EXHIBIT 10.18
*** Indicates material has been omitted pursuant to a Confidential Treatment
Request filed with the Securities and Exchange Commission. A complete copy of
this Agreement has been filed with the Securities and Exchange Commission.
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
AMONG
WCA WASTE CORPORATION,
WASTE CORPORATION OF MISSOURI, INC.,
GECKO INVESTMENTS, LLC
AND
THE SELLERS
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TABLE OF CONTENTS
1. TRANSFER OF MEMBERSHIP INTERESTS............................................ 5
1.1 The Transfer......................................................... 5
1.2 Continuation of the Company.......................................... 5
1.3 Termination of Membership Interests; Resignations.................... 6
2. CONSIDERATION............................................................... 6
2.1 Purchase Price....................................................... 6
2.2 Payment of Purchase Price............................................ 8
2.3 The Closing.......................................................... 9
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS............... 9
3.1 Due Organization..................................................... 9
3.2 Authorization, Validity and Effect of Agreements..................... 9
3.3 Membership Interests of the Company.................................. 10
3.4 Obligations to Issue or Sell Membership Interests.................... 10
3.5 Subsidiaries......................................................... 11
3.6 Predecessor Status; etc.............................................. 11
3.7 Financial Statements................................................. 11
3.8 Liabilities and Obligations.......................................... 11
3.9 Approvals............................................................ 12
3.10 Accounts and Notes Receivable........................................ 12
3.11 Permits and Intangibles.............................................. 12
3.12 Personal Property, Options and Leases................................ 12
3.13 Customers; Contracts and Commitments................................. 13
3.14 Real Property........................................................ 14
3.15 Insurance............................................................ 14
3.16 Employment Matters................................................... 14
3.17 Parachute Provisions................................................. 15
3.18 Benefit Plans; ERISA Compliance...................................... 15
3.19 Conformity with Law.................................................. 17
3.20 Taxes................................................................ 18
3.21 Completeness......................................................... 21
3.22 Government Contracts................................................. 21
3.23 Absence of Changes................................................... 21
3.24 Deposit Accounts; Powers of Attorney................................. 22
3.25 Proprietary Rights................................................... 22
3.26 Validity of Obligations.............................................. 23
3.27 Relations with Governments........................................... 23
3.28 Conflicts of Interest................................................ 23
3.29 Environmental Matters................................................ 24
3.30 No Broker's or Finder's Fees......................................... 26
3.31 Litigation........................................................... 26
3.32 Disclosure........................................................... 26
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4. REPRESENTATIONS OF BUYER PARTIES............................................ 27
4.1 Due Organization..................................................... 27
4.2 Execution............................................................ 27
4.3 Conformity with Law.................................................. 27
4.4 No Broker's or Finder's Fees......................................... 27
4.5 Access to Information; Counsel....................................... 27
5. COVENANTS OF THE PARTIES.................................................... 28
5.1 Notices and Approvals................................................ 28
5.2 Access to Information................................................ 28
5.3 Copies of Agreements................................................. 28
5.4 Records.............................................................. 29
5.5 Taxes................................................................ 29
5.6 Compliance with Laws................................................. 29
5.7 Notice of Breach..................................................... 30
5.8 Reasonable Efforts................................................... 30
5.9 Notification......................................................... 30
5.10 Injunctions.......................................................... 30
5.11 Audit................................................................ 30
5.12 Tax Returns.......................................................... 30
5.13 Cooperation and Transition........................................... 31
5.14 Sellers' Investment Representations and Covenants.................... 31
6. NONCOMPETITION.............................................................. 34
6.1 Prohibited Activities................................................ 34
6.2 Damages.............................................................. 36
6.3 Independent Covenant................................................. 36
6.4 Materiality and Enforceability....................................... 36
7. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION............................................................. 36
7.1 Survival of Covenants, Representations, and Warranties............... 36
7.2 Indemnification by the Sellers....................................... 37
7.3 Indemnification by the Buyer Parties................................. 37
7.4 Notice and Defense of Third Party Claims............................. 38
7.5 Payment and Interest................................................. 39
7.6 NEGLIGENCE AND STRICT LIABILITY...................................... 39
8. BUYER PARTIES' CONDITIONS TO CLOSING........................................ 40
8.1 Representations and Warranties....................................... 40
8.2 Compliance with Conditions........................................... 40
8.3 Suit or Proceeding................................................... 40
8.4 Consents and Approvals............................................... 40
8.5 Material Adverse Change.............................................. 41
8.6 Assignment and Assumption Agreement.................................. 41
8.7 Resignations; Releases............................................... 41
8.8 Permits and Licenses................................................. 41
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8.9 Clearance Certificates............................................... 41
8.10 Affidavit............................................................ 41
8.11 Satisfactory Completion of Due Diligence Investigation............... 41
9. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE.................................. 42
9.1 Representations and Warranties....................................... 42
9.2 Compliance with Conditions........................................... 42
9.3 Suit or Proceeding................................................... 42
10. CLOSING DELIVERIES.......................................................... 42
10.1 Deliveries by the Sellers............................................ 42
10.2 Deliveries by the Buyer Parties...................................... 43
11. CERTAIN DEFINITIONS......................................................... 44
12. GENERAL..................................................................... 47
12.1 Costs................................................................ 47
12.2 Entire Agreement..................................................... 47
12.3 Counterparts......................................................... 48
12.4 Notices.............................................................. 48
12.5 Modification or Waiver............................................... 48
12.6 Binding Effect and Assignment........................................ 49
12.7 Governing Law; Venue................................................. 49
12.8 Section Headings..................................................... 49
12.9 Severability......................................................... 50
12.10 Drafting............................................................. 50
12.11 References........................................................... 50
12.12 Calendar Days, Weeks, Months and Quarters............................ 50
12.13 Gender; Plural and Singular.......................................... 50
12.14 Cumulative Rights.................................................... 50
12.15 No Implied Covenants................................................. 50
12.16 Indirect Action...................................................... 50
12.17 Attorneys' Fees...................................................... 51
12.18 Time of the Essence.................................................. 51
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement") is made
effective the 11th day of January, 2005, between WCA Waste Corporation, a
Delaware corporation ("Parent"), Waste Corporation of Missouri, Inc., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Buyer"), Gecko
Investments, LLC, an Ohio limited liability company (the "Company"), Xxxxxx
Xxxxxxxxxxx, Xxxxxx X. Xxxxx and Xxxxxx X. XxXxxxx (Xxxxxxxxxxx, Xxxxx and
XxXxxxx, collectively, the "Sellers"). Parent and Buyer are sometimes referred
to herein individually as a "Buyer Party" and collectively as the "Buyer
Parties." The Company and the Sellers are sometimes referred to herein
individually as a "Seller Party" and collectively as the "Seller Parties." The
Seller Parties and the Buyer Parties are sometimes referred to herein
individually as a "Party" and collectively as the "Parties."
WHEREAS, the Company is engaged in the business of owning and operating a
municipal solid waste landfill and hauling business in Pike County, Missouri
(the "Business"); and
WHEREAS, Sellers are the owners of all the outstanding membership
interests of the Company; and
WHEREAS, Sellers wish to sell and Buyer wishes to purchase all of the
issued and outstanding membership interests of the Company, in exchange for cash
and shares of common stock, $0.01 par value per share of Parent ("Parent Common
Stock"), upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth below, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto do
hereby agree as follows:
1. TRANSFER OF MEMBERSHIP INTERESTS
1.1 THE TRANSFER. On and subject to the terms and conditions contained
in this Agreement, Sellers will sell, transfer, assign and deliver
to Buyer, and Buyer will purchase, accept and receive from Sellers,
in exchange for the aggregate consideration set forth in Section 2
hereof, all of the Sellers' right, title and interest in and to all
of the issued and outstanding membership interests in the Company
(the "Membership Interests"), together with all of the rights,
benefits, privileges and obligations of the Sellers in the
Membership Interests.
1.2 CONTINUATION OF THE COMPANY. The Parties acknowledge that Buyer will
continue the business of the Company despite the termination of
Sellers' membership interests therein and that the Company shall not
be dissolved as a result. Sellers, in their capacity as managers and
members of the Company, hereby consent to the transfer of the
Membership Interests to Buyer pursuant to this Agreement and to
Buyer's becoming the sole member of the Company thereby.
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1.3 TERMINATION OF MEMBERSHIP INTERESTS; RESIGNATIONS. Sellers hereby
acknowledge and agree that, as a result of this transfer of the
Membership Interests to Buyer, Sellers will cease to hold any
membership interest in or be members of the Company. At the Closing,
Sellers shall resign any positions held with the Company, including
any positions as managing members, managers or officers of the
Company, effective as of the Closing Date, and further agree that
they shall not transact any further business or incur any further
obligations on behalf of the Company, or hold themselves out as
members, managing members, managers, officers, agents or
representatives of the Company, from and after the Closing Date.
2. CONSIDERATION
2.1 PURCHASE PRICE. The aggregate price (the "Purchase Price") to be
paid by the Buyer Parties to the Sellers for the Membership
Interests, which the Parties hereby agree constitutes fair value for
the Membership Interests, shall consist of the following:
(a) Closing Consideration. At Closing, or, with respect to the
Closing Stock Consideration, promptly following the Closing, the
Buyer Parties shall pay and deliver to the Sellers:
(1) cash in an amount equal to Five Million, Five Hundred
Thousand Dollars ($5,500,000), less the total amount necessary
to fully pay and satisfy all of the debt, capital lease and
similar obligations of the Company at and as of the Closing
set forth on Schedule 2.1(a) hereto (as such amounts are set
forth in pay-off letters attached to Schedule 2.1(a)) (the
"Closing Cash Consideration");
(2) Four Hundred Twenty-Eight Thousand, Forty One (428,041)
shares of Parent Common Stock ("Closing Stock Consideration"),
which the Parties agree is equal to that number of shares of
Parent Common Stock determined by dividing Four Million, One
Hundred Fifty-Two Thousand Dollars ($4,152,000) by Nine
Dollars and Seventy Cents ($9.70), the average of the closing
prices per share of Parent Common Stock for the ten
consecutive trading days ending on November 29, 2004, as
reported by the Nasdaq Stock Market; and
(3) convertible notes of Parent in the forms attached hereto
as Exhibit A in the aggregate principal amount equal to One
Million, Five Hundred Thousand Dollars ($1,500,000), issued in
the names of the persons listed on Schedule 2.2(d) hereto, in
the amounts set forth on such schedule;
(b) Stock Holdback. In addition to the amounts set forth in Section
2.1(a) above, the Buyer Parties shall pay and deliver if, as and
when specified in this Section 2.1(b), the following additional
shares of Parent Common Stock (the "Stock Holdback"):
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(1) 10,309 shares shall be retained and held back by the Buyer
Parties to reimburse and compensate the Buyer Parties and the
Company for any Losses related to the proposed Settlement
Agreement between the Company and the State of Missouri
(including any increase in the Company's or the Buyer Parties'
operating expenses resulting from covenants or conditions
imposed on the Company by the Settlement Agreement);
(2) 20,619 shares shall be retained and held back by the Buyer
Parties to reimburse and compensate the Buyer Parties and the
Company for any Losses related to the failure to obtain, or
any delay in obtaining, all necessary approvals, permits,
consents and licenses of governmental authorities for the
opening and operation of a landfill cell under construction at
the Company's landfill located in Pike County, Missouri,
including costs, including lost profits, associated with
closing down the landfill and/or transferring operations to a
temporary facility; and
(3) 51,546 shares shall be retained and held back by the Buyer
Parties to satisfy all amounts owing in respect of the Liens
(as defined in Section 3.14 hereof) on the Company's Real
Property (as defined in Section 3.14 hereof) reflected on
Schedule 2.1(b) attached hereto, and to pay any related costs
and expenses the Buyer Parties may incur in obtaining the full
release and removal from the applicable real property records
of all such Liens. The Parties acknowledge and agree that the
Sellers are jointly and severally obligated to obtain releases
of all such Liens and clear them from the real property
records applicable to the Company's Real Property and shall
use their respective best efforts to do so as soon as possible
following the Closing. Notwithstanding the foregoing, if
within ninety (90) days after the Closing the Sellers shall
not have provided the Buyer Parties with written evidence
satisfactory to the Buyer Parties in their reasonable
discretion that all of the Liens reflected on Schedule 2.1(b)
have been fully released and cleared from the real property
records applicable to the Company's Real Property, the Buyer
Parties may take all such actions as the Buyer Parties, in
their reasonable discretion, deem necessary to satisfy in full
and obtain releases of the Company and the Company's Real
Property from any and all such Liens then remaining of record,
and all of the obligations to which such Liens relate, as well
as all costs and expenses incurred by the Buyer Parties in
connection with satisfying and obtaining releases from such
Liens shall be satisfied first out of the Stock Holdback.
(c) Release of Stock Holdback. With respect to the Losses,
obligations, costs and expenses described in Sections 2.1(b)(1) and
2.1(b)(2) above, and so as to reimburse and compensate Parent, Buyer
and the Company for such amounts, the Parties agree that the Buyer
Parties shall give written notice of such Losses, obligations, costs
and expenses to the Sellers reasonably promptly following the
accrual of such Losses, obligations, costs and expenses, and that
the Buyer Parties
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shall be relieved of any obligation to deliver and be entitled to
cancel, and Sellers shall forfeit any right to receive, that number
of shares of the Stock Holdback with a market value (which, for
purposes of this Section 2.1(c), shall be equal to the closing
market price for shares of Parent Common Stock on the day on which
the Buyer Parties deliver such written notice to the Sellers or, if
such day is not a trading day, the next trading day immediately
following such day) equal to such amounts (as reasonably estimated
by the Buyer Parties). With respect to the Losses, obligations,
costs and expenses described in Section 2.1(b)(3), and so as to
reimburse and compensate Parent, Buyer and the Company for such
amounts, the Parties agree that the Buyer Parties shall be relieved
of any obligation to deliver and be entitled to cancel, and Sellers
shall forfeit any right to receive, that number of shares of the
Stock Holdback as set forth in clause (z) below. To the extent that
the value of the shares of Parent Common Stock in the Stock Holdback
are insufficient to pay such Losses or to fully pay, satisfy and
reimburse such obligations, costs and expenses, any remaining
amounts shall be paid by the Sellers. Shares of Parent Common Stock
remaining of the Stock Holdback, if any, shall be paid to the
Sellers according to the percentages or other formula set forth in
Schedule 2.1(c) hereto as follows: (x) with respect to the shares
held back pursuant to Section 2.1(b)(1) above, such shares shall be
released to Sellers upon the entering of a final Settlement
Agreement between the Company and the State of Missouri, (y) with
respect to the shares held back pursuant to Section 2.1(b)(2) above,
such shares shall be released to Sellers upon the opening and
commencement of operations of the new landfill cell referenced above
and (z) with respect to the shares held back pursuant to Section
2.1(b)(3) above, Schedule 2.1(b) sets forth the number of shares to
be released upon the satisfaction, release and clearance from the
applicable real property records of each Lien reflected on Schedule
2.1(b), as evidenced by the Buyer Parties' receipt of an endorsement
issued under the title policy covering the Company's Real Property;
provided, however, that neither the Buyer Parties nor the Company
shall have any obligation to request such an endorsement or to
release shares from the Stock Holdback more frequently than once a
month. Notwithstanding the foregoing, the Sellers shall be
responsible for and shall pay promptly when due all fines and
assessments in connection with the Settlement Agreement referenced
above.
2.2 PAYMENT OF PURCHASE PRICE.
(a) The Closing Cash Consideration (less such amounts necessary to
fully pay and satisfy all debt, capital lease and similar
obligations of the Company at Closing pursuant to Section 2.1(a)(1)
above) shall be paid by wire transfer of immediately available funds
to an account or accounts designated by the Sellers in the amounts
set forth on Schedule 2.2 hereto.
(b) At the Closing, the Buyer Parties shall pay, by wire transfer or
other immediately available funds, the total amount necessary to
fully pay and satisfy all debt, capital lease and similar
obligations of the Company at Closing pursuant
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to Section 2.1(a)(1) above, which shall be paid out of the Closing
Cash Consideration.
(c) The portion of the Closing Stock Consideration payable to the
Sellers pursuant to Section 2.1(a)(1) above and, if and when payable
pursuant to Section 2.1(b)(2) above, the Stock Holdback (or portion
thereof) shall be delivered to the Sellers in the amounts set forth
on Schedule 2.2 hereto.
(d) At the Closing, Parent shall execute and deliver the convertible
notes of Parent pursuant to Section 2.1(a)(3).
