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PLAN AND AGREEMENT OF MERGER
AMONG
SYNAGRO TECHNOLOGIES, INC.,
SYNAGRO SUB CORP. WISCONSIN, INC.,
A&J CARTAGE, INC.
AND
XXXXX X. XXXXXXX
DATED AS OF JUNE 23, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE 1 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Name and Continued Corporate Existence of Surviving Corporation . . . 3
1.4.1 Name and Existence . . . . . . . . . . . . . . . . . . . . . . 3
1.4.2 Federal Income Tax Treatment of Merger . . . . . . . . . . . . 3
1.5 Governing Law and Articles of Incorporation of Surviving
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Bylaws of Surviving Corporation . . . . . . . . . . . . . . . . . . . 3
1.7 Directors and Officers of Surviving Corporation . . . . . . . . . . . 3
1.7.1 Directors of Surviving Corporation. . . . . . . . . . . . . . 3
1.7.2 Officers of Surviving Corporation. . . . . . . . . . . . . . . 3
1.7.3 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Capital Stock of Surviving Corporation . . . . . . . . . . . . . . . 4
1.9 Conversion of Securities upon Merger . . . . . . . . . . . . . . . . 4
1.9.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9.2 Conversion of A&J Common Stock. . . . . . . . . . . . . . . 4
1.9.2.1 Post-Closing Adjustment to Exchange Value . . . 4
1.9.3 Exchange of A&J Stock Certificates . . . . . . . . . . . . . . 6
1.9.4 Conversion of, and Exchange of Certificates for Sub Corp
Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . 6
1.9.5 Sub Corp Transfer Books Closed . . . . . . . . . . . . . . . . 6
1.10 Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . 6
1.10.1 Assets and Liabilities of Merging Corporations Become Those of
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . 6
1.10.2 Conveyances to Surviving Corporation. . . . . . . . . . . . . 7
1.10.3 Accounting Treatment. . . . . . . . . . . . . . . . . . . . . 7
1.11 Other Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . 7
1.11.1 Opinion of Synagro Counsel . . . . . . . . . . . . . . . . . . 8
1.11.2 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND A&J . . 9
2.1 Representations and Warranties of the Shareholder and A&J . . . . . . 9
2.1.1 Organization and Standing . . . . . . . . . . . . . . . . . . 9
2.1.2 Agreement Authorized and its Effect on Other Obligations . . . 9
2.1.3 Capitalization of A&J . . . . . . . . . . . . . . . . . . . . 9
2.1.4 Ownership of A&J Shares . . . . . . . . . . . . . . . . . . . 10
2.1.5 No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . 10
2.1.7 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 10
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TABLE OF CONTENTS
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2.1.8 Additional Information . . . . . . . . . . . . . . . . . . . . 11
2.1.8.1 Real Estate . . . . . . . . . . . . . . . . . . 11
2.1.8.2 Machinery and Equipment . . . . . . . . . . . . 11
2.1.8.3 Receivables . . . . . . . . . . . . . . . . . . 11
2.1.8.4 Payables . . . . . . . . . . . . . . . . . . . . 11
2.1.8.5 Insurance . . . . . . . . . . . . . . . . . . . 11
2.1.8.6 Contracts . . . . . . . . . . . . . . . . . . . 11
2.1.8.7 Employee Compensation Plans . . . . . . . . . . 11
2.1.8.8 Certain Salaries . . . . . . . . . . . . . . . . 12
2.1.8.9 Bank Accounts . . . . . . . . . . . . . . . . . 12
2.1.8.10 Employee Agreements . . . . . . . . . . . . . . 12
2.1.8.11 Intellectual Property . . . . . . . . . . . . . 12
2.1.8.12 Trade Names . . . . . . . . . . . . . . . . . . 12
2.1.8.13 Promissory Notes . . . . . . . . . . . . . . . . 12
2.1.8.14 Guaranties . . . . . . . . . . . . . . . . . . . 12
2.1.8.15 Leases . . . . . . . . . . . . . . . . . . . . . 12
2.1.8.16 Permits . . . . . . . . . . . . . . . . . . . . 12
2.1.9 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.10 Absence of Certain Changes and Events . . . . . . . . . . . . 13
2.1.10.1 Financial Change . . . . . . . . . . . . . . . . 13
2.1.10.2 Property Damage . . . . . . . . . . . . . . . . 13
2.1.10.3 Dividends . . . . . . . . . . . . . . . . . . . 13
2.1.10.4 Capitalization Change . . . . . . . . . . . . . 13
2.1.10.5 Labor Disputes . . . . . . . . . . . . . . . . . 13
2.1.10.6 Other Material Changes . . . . . . . . . . . . . 13
2.1.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.11.1 General . . . . . . . . . . . . . . . . . . . . 13
2.1.11.2 Subchapter S Matters . . . . . . . . . . . . . . 14
2.1.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . 14
2.1.13 Title to and Condition of Assets . . . . . . . . . . . . . . . 14
2.1.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1.15 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . 15
2.1.16 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1.17 Environmental Compliance . . . . . . . . . . . . . . . . . . . 16
2.1.17.1 Environmental Conditions . . . . . . . . . . . . 16
2.1.17.2 Permits, etc. . . . . . . . . . . . . . . . . . 16
2.1.17.3 Compliance . . . . . . . . . . . . . . . . . . . 16
2.1.17.4 Past Compliance . . . . . . . . . . . . . . . . 17
2.1.17.5 Environmental Claims . . . . . . . . . . . . . . 17
2.1.17.6 Renewals . . . . . . . . . . . . . . . . . . . . 17
2.1.17.7 Asbestos and PCBs . . . . . . . . . . . . . . . 17
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2.1.18 Compliance with Other Laws . . . . . . . . . . . . . . . . . . 17
2.1.19 ERISA Plans or Labor Issues . . . . . . . . . . . . . . . . . 18
2.1.20 Investigations; Litigation . . . . . . . . . . . . . . . . . . 19
2.1.21 Absence of Certain Business Practices . . . . . . . . . . . . 19
2.1.22 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 19
2.1.23 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.2 Investment Representations . . . . . . . . . . . . . . . . . . . . . 20
2.2.1 Shareholder Investment Suitability and Related Matters . . . . 20
2.2.2 Synagro Shares Not Registered . . . . . . . . . . . . . . . . 20
2.2.3 Reliance on Representations . . . . . . . . . . . . . . . . . 20
2.2.4 Investment Intent . . . . . . . . . . . . . . . . . . . . . . 20
2.2.5 Permitted Resale . . . . . . . . . . . . . . . . . . . . . . . 20
2.2.6 Investor Sophistication . . . . . . . . . . . . . . . . . . . . 20
2.2.7 Availability of Information . . . . . . . . . . . . . . . . . 20
2.2.8 Restrictive Legends . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SYNAGRO . . . . . . . . . . 21
3.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . 21
3.2 Agreement Authorized and its Effect on Other Obligations . . . . . . 21
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.4 Reports and Financial Statements . . . . . . . . . . . . . . . . . . 22
3.5 Absence of Certain Changes and Events in Synagro . . . . . . . . . . 23
3.5.1 Financial Change . . . . . . . . . . . . . . . . . . . . . . . 23
3.5.2 Other Material Changes . . . . . . . . . . . . . . . . . . . . 23
3.6 Synagro's Compliance with Other Laws . . . . . . . . . . . . . . . . 23
3.7 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . 23
3.8 Investigations; Litigation . . . . . . . . . . . . . . . . . . . . . 23
3.9 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.10 Nasdaq Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4 OBLIGATIONS PENDING CLOSING DATE . . . . . . . . . . . . . . . 24
4.1 Agreements of Synagro and A&J . . . . . . . . . . . . . . . . . . . . 24
4.1.1 Maintenance of Present Business. . . . . . . . . . . . . . . . 24
4.1.2 Maintenance of Properties . . . . . . . . . . . . . . . . . . 24
4.1.3 Maintenance of Books and Records . . . . . . . . . . . . . . . 24
4.1.4 Compliance with Law . . . . . . . . . . . . . . . . . . . . . 24
4.1.5 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1.6 Notice of Material Developments . . . . . . . . . . . . . . . 24
4.2 Additional Agreements of A&J and the Shareholder . . . . . . . . . . 25
4.2.1 Prohibition of Certain Employment Contracts . . . . . . . . . 25
4.2.2 Prohibition of Certain Loans . . . . . . . . . . . . . . . . . 25
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TABLE OF CONTENTS
(Continued)
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4.2.3 Prohibition of Certain Commitments . . . . . . . . . . . . . . 25
4.2.4 Disposal of Assets . . . . . . . . . . . . . . . . . . . . . . 25
4.2.5 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . 25
4.2.6 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . 25
4.2.7 No Amendment to Articles of Incorporation . . . . . . . . . . 26
4.2.8 No Issuance, Sale, or Purchase of Securities . . . . . . . . . 26
4.2.9 Prohibition on Dividends . . . . . . . . . . . . . . . . . . . 26
4.3 Agreements of Synagro . . . . . . . . . . . . . . . . . . . . . . . . 26
4.3.1 No Amendment to Articles of Incorporation . . . . . . . . . . 26
4.3.2 Notice of Material Developments . . . . . . . . . . . . . . . 26
ARTICLE 5 CONDITIONS PRECEDENT TO OBLIGATIONS . . . . . . . . . . . . . 26
5.1 Conditions Precedent to Obligations of A&J and the Shareholder . . . 26
5.1.1 Representations and Warranties of Synagro True at
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1.2 No Material Litigation . . . . . . . . . . . . . . . . . . . . 27
5.1.3 Closing Documents . . . . . . . . . . . . . . . . . . . . . . 27
5.1.4 Consent of Certain Parties in Privity With Synagro . . . . . . 27
5.2 Conditions Precedent to Obligations of Synagro . . . . . . . . . . . 27
5.2.1 Representations and Warranties of A&J and the Shareholder
True at Effective Date . . . . . . . . . . . . . . . . . . . . 27
5.2.2 No Material Litigation . . . . . . . . . . . . . . . . . . . . 28
5.2.3 Closing Documents . . . . . . . . . . . . . . . . . . . . . . 28
5.2.4 Consent of Certain Parties in Privity with A&J or
the Shareholder . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . 28
6.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Registration Matters . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3.1 Agreement to Register Resales . . . . . . . . . . . . . . . . 29
6.3.2 Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3.3 Registration Expenses . . . . . . . . . . . . . . . . . . . . 29
6.3.4 Preparation; Reasonable Investigation . . . . . . . . . . . . 29
6.3.5 Rights Non-Transferable . . . . . . . . . . . . . . . . . . . 30
6.3.6 Indemnification by Synagro . . . . . . . . . . . . . . . . . . 30
6.3.7 Notices of Claims, etc . . . . . . . . . . . . . . . . . . . . 30
6.3.8 Undertaking to File Reports and Cooperate in Rule 144 and Rule
145 Transactions . . . . . . . . . . . . . . . . . . . . . . . 31
6.3.9 Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . 31
6.4 Nomination of Director . . . . . . . . . . . . . . . . . . . . . . . 31
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ARTICLE 7 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Indemnification by the Shareholder . . . . . . . . . . . . . . . . . 31
7.2 Indemnification by Synagro . . . . . . . . . . . . . . . . . . . . . 32
7.3 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . 32
7.4 Termination of Indemnity, Representations and Warranties . . . . . . 33
ARTICLE 8 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.2 Entirety; Conflict . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.3 Counterparts and Facsimile Signature . . . . . . . . . . . . . . . . 33
8.4 Notices and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.5 Table of Contents and Captions . . . . . . . . . . . . . . . . . . . 34
8.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 34
8.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.8 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "Agreement"), dated as of June
23, 1998, is by and among Synagro Technologies, Inc., a Delaware corporation
("Synagro"), Synagro Sub Corp. Wisconsin, Inc., a Wisconsin corporation and a
wholly owned subsidiary of Synagro formed for the purpose of carrying out the
transactions contemplated hereby ("Sub Corp"), A&J Cartage, Inc., a Wisconsin
corporation ("A&J" or the "Surviving Corporation"), and Xxxxx X. Xxxxxxx, an
individual residing in Franklin, Milwaukee County, Wisconsin and the
shareholder of A&J ("Shareholder"). Sub Corp and A&J are hereinafter
collectively referred to as the "Merging Corporations."
