the date this Agreement
is terminated pursuant to Article XII and (y) the Closing Date.
7.2 PARENT COVENANTS. Without limiting any other covenants or
provisions herein contained, Parent covenants and agrees that, unless otherwise
set forth in this Agreement, from the date of this Agreement it will observe the
following covenants.
(a) SECURITIES LAW COMPLIANCE. During the period that the
Shareholder holds any Hi-Rise Shares and such Hi-Rise Shares are eligible to be
sold under Rule 144 under the Securities Act, the Parent will timely file such
periodic reports as are required by Section 13 of
25
the Securities Exchange Act to be filed by it, so that the Shareholder will have
access to sufficient public information concerning the Parent to enable the
Shareholder to sell the Hi-Rise Shares in compliance with Rule 144, provided,
that the Parent shall have no further obligation under this SECTION 7.2(A) when
such Hi-Rise Shares may be sold by the Shareholder pursuant to paragraph (k)
under Rule 144 and, provided further, that the Parent shall not be deemed to be
in breach of this SECTION 7.2(A) unless and until it is more than ten (10) days
late in filing any such report.
(b) REGISTRATION RIGHTS. From and after the Closing, the
Parent will register or cause to be registered the Hi-Rise Shares issued to the
Shareholder pursuant to this Agreement and the Conversion Shares in accordance
with the Registration Rights Provisions attached as Exhibit E.
(c) PARENT SHAREHOLDER MEETING. Following the Closing, Parent
shall convene a meeting of the shareholders of Parent for the purpose of, among
other things, approving and ratifying the Merger and the terms and conditions of
this Agreement. In connection with such meeting, the Parent's Board of Directors
shall recommend to the shareholders of Parent the approval and ratification of
this Agreement and the Merger.
ARTICLE VIII
OBLIGATIONS OF PARTIES AFTER CLOSING
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by each party in this Agreement and in each Schedule or in any
of the Related Agreements shall survive the Closing Date for a period of two (2)
years after the Closing notwithstanding any investigation at any time made by or
on behalf of the other party, PROVIDED that the representations and warranties
contained in SECTION 5.3 (CAPITAL STOCK), 5.10 (TAXES), SECTION 5.24
(ENVIRONMENTAL COMPLIANCE), SECTION 5.33 (TRANSFERRED ASSETS AND LIABILITIES)
and SECTION 6.7 (CAPITALIZATION OF MERGER SUB; CONTINUATION OF BUSINESS), shall
survive until the applicable statute of limitations shall have expired. All
representations and warranties related to any claim asserted in writing prior to
the expiration of the applicable survival period shall survive (but only with
respect to such claim) until such claim shall be resolved and payment in respect
thereof, if any is owing, shall be made.
8.2 INDEMNIFICATION.
(a) The Shareholder shall indemnify and defend and hold
harmless the Parent and Merger Sub and their respective officers, directors,
employees, agents, representatives and affiliates against and with respect to
any and all damages, claims, losses, penalties, liabilities, actions, fines,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) (all of the foregoing hereinafter collectively referred to as a
"Loss"), regardless of whether an action has been filed or asserted against the
Parent, Merger Sub or the Company after the Closing Date, arising from, in
connection with or with respect to the following items (i) (A)
26
any misrepresentation or breach of warranty by the Company or the Shareholder
under this Agreement or any Related Agreements or (B) any failure to fulfill any
agreement or covenant on the part of the Shareholder or the Company in Article
VII hereof; (ii) any failure to fulfill any agreement or covenant on the part of
the Shareholder or the Company (not covered by clause (i) above) under this
Agreement or any Related Agreements; (iii) any failure of the Merger to qualify
as a tax-free reorganization under Section 368(a)(2)(D) of the Code as a result
of acts of or omissions by (excluding, in all events, any act or omission
required pursuant to this Agreement), or breach of a representation or warranty
made by, the Shareholder; and (iv) any and all actions, suits, proceedings,
judgments, settlements (to the extent approved or entered into by the
Shareholder or the Company as hereinafter provided), costs, penalties and legal
and other expenses incident to any of the foregoing. Any payment by the
Shareholder to the Parent and Merger Sub pursuant to this SECTION 8.2(A) shall
be payable 37.5% in cash and 62.5% in shares of Hi-Rise Common Stock valued for
the purpose of this SECTION 8.2(A) only at the greater of (i) the average of the
last reported sales prices of the Hi-Rise Common Stock as reported on the NASDAQ
Small-Cap Market for the five (5) trading days preceding the date of payment and
(ii) $2.00 per share.
