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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SYNAGRO TECHNOLOGIES, INC.,
RESTEC ACQUISITION CORP.,
NEW ENGLAND TREATMENT COMPANY, INC.,
XXXX X. XXXXXXX,
XXXXXXX X. XXXXXXXX,
XXXXXXX X. XXXXXXXX,
AS EXECUTRIX OF THE ESTATE OF
XXXXXXX X. XXXXXXXX
AND
XXXXXXX X. XXXXXXXX AND XXXXXX XXXXXX,
AS CO-TRUSTEES OF THE
XXXXXXX X. XXXXXXXX REVOCABLE TRUST
UNDER AGREEMENT DATED NOVEMBER 2, 1998
OCTOBER 20, 1999
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER...............................................................................................2
Section 1.1. The Merger..................................................................2
Section 1.2. Effective Time of the Merger................................................2
ARTICLE II
THE SURVIVING CORPORATION................................................................................2
Section 2.1. Certificate of Incorporation................................................2
Section 2.2. Bylaws......................................................................2
Section 2.3. Directors...................................................................2
Section 2.4. Officers....................................................................2
ARTICLE III
CONVERSION OF SHARES.....................................................................................3
Section 3.1. Effect on Capital Stock.....................................................3
Section 3.2. Exchange of Certificates....................................................4
Section 3.3. Purchase Price Adjustment...................................................4
Section 3.4. Stock Transfer Books........................................................6
Section 3.5. No Further Ownership Rights in Company Common Stock.........................6
Section 3.6. Tax and Accounting Consequences.............................................6
Section 3.7. Taking of Necessary Action; Further Action..................................6
Section 3.8. Closing.....................................................................6
Section 3.9. Closing Deliveries..........................................................6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER......................................................8
Section 4.1. Organization and Qualification..............................................8
Section 4.2. Capitalization..............................................................8
Section 4.3. Authority; Non-Contravention; Approvals.....................................9
Section 4.4. Registration Statements....................................................10
Section 4.5. Reports and Financial Statements...........................................10
Section 4.6. Brokers and Finders........................................................11
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS CONCERNING THE TRANSACTION...........................11
Section 4A.1. Ownership..................................................................11
Section 4A.2. Authority; Non-Contravention; Approvals....................................11
Section 4A.3. Brokers and Finders........................................................12
Section 4A.4. Registration Statements....................................................12
Section 4A.5. Investment Representations.................................................12
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS CONCERNING THE
COMPANY.................................................................................................14
Section 5.1. Organization and Qualification.............................................14
Section 5.2. Capitalization.............................................................14
Section 5.3. Authority; Non-Contravention; Approvals....................................15
Section 5.4. Subsidiaries...............................................................15
Section 5.5. Financial Statements.......................................................16
Section 5.6. Absence of Undisclosed Liabilities.........................................16
Section 5.7. Absence of Certain Changes or Events.......................................16
Section 5.8. Litigation.................................................................16
Section 5.9. Accounts Receivable........................................................17
Section 5.10. No Violation of Law; Compliance with Agreements............................17
Section 5.11. Insurance..................................................................17
Section 5.12. Taxes......................................................................17
Section 5.13. Employee Benefit Plans.....................................................19
Section 5.14. Employee and Labor Matters.................................................20
Section 5.15. Environmental Matters......................................................21
Section 5.16. Non-Competition Agreements.................................................22
Section 5.17. Title to Assets............................................................23
Section 5.18. Contracts, Agreements, Plans and Commitments...............................23
Section 5.19. Supplies...................................................................24
Section 5.20. Brokers and Finders........................................................24
Section 5.21. Intellectual Property......................................................24
Section 5.22. Relationships..............................................................25
Section 5.23. Year 2000..................................................................25
Section 5.24. Certain Payments...........................................................25
Section 5.25. Books and Records..........................................................26
Section 5.26. Condition and Sufficiency of Assets........................................26
ARTICLE VI
CONDUCT OF BUSINESS PENDING CLOSING.....................................................................26
Section 6.1. Conduct of Business by the Company Pending the Merger......................26
Section 6.2. Other Offers...............................................................28
Section 6.3. Access to Information......................................................28
Section 6.4. Commercially Reasonable Efforts............................................28
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ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES....................................................28
Section 7.1. Consents...................................................................28
Section 7.2. Further Assurances.........................................................29
Section 7.3. Expenses and Fees..........................................................29
Section 7.4. Agreement to Cooperate.....................................................29
Section 7.5. Notification of Certain Matters............................................29
Section 7.6. Registration Statements....................................................30
Section 7.7. Purchaser's Liquidity Program..............................................31
Section 7.8. Exchange Listing...........................................................31
Section 7.9. Public Statements..........................................................31
Section 7.10. Supplements to Disclosure Schedules........................................32
ARTICLE VIII
CONDITIONS TO CLOSING...................................................................................32
Section 8.1. Conditions to Each Party's Obligation to Effect the Merger.................32
Section 8.2. Conditions to Obligation of the Company and the
Shareholders to Effect the Merger..........................................32
Section 8.3. Conditions to Obligations of Parent to Effect the Merger...................33
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER.......................................................................34
Section 9.1. Termination................................................................34
Section 9.2. Effect of Termination......................................................35
Section 9.3. Extensions; Waiver.........................................................36
Section 9.4. Parent's Option to Extend..................................................36
ARTICLE X
INDEMNIFICATION AND LIMITATION ON LIABILITY.............................................................36
Section 10.1. The Shareholders' Indemnity Obligations....................................36
Section 10.2. Parent's Indemnity Obligations.............................................37
Section 10.3. Indemnification Procedures.................................................37
Section 10.4. Limitation of Shareholders' Liability......................................39
Section 10.5. Limitation of Parent's Liability...........................................39
ARTICLE XI
GENERAL PROVISIONS......................................................................................40
Section 11.1. Survival...................................................................40
Section 11.2. Notices....................................................................40
Section 11.3. Interpretation.............................................................43
Section 11.4. Miscellaneous..............................................................43
Section 11.5. Governing Law..............................................................43
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Section 11.6. Binding Arbitration........................................................43
Section 11.7. Amendment..................................................................45
Section 11.8. Counterparts...............................................................45
Section 11.9. Parties in Interest........................................................45
Section 11.10. Validity...................................................................45
Section 11.11. Guarantee..................................................................45
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EXHIBITS:
Exhibit A Glossary
Exhibit B Form of Estimated Adjustment Amount Worksheet
Exhibit C Form of Release of Claims Agreement
Exhibit D Form of Consulting Agreement
Exhibit E Form of Covenant Not to Compete Agreement
Exhibit F Form of Covenant Not to Compete Agreement
SCHEDULES:
Schedule 1 Ownership of the Company
Schedule 2.3 Directors of the Surviving Corporation
Schedule 2.4 Officers of the Surviving Corporation
Schedule 3.3(d) Projects
Schedule 3.9 Guarantees and Surety Obligations
Schedule 4A.3 Shareholders' Brokers and Finders
Schedule 5.2(b) Capitalization
Schedule 5.3 Authority; Non-Contravention; Approvals
Schedule 5.4 Subsidiaries
Schedule 5.5 Financial Statements
Schedule 5.6 Absence of Undisclosed Liabilities
Schedule 5.7 Absence of Certain Changes or Events
Schedule 5.8 Litigation
Schedule 5.10 No Violation of Law; Compliance with Agreements
Schedule 5.12 Taxes
Schedule 5.13 Employee Benefit Plans
Schedule 5.14 Employee and Labor Matters
Schedule 5.15 Environmental Matters
Schedule 5.16 Non-Competition Agreements
Schedule 5.17 Title to Assets
Schedule 5.18 Contracts, Agreements, Plans and Commitments
Schedule 5.20 Company's Brokers and Finders
Schedule 5.21 Intellectual Property
Schedule 5.22 Relationships
Schedule 5.23 Year 2000 Compliance
Schedule 5.26 Condition and Sufficiency of Assets
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 20, 1999 (the
"Agreement"), is by and among SYNAGRO TECHNOLOGIES, INC., a Delaware corporation
("Parent"), RESTEC ACQUISITION CORP., a Rhode Island corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), NEW ENGLAND TREATMENT COMPANY,
INC., a Rhode Island corporation ("Company"), XXXX X. XXXXXXX, individually
("Xx. Xxxxxxx"), XXXXXXX X. XXXXXXXX, individually ("Xxx. Xxxxxxxx"), XXXXXXX X.
XXXXXXXX, as Executrix of the Estate of Xxxxxxx X. Xxxxxxxx (the "Estate"), and
XXXXXXX X. XXXXXXXX and XXXXXX XXXXXX, as Co-Trustees of the Xxxxxxx X. Xxxxxxxx
Revocable Trust under agreement dated November 2, 1998 (the "Trust"). Each of
Xx. Xxxxxxx and the Estate is a "Shareholder" and, collectively, they are
sometimes referred to as the "Shareholders". The Parent, Merger Sub, Company and
each of the other signatories to this Agreement is a "Party" and, collectively,
they are sometimes referred to as the "Parties." Xxx. Xxxxxxxx, individually and
in her capacity as Co-Trustee of the Trust, and Xxxxxx Xxxxxx, in his capacity
as Co-Trustee of the Trust, join this Agreement for purposes of guaranteeing the
performance by the Estate and Trust, as the case may be, of their respective
joint and several obligations under this Agreement, as further set forth in
Section 11.11 of this Agreement.
W I T N E S S E T H:
WHEREAS, Parent, Merger Sub, the Company and the Shareholders desire
that Merger Sub merge with and into the Company (the "Merger");
WHEREAS, Parent, Merger Sub and the Company intend the Merger to
qualify as a tax-free reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder;
WHEREAS, the Company, the Shareholders, Xxx. Xxxxxxxx and the Trust are
making certain representations, warranties, covenants, agreements and
indemnities herein, as inducement to Parent and Merger Sub to enter into this
Agreement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Glossary attached as Exhibit A.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements stated herein, the receipt
and sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, covenant and agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time (as defined in Section 1.2) in
accordance with the Rhode Island Business Corporation Act, the Merger Sub shall
be merged with and into the Company and the separate existence of the Merger Sub
shall thereupon cease. The Company shall be the surviving corporation in the
Merger and is hereinafter sometimes referred to as the "Surviving Corporation."
SECTION 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time (the "Effective Time") as articles of merger are filed
with the Secretary of State of the State of Rhode Island in accordance with the
Rhode Island Business Corporation Act (the "Merger Filing"). The Merger Filing
shall be made simultaneously with or as soon as practicable after the Closing
(as defined in Section 3.8) in accordance with Article III. The Parties
acknowledge that it is their mutual desire and intent to consummate the Merger
as soon as practicable after the date hereof, and in any event within five (5)
business days after the satisfaction, or waiver, of all conditions to Closing
set forth in Article VIII hereof, subject to the terms and conditions hereof.
Accordingly, subject to the provisions hereof, the Parties shall use all
reasonable efforts to consummate, as soon as practicable, the transactions
contemplated by this Agreement in accordance with Article VIII.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1. CERTIFICATE OF INCORPORATION. The Articles of
Incorporation of Merger Sub as in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation after the
Effective Time, as the same may thereafter be amended in accordance with its
terms and as provided under the Rhode Island Business Corporation Act.
SECTION 2.2. BYLAWS. The Bylaws of Merger Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
after the Effective Time, as the same may thereafter be amended in accordance
with their terms and as provided by the Articles of Incorporation of the
Surviving Corporation and the Rhode Island Business Corporation Act.
SECTION 2.3. DIRECTORS. The directors of the Surviving Corporation
shall be as designated in Schedule 2.3, and such directors shall serve in
accordance with the Bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
SECTION 2.4. OFFICERS. The officers of the Surviving Corporation shall
be as designated in Schedule 2.4, and such officers shall serve in accordance
with the Bylaws of the Surviving Corporation until their respective successors
are duly elected or appointed and qualified.
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ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of the Parent, Merger Sub, the
Company or the Shareholders:
(a) CONVERSION OF SECURITIES. All of the Company's common
stock, $1.00 par value per share (the "Company Common Stock"), issued and
outstanding immediately prior to the Effective Time (excluding any shares of the
Company Common Stock to be canceled pursuant to Section 3.1(b)) shall be
converted, subject to Section 3.1(e), into the right to receive at Closing, in
the aggregate, the sum of:
(i) the number of validly issued, fully paid and
nonassessable shares of common stock, par value $.002 per
share, of Parent ("Parent Common Stock"), determined by
dividing (x) $2,000,000 less (1) the Company's Indebtedness as
of Closing and (2) the amount, if any, by which the Company's
Net Working Capital as of Closing is less than $260,000 by (y)
the Average Parent Common Stock Price; and
(ii) 1,000,000 shares of Parent Common Stock;
provided, however, for purposes of this Section 3.1(a)(ii) (1)
in the event the Average Parent Common Stock Price is less
than $3.00, Parent will issue to the Shareholders, in the
aggregate, the number of shares of Parent Common Stock
determined by dividing Three Million Dollars ($3,000,000) by
the Average Parent Common Stock Price, and (2) in the event
the Average Parent Common Stock Price is more than $7.50,
Parent will issue to the Shareholders, in the aggregate, the
number of shares of Parent Common Stock determined by dividing
Seven Million Five Hundred Thousand Dollars ($7,500,000) by
the Average Parent Common Stock Price.
(iii) Shares issued under Section 3.1(a)(i) and (ii)
to the Shareholders are referred to herein as the "Parent
Shares." Each Shareholder shall be entitled to receive
one-half of the aggregate consideration issuable pursuant to
this Section 3.1(a).
(b) CANCELLATION. Each share of Company Common Stock held in
the treasury of the Company and each share of Company Common Stock held by any
direct or indirect wholly-owned Subsidiary of the Company, if any, immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, be canceled
and retired without payment of any consideration therefor and cease to exist.
(c) CAPITAL STOCK OF MERGER SUB. Each share of common stock,
$.01 par value per share, of Merger Sub ("Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of common
stock, $.01 par value per share, of the Surviving Corporation.
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(d) ADJUSTMENTS TO MERGER CONSIDERATION. The Merger
Consideration (as defined in Section 3.2(a)) shall be appropriately adjusted to
reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend of securities convertible into Parent Common Stock),
reorganization, reclassification, recapitalization or other similar change with
respect to Parent Common Stock occurring (including the record date thereof)
after the date hereof and prior to the Effective Time. In no event shall the
number of shares of Parent Common Stock issued pursuant to Section 3.1(a) exceed
twenty percent (20%) of the total outstanding shares of Parent Common Stock at
the time of Closing.