2.3 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Parent
located at Xxx Xxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, at 10:00
a.m., local time, on January 11, 2005, or at such other place or
time as the Parties may mutually agree upon (the date that the
Closing actually occurs being referred to as the "Closing Date").
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
The Company and the Sellers make the following representations and
warranties jointly and severally and, unless the context clearly indicates
otherwise, all references to the "Seller Parties" in this Article 3 shall apply
to the Company and the Sellers, jointly and severally, as if each such entity
and person were specifically referenced herein. The Seller Parties represent and
warrant that all of the following representations and warranties are true as of
the date of this Agreement and shall be true as of the Closing:
3.1 DUE ORGANIZATION. The Company is a limited liability company duly
organized, validly existing and in good standing under the laws of
its state of organization, and is duly authorized, qualified and
licensed under all applicable laws, regulations, ordinances and
orders of public authorities to carry on its business in the places
and in the manner as now conducted or as proposed to be conducted.
Copies of the Articles of Organization (certified by the Secretary
of State of the Company's state of organization) and Operating
Agreement (certified by the Secretary of the Company) of the
Company, if any, and the organizational documents of each of the
Company's subsidiaries, if any, are all attached hereto as Schedule
3.1. The company records and minute books of the Company and the
Company's subsidiaries, as heretofore made available to Parent, are
correct and complete.
3.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS.
(a) This Agreement (i) constitutes, and all agreements and documents
contemplated hereby when executed and delivered pursuant hereto for
value received will constitute, the valid and legally binding
obligations of each of the Seller Parties enforceable in accordance
with their terms, subject to (A) applicable bankruptcy, insolvency
or other similar laws relating to creditor's rights generally and
(B) general principles of equity, regardless of whether considered
in a
9
proceeding in equity or at law, and (ii) has been duly authorized in
accordance with the Ohio Limited Liability Company Act and the
Articles of Organization and Operating Agreement of the Company.
(b) The execution and delivery of this Agreement by each of the
Seller Parties does not, and the consummation of the transactions
contemplated hereby by the Seller Parties will not, (i) except as
set forth on Schedule 3.2 hereof, require the consent, approval or
authorization of, or declaration, filing or registration with, any
governmental or regulatory authority or any third party; (ii) result
in the breach of any term or provision of, or constitute a default
under, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or the lapse of time
or both) any obligation under, or result in the creation or
imposition of any Lien (as defined in Section 3.14) upon any part of
the property of the Company pursuant to any provision of, any order,
judgment, arbitration award, injunction, decree, indenture,
mortgage, lease, license, lien, or other agreement or instrument to
which the Company is a party or by which it is bound; or (iii)
violate or conflict with any provision of the Articles of
Organization or Operating Agreement of the Company as amended to the
date hereof.
3.3 MEMBERSHIP INTERESTS OF THE COMPANY. The authorized membership
interests of the Company are shown on Schedule 3.3. All of the
Company's issued and outstanding membership interests have been duly
authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the Sellers in the amounts set
forth in Schedule 3.3, and are free and clear of all liens,
encumbrances and claims of every kind. All such membership interests
were offered, issued, sold and delivered in compliance with all
applicable state and federal laws concerning the issuance of
securities. Further, none of such membership interests were issued
in violation of the preemptive rights of any past or present member.
3.4 OBLIGATIONS TO ISSUE OR SELL MEMBERSHIP INTERESTS. No right of first
refusal, option, warrant, call, conversion right or commitment of
any kind exists which obligates the Company to issue any of its
authorized but unissued membership interests. In addition, there are
no (a) outstanding securities or obligations which are convertible
into or exchangeable for any membership interests or other
securities of the Company or (b) contracts, arrangements or
commitments, written or otherwise, under which the Company is or may
become bound to sell or otherwise issue any membership interests or
any other securities. Without limiting the generality of the
foregoing, there is no valid basis upon which any person (other than
the Sellers) may claim to be in any way the record or beneficial
owner of, or to be entitled to acquire (of record or beneficially),
any membership interest or other security of the Company, and no
person has made or, to any Seller Party's respective knowledge,
threatened to make any such claim. In addition, the Company has no
obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its membership interests or any interests
therein or to pay any dividend or make any distribution in respect
thereof.
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3.5 SUBSIDIARIES. Except as set forth on Schedule 3.5, the Company (a)
does not presently own, of record or beneficially, or control,
directly or indirectly, any capital stock, securities convertible
into capital stock or any other equity interest in any corporation,
association or business entity; or (b) is not, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
3.6 PREDECESSOR STATUS; ETC. Set forth on Schedule 3.6 is a list of all
of the names of all predecessors of the Company, including the names
of any entities from whom the Company previously acquired
significant assets. Except as disclosed in Schedule 3.6, the Company
has never been a subsidiary or division of another corporation nor
been a part of an acquisition which was later rescinded.
3.7 FINANCIAL STATEMENTS.
(a) The Seller Parties have furnished to Parent (and copies of which
are attached hereto as Schedule 3.7(a)): (i) the Company's balance
sheet as of December 31, 2001, December 31, 2002 and December 31,
2003; and (ii) the Company's statement of operations for the years
ending December 31, 2001, December 31, 2002 and December 31, 2003.
The financial statements referred to in this subsection are herein
collectively referred to as the "Financial Statements."
(b) The Seller Parties have furnished to Parent (and copies of which
are attached hereto as Schedule 3.7(b)): (i) the Company's balance
sheet as of November 30, 2004 (the "Balance Sheet Date"); and (ii)
the Company's statement of operations for the period beginning
January 1, 2004 and ending November 30, 2004. The financial
statements referred to in this subsection are herein collectively
referred to as the "Interim Financial Statements."
(c) The Financial Statements and the Interim Financial Statements
fully and fairly set forth the financial condition of the Business
as of the dates indicated, and the results of its operations for the
periods indicated, and are in accordance with generally accepted
accounting principles consistently applied, except as otherwise
stated therein or in any attachment to Schedules 3.7(a) and 3.7(b)
attached hereto.
3.8 LIABILITIES AND OBLIGATIONS. The Seller Parties have delivered to
Parent on Schedule 3.8(a) an accurate list, as of the Closing Date,
of all of the Company's liabilities of any kind, character and
description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, together with, in the case of those
liabilities which are not fixed, an estimate of the maximum amount
which may be payable. For each such liability for which the amount
is not fixed or is contested, the Seller Parties have provided a
summary description of the liability. Schedule 3.8(b) lists all
liabilities which shall be assumed by the Sellers at Closing (all
such liabilities, together with all accounts payable of the Company
as of the Closing and all liabilities not disclosed to the Buyer
Parties on Schedule 3.8(a), if any, shall be referred to herein as
the "Retained Liabilities").
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3.9 APPROVALS. Except as set forth on Schedule 3.9, no authorization,
consent or approval of, or registration or filing with, any
governmental authority or any other person is or was required to be
obtained or made by any Seller Party in connection with the
execution, delivery or performance of this Agreement. All
authorizations, consents and approvals set forth on Schedule 3.9
have been obtained, and all registrations and filings have been
accomplished.
3.10 ACCOUNTS AND NOTES RECEIVABLE. The Seller Parties have delivered to
Parent on Schedule 3.10(a) an accurate list as of November 30, 2004
and as of the Closing Date of the Company's accounts and notes
receivable, including receivables from and advances to its
employees, managers and members and amounts which are not reflected
in the most recent available balance sheet. The Seller Parties shall
provide Parent with an aging of all accounts and notes receivable
showing amounts due in 30-day aging categories for the Company. Such
accounts and notes receivable of the Company are collectible in the
amounts shown on Schedule 3.10(a). Schedule 3.10(b) lists the
accounts receivable which shall be assigned by the Company to the
Sellers at Closing (all such assigned accounts receivable, if any,
shall be referred to herein as the "Assigned Receivables").
3.11 PERMITS AND INTANGIBLES. The Seller Parties have delivered to Parent
on Schedule 3.11 an accurate list and summary description as of the
Closing Date of all of the certificates of need, permits, titles
(including motor vehicle titles and current registrations), fuel
permits, licenses, orders, approvals, franchises, certificates,
trademarks, trade names, patents, patent applications, copyrights
and similar rights of approvals owned or held by the Company, all of
which are now valid, in good standing and in full force and effect.
Except as set forth on Schedule 3.11, such permits, titles, fuel
permits, licenses, orders, approvals, franchises, certificates,
trademarks, trade names, patents, patent applications, copyrights
and similar rights of approvals are adequate for the operation of
the Company's business, as presently constituted. Except as set
forth on Schedule 3.11, the Seller Parties have delivered to Parent
a description and copies as of the date of this Agreement, of all of
the Company's material records, reports, notifications, certificates
of need, permits, pending permit applications, engineering studies,
environmental impact studies filed or submitted or required to be
filed or submitted to governmental agencies, other governmental
approvals or applications for approval and of all material
notifications from such governmental agencies.
3.12 PERSONAL PROPERTY, OPTIONS AND LEASES.
(a) The Seller Parties have delivered to Parent on Schedule 3.12 an
accurate list and a complete description as of the Balance Sheet
Date of all of personal property, leases for equipment and real
properties on which are situated buildings, warehouses, workshops,
garages and other structures used in the operation of the Company's
business, and any option or right of first refusal to purchase real
property and including an indication as to which assets were
formerly owned by business or personal Affiliates of the Company.
All leases set forth on Schedule
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3.12 are in full force and effect and constitute legal, valid and
binding agreements of the parties (and their successors) thereto in
accordance with their respective terms, and no default by the
Company or any other party thereto has occurred or is continuing
thereunder. All fixed assets used by the Company in the operation of
its business are either owned by the Company or leased under an
agreement indicated on Schedule 3.12. The Seller Parties have also
indicated on Schedule 3.12 a summary description of all of the
Company's plans or projects involving the opening of new operations,
expansion of any existing operations or the acquisition of any real
or personal property or existing business, to which management of
the Company has devoted any significant effort or expenditure in the
two year period prior to the date of this Agreement, which if
pursued by the Company would require additional expenditures of
significant efforts or capital. Except as described on Schedule
3.12, the Company owns all of the assets and properties it uses in
its business. Except as described on Schedule 3.12, there are no
liens, mortgages, charges, restrictions, pledges, security
interests, options, leases, claims, easements, encroachments or
encumbrances on any property or assets owned or used by the Company.
3.13 CUSTOMERS; CONTRACTS AND COMMITMENTS.
(a) Schedule 3.13(a) sets forth the names and addresses of all of
the Company's customers as of the date hereof, and sets forth
monthly billing information related to such customers. None of the
customers, to the knowledge of the Seller Parties, intends to
terminate or change significantly, its relationship as presently
existing, and the Company has not received notice to such effect.
(b) Schedule 3.13(b) sets forth a true and complete list of all of
the Company's contracts, agreements and other instruments and
arrangements (whether written or oral) to which the Company is a
party or by which the Company is bound (the "Contracts"), including
but not limited to: (i) arrangements relating to providing solid
waste collection, transportation or disposal services to any person
or entity; (ii) licenses, permits, insurance policies and other
arrangements concerning or relating to real estate; (iii)
employment, consulting, collective bargaining or other similar
arrangements relating to or for the benefit of current, future or
former employees, agents, and independent contractors or
consultants; (iv) agreements and instruments relating to the
borrowing of money or obtaining of or extension of credit, (v)
brokerage or finder's agreements; (vi) contracts involving a sharing
of profits or expenses; (vii) acquisition or divestiture agreements;
(viii) service or operating agreements, manufacturer's
representative agreements or distributorship agreements; (ix)
arrangements limiting or restraining any Seller Party with respect
to the Business from engaging or competing in any lines of business
or with any person; (x) documents granting a power of attorney; and
(xi) any other agreements or arrangements that are material to the
future operation of the Company.
(c) Except as set forth on Schedule 3.13(c): (i) this Agreement will
not give rise to the right of any party to terminate or modify any
contract or agreement, (ii) the
13
Company is not a party to any contract, agreement or other
instrument or commitment which, singly or in the aggregate
materially and adversely affects or is likely to materially and
adversely affect the Company's business, operations, properties,
assets or condition (financial or otherwise); and (iii) the Company
is not bound by or subject to (and none of its assets or properties
is bound by or subject to) any arrangement with any labor union.
3.14 REAL PROPERTY. Except as set forth on Schedule 3.14 attached hereto:
(a) The Company owns good and marketable title to its real property
described on Schedule 3.14 (the "Company's Real Property"), free and
clear of any lien, mortgage, charge, restriction, pledge, security
interest, option, lease, claim, easement, encroachment or
encumbrance ("Lien"), other than the exceptions set forth in
Schedule 3.14 (the "Permitted Exceptions"), and no person has an
option to purchase all or any portion of such real property;
(b) The Company's Real Property is not subject to any pending or
threatened condemnation Proceedings against all or part thereof;
(c) The Company has never granted any person or entity a lease,
sublease, license, concession, or other right, written or oral, to
use or occupy the Company's Real Property, nor has the Company ever
entered into an option, right of first refusal, or other agreement
that would permit any person or entity to purchase all or part of
the Company's Real Property; and
(d) The Company has never owned, occupied, or conducted operations
on any lands, other than the Company's Real Property.
3.15 INSURANCE. The Seller Parties have delivered to Parent on Schedule
3.15 an accurate list of all of the Company's insurance policies, as
well as an accurate list of: (a) all of its insurance loss runs and
worker's compensation claims received for the past three (3) policy
years; (b) all open claims; and (c) all known circumstances
reasonably likely to result in a claim. Such insurance policies are
currently in full force and effect and shall remain in full force
and effect through the Closing Date. None of the Company's insurance
has ever been canceled, and the Company has never been denied
coverage.
3.16 EMPLOYMENT MATTERS. Schedule 3.16 contains a list of all employees
of the Company, including the annual compensation, hourly wages, and
daily rate of pay for all such employees. The Company has paid in
full to, or accrued as a current liability, all employees of the
Company all wages, salaries, commissions on jobs finished, bonuses
and other direct compensation for all services performed (including
accrued vacation) by them prior to the Closing and all amounts
required to be reimbursed to the employees, and none of the Buyer
Parties or the Company will, by reason of anything done prior to the
Closing, be liable to any employee for "severance pay" or any other
payment. The Company is in material compliance with all federal,
state, local and foreign laws and regulations
14
respecting employment and employment practices, terms and conditions
of employment and wages and hours.
3.17 PARACHUTE PROVISIONS. The Seller Parties have delivered to Parent on
Schedule 3.17 an accurate schedule showing all of the Company's
employment agreements and any other agreements containing
"parachute" provisions, and deferred compensation agreements (which
shall be Retained Liabilities pursuant to Section 3.8), together
with copies of such plans, agreements and any trusts related
thereto, and classifications of employees covered thereby as of the
Balance Sheet Date.
3.18 BENEFIT PLANS; ERISA COMPLIANCE.
(a) Schedule 3.18 contains a list of all "employee pension benefit
plans" (as defined in Section 3(2) of Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (sometimes referred to
in this Section 3.18 as "Pension Plans"), "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA) (sometimes referred to
in this Section 3.18 as "Welfare Plans") and all other Benefit
Plans, as defined below, currently maintained in whole or in part,
contributed to, or required to be contributed to by the Company for
the benefit of any present or former officer, employee or director
of the Company. For purposes of this Agreement, the term "Benefit
Plan" shall mean any collective bargaining agreement or any bonus,
pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical, dependent care, cafeteria, employee
assistance, scholarship or other plan, program, arrangement or
understanding (whether or not legally binding) maintained in whole
or in part, contributed to, or required to be contributed to by the
Company for the benefit of any present or former officer, employee
or director of the Company which is not a Pension Plan or Welfare
Plan. The Seller Parties have delivered to Parent true, complete and
correct copies of (a) each of the Company's Pension Plans, Welfare
Plans and Benefit Plan (or, in the case of any unwritten Benefit
Plans, descriptions thereof), (b) all material correspondence for
the last three (3) years prior to the Closing Date with the IRS or
the United States Department of Labor relating to plan
qualification, filing of required forms, pending, contemplated or
announced plan audits with respect to any such Pension Plan, Welfare
Plan or Benefit Plan, if any and (c) all other information
reasonably requested by Parent.
(b) The Company does not maintain any Pension Plan or Benefit Plan
intended to be a tax qualified plan described Section 401(a) of the
Code, and no such plan is or has been subject to the minimum funding
rules of Code Section 412 or ERISA Section 302, or the plan
termination insurance provisions of Title IV of ERISA.
