EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
AMONG
U S LIQUIDS NORTHEAST, INC.
AND
U S LIQUIDS INC.
AND
WASTE STREAM ENVIRONMENTAL, INC.
AND
C. XXXXXX XXXXXXX III, C. XXXXXX XXXXXXX, XX. AND XXXXXX X. XXXXXX
TABLE OF CONTENTS
SECTION PAGE
1. DELIVERY OF SHARES; ENDORSEMENT OF COMPANY STOCK..................... 1
1.1 Delivery of Shares.............................................. 2
1.2 Endorsement of Company Stock.................................... 2
2. PURCHASE PRICE....................................................... 2
2.1 Purchase Price.................................................. 2
2.2 Agreed Value of Parent Stock.................................... 2
2.3 Debt Adjustment to Purchase Price............................... 2
2.4 Net Working Capital Adjustment to Purchase Price................ 3
2.5 Contingent Additional Purchase Price............................ 4
3. LEASEHOLD TITLE ASSURANCE............................................ 5
3.1 Leasehold Title Policy.......................................... 5
3.2 Permitted Encumbrances.......................................... 5
3.3 Survey.......................................................... 5
4. CLOSING.............................................................. 6
5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS AND COMPANY........... 6
5.1 Organization; Authority......................................... 6
5.2 Stock Ownership; Absence of Adverse Claims...................... 7
5.3 Capitalization.................................................. 7
5.4 Predecessor Entities; Trade Names............................... 7
5.5 No Subsidiaries................................................. 7
5.6 Financial Statements............................................ 7
5.7 Non-Balance Sheet Liabilities................................... 8
5.8 Accounts Receivable............................................. 8
5.9 Proprietary Rights; Environmental Documents..................... 8
5.10 Real Property; Reporting....................................... 9
5.11 Personal Property; New Projects................................ 10
5.12 Contracts...................................................... 11
5.13 Insurance Policies............................................. 12
5.14 Directors, Officers and Employees; Compensation................ 12
5.15 Employee Plans................................................. 12
5.16 Compliance with ERISA.......................................... 12
5.17 Compliance with Law; No Conflicts.............................. 13
5.18 Taxes.......................................................... 14
5.19 Litigation..................................................... 14
5.20 Absence of Price Renegotiation Contracts....................... 15
5.21 Conduct of Business Since Balance Sheet Date................... 15
5.22 Bank Accounts; Depositories.................................... 16
5.23 Hazardous Materials............................................ 16
5.24 Storage Tanks.................................................. 17
5.25 Absence of Certain Business Practices.......................... 17
5.26 Complete Disclosure............................................ 17
6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT................... 17
6.1 Corporate Organization.......................................... 17
6.2 Corporate Authority............................................. 17
6.3 No Conflicts.................................................... 17
6.4 Binding Agreement............................................... 18
6.5 Public Filings.................................................. 18
6.6 Parent Stock.................................................... 18
7. COVENANTS............................................................ 18
7.1 Access to Land and Records...................................... 18
7.2 Company Activities Prior to Closing............................. 19
7.3 Prohibited Activities Prior to Closing.......................... 19
7.4 Contact with Government Officials............................... 20
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY AND STOCKHOLDERS...... 21
8.1 Representations and Warranties.................................. 21
8.2 Consents........................................................ 21
8.3 No Adverse Proceeding........................................... 21
8.4 Noncompetition Agreements....................................... 21
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND PARENT.............. 21
9.1 Representations and Warranties.................................. 21
9.2 Covenants....................................................... 22
9.3 No Adverse Proceeding........................................... 22
9.4 General Release................................................. 22
9.5 Consents........................................................ 22
9.6 Resignations.................................................... 22
9.7 Good Standing Certificates...................................... 22
9.8 Updated Agreements.............................................. 22
9.9 Noncompetition Agreements....................................... 22
9.10 Delivery of Company Stock...................................... 22
9.11 Environmental Review........................................... 23
9.12 Transferability of Permits..................................... 23
9.13 General........................................................ 23
9.14 Real Estate Lease.............................................. 23
10. POST CLOSING COVENANTS............................................... 23
10.1 Taxes.......................................................... 23