(b) The Parent and Merger Sub, jointly and severally, shall
indemnify and defend and hold harmless the Shareholder against and with respect
to any and all Losses, regardless of whether an action has been filed or
asserted against the Shareholder after the Closing Date, arising from, in
connection with or with respect to the following items: (i) any
misrepresentation, breach of any warranty, or failure to fulfill any agreement
or covenant on the part of the Parent or Merger Sub under this Agreement or any
Related Agreements; (ii) any failure of the Merger to qualify as a tax-free
reorganization under Section 368(a)(2)(D) of the Code as a result of acts of or
omissions by (excluding, in all events, any act or omission required pursuant to
this Agreement), or breach of a representation or warranty made by, the Parent
or Merger Sub; and (iii) any and all actions, suits, proceedings, judgments,
settlements (to the extent approved or entered into by the Parent as hereinafter
provided), costs, penalties and legal and other expenses incident to any of the
foregoing. Any payment pursuant to this SECTION 8.2(B) shall be payable 55% in
cash and 45% in shares of Hi-Rise Common Stock valued for the purpose of this
SECTION 8.2(B) at the mean between the highest and lowest quoted selling prices
of the Hi-Rise Common Stock as reported on the NASDAQ Small-Cap Market for the
trading day immediately preceding the date of payment, unless the payment
relates to indemnification pursuant to SECTION 8.2(B)(II) (and any amount
payable pursuant to SECTION 8.2(B)(III) to the extent it relates to
indemnification pursuant to SECTION 8.2(B)(II)), in which case such payment
shall be in cash.
(c) Any claim for indemnification under this SECTION 8.2 must
be asserted by written notice by a date which is two (2) years following the
Closing Date, except that (i)(A) any claim based upon a breach of the
representations and warranties contained in SECTION 5.3 (CAPITAL STOCK), SECTION
5.10 (TAXES), SECTION 5.24 (ENVIRONMENTAL COMPLIANCE), SECTION 5.33 (TRANSFERRED
ASSETS AND LIABILITIES) and SECTION 6.7 (CAPITALIZATION OF MERGER SUB;
CONTINUATION OF BUSINESS), (B) any claim based upon a breach of any covenant
contained in Article VII and
27
(C) any claim based upon a breach of Section 8.2(a)(iii) or 8.2(b)(ii), may be
asserted until the applicable statute of limitations shall have expired and (ii)
any claim based upon a claim relating to fraud may be asserted with no such time
limitation.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the Shareholder shall have no obligation to indemnify the Parent or
Merger Sub pursuant to this Section 8.2:
(i) unless the aggregate amount of Losses incurred by
the Parent and/or Merger Sub to which the Parent and Merger Sub have
the right to be indemnified under this SECTION 8.2 exceeds $100,000
(and only to the extent of such excess) (the "Shareholder Basket"); and
(ii) for any amount of Losses in excess of $5,000,000
(the "Shareholder Cap"); PROVIDED, HOWEVER, that the Shareholder Basket
and the Shareholder Cap shall not apply to any Losses relating to the
breach of any representation and/or warranty contained in SECTIONS 5.3
(CAPITAL STOCK) and SECTION 5.24 (ENVIRONMENTAL COMPLIANCE); PROVIDED,
FURTHER, that the Shareholder Basket and the Shareholder Cap shall not
apply to any Losses based upon a claim relating to (A) the breach of
Section 8.2(a)(iii), (B) the breach of any covenant contained in
SECTION 7.1, and (C) fraud.