(e) FRACTIONAL SHARES. No certificates or scrip representing
less than one share of Parent Common Stock shall be issued upon the surrender
for exchange of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates"). In lieu of any such fractional share, each holder of shares of
Company Common Stock who would otherwise have been entitled to a fraction of a
share of Parent Common Stock upon surrender of Certificates for exchange shall
be paid upon such surrender cash (without interest) in an amount equal to such
fraction multiplied by the Average Parent Common Stock Price on the Closing
Date.
SECTION 3.2. EXCHANGE OF CERTIFICATES.
(a) Immediately after the Effective Time, Parent will deliver
to each Shareholder upon surrender of all such Certificates for cancellation
together with such other customary documents as may be required, and the
Shareholders shall be entitled to receive in exchange therefor, (A) certificates
evidencing that number of whole shares of Parent Common Stock in immediately
available funds which such holder has the right to receive in accordance with
Section 3.1 hereof in respect of the shares of Company Common Stock formerly
evidenced by such Certificate, and (B) cash in respect of fractional shares as
provided in Section 3.1(e) (the shares of Parent Common Stock and cash being,
collectively, the "Merger Consideration"), and the Certificates so surrendered
shall forthwith be canceled.
(b) Parent shall be entitled to deduct and withhold from the
Merger Consideration otherwise payable pursuant to this Agreement to any holder
of Company Common Stock such amounts as Parent is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by Parent.
SECTION 3.3. PURCHASE PRICE ADJUSTMENT.
(a) Prior to the Closing Date, Xx. Xxxxxxx shall deliver to
the Parent a worksheet, in the form attached as Exhibit B hereto, setting forth
a reasonable estimate of the Indebtedness and Net Working Capital as of the
Closing Date, as well as a computation of the estimated Adjustment Amount (the
"Estimated Adjusted Amount"). The worksheet shall be prepared by Xx. Xxxxxxx,
with a copy provided to the Estate, and shall be reasonably acceptable to the
Parent. If the Estimated Adjustment Amount is a positive number, the Merger
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Consideration payable at Closing to the Shareholders shall be decreased in an
amount equal to the number of validly issued, fully paid and nonassessable
shares of Parent Common Stock determined by dividing the positive Estimated
Adjustment Amount by the Average Parent Common Stock Price. If the Estimated
Adjustment Amount is a negative number, the Merger Consideration payable at
Closing to the Shareholders shall be increased in an amount equal to the number
of validly issued, fully paid and nonassessable shares of Parent Common Stock
determined by dividing the negative Estimated Adjustment Amount by the Average
Parent Common Stock Price.
(b) Within 90 days after the Closing, Parent shall cause the
Company to prepare a consolidated balance sheet of the Company as of the Closing
Date (the "Closing Date Balance Sheet"), including a computation of the actual
Adjustment Amount of the Companies as of the Closing Date (the "Actual
Adjustment Amount"). If within 15 days following delivery of the Closing Date
Balance Sheet the Shareholders do not object in writing thereto, then the Actual
Adjustment Amount shall be as computed on such Closing Date Balance Sheet. If
the Shareholders do object in writing to the computation within such 15-day
period, then the Parent and the Shareholders shall negotiate in good faith and
attempt to resolve their disagreement. Should such negotiations not result in an
agreement within 20 days, then the matter shall be submitted to an independent
accounting firm of national reputation mutually acceptable to the Parent and the
Shareholders (the "Neutral Auditors"). If the Parent and the Shareholders are
unable to agree on the Neutral Auditors, then they shall request the American
Arbitration Association to appoint the Neutral Auditors. All fees and expenses
relating to appointment of the Neutral Auditors and the work, if any, to be
performed by the Neutral Auditors will be borne equally by the Parent and the
Shareholders. The Neutral Auditors will deliver to the Parent and the
Shareholders a written determination (such determination to include a worksheet
setting forth all material calculations used in arriving at such determination
and to be based solely on information provided to the Neutral Auditors by the
Parent and the Shareholders, or their respective affiliates) of the disputed
items within 30 days of receipt of the disputed items, which determination will
be final, binding and conclusive on the Parties.
(c) Promptly following agreement on or delivery of the final,
binding and conclusive Closing Date Balance Sheet setting forth the Actual
Adjustment Amount, the Parent and the Shareholders shall account to each other
as provided for in this Section 3.3(c). If the Estimated Adjustment Amount less
the Actual Adjustment Amount is a positive number, the Shareholders shall have a
right to receive a cash payment equal to such excess. If the Estimated
Adjustment Amount less the Actual Adjustment Amount is a negative number, Parent
shall be entitled to receive a cash payment from the Shareholders equal to such
deficit. Any such excess or deficit payment shall be due and payable within
three (3) business days after the Actual Adjustment Amount is determined
pursuant to this Section 3.3. Any payments due from or to the Shareholders
pursuant to this Section 3.3(c) shall be payable or paid fifty percent (50%) by
or to each Shareholder.
(d) For purposes of determining the Net Working Capital
pursuant to this Section 3.3, any cash payments made or current liabilities
incurred on or after August 1, 1999, and prior to Closing with respect to the
projects described on Schedule 3.3(d) hereto, up to an
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aggregate amount of cash and current liabilities of $260,000, shall not be
deducted in the Net Working Capital computation.
SECTION 3.4. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Company Common Stock thereafter on the records
of the Company.
SECTION 3.5. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration delivered upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled.
SECTION 3.6. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the
Parties that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Code. The Parties hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
SECTION 3.7. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of
Parent, Merger Sub, each of the Shareholders and the Company will take all such
reasonable and lawful action as may be necessary or appropriate in order to
effectuate the Merger in accordance with this Agreement as promptly as possible.
If, at any time after the Effective Time, any such further action is necessary
or desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company and Merger
Sub, the officers and directors of the Company and Merger Sub in office
immediately prior to the Effective Time are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
SECTION 3.8. CLOSING. Subject to the terms and provisions of Article
IX, the closing of the transactions provided for herein (the "Closing") shall
take place at the offices of XXXXXXXX & X'XXXX, LLP, 00 Xxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxxx as promptly as practicable (but in any event within five (5)
business days) following the date on which the last of the conditions set forth
in Article VIII is fulfilled or waived, or at such other time and place as the
Parties shall agree. The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date."
SECTION 3.9. CLOSING DELIVERIES.
(a) At the Closing, the Shareholders shall deliver to the
Parent:
(i) certificates representing the Company Common
Stock, duly endorsed for transfer to the Parent or accompanied by duly
executed assignment
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documents, which shall transfer to the Parent good and valid title to the
Company Common Stock, free and clear of all Liens;
(ii) Release of Claims Agreements executed by the
officers, directors and stockholders of the Company releasing the
Company from any and all prior claims of such officers, directors and
stockholders, in the form attached hereto as Exhibit C;
(iii) all corporate, accounting, business and tax
records of the Company;
(iv) a legal opinion from Xxxxxxxx & O'Neil, LLP,
counsel to Xx. Xxxxxxx and the Company, in a form reasonably
satisfactory to Parent;
(v) a legal opinion from Xxxxxxx, Rock & Talbot,
P.C., counsel to Xxxxxxx Xxxxxxxx, individually, the Estate and the
Trust, in a form reasonably satisfactory to Parent;
(vi) a Consulting Agreement between the Parent and
Xx. Xxxxxxx, individually, in the form attached as Exhibit D hereto; -
(vii) a Covenant Not to Compete Agreement between the
Parent and Xx. Xxxxxxx, individually, in the form attached as Exhibit E
hereto;
(viii) Covenant Not to Compete Agreements between the
Parent and each of Xxx. Xxxxxxxx, individually, the Estate, the Trust
and X. X. Xxxxxxxx Trucking Company, Inc. (the "Trucking Company"), in
the form attached as Exhibit F hereto; and
(ix) such other documents, including certificates of
the Shareholders, as may be required by this Agreement or reasonably
requested by the Parent.
(b) At the Closing, the Parent shall deliver to:
(i) the Shareholders, the Merger Consideration
determined in accordance with Section 3.2;
(ii) Xx. Xxxxxxx, individually, a Consulting
Agreement, in the form attached as Exhibit D;
(iii) Xx. Xxxxxxx, individually, a Covenant Not to
Compete Agreement, in the form attached as Exhibit E;
(iv) each of the Estate, Xxx. Xxxxxxxx, individually,
the Trust and the Trucking Company, a Covenant Not to Compete
Agreement, in the form attached as Exhibit F; and
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(v) documents relating to the removal of the
Shareholders from any and all personal guarantees and/or surety
obligations in connection with the Company's debts or operations listed
on Schedule 3.9; and
(vi) legal opinions from in-house legal counsel to
the Parent, dated the Closing Date, in a form reasonably satisfactory
to the Sellers.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER
Parent and Merger Sub each represent and warrant to the Shareholders as
follows, except as set forth in the Parent's Form 10-K for the fiscal year ended
December 31, 1998, all quarterly reports on Form 10-Q filed with the SEC since
January 1, 1999, and all amendments to any of the foregoing.
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted. Parent is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the properties owned, leased, or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not have, or could not
reasonably be anticipated to have, individually or in the aggregate, a Material
Adverse Effect (as defined in Exhibit A).
SECTION 4.2. CAPITALIZATION.
(a) As of June 30, 1999, the authorized capital stock of
Parent consisted of 100,000,000 shares of Parent Common Stock, of which
17,392,790 shares were issued and outstanding, and 10,000,000 shares of
preferred stock, par value $.002 per share, of which 500,000 shares have been
designated as "Preferred Stock-Junior Participating Series A" and reserved for
issuance upon exercise of rights evidenced by the certificates representing all
outstanding shares of Parent Common Stock, but no such shares are issued and
outstanding. All of the issued and outstanding shares of Parent Common Stock
were validly issued and are fully paid, nonassessable and free of preemptive
rights.
(b) As of June 30, 1999, except for 4,020,393 options granted
pursuant to Parent incentive or option plans (or to current or former employees
of Parent), warrants to acquire 770,000 shares of Parent Common Stock and shares
issuable in connection with proposed acquisitions, if any, there are no
outstanding (i) securities of Parent convertible into or exchangeable for shares
of capital stock or voting securities of Parent or (ii) options or other rights
to acquire from Parent or other obligations of Parent to issue, any capital
stock, voting
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securities or securities convertible into or exchangeable for capital stock or
voting securities of Parent.
(c) All of the shares of capital stock of Merger Sub are owned
beneficially and of record by Parent.
(d) The shares of Parent Common Stock to be issued as part of
the Merger Consideration have been duly authorized and when issued and delivered
in accordance with the terms of this Agreement, will have been validly issued
and will be fully paid and non-assessable, and the issuance thereof is not
subject to any preemptive or other similar right.
SECTION 4.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Parent and Merger Sub each have full corporate power and
authority to execute and deliver this Agreement and, subject to the Parent
Required Statutory Approvals (as defined in Section 4.3(c)), to consummate the
transactions contemplated hereby. This Agreement has been approved by the Board
of Directors of the Parent and no other corporate proceedings on the part of
Parent are necessary to authorize the execution and delivery of this Agreement
or the consummation by Parent of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of Parent and Merger Sub,
and, assuming the due authorization, execution and delivery hereof by the other
Parties, constitutes a valid and legally binding agreement of each of Parent and
Merger Sub enforceable against each of them in accordance with its terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
(b) The execution and delivery of this Agreement by each of
Parent and Merger Sub and the consummation by them of the transactions
contemplated hereby do not and will not violate or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any Lien, upon,
any of the properties or assets of Parent or any of its Subsidiaries under any
of the terms, conditions or provisions of (i) the respective charters or bylaws
of Parent or any of its Subsidiaries, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
court or Governmental Authority applicable to Parent or any of its Subsidiaries
or any of their respective properties or assets (assuming compliance with the
matters referred to in Section 4.3(c)) or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which Parent
or any of its Subsidiaries is now a party or by which Parent or any of its
Subsidiaries or any of their respective properties or assets may be bound or
affected, except, in the case of clauses (ii) and (iii), for matters as would
not have, or could not reasonably be anticipated to have, individually or in the
aggregate, a Material Adverse Effect or materially impair the ability of Parent
to consummate the transactions contemplated by this Agreement.
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(c) Except for (i) the filing of the Registration Statements
(as defined in Section 4.4) with the Securities and Exchange Commission (the
"SEC") pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), and the declaration of the effectiveness thereof by the SEC and filings
with various state blue sky authorities, and (ii) the making of the Merger
Filing with the Secretary of State of Rhode Island in connection with the Merger
(the filings and approvals referred to in clauses (i) and (ii) are collectively
referred to as the "Parent Required Statutory Approvals"), no declaration,
filing or registration with, or notice to, or authorization, consent or approval
of, any governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by Parent or Merger Sub or the
consummation by Parent or Merger Sub of the transactions contemplated hereby,
other than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be, would
not, have, or could not reasonably be anticipated to have, individually or in
the aggregate, a Material Adverse Effect or materially impair the ability of
Parent or Merger Sub to consummate the transactions contemplated by this
Agreement.
SECTION 4.4. REGISTRATION STATEMENTS. None of the information to be
supplied by Parent or its Subsidiaries for inclusion in the Registration
Statements on Form S-3 to be filed under the Securities Act with the SEC by
Parent pursuant to Section 7.6 of this Agreement for the purpose of registering
the Parent Shares (as amended or supplemented, the "Registration Statements")
will, at the time they become effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
SECTION 4.5. REPORTS AND FINANCIAL STATEMENTS.
(a) Since January 1, 1999, Parent has filed with the SEC all
material forms, statements, reports and documents (including all exhibits,
amendments and supplements thereto) required to be filed by it under each of the
Securities Act, the Securities Exchange Act of 1934, as amended, and the
respective rules and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the appropriate acts and
the rules and regulations thereunder.
(b) Parent has previously made available or delivered to the
Company or the Shareholders copies of Parent's (a) Annual Reports on Form 10-K
for the fiscal year ended December 31, 1998, and for the immediately preceding
fiscal year, as filed with the SEC, (b) proxy and information statements
relating to (i) all meetings of its shareholders (whether annual or special) and
(ii) any actions by written consent in lieu of a shareholders' meeting from
January 1, 1999, until the date hereof, and (c) all other reports, including
quarterly reports, or registration statements filed by Parent with the SEC since
January 1, 1999 (other than Registration Statements filed on Form S-8) (the
documents referred to in clauses (a), (b) and (c), including the exhibits
thereto, are collectively referred to as the "Parent SEC Reports").