10.2 Closing Date Actions........................................... 24
10.3 Further Assurance.............................................. 24
10.4 Transition..................................................... 24
10.5 Release of Personal Guaranties................................. 24
10.6 Financial Assurance............................................ 25
10.7 Securities Indemnity........................................... 25
10.8 Rule 144 Reporting............................................. 25
10.9 Survival....................................................... 26
11. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON STOCK......... 26
11.1 Registered Stock............................................... 26
11.2 Contractual Restriction........................................ 26
11.3 Contractual Restriction Legend................................. 26
11.4 General Legend................................................. 26
11.5 Compliance with Law............................................ 26
12. INDEMNIFICATION...................................................... 26
12.1 Indemnification by Stockholders and Company.................... 27
12.2 Indemnification by Buyer....................................... 27
12.3 Calculation of Damages......................................... 27
12.4 Time Limitations............................................... 27
12.5 Limitations on Amount of Stockholders' Liability............... 28
12.6 Procedure for Indemnification with Respect to Third Party
Claims......................................................... 28
12.7 Exclusive Remedy............................................... 29
12.8 Delivery of Contractually Restricted Stock to Satisfy
Obligations of Stockholders.................................... 29
13. TERMINATION OF AGREEMENT............................................. 29
13.1 Termination by Buyer........................................... 29
13.2 Termination by Stockholders.................................... 29
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................ 30
14.1 Nondisclosure by Stockholders.................................. 30
14.2 Nondisclosure by Parent........................................ 30
15. GENERAL.............................................................. 30
15.1 Assignment; Binding Effect; Amendment.......................... 30
15.2 Entire Agreement............................................... 31
15.3 Counterparts................................................... 31
15.4 No Brokers..................................................... 31
15.5 Expenses of Transaction........................................ 31
15.6 Notices........................................................ 31
15.7 Governing Law.................................................. 32
15.8 Appointment of Agent........................................... 33
15.9 No Waiver...................................................... 33
15.10 Time of the Essence........................................... 33
15.11 Captions...................................................... 33
15.12 Severability.................................................. 33
15.13 Construction.................................................. 33
15.14 Standstill Agreement.......................................... 33
15.15 Contemporaneous Transaction Regarding Earth Blends, Inc....... 34
15.16 Schedules..................................................... 34
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is executed and
delivered as of April 21, 1998, among U S LIQUIDS NORTHEAST, INC., a Delaware
corporation ("Buyer"); U S LIQUIDS INC., a Delaware corporation ("Parent");
WASTE STREAM ENVIRONMENTAL, INC., a New York corporation ("Company"); and C.
XXXXXX XXXXXXX III, C. XXXXXX XXXXXXX, XX., and XXXXXX X. XXXXXX, the sole
stockholders of Company ("Stockholders");
WITNESSETH:
WHEREAS, Company operates a non-hazardous commercial waste
collection, transportation and processing business in the northeastern United
States (the "Business");
WHEREAS, as part of the Business, Company owns certain real property
located at 000 Xxxxx Xxxxxx Xxxxxx in Holoyke, Massachusetts and more fully
described on Exhibit A, attached hereto and made a part hereof (the "Owned
Land");
WHEREAS, also as part of the Business, Company leases certain real
property located at 0000 Xxxxx Xxxxxx Xxxx in Jordan, New York and more fully
described on Exhibit B, attached hereto and made a part hereof (the "Jordan
Land"), pursuant to a lease (the "Jordan Lease") with 3 G's Realty Company, LLC
(the "Landlord");
WHEREAS, also as part of the Business, Company manages a fully
permitted facility for the processing of non-hazardous commercial waste (the
"Facility") pursuant to a Sludge Management Services Agreement between the
Company and The County of Onondaga dated September 29, 1992 (the "Onondaga
Contract") on certain real property located at 000 Xxxxxxxx Xxxxxxxxx, Xxxx, in
Syracuse, New York (the "Onondaga Land," together with the Owned Land and the
Jordan Land, the "Land");
WHEREAS, Stockholders own all of the issued and outstanding shares
of the capital stock of Company;
WHEREAS, Buyer is a wholly owned subsidiary of Parent;
WHEREAS, Buyer desires to acquire all of the issued and outstanding
shares of the capital stock of Company from Stockholders and Stockholders desire
to sell such interests to Buyer as set forth herein;
NOW, THEREFORE, in consideration of Ten Dollars ($10) in hand paid,
the premises and of the mutual agreements, representations, warranties and
obligations herein contained, the parties hereby agree as follows:
10 DELIVERY OF SHARES; ENDORSEMENT OF COMPANY STOCK.
1.1 DELIVERY OF SHARES. Upon the terms and subject to the conditions set
forth in this Agreement, Stockholders shall, at the Closing (hereinafter
defined), sell, assign, transfer and deliver to Buyer certificates representing
the number of shares set forth opposite each Stockholder's name on Annex I
attached hereto and made a part hereof (the "Company Stock"), which certificates
represent all of the issued and outstanding capital stock of Company.
Stockholders shall transfer the Company Stock to Buyer free and clear of all
liens, security interests, encumbrances, adverse claims, pledges, charges,
voting trusts, equities and other restrictions on transfer of any nature
whatsoever, except for restrictions on transfer imposed by federal and state
securities laws (collectively, "Adverse Claims").
1.2 ENDORSEMENT OF COMPANY STOCK. Stockholders shall deliver at Closing
the certificates representing the Company Stock, duly endorsed in blank by
Stockholders or accompanied by stock powers duly endorsed in blank and with all
necessary transfer tax and other revenue stamps, acquired at Stockholders'
expense, affixed and cancelled. Stockholders, at their sole expense, agree to
cure (both before and after Closing) any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
the Company Stock or with respect to the stock powers accompanying the Company
Stock.
20 PURCHASE PRICE.
2.1 PURCHASE PRICE. Subject to Sections 2.3 and 2.4 below, in
consideration of the sale to Buyer in accordance with this Agreement of
certificates representing the Company Stock, Parent and Buyer shall be jointly
and severally obligated to pay to Stockholders:
(a) the sum of $2,389,000 at Closing in immediately available funds;
and
(b) that total number of shares of common stock of the Parent, $.01
par value per share, (the "Parent Stock") which shall have an aggregate
Agreed Value of $5,511,000 of which $1,377,750 will be contractually
restricted for a period of one year and $1,377,750 will be contractually
restricted for a period of two years, subject to adjustment in accordance
with Sections 2.3 and 2.4 below. The shares of Parent Stock to be issued
and distributed pursuant to this Section shall be determined pursuant to
Section 2.2. The consideration set forth in this Article 2 shall be
allocated among the Stockholders in accordance with Annex I attached
hereto and made a part hereof.
2.2 AGREED VALUE OF PARENT STOCK. For purposes of this Agreement, the
"Agreed Value" per share of Parent Stock shall be the average of the closing
prices of a share of the common stock of Parent, $.01 par value per share, on
the American Stock Exchange as reported in THE WALL STREET JOURNAL for the five
trading days immediately preceding the six trading days immediately prior to the
Closing Date.
2.3 DEBT ADJUSTMENT TO PURCHASE PRICE. Attached hereto as Schedule 2.3 is
a listing of all of the actual debt of the Company for borrowed money (including
the current portion of such debt) (the "Debt") as of March 31, 1998. The parties
agree that the purchase price was determined as if the Debt was going to be
$3,152,000 on the Closing Date. On the Adjustment Date, the parties will
determine the amount of the Debt in connection with the balance sheet to be
prepared pursuant to Section 2.4 below. If the Debt is less than $3,152,000 on
the Closing Date, the consideration payable in Section 2.1 shall be increased by
an amount equal to the difference between $3,152,000 and the Debt. If the Debt
is more than $3,152,000 on the Closing Date, the consideration payable in
Section 2.1 shall be decreased by an amount equal to the difference between
$3,152,000 and the Debt. Any adjustment made pursuant to this Section 2.3 shall
be made to the Funds.