(e) Notwithstanding anything to the contrary contained in this
Agreement, neither the Parent nor Merger Sub shall have any obligation to
indemnify the Shareholder hereunder;
(i) unless the aggregate amount of Losses incurred by
the Shareholder to which the Shareholder has the right to be
indemnified under this SECTION 8.2 exceeds $100,000 (and only to the
extent of such excess) (the "Hi-Rise Basket"); and
(ii) for any amount of Losses in excess of $5,000,000
(the "Hi-Rise Cap"); PROVIDED, HOWEVER, that the Hi-Rise Basket and the
Hi-Rise Cap shall not apply to any Losses based upon a claim relating
to (A) the breach of Section 8.2(b)(ii), (B) the breach of any covenant
contained in SECTION 7.2, and (C) fraud.
(f) If any action or proceeding be commenced, or if any claim,
demand or assessment be asserted, in respect of which any party ("Indemnitee")
proposes to hold any other party ("Indemnitor") liable under the indemnity
provisions of this SECTION 8.2 (a "Claim"), then if the Indemnitor shall, at its
option, acknowledge its indemnification obligation and notify Indemnitee of its
election to contest or defend any such Claim, such Indemnitor shall be entitled,
at its sole cost and expense, to contest or defend the same with counsel of its
own choosing, and Indemnitee shall not admit any liability with respect thereto
or settle, compromise, pay or discharge the same without the prior written
consent of the Indemnitor so long as any Indemnitor is contesting or defending
the same in good faith, and Indemnitee (and its successors and assigns) shall
cooperate with the Indemnitor in the contest or defense thereof (and the
Indemnitor shall
28
reimburse Indemnitee for the Indemnitee's reasonable actual out-of-pocket
expenses incurred in connection with such cooperation) and Indemnitee shall
enter into any settlement with respect thereto recommended by Indemnitor so long
as the amount of such settlement is paid by the Indemnitor, no obligation to
perform or refrain from performing any act shall be imposed upon Indemnitee by
reason thereof which could have a Material Adverse Effect.
(g) Notwithstanding the foregoing, any Indemnitee shall be
entitled to conduct its own defense at the reasonable cost and expense of the
Indemnitor if not doing so would materially prejudice the Indemnitee due to the
nature of any claims or counterclaims presented or by virtue of a conflict
between the interest of the Indemnitee and the Indemnitor, and PROVIDED further
that in any event the Indemnitee may participate in such defense at its own
expense. If Indemnitee shall have given Indemnitor thirty (30) days written
notice that it intends to assume the defense of any Claim and if the Indemnitor
fails to assume the defense of such Claim as provided above by the end of such
thirty (30) day period or such later reasonable time (which shall be such period
of time as will not result in prejudice to the rights of the Indemnitee), then
the Indemnitee shall have the right to prosecute and conduct its own defense by
counsel of its choice, and in connection therewith shall have full right to
conduct the defense thereof and to enter into any compromise or settlement
thereof with the consent of the Indemnitor (which shall not unreasonably be
withheld, conditioned or delayed). Such defense shall be at the cost and expense
of the Indemnitor if it is subsequently determined that the Indemnitor was
obligated to defend or indemnify the Indemnitee with respect to such action,
proceeding, claim, demand or assessment.
8.3 RESTRICTIONS.
(a) From and after the Closing Date until the fifth
anniversary of the termination of the Shareholder's employment with the Company
under that certain Shareholder Employment Agreement (as defined in SECTION 9.6
hereof), the Shareholder shall not disclose, to any Person or entity, or make
use of, without the authorization of the Parent, any non-public pricing
strategies or records of the Company, any proprietary data or trade secrets of
the Company or any financial or other non-public information about the Company;
PROVIDED that the foregoing restrictions shall not apply to any information
which: (i) is or becomes publicly known through no negligent or wrongful act or
omission on the part of the Shareholder; (ii) is or becomes available to the
disclosing party on a non-confidential basis from a third party without a
similar restriction and without breach of this Agreement; (iii) is approved for
release by the Parent; or (iv) is required to be disclosed in accordance with
applicable law.