(c) Each of the Pension Plans, Welfare Plans and Benefit Plans
sponsored by, and each of the benefit plans formerly sponsored by,
the Company: (i) has been in material compliance with all reporting
and disclosure requirements of (A) Part 1 or Subtitle B of Title I
of ERISA, if applicable, or (B) other applicable law, (ii)
15
has had the appropriate required Form 5500 (or equivalent annual
report) filed timely with the appropriate governmental entity for
each year of its existence, (iii) has at all times complied with the
bonding requirements of (A) Section 412 of ERISA, if applicable, or
(B) other applicable law, (iv) has no issue pending (other than the
payment of benefits in the normal course) nor any issue resolved
adversely to the Company or any of its subsidiaries which may
subject the Company or any of its subsidiaries to the payment of any
material penalty, interest, tax or other obligation, nor is there
any basis for any imposition of any such liability, and (v) has been
maintained in all respects in material compliance with the
applicable requirements of ERISA, the Code and other applicable law
not otherwise covered hereunder so as not to give rise to any
material liabilities to the Company.
(d) There are no voluntary employee benefit associations maintained
by the Company and intended to be exempt from federal income tax
under Section 501(c)(9) of the Code.
(e) Neither the execution of this Agreement nor the consummation of
the transactions contemplated by this Agreement will give rise to
any, or trigger any, change of control, severance or other similar
provisions in any Pension Plan, Welfare Plan or Benefit Plan
sponsored by the Company. The consummation of any transaction
contemplated by this Agreement will not result in any: (i) payment
(whether of severance pay or otherwise) becoming due from the
Company to any of its officers, employees, former employees or
directors or to the trustee under any "rabbi trust" or similar
arrangement; (ii) benefit under any Benefit Plan of the Company
being established or becoming accelerated, vested or payable; or
(iii) payment or series of payments by the Company, directly or
indirectly, to any person that would constitute a "parachute
payment" within the meaning of Section 280G of the Code.
(f) The Company does not provide any material post-retirement
medical, health, disability or death protection coverage or
contribute to or maintain any employee welfare benefit plan which
provides for medical, health, disability or death benefit coverage
following termination of employment by any officer, director or
employee except as is required by Section 4980B(f) of the Code or
other applicable statute, nor has the Company made any
representations, agreements, covenants or commitments to provide
that coverage.
(g) With respect to any Welfare Plan of the Company, (i) each such
Welfare Plan that is a group health plan, as such term is defined in
Section 5000(b)(1) of the Code, complies in all material respects
with any applicable requirements of Part 6 of Title I of ERISA and
Section 4980B(f) of the Code and (ii) each such Welfare Plan
(including any such plan covering retirees or other former
employees) may be amended or terminated with respect to health
benefits without material liability to the Company on or at any time
after the Closing Date.
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(h) All contributions required by law or by a collective bargaining
or other agreement to be made under any Pension Plan, Welfare Plan
or Benefit Plan of the Company with respect to all periods through
the Closing Date, including a pro rata share of contributions due
for the current plan year, will have been made by such date or
provided for by adequate reserves by the Company. No changes in
contribution rates or benefit levels have been implemented or
negotiated (but not yet implemented), with respect to any Pension
Plan, Welfare Plan or Benefit Plan of the Company since the date on
which the information provided in the attached Schedule has been
provided, and no such changes are scheduled to occur.
(i) The Company has not, nor will the Company have, any liability or
obligation for taxes, penalties, contributions, losses, claims,
damages, judgments, settlement costs, expenses, costs, or any other
liability or liabilities of any nature whatsoever arising out of or
in any manner relating to any Pension Plan, Welfare Plan or Benefit
Plan (including but not limited to employee benefit plans such as
foreign plans which are not subject to ERISA), that has been, or is,
contributed to by any entity, whether or not incorporated, which is
deemed to be under common control (as defined in Section 414 of the
Code), with the Company.
3.19 CONFORMITY WITH LAW.
(a) The Company has complied with, and the Company is not in
material default under, any law, rule, ordinance, ruling, directive,
or regulation or under any order, award, judgment or decree of any
court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having
jurisdiction over the Company or any of its assets or businesses;
there are no claims, actions, suits or Proceedings, pending or
threatened, against or affecting the Company, at law or in equity,
or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality
having jurisdiction over the Company or its business; and no notice
of any claim, action, suit or Proceeding, whether pending or
threatened, has been received by the Company.
(b) The Company has conducted and is conducting its business in
material compliance with the requirements, standards, criteria and
conditions set forth in applicable federal, state and local
statutes, ordinances, permits, licenses, orders, approvals,
variances, rules and regulations, including, without limitation, all
such laws, rules, ordinances, decrees and orders relating to
intellectual property protection, transportation, wage and hour,
antitrust matters, consumer protection, currency exchange,
environmental protection, equal employment opportunity, health and
occupational safety, pension and employee benefit matters,
securities and investor protection matters, labor and employment
matters, and trading-with-the-enemy matters.
(c) The Company has not received any notification of any asserted
present or past unremedied failure by it to comply with any of such
laws, rules, ordinances, decrees or orders.
17
3.20 TAXES. Except as set forth in Schedule 3.20:
(a) The Company has timely filed or, if not yet due, will timely
file all Tax Returns required to be filed by it on or before the
Closing Date and all such Tax Returns are or, in the case of Tax
Returns not yet filed, will be, true, correct and complete in all
material respects and the Company has paid when due all Taxes
reported thereon or, in the case of Taxes not yet due, will pay such
Taxes when due. All Taxes required to be paid by the Company
(whether or not shown on any Tax Return) have been paid on a timely
basis.
(b) Copies of (i) any Tax examinations, (ii) extensions of statutory
limitations, and (iii) the federal and local income Tax returns of
the Company for the most recent three (3) Tax years (or such shorter
period of time as the Company has existed) are attached as Schedule
3.20.
(c) The amounts shown as accruals for Taxes on the Interim Financial
Statements delivered to Parent as a part of Schedule 3.7(b) are
sufficient for the payment of all Taxes of the kinds indicated
(including penalties and interest) for all fiscal periods ended on
or before the Closing Date, the Company has reserved an amount
sufficient to pay all such Taxes, and the working capital of the
Company is sufficient to pay any such Tax applicable to it.
(d) No extension of time has been requested or granted for the
Company to file any Tax Return that has not yet been filed or to pay
any Tax that has not yet been paid and the Company has not granted a
power of attorney that remains outstanding with regard to any Tax
matter.
(e) The Company has complied in all respects with all applicable
Laws, rules and regulations relating to withholding Taxes and
information returns, including, without limitation, the withholding
and reporting requirements under Sections 1441 through 1464, 3401
through 3406, and 6041 through 6048 of the Code, as well as any
similar provisions under any other laws, and has, within the time
and manner prescribed by law, withheld from employee wages and other
payments and paid over to the proper government body all amounts
required to have been so withheld and paid.
(f) There is no pending or, to the knowledge of the Company or any
Seller, proposed Tax audit of the Company or any Seller with regard
to Tax Matters relating to the Company.
(g) The Parent has received copies of all material audit reports and
correspondence between the Company, or any Seller with regard to Tax
matters relating to the Company, and any Tax Authority issued or
made during the last three (3) years. A complete summary of all oral
communications between the Company or any Seller and any Tax
Authority relating to any Tax audits of the Company during such
years, including without limitation any Tax audit that is in
18
progress or for which a still effective extension of the statute of
limitations was granted.
(h) The Company has not received within the last four (4) years
notice of a Tax deficiency (or such shorter period of time as the
Company has existed) and, to the knowledge of the Company, no Tax
deficiency is pending or proposed, and no issue has been raised in
any Tax audit which, by application of similar principles to any
past, present or future period, would result in an adjustment to the
amounts reported in a subsequent period.
(i) There are no Liens, other than Permitted Exceptions, arising
from or related to Taxes on or ending against the Company or any of
its properties.
(j) There are no presently outstanding waivers or extensions or
requests for waiver or extension of the time within which a Tax
deficiency may be asserted or assessed.
(k) The Company has not changed any Tax accounting method during any
of the seven (7) most recent Taxable years ending on or before the
Closing Date, (or such shorter period of time as the Company has
existed). The Company has not taken any action, whether or not
required, that has resulted or will result in deferring a liability
for Taxes of the Company from any taxable period ending on or before
the Closing Date to any taxable period ending after such date,
unless such action is in accordance with past practice.
(l) The Company has never been required to include in income any
adjustment pursuant to section 481 of the Code and no Tax Authority
has ever made or proposed any such adjustment. The Company has never
entered into a closing agreement, as described in section 7121 of
the Code, or an advance pricing agreement or other agreement with a
Tax Authority relating to Taxes.
(m) The Company does not own any property that is tax-exempt use
property within the meaning of section 168(h) of the Code, that is
described in section 168(f)(8) of the Code as in effect prior to its
amendment by the Tax Reform Act of 1986, that is tax-exempt bond
financed property within the meaning of Section 168(g) of the Code
or that is "limited use property" within the meaning of Rev. Proc.
76-30.
(n) None of the property of the Company directly or indirectly
secures any debt the interest on which is tax exempt under section
103(a) of the Code.
(o) The Company is not a party to any arrangement to which sections
162(m) or 280G of the Code could under any circumstances apply.
(p) The Company is a partnership for federal income tax purposes,
and has been a partnership for federal income tax purposes
throughout its entire existence.
19
(q) The Company is not now or has never been (i) an includable
member, including a parent, of an "affiliated group" within the
meaning of section 1504(a) of the Code or otherwise liable for the
Taxes of a person other than itself pursuant to Treasury Regulation
section 1.1502-6 or any similar provision of state, local or foreign
law, whether or not as a transferee, a successor, by operation of
law, by contract or otherwise, (ii) a member of any consolidated,
combined or unitary Tax Return filing group, (iii) a party to any
Tax sharing agreement, Tax indemnity agreement or similar agreement,
arrangement or practice with respect to Taxes, including an
agreement that obligates it to make any payment computed by
reference to the Taxes, Taxable income or Tax losses of any other
individual or entity, (iv) the owner of a more than 50% interest, by
voting power or by value, in an entity treated as corporation for
federal income tax purposes, or the (v) the owner of an interest in
an entity that is or is treated as a Tax partnership, trust,
regulated investment company as defined in section 851 of the Code,
real estate investment trust as defined in section 856 of the Code
or foreign personal holding company as defined in section 552(a) of
the Code.
(r) The Company has disclosed on its federal, state, local and
foreign income Tax Returns all positions taken therein that could
give rise to a penalty under section 6662 of the Code or any
corresponding provision of state, local or foreign Tax law.
(s) No unresolved claim, and to the knowledge of the Company, no
claim has ever been made by a Tax Authority in a jurisdiction in
which the Company does not pay Taxes or file Tax Returns that such
entity is or may be subject to Tax in such jurisdiction.
(t) The Company has never requested a private ruling from a Tax
Authority on any matter.
(u) The Company has retained all supporting and backup papers,
receipts, spreadsheets and other information necessary for the
preparation of all Tax Returns that have not yet been filed and the
defense of Tax audits involving all Taxable periods either ended on
or during the six (6) years prior to the Closing Date (or such
shorter period of time as the Company has existed).
(v) The Company has collected and remitted to the appropriate Tax
Authorities all sales and use and similar Taxes required to have
been collected and remitted on or prior to the Closing Date and has
been furnished, and if required has filed, properly completed
exemption certificates for all exempt transactions. The Company has
maintained and has in its possession all records, supporting
documents and exemption and resale certificates required by
applicable sales Tax statutes and regulations to be retained in
connection with the collection and remittance of sales and use and
similar Taxes for all periods up to and including the Closing Date.
20
Each reference to a provision in this Section 3.20 shall be treated
for state, local and foreign Tax purposes as a reference to
analogous or similar provisions of state and local law.
3.21 COMPLETENESS. The certified copies of the Articles of Organization
and Operating Agreement, both as amended to date, of the Company and
the copies of all leases, instruments, agreements, licenses,
permits, certificates or other documents which are included on
schedules attached hereto or which have been delivered to Parent in
connection with the transactions contemplated hereby are complete
and correct; neither the Company nor any other Party hereto is in
default thereunder; except as set forth in the schedules and
documents attached to this Agreement, the rights and benefits of the
Company thereunder will not be adversely affected by the
transactions contemplated hereby; and the execution of this
Agreement and the performance of the obligations hereunder will not
violate or result in a breach or constitute a default under any of
the terms or provisions thereof. None of such leases, instruments,
agreements, contracts, licenses, permits, certificates or other
documents requires notice to, or the consent or approval of, any
governmental agency or other third party to any of the transactions
contemplated hereby to remain in full force and effect or give rise
to any right to termination, cancellation or acceleration or loss of
any right or benefit hereunder.
3.22 GOVERNMENT CONTRACTS. Except as set forth on Schedule 3.22, the
Company is not now, and has never been, a party to any governmental
contract subject to price redetermination or renegotiation.
3.23 ABSENCE OF CHANGES. Except as set forth in Schedule 3.23, since the
Balance Sheet Date, there has not been:
(a) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the
Company;
(b) any damage, destruction or loss (whether or not covered by
insurance), change in zoning, or change in any law, rule,
regulation, ordinance, or permit condition, materially adversely
affecting the properties or business of the Company;
(c) any change in the authorized or outstanding membership interests
of the Company or any grant of any options, warrants, calls,
conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the membership interests or any direct or indirect
redemption, purchase or other acquisition of any of the membership
interests of the Company;
(e) any bonus or any increase in the compensation, sales
commissions, fringe benefits or fee arrangement payable or to become
payable by the Company to any of its managers, managing members,
officers, employees, consultants or agents or any change in the
method by which sales commissions are calculated and paid;
21
(f) any work interruptions, labor grievances or claims filed or, to
any Seller Party's knowledge, any proposed law or regulation or any
event or condition of any character, materially adversely affecting
the business or future prospects of the Company;
(g) any sale or transfer, or any agreement to sell or transfer, any
assets, property or rights of the Company to any person;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in the assets, property
or rights of the Company or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
(j) any purchase or acquisition, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets of the
Company;
(k) any waiver of any material rights or claims of the Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a
party; or
(m) any transaction by the Company outside the ordinary course of
its business.
3.24 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY.
(a) The Company has delivered to Parent on Schedule 3.24 an accurate
list as of the date of this Agreement, of:
(1) the name of each financial institution in which the
Company has accounts or safe deposit boxes;
(2) the names in which such accounts or boxes are held;
(3) the type of accounts; and
(4) the name of each person authorized to draw thereon or have
access thereto.
(b) Schedule 3.24 also sets forth the name of each person,
corporation, firm or other entity holding a general or special power
of attorney from the Company or any of its subsidiaries and a
description of the terms of such power. Each such power has been or
will be canceled on or before the Closing Date.
3.25 PROPRIETARY RIGHTS. Except as set forth on Schedule 3.25, the
Company does not own or have any right or interest in any
Intellectual Property, or any license or
22
assignment with respect thereto. The Company has not granted to any
third party a license or other authorization to use any Intellectual
Property of the Company, and no third party owns any ownership
interest in or holds any claim, lien or other encumbrance, on the
Company's Intellectual Property. None of the Seller Parties has
received any notification that the Company has infringed upon or is
infringing upon, or has engaged in or is engaging in any
unauthorized use or misappropriation of, any Intellectual Property
owned by or belonging to any other person; and there is no pending
or threatened claim, and no basis for the assertion of any claim,
against the Company with respect to any such infringement,
unauthorized use or misappropriation. The Company has not entered
into any licensing agreements to use the Intellectual Property of
third parties, and does not owe to any third parties royalties for
the use of Intellectual Property.
3.26 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the Company and the performance of the transactions
contemplated herein have been duly and validly authorized and
approved by the managers and the members of the Company, and this
Agreement has been duly and validly authorized by all necessary
limited liability company action and is a legal, valid and binding
obligation of the Company and each Seller.
3.27 RELATIONS WITH GOVERNMENTS. Neither the Company, nor any member,
manager, director, officer, agent, employee or other person acting
on behalf of the Company, has used any funds of the Company for
improper or unlawful contributions, payments, gifts or
entertainment, or made any improper or unlawful expenditures
relating to political activity to domestic or foreign government
officials or others. The Company has adequate financial controls to
prevent such improper or unlawful contributions, payments, gifts,
entertainment or expenditures. Neither the Company, nor any member,
manager, director, officer, agent, employee or other person acting
on behalf of the Company, has accepted or received any improper or
unlawful contributions, payments, gifts or expenditures. The Company
has at all times complied, and is in compliance, in all material
respects, with the Foreign Corrupt Practices Act and in all material
respects with all foreign laws and regulations relating to
prevention of corrupt practices.