W I T N E S S E T H:
WHEREAS, Synagro is a corporation duly organized and validly existing
under the laws of the State of Delaware, with its registered office at 0000
Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 and its principal executive office at
0000 Xxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000;
WHEREAS, the authorized capital stock of Synagro consists of (i)
10,000,000 shares of preferred stock, par value $.002 per share, of which
500,000 shares have been designated as "Preferred Stock-Junior Participating
Series A" and reserved for issuance upon exercise of Rights evidenced by the
certificates representing all outstanding shares of Synagro Common Stock,
though no such shares are issued or outstanding; and (ii) 100,000,000 shares of
common stock, par value $.002 per share ("Synagro Common Stock"), of which, at
June 6, 1998, 9,082,638 shares were issued and outstanding, and an additional
2,261,031 shares were reserved for issuance pursuant to stock options and
600,000 shares were reserved for issuance pursuant to outstanding warrants; at
the same date, no shares of Common Stock were held in Synagro's treasury;
WHEREAS, Sub Corp is a corporation duly organized and validly existing
under the laws of the State of Wisconsin, with its registered office at 00 Xxxx
Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000;
WHEREAS, the authorized capital stock of Sub Corp consists of 1,000
shares of common stock, $.01 par value per share, of which at the date hereof
1,000 shares were issued and outstanding and held beneficially and of record by
Synagro ("Sub Corp Common Stock");
WHEREAS, A&J is a corporation duly organized and validly existing under
the laws of the State of Wisconsin, with its registered office at and its
principal executive office at 0000 Xxxxx 0xx Xxxxx, Xxxxxxxxx, Xxxxxxxxx 00000;
WHEREAS, the authorized capital stock of A&J consists of 100 shares (the
"A&J Shares") of common stock, $10.00 par value per share ("A&J Stock"), all of
which are issued and outstanding;
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WHEREAS, the Shareholder owns all of the issued and outstanding A&J
Shares and, as such, the Shareholder expects to receive, directly or
indirectly, substantial benefit from the transactions contemplated hereby;
WHEREAS, the respective boards of directors of Sub Corp and A&J deem it
desirable and in the best interests of their respective corporations and their
respective stockholders, and the Shareholder deems it desirable and in his best
interests, that Sub Corp be merged with and into A&J, pursuant to the
applicable provisions of Section 180.1101 of the Wisconsin Business Corporation
Law (the "Corporations Act") in exchange for the consideration herein provided
for, and have proposed, declared advisable, and approved such merger pursuant
to this Agreement which has been duly approved by resolutions of the respective
boards of directors of Sub Corp and A&J;
WHEREAS, Synagro, A&J and others have executed a letter agreement dated
April 21, 1998 (the "Letter Agreement") relating to the acquisition by Synagro
of substantially all of the assets of A&J, such acquisition being subject to
change to accommodate the needs of the parties thereto; and
WHEREAS, the parties desire to evidence their agreement with respect to
the form of and the other terms and provisions not set forth in the Letter
Agreement with respect to the transaction contemplated by the Letter Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and in order to set forth the terms
and conditions of the merger, the mode of carrying the same into effect, the
manner and basis of converting (i) the outstanding shares of Sub Corp Common
Stock into shares of A&J Stock, and (ii) the outstanding shares of A&J Stock
into shares of Synagro Common Stock, and such other details and provisions as
are deemed necessary or proper, the parties hereto agree as follows:
ARTICLE 1
MERGER
1.1 Surviving Corporation. Subject to the adoption and approval of
this Agreement by the requisite vote of the stockholders of Sub Corp and to the
other conditions hereinafter set forth, Sub Corp and A&J shall be, upon the
Effective Date (as defined in Section 1.3 hereof), merged into a single
surviving corporation, which shall be A&J, one of the Merging Corporations,
which shall continue its corporate existence and remain a Wisconsin corporation
governed by and subject to the laws of that state.
1.2 Stockholder Approval. This Agreement shall be submitted for
adoption and approval by the stockholders of Sub Corp in accordance with its
articles of incorporation and the applicable laws of the State of Wisconsin.
1.3 Effective Date. The merger shall become effective upon the
filing by A&J of Articles of Merger with the Department of Financial
Institution of the State of Wisconsin in accordance with the Corporations Act.
The date upon which the merger shall become effective is referred to in this
Agreement as the "Effective Date."
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1.4 Name and Continued Corporate Existence of Surviving Corporation
1.4.1 Name and Existence. Effective as of the Effective Date,
the Articles of Incorporation of A&J (the "A&J Articles"), the
corporation whose corporate existence is to survive the merger and
continue thereafter as the surviving corporation, shall be the Articles
of Incorporation of the Surviving Corporation and the identity,
existence, purposes, powers, objects, franchises, rights, and immunities
of A&J, the surviving corporation of the merger, shall continue
unaffected and unimpaired by the merger, and the corporate identity,
existence, purposes, powers, objects, franchises, rights, and immunities
of Sub Corp shall be wholly merged into A&J, and A&J shall be fully
vested therewith. Accordingly, on the Effective Date, the separate
existence of Sub Corp, except insofar as continued by statute, shall
cease.
1.4.2 Federal Income Tax Treatment of Merger. The merger is
intended to qualify as and, subject to the requirements of Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the
"Code"), shall be characterized as a tax-free reverse subsidiary merger
transaction described in Section 368(a)(2)(E) of the Code.
1.5 Governing Law and Articles of Incorporation of Surviving
Corporation. The laws of Wisconsin shall continue to govern the Surviving
Corporation. On the Effective Date, the A&J Articles shall be the articles of
incorporation of A&J until further amended in the manner provided by law.
1.6 Bylaws of Surviving Corporation. Effective as of the Effective
Date, the bylaws of A&J (the "A&J Bylaws") shall be the bylaws of the Surviving
Corporation until altered, amended, or repealed, or until new bylaws shall be
adopted in accordance with the provisions of law, the A&J Articles and the A&J
Bylaws.
1.7 Directors and Officers of Surviving Corporation
1.7.1 Directors of Surviving Corporation. The names and
addresses of the persons who, upon the Effective Date, shall constitute
the board of directors of the Surviving Corporation, and who shall hold
office until the first annual meeting of stockholders of the Surviving
Corporation next following the Effective Date, are as follows:
NAME ADDRESS
---- -------
Xxxxx X. Xxxxxxx 0000 Xxxxx 0xx Xxxxx, Xxxxxxxxx, Xxxxxxxxx 00000
Xxxx X. Xxxxxx 0000 Xxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000
Xxxx X. Rome 0000 Xxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000
1.7.2 Officers of Surviving Corporation. The names and
addresses of the persons who, upon the Effective Date, shall constitute
the officers of the Surviving Corporation, and who shall hold their
respective offices of the Surviving Corporation, subject to the A&J
Bylaws, from and after the Effective Date, are as follows:
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Xxxx X. Xxxxxx President
Xxxxx X. Xxxxxxx Vice President
Xxxx X. Rome Secretary and Treasurer
1.7.3 Vacancies. On or after the Effective Date, if a vacancy
shall exist for any reason in the board of directors or in any of the
offices of the Surviving Corporation, such vacancy shall be filled in
the manner provided in the A&J Articles and/or A&J Bylaws.
1.8 Capital Stock of Surviving Corporation. The authorized number of
shares of capital stock of the Surviving Corporation, and the par value,
designations, preferences, rights, and limitations thereof, and the express
terms thereof, shall be as set forth in the A&J Articles.
1.9 Conversion of Securities upon Merger
1.9.1 General. The manner and basis of converting the issued
and outstanding shares of the capital stock of (A) Sub Corp into shares
of the capital stock of A&J and (B) A&J into shares of the capital stock
of Synagro and/or other consideration herein provided for shall be as
hereinafter set forth in this Section 1.9.
1.9.2 Conversion of A&J Common Stock. On the Effective Date,
the A&J Shares, without any action on the part of the holder thereof,
shall automatically become and be converted into the right to receive
(i) certificates evidencing 1,346,929 fully paid and nonassessable
shares of issued and outstanding Synagro Common Stock (which, together
with associated Preferred Stock Purchase Rights, are hereinafter
referred to as the "Synagro Shares"), (ii) cash in the amount of
$1,175,170 (the "Cash Amount"), and (iii) a promissory note,
substantially in the form of Exhibit A hereto, in the principal amount
of $1,128,079 (plus all principal amounts payable to Shareholder under
Section 1.9.2(iii) of each of the Other Merger Agreements (as defined
herein), (the "Promissory Note"), upon surrender, in accordance with
Section 1.9.3 hereof, of certificates theretofore evidencing the A&J
Shares (the Synagro Shares together with the Cash Amount and the
Promissory Note collectively, the "Exchange Value").
1.9.2.1 Post-Closing Adjustment to Exchange Value
(a) Preparation of Closing Balance Sheet. Not
later than 60 days following the Effective Date (as
hereinafter defined), Shareholder shall prepare and
deliver to Synagro for its review in accordance with this
section a balance sheet (the "Closing Balance Sheet") of
A&J prepared as of the Effective Date and prepared in
accordance with generally accepted accounting principles
("GAAP") in a manner consistent with the financial
statements described in Section 2.1.6 hereof. All of the
parties hereto shall cooperate fully with each other in
the preparation of the Closing Balance Sheet, and Synagro
shall have access at all reasonable times to review
workpapers, books and records relating to the preparation
of the Closing Balance Sheet.
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(b) Right to Dispute Closing Balance Sheet.
Synagro shall have the right to dispute the Closing
Balance Sheet by giving notice of dispute to Shareholder
within 30 days after the Closing Balance Sheet has been
given to Synagro. Such notice shall set forth in detail
the reasons for the dispute and Synagro's proposed
adjustments to the Closing Balance Sheet. If Synagro does
not give notice of dispute to Shareholder within such 30
day period in accordance with the foregoing, the Closing
Balance Sheet as prepared by Shareholder shall become
final and binding upon Synagro. If Synagro does give
notice of dispute to Shareholder within such 30 day
period, Shareholder and Synagro shall endeavor in good
faith to reach agreement on all of the disputed items. If
the parties are unable to reach an agreement on the
disputed items during such 30 day period, then the
disputed items which have not been resolved shall be
submitted to the accounting firm of Xxxxxx Xxxxxxxx,
Houston, Texas for determination and resolution on the
basis of such procedures as such accounting firm, in its
sole judgement, deems applicable and appropriate, taking
into account GAAP and the terms of this Agreement. Such
accounting firm shall review the disputed matters and as
promptly as practicable deliver to Shareholder and to
Synagro a statement setting forth its determination as to
the proper treatment of the matters in dispute, and such
determination shall be final and binding upon the parties
without any further right of appeal; provided, however,
neither such determination nor any other provisions of
this Section 1.9.2.1 shall affect Synagro's right to seek
indemnification for any breaches of representations and
warranties by Shareholder pursuant to Article 7 hereof.
All charges of such accounting firm and other expenses
directly incurred in making such determination shall be
borne equally by the parties hereto.
(c) Adjustment of Consideration. In the event
that A&J's tangible assets net of liabilities ("Net
Assets") as shown on the Closing Balance Sheet, as finally
prepared and binding upon the parties in accordance with
Sections 1.9.2.1(a) and (b) is less than the Net Assets on
April 30, 1998 then Synagro shall have the right to give
notice thereof to the Shareholder, whereupon the
Shareholder shall have 10 days to refund to Synagro a cash
amount equal to the amount by which the Net Assets on
April 30, 1998 exceeds the amount of the Net Assets as
shown on the Closing Balance Sheet, or cancel the
Promissory Note and promptly surrender it to Synagro
whereupon Synagro shall execute and deliver to Shareholder
a new promissory note, which note shall be in the same
form and contain the same terms and provisions as the
Promissory Note, in the aggregate principal amount of
$1,128,079 (plus all amounts payable under Section
1.9.2(iii) of each of the Other Merger Agreements) less
the difference between the Net Assets on April 30, 1998
and the Effective Date (and any other adjustments made
pursuant to Section 1.9.2.1 of each of the Other Merger
Agreements).
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1.9.3 Exchange of A&J Stock Certificates. On the Effective
Date, the Shareholder shall surrender the certificates representing the
A&J Shares to Synagro, and Shareholder shall be entitled upon such
surrender to receive in exchange therefor a certificate or certificates
representing the Synagro Shares together with the Cash Amount, and the
Promissory Note (the "Exchange").