(c) As of their respective dates, the Parent SEC Reports did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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(d) The audited consolidated financial statements and
unaudited interim consolidated financial statements of Parent included in such
reports (collectively, the "Parent Financial Statements") have been prepared in
accordance with GAAP (except as may be indicated therein or in the notes
thereto) and fairly present in all material respects the consolidated financial
position of Parent and its Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended, subject, in the case of the unaudited interim financial statements, to
normal year-end and audit adjustments and any other adjustments described
therein.
SECTION 4.6. BROKERS AND FINDERS. Parent has not entered into any
contract, arrangement or understanding with any Person or firm which may result
in the obligation of Parent to pay any finder's fees, brokerage or agent
commissions or other like payments in connection with the transactions
contemplated hereby. There is no claim for payment by Parent of any investment
banking fees, finder's fees, brokerage or agent commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
CONCERNING THE TRANSACTION
Each Shareholder and the Company, severally but not jointly, represent
and warrant to the Parent and Merger Sub as follows:
SECTION 4A.1 OWNERSHIP.
(a) The Shareholder holds of record and beneficially all of
the capital stock of the Company shown as owned by the Shareholder on Schedule 1
free and clear of any Liens (except for Liens arising under Federal and state
securities laws and restrictions arising under the Company's organizational
documents which have been waived).
(b) There are no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, debenture, instrument or other agreement obligating the Shareholder to
deliver or sell, or cause to be delivered or sold, any capital stock in the
Company, or obligating the Shareholder to grant, extend or enter into any such
agreement or commitment. There are no voting trusts, proxies or other agreements
or understandings to which the Shareholder is a party or is bound with respect
to the voting of any ownership interest of the Company.
SECTION 4A.2 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Shareholder has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been approved by the Board of Directors and shareholders of the Company, and
no other proceedings on the part of the Shareholder are necessary to authorize
the execution and delivery of this
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Agreement by the Shareholder or the consummation by the Shareholder of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Shareholder, and, assuming the due authorization, execution and
delivery hereof by the other Parties, constitutes a valid and legally binding
agreement of the Shareholder, enforceable against the Shareholder in accordance
with its terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally, and (ii) general
equitable principles.
(b) The execution and delivery of this Agreement by the Shareholder and
the consummation by the Shareholder of the transactions contemplated hereby do
not and will not violate or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Lien upon any of the
properties or assets of the Shareholder under any of the terms, conditions or
provisions of (i) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or Governmental
Authority applicable to the Shareholder, or any of its properties or assets, or
(ii) any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument, obligation or agreement
of any kind to which the Shareholder is now a party or by which the Shareholder
or any of the Shareholder's properties or assets may be bound or affected.
(c) No declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by the
Shareholder or the consummation by the Shareholder of the transactions
contemplated hereby.
SECTION 4A.3 BROKERS AND FINDERS. Except as disclosed on Schedule 4A.3,
the Shareholder has not entered into any contract, arrangement or understanding
with any Person or firm which may result in the obligation of the Company to pay
any finder's fees, brokerage or agent commissions or other like payments in
connection with the transactions contemplated hereby.
SECTION 4A.4 REGISTRATION STATEMENTS. None of the information to be
supplied by the Shareholder for inclusion in the Registration Statements will
contain any untrue statement of any material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
SECTION 4A.5 INVESTMENT REPRESENTATIONS. The Shareholder acknowledges,
represents and agrees that:
(a) (i) Parent has made available to the Shareholder the
information and documents described in Section 4.5 hereof, (ii) the Shareholder
understands the risks associated with ownership of Parent Common Stock, and
(iii) the Shareholder is capable of bearing the financial risks associated with
such ownership;
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(b) The Parent Shares included within the Merger Consideration
have not been registered under the Securities Act or registered or qualified
under any applicable state securities laws;
(c) The Parent Shares are being issued to the Shareholder in
reliance upon exemptions from such registration or qualification requirements,
and the availability of such exemptions depends in part upon the Shareholder's
bona fide investment intent with respect to the Parent Shares;
(d) The Shareholder's acquisition of the Parent Shares is
solely for the Shareholder's own account for investment, and the Shareholder is
not acquiring such Parent Shares for the account of any other Person or with a
view toward resale, assignment, fractionalization, or distribution thereof;
(e) The Shareholder shall not offer for sale, sell, transfer,
pledge, hypothecate or otherwise dispose of any of the Parent Shares except in
accordance with this Agreement and (A) the registration requirements of the
Securities Act and applicable state securities laws or (B) upon delivery to
Parent of an opinion of legal counsel reasonably satisfactory to Parent that an
exemption from registration is available or pursuant to an effective
registration statement covering the Parent Shares to be sold;
(f) The Shareholder has such knowledge and experience in
financial and business matters that the Shareholder is capable of evaluating the
merits and risks of an investment in the Parent Shares, and to make an informed
investment decision with respect thereto;
(g) The Shareholder has had the opportunity to ask questions
of, and receive answers from, Parent's officers and directors concerning the
Shareholder's acquisition of the Parent Shares and to obtain such other
information concerning Parent and the Parent Shares, to the extent Parent's
officers and directors possessed the same or could acquire it without
unreasonable effort or expense, as the Shareholder deemed necessary in
connection with making an informed investment decision; and
(h) In addition to any other legends required by law or the
other agreements entered into in connection herewith, each certificate
evidencing the Parent Shares will bear a conspicuous restrictive legend
substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("ACT"), OR UNDER ANY APPLICABLE STATE
SECURITIES LAWS, AND THEY CANNOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED
EXCEPT IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF THE ACT
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AND SUCH OTHER STATE LAWS OR UPON DELIVERY TO THIS
CORPORATION OF AN OPINION OF LEGAL COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SHAREHOLDERS CONCERNING THE COMPANY.
The Company and the Shareholders, jointly and severally, represent and
warrant to Parent and Merger Sub as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the properties owned, leased, or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not have, or could not
reasonably be anticipated to have, individually or in the aggregate, a Material
Adverse Effect. True, accurate and complete copies of the Company's articles or
certificates of incorporation, as amended, and the Company's bylaws, in each
case as in effect on the date hereof, including all amendments thereto, have
heretofore been delivered to Parent.
SECTION 5.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
8,000 shares of Company Common Stock. As of the date of this Agreement there
are, and as of Closing there will be, 250 shares of Company Common Stock issued
and outstanding and no other shares of capital stock of the Company issued and
outstanding. All of such issued and outstanding shares of Company Common Stock
are validly issued and are fully paid, nonassessable and free of preemptive
rights and are owned beneficially and of record as set forth on Schedule 1, free
and clear of all Liens. No Subsidiary of the Company, other than as described on
Schedule 1, holds any shares of the capital stock of the Company.
(b) Except as set forth on Schedule 5.2(b), there are no
outstanding (i) subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, debenture,
instrument or other agreement obligating the Company to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of the capital stock
of the Company, or obligating the Company to grant, extend or enter into any
such agreement or commitment or (ii) obligations of the Company to repurchase,
redeem or otherwise acquire any
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securities referred to in clause (i) above. There are no voting trusts, proxies
or other agreements or understandings to which the Company is a party or is
bound with respect to the voting of any shares of capital stock of the
Companies.
SECTION 5.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Company has full corporate power and authority to
execute and deliver this Agreement and, subject to the Company Required
Statutory Approvals (as defined in Section 5.3(c), to consummate the
transactions contemplated hereby. This Agreement has been approved by the Board
of Directors and Shareholders of the Company, and no other corporate proceedings
on the part of the Company are necessary to authorize the execution and delivery
of this Agreement or the consummation by the Company and the Shareholders of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery hereof by the other Parties, constitutes a valid and legally binding
agreement of the Company enforceable against the Company in accordance with its
terms.
(b) Except as disclosed on Schedule 5.3 hereto, the execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby do not and will not violate or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Lien upon any of the properties or assets of the Company under
any of the terms, conditions or provisions of (i) charters or bylaws of the
Company, (ii) any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court or Governmental
Authority applicable to the Company, or any of its respective properties or
assets, or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which the Company is now a party or by which any of
the Company or any of its respective properties or assets may be bound or
affected.
(c) Except for the Merger Filing with the Secretary of State
of the State of Rhode Island in connection with the Merger (the "Company
Required Statutory Approval") or as disclosed on Schedule 5.3 hereto, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company or the
Shareholders or the consummation by the Company or the Shareholders of the
transactions contemplated hereby.
SECTION 5.4. SUBSIDIARIES. Except as set forth on Schedule 5.4, the
Company does not have any Subsidiaries, nor does the Company hold any equity
interest in or control (directly or indirectly, through the ownership of
securities, by contract, by proxy, alone or in combination with others, or
otherwise) any corporation, limited liability company, partnership, business
organization or other Person.
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SECTION 5.5. FINANCIAL STATEMENTS. The audited financial statements of
the Company for the fiscal year ended December 31, 1998, attached as part of
Schedule 5.5, have been prepared in accordance with GAAP (except as may be
indicated therein or in the notes thereto) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods then ended. The
unaudited interim financial statements of the Company for the seven (7) months
ended July 31, 1999, also attached as part of Schedule 5.5 (and together with
the audited financial statements described in the preceding sentence, the
"Company's Financial Statements"), have been prepared in accordance with the
accrual method of accounting and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the seven (7) month period then ended, subject to
normal year-end adjustments and any other adjustments described therein.
SECTION 5.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
Schedule 5.6, the Company has not incurred any liabilities or contingencies
(whether absolute, accrued, contingent or otherwise) of any nature, except
liabilities (i) which are accrued or reserved against the Company's Financial
Statements or reflected in the notes thereto or (ii) which were incurred after
December 31, 1998, and were incurred in the ordinary course of business and
consistent with past practices.
SECTION 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since July 31, 1999,
and except as described on Schedule 5.7, (i) the Company has not declared or set
aside or paid any dividend or made any other distribution with respect to any
outstanding securities or ownership interests, or, directly or indirectly,
purchased, redeemed or otherwise acquired any of its securities or ownership
interests and (ii) the Company has not granted any general increase in the
compensation of any of its officers, directors or employees (including any
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) and has not paid any bonuses to any officers, directors or
employees. Since December 31, 1998, and except as described on Schedule 5.7, (i)
the Company has not adopted, entered into or amended any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation, health
care, employment or other employee benefit plan, agreement, trust fund or
arrangement for the benefit or welfare of any employee or retiree, except as
required to comply with changes in applicable law; (ii) the Company has not made
any amendment to any of the articles of incorporation, certificates of
partnership, regulations, bylaws, partnership agreements, operating agreements
or other similar documents or changed the character of any of its businesses in
any manner; (iii) the businesses of the Company have been conducted in the
ordinary course of business consistent with past practices; and (iv) there has
not been any event, occurrence, development or state of circumstances or facts
which has had, or could reasonably be anticipated to have, individually or in
the aggregate, a Material Adverse Effect.
SECTION 5.8. LITIGATION. Except as described on Schedule 5.8, there are
no claims, suits, actions, Environmental Claims, inspections, investigations or
proceedings pending or, to the knowledge of the Company, threatened against,
relating to or affecting the Company before any court, governmental department,
commission, agency, instrumentality, authority, or any
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mediator or arbitrator. Except as described on Schedule 5.8, the Company is not
subject to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality, authority, or any
mediator or arbitrator.
SECTION 5.9. ACCOUNTS RECEIVABLE. All accounts receivable reflected on
the Company's Financial Statements represent sales actually made in the ordinary
course of business and are collectible in the ordinary course of business.
SECTION 5.10. NO VIOLATION OF LAW; COMPLIANCE WITH AGREEMENTS.
(a) Except as disclosed on Schedule 5.10, the Company is not
in violation of and has been given notice or been charged with any violation of,
any law, statute, order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable Environmental Law) of any governmental or
regulatory body or authority. To the knowledge of the Shareholders, no
investigation or review by any governmental or regulatory body or authority is
pending or threatened, nor has any governmental or regulatory body or authority
indicated an intention to conduct the same. Except as disclosed on Schedule
5.10, the Company has all permits (including without limitation Environmental
Permits), licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals required or necessary to
conduct its business as presently conducted (collectively, the "Company
Permits"). The Company is not in violation of the terms of the Company Permits.
(b) Except as disclosed on Schedule 5.10, the Company is not
in breach or violation of or in default in the performance or observance of any
term or provision of, and no event has occurred which, with lapse of time or
action by a third party, could result in a default under, (i) the charter,
bylaws or similar organizational instruments of the Company or (ii) any
contract, commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which the Company is a
party or by which it is bound or to which any of its property is subject.
SECTION 5.11. INSURANCE. The Shareholders have heretofore delivered to
the Parent true and correct copies of all insurance policies owned by the
Company or by which the Company or any of its properties or assets is covered
against present losses, all of which are now in full force and effect. No
insurance has been refused with respect to any operations, properties or assets
of the Company nor has coverage of any insurance been limited by any insurance
carrier that has carried, or received any application for, any such insurance
during the last three years. No insurance carrier has denied any claims made
against any of the Company's policies.
SECTION 5.12. TAXES.