3.28 CONFLICTS OF INTEREST. Except as set forth on Schedule 3.28, neither
(a) any past or present officer, manager or member of the Company,
nor (b) any relative of any past or present officer, manager or
member of the Company, nor (c) any corporation, partnership, trust
or other entity of which any such past or present officer, manager
or member of the Company has a direct or indirect interest or is a
director, officer, member, manager, stockholder, partner or trustee,
is or has ever been a party, directly or indirectly, to any
transaction with the Company, including without limitation any
agreement or other arrangement providing for the furnishing of
services by or to the Company or the rental of any property from or
to the Company, or otherwise requiring or contemplating any payments
by or to the Company. Except as set forth on Schedule 3.28, neither
any present officer, manager or member of the Company, nor any
relative of any such officer, manager or member, owns directly or
indirectly any interest in any corporation,
23
firm, partnership, trust or other entity or business which is a
competitor, potential competitor, customer, client or supplier of
the Company or any related business. For purposes of this Section
3.28, competitors shall include, without limitation, persons or
entities engaged in waste transportation, recycling and/or disposal
operations. The Sellers do not own any legal or equitable interest
in, nor is any Seller the holder of liens on, any real property,
equipment, fixtures, vehicles, Intellectual Property, contract
rights, permits, licenses, accounts, general intangibles, or other
assets utilized by the Company in the operation of its businesses.
Except as set forth in Schedule 3.28, none of the Sellers has any
claims against, or are owed any amounts (including, without
limitation any bonuses, commissions, royalties, rentals or other
payments) by, the Company. Except as set forth in Schedule 3.28, no
Seller has incurred any liability, contingent or otherwise, to, nor
is any Seller indebted to, the Company.
3.29 ENVIRONMENTAL MATTERS. The Seller Parties have delivered to Parent
all of the correspondence, agreements, notices or other documents
related to the items set forth on Schedule 3.29. Schedule 3.29 also
contains a list of all disposal sites used by the Business since its
inception.
Except as set forth in Schedule 3.29:
(a) The Company and any property (whether real or personal) which is
or was formerly leased, used, operated, owned or managed in whole or
in part in any manner by the Company or any of its organizational
predecessors (individually, any "Business Facility", and
collectively, the "Business Facilities") and all operations of the
Company and its Business Facilities, are in material compliance and
have been in material compliance with all applicable Environmental
Laws;
(b) the Company and its Business Facilities have obtained and are in
compliance with all permits, licenses, registrations, approvals and
other authorizations (including all applications for all of the
foregoing) required under any Environmental Law for the business of
the Company as currently conducted (collectively, "Environmental
Permits"), and Schedule 3.29 contains an accurate and complete
listing of all of its Business Facilities and all of its
Environmental Permits of the Company;
(c) there is no past or present event, condition or circumstance
that may interfere with the conduct of the Company's business in the
manner now conducted relating to the Company's compliance with
Environmental Laws or which constitutes a violation thereof, or
which could have a material adverse effect upon the Company's
business, prospects or financial condition;
(d) during the term of the Company's ownership of or control of its
Business Facilities ("Ownership Term"), the Company and its Business
Facilities, and any operations thereon, have not been and are not
currently subject to an Environmental Claim;
24
(e) there are no Environmental Claims or investigations pending or
threatened, involving the release or threat of release of any
Polluting Substances from or on (i) any Business Facility of the
Company, or (ii) any other property where Polluting Substances
generated by the Company or originating from any Business Facility
of the Company have been recycled, stored, treated, released or
disposed, or (iii) any property to which Polluting Substances were
transported by the Company or (iv) any property on which the Company
performs or performed or may be required to perform Remediation;
(f) there are no Polluting Substances on any Business Facility of
the Company in an amount or concentration which would require
reporting to any governmental authority or Remediation to comply
with the requirements of Environmental Laws and which have not been
so reported;
(g) the Company has not undertaken Remediation or other
decontamination or cleanup of any facility or site or entered into
any agreement or extended any offer for the payment of costs
associated with such activity;
(h) the Company has filed all notices, notifications, financial
assurance, applications and all similar documents which are required
to be obtained or filed for the operation of its business or the use
or operation of any of its Business Facilities and has not received
any notification that such filings are incomplete or insufficient;
(i) there are no Environmental Claims for which the Company has
failed to notify its insurers within contractually required notice
periods or for which insurers have denied coverage or reserved their
rights to deny coverage;
(j) there are no false or misleading statements relating to the
Company or any of its Business Facilities in any current or prior
Environmental Permit that were made during the Ownership Term;
(k) the transactions contemplated by this Agreement will not require
the amendment or transfer of any of the Environmental Permits;
(l) the Company is not now, and to the best of each Seller Party's
respective knowledge, will not be in the future, as a result of the
operation or condition of any Business Facility of the Company or
the businesses thereon as conducted prior to or at Closing, subject
to any: (i) contingent liability in connection with any release or
threatened release of Polluting Substances into the environment
other than the normal or routine disposal of solid waste, whether on
or off the Properties or any Business Facility of the Company; (ii)
reclamation, decontamination or Remediation requirements under
Environmental Laws, or any reporting requirements related thereto,
except for ordinary closure requirements under Environmental Laws;
or (iii) consent order, compliance order or administrative order
relating to or issued under any Environmental Law;
25
(m) except as referenced in the Environmental Permits, there are no
obligations, undertakings or liabilities arising out of or relating
to Environmental Laws which the Company has agreed to, assumed or
retained, by contract or otherwise;
(n) there are no, nor to any Seller Party's respective knowledge,
have there ever been any, storage tanks on or under any Business
Facility of the Company, and any Business Facility of the Company
containing such tanks during the Ownership Term has been remediated
in compliance with all Environmental Laws;
(o) no drinking water intakes or water xxxxx exist within a two-mile
radius of any Business Facility of the Company, which could have an
adverse affect on the Environmental Permits or any other
governmental authorization;
(p) there are no polychlorinated biphenyls on or in the Properties
or any Business Facility of the Company or any equipment or fixtures
thereon; and
(q) there are no airports, flood plains, wetlands, fault areas or
seismic impact zones on or near any property of the Company which
could have a material effect on the Environmental Permits, any
governmental authorization or the assets of the Company.
3.30 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker,
person or firm has acted directly or indirectly on behalf of any
Seller Party in connection with this Agreement or the transactions
contemplated herein who will be entitled to any broker's or finder's
fee or any other commission or similar fee or expense, directly or
indirectly, in connection with this Agreement or the transactions
contemplated herein.
3.31 LITIGATION. Except as set forth in Schedule 3.31, there are no
Proceedings pending or, to the knowledge of the Seller Parties,
threatened against the Company, or challenging the validity or
propriety of the transactions contemplated by this Agreement or any
permit or other governmental authorization; to the knowledge of the
Seller Parties, there is no basis or ground for any such
Proceedings; and there is no outstanding order, writ, injunction or
decree of any court, administrative agency, governmental body or
arbitration tribunal against the Seller Parties or their respective
assets, which relates to or could have an effect on the Company. Set
forth on Schedule 3.31 are all Proceedings during the last five
years to which the Company was a party, or which, to the knowledge
of any Seller Party, were threatened against the Company, or which
relate in any manner to the assets of the Company.
3.32 DISCLOSURE. This Agreement and the schedules hereto and all other
documents and information furnished to Parent and its
representatives pursuant hereto do not and will not include any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements herein and therein not misleading.
If any Seller Party becomes aware of any fact or circumstance which
would
26
change a representation or warranty of the Seller Parties in this
Agreement or any representation made on behalf of the Seller
Parties, such Seller Party shall immediately give notice of such
fact or circumstance to Parent. Such notification shall not relieve
the Seller Parties of their obligations under this Agreement, and at
the sole option of Parent, the truth and accuracy of any and all
warranties and representations of the Seller Parties, or on behalf
of any of them, at the date of this Agreement and as of the Closing
Date, shall be a precondition to the consummation of this
transaction.
4. REPRESENTATIONS OF BUYER PARTIES
The Buyer Parties jointly and severally represent and warrant that all of
the following representations and warranties are true as of the date of this
Agreement and shall be true at the time of Closing:
4.1 DUE ORGANIZATION. Each of Parent and Buyer is duly organized,
validly existing and in good standing under the laws of the State of
Delaware and is duly authorized, qualified and licensed under all
applicable laws, regulations, and ordinances of public authorities
to carry on its business in the places and in the manner as now
conducted except for where the failure to be so authorized,
qualified or licensed would not have a material adverse effect on
its business.
4.2 EXECUTION. (a) The execution, delivery and performance of this
Agreement and the transactions contemplated hereby are duly and
validly authorized by all requisite corporate action on the part of
the Buyer Parties, and (b) this Agreement constitutes the legal,
valid and binding obligation of the Buyer Parties enforceable in
accordance with its terms.
4.3 CONFORMITY WITH LAW. Each of the Buyer Parties has the corporate
power and right to enter into and perform this Agreement and the
transactions contemplated herein. Neither Parent's nor Buyer's
execution of this Agreement nor the consummation of the transactions
contemplated herein violate or conflict with (a) any law, rule,
regulation, ordinance or decree applicable to the Buyer Parties; (b)
any provision of Parent's or Buyer's certificate of incorporation or
bylaws; or (c) any material agreement or instrument to which Parent
or Buyer is a party or by which it is bound.
4.4 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker,
person or firm has acted directly or indirectly on behalf of the
Buyer Parties in connection with this Agreement or the transactions
contemplated herein who will be entitled to any broker's or finder's
fee or any other commission or similar fee or expense, directly or
indirectly, in connection with this Agreement or the transactions
contemplated herein.
4.5 ACCESS TO INFORMATION; COUNSEL. The Buyer Parties have been provided
access to information concerning the Company, and have had the
opportunity to consult with counsel regarding this Agreement.
Notwithstanding the foregoing, the Buyer
27
Parties' investigation and representation by counsel shall not limit
or diminish the Buyer Parties' reliance upon the representations,
warranties and covenants set forth in this Agreement.
5. COVENANTS OF THE PARTIES
5.1 NOTICES AND APPROVALS. The Seller Parties shall timely give all
notices and request all approvals and assignments that may be
required under applicable law or any of the permits, agreements,
orders or other instruments to which the Company is bound, in
connection with the contemplated transaction.
5.2 ACCESS TO INFORMATION.
(a) On and after the date of this Agreement, the Seller Parties will
furnish to Parent such information with respect to the Company as
Parent shall reasonably request. Without limitation of the
foregoing, the Seller Parties shall (i) afford to Parent and its
officers, employees, accountants, consultants, counsel and other
authorized representatives reasonable access, throughout the period
prior to the earlier of the Closing Date or the date this Agreement
is terminated, to the Company's plants, properties (including,
without limitation, the Real Property), and books and records
relating to the Company; (ii) use its best efforts to cause its
representatives to furnish to Parent and its authorized
representatives such additional financial and operating data and
other information as to the Company as Parent or its duly authorized
representatives may from time to time reasonably request; and (iii)
afford Parent and its representatives reasonable access, throughout
the period prior to the Closing Date, to the Company's present and
potential customers relating to the Business, such that Parent may
conduct such due diligence investigation relating to customer
relations as Parent deems reasonably necessary or appropriate. The
Seller Parties hereby release, discharge and hold harmless each of
Parent and Buyer, any affiliate or subsidiary of Parent or Buyer,
and any officer, director, shareholder, employee, agent, attorney,
joint venturer, partner, servant, consultant, representative,
trustee, successor or assign of Parent or Buyer or of any of its
affiliates or subsidiaries, from all liability or claims by reason
of any such access or contact referred to in this Section 5.2,
except for any misuse by Parent or Buyer of such information.
(b) Parent and Buyer covenant and agree that, prior to the Closing,
all due diligence materials will be used solely for the purposes of
assessing the Company in connection with the Buyer Parties' possible
acquisition thereof pursuant to this Agreement, and that any other
use shall be strictly prohibited; provided, however, that following
the Closing, Parent and Buyer may use all such materials for any
purposes in their sole discretion.
5.3 COPIES OF AGREEMENTS. True and correct copies of all agreements
(including copies of all insurance agreements) relating to the
Company shall be delivered to Parent on the Closing Date.
28
5.4 RECORDS. The Seller Parties shall retain and maintain the records of
the Company in the normal course of business.
5.5 TAXES.
(a) From and after the Closing, upon written notice by Parent, the
Sellers shall pay to Parent or, at the Sellers' option, to the
Internal Revenue Service and/or federal, state or local, or foreign
Tax Authorities, as appropriate, and shall otherwise indemnify, save
and hold Parent, Buyer and the Company harmless from and against all
demands, claims, actions, causes of action, assessments, losses,
damages, liabilities, costs and expenses asserted against, resulting
to, imposed upon or incurred by Parent, Buyer or the Company with
respect to the Company which directly or indirectly relate to or
arise out of any Tax years (including partial years) on or prior to
the Closing Date with respect to any deficiencies assessed by the
Internal Revenue Service and/or federal, state and local, and
foreign Tax Authorities for any federal, state or local, or foreign
income, sales, ad valorem or other tax liability arising on or prior
to the Closing Date. The Sellers shall also be obligated under this
Section 5.5 for any assessment caused by any act or failure to act
on the part of any Seller after the date of this Agreement. Nothing
contained herein shall affect the Sellers' right to contest any Tax
liability in the manner set forth in the applicable statute.
(b) For purposes of this Agreement, Taxes of the Company incurred
with respect to a Taxable period that includes but does not end on
the Closing Date, shall be allocated to the portion of the period
ending on the Closing Date (A) except as provided in (B) and (C)
below, to the extent feasible, on a specific identification basis,
according to the date of the event or transaction giving rise to the
Tax, and (B) except as provided in (C) below, with respect to
periodically assessed ad valorem Taxes and Taxes not otherwise
feasibly allocable to specific transactions or events, in proportion
to the number of days in such period occurring before the Closing
Date compared to the total number of days in such period, and (C) in
the case of any Tax based upon or related to income or receipts, in
an amount equal to the Tax which would be payable if the relevant
taxable period ended on the Closing Date (for the elimination of
doubt, Taxes incurred by reason of the transactions contemplated by
this Agreement shall be allocated to the portion of the period
ending on the Closing Date). Any credits relating to a Taxable
period that begins before and ends after the Closing Date shall be
taken into account as though the relevant Taxable period ended on
the Closing Date.
(c) Notwithstanding any other provision of this Agreement, including
this Section 5.5, the Sellers shall be liable for and shall pay all
Taxes arising from, or related to, the transactions contemplated by
this Agreement, whether such Taxes are incurred by the Sellers, the
Company, Parent or Buyer.
5.6 COMPLIANCE WITH LAWS. The Seller Parties and the Buyer Parties shall
comply with all applicable laws as may be required for the sale and
transfer of the
29
Membership Interests and for the performance of all other acts and
things contemplated by this Agreement.
5.7 NOTICE OF BREACH. In the event of, and promptly after, the taking of
any action or occurrence or threatened occurrence of any event, the
taking of which would make untrue, inaccurate or misleading, or
would constitute or result in a breach or violation of, any of the
representations, warranties, covenants or agreements of a party set
forth herein, or would, if it had occurred prior to the date hereof,
make any representation or warranty made by such party herein
untrue, inaccurate or misleading, such party shall promptly give
written notice thereof to the other party.
5.8 REASONABLE EFFORTS. Each of the parties hereto agrees to use
reasonable efforts to take or cause to be taken all actions, and to
do or cause to be done all things reasonably necessary, proper or
advisable to satisfy promptly all conditions required hereby to be
satisfied by such party in order to consummate and make effective
the transactions contemplated hereby.
5.9 NOTIFICATION. The Seller Parties shall notify the Buyer Parties, and
the Buyer Parties shall immediately notify the Seller Parties, of
any litigation, arbitration or administrative proceeding pending or,
to any of their knowledge, threatened against the Seller Parties or
the Buyer Parties, as the case may be, which challenges the
transactions contemplated hereby.
5.10 INJUNCTIONS. If any United States, state or foreign court having
jurisdiction over any party issues or otherwise promulgates any
injunction, decree or similar order prior to the Closing which
prohibits the consummation of the transactions contemplated hereby,
the parties will use their respective reasonable efforts to have
such injunction dissolved or otherwise eliminated as promptly as
possible and, prior to or after the Closing, to pursue the
underlying litigation diligently and in good faith.
5.11 AUDIT. Parent, at its own cost and expense, will engage external
auditors to audit the Company's financial records (including up to
three years of historical data). The Sellers shall fully cooperate
with such audit and will assist in the completion of such audit,
including, without limitation, by providing, executing and
acknowledging all such documents that are necessary to complete the
audit (including having the Company's financial records converted,
if necessary and for Parent's use only, to accrual based accounting
financials in accordance with GAAP), and by making any
representations regarding the Business and the Company's financial
records, as may be reasonably requested by Parent or the external
auditors.