1.9.4 Conversion of, and Exchange of Certificates for Sub Corp
Common Stock. On the Effective Date, each share of Sub Corp Common
Stock then issued and outstanding, without any action on the part of the
holder thereof (and after giving effect to the conversion in the merger
of all then outstanding shares of capital stock of A&J into capital
stock of Synagro and/or other consideration herein provided for) shall
automatically become and be converted into one-tenth of one fully paid
and nonassessable share of issued and outstanding A&J Stock. On the
Effective Date, Synagro shall surrender the outstanding certificate
theretofore representing shares of Sub Corp Common Stock to A&J, A&J
will cancel the certificates representing the Sub Corp Common Stock, and
shall receive in exchange therefor a certificate or certificates
representing the number of whole shares of A&J Stock into which the
shares of Sub Corp Common Stock theretofore represented by the
certificate so surrendered shall have been converted as aforesaid.
1.9.5 Sub Corp Transfer Books Closed. Upon the Effective Date,
the stock transfer books of Sub Corp shall be deemed closed, and no
transfer of any certificates theretofore representing shares of Sub Corp
Common Stock shall thereafter be made or consummated.
1.10 Assets and Liabilities
1.10.1 Assets and Liabilities of Merging Corporations Become
Those of Surviving Corporation. On the Effective Date, all rights,
privileges, powers, immunities, and franchises of each of the Merging
Corporations, both of a public and private nature, and all property,
real, personal, and mixed, and all debts due on whatever account, as
well as stock subscriptions and all other choices or things in action,
and all and every other interest of or belonging to or due to either of
the Merging Corporations, shall be taken by and deemed to be transferred
to and shall be vested in the Surviving Corporation without further act
or deed, and all such rights, privileges, powers, immunities, and
franchises, property, debts, choices or things in action, and all and
every other interest of each of the Merging Corporations shall be
thereafter as effectually the property of the Surviving Corporation as
they were of the respective Merging Corporations, and the title to any
real or other property, or any interest therein, whether vested by deed
or otherwise, in either of the Merging Corporations, shall not revert or
be in any way impaired by reason of the merger, provided, however, that
all rights of creditors and all liens upon any properties of each of the
Merging Corporations shall be preserved unimpaired, and all debts,
liabilities, restrictions, obligations, and duties of the respective
Merging Corporations, including without limitation all obligations,
liabilities and duties as lessee under any existing lease, shall
thenceforth attach to the Surviving Corporation and may be enforced
against and by it to the same extent as if such debts, liabilities,
duties, restrictions and obligations had been incurred or contracted by
it. Any
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action or proceeding pending by or against either of the Merging
Corporations may be prosecuted to judgment as if the merger had not
taken place, or the Surviving Corporation may be substituted in place of
either of the Merging Corporations.
1.10.2 Conveyances to Surviving Corporation. The Merging
Corporations hereby agree, respectively, that from time to time, as and
when requested by the Surviving Corporation, or by its successors and
assigns, they will execute and deliver or cause to be executed and
delivered, all such deeds, conveyances, assignments, permits, licenses
and other instruments, and will take or cause to be taken such further
or other action as the Surviving Corporation, its successors or assigns,
may deem necessary or desirable to vest or perfect in or confirm to the
Surviving Corporation, its successors and assigns, title to and
possession of all the property, rights, privileges, powers, immunities,
franchises, and interests referred to in Section 1.10.1 and otherwise
carry out the intent and purposes of this Agreement.
1.10.3 Accounting Treatment. The assets and liabilities of the
Merging Corporations shall be taken up on the books of the Surviving
Corporation in accordance with generally accepted accounting principles,
and the capital surplus and retained earnings accounts of the Surviving
Corporation shall be determined, in accordance with generally accepted
accounting principles, by the board of directors of the Surviving
Corporation. Nothing herein shall prevent the board of directors of the
Surviving Corporation from making any future changes in its accounts in
accordance with law.
1.11 Other Closing Deliveries. Contemporaneously with the Exchange,
(i) the Shareholder shall execute and deliver to Synagro a confidentiality and
noncompetition agreement in substantially the form of Exhibit B hereto (the
"Noncompete Agreement"); (ii) the Shareholder, Xxxxxx X. Xxxxxxxx ("Xxxxxxxx"),
Xxxx X. Xxxxxxx ("Xxxxxxx"), Xxxx X. Xxxxxx, Xxxxxx X. Xxxxx and Xxxxxx X.
Xxxxx shall execute and deliver a voting agreement and irrevocable proxy
substantially in the form of Exhibit C hereto (the "Voting Agreement"); (iii)
Synagro shall execute and deliver to Shareholder the Promissory Note; (iv)
Synagro shall deliver to the Shareholder the certificate required by Section
5.1.1 hereof, and the Shareholder shall deliver to Synagro the certificate
required by Section 5.2.1 hereof; (v) Synagro, the Shareholder, Xxxxxxxx and
Xxxxxxx shall execute and deliver a registration rights agreement substantially
in the form of Exhibit D hereto (the "Registration Rights Agreement"; (vi)
Synagro and the Shareholder shall execute and deliver a non-qualified stock
option agreement substantially in the form of Exhibit E hereto (the "Stock
Option Agreement"); (vii) the Shareholder and Synagro shall execute and deliver
an employment agreement substantially in the form of Exhibit F hereto (the
"Employment Agreement"); (viii) the Shareholder and the Surviving Corporation
shall execute and deliver a lease substantially in the form of Exhibit G hereto
(the "Lease") and a memorandum of lease substantially in the form of Exhibit H
hereto (the "Lease Memorandum"); (ix) the Shareholder shall cause Oak Creek
Storage & Handling, Inc., a Wisconsin corporation wholly owned by Shareholder
("Oak Creek") to execute and deliver a lease agreement substantially in the
form of Exhibit I hereto, covering the lease by Oak Creek to the Surviving
Corporation of the office building located at 0000 Xxxxx 0xx Xxxxx, Xxxxxxxxx,
Xxxxxxxxx 00000 currently occupied by A&J (the "Office Building Lease"); and
(x) Synagro and the Shareholder will deliver to one another the opinions of
counsel described below:
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1.11.1 Opinion of Synagro Counsel. Xxxxxx & Xxxxxx, L.L.P.,
counsel for Synagro, shall issue an opinion to the Shareholder, in form
and substance satisfactory to the Shareholder, to the effect that (i)
Synagro has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware;
(ii) all corporate proceedings required to be taken by or on the part of
Synagro to authorize the execution of this Agreement and the
implementation of the transactions contemplated hereby have been taken;
(iii) the shares of Synagro Common Stock which are to be delivered in
accordance with this Agreement will, when issued, be validly issued,
fully paid and nonassessable outstanding securities of Synagro; (iv)
this Agreement and the Ancillary Documents (as hereinafter defined) to
which Synagro is a party have been duly executed and delivered by, are
the legal, valid and binding obligation of, and are enforceable against
Synagro in accordance with their respective terms, except as
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally;
provided that said opinion shall be limited to federal law, the laws of
the State of Texas and the general corporate law of the State of
Delaware; and (v) except as specified by such counsel (such exceptions
to be acceptable to A&J) such counsel does not know of any material
litigation, proceedings, or governmental investigation pending or
threatened against or relating to Synagro, any of its subsidiaries, or
their respective properties or businesses in which it is sought to
restrain, prohibit or otherwise affect the consummation of the
transactions contemplated by this Agreement. Such opinion also shall
cover such other matters incident to the transactions herein
contemplated as A&J and its counsel may reasonably request. In
rendering such opinion, such counsel may rely upon (i) certificates of
public officials and of officers of Synagro as to matters of fact and
(ii) the opinion or opinions of other counsel, which opinions shall be
reasonably satisfactory to A&J, as to matters other than federal or
Texas law. As used herein, "Ancillary Documents" means the the
Promissory Note and the Option Agreement.
1.11.2 Opinion of Counsel. Domnitz, Mawicke, Goisman & Xxxxxxxxx,
S.C., counsel to A&J and the Shareholder, shall issue an opinion to
Synagro in form and substance satisfactory to Synagro, to the effect that
(i) A&J has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Wisconsin;
(ii) all corporate proceedings required to be taken by or on the part of
the Shareholder to authorize the execution of this Agreement and the
implementation of the transactions contemplated hereby have been taken;
(iii) all outstanding shares of the A&J Stock have been validly issued
and are fully paid and nonassessable; (iv) this Agreement and the
Ancillary Documents to which Shareholder is a party have been duly
executed and delivered by, and are the legal, valid and binding
obligation of the Shareholder, and are enforceable against the
Shareholder in accordance with their respective terms, except as the
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally;
and (v) except as specified by such counsel (such exceptions to be
acceptable to Synagro) such counsel does not know of any material
litigation, proceedings or governmental investigation, pending or
threatened against or relating to A&J, its properties or businesses, or
the Shareholder in which it is sought to restrain, prohibit or otherwise
affect
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consummation of the transactions contemplated by this Agreement. Such
opinion shall also cover such other matters incident to the transactions
herein contemplated as Synagro and its counsel may reasonably request.
In rendering such opinion, such counsel may rely upon (i) certificates
of public officials and of officers of A&J as to matters of fact and
(ii) on the opinion or opinions of other counsel, which opinions shall
be reasonably satisfactory to Synagro, as to matters other than federal
or Wisconsin law.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDER AND A&J
2.1 Representations and Warranties of the Shareholder and A&J. The
Shareholder and A&J jointly and severally represent and warrant to Synagro as
follows:
2.1.1 Organization and Standing. A&J is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Wisconsin, has full requisite corporate power and authority to
carry on its business as it is currently conducted and to own and
operate the properties currently owned and operated by it, and is duly
qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in all jurisdictions in
which the character of the properties owned or the nature of the
business conducted by it would make such qualification or licensing
necessary, except where the failure to be so qualified or licensed would
not have a material adverse effect on its financial condition,
properties or business.
2.1.2 Agreement Authorized and its Effect on Other Obligations.
The execution, delivery and performance of this Agreement have been duly
and validly authorized by all necessary corporate action on the part of
A&J. This Agreement is a valid and binding obligation of A&J and the
Shareholder enforceable against A&J and the Shareholder in accordance
with its terms, except as such enforceability may be limited by (a)
equitable principles of general applicability or (b) bankruptcy,
insolvency, reorganization, fraudulent conveyance or similar laws
affecting the rights of creditors generally. The execution, delivery
and performance of this Agreement by A&J and the Shareholder will not
conflict with or result in a violation or breach of any term or
provision of, nor constitute a default under (i) the Articles of
Incorporation or Bylaws of A&J or (ii) to the extent such conflict,
violation, breach or default could have a material adverse effect on the
business, operations, assets or financial condition of A&J or the
Shareholder, any obligation, indenture, mortgage, deed of trust, lease,
contract or other agreement to which A&J or the Shareholder is a party
or by which A&J or the Shareholder or their respective properties are
bound.
2.1.3 Capitalization of A&J. The authorized capitalization of
A&J consists of 100 shares of A&J Stock, all of which are issued and
outstanding and all of which are held beneficially and of record by the
Shareholder. A&J does not have any outstanding options, warrants, calls
or commitments of any character relating to its capital stock. All
issued and outstanding shares of A&J Stock are validly issued, fully
paid and non-assessable. None of the outstanding shares of A&J Stock is
subject to any voting trust, voting agreement or other
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agreement or understanding with respect to the voting thereof, nor is
any proxy in existence with respect thereto.
2.1.4 Ownership of A&J Shares. The Shareholder holds good and
valid title to all of the A&J Shares free and clear of all Encumbrances.
The Shareholder possesses full authority and legal right to sell,
transfer and assign to Synagro the A&J Shares, free and clear of all
Encumbrances. Upon transfer to Synagro by the Shareholder of the A&J
Shares, Synagro will own the A&J Shares free and clear of all
Encumbrances. There are no claims pending or, to the knowledge of A&J,
and the Shareholder, threatened, against A&J or the Shareholder that
concern or affect title to the A&J Shares, or that seek to compel the
issuance of capital stock or other securities of A&J.
2.1.5 No Subsidiaries. As of the date hereof, A&J has no
subsidiaries, whether wholly or partially owned, and does not own,
beneficially or of record, or have any obligation to acquire, any
material amount of, or have any material investment in, any stock,
partnership or membership interest or other equity or debt securities of
any other business, enterprise or entity.