(b) The Shareholder acknowledges that the restrictions
contained in this SECTION 8.3 may be specifically enforced.
8.4 DELIVERY OF RECORDS. On the Closing Date, the Shareholder shall
deliver, cause to be delivered, or make available to the Parent all records and
files then in the Shareholder's possession relating to the operation of the
Business.
29
8.5 COOPERATION; FURTHER ASSURANCES. From time to time, as and when
reasonably requested by the Parent or the Shareholder, respectively, after the
Closing, the other of them will execute and deliver, or cause to be executed and
delivered, all such documents, instruments and consents and will use reasonable
efforts to take all such other action as may be reasonably necessary to carry
out the intent and purposes of this Agreement, and, with respect to a request by
the Parent, to vest in the Surviving Corporation good title to, possession of
and control of all of the Assets.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND MERGER SUB
The obligation of the Parent and Merger Sub hereunder to consummate the
transactions contemplated hereby shall be subject at their election to the
satisfaction at or prior to the Closing of each of the conditions stated in this
Article IX.
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company and the Shareholder contained in this Agreement and the Schedules
shall be true and correct in all respects on the date of such Closing with the
same effect as though made on and as of that date, and the Company and the
Shareholder shall have performed and satisfied in all respects all agreements
and covenants required to be performed or satisfied by them at or prior to the
Closing.
9.2 CERTIFIED DOCUMENTS, ETC. The Parent and Merger Sub shall have
received certificates as to the incumbency of officers and certificates from
appropriate authorities as to the legal existence and tax good standing of the
Company, and such other documents and certificates as the Parent and Merger Sub
or their counsel may reasonably request.
9.3 CONSENTS AND WAIVERS. No preliminary or permanent injunction or
other order by any Governmental Authority which prohibits the consummation of
the transactions contemplated by this Agreement shall have been issued and
remain in effect. No statute, rule, regulation, executive order, stay, decree,
or judgment shall have been enacted, entered, issued, promulgated or enforced by
any court or Governmental Authority which prohibits or restricts the
consummation of the Agreement. All authorizations, consents, orders or approvals
of, or declarations or filings with, and all expirations of waiting periods
imposed by, any Governmental Authority or any other third party shall have been
filed, occurred or been obtained, and shall be in full force and effect.
9.4 LITIGATION. No suit, action or other proceeding shall be pending or
threatened before any Governmental Authority seeking to restrain the Parent or
Merger Sub or prohibit any of the transactions contemplated hereby.
9.5 PROCEEDINGS. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be satisfactory in form
30
and substance to the Parent and Merger Sub and their counsel and the Parent and
Merger Sub shall have received copies of all such documents and other evidences
as they or their counsel may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
9.6 EMPLOYMENT AND NON-COMPETITION AGREEMENT. The Parent and the
Shareholder shall have entered into an employment and non-competition agreement
in the form attached hereto as EXHIBIT F (the "Shareholder Employment
Agreement") and the Parent and certain key sales employees of the Company listed
on Schedule 9.6 attached hereto shall have entered into employment agreements in
the form attached hereto as EXHIBIT G.