5.12 TAX RETURNS. With respect to any Tax Return, any audit or other
examination by any governmental authority after the Closing Date
which includes any period ending on or before the Closing Date,
Parent shall consult with the Sellers and the Sellers shall provide
Parent such assistance as necessary in connection with the
30
preparation of such Tax Return, audit or other examination or any
judicial or administrative proceeding relating to liability for
Taxes, and the Sellers will provide Parent with any records or
information related to the Company that may be relevant to any of
the foregoing. Parent shall file any Tax Return necessary with
regard to the transactions contemplated by this Agreement.
5.13 COOPERATION AND TRANSITION.
(a) The Parties shall cooperate in the transition of the Company and
the Business to the Buyer Parties, including by transferring the
books, records and accounts of the Company to the Buyer Parties and
by executing such additional instruments and taking such additional
acts as are reasonable and necessary. The Seller Parties shall use
reasonable efforts to assist the Buyer Parties in obtaining or
transferring Environmental Permits.
(b) Following the Closing Date, the Sellers shall be entitled to
receive all amounts collected in respect of the Assigned
Receivables, and all amounts collected and received by the Company
in respect of the Assigned Receivables shall be promptly remitted to
the Sellers. Following the Closing Date, the Sellers shall be liable
for and shall timely pay all amounts due under the Retained
Liabilities, and any invoices or demands received by the Company in
respect of the Retained Liabilities shall be promptly sent to the
Sellers.
(c) Immediately prior to the Closing, the Company shall distribute
all cash on hand of the Company as of the Closing Date to the
Sellers.
5.14 SELLERS' INVESTMENT REPRESENTATIONS AND COVENANTS.
(a) Each of the Sellers understands that neither the convertible
notes of Parent to be issued pursuant to this Agreement ("Notes")
nor the shares of Parent Common Stock to be issued to the Sellers
pursuant to this Agreement, including the shares of Parent Common
Stock to be issued upon conversion of the Notes (the "Shares") will
be registered under the Securities Act of 1933, as amended (the
"Securities Act") or any state securities laws and are being issued
pursuant to an exemption from registration pursuant to Section 4(2)
of the Securities Act or Regulation D promulgated under the
Securities Act and pursuant to similar provisions of applicable
state securities laws. Each of the Sellers understands that the
reliance of Parent on such exemptions is predicated in part on the
Seller's representations, warranties, covenants and acknowledgments
set forth in this Section 5.14.
(b) Each of the Sellers agrees that appropriate "stop-transfer"
instructions will be given to Parent's transfer agent regarding the
Shares and that the certificates representing the Shares shall be
stamped or otherwise imprinted with a restrictive legend
substantially similar to the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE
31
"ACT") AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN
RULE 144 OF THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER ACT, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF
THE ISSUER.
(c) Except as disclosed on the Investment Representations Schedule
attached hereto, each of the Sellers represents and warrants that
such Seller is an "accredited investor" as defined in Rule 501
promulgated under the Securities Act.
(d) Each of the Sellers represents and warrants that the Notes and
the Shares will be acquired by such Seller for such Seller's own
account, not as a nominee or agent, and without a view to resale or
other distribution within the meaning of the Securities Act and the
rules and regulations thereunder and that such Seller will not
distribute any of the Notes or the Shares in violation of the
Securities Act. In the event that Xxxxxx XxXxxxx desires to transfer
any of the Shares received by him pursuant to this Agreement to Xxx
Xxxxxxxx, such shares may only be transferred after complying with
the following conditions: (i) Xxx Xxxxxxxx shall execute and deliver
an agreement whereby he makes the investment representations of the
Sellers and agrees to abide and be bound by the covenants of the
Sellers set forth in subsections (a) through (i) of this Section
5.14 and shall provide such other information as reasonably
requested by Parent; (ii) such transfer shall be made pursuant to a
registration statement or an exemption from the registration
requirements of the Securities Act and any applicable state
securities laws, and (iii) Parent shall receive a legal opinion of
counsel reasonably acceptable to Parent described in Section 5.14(i)
hereof.
(e) Each of the Sellers represents and warrants that the address set
forth below such Seller's name in the Investment Representations
Schedule is such Seller's principal residence.
(f) Each of the Sellers (i) acknowledges that the Notes and the
Shares issued, or to be issued, to such Seller must be held
indefinitely by such Seller unless subsequently registered under the
Securities Act or an exemption from registration is available, (ii)
is aware that any routine sales of Shares made pursuant to Rule 144
under the Securities Act may be made only in limited amounts and in
accordance with the terms and conditions of that Rule and that in
such cases where the Rule is not applicable, compliance with some
other registration exemption will be required, and (iii) is aware
that Rule 144 is not currently available for use by such Seller for
resale of any of the Notes or the Shares to be acquired by such
Seller pursuant to this Agreement.
32
(g) Each of the Sellers represents and warrants to Parent that such
Seller has such knowledge and experience in financial and business
matters such that such Seller is capable of evaluating the merits
and risks of such Seller's investment in any of the Shares to be
acquired by such Seller.
(h) Each of the Sellers confirms that he or it has received and read
(i) Parent's registration statement on Form S-1, as amended (ii)
Parent's quarterly report on Form 10-Q for the quarter ended June
30, 2004, and (iii) Parent's quarterly report on Form 10-Q for the
quarter ended September 30, 2004. Each of the Sellers also confirms
that Parent has made available to such Seller the opportunity to ask
questions of and receive answers from it concerning the terms and
conditions of such Seller's investment in the Shares, and the Seller
has received to such Seller's satisfaction, such additional
information, in addition to that set forth herein, about Parent's
operations and the terms and conditions of this Agreement as such
Seller has requested.
(i) In order to ensure compliance with the provisions of this
Section 5.14, each Seller agrees that after the Closing Date such
Seller will not sell or otherwise transfer or dispose of the Notes
or the Shares or any interest therein (unless such shares have been
registered under the Securities Act) without first complying with
either of the following conditions, the expenses and costs of
satisfaction of which shall be fully borne and paid for by such
Seller:
(A) Parent shall have received a written legal opinion from
legal counsel, which opinion and counsel shall be satisfactory
to Parent in the exercise of its reasonable judgment, or a
copy of a "no-action" or interpretive letter of the Securities
and Exchange Commission specifying the nature and
circumstances of the proposed transfer and indicating that the
proposed transfer will not be in violation of any of the
registration provisions of the Securities Act and the rules
and regulations promulgated thereunder; or
(B) Parent shall have received an opinion from its own
counsel, to the effect that the proposed transfer will not be
in violation of any of the registration provisions of the
Securities Act and the rules and regulations promulgated
thereunder, provided that if such Seller has complied with the
holding period and other requirements of Rule 144 under the
Securities Act in connection with such sale or transfer, such
opinion shall be furnished at Parent's expense.
This paragraph shall no longer be applicable to any Notes or Shares
following their transfer pursuant to a registration statement
effective under the Securities Act or if the opinion of counsel
referred to above is to the further effect that transfer
restrictions and the legend referred to herein are no longer
required in order to establish compliance with any provisions of the
Securities Act.
(j) The Parties agree that, upon a Seller's request, the restrictive
legend set forth in Section 5.14(b) may be removed from such
Seller's certificates evidencing
33
Shares in the following circumstances: (i) following any sale of
such Shares pursuant to Rule 144 under the Securities Act; (ii) if
such Shares are eligible for sale under Rule 144(k) under the
Securities Act; or (iii) if Parent receives a written opinion of
counsel reasonably satisfactory to Parent to the effect that such
legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Securities and Exchange
Commission); provided, however, that in connection with the issuance
of the Shares, each Seller hereby agrees to adhere to and abide by
all prospectus delivery requirements under the Securities Act and
rules and regulations of the Securities and Exchange Commission.
Parent agrees that, upon a Seller's written request to remove the
restrictive legend from such Seller's certificate evidencing such
Seller's Shares, which written request shall have been delivered to
Parent at a time when such restrictive legend is eligible for
removal under this Section 5.14(j), Parent will, reasonably promptly
following the delivery by a Seller to Parent or Parent's transfer
agent of the certificate representing the Shares issued with a
restrictive legend, deliver or cause to be delivered to such Seller
a certificate representing such Shares that is free from all
restrictive legends. Each Seller agrees that the removal of the
restrictive legend from certificates representing the Shares as set
forth in this Section 5.14(j) is predicated upon Parent's reliance
that no Seller will sell any Shares except pursuant to either the
registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption
therefrom.
(k) If the Company shall determine to prepare and file with the
Securities and Exchange Commission a registration statement on Form
S-3 or its successor form (each as promulgated under the Securities
Act) relating to an offering of shares of the Company's Common Stock
under the Securities Act in which any of its directors or executive
officers are selling security holders other than with respect to any
equity securities issuable in connection with stock option or other
employee benefit plans of the Company, then the Company shall send
to each Seller who holds Shares a written notice of such
determination and, if within fifteen days after the date of such
notice, any such Seller shall so request in writing, the Company
shall include in such registration statement all or any part of the
Shares held by such Seller that such Seller requests to be
registered on and subject to the same terms and conditions as
applicable to Parent's directors and officers who are selling
security holders under such registration statement, including but
not limited to any underwriting cutbacks, furnishing of information
and liability and indemnification therefore and allocation of costs
and expenses of registration; provided, that, the Company shall not
be required to register any Shares pursuant to this Section 5.14(k)
that are eligible for resale pursuant to Rule 144 or Rule 144(k)
promulgated under the Securities Act or that are the subject of a
then effective registration statement.
6. NONCOMPETITION
6.1 PROHIBITED ACTIVITIES:
34
(a) Except as set forth in the following paragraph, none of the
Sellers (the "Restricted Parties"), shall for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in
conjunction with any other person, company, partnership, corporation
or business of whatever kind or nature, engage, as an officer,
director, shareholder, owner, member, partner, joint venturer,
lender or in any other capacity, whether as an employee, independent
contractor, consultant, advisor, or otherwise, or as a sales
representative, of any business in direct or indirect competition
with the Company, Parent or any Affiliate of Parent located *** (the
"Non-Compete Area").
(b) Notwithstanding the foregoing provisions of this paragraph (a)
each Restricted Party may (i) be a passive investor owning no more
than five percent (5%) of the outstanding equity securities of any
corporation or other entity the equity securities of which are
listed on a national securities exchange or traded on the NASDAQ
National Market System and with which such persons have no other
connection whatsoever and/or (ii) invest in or act as an employee
of, consultant for, or hold another position with, Parent;
(c) The Restricted Parties shall not, and each of them shall cause
each of his Affiliates not to, offer to employ any person (other
than Xxxxxx Xxxxxxx or Xxxxx Xxxxxxx) who is, at that time, or who
has been within one (1) year prior to that time, an employee of the
Company;
(d) With respect to operations or transactions in the Non-Compete
Area, the Restricted Parties shall not, and each of them shall cause
his Affiliates to not, engage or participate in any effort or act to
solicit or induce any customer, supplier, associate, employee, sales
or other agent, independent contractor, or other person in a
business relationship with Parent or which has been a customer,
supplier, associate, employee, sales or other agent, independent
contractor, or other person in a business relationship with Parent
within *** prior to that time, to discontinue such relationship with
Parent or to take any action which might be disadvantageous to
Parent or not to take any action which might be advantageous to
Parent;
(e) With respect to operations or transactions in the Non-Compete
Area, none of the Restricted Parties shall, for any reason
whatsoever, directly or indirectly for himself or on behalf of or in
conjunction with any other person, company, partnership, corporation
or business of whatever kind or nature, call upon any prospective
acquisition candidate of such persons, on such persons' behalf or on
behalf of any competitor, which candidate was either called upon by
or for which Parent or its Affiliates made an acquisition analysis,
for the purpose of acquiring such entity.
(f) The time period for the restrictions set forth in this Article 6
shall be *** after the Closing Date.
35
6.2 DAMAGES. The Restricted Parties each acknowledge that the damages
that would be suffered by the Buyer Parties and the Company as a
result of any breach of the provisions of this Article 6 may not be
calculable and that an award of a monetary judgment for such a
breach would be an inadequate remedy. Consequently, the Buyer
Parties and the Company shall have the right, in addition to any
other rights they may have, to obtain, in any court of competent
jurisdiction, injunctive relief to restrain any breach or threatened
breach of any provision of this Article 6 or otherwise to
specifically enforce any of the provisions hereof, and none of the
Buyer Parties or the Company shall be obligated to post a bond or
other security in seeking such relief. This remedy is in addition to
damages directly or indirectly suffered by the Buyer Parties and
reasonable attorneys fees.
6.3 INDEPENDENT COVENANT. All of the covenants contained in this Article
6 shall be construed as an agreement independent of any other
provision of this Agreement, and the existence of any claim or cause
of action of the Restricted Parties against either of the Buyer
Parties, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Buyer Parties of
such covenants.
6.4 MATERIALITY AND ENFORCEABILITY. The Restricted Parties each agree
that the covenants contained in this Article 6 are a material and
substantial part of this transaction. The Parties agree that a
portion of the consideration paid by the Buyer Parties pursuant to
this Agreement is in exchange for the covenants contained in this
Article 6, and therefore, the duration and area for which the
covenants in this Article 6 are to be effective are reasonable. In
the event that any court finally determines that the time period or
the geographic scope of any such covenant is unreasonable or
excessive and any covenant is to that extent made unenforceable, the
Parties agree that the restrictions of this Article 6 shall remain
in full force and effect for the greatest time period and within the
greatest geographic area that would not render it unenforceable. The
Parties intend that each of the covenants in Article 6 shall be
deemed to be a separate covenant.
7. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.1 SURVIVAL OF COVENANTS, REPRESENTATIONS, AND WARRANTIES. Except as
set forth below in respect of certain representations and warranties
of the Seller Parties (as defined in Article 3), the covenants,
representations and warranties of the Parties contained in this
Agreement shall survive the Closing hereunder and continue in full
force and effect for the longer of (a) ***, or (b) the expiration of
the statute of limitations applicable to such representation,
warranty or covenant, and thereafter shall terminate ("Expiration
Date"). Notwithstanding the foregoing, (x) the indemnification
obligations for any misrepresentations contained in Sections 3.18
and 3.20 shall survive the Closing and shall continue in full force
until the later of (i) the date upon which the liability to which
any such Tax claim may relate is barred by all applicable statutes
of limitation, taking into account any extensions or waivers
thereof; or (ii) the date upon which any claim for refund or credit
36
related to such Tax claim is barred by all applicable statutes of
limitation, (y) the indemnification obligations for any
misrepresentations contained in Sections 3.29 shall survive the
Closing hereunder and continue in full force and effect for ***, and
(z) the indemnification obligations for any misrepresentations
contained in Sections 3.3 shall survive the Closing hereunder and
continue in full force and effect forever thereafter, without
limitation as to time.
7.2 INDEMNIFICATION BY THE SELLERS. The Sellers jointly and severally,
unconditionally, absolutely and irrevocably agree to and shall
defend, indemnify and hold harmless the Buyer Parties and the
Company, and each of their respective subsidiaries, shareholders,
affiliates, officers, directors, employees, counsel, agents,
successors, assigns heirs and legal and personal representatives
(the Buyer Parties, the Company and all such persons or entities are
collectively referred to as "Buyer's Indemnified Persons") from and
against, and shall reimburse Buyer's Indemnified Persons for, each
and every Loss paid, imposed on or incurred by Buyer's Indemnified
Persons, directly or indirectly, relating to, resulting from or
arising out of: (a) any inaccuracy in any representation or warranty
of the Seller Parties under this Agreement, or the Schedules hereto,
whether or not Buyer's Indemnified Persons relied thereon or had
knowledge thereof, or any breach or nonfulfillment of any covenant,
agreement or other obligation of the Seller Parties under this
Agreement or any agreement or document delivered pursuant hereto;
(b) all liabilities of the Company on or prior to the Closing Date,
including, but not limited to claims, demands and causes of action
against the Company and/or the Buyer Parties arising from or related
to the ownership or operation of the assets of the Company and the
Business on or prior to the Closing Date; (c) all Environmental
Claims arising with respect to facts, conditions, events, operations
and circumstances existing on or prior to the Closing Date; (d) the
Retained Liabilities; and (e) any other facts or circumstances in
any manner relating to the period ending on the Closing Date.