2.1.6 Financial Statements. The Shareholder has delivered to
Synagro A&J's audited balance sheet and related statements of income,
retained earnings and cash flows, with appended notes which are an
integral part of such statements, as of and for the twelve months ended
December 31, 1997 (the "Audited A&J Financial Statements"), and also has
delivered to Synagro copies of A&J's unaudited balance sheet and related
statements of income, retained earnings and cash flows as of and for the
four-month period ending April 30, 1998 (the "Unaudited A&J Financial
Statements", and, together with the Audited A&J Financial Statements"
the "A&J Financial Statements"). Copies of the A&J Financial Statements
are attached hereto as Schedule 2.1.6. All of the A&J Financial
Statements are complete in all material respects (except, with respect
to the Unaudited A&J Financial Statements, for the omission of notes and
schedules), present fairly the financial condition of A&J as of the
dates indicated, and the results of operations for the respective
periods indicated, and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except as
noted therein and subject, in the case of the Unaudited A&J Financial
Statements, to normal year-end adjustments and other adjustments
described therein; in addition, the Unaudited A&J Financial Statements,
though unaudited, include all adjustments which A&J, the Shareholder and
consider necessary for a fair presentation of A&J's results for that
period. December 31, 1997 may sometimes be hereinafter referred to as
the "Balance Sheet Date".
2.1.7 Liabilities. Except as disclosed on Schedule 2.1.7
hereto, A&J has no pending or, to A&J's and the Shareholder's knowledge,
threatened liabilities or obligations, either accrued, absolute or
contingent, nor does A&J or Shareholder have any knowledge of any
potential liabilities or obligations, which would materially adversely
affect the value and conduct of the business of A&J, other than those
(i) reflected or reserved against in the Unaudited A&J Financial
Statements or (ii) incurred in the ordinary course of business since the
Balance Sheet Date.
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2.1.8 Additional Information. Attached as Schedule 2.1.8 hereto
are true, complete and correct lists of the following items:
2.1.8.1 Real Estate. All real property and
structures thereon (i) owned, or subject to a contract of
purchase and sale, by A&J, with a description of the nature and
amount of any Encumbrances thereon created by A&J or Shareholder,
or (ii) leased, or subject to a lease commitment, by A&J, with a
description of the terms of each lease and lease commitment. The
term "Encumbrances" means all liens, security interests, pledges,
mortgages, deeds of trust, claims, rights of first refusal,
options, charges, restrictions or conditions to transfer or
assignment, liabilities, obligations, privileges, equities,
easements, rights-of-way, limitations, reservations, restrictions
and other encumbrances of any kind or nature;
2.1.8.2 Machinery and Equipment. All machinery,
vehicles, trailers, transportation equipment, tools, equipment,
furnishings, and fixtures (i) owned or subject to a contract of
purchase and sale, by A&J with a description of the nature and
amount of any Encumbrances thereon or (ii) leased, or subject to
a lease commitment, by A&J, with a description of each lease and
lease commitment;
2.1.8.3 Receivables. All accounts and notes
receivable of A&J, together with (i) aging schedules by invoice
date and due date, (ii) the amounts provided for as an allowance
for bad debts, (iii) the identity and location of any asset in
which A&J holds a security interest to secure payment of the
underlying indebtedness, and (iv) a description of the nature and
amount of any Encumbrance on such accounts and notes receivable;
2.1.8.4 Payables. All accounts and notes payable of
A&J, together with an appropriate aging schedule;
2.1.8.5 Insurance. All insurance policies or bonds
currently maintained by A&J, including title insurance policies,
and those covering A&J's properties, machinery, equipment,
fixtures, employees and operations, as well as a listing of any
deductibles, premiums, audit adjustments or retroactive
adjustments due or pending on such policies or any predecessor
policies;
2.1.8.6 Contracts. All sludge contracts, bulking
agent contracts and all other material contracts to which A&J is
a party which are to be performed in whole or in part after the
date hereof;
2.1.8.7 Employee Compensation Plans. All bonus,
incentive compensation, deferred compensation, profit-sharing,
retirement, pension, welfare, group insurance, death benefit, or
other fringe benefit plans, arrangements or trust agreements of
A&J, whether or not subject to ERISA (as hereinafter defined),
together with copies of the most recent reports with respect to
such plans, arrangements, or trust agreements filed with any
governmental agency, and all
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Internal Revenue Service determination letters that have been
received with respect to such plans;
2.1.8.8 Certain Salaries. The names and salary
rates of all present employees of A&J who have salaries in excess
of $25,000, and all arrangements with respect to any bonuses to
be paid to them from and after the date of this Agreement;
2.1.8.9 Bank Accounts. The name of each bank in
which A&J has an account, the account numbers of each account and
the names of all persons authorized to draw thereon;
2.1.8.10 Employee Agreements. Any collective
bargaining agreements of A&J with any labor union or other
representative of employees, including amendments, supplements,
and written or oral understandings, and all employment and
consulting and severance agreements of A&J;
2.1.8.11 Intellectual Property. All patents,
trademarks, copyrights and other intellectual property rights
owned, licensed, or used by A&J;
2.1.8.12 Trade Names. All trade names, assumed names
and fictitious names used or held by A&J, whether and where such
names are registered, and where used;
2.1.8.13 Promissory Notes. All long-term and short-
term promissory notes, installment contracts, loan agreements,
credit agreements, and any other agreements of A&J relating
thereto or with respect to collateral securing the same;
2.1.8.14 Guaranties. All indebtedness, liabilities
and commitments of others and as to which A&J is a , endorser,
co-maker, surety, or accommodation maker, or contingently liable
therefor and all letters of credit, whether stand-by or
documentary, issued by any third party;
2.1.8.15 Leases. All material leases to which A&J is
a party whether as lessor or lessee not previously described on
Schedule 2.1.8.1 or Schedule 2.1.8.2; and
2.1.8.16 Permits. All permits, authorizations,
variances, waivers, exemptions, rights-of-way, franchises,
ordinances, approvals, certifications, licenses, registrations,
orders, decrees and other similar rights applicable to current
operations conducted by A&J (collectively, "Permits") and all
environmental audits, assessments, investigations and reviews
conducted by or on behalf of A&J within the last five years on
any property owned or used by it.
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2.1.9 No Defaults. Except as set forth on Schedule 2.1.9, A&J
is not in default in any material obligation or covenant on its part to
be performed under any obligation, lease, contract, order, plan or other
agreement or arrangement.
2.1.10 Absence of Certain Changes and Events. Other than as a
result of the transactions contemplated by this Agreement, since the
Balance Sheet Date, there has not been:
2.1.10.1 Financial Change. Any material adverse
change in the financial condition, backlog, operations, assets,
liabilities or business of A&J;
2.1.10.2 Property Damage. Any material damage,
destruction, or loss to the business or properties of A&J
(whether or not covered by insurance);
2.1.10.3 Dividends. Except as set forth on Schedule
2.1.10.3, any declaration, setting aside, or payment of any
dividend or other distribution in respect of the A&J Stock, or
any direct or indirect redemption, purchase or any other
acquisition by A&J of any such stock;
2.1.10.4 Capitalization Change. Any change in the
capital stock or in the number of shares or classes of the
authorized or outstanding capital stock of A&J as described in
Section 2.1.3 hereof;
2.1.10.5 Labor Disputes. Except as disclosed on
Schedule 2.1.16, any labor disputes involving A&J; or
2.1.10.6 Other Material Changes. Except as set forth
on Schedule 2.1.10.6, any other event or condition known to A&J
or the Shareholder pertaining to and adversely affecting the
operations, assets or business of A&J which could constitute a
material adverse change in the business, assets or financial
condition of A&J, other than events or conditions which are of a
general or industry wide nature and of general public knowledge,
or which have been disclosed to Synagro in writing.
2.1.11 Taxes.
2.1.11.1 General. All federal, state and local
income, value added, sales, use, franchise, gross revenue,
turnover, excise, payroll, property, employment, customs duties
(collectively, "Taxes") and any and all other tax returns,
reports, and estimates have been filed with appropriate
governmental agencies, domestic and foreign, by A&J for each
period for which any such returns, reports, or estimates were
due; all taxes shown by such returns to be payable and, except as
set forth in Schedule 2.1.11, any and all other taxes due and
payable have been paid other than those being contested in good
faith by A&J; and the tax provisions reflected in the Unaudited
A&J Balance Sheet are adequate, in accordance with generally
accepted
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accounting principles, to cover liabilities of A&J at the date
thereof for all taxes, including any assessed interest, assessed
penalties and additions to taxes of any character whatsoever
applicable to A&J or its assets or business. No waiver of any
statute of limitations executed by A&J with respect to any income
or other tax is in effect for any period. Except as set forth on
Schedule 2.1.11 hereto, the income tax returns of A&J have never
been examined by the Internal Revenue Service or the taxing
authorities of any other jurisdiction. There are no tax liens on
any assets of A&J except for taxes not yet currently due.
2.1.11.2 Subchapter S Matters. A&J (i) made an
effective, valid and binding S election pursuant to Section 1362
of the Code effective February 1, 1987, (ii) has maintained its
status as an S Corporation pursuant to Section 1361 of the Code
without lapse or interruption since the date of said election, and
(iii) made and continuously maintained, since the effective date
of its federal S election, elections similar to the federal S
election in each state or local jurisdiction where A&J does
business or is required to file a tax return to the extent such
states or jurisdictions permit such elections. A&J neither is nor
will or can be subject to the built-in gains tax under Section
1374 of the Code or any similar corporate level tax imposed on A&J
by any taxing authority. A&J (i) has not adopted or used LIFO as
a method of accounting for inventory, and (ii) has no other tax
item, election, agreement or adjustment which will accelerate or
trigger income or deferred deductions of A&J as a result of
termination of A&J's status as an S Corporation.
2.1.12 Intellectual Property. A&J owns or possesses licenses to
use all patents, patent applications, trademarks and service marks
(including registrations and applications therefor), trade names,
copyrights and written know-how, trade secrets and all other similar
proprietary data and the goodwill associated therewith (collectively,
the "Intellectual Property") that are either material to its business or
that are necessary for the rendering of any services rendered by it and
the use or sale of any equipment or products used or sold by it,
including all such Intellectual Property listed in Schedule 2.1.8
hereto. The Intellectual Property so owned or possessed by A&J is owned
or licensed free and clear of any Encumbrance. A&J has not granted to
any other person any license to use any Intellectual Property. A&J has
not received any notice of infringement, misappropriation, or conflict
with, the intellectual property rights of others in connection with the
use by it of the Intellectual Property or otherwise in connection with
the operation of its business.
2.1.13 Title to and Condition of Assets. A&J has good,
indefeasible and marketable title to all its properties, interests in
properties and assets, real and personal, reflected in the Unaudited A&J
Financial Statements or in Schedule 2.1.8 hereto, free and clear of any
Encumbrance, except (i) Encumbrances reflected in Schedule 2.1.8 hereto,
(ii) liens for current taxes not yet due and payable, and (iii) such
imperfections of title, easements and Encumbrances, if any, as are not
substantial in character, amount, or extent and do not and will not
materially detract from the value, or interfere with the present use, of
the property subject thereto or affected thereby, or otherwise
materially impair business operations (the matters described in clauses
(ii) and (iii) collectively, "Permitted Encumbrances"). All leases
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pursuant to which A&J leases (whether as lessee or lessor) any
substantial amount of real or personal property are in good standing,
valid, and effective; and there is not, under any such leases, any
existing default or event of default or, to A&J's and the Shareholder's
knowledge, any event which with notice or lapse of time, or both, would
constitute a default by A&J and in respect to which A&J has not taken
adequate steps to prevent a default from occurring. The buildings and
premises of A&J that are used in its business are in good operating
condition and repair, subject only to ordinary wear and tear. All
equipment, machinery, vehicles, trailers, transportation equipment,
tools and other major items of equipment of A&J are in good operating
condition and in a state of reasonable maintenance and repair, ordinary
wear and tear excepted, and are free from any known defects except as
may be repaired by routine maintenance and such minor defects as will
not substantially interfere with the continued use thereof in the
conduct of normal operations. To A&J's and the Shareholder's knowledge,
all such assets conform in all material respects to all applicable laws
governing their use. Except as set forth in Schedule 2.1.18 hereto, no
notice of any violation of any law, statute, ordinance, or regulation
relating to any such assets has been (or are being) received by A&J or
the Shareholder, except such as have been fully complied with.