2.4 NET WORKING CAPITAL ADJUSTMENT TO PURCHASE PRICE. The parties agree
that the purchase price was determined as if the net working capital of Company,
together with Earth Blends, Inc. ("EBI," together with Company, the "Combined
Companies") was going to be $1.00 at the close of business on the Closing Date.
Accordingly, the parties agree that the purchase price set forth in this Article
2 shall be adjusted (up or down) on the Adjustment Date (as hereinafter defined)
to reflect the actual net working capital of the Combined Companies on the
Closing Date (the "Actual Net Working Capital"), as shown on the balance sheet
to be prepared in accordance with this Section 2.4. If the Actual Net Working
Capital of the Combined Companies so reflected is greater than $1.00, then the
purchase price paid pursuant to Section 2.1 shall be increased dollar for dollar
for each dollar the Actual Net Working Capital exceeds $1.00 on the Closing
Date. If the Actual Net Working Capital of the Combined Companies so reflected
is less than $1.00, then the purchase price paid pursuant to Section 2.1 shall
be decreased dollar for dollar for each dollar the Actual Net Working Capital
falls below $1.00 on the Closing Date. For purposes of this Agreement, Actual
Net Working Capital shall mean the aggregate current assets of the Combined
Companies on the Closing Date minus the aggregate of all current liabilities of
the Combined Companies on the Closing Date (excluding the sum of $200,000 paid
or payable to Xx. Xxxxxxx and Xx. Xxxxxxxxxxx), calculated in accordance with
generally accepted accounting principles applied consistently with the practices
used in the balance sheet of the Combined Companies as of March 31, 1998
("GAAP"), excluding the Debt and the current maturities of leases. Any
adjustment made pursuant to this Section 2.4 shall be made to the Funds.
In order to facilitate the contemplated adjustment to purchase price on
the Adjustment Date, on the Closing Date the parties will prepare and agree upon
an estimated net working capital balance
-3-
for the Combined Companies as of March 31, 1998 (the "Estimated Working
Capital"). The amount of the Estimated Working Capital (positive or negative)
will be an adjustment to the purchase price on the Closing Date. In computing
the adjustment amounts provided for this Section, the party owing payment to the
other pursuant to this Section shall make such payment in cash.
On the date which is 60 days after the Closing Date (the "Adjustment
Date") the parties shall adjust the Purchase Price in accordance with this
Section 2.4 based on a balance sheet of the Combined Companies as of the Closing
Date, without giving effect to the transactions contemplated by this Agreement,
except the payment of the Estimated Working Capital (the "Closing Balance
Sheet"), prepared by Buyer in accordance with GAAP and delivered to
Stockholders, together with the supporting documentation for all current assets
and liabilities used to prepare such balance sheet, at least 21 days prior to
the Adjustment Date. No accounts receivable shall be written off in whole or in
part in connection with preparing such balance sheet and the reserves for
doubtful accounts for the Combined Companies will not exceed $20,000 as set
forth on the Estimated Working Capital balance sheet.
In the event of a dispute between the parties as to the Actual Net Working
Capital, the parties will have 30 days to resolve the dispute among themselves.
If the parties have not resolved such dispute within such 30-day period, then
the parties shall select an arbitrator who shall decide the dispute within 30
days after being selected. If the parties cannot agree on an arbitrator, then
Buyer and Stockholders (as a group) shall each select an arbitrator and the two
arbitrators so selected shall select a third arbitrator. The parties hereto each
agree to be bound by the decision of the arbitrator(s). In the event that three
arbitrators are chosen, a majority decision will be required. Each arbitrator
can be any natural person above the age of 18 and need not have any specific
qualification. All costs of the arbitration shall be split equally between Buyer
and Stockholders (as a group).