7.3 INDEMNIFICATION BY THE BUYER PARTIES. After the Closing Date, the
Buyer Parties unconditionally, absolutely and irrevocably agrees to
and shall defend, indemnify and hold harmless the Sellers and their
respective counsel, agents, contractors, successors, assigns, heirs
and legal and personal representatives (the Sellers and such persons
are collectively referred to as the "Sellers' Indemnified Persons")
from and against, and shall reimburse the Sellers' Indemnified
Persons for, each and every Loss paid, imposed on or incurred by the
Sellers' Indemnified Persons, directly or indirectly, relating to,
resulting from or arising out of (a) any inaccuracy in any
representation or warranty of the Buyer Parties under this
Agreement, whether or not the Sellers' Indemnified Persons relied
thereon or had knowledge thereof, or any breach or nonfulfillment of
any covenant, agreement or other obligation of the Buyer Parties
under this Agreement or any agreement or document delivered pursuant
hereto; (b) all liabilities of the Company arising after the Closing
Date that are not attributable to the period of time on or prior to
the Closing Date, including, but not limited to claims, demands and
causes of action against the Company and/or the Buyer Parties
arising from or related to the ownership or operation of the Company
after the Closing Date; (c) all
37
Environmental Claims arising with respect to facts, conditions,
events, operations and circumstances arising solely after the
Closing Date; provided, however, that in the event of any
Environmental Claim that arises with respect to facts, conditions,
events, operations and circumstances arising both before and after
the Closing Date, the Buyer Parties' indemnification obligations
shall be limited to such matters arising with respect to facts,
conditions, events, operations and circumstances after the Closing
Date; and (d) any other facts or circumstances in any manner
relating to the period after the Closing Date.
7.4 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS.
If any Proceeding shall be brought or asserted under this Article 7
against an indemnified party or any successor thereto (the
"Indemnified Person") in respect of which indemnity may be sought
under this Article 7 from an indemnifying person or any successor
thereto (the "Indemnifying Person"), the Indemnified Person shall
give prompt written notice of such Proceeding to the Indemnifying
Person who shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified
Person and the payment of all expenses; provided, that any delay or
failure to so notify the Indemnifying Person shall relieve the
Indemnifying Person of its obligations hereunder only to the extent,
if at all, that it is prejudiced by reason of such delay or failure.
In no event shall any Indemnified Person be required to make any
expenditure or bring any cause of action to enforce the Indemnifying
Person's obligations and liability under and pursuant to the
indemnifications set forth in this Article 7. In addition, the
filing of a Proceeding shall not be required as a condition or
prerequisite to the Indemnifying Person's obligations under this
Article 7, if the Indemnified Person is required to expend sums for
investigation or remedial purposes as a result of a threatened
Proceeding. The Indemnified Person shall have the right to employ
separate counsel in any of the foregoing Proceedings and to
participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Indemnified Person
unless the Indemnified Person shall in good faith determine that
there exist actual or potential conflicts of interest which make
representation by the same counsel inappropriate. The Indemnified
Person's right to participate in the defense or response to any
Proceeding should not be deemed to limit or otherwise modify its
obligations under this Article 7. In the event that the Indemnifying
Person, within 15 days after notice of any such Proceeding, fails to
assume the defense thereof, the Indemnified Person shall have the
right to undertake the defense, compromise or settlement of such
Proceeding for the account of the Indemnifying Person, subject to
the right of the Indemnifying Person to assume the defense of such
Proceeding with counsel reasonably satisfactory to the Indemnified
Person at any time prior to the settlement, compromise or final
determination thereof. Anything in this Article to the contrary
notwithstanding, the Indemnifying Person shall not, without the
Indemnified Person's prior written
38
consent, settle or compromise any Proceeding or consent to the entry
of any judgment with respect to any Proceeding for anything other
than money damages paid by the Indemnifying Person. The Indemnifying
Person may, without the Indemnified Person's prior written consent,
settle or compromise any such Proceeding or consent to entry of any
judgment with respect to any such Proceeding that requires solely
the payment of money damages by the Indemnifying Person and that
includes as an unconditional term thereof the release by the
claimant or the plaintiff of the Indemnified Person from all
liability in respect of such Proceeding. The Indemnified Person
shall not, without the Indemnifying Person's prior written consent,
settle or compromise any Proceeding or consent to the entry of any
judgment with respect to any Proceeding. Notwithstanding the
foregoing, if the Indemnified Person reasonably believes that the
pendency of such Proceeding would have a material adverse effect on
the Indemnified Person, the Indemnified Person may, after delivering
written notice of such proposed action to the Indemnifying Person,
settle or compromise any such Proceeding or consent to entry of any
judgment with respect to any such Proceeding without the
Indemnifying Person's prior written consent; provided, however,
that, if within seven (7) days after receipt by the Indemnifying
Person of such written notice from the Indemnified Person, the
Indemnifying Person delivers written notice to the Indemnified
Person to the effect that the Indemnifying Person disputes its
liability, or the amount thereof, in respect of such Proceeding, the
Indemnifying Person shall be liable for indemnification with respect
to such Proceeding to the extent of the lesser of: (i) the amount of
the Loss in respect of such Proceeding and the settlement thereof or
(ii) the amount of Loss for which the Indemnifying Person would have
been liable under this Agreement in the event that the Indemnified
Person had not settled such Proceeding without the Indemnifying
Person's prior written consent.
Notwithstanding anything to the contrary in this Article 7, the
Sellers shall not have any obligation to provide indemnification
under this Agreement until the aggregate amount of the Buyer
Indemnified Persons' Loss shall exceed $***, provided that the
Sellers' indemnity obligations shall be for every dollar of the
Buyer Indemnified Persons' Loss up to $*** (the "Maximum
Indemnification Amount").
7.5 PAYMENT AND INTEREST. The Indemnifying Person shall make any payment
required to be made under this Section 7.5 in immediately available
funds and on demand. Any amounts or payments required to be paid by
an Indemnifying Person under this Section 7.5 which are not paid
within fifteen (15) business days of receipt by the Indemnifying
Person of the Indemnified Person's demand therefor shall thereafter
be deemed delinquent, and the Indemnifying Person shall pay to the
Indemnified Person immediately upon demand, interest at the lesser
of six percent (6%) per annum or the highest amount allowed by Texas
law, from the date such payment becomes delinquent to the date of
payment of such delinquent sums.
7.6 NEGLIGENCE AND STRICT LIABILITY. WITHOUT LIMITING OR ENLARGING THE
SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE PARTIES HERETO SHALL BE ENTITLED TO INDEMNIFICATION
IN ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS
OR CLAIM GIVING
39
RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE STRICT
LIABILITY OF THE PARTY INDEMNIFIED. THE INDEMNIFIED PARTY SHALL BE
ENTITLED TO INDEMNIFICATION WITH RESPECT TO LOSSES OR CLAIMS ARISING
IN PART FROM THE NEGLIGENCE OF THE INDEMNIFIED PARTY; PROVIDED THAT
THE INDEMNIFIED PARTY SHALL NOT BE ENTITLED TO INDEMNIFICATION FOR
THAT PERCENTAGE OF A LOSS OR CLAIM ATTRIBUTABLE TO THE INDEMNIFIED
PARTY'S NEGLIGENCE. THE PARTIES AGREE THAT THIS PARAGRAPH
CONSTITUTES A CONSPICUOUS LEGEND.
8. BUYER PARTIES' CONDITIONS TO CLOSING.
Unless waived, in whole or in part, in writing by Parent, the obligations
of the Buyer Parties to effect the transactions contemplated hereby and in the
other agreements referred to herein shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Seller Parties in this Agreement and the
disclosures contained in the exhibits and schedules to this
Agreement shall be true in all material respects at and as of the
Closing, and the Buyer Parties shall have received a certificate
from the Seller Parties dated as of the Closing Date to that effect.
8.2 COMPLIANCE WITH CONDITIONS. The Seller Parties shall have performed
and complied with all agreements, covenants and conditions in this
Agreement required to be performed and complied with by them before
the Closing. All requisite action in order to consummate this
Agreement shall be properly taken by the Seller Parties, and the
Buyer Parties shall have received a certificate from the Seller
Parties dated as of the Closing Date to that effect.
8.3 SUIT OR PROCEEDING. No suits or proceedings, legal or
administrative, relating to any of the transactions contemplated by
this Agreement shall be overtly threatened or commenced that, in the
sole discretion of Parent and its counsel, would make it inadvisable
for Parent or Buyer to consummate the transactions contemplated by
this Agreement.
8.4 CONSENTS AND APPROVALS.
(a) All consents, waivers, novations, authorizations and approvals
of any governmental or regulatory authority, and any other consents,
waivers, novations, authorizations and approvals required by the
Buyer Parties in connection with: (i) the execution, delivery and
performance by the Seller Parties of this Agreement; and (ii) the
other agreements and instruments delivered by the Seller Parties
under this Agreement shall have been duly obtained and shall be in
full force and effect at the Closing Date;
40
(b) Parent shall have received approval of this Agreement and the
issuance of the Shares hereunder by its Board of Directors, in its
sole discretion;
(c) Buyer shall have received approval of this Agreement by its
Board of Directors or its Managers, as the case may be, in their
sole discretion; and
(d) Parent shall have received approval of this Agreement by Xxxxx
Fargo Bank, N.A., as Administrative Agent pursuant to Parent's
credit facility.
8.5 MATERIAL ADVERSE CHANGE. As of the Closing, there shall have been no
material adverse change in the business, operations, prospects or
financial condition of the Company, nor shall there have been any
material change in the condition of the material assets of the
Company, and Parent shall have received a certificate from the
Seller Parties dated as of the Closing Date to both such effects.
8.6 ASSIGNMENT AND ASSUMPTION AGREEMENT. The Company and the Sellers
shall have executed an assignment and assumption agreement in form
and substance reasonably satisfactory to Parent pursuant to which
the Company shall assign to Sellers all of the Assigned Receivables
and the Sellers shall assume all of the Retained Liabilities.
8.7 RESIGNATIONS; RELEASES. The Buyer Parties shall have received a
written instrument signed by each of the managing members, managers,
directors and officers, as applicable, of the Company resigning as
such from the Company effective as of the Closing Date. The Buyer
Parties also shall have received a written release of the Buyer
Parties and the Company from each Seller, which release shall be in
form and substance reasonably satisfactory to Parent.
8.8 PERMITS AND LICENSES. The Seller Parties shall have provided
evidence satisfactory to Parent that, as of the Closing Date, all
permits, licenses and governmental approvals of whatever kind and
nature necessary for the current and continued future operation of
the Company's business as presently conducted shall have been
granted, are in full force and effect, and will continue to be in
full force and effect after the Closing.
8.9 CLEARANCE CERTIFICATES. The Company and the Sellers, as the case may
be, shall have provided Parent with a clearance certificate or
similar document(s) which may be required by any state or foreign
taxing authority in order to relieve Parent of any obligation to
withhold any portion of the Purchase Price.
8.10 AFFIDAVIT. Each of the Sellers shall have furnished Parent with an
affidavit stating, under penalty of perjury, their respective
taxpayer identification numbers and that each Seller is not a
foreign person pursuant to Section 1445(b)(2) of the Code.
8.11 SATISFACTORY COMPLETION OF DUE DILIGENCE INVESTIGATION. Parent shall
have completed an investigation of the business, contracts, legal
documents, assets and financial books and records of the Company at
its sole cost and expense, and
41
Parent shall be satisfied, in its sole and absolute discretion, with
the results thereof.
9. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE
The obligations of the Seller Parties to close under this Agreement is
subject to the following conditions (any one of which, at the option of the
Seller Parties, may be waived in writing by the Seller Parties) existing on the
Closing Date.
9.1 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Buyer Parties in this Agreement shall be true in
all material respects at and as of the Closing Date as though each
such representation and warranty was made and delivered at and as of
the Closing Date, and the Seller Parties shall have received a
certificate from the Buyer Parties dated the Closing Date to that
effect.
9.2 COMPLIANCE WITH CONDITIONS. Each of the Buyer Parties shall perform
and comply with all agreements, covenants and conditions in this
Agreement required to be performed and complied with by it before
Closing, and the Seller Parties shall have received a certificate
from the Buyer Parties dated the Closing Date to that effect.
9.3 SUIT OR PROCEEDING. No suits or proceedings, legal or
administrative, relating to any of the transactions contemplated by
this Agreement shall be overtly threatened or commenced that, in the
reasonable discretion of the Seller Parties and their counsel, would
make it inadvisable for the Seller Parties to consummate the
transactions contemplated by this Agreement.
10. CLOSING DELIVERIES
10.1 DELIVERIES BY THE SELLERS. At the Closing, the Seller Parties shall
deliver the following, all duly executed, to the Buyer Parties:
(a) the certificates for all issued and outstanding membership
interests, validly endorsed for transfer by the applicable Seller or
accompanied by validly executed membership interest transfer powers,
and subject only to the following restrictive legend, if any:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER FEDERAL OR STATE SECURITIES LAWS, AND WERE ACQUIRED
BY THE REGISTERED HOLDER PURSUANT TO A REPRESENTATION THAT SUCH
HOLDER WAS ACQUIRING SUCH SECURITIES FOR INVESTMENT. THE SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
FEDERAL OR STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED THEREUNDER. ANY TRANSFER CONTRARY TO SUCH RESTRICTION
IS VOID.;
(b) the Resignations and Releases, as provided in Section 8.7;
42
(c) the Assignment and Assumption Agreement, as provided in Section
8.6;
(d) such resolutions and authorizations by the managers and the
members of the Company as are necessary or required by Parent in
connection with this transaction and including a certificate dated
as of the Closing Date duly executed by the Secretary of the Company
certifying as to incumbency, specimen signatures, and the
resolutions of the Managers and the Members duly authorizing this
Agreement and the transactions contemplated hereby;
(e) Officer's certificates, reasonably satisfactory in form and
substance to Parent, executed by the appropriate member or manager
of the Company, and certifying, as of the Closing Date, (i) that the
Company's representations herein are true and correct, (ii) that the
Company has performed its covenants hereunder in all material
respects (unless waived by Parent in writing) and (iii) as to the
absence of any material adverse change;
(f) wiring instructions duly executed by the Sellers directing
Parent as to the proper payment of the cash portion of the Purchase
Price and mailing instructions duly executed by the Sellers
directing Parent as to the proper delivery of the stock portion of
the Purchase Price;
(g) a compact disc containing all manual and automated routing and
billing information, data and components thereof related to the
Company in a machine readable format;
(h) all other documents, instruments and writings reasonably
requested by Parent to be delivered by the Seller Parties at or
prior to the Closing;
(i) a release in the form attached hereto as Exhibit B, duly
executed by the Sellers releasing Parent and its Affiliates from any
and all claims that the Sellers may have against Parent, its
Affiliates or the Company (exclusive of any claims arising pursuant
to this Agreement); and
(j) an affidavit from each of the Sellers stating, under penalty of
perjury, such Seller's taxpayer identification number and that such
Seller is not a foreign person pursuant to Section 1445(b)(2) of the
Code.
10.2 DELIVERIES BY THE BUYER PARTIES.
(a) At the Closing, the Buyer Parties shall deliver to the Seller
Parties the cash portion of the Purchase Price, by wire transfer or
other form of immediately available funds.
(b) Promptly after the Closing Date, Parent shall cause to be
executed and delivered to the Sellers certificates representing the
shares of Parent Common Stock to be delivered to the Sellers as
contemplated in Section 2.1(a)(2) of this Agreement.
43
11. CERTAIN DEFINITIONS
"Affiliate" means (a) any entity directly or indirectly controlled by,
controlling or under common control with a Party; (b) any director or
executive officer of such party or of any entity referred to in (a) above;
and (c) if any Party in (a) above is an individual, any member of the
immediate family (including parents, spouse and children) of such
individual and any trust whose principal beneficiary is such individual or
one or more members of such immediate family and any person or entity who
is controlled by any such member or trust. For purposes of this
definition, any person or entity which owns directly or indirectly 10% or
more of the securities having ordinary voting power for the election of
directors or other governing body of a corporation or 10% or more of the
partnership or other ownership interests of any entity (other than as a
limited partner of such other entity) will be deemed to "control"
(including, with its correlative meanings, "controlled by" and "under
common control with") such entity or person.
"Code" means the Internal Revenue Code of 1986, as amended.
"Disposal" or "disposed" means the discharge, deposit, injection, dumping,
spilling, leaking or placing of any Polluting Substance into or on any
land or water so that such Polluting Substance or any constituent thereof
may enter the environment or be emitted into the air or discharged into
any waters, including ground waters.