2.1.14 Contracts. All material contracts, leases, plans or other
arrangements to which A&J is a party, by which it is bound or to which
A&J or the assets of A&J are subject are in full force and effect and
constitute valid and binding obligations of A&J. A&J is not, and to the
knowledge of A&J and the Shareholder, no other party to any such
contract, lease, plan or other arrangement, is in default of any
material obligation or provision thereunder, and, to A&J's and the
Shareholder's knowledge, no event has occurred which (with or without
notice, lapse of time, or the happening of any other event) would
constitute a material default thereunder. No contract has been entered
into on terms which could reasonably be expected to have a material
adverse effect on A&J. Neither A&J nor the Shareholder has received any
information that would cause A&J or the Shareholder to conclude that any
customer of A&J will (or is likely to) cease doing business with A&J (or
any successors thereto) as a result of the consummation of the
transactions contemplated hereby.
2.1.15 Licenses and Permits. Except as set forth on Schedule
2.1.15, A&J possesses all Permits necessary under law or otherwise for
it to conduct its business as now being conducted and to construct, own,
operate, maintain and use its assets in the manner in which they are now
being constructed, operated, maintained and used. Each of such Permits
and the rights of A&J with respect thereto is (and will be following the
consummation of the transactions contemplated hereby) valid and
subsisting, in full force and effect, and enforceable by A&J subject to
administrative powers of regulatory agencies having jurisdiction.
Except as set forth in Schedule 2.1.15 hereto, A&J is in compliance in
all material respects with the terms of such Permits and there is no
pending, or to A&J's and the Shareholder's knowledge, threatened claim
that A&J is not in compliance with any Permit. Except as set forth in
Schedule 2.1.15 hereto, none of such Permits have been, or to the
knowledge of A&J and the Shareholder, are threatened to be, revoked,
canceled, suspended or modified.
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2.1.16 Litigation. Except as set forth on Schedule 2.1.16
hereto, there is no suit, action, or legal, administrative, arbitration,
or other proceeding or governmental investigation pending to which A&J
is a party or, to the knowledge of A&J and the Shareholder, might become
a party or which particularly affect A&J. Neither A&J nor the
Shareholder has received notice of any pending change in the zoning or
building ordinances directly affecting the real property or leasehold
interests of A&J, nor, to the knowledge of A&J and the Shareholder, is
any such change threatened.
2.1.17 Environmental Compliance.
2.1.17.1 Environmental Conditions. Except as set
forth in Schedule 2.1.17 hereto, to the best knowledge of A&J and
the Shareholder, there are no environmental conditions or
circumstances, including, without limitation, the presence or
release of any hazardous substance, on any property presently or
previously owned by A&J, or on any property to which hazardous
substances or waste generated by the operations of A&J or by the
use of the assets of A&J were disposed of. The term "hazardous
substance" means (i) asbestos, polychlorinated biphenyls, urea
formaldehyde, lead based paint, radon gas, petroleum, oil, solid
waste, pollutants and contaminants, and (ii) any chemicals,
materials, wastes or substances that are defined, regulated,
determined or identified as toxic or hazardous in any Applicable
Environmental Laws (as hereinafter defined), including, but not
limited to, substances defined as "hazardous substances,"
"hazardous materials," or "hazardous waste" in CERCLA, RCRA, HMTA
(as such terms are hereinafter defined), or comparable state and
local statutes or in the regulations adopted and promulgated
pursuant to said statutes;
2.1.17.2 Permits, etc. Except as set forth in
Schedule 2.1.17 hereto, to the best knowledge of A&J and the
Shareholder, A&J has in full force and effect all environmental
permits, licenses, approvals and other authorizations required to
conduct its operations, other than those that are not material to
its business or operations, and is operating in substantial
compliance thereunder;
2.1.17.3 Compliance. To the best knowledge of A&J
and the Shareholder, except as set forth on Schedule 2.1.17
hereto, neither the operations of A&J nor the use of the assets
of A&J violate in any respect any applicable federal, state or
local law, statute, ordinance, rule, regulation, order or notice
requirement pertaining to (a) the condition or protection of air,
groundwater, surface water, soil, or other environmental media,
(b) the environment, including natural resources or any activity
which affects the environment, or (c) the regulation of any
pollutants, contaminants, waste, or substances (whether or not
hazardous or toxic), including, without limitation, the
Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 et seq.)
("HMTA"), the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.) ("RCRA"), the Clean Water Act (33 U.S.C.
1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et
seq.), the
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Toxic Substances Control Act (17 U.S.C. Section 2601 et seq.),
the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
Section 136 et seq.), the Safe Drinking Water Act (42 U.S.C.
Section 201 and Section 300f et seq.), the Rivers and Harbors Act
(33 U.S.C. Section 401 et seq.), the Oil Pollution Act (33 U.S.C.
Section 2701 et seq.) and analogous federal, interstate, state
and local requirements, as any of the foregoing may have been
amended or supplemented from time to time (collectively, the
"Applicable Environmental Laws"), other than violations that in
the aggregate are not material to the business or operations of
A&J;
2.1.17.4 Past Compliance. To the best knowledge of
A&J and the Shareholder, except as set forth in Schedule 2.1.17
hereto, none of the operations or assets of A&J has ever been
conducted or used in such a manner as to constitute a violation
of any of the Applicable Environmental Laws, other than
violations that in the aggregate are not material to the business
or operations of A&J;
2.1.17.5 Environmental Claims. Except as set forth
in Schedule 2.1.17 hereto, no notice has been served on A&J or
the Shareholder from any entity, governmental agency or
individual regarding any existing, pending or threatened
investigation, inquiry, enforcement action or litigation related
to alleged violations under any Applicable Environmental Laws, or
regarding any claims for remedial obligations, response costs or
contribution under any Applicable Environmental Laws;
2.1.17.6 Renewals. Except as set forth on Schedule
2.1.17 hereto, neither A&J nor the Shareholder knows of any
reason A&J or its successors would not be able to renew any of
the permits, licenses, or other authorizations required pursuant
to any of the Applicable Environmental Laws to operate and use
any of assets of A&J for their current purposes and uses; and
2.1.17.7 Asbestos and PCBs. Except as set forth on
Schedule 2.1.17 hereto, to the best knowledge of A&J and the
Shareholder, no material amounts of friable asbestos currently
exist on any property owned or operated by A&J, nor do
polychlorinated biphenyls exist in concentrations of 50 parts per
million or more in electrical equipment owned or being used by
A&J in the operations or on the properties of A&J.
2.1.18 Compliance with Other Laws. Except as set forth on
Schedule 2.1.18, A&J is not in violation of or in default with respect
to, or in alleged violation of or alleged default with respect to, the
Occupational Safety and Health Act (29 U.S.C. Sections 651 et seq.), as
amended, or any other applicable law or any applicable rule, regulation,
or any writ or decree of any court or any governmental commission,
board, bureau, agency, or instrumentality, or delinquent with respect to
any report required to be filed with any governmental commission, board,
bureau, agency or instrumentality, other than such violations, defaults
or delinquencies that in the aggregate are not material to the business
or operations of A&J.
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2.1.19 ERISA Plans or Labor Issues. Schedule 2.1.8 sets forth a
brief description all Employee Compensation Plans which A&J maintains,
to which A&J contributes or has an obligation to contribute, or with
respect to which A&J has any liability or reasonable expectation of
liability (all such plans, policies, programs and arrangements
individually, a "Plan" and collectively, "Plans") as of the Effective
Date. Except as set forth in Schedule 2.1.8, A&J does not maintain any
Plans. For purposes of this Section 2.1.19, all references to A&J shall
be deemed to refer to A&J and any trade or business, whether or not
incorporated, which together with A&J would be deemed or treated as a
"single employer" within the meaning of Section 414 of the Code or ERISA
Section 4001. None of the Plans (i) is an "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), (ii) is subject to Title IV
of ERISA or the minimum funding requirements of Section 412 of the Code
or Section 302 of ERISA, (iii) is a plan of the type described in
Section 4063 of ERISA or Section 413(c) of the Code, (iv) is a
"multiemployer plan" (as defined in Section 3(37) of ERISA), (v)
provides for medical, dental, life, disability or other insurance
benefits to current or future retired employees or former employees of
A&J (other than as required for group health plan continuation coverage
under Code Section 4980B or similar state law), (vi) obligates A&J to
pay any severance or similar benefits solely as a result of a change in
control or ownership within the meaning of Code Section 280G, or (vii)
is a "voluntary employees' beneficiary association" within the meaning
of Code Section 501(c)(9). Each Plan is, in all material respects, in
compliance, and has been administered, maintained and funded in all
material respects in accordance, with the applicable provisions of ERISA
and the Code and all other applicable laws, rules and regulations. To
the best knowledge of A&J and the Shareholder, neither A&J nor any
fiduciary to any Plan, with respect to any Plan, has (i) engaged in any
prohibited transaction under ERISA or the Code; (ii) breached any
fiduciary duty owed by it; or (iii) failed to file and distribute,
timely and properly, all reports and information required to be filed or
distributed in accordance with ERISA or the Code. There are no pending
or threatened, actions, suits, investigations, arbitrations or claims
with respect to any Plan (other than routine claims for benefits) which
could reasonably be expected to result in material liability to A&J, and
there are no changes in contributions or benefit levels that have been
implemented, or negotiated and not yet been implemented, with respect to
any Plan that have not been disclosed in Schedule 2.1.8. All
contributions or premiums which are due on or before the Effective Date
with respect to the Plans have been or will be timely paid by A&J. None
of the Plans requires A&J to make any bonus, severance or other payment
to or on behalf of any current or former employee, officer or director
of A&J solely by reason of the change of ownership or control
contemplated by this Agreement. Each Plan may be amended or terminated
after the Effective Date without contravening the terms of such Plan or
any applicable laws and without material liability to the adopting
employer. With respect to each Plan, A&J has provided Synagro with true,
complete and correct copies, to the extent applicable, of (i) all
documents pursuant to which the Plans are maintained, funded and
administered, (ii) the most recent annual report (Form 5500 series)
filed with the Internal Revenue Service (with attachments including,
without limitation, audited financial statements), and (iii) all
rulings, determinations, notices and opinions issued by any governmental
entity in the last three years (and pending requests for governmental
rulings, determinations, and opinions). A&J has not engaged in any
unfair labor practices which
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could reasonably be expected to result in a material adverse effect on
the operations or assets of A&J. Except as described in Schedule
2.1.16 hereto, A&J has no dispute with any of the existing or former
employees of A&J. There are no labor or employment disputes affecting
A&J or, to the knowledge of A&J and the Shareholder, any disputes
threatened by current or former employees of A&J. There will not be any
penalty for the termination of any Plan listed on Schedule 2.1.8 or any
other item listed in Section 2.1.8.7.
2.1.20 Investigations; Litigation. Except as set forth in
Schedule 2.1.20 hereto, neither A&J nor the Shareholder has received
notice of any investigation or review by any governmental entity with
respect to A&J or any of the transactions contemplated by this Agreement
nor, to the knowledge of A&J and the Shareholder, is any such
investigation or review threatened, nor has any governmental entity
indicated to A&J an intention to conduct the same, and there is no
action, suit or proceeding pending or, to the knowledge of A&J and the
Shareholder, threatened against or affecting A&J at law or in equity, or
before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, that either
individually or in the aggregate, has or is likely to result in a
material adverse change in the financial condition, properties or
business of A&J.
2.1.21 Absence of Certain Business Practices. Neither A&J, the
Shareholder nor any officer or director of A&J, nor, to the knowledge of
A&J and the Shareholder, any employee or agent of A&J or any other
person acting on behalf of A&J or the Shareholder, has, directly or
indirectly, within the past five years, given or agreed to give any gift
or similar benefit to any customer, supplier, government employee or
other person who is or may be in a position to help or hinder the
business of A&J (or to assist A&J in connection with any actual or
proposed transaction) which (i) might subject A&J to any damage or
penalty in any civil, criminal or governmental litigation or proceeding,
(ii) if not given in the past, might have had a material adverse effect
on the assets, business or operations of A&J, or (iii) if not continued
in the future, might materially and adversely affect the assets,
business operations or prospects of A&J or which might result in
liability to A&J in a private or governmental litigation or proceeding.