9.7 AMENDMENTS TO LEASE AGREEMENTS. The Company and the Shareholder
shall have entered into an amendment to each of (i) the lease agreement, dated
January 1, 1998, between the Shareholder and the Company for the Company's
facilities located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, in the form of
Exhibit H-1 attached hereto (the "▇▇▇▇▇ Street Lease Amendment"), (ii) the lease
agreement, dated January 1, 1998 between the Shareholder and the Company for the
Company's facilities located at Highway 183 and ▇▇▇▇▇▇▇ Road, Easley, South
Carolina, in the form attached hereto as EXHIBIT H-2 (the "183 Street Lease
Amendment"), and (iii) the lease agreement, dated January 1, 1998, between the
Shareholder and the Company, for the Company's facility located at 1506 ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ Road, Conover, North Carolina, in the form attached hereto as EXHIBIT I
(the "Conover Lease Amendment"), in each case with the Company's obligations
thereunder guaranteed by the Parent.
9.8 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, results of operations, financial condition or
prospects of the Company since June 30, 1998.
ARTICLE X
CONDITIONS OF THE OBLIGATIONS OF THE SHAREHOLDER
The obligation of the Shareholder hereunder to consummate the
transactions contemplated hereby shall be subject at his election to the
satisfaction of each of the conditions stated in this Article X.
10.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Parent and Merger Sub contained in this Agreement shall be true and
correct in all respects on the date of Closing with the same effect as though
made on and as of that date, and the Parent and Merger Sub shall have performed
and satisfied in all respects all covenants and agreements required by this
Agreement to be performed and satisfied by the Parent and Merger Sub at or prior
to the Closing.
31
10.2 LITIGATION. No suit, action or other proceeding shall be pending
or threatened before any Governmental Authority seeking to restrain the
Shareholder or prohibit any of the transactions contemplated hereby.
10.3 CONSENTS AND WAIVERS. No preliminary or permanent injunction or
other order by any Governmental Authority which prohibits the consummation of
this Agreement shall have been issued and remain in effect. No statute, rule,
regulation, executive order, stay, decree, or judgment shall have been enacted,
entered, issued, promulgated or enforced by any court or Governmental Authority
which prohibits or restricts the consummation of the Agreement. All material
authorizations, consents, orders or approvals of, or declarations or filings
with, and all expirations of waiting periods imposed by, any Governmental
Authority shall have been filed, occurred or been obtained, and shall be in full
force and effect.
10.4 CERTIFIED DOCUMENTS, ETC. The Shareholder shall have received
certificates as to the incumbency of officers and certificates from appropriate
authorities as to the legal existence and good standing of the Parent and Merger
Sub, and such other documents and certificates as the Shareholder or his counsel
may reasonably request.
10.5 EMPLOYMENT AND NON-COMPETITION AGREEMENT. The Parent and the
Shareholder shall have entered into the Shareholder Employment Agreement.
10.6 REPAYMENT OF LOANS. The Company and the Shareholder shall have
entered into an agreement for the repayment of certain loans made by Shareholder
to the Company in the form attached hereto as EXHIBIT J, which obligation of the
Company shall be guaranteed by the Parent.
10.7 AMENDMENTS TO LEASE AGREEMENTS. The Company and the Shareholder
shall have entered into the ▇▇▇▇▇ Street Lease Amendment, the 183 Street Lease
Amendment and the Conover Lease Amendment, in each case with the Company's
obligations thereunder guaranteed by the Parent.
ARTICLE XI
NON-COMPETITION AND NON-INTERFERENCE
11.1 NON-COMPETITION; NON-INTERFERENCE. In consideration of the
consummation by the Parent and Merger Sub of the transactions contemplated
hereby, the Shareholder agrees that from the date of this Agreement until the
seventh anniversary of the Closing Date (the "Non-competition Period"), the
Shareholder will not:
(a) directly or indirectly engage in or have any interest in
any sole proprietorship, partnership, corporation or business or any other
person or entity (whether as an employee, officer, director, partner, agent,
security holder, creditor, consultant or otherwise) that directly or indirectly
(or through any affiliated entity) engages in competition with the Business.