(a) Except as set forth on Schedule 5.12, (i) the Company has
(x) duly filed (or there has been filed on its behalf) with the appropriate
taxing authorities all Tax Returns (as hereinafter defined) required to be filed
by it on or prior to the date hereof, and (y) duly paid in full or made adequate
provision therefor on the Company's Financial Statements in accordance with GAAP
(or there has been paid or adequate provision has been made on its behalf) for
the payment of all Taxes (as hereinafter defined) for all periods ending through
the date hereof; (ii)
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all such Tax Returns filed by or on behalf of the Company are true, correct and
complete in all material respects; (iii) the Company is not the beneficiary of
any extension of time within which to file any Tax Return; (iv) no claim has
been made since January 1, 1997 by any authority in a jurisdiction where the
Company does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction; (v) the liabilities and reserves for Taxes reflected in the
most recent balance sheet included in the Company's Financial Statements to
cover all Taxes for all periods ending at or prior to the date of such balance
sheet have been determined in accordance with GAAP, and there is no material
liability for Taxes for any period beginning after such date other than Taxes
arising in the ordinary course of business; (vi) there are no Liens for Taxes
upon any property or assets of the Company, except for Liens for Taxes not yet
due; (vii) the Company has not made any change in accounting methods since
December 31, 1998; (viii) the Company has not received a ruling from any taxing
authority or signed an agreement with any taxing authority; (ix) the Company has
complied in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code, as amended
or similar provisions under any foreign laws) and has, within the time and the
manner prescribed by law, withheld and paid over to the appropriate taxing
authority all amounts required to be so withheld and paid over under all
applicable laws in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, partner, member or other third
party; (x) no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any Taxes
or Tax Returns of the Company, and as of the date of this Agreement the Company
has not received a written notice of any pending audits or proceedings; (xi) no
partner, stockholder, member, director or officer (or employee responsible for
Tax matters) of the Company expects any authority to assess any additional Taxes
with respect to the Company for any period for which Tax Returns have been
filed; (xii) the federal income Tax Returns of the Company have been examined by
the Internal Revenue Service ("IRS") (which examination has been completed) or
the statute of limitations for the assessment of federal income Taxes of the
Company has expired, for all periods through and including December 31, 1994,
and no deficiencies were asserted as a result of such examinations which have
not been resolved and fully paid; (xiii) no adjustments or deficiencies relating
to Tax Returns of the Company have been proposed, asserted or assessed by any
taxing authority, except for such adjustments or deficiencies which have been
fully paid or finally settled; and (xiv) the Company has delivered to the Parent
true, correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Company since December 31, 1993.
(b) There are no outstanding requests, agreements, consents or
waivers to extend the statute of limitations applicable to the assessment of any
Taxes or deficiencies against the Company, and no power of attorney granted by
the Company with respect to any Taxes is currently in force. The Company has
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Section 6662 of the Code. The Company is not a party to any agreement
providing for the allocation or sharing of Taxes with an entity that is not
directly or indirectly a wholly-owned Subsidiary of the Company. The Company has
not, with regard to any assets or property held, acquired or to be acquired by
it, filed a consent to the application of Section 341(f) of the Code, or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a
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subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company. The Company (i) has not been a member of an affiliate
group filing a consolidated federal income Tax Return (other than a group the
common parent of which was the Company) and (ii) has no liability for Taxes of
any Person (other than any of the Company and its Subsidiaries) under Section
1.1502-6 of the United States Treasury Regulations (or any similar provision of
state, local or foreign law), as a transferee or successor, by contract, or
otherwise.
SECTION 5.13. EMPLOYEE BENEFIT PLANS.
(a) Each Plan and each Benefit Program (as such terms are
defined below) is listed on Schedule 5.13 hereto. No Plan or Benefit Program is
or has been (i) covered by Title IV of the Employer Retirement Income Security
Act of 1974, as amended ("ERISA"), (ii) subject to the minimum funding
requirements of Section 412 of the Code or (iii) a "multi-employer plan" as
defined in Section 3(37) of ERISA, nor has the Company contributed to, or ever
had any obligation to contribute to, any multi-employer plan. Each Plan and
Benefit Program intended to be qualified under Section 401(a) of the Code is
designated as a tax-qualified plan on Schedule 5.13 and is so qualified. No Plan
or Benefit Program provides for any retiree health benefits for any employees or
dependents of the Company other than as required by the Consolidated Budget
Reconciliation Act of 1985, as amended ("COBRA"). There are no claims pending
with respect to, or under, any Plan or any Benefit Program, other than routine
claims for benefits, and there are no disputes or litigation pending or, to the
knowledge of the Companies, threatened, with respect to any such Plans or
Benefit Programs.
(b) The Shareholders have heretofore delivered to Parent true
and correct copies of the following, if any:
(i) each Plan and each Benefit Program listed on
Schedule 5.13, all amendments thereto as of the date hereof and all
current summary plan descriptions provided to employees regarding the
Plans and Benefit Programs;
(ii) each trust agreement and annuity contract (or
any other funding instruments) pertaining to any of the Plans or
Benefit Programs, including all amendments to such documents to the
date hereof;
(iii) each management or employment contract or
contract for personal services and a complete description of any
understanding or commitment between the Company and any officer,
consultant, director, employee or independent contractor of the
Company; and
(iv) a complete description of each other plan,
policy, contract, program, commitment or arrangement providing for
bonuses, deferred compensation, retirement payments, profit sharing,
incentive pay, commissions, hospitalization or medical expenses or
insurance (including, without limitation, health, dental, life and
disability insurance) or any other benefits for any officer,
consultant, director, annuitant, employee or independent contractor of
the Company as such or members of their families (other than directors'
and officers' liability policies), whether or not insured (a "Benefit
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Program"). For purposes of this Agreement, "Plan" means an "employee
benefit plan" (as defined in Section 3(3) of ERISA) which is or has
been established or maintained, or to which contributions are or have
been made, by the Company or by any trade or business, whether or not
incorporated, which, together with the Company, is under common
control, as described in Section 414(b) or (c) of the Code.
(c) Except as disclosed on Schedule 5.13, to the best
knowledge of the Shareholders, each Plan and Benefit Program has been maintained
and administered in compliance with its terms and in accordance with all
applicable laws, rules and regulations. The Company has no commitment or
obligation to establish or adopt any new or additional Plans or Benefit Programs
or to increase the benefits under any existing Plan or Benefit Program.
(d) Except as set forth on Schedule 5.13, neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will (i) result in any payment to be made by
the Company, including, without limitation, severance, unemployment
compensation, golden parachute (defined in Section 280G of the Code) or
otherwise, becoming due to any employee of the Company, or (ii) increase any
benefits otherwise payable under any Plan or any Benefit Program.
(e) As of the date hereof, the Company does not sponsor any
simplified employee pension plans as described in Section 408(k) of the Code and
there are no claims against the Company for benefits relating to any such plans.
SECTION 5.14. EMPLOYEE AND LABOR MATTERS.
(a) Schedule 5.14 hereto includes a true and complete list,
dated as of August 19, 1999, of all employees of the Company, listing the title
or position held, base salary or wage rate and, for the period since July 31,
1999, any bonuses, commissions or profit sharing payable to such employees.
(b) Except as set forth on Schedule 5.14, the Company is not a
party to or bound by any written employment agreements or commitments, other
than on an at-will basis. The Company is in compliance with all applicable laws
respecting the employment and employment practices, terms and conditions of
employment and wages and hours of its employees and are not engaged in any
unfair labor practice. To the best knowledge of the Shareholders, all employees
of the Company who work in the United States are lawfully authorized to work in
the United States according to federal immigration laws. There is no labor
strike or labor disturbance pending or, to the knowledge of the Company or the
Shareholders, threatened against the Company with respect to the Business and,
during the past five years, the Company has not experienced a work stoppage.
(c) Except as set forth on Schedule 5.14, (i) the Company is
not a party to or bound by the terms of any collective bargaining agreement or
other union contract applicable to any employee of the Company and no such
agreement or contract has been requested by any employee or group of employees
of the Company, nor has there been any discussion with respect thereto by
management of the Company with any employees of any of the Companies, (ii)
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neither the Company nor either of the Shareholders is aware of any union
organizing activities or proceedings involving, or any pending petitions for
recognition of, a labor union or association as the exclusive bargaining agent
for, or where the purpose is to organize, any group or groups of employees of
the Company, or (iii) there is not currently pending, with regard to any of its
facilities, any proceeding before the National Labor Relations Board, wherein
any labor organization is seeking representation of any employees of the
Company.
SECTION 5.15. ENVIRONMENTAL MATTERS. Except as set forth on Schedule
5.15 to this Agreement:
(a) Neither the Company nor any of its Business Facilities (as
defined in Exhibit A) is in violation of, or has violated, or has been or is in
non-compliance with, any Environmental Law, including, but not limited to, the
conduct of the business of the Company or the ownership, use, maintenance or
operation of any of the Business Facilities by the Company.
(b) Except in compliance with Environmental Laws (including,
without limitation, by obtaining necessary Environmental Permits), (i) no
Materials of Environmental Concern (as defined in Exhibit A) have been used,
generated, extracted, mined, beneficiated, manufactured, stored, treated, or
disposed of, or in any other way released (and no release is threatened) by the
Company, on, under or about any Business Facility or transferred or transported
by the Company to or from any Business Facility, and (ii) to the knowledge of
the Shareholders no Materials of Environmental Concern have been generated,
manufactured, stored or treated or disposed of, or in any other way released
(and no release is threatened) by the Company, on, under, about or from any
property adjacent to any current Business Facility;
(c) There are no Environmental Claims known, pending or, to
the knowledge of the Shareholders, threatened against the Company or any of its
Business Facilities, and, to the knowledge of the Shareholders, there is no
basis for same;
(d) The Company and all of its Business Facilities have
obtained all Environmental Permits applicable to the operation of the business
of the Company as presently conducted, and the Company and its Business
Facilities are in compliance with all terms and conditions of such Environmental
Permits. The Company and all of its Business Facilities have timely filed
applications for renewal of all such Environmental Permits. Regarding all
Environmental Permits for which renewal, amendment, or modification is sought or
pending, no material expenditures, capital improvements, or changes in operation
will be necessary as a condition or as a result of such renewal, amendment, or
modification;
(e) The Company has all environmental and pollution control
equipment necessary to comply with all Environmental Laws (including, without
limitation, to comply with all applicable Environmental Permits applicable to
the operation of the business of the Company as presently conducted);
(f) To the knowledge of the Shareholders, there are no
Materials of Environmental Concern on any Business Facility of the Company
exceeding any standard or limitation established, published or promulgated
pursuant to Environmental Laws, or which
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would require reporting to any Governmental Authority or Remediation to comply
with the Requirements of Environmental Laws (as defined in Exhibit A);
(g) To the knowledge of the Shareholders, none of the off-site
locations where Materials of Environmental Concern generated from any Business
Facility of the Company, or for which the Company has arranged for their
disposal, treatment or application, has been nominated or identified as a
facility which is subject to an existing or potential claim under Environmental
Laws;
(h) The Company has not been named as a potentially
responsible party under, and no Business Facility of the Company has been
nominated or identified as a facility which is subject to, an existing or
potential claim under CERCLA or comparable Environmental Laws, and, to the
knowledge of the Shareholders, no Business Facility of the Company is subject to
any Lien arising under Environmental Laws;
(i) The Company has not received any notice of any release or
threatened release of Materials of Environmental Concern, or remedial obligation
under, Environmental Laws or Permits, relating to the ownership, use,
maintenance, operation of any Business Facility of the Company or in connection
with the business of the Company, nor, to the knowledge of the Shareholders, is
there any basis for any of the foregoing, nor has the Company voluntarily
undertaken Remediation or other decontamination or cleanup of any facility or
site or entered into any agreement for the payment of costs associated with such
activity;
(j) To the knowledge of the Shareholders, there is no
Environmental Law or Requirement of Environmental Laws that will require future
compliance costs on the part of the Company in excess of One Hundred Thousand
Dollars ($100,000) above costs currently expended in the ordinary course of
business;
(k) The Company has filed all notices, notifications,
financial security, waste managements plans, or applications which are required
to be filed by the Company for the operation of its business or the use or
operation of any Business Facility of the Company; and (l) Except for sludge and
processed by-products, no current Business Facility (or equipment thereon) of
the Company contains any lead containing materials, asbestos containing
materials or polychlorinated biphenyls in any form.
For purposes of this Section, the "Company" shall include any entity which is,
in whole or in part, a predecessor of the Company and all of its present and
former Subsidiaries and their successors of predecessors.
SECTION 5.16. NON-COMPETITION AGREEMENTS. Except as disclosed on
Schedule 5.16 hereto, neither the Company nor either of the Shareholders is a
party to any agreement which purports to restrict or prohibit any of them from,
directly or indirectly, engaging in any business currently engaged in by the
Company. None of the Shareholders is a party to any agreement which, by virtue
of such person's relationship with the Company, restricts the Company or any
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Subsidiary of the Company from, directly or indirectly, engaging in any of the
businesses described above.
SECTION 5.17. TITLE TO ASSETS. Except as disclosed on Schedule 5.17,
the Company has good and indefeasible title to its assets and valid leasehold
interests in its leased assets and properties, as reflected in the most recent
balance sheet included in the Company's Financial Statements, except for
properties and assets that have been disposed of in the ordinary course of the
conduct of the Business since the date of the latest balance sheet included
therein, free and clear of all Liens, except (i) Liens for current taxes,
payments of which are not yet delinquent, (ii) such imperfections in title and
easements and encumbrances, if any, as are not substantial in character, amount
or extent and do not interfere with the present use of the property subject
thereto or affected thereby, or otherwise impair the Company's business
operations (in the manner presently carried on by the Company), or (iii) any
Lien securing any debt or obligation described on Schedule 5.17 which is
expressly referenced as being secured. All leases under which the Company leases
any real property have been delivered to Parent and are in good standing, valid
and effective in accordance with their respective terms, and there is not, under
any of such leases, any existing default or event which, with notice or lapse of
time or both, would become a default by or on behalf of the Company or its
Subsidiaries, or by or on behalf of any third party.
SECTION 5.18. CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS. Schedule
5.18 hereto sets forth a complete list of the following contracts, agreements,
plans and commitments (collectively, the "Contracts") to which the Company is a
party or by which the Company or any of its assets is bound as of the date
hereof:
(a) any contract, commitment or agreement that involves
aggregate expenditures by the Company of more than Fifty Thousand Dollars
($50,000) per year;
(b) any contract or agreement (including any such contracts or
agreements entered into with any Governmental Authority) relating to the
maintenance or operation of the Business that involves aggregate expenditures by
the Company of more than Fifty Thousand Dollars ($50,000);
(c) any indenture, loan agreement or note under which the
Company has outstanding indebtedness, obligations or liabilities for borrowed
money;
(d) any lease or sublease for the use or occupancy of real
property;
(e) any non-competition agreement described in Section 5.16;
(f) any guarantee, direct or indirect, by any Person of any
contract, lease or agreement entered into by the Company;
(g) any partnership, joint venture or construction and
operation agreement;
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(h) any agreement of surety, guarantee or indemnification with
respect to which the Company is the obligor, outside of the ordinary course of
business;
(i) any contract that requires the Company to pay for goods or
services substantially in excess of its estimated needs for such items or the
fair market value of such items;
(j) any contract, agreement, agreed order or consent agreement
that requires the Company to take any actions or incur any expenses to remedy
non-compliance with any Environmental Law; and
(k) any other contract material to the Company or its
business.