2.1.22 Consents and Approvals. No consent, approval or
authorization of, or filing or registration with, any governmental or
regulatory authority, or any other person or entity other than the
Shareholder, is required to be made or obtained by A&J in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby except for the
consents, approvals or authorizations listed on Schedule 2.1.22 hereto
(which were obtained on or before the date hereof) or that could not
have a material adverse effect on the business, operations, assets or
financial condition of the Shareholder or A&J.
2.1.23 Finder's Fee. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by A&J and
the Shareholder and their counsel directly with Synagro and its counsel,
without the intervention of any other person as the result of any act of
A&J or the Shareholder in such manner as to give rise to any valid
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claim against Synagro, Sub Corp or A&J for a brokerage commission,
finder's fee or any similar payments.
2.2 Investment Representations. Each of A&J and the Shareholder
acknowledges, represents and agrees that:
2.2.1 Shareholder Investment Suitability and Related Matters.
(i) Synagro has made available to A&J and the Shareholder the
information and documents described in Section 3.4. hereof, (ii) the
Shareholder understands the risks associated with ownership of Synagro
Common Stock, and (iii) the Shareholder is capable of bearing the
financial risks associated with such ownership;
2.2.2 Synagro Shares Not Registered. Except for the Registered
Synagro Shares (as hereinafter defined), the Synagro Shares have not
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or registered or qualified under any applicable state
securities laws (the Synagro Shares not constituting Registered Synagro
Shares are herein referred to as the "Unregistered Synagro Shares");
2.2.3 Reliance on Representations. The Unregistered Synagro
Shares are being issued to the Shareholder in reliance upon exemptions
from such registration or qualification requirements, and the
availability of such exemptions depends in part upon the Shareholder's
bona fide investment intent with respect to the Synagro Shares;
2.2.4 Investment Intent. The Shareholder's acquisition of the
Unregistered Synagro Shares is solely for its own account for
investment, and the Shareholder is not acquiring the Unregistered
Synagro Shares for the account of any other person or with a view toward
resale, assignment, fractionalization, or distribution thereof;
2.2.5 Permitted Resale. The Shareholder shall not offer for
sale, sell, transfer, pledge, hypothecate or otherwise dispose of any of
the Unregistered Synagro Shares except in accordance with the
registration requirements of the Securities Act and applicable state
securities laws or upon delivery to Synagro of an opinion of legal
counsel reasonably satisfactory to Synagro that an exemption from
registration is available or pursuant to an effective registration
statement covering the Synagro Shares to be sold;
2.2.6 Investor Sophistication. The Shareholder has such
knowledge and experience in financial and business matters that he and
it are capable of evaluating the merits and risks of an investment in
the Synagro Shares, and to make an informed investment decision with
respect thereto;
2.2.7 Availability of Information. The Shareholder has had the
opportunity to ask questions of, and receive answers from Synagro's
officers and directors concerning the Shareholder's acquisition of the
Synagro Shares and to obtain such other information concerning Synagro
and the Synagro Shares, to the extent Synagro's officers and directors
possessed the same or could acquire it without unreasonable effort or
expense, as the
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Shareholder deemed necessary in connection with making an informed
investment decision; and
2.2.8 Restrictive Legends. In addition to any other legends
required by law or the other agreements entered into in connection
herewith, each certificate evidencing the Unregistered Synagro Shares
will bear a conspicuous restrictive legend substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED EXCEPT
IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE ACT AND
SUCH OTHER STATE LAWS OR UPON DELIVERY TO THIS CORPORATION OF AN
OPINION OF LEGAL COUNSEL SATISFACTORY TO THE CORPORATION THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SYNAGRO
Synagro represents and warrants to A&J and the Shareholder as follows:
3.1 Organization and Standing. Synagro is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has full requisite corporate power and authority to carry on its
business as it is currently conducted, and to own and operate the properties
currently owned and operated by it, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties owned or
the nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not have a material adverse effect on its financial condition, properties
or business. Sub Corp is, or on the Effective Date will be, a corporation duly
organized, validly existing and in good standing under the laws of the State of
Wisconsin.
3.2 Agreement Authorized and its Effect on Other Obligations. The
execution, delivery and performance of this Agreement have been duly and
validly authorized by all necessary corporate action on the part of Synagro and
Sub Corp, and this Agreement is a valid and binding obligation of Synagro and
Sub Corp enforceable against Synagro in accordance with its terms, except as
such enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally. The
execution, delivery and performance of this Agreement by Synagro will not
conflict with or result in a violation or breach of any term or provision of,
or constitute a default under (i) the Certificate of Incorporation or Bylaws of
Synagro or Sub Corp or (ii) any obligation, indenture,
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mortgage, deed of trust, lease, contract or other agreement to which Synagro or
Sub Corp or any of their respective properties are bound.
3.3 Capitalization. The capitalization of Synagro consists of (i)
10,000,000 shares of preferred stock, par value $.002 per share, of which
500,000 shares have been designated as "Preferred Stock - Junior Participating
Series A" and reserved for issuance upon exercise of Rights evidenced by the
certificates representing all outstanding shares of Synagro Common Stock, but
no such shares are issued or outstanding; and (ii) 100,000,000 shares of
Synagro Common Stock, of which as of June 6, 1998, 9,082, 638 shares were
issued and outstanding, 2,261,031 shares were reserved for issuance pursuant to
stock options and 600,000 shares were reserved for issuance pursuant to
outstanding warrants. Except as set forth in this Section 3.3., there are
outstanding as of the date hereof (i) no securities of Synagro or any other
person convertible into or exchangeable or exercisable for shares of capital
stock or other voting securities of Synagro, and (ii) no subscriptions,
options, warrants, calls, or rights obligating Synagro to issue, deliver, sell,
purchase, redeem or acquire shares of capital stock or other voting securities
of Synagro except as a result of letters of intent or other agreements relating
to acquisitions by Synagro. All of the outstanding Synagro Common Stock is,
and, when issued, the Synagro Shares will be, validly issued, fully paid and
nonassessable and not subject to any preemptive right. There is no stockholder
agreement, voting trust, or other agreement or understanding to which Synagro
is a party or by which it is bound relating to the voting of any shares of
capital stock of Synagro.
3.4 Reports and Financial Statements. Synagro has previously
furnished to the Shareholder true and complete copies of (i) Synagro's annual
report filed with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), for Synagro's fiscal year ended December 31, 1997; (ii) Synagro's
quarterly and other reports filed with the Commission since December 31, 1997;
(iii) all definitive proxy solicitation materials filed with the Commission
since December 31, 1997; and (iv) any registration statements (other than those
relating to employee benefit plans) declared effective by the Commission since
December 31, 1997. All of the foregoing items are listed on Schedule 3.4
hereto (collectively, the "Synagro SEC Documents"). The consolidated financial
statements of Synagro and its consolidated subsidiaries included in Synagro's
most recent report on Form 10-K and most recent report on Form 10-Q were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved and fairly present the
consolidated financial position of Synagro and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and
changes in financial position for the periods then ended; and the Synagro SEC
Documents did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were,
made not misleading. Since December 31, 1997, Synagro has filed with the
Commission all material reports, registration statements and other material
filings required to be filed with the Commission under the rules and
regulations of the Commission.
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3.5 Absence of Certain Changes and Events in Synagro. Since March
31, 1998, there has not been:
3.5.1 Financial Change. Any material adverse change in the
financial condition, backlog, operations, assets, liabilities or
business of Synagro; or
3.5.2 Other Material Changes. Any other event or condition
known to Synagro particularly pertaining to and adversely affecting the
operations, assets or business of Synagro which could constitute a
material adverse change in the business, assets or financial condition
of Synagro, other than events or conditions which are of a general or
industry-wide nature and of general public knowledge, or which have been
disclosed to the Shareholder in writing.
3.6 Synagro's Compliance with Other Laws. Synagro is not in
violation of or in default with respect to any applicable law, rule or
regulation, or any writ or decree of any court or any governmental commission,
board, bureau, agency, or instrumentality, or delinquent with respect to any
report required to be filed with any governmental commission, board, bureau,
agency or instrumentality which could have a material adverse effect upon its
financial condition, properties or business.
3.7 Consents and Approvals. Except for the filing of the
Registration Statement (as hereinafter defined) pursuant to Section 6.3.1
hereof, no consent, approval or authorization of, or filing of a registration
with, any governmental or regulatory authority, or any other person or entity
is required to be made or obtained by Synagro in connection with the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
3.8 Investigations; Litigation. No investigation or review by any
governmental entity with respect to Synagro in connection with any of the
transactions contemplated by this Agreement is pending or, to the best of
Synagro's knowledge, threatened, nor has any governmental entity indicated to
Synagro an intention to conduct the same. There is no action, suit or
proceeding pending or, to the best of Synagro's knowledge, threatened against
or affecting Synagro by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, which either
individually or in the aggregate, has or is likely to result in any material
adverse change in the financial condition, properties or businesses of Synagro.
3.9 Finder's Fee. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on by Synagro and its
counsel directly with A&J and the Shareholder and their counsel, without the
intervention by any other person as the result of any act of Synagro in such a
manner as to give rise to any valid claim against the Shareholder or A&J for
any brokerage commission, finder's fee or any similar payments.
3.10 Nasdaq Compliance. Synagro meets all current requirements for
listing on the Nasdaq Small-Cap Market and has not received any notice, whether
written or oral, from the National Association of Securities Dealers, Inc.
suggesting that its listing is not in good standing.
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ARTICLE 4
OBLIGATIONS PENDING CLOSING DATE
4.1 Agreements of Synagro and A&J. Except as expressly contemplated
elsewhere in this Agreement, each of Synagro and A&J agree that since April 30,
1998, it has:
4.1.1 Maintenance of Present Business. Operated its business
only in the usual, regular, and ordinary manner so as to maintain the
goodwill it now enjoys and, to the extent consistent with such
operation, used all reasonable efforts to preserve intact its present
business organization, keep available the services of its present
officers and employees, and preserve its relationships with customers,
suppliers, jobbers, distributors, and others having business dealings
with it;
4.1.2 Maintenance of Properties. At its expense, maintained all
of its property and assets in customary repair, order, and condition,
reasonable wear and tear excepted;
4.1.3 Maintenance of Books and Records. Maintained its books of
account and records in the usual, regular, and ordinary manner, in
accordance with generally accepted accounting principles applied on a
consistent basis;
4.1.4 Compliance with Law. Duly complied in all material
respects with all laws, rules, regulations and orders, and fully
complied with all Permits, applicable to it and to the conduct of its
business;
4.1.5 Inspection. Permitted Synagro and its authorized
representatives, during normal business hours, to inspect its records
and to consult with its officers, employees, attorneys, and agents for
the purpose of determining the accuracy of the representations and
warranties herein made and the compliance with covenants contained in
this Agreement; and
4.1.6 Notice of Material Developments. Promptly notified the
other party hereto in writing of any "material adverse change" in, or
any changes which, in the aggregate, could result in a "material adverse
change" in, the consolidated financial condition, business or affairs of
A&J, whether or not occurring in the ordinary course of business. As
used in this Agreement, the term "material adverse change" means any
change, event, circumstance or condition (collectively, a "Change")
which when considered with all other Changes would reasonably be
expected to result in a "loss" having the effect of so fundamentally
adversely affecting the business or financial prospects of A&J or
Synagro, as applicable, that the benefits reasonably expected to be
obtained by Synagro, with respect to losses by A&J, and the Shareholder,
with respect to losses by Synagro, as a result of the consummation of
the transactions contemplated by this Agreement would be jeopardized
with relative certainty. The term "loss" shall mean any and all direct
or indirect payments, obligations, assessments, losses, loss of income,
liabilities, fines, penalties, costs and expenses paid or incurred or
more likely than not to be paid or incurred, or diminutions in value of
any kind or character (whether known or unknown, conditional or
unconditional, xxxxxx or inchoate, liquidated or unliquidated, secured
or unsecured, accrued, absolute, contingent or otherwise) that are more
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likely than not to occur, including without limitation penalties,
interest on any amount payable to a third party as a result of the
foregoing and any legal or other expenses reasonably incurred or more
likely than not to be incurred in connection with investigating or
defending any demands, claims, actions or causes of action that, if
adversely determined, would likely result in losses, and all amounts
paid in settlement of claims or actions; provided, that losses shall be
net of any recoveries by A&J or Synagro, as applicable, from third
parties and any insurance proceeds A&J or Synagro, as applicable, is
entitled to receive from a nonaffiliated insurance company on account of
such losses (after taking into account any costs incurred in obtaining
such proceeds and any increase in insurance premiums as a result of a
claim with respect to such proceeds). The parties agree, however, that
a reduction in the trading price of Synagro Common Stock on the Nasdaq
Small-Cap Market shall not, in and of itself, constitute a material
adverse change.