32
For these purposes, ownership of securities of not in excess of two percent (2%)
of any class of securities of a public company shall not be considered to be
competition with the Company or the Surviving Corporation or any of its
affiliates; or
(b) persuade or attempt to persuade any potential customer or
client to which the Company has made a presentation, or with which the Company
has been having discussions, not to hire the Company or the Surviving
Corporation, or to hire any other Person than the Company or the Surviving
Corporation; or
(c) solicit for himself or any Person other than the Company
or the Surviving Corporation the Business of any Person which is a customer or
client of the Company, or was its customer or client within two years prior to
the date of this Agreement; or
(d) persuade or attempt to persuade any employee of the
Company or the Surviving Corporation, or any individual who was its employee
during the two years prior to the date of this Agreement, to leave the Company's
or the Surviving Corporation's employ, or to become employed by any person other
than the Company or the Surviving Corporation; PROVIDED, that in the event that
the Executive's employment with the Company is terminated by the Company without
Cause (as defined in the Shareholder Employment Agreement) the Non-competition
Period shall terminate one year after the termination of the Executive's
employment by the Company.
It is the desire and intent of the parties to this Agreement that the
provisions of this SECTION 11.1 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. If any particular provisions or portion of this
SECTION 11.1 shall be adjudicated to be invalid or unenforceable, this Section
shall be deemed amended to delete therefrom such provision or portion thereof
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of such Section in the particular jurisdiction in which
such adjudication is made.
The parties recognize that the performance of the obligations under
this SECTION 11.1 by the Shareholder is special, unique and extraordinary in
character, and that in the event of the breach by the Shareholder of the terms
and conditions of this SECTION 11.1 to be performed, the Parent and/or the
Surviving Corporation shall be entitled, if it so elects, to institute and
prosecute proceedings in any court of competent jurisdiction, either in law or
in equity, to obtain damages for any breach of this SECTION 11.1, or to enforce
the specific performance thereof by the Shareholder or to enjoin the Shareholder
from performing services for any such other person, firm or corporation.
33
ARTICLE XII
TERMINATION
12.1 TERMINATION. This Agreement may be terminated:
(a) By mutual written consent of the Shareholder and the
Company, on the one hand, and the Parent and Merger Sub, on the other hand.
(b) By the Shareholder and the Company, on the one hand, or
the Parent and Merger Sub, on the other hand, if the Closing shall not have
been consummated by November 30, 1998; PROVIDED, HOWEVER, that either party may
extend the termination date set forth in this SECTION 11.1(B) for a period not
to exceed five (5) days if any material authorization, consent or approval of
any Governmental Authority has not been obtained by such date.
(c) By the Parent and Merger Sub if either the Shareholder or
the Company materially breaches any representation, warranty, covenant or
agreement in this Agreement.
(d) By the Shareholder and the Company if the Parent or Merger
Sub materially breaches any representation, warranty, covenant or agreement of
this Agreement.
12.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become of no further
force or effect and, except for a termination resulting from a breach by a party
of any of its material obligations under this Agreement, there shall be no
liability or obligation on the part of the Shareholder, the Company, the Parent
or Merger Sub or their respective officers or directors (except as set forth in
SECTIONS 14.3, 14.4, 14.9, and 14.10 hereof, which shall survive the
termination). Notwithstanding the foregoing, nothing contained in this SECTION
12.2 shall relieve any party from liability for willful breach of this Agreement
that results in termination of this Agreement. Upon request therefor, each party
shall redeliver all documents, work papers and other material of any other party
relating to the transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing same.
ARTICLE XIII
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Business" shall mean the business of manufacturing, marketing,
distributing and selling non-mobile solid waste handling equipment in which the
Company is engaged.
"Company" shall mean Bes-Pac, Inc.
34
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations and interpretations thereunder.
"GAAP" means generally accepted accounting principles consistently
applied.
"Governmental Authority" means any nation or country (including but not
limited to the United States) and any state, commonwealth, territory or
possession thereof and any political subdivision of any of the foregoing,
including but not limited to courts, departments, commissions, boards, bureaus,
agencies, panels, ministries or other instrumentalities.