True, correct and complete copies of each of such contracts, agreements, plans
and commitments have been delivered to or made available for inspection by
Parent. All such contracts, agreements, plans and commitments (i) were duly and
validly executed and delivered by the Company and (ii) to the knowledge of the
Shareholders, are valid and in full force and effect. Except as set forth on
Schedule 5.18, the Company has fulfilled all material obligations required of
the Company under each such contract, agreement, plan or commitment to have been
performed by it prior to the date hereof, including timely paying all interest
on its debt as such interest has become due and payable. Except as set forth on
Schedule 5.18, there are no counterclaims or offsets under any of such
contracts, agreements, plans and commitments.
The consummation of the Merger will vest in the Surviving Corporation
all rights and benefits under the Contracts and the right to operate the
Company's business and assets under the terms of the Contracts and the manner
currently operated and used by the Company.
SECTION 5.19. SUPPLIES. To the knowledge of the Shareholders, the
Supplies of the Company are of a quantity and quality that have been normal for
the Company in the ordinary course of business of the Company.
SECTION 5.20. BROKERS AND FINDERS. Except as disclosed on Schedule
5.20, the Company has not entered into any contract, arrangement or
understanding with any Person or firm which may result in the obligation of the
Company to pay any finder's fees, brokerage or agent commissions or other like
payments in connection with the transactions contemplated hereby. There is no
claim for payment by the Company of any investment banking fees, finder's fees,
brokerage or agent commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 5.21. INTELLECTUAL PROPERTY. To the knowledge of the
Shareholders, except as disclosed on Schedule 5.21 hereto, the Company has
rights to use, whether through ownership, licensing or otherwise, all patents,
trademarks, service marks, trade names, copyrights, software, trade secrets and
other proprietary rights and processes that are material to its business as now
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conducted (collectively, the "Company Intellectual Property Rights"). Except as
set forth on Schedule 5.21, the Company does not own any patents. The Company
has no knowledge of any infringement by any other Person of any of the Company
Intellectual Property Rights, and, other than within the ordinary course of
business, the Company has not entered into any agreement to indemnify any other
party against any charge of infringement of any of the Company Intellectual
Property Rights. To the knowledge of the Shareholders, the Company has not and
does not violate or infringe any intellectual property right of any other
Person, and the Company has not received any communication alleging that they
violated or infringed the intellectual property right of any other person. The
Companies have not been sued for infringing any intellectual property right of
another person. There is no claim or demand of any Person pertaining to, or any
proceeding which is pending or, to the knowledge of the Company, threatened,
that challenges the rights of the Company in respect of any Company Intellectual
Property Rights, or that claims that any default exists under any Company
Intellectual Property Rights. None of the Company Intellectual Property Rights
is subject to any outstanding order, ruling, decree, judgment or stipulation by
or with any court, tribunal, arbitrator, or other Governmental Authority.
SECTION 5.22. RELATIONSHIPS. Except as set forth on Schedule 5.22,
since January 1, 1999, the Company has not received notice from any customer,
supplier or any party to any Contract involving more than Fifty Thousand Dollars
($50,000) annually with the Company (each a "Contract Party") that such Contract
Party intends to discontinue doing business with the Company, and, since such
date, no Contract Party has indicated any intention (a) to terminate its
existing business relationship with any of the Companies or (b) not to continue
its business relationship with the Company, whether as a result of the
transactions contemplated hereby or otherwise. Except as set forth on Schedule
5.22, the Company has not entered into or participated in any related party
transaction during the past year.
SECTION 5.23. YEAR 2000. To the knowledge of the Shareholders, after
reasonable investigation by the Shareholders and except as disclosed on Schedule
5.23 hereto, all emissions monitors and computers controlling the operation of
incinerators used by the Company are Year 2000 Compliant. "Year 2000 Compliant"
means as to any device (including, without limitation, all software, firmware,
microprocessing chips and/or other data processing devices related to such
device) utilized by and material to the business operations of the Company, that
such device will be able to accurately process date data from, into and between
the twentieth and twenty-first centuries when used in accordance with the
applicable documentation setting forth the requirements for the use of the
specific item.
SECTION 5.24. CERTAIN PAYMENTS. To the best knowledge of the
Shareholders, neither the Company nor any stockholder, officer, director or
employee of the Company has paid or received or caused to be paid or received,
directly or indirectly, in connection with any of the business of the Company
(a) any bribe, kickback or other similar payment to or from any domestic or
foreign government or agency thereof or any other Person or (b) any contribution
to any domestic or foreign political party or candidate (other than from
personal funds of such stockholder, officer, director or employee not reimbursed
by the Company or as permitted by applicable law).
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SECTION 5.25. BOOKS AND RECORDS. To the knowledge of the Shareholders,
the corporate minute books and other organizational records of the Company are
correct and complete in all material respects and the signatures appearing on
all documents contained therein are the true signatures of the person purporting
to have signed the same. To the knowledge of the Shareholders, all actions
reflected in said books and records were duly and validly taken in compliance
with the laws of the applicable jurisdiction and no meeting of the Board of
Directors of the Company or any committee thereof has been held for which
minutes have not been prepared and are not contained in the minute books. All
such books and records are located in the offices of the Company.
SECTION 5.26. CONDITION AND SUFFICIENCY OF ASSETS. To the knowledge of
the Shareholders and the Company, except as disclosed on Schedule 5.26 hereto,
all buildings, improvements and equipment owned or leased by the Company is
structurally sound, in good operating condition and repair (subject to normal
wear and tear) and adequate for the uses to which they are being put, and none
of the buildings, improvements and equipment owned or leased by the Company is
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs not in excess of $100,000 per repair.
ARTICLE VI
CONDUCT OF BUSINESS PENDING CLOSING
SECTION 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
After the date hereof and prior to the Closing Date, unless Parent shall
otherwise agree in writing, the Company shall, and the Shareholders shall cause
the Company to:
(a) conduct its businesses in the ordinary and usual course of
business and consistent with past practice;
(b) not (i) amend or propose to amend its charter or bylaw,
(ii) split, combine, reorganize, reclassify, recapitalize or take any similar
action with respect to its outstanding capital stock or (iii) declare, set aside
or pay any dividend or distribution payable in cash, stock, property or
otherwise;
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of, any additional share of, or any options, warrants or
rights of any kind to acquire any share of, its capital stock of any class or
any debt or equity securities convertible into or exchangeable for such capital
stock;
(d) not (i) incur or become contingently liable with respect
to any indebtedness for borrowed money, (ii) redeem, purchase, acquire or offer
to redeem, purchase or acquire any shares of its capital stock or any options,
warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock, (iii) make any
acquisition of any assets or businesses other than expenditures for fixed or
capital assets described on Schedule 3.3(d) hereto or in the ordinary course of
business not exceeding $100,000 in any instance or $200,000 in the aggregate,
(iv) sell, pledge, dispose of or encumber
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any assets or businesses other than sales in the ordinary course of business or
(v) enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(e) use all reasonable efforts to preserve intact its business
organization and goodwill, keep available the services of its respective present
officers and key employees, and preserve the goodwill and business relationships
with customers and others having business relationships with them and not engage
in any action, directly or indirectly, with the intent to adversely impact the
transactions contemplated by this Agreement;
(f) not enter into or amend any employment, severance, special
pay arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees;
(g) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation, health
care, employment or other employee benefit plan, agreement, trust fund or
arrangement for the benefit or welfare of any employee or retiree, except as
required to comply with changes in applicable law or as contemplated hereunder;
(h) use commercially reasonable efforts to maintain with
financially responsible insurance companies insurance on its tangible assets and
its businesses in such amounts and against such risks and losses as are
consistent with past practice;
(i) not make, change or revoke any material Tax election or
make any material agreement or settlement regarding Taxes with any taxing
authority;
(j) not make any change in the Company's financial, Tax or
accounting methods, practices or policies, or in any assumption underlying such
a method, practice or policy;
(k) give prompt written notice to Parent of the commencement
of any Environmental Claim, or non-routine inspection by any Governmental
Authority with responsibility for enforcing or implementing any applicable
Environmental Laws, and provide to Parent such information as Parent may
reasonably request regarding any such Environmental Claim, any developments in
connection therewith, and, as applicable, any anticipated or actual response
thereto;
(l) not enter into or assume any contracts or agreements
having a value or imposing an obligation upon the Company in excess of $100,000
annually and all contracts or agreements having a value to or imposing an
obligation on the Company that have remaining obligations of $200,000 or more,
regardless of the annual payment;
(m) maintain its books of account and records in the usual,
regular and ordinary manner consistent with past policies and practice;
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(n) not compromise, settle, grant any waiver or release
relating to or otherwise adjust any litigation or claims of any nature
whatsoever pending against the Company; and
(o) not take any action or omit to take any action, which
action or omission would result in a breach of any of the representations and
warranties set forth in this Agreement.
SECTION 6.2. OTHER OFFERS. Except in connection with the transactions
contemplated by this Agreement, from and after the date hereof, and continuing
through the earlier of Closing or the termination of this Agreement in
accordance with the terms hereof, the Shareholders and the Company shall not,
and shall not permit the Company's officers, directors, employees, Affiliates,
representatives or agents to, directly or indirectly, (i) solicit, initiate or
knowingly encourage any offer or proposal for, or any indication of interest in,
a merger or business combination involving the Company or the acquisition of an
equity interest in, or any substantial portion of the assets of the Company or
(ii) engage in negotiations with or disclose any nonpublic information relating
to the Company or Parent, or afford access to the properties, books or records
of the Company, to any Person. The Company shall promptly notify and provide
copies to Parent of any offer, proposal, solicitation or indication of interest,
or communication with respect thereto, delivered to or received from any third
party.
SECTION 6.3. ACCESS TO INFORMATION. The Shareholders and the Company
shall give the Parent and Merger Sub, and their respective accountants, counsel,
financial advisors, and other representatives (the "Parent Representatives")
full access (and shall otherwise fully cooperate, including by making available
copies of all of the following documents which are susceptible to photostatic
reproduction) during normal business hours throughout the period prior to
Closing to all of the Company's respective properties, books, records
(including, but not limited to, Tax Returns and any and all records or documents
which are within the possession of governmental or regulatory authorities,
agencies or bodies, and the disclosure of which the Company can facilitate or
control), Contracts, premises, permits, Environmental Permits, licenses,
Governmental Authorizations, commitments of any nature (whether written or oral)
and records, and shall permit the Parent, Merger Sub and/or Parent
Representatives to make such inspections (including without limitation
environmental inspections, sampling, and analysis) as they may require and
furnish to the Parent, Merger Sub and/or Parent Representatives during such
period all such information concerning the Company and its affairs as the Parent
may reasonably request.
SECTION 6.4. COMMERCIALLY REASONABLE EFFORTS. The Shareholders and
Company will use all reasonable commercial efforts to cause the representations
and warranties contained in Articles IV-A and V hereof to continue to be true
and correct through the Closing Date and to obtain the satisfaction of the
conditions to Closing set forth in Section 8.1 and 8.3 hereof.
ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES
SECTION 7.1. CONSENTS. Subsequent to the Closing Date, the Shareholders
will use all reasonable commercial efforts, at the request of the Parent or
Merger Sub provided that the
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Parent reimburses the Shareholders for all out of-pocket costs and expenses, to
assist the Parent or Merger Sub in obtaining all necessary, proper, appropriate
or advisable consents, novations, approvals or waivers which the Parent or
Merger Sub may reasonably seek from time to time in order to effect, confirm or
document the transactions contemplated by this Agreement, including using their
reasonable commercial efforts to obtain all necessary, proper, appropriate or
advisable consents, novations, approvals or waivers of third parties required in
order to preserve material contractual relationships of the Company.
SECTION 7.2. FURTHER ASSURANCES. The Parties shall execute and deliver
to the others, after the Closing Date, any other instrument which may be
requested by another Party and which is reasonably appropriate to perfect or
evidence any of the sales, assignments, transfers or conveyances contemplated by
this Agreement or to obtain any consents or licenses necessary to operate the
Business in the manner operated by the Company prior to the date hereof.
SECTION 7.3. EXPENSES AND FEES. The Company shall pay all costs and
expenses incurred by the Company in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, any and all
broker's commissions, employee bonuses, and the fees and expenses of the
Company' attorneys and accountants. The Company will make all necessary
arrangements so that Parent or Merger Sub will not be charged with any such
costs or expenses, and all such costs and expenses shall be accrued on the
financial books and records of the Company prior to Closing and shall be
included in the calculation of Net Working Capital. Each Shareholder shall be
responsible for all costs and expenses incurred by such Shareholder in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, the fees and expenses of the Shareholder's
attorneys. Parent shall pay all costs and expenses incurred by Parent and Merger
Sub in connection with this Agreement and the transactions contemplated hereby,
including without limitation, the fees and expenses of their attorneys and
accountants.
SECTION 7.4. AGREEMENT TO COOPERATE. Subject to the terms and
conditions herein provided, the Parties shall use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its reasonable efforts to obtain all necessary, proper or
advisable waivers, consents and approvals under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement, including using its reasonable efforts to obtain all necessary or
appropriate waivers, consents or approvals of third parties required in order to
preserve material contractual relationships of the Company.
SECTION 7.5. NOTIFICATION OF CERTAIN MATTERS. Each of the Parties
agrees to give prompt notice to each other Party of, and to use their respective
reasonable best efforts to prevent or promptly remedy, (i) the occurrence or
failure to occur or the impending or threatened occurrence or failure to occur,
of any event which occurrence or failure to occur would be likely to cause any
of its representations or warranties in this Agreement to be untrue or
inaccurate in any material respect (or in all respects in the case of any
representation or warranty containing any materiality qualification) at any time
from the date hereof to the Closing and (ii) any material failure (or any
failure in the case of any covenant, condition or agreement containing any
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materiality qualification) on its part to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
Shareholders shall give prompt written notice to Parent of the commencement of
any Environmental Claim, or inspection by any Governmental Authority with
responsibility for enforcing or implementing any applicable Environmental Laws,
and provide to Parent such information as Parent may reasonably request
regarding such Environmental Claim, any developments in connection therewith,
and, as applicable, the Company' anticipated or actual response thereto.
Notwithstanding the other provisions of this Section 7.5 and except for those
supplements to the Disclosure Schedules permitted in Section 7.10 hereof, the
delivery of any notice pursuant to this Section shall not limit or otherwise
affect the remedies available hereunder to the Party receiving such notice.