4.2 Additional Agreements of A&J and the Shareholder. Except as
expressly contemplated elsewhere in this Agreement, A&J and the Shareholder
agree that since the Balance Sheet Date, A&J has not:
4.2.1 Prohibition of Certain Employment Contracts. Entered into
any contracts of employment which cannot be terminated on notice of 30
days or less or which provide for any severance payments or benefits
covering a period beyond the earlier of the termination date or notice
thereof;
4.2.2 Prohibition of Certain Loans. Incurred any borrowings
which would exceed $25,000, in the aggregate, for any purpose except (i)
the refunding of indebtedness now outstanding, (ii) the prepayment by
customers of amounts due or to become due for services rendered or to be
rendered in the future, or (iii) as is otherwise approved in writing by
Synagro;
4.2.3 Prohibition of Certain Commitments. Entered into
commitments of a capital expenditure nature or incur any contingent
liabilities which would exceed $10,000 in the aggregate except (i) as
may be necessary for the maintenance of existing facilities, machinery
and equipment in good operating condition and repair in the ordinary
course of business, or (ii) as is otherwise approved in writing by
Synagro;
4.2.4 Disposal of Assets. Sold, disposed of, or encumbered, any
property or assets, except (i) in the usual and ordinary course of
business, (ii) property or assets which individually have a value of
less than $1,000; or (iii) as may be approved in writing by Synagro;
4.2.5 Maintenance of Insurance. Discontinued its current level
of insurance;
4.2.6 Acquisition Proposals. Directly or indirectly (i)
solicited, initiated or encouraged any inquiry or Acquisition Proposal
(as hereinafter defined) from any person or (ii) participated in any
discussions or negotiations regarding, or furnish to any person other
than Synagro or its representatives any information with respect to, or
otherwise facilitate
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or encourage any Acquisition Proposal by any other person. As used
herein "Acquisition Proposal" means any proposal for a merger,
consolidation or other business combination involving A&J or for the
acquisition or purchase of any equity interest in, or a material portion
of the assets of, A&J, other than the transactions with Synagro
contemplated by this Agreement. A&J shall promptly communicate to
Synagro the terms of any such written Acquisition Proposals which it may
receive or any written inquiries made to it or any of its directors,
officers, representatives or agents;
4.2.7 No Amendment to Articles of Incorporation. Amended its
Articles of Incorporation or merged or consolidated with or into any
other corporation or changed in any manner the rights of its common
stock or the character of its business;
4.2.8 No Issuance, Sale, or Purchase of Securities. Issued or
sold, or issued options or rights to subscribe to, or entered into any
contract or commitment to issue or sell (upon conversion or otherwise),
any shares of A&J Stock, or subdivided or in any way reclassified any
shares of A&J Stock, or acquired, or agreed to acquire, any shares of
A&J Stock; and
4.2.9 Prohibition on Dividends. Declared or paid any dividend
on shares of A&J Stock or made any other distribution of assets to the
holders thereof.
4.3 Agreements of Synagro. Synagro agrees that since March 31, 1998
it has not:
4.3.1 No Amendment to Articles of Incorporation. Amended its
Certificate of Incorporation or merged with or into any other
corporation or changed in any manner the rights of the Synagro Shares;
and
4.3.2 Notice of Material Developments. Promptly furnished to
the Shareholder copies of all Synagro's communications to its
stockholders and all reports filed by it with the Commission and the
National Association of Securities Dealers, Inc. and relating to
periodic or other material developments concerning Synagro's financial
condition, business, or affairs.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1 Conditions Precedent to Obligations of A&J and the Shareholder.
The obligations of A&J and the Shareholder to consummate and effect the
transactions contemplated hereunder shall be subject to the satisfaction of the
following conditions, or to the waiver thereof by the Shareholder, on behalf of
himself and A&J, on or before the Effective Date:
5.1.1 Representations and Warranties of Synagro True at
Effective Date. The representations and warranties of Synagro herein
contained shall be, in all material
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respects, true as of and at the Effective Date, except as affected by
transactions permitted or contemplated by this Agreement; Synagro shall
have performed and complied, in all material respects, with all
covenants required by this Agreement to be performed or complied with by
Synagro before the Effective Date; and Synagro shall have delivered to
the Shareholder a certificate, dated the Effective Date and signed by
its president or a vice president and its secretary, to such effect.
5.1.2 No Material Litigation. No suit, action, or other
proceeding shall be pending, or to Synagro's knowledge, threatened,
before any court or governmental agency in which it will be, or it is,
sought to restrain or prohibit or to obtain damages or provide other
relief in connection with this Agreement or the consummation of the
transactions contemplated hereby or which might result in a material
adverse change in the value of the consolidated assets and business of
Synagro.
5.1.3 Closing Documents. Synagro shall have executed and
delivered to the appropriate parties the documents and instruments to be
executed and delivered by it pursuant to Section 1.11 hereof, the
Exchange shall have occurred, and the Shareholder shall have received
the opinion required by Section 1.11.1 hereof.
5.1.4 Consent of Certain Parties in Privity With Synagro. The
holders of any material indebtedness of Synagro, the lessors of any
material property leased by Synagro, and the other parties to any other
material agreements to which Synagro is a party shall, when and to the
extent necessary in the reasonable opinion of the Shareholder, have
consented to the transactions contemplated hereby.
5.1.5 Other Merger Agreements. The Other Merger Agreements (as
hereinafter defined), and all documents and instruments contemplated
thereby, shall have been duly executed and delivered, and the
transactions contemplated by the Other Merger Agreements shall have been
consummated. As used herein, the "Other Merger Agreements" shall mean
(i) that certain Plan and Agreement of Merger, of even date herewith,
among Synagro, Synagro Sub Corp. Michigan, Inc. ("Synagro Michigan"),
Michigan Organic Resources, Inc. ("MORI"), Xxxxxxxx, and the Shareholder
regarding the merger of Synagro Michigan with and into MORI; and (ii)
that certain Plan and Agreement of Merger, of even date herewith, among
Synagro, Synagro Sub Florida, Inc. ("Synagro Florida"), A&J Cartage,
Inc. Southeast ("A&J Florida"), Xxxxxxx and the Shareholder regarding
the merger of Synagro Florida with and into A&J Florida.
5.2 Conditions Precedent to Obligations of Synagro. The obligation
of Synagro to consummate and effect the transactions contemplated hereunder
shall be subject to the satisfaction of the following conditions, or to the
waiver thereof by Synagro, on or before the Effective Date.
5.2.1 Representations and Warranties of A&J and the Shareholder
True at Effective Date. The representations and warranties of A&J and
the Shareholder herein contained shall be, in all material respects,
true as of and at the Effective Date, except as affected by transactions
permitted or contemplated by this Agreement; A&J and the Shareholder
shall have performed and complied in all material respects, with all
covenants required by this Agreement to be performed or complied with by
them before the Effective
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Date; and A&J and the Shareholder shall have delivered to Synagro a
certificate, dated the Effective Date and signed by an executive officer
of A&J and by the Shareholder to such effect.
5.2.2 No Material Litigation. No suit, action, or other
proceeding shall be pending, or to the Shareholder's knowledge,
threatened, before any court or governmental agency in which it will be,
or it is, sought to restrain or prohibit or to obtain damages or other
relief in connection with this Agreement or the consummation of the
transactions contemplated hereby or which might result in a material
adverse change in the value of the assets and business of A&J.
5.2.3 Closing Documents. The Shareholder and A&J shall have
executed and delivered to the appropriate parties the documents and
instruments to be executed and delivered by them pursuant to Section
1.11 hereof, the Exchange shall have occurred and Synagro shall have
received the opinion required by Section 1.11.2 hereof.
5.2.4 Consent of Certain Parties in Privity with A&J or the
Shareholder. The holders of any material indebtedness of A&J or the
Shareholder, the lessors of any material property leased by A&J or the
Shareholder, the other parties to any other material agreements to which
A&J or the Shareholder are a party and the appropriate authority issuing
any Permits shall, when and to the extent necessary in the reasonable
opinion of Synagro, have consented to the transaction contemplated
hereby.
5.2.5 Other Merger Agreements. The Other Merger Agreements, and
all documents and instruments contemplated thereby, shall have been duly
executed and delivered, and the transactions contemplated by the Other
Merger Agreements shall have been consummated.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Further Assurances. From time to time, as and when requested by
any party hereto, any other party hereto shall execute and deliver, or cause to
be executed and delivered, such documents and instruments and shall take, or
cause to be taken, such further or other actions as may be reasonably necessary
to effect the transactions contemplated hereby.
6.2 Payment of Taxes. The Shareholder agrees to pay timely all Taxes
assessed or assessable against him or A&J arising out of or in any way related
to the ownership, business or operations of A&J through the end of the
Effective Date, including, without limitation, any Taxes resulting from the
consummation of the transactions contemplated hereby, except to the extent the
Shareholder is contesting any portion of such taxes in good faith and have made
appropriate reserves for the payment thereof.
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6.3 Registration Matters.
6.3.1 Agreement to Register Resales. Synagro agrees that within
90 days following the Effective Date, it will file with the Commission
on Form S-3, a shelf registration statement pursuant to Rule 415 of the
Securities Act (the "Registration Statement") covering the resale by the
Shareholder of 200,000 of the Synagro Shares (the "Registered Synagro
Shares"), and will use its best efforts to cause the same to be declared
effective promptly by the Commission. Synagro agrees to maintain such
Registration Statement in effect for the maximum period allowable under
the regulations promulgated by the Commission, and in any event to
maintain the same (or, to the extent necessary, successive registration
statements) through at least December 31, 2001. In any offering
pursuant to this Section 6.3.1, Synagro will use its best efforts to
effect any such registration and use its best efforts to effect such
qualification and compliance as may be required and as would permit or
facilitate the resale of the Registered Shares, including, without
limitation, registration under the Securities Act, appropriate
qualifications under applicable blue-sky or other state securities laws
and, appropriate compliance with any other governmental requirements.
6.3.2 Procedures. With respect to sales by the Shareholder of
Registered Synagro Shares through the Nasdaq Market System or any such
other exchange, the Shareholder may only sell such shares on any day
after the first sale of Synagro Stock has occurred through the Nasdaq
Market System or such other exchange on such day and thereafter the
Shareholder may only sell 1,000 Registered Synagro Shares for each 1,000
shares of Synagro Stock sold by unrelated third parties through the
Nasdaq Market System or such other exchange on such day. In no event
shall the plan of distribution of Registered Synagro Shares include the
use of a contractual underwriter, nor shall Synagro have any obligation
to enter into an underwriting agreement with any investment banking firm
participating as a broker in the execution of any such resales. Synagro
agrees that it will furnish to the Shareholder such number of
prospectuses, prospectus supplements, or other documents incident to any
registration, qualification or compliance referred to herein as the
Shareholder from time to time may reasonably request.
6.3.3 Registration Expenses. All expenses (except for
commissions and any legal fees for the Shareholder's counsel) of
registration of the Registered Synagro Shares effected pursuant to this
Section 6.3 (including, but not limited to, the expenses of any
qualifications under the blue-sky or other state securities laws and
compliance with governmental requirements of preparing and filing any
post-effective amendments or prospectus supplements required for the
lawful distribution of the Registered Synagro Shares to the public in
connection with such registration) will be paid by Synagro.
6.3.4 Preparation; Reasonable Investigation. In connection with
the preparation and filing of the Registration Statement under the
Securities Act pursuant to this Section 6.3, Synagro will give the
Shareholder (and any single counsel designated by the Shareholder), the
opportunity to participate in the preparation of the Registration
Statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or
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supplement thereto, and will give each of them such access to its books
and records and such opportunities to discuss the business of Synagro
with its officers and the independent public accountants who have
certified its financial statements as shall be necessary to conduct a
reasonable investigation within the meaning of the Securities Act.