"Environmental Claim(s)" means all claims, liabilities, notices, actions,
causes of action (arising under common law, contract or statute), suits,
judgments, demands, liens, governmental or private investigations or
testing, demands to study or notification of status of being potentially
responsible for clean-up of any facility or for being in violation or in
potential violation of any requirement of Environmental Law, whether
threatened, sought, brought or imposed relating to or which seeks to
impose liability or to recover damages, losses, payments, penalties,
costs, fines, penalties, disbursements or expenses (including, without
limitation, fees disbursements and expenses of attorneys and other
professional advisors and of expert witnesses and costs of investigation,
testing and preparation) regarding the Company, any of its Business
Facilities, its assets or any operations conducted by the Company for: (a)
improper use or treatment of wetlands, pinelands or other protected land
or wildlife; (b) noise; (c) pollution, contamination, preservation,
protection, decontamination, remediation or clean-up of the air, surface
water, groundwater, soil or protected lands; (d) exposure of persons or
property to Polluting Substances and the effects thereof; (e) the release,
threatened release, generation, extraction, mining, presence, manufacture,
processing, distribution in commerce, use, handling, discharge, recycling,
management, transfer, transportation, treatment, storage, disposal or
remediation of Polluting Substances; (f) the implementation of spill
prevention and/or disaster plans relating to Polluting Substances; or (g)
maintaining, disclosing or reporting information to governmental
authorities or any third party under any Environmental Law. The term
"Environmental Claim" also includes any costs incurred in responding to
efforts to require or in testing for the need for Remediation and any
claim based upon any asserted or actual breach or violation of any
requirements of Environmental Law. An "Environmental Claim" further
includes a Proceeding to issue, modify, revoke or terminate an
Environmental Permit, or to adopt or
44
amend a regulation to the extent that such a Proceeding or occurrence
attempts to redress violations of any applicable Environmental Permit or
will impair the current financial condition of the Company or the ability
of the Company to conduct its business operations or to continue in
business as a going concern.
"Environmental Law(s)" means any and all federal, state and local laws,
ordinances, rules, regulations, operational memoranda, interpretations and
orders of courts or administrative agencies or authorities relating to
pollution, contamination, preservation, protection or cleanup of the
environment (including, without limitation, ambient air, surface water,
ground water, land surface, wildlife, wetlands and subsurface strata),
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; the Solid Waste
Disposal Act, as amended ("RCRA"); the Atomic Energy Act of 1954, as
amended; the Hazardous Materials Transportation Act, as amended; the Toxic
Substances Control Act, as amended; the Pollution Prevention Act of 1990,
as amended; the Emergency Planning and Community Right to know Act, as
amended; the Clean Air Act, as amended; the Clean Water Act, as amended;
the Oil Pollution Act of 1990, as amended; the Safe Drinking Water Act, as
amended; the Occupational Safety and Health Act, as amended; state
environmental laws in all jurisdictions in which any of the Company's
Business Facilities or other operations are located; all regulations
promulgated under any of the foregoing from time to time; and any and all
other laws, rules and regulations relating to (a) improper use or
treatment of wetlands, pinelands or other protected land or wildlife; (b)
noise; (c) pollution, contamination, preservation, protection,
decontamination, remediation or clean-up of the air, surface water,
groundwater, soil or protected lands; (d) exposure of persons or property
to Polluting Substances and the effects thereof; (e) the release,
threatened release, generation, extraction, mining, presence, manufacture,
processing, distribution in commerce, use, handling, discharge, recycling,
management, transfer, transportation, treatment, storage, disposal or
remediation of Polluting Substances; (f) the implementation of spill
prevention and/or disaster plans relating to Polluting Substances; or (g)
maintaining, disclosing or reporting information to governmental
authorities or any third party under any Environmental Law.
Notwithstanding the foregoing, if any Environmental Law is amended prior
to the Closing so as to broaden the meaning of the term defined in it,
such broader meaning shall apply subsequent to the effective date of such
amendment. Any specific references to a law shall include any amendments
to it promulgated from time to time.
"GAAP" means generally accepted accounting principles.
"Intellectual Property" means patents, trademarks, trade names,
copyrights, and trade secrets, processes, designs, inventions, methods,
formulas, and other know-how and technology that is not generally known
within the industry and lends a competitive advantage.
"Knowledge" of any party means any fact or circumstance of which such
party knows or reasonably should know.
45
"Loss" means any loss, damage, injury, decline in value, lost opportunity,
liability, claim, demand, Proceeding, settlement, judgment, award,
punitive damage, fine, penalty, tax, fee, charge, cost or expense
(including, without limitation, costs of attempting to avoid or in
opposing the imposition thereof, interest, penalties, costs of preparation
and investigation, and the reasonable fees, disbursements and expenses of
attorneys, accountants and other professional advisors), as well as with
respect to compliance with the requirements of Environmental Law or
Environmental Claims.
"Material" shall mean any matter or matters that, in the aggregate, either
(a) involves consideration by or to, or reasonably foreseeable liabilities
of, the Company in excess of the equivalent of $10,000.00, or (b) without
which the operation of the Company could not be conducted in its present
manner.
"Material Adverse Effect" shall mean any material adverse change in or
effect on, or any change that may reasonably be expected to have a
material adverse effect on, (a) the business, operations, assets,
liabilities, condition (financial or otherwise), results of operations, or
prospects of such person or (a) the ability of such person to consummate
the transactions contemplated by this Agreement or any related agreement
to which it is a party.
"Polluting Substances" means (a) any material, waste or substance
designated, classified, regulated or included within the statutory and/or
regulatory definitions of "hazardous substances," "radioactive material,"
"hazardous waste," "extremely hazardous substance," "hazardous chemical,"
"regulated substance," "contaminant," "pollutant," "hazardous material,"
or "toxic substance" under any Environmental Law; (b) any material, waste
or substance which is or contains hydrocarbons, petroleum, oil or a
fraction thereof; (c) radioactive material (including regulated naturally
occurring radioactive materials); (d) solid waste, as defined under RCRA,
that poses an imminent and substantial endangerment to health or the
environment; (e) such other substances, materials, or wastes that become
classified or regulated as hazardous or toxic under any federal, state or
local law or regulation from time to time; and (f) methane. To the extent
that the laws or regulations of any applicable state or local jurisdiction
establish a meaning for any term defined herein through reference to
federal Environmental Laws which is broader than the meaning under such
federal Environmental Laws, such broader meaning shall apply.
"Proceeding" means any action, suit, claim, investigation, review or other
judicial, administrative, arbitral, investigatory or other proceeding.
"Remediation" means any action necessary to bring about compliance with
the requirements of Environmental Law including (a) services of
professionals; (b) the removal and disposal, in situ remediation, or
containment (if containment is practical under the circumstances and is
permissible within requirements of Environmental Law), investigation, or
monitoring of any and all Polluting Substances at or on any Business
Facility of the Company; (c) the taking of reasonably necessary
precautions to protect against the release or threatened release of
Polluting Substances at, on, in, about, under, within or near the air,
soil, surface water, groundwater or soil vapor at any Business
46
Facility of the Company or any surrounding areas thereof; (d) any action
necessary to mitigate the usurpation of wetlands, pinelands or other
protected land or reclaim the same or to protect and preserve wildlife
species; (e) any action necessary to meet the requirements of an
Environmental Permit or (vi) any other action reasonably required to
satisfy requirements of Environmental Law imposed upon the Company, any of
its Business Facilities and/or any operation thereon.
"Tax" (including, with correlative meaning, "Taxes" and "Taxable") means
(i)(A) any United States or other federal, state, provincial, local or
foreign net income, gross income, business and occupation, admissions,
gross receipts, sales, use, value added, ad valorem, transfer, transfer
gains, franchise, profits, license, withholding, payroll, employment,
excise severance, stamp, rent, recording, occupation, premium, real or
personal property, intangibles, environmental or windfall profits tax,
alternative or add-on minimum tax, customs duty or other tax, fee, duty,
levy, impost, assessment or charge of any kind whatsoever (including but
not limited to taxes assessed to or on real property and water and sewer
rents relating thereto), together with (B) any interest and any penalty,
addition to tax or additional amount imposed by any governmental body
(domestic or foreign) (a "Tax Authority") responsible for the imposition
of any such tax; (ii) any liability for the payment of any amount of the
type described in the immediately preceding clause (i) as a result of
being a member of an affiliated, consolidated, unitary or combined group
with any other corporation at any time prior to the Closing Date; and
(iii) any liability for the payment of any amount of the type described in
the preceding clause (i) as a result of a contractual obligation to any
other person.
"Tax Return" means any report, return, or other information (including any
attached schedules or any amendments to such report, return, document,
declaration or any other information) required to be supplied to or filed
with any Tax Authority or jurisdiction (foreign or domestic) with respect
to any Tax, including an information return, any document with respect to
or accompanying payments or estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return document, declaration or other information.
12. GENERAL
12.1 COSTS. The Parties shall pay their respective expenses (including,
without limitation, the fees, disbursements and expenses of their
attorneys and accountants) in connection with the negotiation and
preparation of this Agreement and the consummation of the
transactions contemplated hereby; provided, however, that the
Sellers shall pay any filing fees, transfer taxes, sales taxes, or
other charges levied by any government entity on account of the
transactions contemplated by this Agreement.
12.2 ENTIRE AGREEMENT. This Agreement, together with all exhibits and
schedules hereto, each of which are hereby incorporated by this
reference and made a part hereof, embodies the entire agreement and
understanding between the parties hereto relating to the subject
matter hereof and supersedes any prior agreements and understandings
relating to the subject matter hereof.
47
12.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which collectively shall constitute one and the same instrument
representing this Agreement between the parties hereto, and it shall
not be necessary for the proof of this Agreement that any party
produce or account for more than one such counterpart. Facsimile
signatures shall be given the same force and effect as original
signatures and shall be treated for all purposes and intents as
original signatures.
12.4 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have
been duly given (i) on the day of service if served personally on
the party to whom notice is to be given, (ii) on the day of
transmission if sent via facsimile transmission to the facsimile
number given below, (iii) on the day after delivery to an overnight
courier service, or (iv) on the fifth day after mailing, if mailed
to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid and properly addressed, to
the party as follows:
If to a Seller Party: Gecko Investments, LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx Xxxxxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxxxx
If to a Buyer Party: WCA Waste Corporation
Xxx Xxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, President
Telecopy: 000-000-0000
Copy to: WCA Waste Corporation
Xxx Xxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: J. Xxxxxx Xxxxxx,
Vice President and General
Counsel
Telecopy: 000-000-0000
Any party may change its address for the purpose of this Section
12.4 by giving the other party written notice of its new address in
the manner set forth above.
12.5 MODIFICATION OR WAIVER. This Agreement may be amended, modified or
superseded, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, but only by a written
instrument executed by the parties hereto. No waiver of any nature,
in any one or more instances, shall be deemed to be or construed as
a further or continued waiver of any condition or any breach of any
other term, covenant, representation or warranty in this Agreement.
48
12.6 BINDING EFFECT AND ASSIGNMENT. Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the
other party hereto and any such attempted assignment without such
prior written consent shall be void and of no force and effect;
provided, however, that the Buyer Parties may assign any or all of
its rights hereunder, whether before or after the Closing Date, to
one or more of its subsidiaries or affiliates; provided further,
that no such assignment shall reduce or otherwise vitiate any of the
obligations of the Buyer Parties hereunder. This Agreement shall
inure to the benefit of and shall be binding upon the successors and
permitted assigns of the parties hereto.
12.7 GOVERNING LAW; VENUE.
(a) THIS AGREEMENT, AND ALL QUESTIONS RELATING TO ITS VALIDITY,
INTERPRETATION, PERFORMANCE AND ENFORCEMENT (INCLUDING, WITHOUT
LIMITATION, PROVISIONS CONCERNING LIMITATIONS OF ACTION), SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS (EXCLUSIVE OF THE CONFLICT OF LAW PROVISIONS THEREOF)
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE.
(b) IF ANY DISPUTE ARISES OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR THE TERMINATION THEREOF, OR THE RELATIONSHIP CREATED BY
OR DESCRIBED IN THIS AGREEMENT, THE PARTIES AGREE TO BRING SUIT UPON
ALL SUCH MATTERS THEN IN DISPUTE ONLY IN THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF TEXAS, OR, IF SAID COURT LACKS
DIVERSITY JURISDICTION, IN THE DISTRICT COURTS IN AND FOR XXXXXX
COUNTY, TEXAS.
(c) THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM
THEREIN.
(d) THE SELLER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
IN ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE SELLER AT ITS
ADDRESS SET FORTH IN SECTION 12.4 HEREIN, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING.
12.8 SECTION HEADINGS. The section headings contained in this Agreement
are inserted for convenience of reference only and shall not affect
the meaning or interpretation of this Agreement.
49
12.9 SEVERABILITY. If for any reason whatsoever, any one or more of the
provisions hereof shall be held or deemed to be illegal,
inoperative, unenforceable or invalid as applied to any particular
case or in all cases, such circumstances shall not have the effect
of rendering such provision illegal, inoperative, unenforceable or
invalid in any other case or of rendering any of the other
provisions hereof illegal, inoperative, unenforceable or invalid.
Furthermore, in lieu of each such illegal, invalid, unenforceable or
inoperative provision, there shall be added automatically, as part
of this Agreement, a provision similar in terms of such illegal,
invalid, unenforceable or inoperative provision as may be possible
and as shall be legal, valid, enforceable and operative.
12.10 DRAFTING. The parties acknowledge and confirm that they and/or their
respective attorneys have participated jointly in the review and
revision of this Agreement and that it has not been written solely
by any one party or counsel for any one party. The parties therefore
stipulate and agree that the rule of construction to the effect that
any ambiguities are to be or may be resolved against the drafting
party shall not be employed in the interpretation of this Agreement
to favor any party against another.
12.11 REFERENCES. The use of the words "hereof," "herein," "hereunder,"
"herewith," "hereto," "hereby," and words of similar import shall
refer to this entire Agreement, and not to any particular article,
section, subsection, clause, or paragraph of this Agreement, unless
the context clearly indicates otherwise.
12.12 CALENDAR DAYS, WEEKS, MONTHS AND QUARTERS. Unless otherwise
specified herein, any reference to "day," "week," "month" or
"quarter" herein shall mean a calendar day, week, month or quarter.
12.13 GENDER; PLURAL AND SINGULAR. Unless the context clearly indicates
otherwise, the singular shall include the plural and vice versa.
Whenever the masculine, feminine or neuter gender is used
inappropriately in this Agreement, this Agreement shall be read as
if the appropriate gender had been used.
12.14 CUMULATIVE RIGHTS. All rights and remedies specified herein are
cumulative and are in addition to, not in limitation of, any rights
or remedies the parties may have by statute, at law, in equity, or
otherwise, and all such rights and remedies may be exercised
singularly or concurrently.
12.15 NO IMPLIED COVENANTS. Each party, against the other, waives and
relinquishes any right to assert, either as a claim or as a defense,
that any other party is bound to perform or liable for the
nonperformance of any implied covenant or implied duty or implied
obligation.
12.16 INDIRECT ACTION. Where any provision hereof refers to action to be
taken by any person or party, or which such person or party is
prohibited from taking, such provision shall be applicable whether
the action in question is taken directly or indirectly by such
person or party.
50
12.17 ATTORNEYS' FEES. The prevailing party in any dispute between the
parties arising out of the interpretation, application or
enforcement of any provision hereof shall be entitled to recover all
of its reasonable attorneys' fees and costs whether suit be filed or
not, including without limitation costs and attorneys' fees related
to or arising out of any trial or appellate proceedings.
12.18 TIME OF THE ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
51
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above stated.
WCA WASTE CORPORATION, a Delaware
corporation
By: /s/ Xxx X. Xxxxx, Xx.
-----------------------------------
Name: Xxx X. Xxxxx, Xx.
Title: Chairman
WASTE CORPORATION OF MISSOURI, INC.,
a Delaware corporation
By: /s/ Xxxxx Xxxxx
-----------------------------------
Name: Xxxxx Xxxxx
Title: Vice President
GECKO INVESTMENTS, LLC, an Ohio limited
liability company
By: /s/ Xxxxxx Xxxxxxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxxxxxx
Title: President
/s/ Xxxxxx Xxxxxxxxxxx
---------------------------------------
XXXXXX XXXXXXXXXXX
/s/ Xxxxxx X. Xxxxx
---------------------------------------
XXXXXX X. XXXXX
/s/ Xxxxxx X. XxXxxxx
---------------------------------------
XXXXXX X. XXXXXXX
52
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above stated solely for the purpose of joining in, making and
agreeing to the representations and covenants contained in subsections (a)
through (i) of Section 5.14 of this Agreement as if the undersigned were, solely
for purposes of such sections, a "Seller."