SECTION 7.6. REGISTRATION STATEMENTS.
(a) Parent shall use reasonable efforts to file with the SEC
promptly upon receipt of a written request from all of the Shareholders as a
group (provided that such request may be made or delivered no earlier than
August 31, 2000), the Registration Statement registering all of the Parent
Shares and shall use reasonable efforts to have the Registration Statement
declared effective by the SEC as promptly as reasonably practicable. Parent
shall also take any action required to be taken under applicable state blue sky
or securities laws in connection with the issuance and registration of Parent
Shares pursuant hereto. Parent and the Shareholders shall promptly furnish to
each other all information, and take such other actions, as may reasonably be
requested in connection with any action by any of them in connection with this
Section. Except as otherwise provided in this Section 7.6, no Parent Shares may
be transferred or sold during the twelve (12) months following Closing. The
Registration Statement shall cover the resale of the Parent Shares on Form S-3,
if available, and the Parent may combine registrations of Parent Shares under
this Section 7.6 with registrations of Parent Common Stock required under the
Purchase and Sale Agreement. The Parent shall use its commercially reasonable
efforts to cause such shelf Registration Statement to become effective as soon
as practical after such filing, and to cause the Parent Shares to be qualified
in such state jurisdictions as the Shareholders may reasonably request. The
Parent shall use commercially reasonable efforts to keep the shelf Registration
Statement current and effective for one year after it is first declared
effective.
(b) If Parent proposes to register for its own account any of
its securities under the Securities Act for sale (other than a registration
statement on Form S-4 or S-8, a registration statement filed in connection with
an exchange offer or an offering of securities solely to Parent's existing
shareholders, or a registration statement filed in connection with an exchange
offer or an offering of securities by any of the Parent's shareholders), Parent
shall give written notice to the Shareholders of the Parent's intention to
effect such a registration not later than 15 days prior to the anticipated date
of filing with the SEC of a Registration Statement, which notice shall offer the
Shareholders the opportunity to include in such Registration Statement any of
the Parent Shares held by the Shareholders that the Shareholders may request be
included therein (a "Piggyback Registration"). Notwithstanding the preceding
sentence, Parent's obligation under this Section 7.6(b) shall be limited to
registrations as to which a Registration Statement is to be filed (i) during the
period beginning on the first anniversary of the Closing Date and ending on the
fifth anniversary of the Closing Date, and (ii) only if the
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Shareholders are subject to the volume restrictions set forth in Rule 144 of the
Securities Act. Subject to the provisions of this Agreement, Parent will use its
reasonable efforts to cause all the Parent Shares for which the Shareholders
have requested registration to be registered under the Securities Act to the
extent required to permit the sale by the Shareholders of such Parent Shares;
provided, that if a Piggyback Registration relates to an underwritten public
offering and the managing underwriter or underwriters believe that the inclusion
of all shares requested to be included in the proposed registration would
adversely affect the marketing of such shares, Parent may first include in such
registration all securities Parent proposes to sell, and The Shareholders shall
accept a reduction (including a total elimination) in the number of shares to be
included in such registration, pro rata with the other holders of Parent Common
Stock making requests for registration, on the basis of the number of shares of
Parent Common Stock so requested to be included by the Shareholders and the
other selling shareholders. Nothing in this Section 7.6(b) shall limit Parent's
ability to withdraw a Registration Statement it has filed either before or after
effectiveness.
(c) Parent shall pay the expenses incurred in connection with
any proposed registration of securities by Parent under this Section 7.6,
whether or not effected or consummated, including, without limitation, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel and accountants for Parent.
SECTION 7.7. PURCHASER'S LIQUIDITY PROGRAM. Notwithstanding any other
provision set forth herein, with respect to all sales by the Shareholders of
Parent Shares through the NASDAQ or any such other exchange, the Shareholders
may only sell such shares on any day after the first sale of Parent Common Stock
has occurred through the NASDAQ or such other exchange and on such day, the
Shareholders may only sell 1,000 Parent Shares in the aggregate for each 1,000
shares of Parent Common Stock sold by unrelated third parties through the NASDAQ
or such other exchange on such day. In no event shall the plan of distribution
of Parent Shares include the use of a contractual underwriter, nor shall Parent
have any obligation to enter into an underwriting agreement with any investment
banking firm participating as a broker in the execution of any such resales.
Parent agrees that it will furnish to the Shareholders such number of
prospectuses, prospectus supplements, or other documents incident to any
registration, qualification or compliance referred to herein as the Shareholders
from time to time may reasonably request.
SECTION 7.8. EXCHANGE LISTING. Parent shall use its reasonable efforts
to effect, at or before the effective date of a Registration Statement,
authorization for listing on NASDAQ, upon official notice of issuance, of the
shares of Parent Common Stock to be issued pursuant to the transactions
contemplated by this Agreement.
SECTION 7.9. PUBLIC STATEMENTS. Except as required by law or the
National Association of Securities Dealers ("NASD"), the Parties shall obtain
the written consent of the other Parties prior to issuing any press release or
any written public statement with respect to this Agreement or the transactions
contemplated hereby and shall not issue any such press release or written public
statement prior to such consent, which will not be unreasonably withheld.
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SECTION 7.10. SUPPLEMENTS TO DISCLOSURE SCHEDULES. From time to time
prior to the date ten (10) days prior to Closing, the Shareholders may update
the Disclosure Schedules to this Agreement in order to make the information set
forth therein complete and accurate, so long as such an update does not disclose
an event, fact or condition which could have a Material Adverse Effect on the
Company. In the event such an update discloses an event or condition which could
have a Material Adverse Effect on the Company, then Parent may terminate this
Agreement if (i) the Parent notified the Shareholders that Parent believed, in
its reasonable business judgment, that the updated information disclosed an
event, fact or condition which could have a Material Adverse Effect on the
Company, (ii) the Parent negotiated in good faith with the Shareholders with
respect to adjustments, if any, to the terms of this Agreement as a result of
the updated information, and (iii) the Parties failed to agree on any such
adjustments.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each Party to effect the Merger shall be
subject to the fulfillment or waiver, if permissible, of the following
conditions on or prior to the Effective Time:
(a) no preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
Merger shall have been issued and remain in effect (each Party agreeing to use
its reasonable efforts to have any such injunction, order or decree lifted); and
(b) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the consummation of
the Merger or make the consummation of the Merger illegal; and
(c) the transactions contemplated by the Purchase and Sale
Agreement dated the same date as this Agreement by and among Parent, Xx.
Xxxxxxx, Xxx. Xxxxxxxx, the Estate, the Trust and Xxxxxx Xxxxxxx, as Trustee of
the Xxxx X. Xxxxxxx 1998 Grat (the "Purchase and Sale Agreement"), shall have
been consummated.
SECTION 8.2. CONDITIONS TO OBLIGATION OF THE COMPANY AND THE
SHAREHOLDERS TO EFFECT THE MERGER. Unless waived by the Company and the
Shareholders, the obligations of the Company and the Shareholders to effect the
Merger shall be subject to the fulfillment of the following additional
conditions on or prior to the Closing Date:
(a) Parent and Merger Sub shall have performed in all material
respects (or in all respects in the case of any agreement containing any
materiality qualification) their agreements contained in this Agreement required
to be performed on or prior to the Effective Time;
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(b) the representations and warranties of Parent and Merger
Sub contained in this Agreement shall be true and correct in all material
respects (or in all respects in the case of any representation or warranty
containing any materiality qualification) on and as of the date made and on and
as of the Closing Date as if made at and as of such date;
(c) the Shareholders shall have received certificates executed
on behalf of Parent and Merger Sub by the President or a Vice President of the
Parent and Merger Sub with respect to (a) and (b) above;
(d) the Shareholders shall have received legal opinions from
in-house legal counsel to the Parent, dated the Closing Date, in a form
reasonably satisfactory to the Sellers; and
(e) the Parent shall have entered into a Consulting Agreement
with Xx. Xxxxxxx, in the form attached hereto as Exhibit D.
SECTION 8.3. CONDITIONS TO OBLIGATIONS OF PARENT TO EFFECT THE MERGER.
Unless waived by Parent and Merger Sub, the obligations of Parent and Merger Sub
to effect the Merger shall be subject to the fulfillment of the following
additional conditions on or prior to the Effective Time:
(a) the Shareholders and the Company shall have performed in
all material respects (or in all respects in the case of any agreement
containing any materiality qualification) their agreements contained in this
Agreement required to be performed on or prior to the Closing Date;
(b) the representations and warranties of the Shareholders and
the Company contained in this Agreement shall be true and correct in all
material respects (or in all respects in the case of any representation or
warranty containing any materiality qualification) on and as of the date made
and on and as of the Closing Date as if made at and as of such date;
(c) since the date hereof, there shall have been no changes
that constitute, and no event or events shall have occurred which have resulted
in or constitute, a Material Adverse Effect;
(d) Parent shall have received legal opinions from legal
counsel to the Shareholders and the Company, dated the Closing Date, in a form
reasonable satisfactory to Parent, and as described in Section 3.8(a);
(e) the Shareholders shall have executed Release of Claims
Agreements, in the form attached hereto as Exhibit C;
(f) Xx. Xxxxxxx, individually, shall have entered into a
Consulting Agreement, in the form attached hereto as Exhibit D;
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(g) Xx. Xxxxxxx, individually, shall have entered into a
Covenant Not to Compete Agreement, in the form attached hereto as Exhibit E;
(h) the Estate, Xxx. Xxxxxxxx, individually, the Trust and the
Trucking Company shall have entered into Covenant Not to Compete Agreements, in
the form attached hereto as Exhibit F;
(i) Parent shall have received certificates representing the
Company Common Stock duly endorsed for transfer as described in Section
3.8(a)(i);
(j) Parent shall have received a certificate executed by each
of the Shareholders with respect to (a) and (b) above; and
(k) Parent shall have entered into employment agreements with
Xxxx XxXxxxxxx and Xxxxx Xxxxxxxxx.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Effective
Time in the following manner:
(a) Any Shareholder shall have the right to terminate this
Agreement:
(i) if the representations and warranties of Parent
and Merger Sub shall fail to be true and correct in all material
respects (or in all respects in the case of any representation or
warranty containing any materiality qualification) on and as of the
date made or, except in the case of any such representations and
warranties made as of a specified date, on and as of any subsequent
date as if made at and as of such subsequent date and such failure
shall not have been cured in all material respects (or in all respects
in the case of any representation or warranty containing any
materiality qualification) within 15 days after written notice of such
failure is given to Parent by the Shareholders;
(ii) if the Merger is not completed by November 1,
1999 (provided that (a) the right to terminate this Agreement under
this Section 9.1(a)(ii) shall not be available to the Shareholder if
the failure of the Shareholder to fulfill any obligation to Parent or
Merger Sub under or in connection with this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before
such date and (b) Parent has not exercised its option to extend under
Section 9.4);
(iii) if the Merger is enjoined by a final,
unappealable court order; or
(iv) if Parent or Merger Sub (A) fails to perform in
any material respect (or in all respects in the case of any covenant
containing any materiality qualification) any of its covenants in this
Agreement and (B) does not cure such default in all material
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respects (or in all respects in the case of any covenant containing
any materiality qualification) within 15 days after notice of such
default is given to Parent by the Shareholder.
(b) Parent shall have the right to terminate this Agreement;
(i) if the representations and warranties of the
Company or the Shareholders shall fail to be true and correct in all
material respects (or in all respects in the case of any representation
or warranty containing any materiality qualification) on and as of the
date made or, except in the case of any such representations and
warranties made as of a specified date, on and as of any subsequent
date as if made at and as of such subsequent date and such failure
shall not have been cured in all material respects (or in all respects
in the case of any representation or warranty containing any
materiality qualification) within 15 days after written notice of such
failure is given to the Shareholders by Parent;
(ii) if the Merger is not completed by November 1,
1999, as such date may be extended pursuant to Section 9.4 below
(provided that the right to terminate this Agreement under this Section
9.1(b)(ii) shall not be available to Parent if the failure of Parent to
fulfill any obligation to the Shareholders under or in connection with
this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date);
(iii) if the Shareholders or the Company (A) fail to
perform in any material respect (or in all respects in the case of any
covenant containing any materiality qualification) any of their
covenants in this Agreement and (B) do not cure such default in all
material respects (or in all respects in the case of any covenant
containing any materiality qualification) within 15 days after notice
of such default is given to the Shareholders by Parent; or
(iv) pursuant to Section 7.10.
(c) The Shareholders and Parent mutually agree in writing.
SECTION 9.2. EFFECT OF TERMINATION. The following provisions shall
apply in the event of a termination of the Agreement:
(a) If this Agreement is terminated by either Parent or the
Shareholders pursuant to the provisions of Section 9.1, this Agreement shall
forthwith become void and there shall be no further obligations on the part of
the Shareholders, Parent, Company or Merger Sub, or their respective
stockholders, directors, officers, employees, agents or representatives.
Notwithstanding the preceding sentence or any other provision set forth herein,
nothing in this Section 9.2 shall relieve any Party from liability for any
breach of this Agreement, including, without limitation, any breach of the
prohibition in Section 7.10 against updating the Disclosure Schedules with
information which could have a Material Adverse Effect on the Company.
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(b) The Parties acknowledge and agree that Parent, as a result
of the actual damages Parent would sustain by reason of such negligent or
willful failure of the Company or the Shareholders to perform their obligations
hereunder, could not be made whole by monetary damages, and it is accordingly
agreed that Parent shall have the right to elect, in addition to any and all
other remedies at law or in equity, to enforce specific performance under this
Agreement and the Company or the Shareholders waive the defense in any such
action for specific performance that a remedy at law would be adequate.
SECTION 9.3. EXTENSIONS; WAIVER. At any time prior to the Effective
Time, the Parties may (a) extend the time for the performance of any of the
obligations or other acts of the other Parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant thereto and (c) waive compliance with any of the agreements or
conditions herein. Any agreement on the part of a Party to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such Party.
SECTION 9.4. PARENT'S OPTION TO EXTEND. At Parent's option (exercised
by providing written notice to the Shareholders prior to November 1, 1999), the
deadline of November 1, 1999 set forth in Sections 9.1(a)(ii) and 9.1(b)(ii),
above, may be extended to December 31, 1999; provided, however, that if the
transactions contemplated hereby fail to close by the expiration of such
extended period, Parent shall pay the reimbursement payment set forth in Section
9.4 of the Purchase and Sale Agreement as reimbursement for the costs and
expenses incurred by the Company in connection with the negotiation and
execution of this Agreement, as well as the Purchase and Sale Agreement, unless
the Shareholders have breached this Agreement or the failure of any Shareholder
to fulfill any obligation to Purchaser under or in connection with this
Agreement has been the cause of or resulted in the failure of the transactions
contemplated hereby to close before the expiration of such extended period.