6.3.5 Rights Non-Transferable. The registration rights provided
by this Section 6.3 are for the benefit solely of the Shareholder, are
personal in nature, and shall not be available to any subsequent holder
of the Registered Synagro Shares (other than subsequent holders who have
become such by gift or other transfer by the Shareholder to an immediate
family member of the Shareholder, by will or through operation of the
laws of descent and distribution).
6.3.6 Indemnification by Synagro. Synagro agrees to indemnify
and hold harmless the Shareholder against any and all claims, demands,
losses, costs, expenses, obligations, liabilities, joint or several,
damages, recoveries and deficiencies, including interest, penalties and
attorneys' fees (collectively, "Claims"), to which the Shareholder may
become subject under the Securities Act or otherwise, insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and Synagro will reimburse the Shareholder for
any legal or any other expenses reasonably incurred by him in connection
with investigating or defending any such Claim (or action or proceeding
in respect thereof); provided that Synagro shall not be liable in any
such case to the extent that any such Claim (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to
Synagro through an instrument duly executed by the Shareholder or A&J
specifically stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Shareholder and shall survive
any transfer of Registered Synagro Shares by the Shareholder.
6.3.7 Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
proceeding involving a Claim referred to in this Section 6.3, such
indemnified party will, if a claim in respect thereof is to be made
against Synagro, give written notice to Synagro, in the manner and to
the address specified in Section 8.4 hereof, of the commencement of such
action, provided that the failure of any indemnified party to give
notice as provided herein shall not relieve Synagro of its obligations
under this Section 6.3, except the extent that Synagro is actually
prejudiced by such failure to give notice. In case any such action is
brought against Synagro, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such Claim, Synagro shall
be
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entitled to participate in and to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party, and after
notice from Synagro to such indemnified party of its election so to
assume the defense thereof, Synagro shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof other than
reasonable costs of investigation. Synagro shall not, without the
consent of the indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified
party of a release from all liability in respect to such Claim.
6.3.8 Undertaking to File Reports and Cooperate in Rule 144 and
Rule 145 Transactions. For as long as the Shareholder is subject to
Rule 144 or Rule 145 of the Securities Act and continues to hold any
Synagro Shares, Synagro will use reasonable commercial efforts to timely
file all annual, quarterly and other reports required to be filed by it
under Section 13 or 15(d) of the Exchange Act and the rules and
regulations of the Commission thereunder, as amended from time to time.
If the Shareholder proposes to sell any Synagro Shares pursuant to Rules
144 and 145, Synagro shall cooperate with the Shareholder so as to
enable such sale to be made in accordance with applicable laws, rules
and regulations, the requirements of Synagro's transfer agent, and the
reasonable requirements of the broker through which the sales are
proposed to be executed. Without limiting the generality of the
foregoing, Synagro shall, upon request, furnish with respect to each
such sale (i) a written statement certifying that Synagro has complied
with the public information requirements of Rules 144 and 145 and (ii)
an opinion of Synagro's counsel regarding such matters as Synagro's
transfer agent or the Shareholder's broker may reasonably desire to
confirm.
6.3.9 Beneficiaries. The provisions of this Section 6.3 are for
the benefit of the Shareholder and Synagro, and, subject to Section
6.3.5, no other person shall acquire or have any rights under or by
virtue of this Section 6.3.
6.4 Nomination of Director. For a period of ninety (90) days, the
Shareholder shall have the right, subject to approval of the board of directors
of Synagro (the "Board"), to nominate one director for election to the Board in
accordance with the Certificate of Incorporation and Bylaws of Synagro;
provided that said nominee shall be a knowledgeable expert in the industry in
which Synagro and its subsidiaries operate.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Shareholder. After the Effective Date, in
addition to any other remedies available to Synagro under this Agreement, or at
law or in equity, the Shareholder shall indemnify, defend and hold harmless
Synagro, A&J and their respective officers, directors, employees, agents, and
stockholders, against and with respect to any and all claims, costs, damages,
losses, expenses, obligations, liabilities, recoveries, suits, causes of action
and deficiencies, including interest, penalties and reasonable attorneys' fees
and expenses (collectively, "Damages") that such
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indemnitees shall incur or suffer, which arise, result from or relate to (i)
any breach of, or failure by, A&J or the Shareholder to perform their
respective representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument
furnished or delivered to Synagro by A&J, or the Shareholder under this
Agreement; (ii) the ownership or operations of A&J before the Closing Date, and
(iii) all Taxes arising out of or in any way related to the ownership, business
or operations of A&J through the end of the Effective Date, including, without
limitation, any Taxes resulting from the consummation of the transaction
contemplated hereby.
7.2 Indemnification by Synagro. After the Effective Date, in addition
to any other remedies available to the Shareholder under this Agreement, or at
law or in equity, Synagro shall indemnify, defend and hold harmless and the
Shareholder, against and with respect to any and all Damages that the
Shareholder shall incur or suffer, which arise, result from or relate to (i)
any breach of, or failure by Synagro to perform, any of its representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or delivered to or the
Shareholder by or on behalf of Synagro under this Agreement; and (ii) the
ownership or operations of A&J from and after the Effective Date.
7.3 Indemnification Procedures. If any party hereto discovers or
otherwise becomes aware of a claim for Damages arising under this Article 7,
such indemnified party shall give written notice (an "Indemnification Notice")
to the indemnifying party, specifying such claim, and may thereafter exercise
any remedies available to such party under this Agreement; provided, however,
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of any obligations hereunder, to the
extent the indemnifying party is not materially prejudiced thereby. Further,
promptly after receipt by an indemnified party hereunder of written notice of
the commencement of any action or proceeding with respect to which a claim for
Damages arising under this Article 7 may be made, such indemnified party shall,
if a claim in respect thereof is to be made against any indemnifying party,
give written notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of any obligations hereunder,
to the extent the indemnifying party is not materially prejudiced thereby. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to the extent
that it may wish, with counsel reasonably satisfactory to such indemnified
party, and after such notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying party
shall not be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof
unless the indemnifying party has failed to assume the defense of such claim
and employ counsel reasonably satisfactory to such indemnified person. An
indemnifying party who elects not to assume the defense of a claim shall not be
liable for the fees and expenses of more than one counsel in any single
jurisdiction for all parties indemnified by such indemnifying party with
respect to such claim or with respect to claims separate but similar or related
in the same jurisdiction arising out of the same general allegations.
Notwithstanding any of the foregoing to the contrary, the indemnified party
will be entitled to select its own counsel and assume the defense of any action
brought against it if the indemnifying party fails to select counsel reasonably
satisfactory to the indemnified party,
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and the expenses of such defense shall be paid by the indemnifying party. No
indemnifying party shall consent to entry of any judgment or enter into any
settlement with respect to a claim without the consent of the indemnified
party, which consent shall not be unreasonably withheld, or unless such
judgment or settlement includes as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability with respect to such claim. No indemnified party shall consent to
entry of any judgment or enter into any settlement of any such action, the
defense of which has been assumed by an indemnifying party, without the consent
of such indemnifying party, which consent shall not be unreasonably withheld.
7.4 Termination of Indemnity, Representations and Warranties. The
indemnities provided in Sections 7.1 and 7.2 shall terminate with respect to
all Damages which are not the subject of an Indemnification Notice received by
the indemnifying party within two years after the Effective Date; except that
the time period for receipt of an Indemnification Notice for the indemnities
contained in Section 7.1(i), with respect to a breach of the representations,
warranties, covenants and agreements contained in Sections 2.1.4, 2.1.11,
2.1.13, 2.1.15, 2.2, and 6.2, shall survive for the applicable statute of
limitations period; and provided that the indemnity contained in Section
7.2(ii) shall survive indefinitely. The indemnities provided in Sections 7.1
and 7.2 shall survive indefinitely with respect to Damages for which an
Indemnification Notice is received by the indemnifying party within the
applicable period provided in the preceding sentence. The representations and
warranties contained in Articles 2 and 3 hereof shall terminate two years after
the Closing Date, except that the representations warranties, covenants and
agreements contained in Sections 2.1.4, 2.1.11, 2.1.13, 2.1.15, and 6.2, shall
survive for the applicable statute of limitations period.
ARTICLE 8
MISCELLANEOUS
8.1 Press Releases. The Shareholder shall not make any public
statement or announcement concerning this Agreement or the transactions
contemplated herein without the prior consent of Synagro, subject, however, to
the right of the Shareholder to make such an announcement when in the opinion
of its counsel such public statement or announcement is legally required.
Prior to making any public statement or announcement concerning this Agreement
or the transactions contemplated hereby, Synagro shall provide a copy thereof
to the Shareholder.
8.2 Entirety; Conflict. This Agreement and the Letter Agreement
embody the entire agreement among the parties with respect to the subject
matter hereof, and all prior representations, warranties and agreements between
the parties with respect thereto, whether written or oral, are hereby
superseded in their entirety. This Agreement may not be modified or amended in
any manner except by written instrument executed by all of the parties hereto.
In the event of any conflict between the terms and provisions of this Agreement
and those of the Letter Agreement, the terms and provisions of this Agreement
shall control.
8.3 Counterparts and Facsimile Signature. Any number of counterparts
of this Agreement may be executed and each such counterpart shall be deemed to
be an original instrument,
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but all such counterparts together shall constitute but one instrument. This
Agreement may be executed by any party by facsimile signature, with the
original signature to be promptly delivered thereafter, and such facsimile
signature shall be binding upon the party so executing this Agreement.
8.4 Notices and Waivers. Any notice or waiver to be given to any
party hereto shall be in writing and shall be delivered in person or by
courier, sent by facsimile transmission or first class registered or certified
mail, postage prepaid, return receipt requested.
IF TO SYNAGRO OR SUB CORP:
Addressed to: With a copy to:
Synagro Technologies, Inc. Xxxxxx & Xxxxxx, L.L.P.
0000 Xxx Xxxxxx, Xxxxx 000 700 Louisiana, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000 Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Rome Attention: T. Xxxxxxx Xxxxxx
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
IF TO A&J OR THE SHAREHOLDER:
Addressed to: With a copy to:
A&J Cartage, Inc. Domnitz, Mawicke, Goisman & Xxxxxxxxx, S.C.
0000 Xxxxx 0xx Xxxxx 0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx Attention: Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, with return receipt requested, shall be deemed
to be received on the third business day after so mailed, and if delivered in
person or by courier or facsimile to such address, upon delivery during normal
business hours on any business day.
8.5 Table of Contents and Captions. The table of contents and
captions contained in this Agreement are solely for convenient reference and
shall not be deemed to affect the meaning or interpretation of any article,
section, or paragraph hereof.
8.6 Successors and Assigns. Neither Synagro, A&J nor the Shareholder
may transfer or assign this Agreement or any of their respective rights, duties
or obligations hereunder without the prior written consent of the other parties
hereto.
8.7 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the
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parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such which may be hereafter
declared invalid, void or unenforceable.
8.8 Applicable Law. The laws of the State of Texas will govern the
interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof, except to the extent
that the form and content of the Articles of Merger and the consequences of the
filing thereof shall be governed by the Corporations Act, and the Shareholder,
A&J, Sub Corp and Synagro agree that the state and federal courts situated in
Xxxxxx, County, Texas shall have personal jurisdiction over the Shareholder,
A&J, Sub Corp and Synagro, and shall be the sole venue, to hear all disputes
arising under this Agreement. This Agreement is to be at least partially
performed in Xxxxxx, County, Texas and, as such, the Shareholder, A&J, Sub Corp
and Synagro, agree that venue shall be proper with the state or federal courts
in Xxxxxx County, Texas to hear such disputes. In the event either the
Shareholder, A&J, Sub Corp or Synagro is not able to effect service of process
upon the other with respect to such disputes, the Shareholder, A&J, Sub Corp
and Synagro expressly agree that the Secretary of State for the State of Texas
shall be an agent of the Shareholder, A&J, Sub Corp and/or the Synagro, as
applicable, to receive service of process on behalf of the Shareholder, A&J,
Sub Corp and/or Synagro, as applicable, with respect to such disputes.
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IN WITNESS WHEREOF, the Shareholder has executed this Agreement, and
Synagro, Sub Corp and A&J have caused this Agreement to be signed in their
respective corporate names by their respective duly authorized representatives,
all as of the day and year first above written.
SYNAGRO TECHNOLOGIES, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
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SYNAGRO SUB CORP. WISCONSIN, INC.
By:
------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
A&J CARTAGE, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
SHAREHOLDER
---------------------------------------------
XXXXX X. XXXXXXX
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