"Indebtedness" means all obligations for borrowed money, contingent or
otherwise, whether current or long-term, which in accordance with GAAP would be
classified upon the obligor's balance sheet as liabilities (other than deferred
taxes) and shall also include capitalized leases, guarantees, endorsements
(other than for collection in the ordinary course of business) or other
arrangements whereby responsibility is assumed for the obligations of others,
including any agreement to purchase or otherwise acquire the obligations of
others or any agreement, contingent or otherwise, to furnish funds for the
purchase of goods, supplies or services for the purpose of payment of the
obligations of others, other than accounts or trade payables in the ordinary
course of business.
"Knowledge of the Shareholder" means the knowledge with respect to the
matter in question of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ after reasonable inquiry as to such
matter.
"Legal Requirements" means, when described as being applicable to any
Person, any and all laws (statutory, judicial or otherwise) ordinances,
regulations, judgments, orders, directives, injunctions, writs, decrees or
awards of, and any contracts, agreements or undertakings with, any Governmental
Authority, in each case as and to the extent applicable to such Person or such
Person's business, operations or properties.
"Lien" shall mean any mortgage, deed of trust, pledge, security
interest, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing, 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 of any
jurisdiction).
"Material Adverse Effect" means a material adverse change in, or the
occurrence of any event which will or would have a material adverse effect on,
the assets, properties, liabilities, business, affairs, results of operations or
condition (financial or otherwise) of the Company, other than as a result of
general economic conditions in the United States.
"Material Adverse Effect on the Parent and Merger Sub" means a material
adverse change in, or the occurrence of any event which will or would have a
material adverse effect on, the assets, properties, liabilities, business,
affairs, results of operations or condition (financial or otherwise) of the
Parent and Merger Sub, other than as a result of general economic conditions in
the United States.
35
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Related Agreements" mean any other agreements or instruments to be
executed in connection with the transactions contemplated hereby.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Tax" or "Taxes" shall mean any foreign, federal, state or local tax
assessment or governmental charge.
ARTICLE XIV
MISCELLANEOUS
14.1 AMENDMENTS AND WAIVERS. This Agreement may not be amended, nor any
provision hereof waived, unless such amendment or waiver is approved in writing
by the Parent and Merger Sub, on the one hand, and the Shareholder, on the other
hand. No delay in the exercise of any rights hereunder shall operate as a waiver
of any rights of the Parent and/or Merger Sub.
14.2 NOTICES. All notices, requests, consents, reports and demands
shall be in writing and shall be hand delivered, sent by facsimile or other
electronic medium, or mailed, postage prepaid, to the Parent and/or Merger Sub
or to the Shareholder and/or the Company at the address set forth below or to
such other address as may be furnished in writing to the other parties hereto. A
notice shall be deemed effective (i) upon delivery, if by hand or overnight
courier, (ii) on the date faxed or electronically transmitted, if confirmation
of such transmission is obtained, and (iii) upon the third day following mailing
as set forth above.
IF TO THE SHAREHOLDER OR THE ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
COMPANY: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇, Loop & ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
36
IF TO THE PARENT OR MERGER SUB: Hi-Rise Recycling Systems, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇▇ Traurig, P.A.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
14.3 EXPENSES. Subject to the provisions of SECTIONS 3.2 and 14.4, each
of the parties to this Agreement shall bear its own expenses incurred in
connection with the negotiation, preparation, execution and closing of this
Agreement and the transactions contemplated hereby (it being understood that the
Shareholder shall bear all costs and expenses of the Company).
14.4 INDEMNIFICATION FOR BROKER FEES. The Shareholder agrees to
indemnify and save harmless the Parent, Merger Sub, and their respective
partners, officers, directors, employees and agents, and the Parent agrees to
indemnify and save harmless the Shareholder, and his partners, officers,
directors, employees and agents, from and against any and all actions, causes of
action, suits, losses, liabilities and damages, and expenses (including, without
limitation, reasonable attorneys' fees and disbursements in connection
therewith) for any brokers or finders fees arising with respect to brokers or
finders engaged by the indemnifying party.