2.5 CONTINGENT ADDITIONAL PURCHASE PRICE. In addition to the consideration
payable pursuant to Section 2.1, Parent shall pay to Stockholders, each and any
of the following if, as and when the events described below occur:
(a) In the event that Company owns 100% of the Yarmouth Project (as
hereinafter defined):
(i) Company operates three units of equipment used for the
purpose of reprocessing non-hazardous commercial waste which Company
rents to third parties (the "Aunti-Hydro Project"). Parent will pay
to Stockholders an aggregate additional consideration of $600,000 in
immediately available funds if the EBITDA (as defined below) derived
from the Aunti-Hydro Project is greater than $194,000 for any
Payment Period (as defined below) within the period from January 1,
1998 to December 31, 2000
-4-
(ii) Parent will pay to Stockholders an aggregate additional
consideration of $400,000 in immediately available funds if Company
(or the venture to which Company is a party) completes construction
of, and receives full and final permits and authorizations from any
governmental or regulatory agency that has jurisdiction over, the
non-hazardous waste processing facility located at Yarmouth,
Massachusetts (the "Yarmouth Project") on or before December 31,
2001.
(iii) Parent will pay to Stockholders an aggregate additional
consideration in unrestricted Parent Stock for the combined EBITDA
derived from the Aunti-Hydro Project and Company's portion of the
Yarmouth Project as follows:
(A) Parent Stock which shall have an aggregate Agreed
Value (as defined below) of $750,000 if the EBITDA derived from the
Yarmouth Project is greater than $504,000 for any Payment Period
within the period from January 1, 1998 to December 31, 2001; and
(B) the Parent Stock payable in (A) above plus Parent
Stock which shall have an aggregate Agreed Value (as defined below)
of $1,000,000 if the EBITDA derived from the Yarmouth Project is
greater than $704,000 for any Payment Period within the period from
January 1, 1998 to December 31, 2001.
(b) In the event that Company owns 50% of the Yarmouth Project:
(i) Company operates the Aunti-Hydro Project. Parent will pay
to Stockholders an aggregate additional consideration of $600,000 in
immediately available funds if the EBITDA derived from the
Aunti-Hydro Project is greater than $194,000 for any Payment Period
within the period from January 1, 1998 to December 31, 2000.
(ii) Parent will pay to Stockholders an aggregate additional
consideration of $300,000 in immediately available funds if Company
completes construction of, and receives full and final permits and
authorizations from any governmental or regulatory agency that has
jurisdiction over the Yarmouth Project on or before December 31,
2001.
(iii) Parent will pay to Stockholders an aggregate additional
consideration in unrestricted Parent Stock for the combined EBIDTA
derived from the Aunti-Hydro Project and Company's portion of the
Yarmouth Project as follows: Parent Stock which shall have an
aggregate Agreed Value (as defined below) of $875,000 if the EBITDA
derived from the Yarmouth Project is greater than $352,000 for any
-5-
Payment Period within the period from January 1, 1998 to December
31, 2001.
(c) In the event that Company does not own the Yarmouth Project:
(i) Company operates the Aunti-Hydro Project. Parent will pay
to Stockholders an aggregate additional consideration of $600,000 in
immediately available funds if the EBITDA derived from the
Aunti-Hydro Project is greater than $194,000 for any Payment Period
within the period from January 1, 1998 to December 31, 2000.
(d) Parent will pay to Stockholders an aggregate additional
consideration in the amount of $500,000 in immediately available funds in
the event that the board of directors of Parent (the "Board") approves the
purchase of a 50% interest in Pocono Grow Fertilizer Corporation (the
"Pocono Grow Project"). Parent shall use its best efforts to complete its
evaluation of, and, if determined to be in the best interests of Parent,
to obtain the approval of the Board for, the Pocono Grow Project prior to
May 15, 1998.
(e) Any consideration that becomes due pursuant to this Section 2.5
will be paid by Parent to Stockholders within 30 days after the occurrence
of the event that gives rise to such consideration becoming due ("Payment
Date") in accordance with the percentages set forth in Annex I. For
purposes of this Section 2.5, the "Agreed Value" per share of Parent Stock
shall be the average of the closing prices of a share of the only class of
common stock of Parent, $.01 par value per share, on the American Stock
Exchange as reported in THE WALL STREET JOURNAL for the five trading days
immediately preceding the five trading days immediately prior to the
Payment Date, adjusted for any stock splits, stock dividends and other
capital expenditures between the first date of the valuation period and
the Payment Date.
(f) For purposes of this Agreement, "Payment Period" shall mean any
consecutive twelve calendar month period; provided, however that EBITDA
will be calculated only as of the end of any calendar month.