ARTICLE X
INDEMNIFICATION AND LIMITATION ON LIABILITY
SECTION 10.1. THE SHAREHOLDERS' INDEMNITY OBLIGATIONS.
(a) Each Shareholder shall, severally but not jointly,
indemnify and hold harmless the Company (after the Closing), Parent and the
Company's (after the Closing) and the Parent's respective officers, directors,
stockholders, employees, agents, representatives and Affiliates (each a "Parent
Indemnified Party") from and against any and all claims, actions, causes of
action, arbitrations, proceedings, losses, damages, remediations, liabilities,
strict liabilities, judgments, fines, penalties and expenses (including, without
limitation, reasonable attorneys' fees) (collectively, the "Indemnified
Amounts") paid, imposed on or incurred by a Parent Indemnified Party, directly
or indirectly, (i) relating to, resulting from or arising out of (x) any breach
or misrepresentation in any of the representations and warranties made by such
Shareholder in Article IV-A of this Agreement, or any certificate or instrument
delivered by such Shareholder in connection with this Agreement, or (y) any
violation or breach by such Shareholder of, or default by such Shareholder
under, the terms of this Agreement or any certificate or instrument delivered by
such Shareholder in connection with this Agreement, or (ii)
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relating to, resulting from or arising out of any allegation of a third party of
the events described in Sections 10.1(a)(i), above.
(b) The Shareholders shall, jointly and severally, indemnify
and hold harmless the Parent and the Company (after the Closing) and the other
Parent Indemnified Parties from and against any and all Indemnified Amounts
paid, imposed on or incurred by a Parent Indemnified Party, directly or
indirectly, (i) relating to, resulting from or arising out of (x) any breach or
misrepresentation in any of the representations and warranties made by the
Company or the Shareholders in Article V of this Agreement, including without
limitation with respect to environmental matters, or any certificate or
instrument delivered in connection with this Agreement, or (y) any violation or
breach by the Company of, or default by the Company under, the terms of this
Agreement or any certificate or instrument delivered by the Company in
connection with this Agreement, or (ii) relating to, resulting from or arising
out of any allegation of a third party of the events described in Sections
10.1(b)(i), above.
(c) For purposes of Section 10.1(a) and (b), Indemnified
Amounts shall include without limitation those Indemnified Amounts ARISING OUT
OF THE STRICT LIABILITY (INCLUDING BUT NOT LIMITED TO STRICT LIABILITY ARISING
PURSUANT TO ENVIRONMENTAL LAWS) OR NEGLIGENCE OF ANY OF THE PARTIES, INCLUDING
ANY PARENT INDEMNIFIED PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT, ACTIVE OR PASSIVE.
SECTION 10.2. PARENT'S INDEMNITY OBLIGATIONS. Parent shall indemnify
and hold harmless the Shareholders and the Shareholders' agents, representatives
and Affiliates (each a "Shareholders Indemnified Party") from and against any
and all Indemnified Amounts incurred by a Shareholders Indemnified Party as a
result of (a) any breach or misrepresentation in any of the representations and
warranties made by or on behalf of Parent in this Agreement or any certificate
or instrument delivered in connection with this Agreement, or (b) any violation
or breach by Parent or Merger Sub of or default by Parent or Merger Sub under
the terms of this Agreement or any certificate or instrument delivered in
connection with this Agreement.
SECTION 10.3. INDEMNIFICATION PROCEDURES. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(a) Promptly after receipt by an indemnified party under
Section 10.1 or 10.2 of notice of the commencement of any third party claim or
claims asserted against it ("Third-Party Claim"), such indemnified party will,
if a claim is to be made against an indemnifying party under such Section, give
notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Third-Party Claim referred to in Section 10.3(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Third-Party Claim, the indemnifying party
will, unless the claim involves Taxes, be entitled to
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participate in such Third-Party Claim and, to the extent that it wishes (unless
(i) the indemnifying party is also a party to such Third-Party Claim and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
Third-Party Claim and provide indemnification with respect to such Third-Party
Claim), to assume the defense of such Third-Party Claim with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Third-Party Claim, the indemnifying party will not, as long as it diligently
conducts such defense, be liable to the indemnified party under this Article X
for any fees of other counsel or any other expenses with respect to the defense
of such Third-Party Claim, in each case subsequently incurred by the indemnified
party in connection with the defense of such Third-Party Claim, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Third-Party Claim, (i) it will be conclusively established for purposes of
this Agreement that the claims made in that Third-Party Claim are within the
scope of and subject to indemnification; (ii) no compromise or settlement of
such claims may be effected by the indemnifying party without the indemnified
party's consent unless (A) there is no finding or admission of any violation of
law, rule, regulation or other legal requirement or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, (B) the indemnified party receives as part of such settlement
a legal, binding and enforceable unconditional satisfaction and/or release, in
form and substance reasonably satisfactory to it, providing that such
Third-Party Claim and any claimed liability of the indemnified party with
respect thereto is being fully satisfied by reason of such compromise or
settlement and that the indemnified party is being released from any and all
obligations or liabilities it may have with respect thereto, and (C) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Third-Party
Claim and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Third-Party Claim, the indemnifying party will be
bound by any determination made in such Third-Party Claim or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Third-Party Claim may adversely affect it or its Affiliates other than as a
result of monetary damages for which it would be entitled to indemnification
under this Agreement, the indemnified party may, by notice to the indemnifying
party, assume the exclusive right to defend, compromise, or settle such
Third-Party Claim, but the indemnifying party will not be bound by any
determination of a Third-Party Claim so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
(d) Shareholders hereby consent to the non-exclusive
jurisdiction of any court in which a Third-Party Claim is brought against any
indemnified party for purposes of any claim that an indemnified party may have
under this Agreement with respect to such Third-Party Claim or the matters
alleged therein, and agree that process may be served on Shareholders with
respect to such a claim anywhere in the world.
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(e) In the event any indemnified party should have a claim
against any indemnifying party hereunder that does not involve a Third-Party
Claim, the indemnified party shall transmit to the indemnifying party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to such claim to
the extent feasible (which estimate shall not be conclusive of the final amount
of such claim) and the basis of the indemnified party's request for
indemnification under this Agreement.
(f) The Shareholders may satisfy any claim for indemnification
hereunder by the delivery of Parent Shares to the Parent which Parent Shares
shall be valued at the average of the Daily Per Share Prices for the twenty (20)
consecutive trading days beginning on the twenty-first (21st) trading day prior
to delivery by the Shareholders to the Parent pursuant to this Article X.
SECTION 10.4. LIMITATION OF SHAREHOLDERS' LIABILITY.
(a) Notwithstanding anything to the contrary contained in
Article X, the aggregate liability of the Estate for any event or occurrence
giving rise to the Estate being required to indemnify Parent Indemnified Parties
pursuant to Section 10.1 of this Agreement shall be limited to $3,500,000.
(b) Notwithstanding anything to the contrary contained in
Article X, the aggregate liability of Xx. Xxxxxxx for any event or occurrence
giving rise to Xx. Xxxxxxx being required to indemnify Parent Indemnified
Parties pursuant to Section 10.1 of this Agreement shall be limited to
$3,500,000.
(c) Parent Indemnified Parties are entitled to indemnification
pursuant to Section 10.1 as follows:
(i) until and including the first anniversary of the
Closing Date, only if the amount of any Indemnified Amount,
individually or in the aggregate with all other Indemnified Amounts
hereunder and under the terms of the Purchase and Sale Agreement,
exceeds Two Hundred Fifty Thousand Dollars ($250,000), and then only to
the extent of such excess; and
(ii) after the first anniversary of the Closing Date,
only if the amount of any Indemnified Amount, individually or in the
aggregate with all other Indemnified Amounts hereunder and under the
terms of the Purchase and Sale Agreement since the Closing Date,
exceeds Five Hundred Thousand Dollars ($500,000), and then only to the
extent of such excess.
SECTION 10.5. LIMITATION OF PARENT'S LIABILITY. Shareholders
Indemnified Parties are entitled to indemnification pursuant to Section 10.2 as
follows:
(i) until and including the first anniversary of the
Closing Date, only if the amount of any Indemnified Amount,
individually or in the aggregate with all other Indemnified Amounts
hereunder and under the terms of the Purchase and Sale Agreement,
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exceeds Two Hundred Fifty Thousand Dollars ($250,000), and then only to the
extent of such excess; and
(ii) after the first anniversary of the Closing Date, only if
the amount of any Indemnified Amount, individually or in the aggregate with all
other Indemnified Amounts hereunder and under the terms of the Purchase and Sale
Agreement since the Closing Date, exceeds Five Hundred Thousand Dollars
($500,000), and then only to the extent of such excess.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1. SURVIVAL. The representations, warranties, covenants and
agreements (including, but not limited to, indemnification obligations) set
forth in this Agreement and in any certificate or instrument delivered in
connection herewith shall be continuing and shall survive the Closing for a
period of two years following the date of Closing; provided, however, that in
the case of all such representations, warranties, covenants and agreements
(including, but not limited to, indemnification obligations) there shall be no
such termination with respect to any such representation, warranty, covenant or
agreement as to which a bona fide claim has been asserted by written notice of
such claim delivered to the Party or Parties making such representation,
warranty, covenant or agreement prior to the expiration of the survival period;
provided, further, that (i) the representations and warranties set forth in
Sections 4A.1 (Ownership), 4A.2 (Authority; Non-Contravention; Approvals) and
5.2 (Capitalization) hereof shall survive the Closing indefinitely, (ii) Section
5.12 (Taxes) shall survive the Closing for the greater of two years or the
statutory survival period applicable to Taxes, (iii) the covenants contained in
this Agreement to be performed after the Closing shall survive until fully
performed; and (iv) the indemnification obligations of the Shareholders set
forth in Section 10.1(a) and Section 10.1(b) shall survive the Closing until the
termination of the respective representations and warranties.
SECTION 11.2. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by a
nationally recognized overnight delivery service, mailed by registered or
certified mail (return receipt requested) or sent via facsimile to the Parties
at the following addresses (or at such other address for a Party as shall be
specified by like notice):
(a) If to Parent, Merger Sub or the Company (on or after
Closing), to:
Synagro Technologies, Inc.
0000 Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Rome
Telecopy: 713/369-1760
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with a copy to:
Xxxxx Liddell & Xxxx LLP
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy: 713/223-3717
(b) If to Xx. Xxxxxxx or the Company (prior to Closing),
to:
Xxxx X. Xxxxxxx
00 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telecopy: 203/622-9064
with a copy to:
Xxxxxx X. Xxxx, Esq.
Xxxxxxxx & X'Xxxx, LLP
00 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telecopy: 203/869-6565
(c) If to Xxxxxxx X. Xxxxxxxx, as
Executrix of the Estate of Xxxxxxx X. Xxxxxxxx
or as Co-Trustee of the Xxxxxxx X. Xxxxxxxx
Revocable Trust, to:
Xxxxxxx X. Xxxxxxxx
00 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
with a copy to:
Xxxx X. Xxxxxxx, Esq.
Xxxxxxx, Rock & Talbot, P.C.
000 Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopy: 203/250-1795
and
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Xxxxxx X. Xxxxx
c/o Astra Zeneca
000 Xxxxxxxxxxxx Xxxx.
Xxxxx, Xxxxxxxxxxxx 00000
Telecopy: 610/695-4491
(d) If to Xxxxxxx X. Xxxxxxxx, individually, to:
Xxxxxxx X. Xxxxxxxx
00 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
with a copy to:
Xxxxxxx & Xxxxxxx, LLP
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Gold, Esq.
Telecopy: 203/324-8191
and
Xxxxxx X. Xxxxx
c/o Astra Zeneca
000 Xxxxxxxxxxxx Xxxx.
Xxxxx, Xxxxxxxxxxxx 00000
Telecopy: 610/695-4491
(e) If to Xxxxxx Xxxxxx, as Co-Trustee of the Xxxxxxx X.
Xxxxxxxx Revocable Trust, to:
Xxxxxx Xxxxxx (Personal and Confidential)
c/o X. X. Xxxxxxxx, Inc.
X.X. Xxx 000
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telecopy: 203/723-5640
with a copy to:
Xxxx X. Xxxxxxx, Esq.
Xxxxxxx, Rock & Talbot, P.C.
000 Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxx, Xxxxxxxxxxx 00000
Telecopy: 203/250-1795
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49
SECTION 11.3. INTERPRETATION. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
interpretation of this Agreement. In this Agreement, unless a contrary intention
is specifically set forth, (i) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any Party solely because
such Party or its legal representative drafted such provision.
SECTION 11.4. MISCELLANEOUS. This Agreement (including the documents
and instruments referred to herein and the Schedules and Exhibits attached
hereto) constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the Parties, or any
of them, with respect to the subject matter hereof. Neither this Agreement nor
the rights, interests and obligations arising pursuant to this Agreement
(including the documents and instruments referred to herein and the Schedules
and Exhibits attached hereto) shall not be assigned by operation of law or
otherwise except that Merger Sub or Parent may assign this Agreement to any
other wholly-owned Subsidiary of Parent, but no such assignment shall relieve
the Parent or the Merger Sub, as the case may be, of its obligations hereunder.
SECTION 11.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY
WITHIN SUCH STATE.
SECTION 11.6. BINDING ARBITRATION.
(a) General. Notwithstanding any provision of this Agreement
to the contrary, upon the request of any Party (defined for the purpose of this
provision to include Affiliates, principals and agents of any such Party), any
dispute, controversy or claim arising out of, relating to, or in connection
with, this Agreement or any agreement executed in connection herewith or
contemplated hereby, or the breach, termination, interpretation, or validity
hereof or thereof (hereinafter referred to as a "Dispute"), shall be finally
resolved by mandatory and binding arbitration in accordance with the terms
hereof. Any Party may bring an action in court to compel arbitration of any
Dispute. Any Party who fails or refuses to submit any Dispute to binding
arbitration following a lawful demand by the opposing Party shall bear all costs
and expenses incurred by the opposing Party in compelling arbitration of such
Dispute.