14.5 COUNTERPARTS. This Agreement and any exhibit hereto may be
executed in multiple counterparts, each of which shall constitute an original
but all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any exhibit hereto may be delivered via
telecopier, with the intention that they shall have the same effect as an
original counterpart hereof.
14.6 EFFECT OF HEADINGS. The article and section headings herein are
for convenience only and shall not affect the construction hereof.
14.7 FURTHER ASSURANCES. Each of the parties shall execute and deliver
such documents, and take such other action, as shall be reasonably requested by
any other party hereto to carry out the transactions contemplated by this
Agreement.
14.8 GOVERNING LAW; ARBITRATION. This Agreement shall be deemed a
contract made under the laws of the State of Florida and together with the
rights and obligations of the parties hereunder, shall be construed under and
governed by the laws of such State. Other than with respect to injunctive or
equitable relief sought by either party to this Agreement or pursuant to SECTION
3.2 hereof, all disputes arising after the Closing in connection with this
Agreement shall be finally settled under the Rules of the American Arbitration
Association (the "Rules") by three (3) arbitrators appointed in accordance with
the Rules. Any such arbitration shall be held in Miami, Florida pursuant to the
Laws of the State of Florida unless the parties hereto mutually
37
agree in writing upon some other location for arbitration. The arbitrators shall
not be empowered to award punitive, exemplary and/or consequential damages to
any party. There shall be no consolidation of this arbitration with any other
dispute or proceeding involving third parties. The provisions of this Agreement
shall prevail in case of inconsistency between the Rules and this Agreement.
14.9 ATTORNEYS' FEES. In the event of a suit for the collection of any
damages resulting from, or for the injunction of any action constituting, a
breach of any of the terms or provisions of this Agreement, then the
non-prevailing party shall pay all reasonable costs, fees (including reasonable
attorneys' fees) and expenses of the prevailing party.
14.10 PUBLICITY. No party hereto shall issue or make, or cause to have
issued or made, any public release or announcement concerning this Agreement or
the transactions contemplated hereby, without the advance approval in writing of
the form and substance thereof by the other party hereto, except as required by
law (in which case, so far as possible, there shall be consultation between the
parties prior to such announcement).
14.11 ENTIRE AGREEMENT. This Agreement (including exhibits and
schedules), constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof and shall supersede all prior negotiations,
understandings, agreements, arrangements and understandings, both oral and
written, among the parties hereto with respect to such subject matter,
including, without limitation, the Letter of Intent dated May 26, 1998 by and
among the Parent, the Company and the Shareholder.
14.12 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses, sections or subsections contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or subsections had not
been inserted.
14.13 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by any party hereto without the prior written consent of the other
party; PROVIDED, HOWEVER, that the Parent may assign its rights (but not its
obligations) hereunder to any of its wholly-owned subsidiaries.
14.14 SPECIFIC PERFORMANCE. Each of the Shareholder and the Company
recognizes and agrees that the Parent and Merger Sub shall not have an adequate
remedy if either the Shareholder or the Company fails to satisfy the provisions
of this Agreement and that damages will not be readily ascertainable, and that
the Shareholder and the Company expressly agree that
38
in the event of such failure the Parent and Merger Sub shall be entitled to seek
specific performance of the Shareholder's and the Company's obligations
hereunder and that neither the Shareholder nor the Company will oppose an
application seeking such specific performance.
39
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives as of the date set forth in the first paragraph.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
BES-PAC, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
HI-RISE RECYCLING SYSTEMS, INC.
By: /s/ J. ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
J. ▇▇▇▇ ▇▇▇▇▇▇▇, Chief Operating Officer
BPI ACQUISITION CORP.
By: /s/ J. ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
J. ▇▇▇▇ ▇▇▇▇▇▇▇, President
40