/s/ Xxxxxxx Xxxxxxx
---------------------------
XXXXXXX XXXXXXX
53
EXHIBIT A
THIS NOTE IS SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN ARTICLE 2 BELOW.
THIS NOTE AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES 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 SECURITIES ACT AND SUCH STATE LAWS OR
UPON DELIVERY TO THE COMPANY OF AN OPINION OF LEGAL COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
WCA WASTE CORPORATION
CONVERTIBLE NOTE
$___________________ January 11, 2005
FOR VALUE RECEIVED, the undersigned ("THE COMPANY") hereby promises to pay
to the order of _____________ ("HOLDER"), at the offices of
_______________________________ the principal sum of ________________________
Dollars ($__________), together with interest, as hereinafter described.
The principal of this Note is due and payable on January 11, 2010 (the
"Maturity Date"). Interest on this Note shall be due and payable quarterly on
the 15th day following the close of each calendar quarter, as it accrues and at
maturity.
The principal from day to day unpaid shall, except as stated below, bear
interest at a rate per annum which shall from day to day be equal to the lesser
of (a) the Maximum Rate (hereinafter defined) and (b) eight percent (8%).
Interest shall be calculated on the basis of actual days (including the
first day but excluding the last day) elapsed but computed as if each calendar
year consisted of 360 days (unless the result would exceed the Maximum Amount,
in which event such interest shall be calculated on the basis of a year of 365
or 366 days, as the case may be).
As used herein, the terms "MAXIMUM AMOUNT" and "MAXIMUM RATE" mean,
respectively, the maximum amount and the maximum rate of interest which, under
applicable law, the holder hereof is permitted to contract for, charge, take,
reserve or receive on this Note. Regardless of any other provision in this Note,
the Holder shall never be entitled to contract for, charge, take, reserve,
receive, or apply, as interest on this Note any amount in excess of the Maximum
Amount, and if the Holder ever contracts for, charges, takes, reserves, receives
or applies as interest any such excess, it shall be deemed a partial prepayment
of principal and treated hereunder as such and any remaining excess shall be
refunded to the Company. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds
the Maximum Amount, the Company and the Holder shall, to the maximum extent
permitted under applicable law, (a) treat all advances as but a single extension
of credit (and the Holder and the Company agree that such is the case and that
any provision herein for multiple advances is for convenience only), (b)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest, (c) exclude voluntary prepayments and the effects thereof and (d)
"spread" the total amount of interest throughout the entire contemplated term of
this Note; provided that if this Note is paid in full prior to the end of the
full contemplated term hereof, and if the interest received for the actual
period of existence hereof exceeds the Maximum Amount, the Holder shall refund
such excess, and, in such event, the Holder shall not, to the extent permitted
by applicable law, be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in excess of
the Maximum Amount.
Article 1. Prepayment and Conversion.
(a) At any time after the first anniversary of the date hereof that the
price per share of the Company's common stock, $0.01 par value per share (the
"Common Stock"), as reported by the Nasdaq Stock Market (or if the Common Stock
is not then trading on the Nasdaq Stock Market, the price per share of the
Common Stock as reported on such other national securities exchange on which the
Common Stock is then listed for trading), equals or exceeds Fifteen Dollars
($15.00) (the "Trigger Price"), the Company may, by written notice to the
Holder, either:
(i) declare that all unpaid principal of, and accrued interest on,
this Note shall, effective on the date of the written notice, with no
further action of the Company or Holder, be converted into the right to
receive fully paid and nonassessable shares of the Common Stock, computed
to the nearest whole share, at the Conversion Price (as defined Article
1(c)) in effect as of the date of such written notice, or
(ii) prepay this Note, or any portion thereof, at any time and
without premium or penalty, provided, however, that no prepayment shall be
effective until after the expiration of thirty (30) days after the Company
has notified the Holder of its intent to prepay the Note, and Holder has
not elected pursuant to Article 1(b) to convert this Note into shares of
Common Stock.
(b) At any time after the date hereof, the Holder may, by written notice
to the Company, declare that all unpaid principal of, and accrued interest on,
this Note shall, effective on the date of the written notice, with no further
action of the Company or Holder, be converted into the right to receive fully
paid and nonassessable shares of the Common Stock, computed to the nearest whole
share, at the Conversion Price in effect as of the date of such written notice.
(c) This Note shall be convertible as provided in Article 1(a) or (b) at
the rate per share (the "Conversion Price"), equal to $10.37, subject to
adjustment as provided in Article 1(d). In the event of any such conversion, the
Holder shall surrender this Note to the Company at its then principal offices.
Upon such surrender of the Note, the Company shall as promptly as practicable
deliver to Holder certificates evidencing the shares of Common Stock into which
the Note has been converted. No fractional shares or scrip representing
fractional shares will be issued, and the Company shall pay to the Holder in
cash or by check that amount representing any such fractional amount. The
Company shall at all times during which the Note shall be
2
outstanding, reserve and keep available out of its authorized but unissued
stock, for the purpose of effecting the conversion of the Note, such number of
its duly authorized shares of Common Stock as shall from time to time be
sufficient to effect the conversion of the Note. Upon effectiveness of the
conversion as set forth in Article 1(a) or (b), as appropriate, this Note shall
no longer be deemed to be outstanding and all rights with respect hereto shall
immediately cease and terminate at such time, except only the right of Holder to
receive shares of Common Stock (and cash, if any, with respect to fractional
shares or any consideration payable pursuant to Article 1(d)) in exchange
therefor.
(d) The Trigger Price, the Conversion Price and the terms of this
Article 1 shall be subject to adjustment as follows. In case of a merger,
consolidation or other combination of the Company into any other corporation or
entity, or of the sale of the properties and assets of the Company as, or
substantially as, an entirety to any other corporation or entity, or if there is
a reclassification of the Common Stock, this Note shall after such merger,
consolidation, combination, sale or reclassification be convertible into the
right to receive the number of shares of stock or other securities or property
of the Company, or of the corporation or entity resulting from such
consolidation or combination or surviving such merger or to which such sale
shall be made, as the case may be, to which a holder of the Common Stock
issuable upon exercise of this Note would have been entitled upon such merger,
consolidation, combination, sale or reclassification, had this Note been
converted prior thereto (in each case, without accelerating the delivery
schedule set forth in Article 1(a) or (b)); and in any case, if necessary, the
provisions set forth in this Article 1 regarding the rights and interest of
Holder and the Company shall be appropriately adjusted so as to apply
thereafter, as nearly as possible, to the right to receive any shares of stock
or other securities or property thereafter deliverable on the conversion of this
Note. In the event of a dividend on the shares of Common Stock payable in shares
of Common Stock or in the event the outstanding shares of Common Stock shall be
subdivided (by stock split, or otherwise) into a greater number of shares of
Common Stock, the Trigger Price and the Conversion Price then in effect shall,
concurrently with the effectiveness of such stock dividend or subdivision, be
proportionately decreased. In the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Trigger Price and the Conversion
Price then in effect shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased. In case the Company
shall make a special or extraordinary dividend or distribution to all holders of
Common Stock or evidences of indebtedness or assets (including cash and
securities, but excluding shares of Common Stock)(any of the foregoing, a
"Distribution") then either (i) the Company shall, if it so elects, reserve such
Distribution for distribution to Holder upon conversion of this Note so that
Holder will receive upon such conversion, in addition to the shares of Common
Stock to which Holder is entitled, the amount and kind of such Distribution
which Holder would have received if Holder had converted this Note into Common
Stock immediately prior to the record date for the Distribution, or (ii) the
Trigger Price and the Conversion Price shall be equitably adjusted to account
for such Distribution. All calculations under this Article 1(d) shall be made to
the nearest cent or the nearest share, as the case may be.
(e) The Company believes that the holding period, as determined by Rule
144(d)(3)(ii) promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as in effect on date hereof (the "Holding Period"), for
any shares of Common Stock
3
acquired as a result of the conversion of this Note should commence on the date
hereof. To the extent that such conversion occurs more than two (2) years after
the date hereof and Rule 144(k) is otherwise applicable, the certificates
evidencing the shares of Common Stock into which the Note has been converted
shall be issued free of any legend or restriction on transfer. To the extent
that such conversion occurs more than one (1) year but less than two (2) years
after the date hereof, and Rule 144 is otherwise applicable, the certificates
evidencing the shares of Common Stock into which the Note has been converted
shall be issued with a legend in substantially the form set forth in Article 2,
and the Company shall assist in obtaining a legal opinion sufficient to allow
such shares to be transferred in accordance with an applicable exemption from
registration.
Article 2. Transfer of the Note. This Note shall not be transferable
except by operation of law. This Note and each Note issued in exchange for or
upon transfer of this Note shall be stamped or otherwise imprinted with a legend
in substantially the following form:
THIS NOTE IS SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN ARTICLE 2 BELOW.
THIS NOTE AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES 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 SECURITIES ACT AND SUCH STATE LAWS OR
UPON DELIVERY TO THE COMPANY OF AN OPINION OF LEGAL COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
Article 3. Default.
(a) "Event of Default," wherever used herein, means any one of the
following events:
(1) default in the payment of any interest when due on this
Note prior to the Maturity Date that is not cured by the Company
within ten days after receiving written notice from the Holder of such
default; or
(2) the entry of a decree or order for relief by a court
having jurisdiction in respect of the Company in an involuntary case
under the federal bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, or the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the Company
or for any substantial part of its property, or ordering the winding
up or liquidation of its affairs and the continuance of any such
decree or order unstayed and in effect for a period of sixty (60)
consecutive days; or
(3) the commencement by the Company of a voluntary case under
the federal bankruptcy laws, as now constituted or hereafter amended,
or any other applicable federal or state bankruptcy, insolvency or
other similar law, or the
4
consent by it to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or
other similar official) of the Company or for any substantial part of
its property, or the making by it of any assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due.
(b) If an Event of Default occurs, then and in every such case
Holder may (i) declare the principal and all accrued interest of this
Note to be due and payable immediately, by a notice in writing to the
Company, and upon any such declaration such principal shall become
immediately due and payable, or (ii) convert this Note into shares of
the Common Stock as more fully set forth in paragraph 1(b) hereof.
(c) If an Event of Default occurs and is continuing, Holder
may pursue any available remedy to collect the payment of principal or
interest on this Note or to enforce the performance of any provision
hereof. A delay or omission by Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of
Default. All remedies are cumulative to the extent permitted by law.
(d) The Company expressly waives all notices of nonpayment,
demands for payment, presentations for payment, notices of intention
to accelerate maturity, protest and notice of protest, and notices of
acceleration of the indebtedness due hereunder.
Article 4. Collection and Enforcement Fees. If an Event of Default occurs,
and this Note is placed in the hands of an attorney for collection or
enforcement (whether or not suit is filed), or if this Note is collected or
enforced by suit or legal proceedings or through bankruptcy proceedings, the
Company agrees to pay in addition to all sums then due hereon, including
principal and interest, all reasonable expenses of collection and enforcement
including reasonable attorneys' fees.
Article 5. Amendments and Waivers. This Note may be amended by written
agreement of the Company and Holder. No waiver of the provisions hereof shall be
effective unless agreed to in writing by the party against whom such waiver is
asserted.
Article 6. Severability Clause. In case any provision in this Note (other
than the obligation of the Company to pay principal and interest as and when
provided herein) shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Article 7. Notice. All notices to the Company required or permitted by
this Note shall be sufficient if given in writing and executed by Holder and if
notice is required or permitted from more than one Holder, such notice may be
executed in multiple counterparts. All such notices to the Company shall be
delivered by registered or certified mail, return receipt requested, or
personally delivered, to the Company at Xxx Xxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000, or such other address as the Company may designate by written notice to
Holder. Any notices by the Company to Holder shall be delivered by registered or
certified mail, return receipt requested, nationally recognized overnight
courier or personally delivered to Holder, at
5
_____________________________________, or such other address as the Holder may
designate by written notice to the Company. Notices sent by mail as permitted
above shall be deemed given on the third business day after deposit, postage
paid, in the mails. All other notices shall be deemed given upon receipt.
Article 8. Governing Law. This Note shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of the State of Delaware, exclusive
of any such law under which the law of any other jurisdiction would apply.
Article 9. Construction. The headings and captions used in this Note are
inserted solely for convenience in locating the provisions of this Note and not
as an aid in construction. The plural usage of a word shall be deemed to include
the singular thereof and vice versa. Each gender shall be deemed to include the
other genders.
IN WITNESS WHEREOF, the Company has caused this Note to be signed by its
duly authorized officer effective on the 11th day of January, 2005.
WCA WASTE CORPORATION
By: ___________________________________
Name: _________________________________
Title: ________________________________
ACCEPTED:
______________________________________
__________________
6
EXHIBIT B
RELEASE
THIS RELEASE is being executed and delivered in accordance with the terms
of the Membership Interest Purchase Agreement of even date herewith (the
"Agreement") among WCA WASTE CORPORATION, a Delaware corporation ("Parent"),
Waste Corporation of Missouri, Inc., a Delaware corporation ("Buyer"), GECKO
INVESTMENTS, LLC, an Ohio limited liability company (the "Company"), XXXXXX
XXXXXXXXXXX, XXXXXX X. XXXXX, and XXXXXX XXXXXXX (Xxxxxxxxxxx, Xxxxx and
XxXxxxx, collectively, the "Sellers"). Capitalized terms used in this Release
without definition have the respective meanings ascribed to them in the
Agreement.
WHEREAS, each of the Sellers acknowledges that the execution and delivery
of this Release is a condition precedent to Parent's and Buyer's obligation to
purchase the outstanding membership interests of the Company pursuant to the
Agreement and that Parent and Buyer are relying on this Release in consummating
such purchase.
NOW, THEREFORE, each of the Sellers, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and intending to
be legally bound, in order to induce Parent and Buyer to purchase the
outstanding membership interests of the Company pursuant to the Agreement,
hereby agrees as follows:
Each of the Sellers hereby releases and forever discharges Parent, Buyer,
the Company, and each of their individual, joint or mutual, past, present and
future representatives, Affiliates, members, partners, controlling persons,
successors and assigns (individually, a "Releasee" and collectively,
"Releasees") from any and all claims, demands, proceedings, causes of action,
orders, obligations, contracts, agreements, debts and liabilities whatsoever,
whether known or unknown, suspected or unsuspected, contingent or fixed, both at
law and in equity, which the Sellers now have, have ever had or may hereafter
have against the respective Releasees arising contemporaneously with or prior to
the Closing or on account of or arising out of any matter, cause or event
occurring contemporaneously with or prior to the Closing, including, but not
limited to, any rights to indemnification or reimbursement from the Company,
whether pursuant to the organizational documents of the Company or otherwise and
whether or not relating to claims pending on, or asserted after, the Closing;
provided, however, that nothing contained herein shall operate to release any
obligations of Parent, Buyer or the Company arising under the Agreement or the
documents executed in connection therewith.
Each of the Sellers hereby irrevocably covenants and agrees to refrain
from, directly or indirectly, asserting any claim or demand, or commencing,
instituting or causing to be commenced, any Proceeding of any kind against any
Releasee, based upon any matter purported to be released hereby.
Without in any way limiting any of the rights and remedies otherwise
available to any Releasee against Sellers, each of the Sellers for himself,
shall indemnify and hold harmless each Releasee from and against all loss,
liability, claim, damage (including incidental and consequential damages) or
expense (including costs of investigation and defense and reasonable attorney's
fees), whether or not involving third party claims, arising directly or
indirectly from or in connection with the assertion of any claim or other matter
purported to be released pursuant to
this Release or the assertion by any third party of any claim or demand against
any Releasee which claim or demand arises directly or indirectly from, or in
connection with, any assertion by or on behalf of any Seller against such third
party of any claims or other matters purported to be released pursuant to this
Release.
If any provision of this Release is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Release will
remain in full force and effect. Any provision of this Release held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable. Furthermore, in lieu of each such
provision held to be invalid or unenforceable, there shall be added
automatically, as part of this Release, a provision as similar in terms of such
invalid or unenforceable provision as may be possible and as shall be valid and
enforceable.
This Release may not be changed except in a writing signed by the
person(s) against whose interest such change shall operate. This Release shall
be governed by and construed under the laws of the State of Texas without regard
to its principles of conflicts of law.
All words used in this Release will be construed to be of such gender or
number as the circumstances require.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Release as of this ___ day of January, 2005.
SELLERS
_______________________________________
Xxxxxx Xxxxxxxxxxx
_______________________________________
Xxxxxx X. Xxxxx
_______________________________________
Xxxxxx XxXxxxx
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