(b) Governing Rules. The arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect at the time of the arbitration, except as they may be
modified herein or by mutual agreement of the Parties. The seat of the
arbitration shall be New York, New York. Notwithstanding Section 11.6, the
arbitration and this clause shall be governed by the Federal Arbitration Act, 9
U.S.C. Section 1 et seq.
43
50
(the "Federal Arbitration Act"). The arbitrator shall award all reasonable and
necessary costs (including the reasonable fees and expenses of counsel) incurred
in conducting the arbitration to the prevailing Party in any such Dispute. The
Parties expressly waive all rights whatsoever to file an appeal against or
otherwise to challenge any award by the arbitrators hereunder; provided, that
the foregoing shall not limit the rights of any Party to bring a proceeding in
any applicable jurisdiction to confirm, enforce or enter judgment upon such
award (and the rights of the other Party, if such proceeding is brought to
contest such confirmation, enforcement or entry of judgment, but only to the
extent permitted by the Federal Arbitration Act).
(c) No Waiver; Preservation of Remedies. No provision of, nor the
exercise of any rights under this Agreement shall limit the right of any Party
to apply for injunctive relief or similar equitable relief with respect to the
enforcement of this Agreement or any agreement executed in connection herewith
or contemplated hereby, and any such action shall not be deemed an election of
remedies. Such rights can be exercised at any time except to the extent such
action is contrary to a final award or decision in any arbitration proceeding.
The Parties agree that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
Parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof. The
institution and maintenance of an action for injunctive relief or similar
equitable relief shall not constitute a waiver of the right of any Party,
including without limitation the plaintiff, to submit any Dispute to arbitration
nor render inapplicable the compulsory arbitration provisions of this Agreement.
(d) Arbitration Proceeding. In addition to the authority conferred on
the arbitration tribunal by the rules specified above, the arbitration tribunal
shall have the authority to order reasonable discovery, including the deposition
of party witnesses and production of documents. The arbitral award shall be in
writing, state the reasons for the award, and be final and binding on the
Parties with no right of appeal. All statutes of limitations that would
otherwise be applicable shall apply to any arbitration proceeding. Any
attorney-client privilege and other protection against disclosure of
confidential information, including without limitation any protection afforded
the work-product of any attorney, that could otherwise be claimed by any Party
shall be available to and may be claimed by any such Party in any arbitration
proceeding. No Party waives any attorney-client privilege or any other
protection against disclosure of confidential information by reason of anything
contained in or done pursuant to or in connection with this Agreement. Each
Party agrees to keep all Disputes and arbitration proceedings strictly
confidential, except for disclosures of information to the Parties' legal
counsel or auditors or those required by applicable law. The arbitrators shall
determine the matters in dispute in accordance with the substantive law of the
State of Delaware, without regard to conflict of law rules. The obligation to
arbitrate any dispute shall be binding upon the successors and assigns of each
of the Parties.
(e) Appointment of Arbitrators. The arbitration shall be conducted by
three (3) arbitrators. The Party initiating arbitration (the "Claimant") shall
appoint its arbitrator in its request for arbitration (the "Request"). The other
Party (the "Respondent") shall appoint its arbitrator within 30 days after
receipt of the Request and shall notify the Claimant of such
44
51
appointment in writing. If the Respondent fails to appoint an arbitrator within
such 30-day period, the arbitrator named in the Request shall decide the
controversy or claim as sole arbitrator. Otherwise, the two (2) arbitrators
appointed by the Parties shall appoint a third (3rd) arbitrator within 30 days
after the Respondent has notified Claimant of the appointment of the
Respondent's arbitrator. When the third (3rd) arbitrator has accepted the
appointment, the two (2) Party-appointed arbitrators shall promptly notify the
Parties of the appointment. If the two (2) arbitrators appointed by the Parties
fail to appoint a third (3rd) arbitrator or so to notify the Parties within the
time period prescribed above, then the appointment of the third (3rd) arbitrator
shall be made by the American Arbitration Association, which shall promptly
notify the Parties of the appointment. The third (3rd) arbitrator shall act as
Chair of the panel.
(f) Other Matters. This arbitration provision constitutes the entire
agreement of the Parties with respect to its subject matter and supersedes all
prior discussions, arrangements, negotiations and other communications on
dispute resolution. This arbitration provision shall survive any termination,
amendment, renewal, extension or expiration of this Agreement or any agreement
executed in connection herewith or contemplated hereby unless the Parties
otherwise expressly agree in writing. The obligation to arbitrate any dispute
shall be binding upon the successors and assigns of each of the Parties.
SECTION 11.7. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the Parties.
SECTION 11.8. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 11.9. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each Party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 11.10. VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 11.11. GUARANTEE. Xxxxxxx Xxxxxxxx, individually and as
Co-Trustee of the Trust, and Xxxxxx Xxxxxx, as Co-Trustee of the Trust, jointly
and severally, unconditionally and irrevocably guarantee the full, prompt and
complete performance of all obligations of the Estate and Trust, as the case may
be, under this Agreement and the documents executed and delivered by the Estate
and Trust in connection with the transactions contemplated in this Agreement.
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52
IN WITNESS WHEREOF, the Parties have executed and delivered this
Agreement effective as of the date first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Xxxx X. Xxxxxx, Chairman and Chief
Executive Officer
RESTEC ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Xxxx X. Xxxxxx, Chairman and Chief
Executive Officer
NEW ENGLAND TREATMENT COMPANY,
INC.
By: /s/ Xxxx X. Xxxxxxx
---------------------------------------
Xxxx X. Xxxxxxx, President
/s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxxx, individually
THE XXXXXXX X. XXXXXXXX
REVOCABLE TRUST
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxxx, Co-Trustee
By: /s/ Xxxxxx Xxxxxx
---------------------------------------
Xxxxxx Xxxxxx, Co-Trustee
THE SHAREHOLDERS:
/s/ Xxxx X. Xxxxxxx
---------------------------------------
Xxxx X. Xxxxxxx, individually
THE ESTATE OF XXXXXXX X. XXXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxxx, Executrix
46
53
EXHIBIT A
GLOSSARY
For purposes of this Agreement, the following terms shall have the
meaning specified or referred to below when capitalized (or if not capitalized,
unless the context clearly requires otherwise) when used in this Agreement.
"Affiliate(s)" with respect to any Person, means any Person directly or
indirectly controlling, controlled by or under common control with such Person,
and any natural person who is an officer, director or partner of such Person and
any members of their immediate families living within the same household. A
Person shall be deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, by contract or otherwise.
"Average Parent Common Stock Price" means the average of the Daily Per
Share Prices for the twenty (20) consecutive trading days beginning on the
twenty-first (21st) trading day prior to the date of this Agreement.
"Business Facility" or "Business Facilities" includes any property
(whether real or personal) which the Company or any of their Subsidiaries
currently lease, operate, or own or manage in any manner or which the Company or
any of their Subsidiaries or any of their respective organizational predecessors
formerly leased, operated, owned or managed in any manner.
"Code" means the Internal Revenue Code of 1986, as amended, or any
amending or superseding tax laws of the United States of America.
"Daily Per Share Price" means the per share closing price on the NASDAQ
Small Cap Exchange (the "NASDAQ") of Parent Common Stock (as reported by The
Wall Street Journal for that day).
"Environmental Claim(s)" means any claim; litigation; demand; action;
cause of action; suit; loss; cost, including, but not limited to, attorneys'
fees, diminution in value, and expert's fees; damage; punitive damage; fine,
penalty, expense, liability, criminal liability, strict liability, judgment,
governmental or private investigation and testing; notification of status of
being potentially responsible for clean-up of any facility or for being in
violation or in potential violation of any Environmental Law; proceeding;
Exhibit A - Page 1
54
consent or administrative orders, agreements or decrees; lien; personal injury
or death of any person; or property damage, whether threatened, sought, brought
or imposed, that is related to or that seeks to recover losses, damages, costs,
expenses and/or liabilities related to, or seeks to impose liability for: (i)
improper use or treatment of wetlands, pinelands or other protected land or
wildlife; (ii) noise; (iii) radioactive materials (including naturally occurring
radioactive materials ("NORM")); (iv) explosives; (v) pollution, contamination,
preservation, protection, decontamination, remediation or clean-up of the air,
surface water, groundwater, soil or protected lands; (vi) solid, gaseous or
liquid waste generation, handling, discharge, release, threatened release,
treatment, storage, disposal or transportation; (vii) exposure of persons or
property to Materials or Environmental Concern and the effects thereof; (viii)
the release or threatened release (into the indoor or outdoor environment),
generation, extraction, mining, beneficiating, manufacture, processing,
distribution in commerce, use, transfer, transportation, treatment, storage,
disposal of Remediation of Materials of Environmental Concern; (ix) injury to,
death of or threat to the health or safety of any person or persons caused
directly or indirectly by Materials of Environmental Concern; (x) destruction
caused directly or indirectly by Materials of Environmental Concern or the
release or threatened release of any Materials of Environmental Concern or any
property (whether real or personal); (xi) the implementation of spill prevention
and/or disaster plans relating to Material of Environmental Concern; (xiii)
community right-to-know and other disclosure laws; or (xiii) maintaining,
disclosing or reporting information to Governmental Authorities of any other
third person under any Environmental Law. The term, "Environmental Claim," also
includes, without limitation, any losses, damages, costs, expenses and/or
liabilities incurred in testing, if such testing confirms the presence of
Materials of Environmental Concern.
"Environmental Law(s)" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, guidance document, order, consent agreement,
order or consent judgment, decree, injunction, requirement or agreement with any
governmental entity or any judicial or administrative decision relating to (x)
the protection, preservation or restoration of the environment (including,
without limitation, air, water, vapor, surface water, groundwater, drinking
water supply, surface land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety, (y) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, application, production, release or disposal of Materials of
Environmental Concern, in each case as amended from time to time, or (z) health,
worker protection or community's right to know. The term "Environmental Law"
includes, without limitation, (i) the Federal Comprehensive Environmental
Response
Exhibit A - Page 2
55
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal Act and the Federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act,
and the Federal Occupational Safety and Health Act of 1970, each as amended from
time to time, and (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of,
effects of or exposure to any Materials of Environmental Concern.
"Environmental Permit(s)" means all permits, licenses, certificates,
registrations, identification numbers, applications, consents, approvals,
variances, notices of intent, and exemptions necessary for the ownership, use
and/or operation of any current Business Facility or to conduct the Company'
business as currently conducted in compliance with Requirements of Environmental
Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means U.S. generally accepted accounting principals applied on a
consistent basis.
"Governmental Authority" or "Governmental Authorities" means any nation
or government, any state or political subdivision thereof and any agency or
entity exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, government.
"Indebtedness" means the aggregate long-term indebtedness, net of
sinking fund and other cash reserves, if any, that are not included in Net
Working Capital, and other long-term liabilities of the Companies determined in
accordance with GAAP.
"Lien(s)" means any mortgage, pledge, hypothecation, security interest,
encumbrance, claim, right of first refusal, option, lien, charge, condition,
restriction or burden of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code of any jurisdiction).
Exhibit A - Page 3
56
When used in this Agreement in connection with the Company and their
Subsidiaries, or the Parent and its Subsidiaries, as the case may be, "Material
Adverse Effect" means any event, occurrence, fact, condition, change,
development or effect that is or could reasonably be anticipated to be
materially adverse to the business, assets (including intangible assets),
liabilities, financial condition, results of operations, properties (including
intangible properties) or business prospects of the Company and all of their
Subsidiaries or the Parent and all of its Subsidiaries, as applicable, taken as
a whole.
"Materials of Environmental Concern" means: (i) those substances
included within the statutory and/or regulatory definitions or listings of
"hazardous substance," "medical waste," "special waste," "hazardous waste,"
"extremely hazardous substance," "regulated substance," "solid waste,"
"hazardous materials," or "toxic substances," under any Environmental Law; (ii)
any material, waste or substance which is or contains: (A) petroleum, oil or a
fraction thereof, (B) explosives, or (C) radioactive materials (including
naturally occurring radioactive materials); and (iii) such other substances,
materials, or wastes that are or become classified or regulated as hazardous or
toxic under any applicable federal, state or local law or regulation.
"Net Working Capital" means the aggregate current assets of the Company
less the aggregate current liabilities of the Company determined in accordance
with GAAP.
"Person" means any individual, partnership, joint venture, corporation,
limited liability company, association, trust, unincorporated organization,
government or agency or subdivision thereof or any other entity.
"Parent Common Stock" means validly issued, fully paid and
nonassessable shares of common stock, par value $.002 per share, of Parent.
"Parent Shares" means the shares of Parent Common Stock issuable to the
Shareholders as determined pursuant to Section 3.1 of the Agreement.
"Remediation" means any action necessary to: (i) comply with and ensure
compliance with the Requirements of Environmental Laws and (ii) the taking of
all reasonably necessary precautions to protect against and/or respond to,
remove or remediate or monitor the release or threatened release of Materials of
Environmental Concern at, on, in, about, under, within or near the air, soil,
surface water, groundwater or soil vapor at any Business Facility of the Company
or any of their Subsidiaries or of any
Exhibit A - Page 4
57
property affected by the business, operations, acts omissions, or Materials of
Environmental Concern of the Company or any of their Subsidiaries.
"Requirement(s) of Environmental Law(s)"means all requirements,
conditions, restrictions or stipulations of Environmental Laws imposed upon or
related to the Company or any of their Subsidiaries or the assets, Business
Facilities and/or the business of the Company or any of their Subsidiaries.
"Subsidiary" or "Subsidiaries" shall mean, when used with reference to
an entity, any other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions, or a majority of the outstanding
voting securities of which, are owned directly or indirectly by such entity.
"Supplies" means all office supplies, kitchen supplies, laundry
supplies, medical supplies, spare parts, safety equipment, maintenance supplies,
other supplies used or consumed in the Business and other similar items which
exist on the Closing Date.
"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social security, occupation, use,
severance, environmental, license, net worth, payroll, employment, franchise,
transfer and recording taxes, fees and charges, imposed by the IRS or any other
taxing authority (whether domestic or foreign including, without limitation, any
state, county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments.
"Tax Return(s)" shall mean any report, return, document, declaration or
other information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns and documents (i) with respect to or
accompanying payments of estimated Taxes or (ii) with respect to or accompanying
requests for the extension of time in which to file any such report, return,
document, declaration or other information, including any schedule or attachment
thereto and any amendment thereof.
Exhibit A - Page 5