(g) For purposes of this Agreement, "EBITDA" shall mean earnings
before interest, income taxes, depreciation and amortization, consistently
applied in accordance with the proforma financial statements set forth in
Exhibit D, subject to 2% overhead costs. Parent will provide Stockholders
and their representatives with reasonable access to all books and records
needed to confirm the EBITDA calculation.
(h) Buyer agrees to cause Company to use its best efforts to (i)
consummate the purchase of the Aunti-Hydro assets substantially in
accordance withy the terms of the draft
-6-
purchase agreement set forth in Schedule 5.4 and (ii) pursue the Yarmouth
Project substantially as contemplated by the memorandum of understanding
as a joint venture or, if the proposed joint venture is not consummated,
on its own.
30 LEASEHOLD TITLE ASSURANCE.
3.1 LEASEHOLD TITLE POLICY. Stockholders and Buyer will cooperate after
Closing to obtain an extended coverage leasehold policy of title insurance from
Xxxxxxx Title Insurance Company (the "Title Company") in the amount of
$1,320,000 with each of the Title Company's standard printed exceptions deleted
and including comprehensive, access, contiguity, non-arbitration, going concern,
non-imputation and zoning endorsements (to the extent such endorsements are
available in New York), insuring valid leasehold title to the Leased Land (as
defined in Section 9.14 below) in Buyer subject only to the exceptions permitted
by Section 3.2 hereof (the "Title Policy").
3.2 PERMITTED ENCUMBRANCES. The Title Policy shall insure Buyer's interest
in the Leased Land to be free and clear of all encumbrances whatsoever except:
(i) zoning ordinances and regulations which do not, in Buyer's judgment,
adversely affect Buyer's use of the Leased Land for its current uses; (ii) real
estate taxes and assessments, both general and special, which are a lien but are
not yet due and payable at the Closing Date; (iii) easements, encumbrances,
covenants, conditions, reservations and restrictions of record, if any, as shown
on Exhibit C; and (iv) the Real Estate Lease (as defined in Section 9.14 below).
Buyer shall pay all of the costs associated with the delivery of the Title
Policy.
3.3 SURVEY. Stockholders shall obtain for Buyer's use and for the use of
the Title Company in connection with the issuance of the Title Policy a current
and complete survey of the Leased Land made on the ground by a competent
registered surveyor, showing: (a) the exact boundary lines of the Leased Land;
(b) the location thereon of all, if any, buildings, improvements, and easements
now existing; (c) the number of acres in the Leased Land; (d) the location of
any buildings, fences or other improvements which encroach on the Leased Land;
(e) the location of any improvements on the Leased Land which encroach on any
neighboring property or on any property which is subject to any easement or
right-of-way; (f) all building lines established in respect of the Leased Land;
and (g) all public access to the Land, and representing that the boundaries of
the Leased Land are contiguous with the boundaries of all adjoining parcels (the
"Survey"). Stockholders shall pay all of the costs of the Survey.
40 CLOSING. Unless the parties agree otherwise, the closing of the within
contemplated transaction (the "Closing") shall take place on the date that is
within five business days after the completion, satisfaction or waiver of each
of the conditions to Closing set forth in Articles 8 and 9. The Closing shall
take place at a location mutually agreeable to Buyer and Stockholders. The date
on which the Closing occurs shall be referred to as the "Closing Date."
-7-
50 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS AND COMPANY. Company as to the
time period before Closing only, and each Stockholder, jointly and severally,
represent and warrant to Buyer that the statements contained in this Section 5
except as set forth in the schedules to the subsections of this Section 5
delivered by Stockholders to Buyer on the date hereof (such schedules
hereinafter collectively referred to as the "Disclosure Schedules" and,
individually, as a "Disclosure Schedule"): (i) are correct as of the date of
this Agreement; (ii) will be correct as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 5); and (iii) shall survive the Closing.
Wherever a representation or warranty herein is qualified as having been
made "to the best of Stockholders' knowledge", such phrase shall mean the
knowledge of any Stockholder, after reasonable inquiry.
5.1 ORGANIZATION; AUTHORITY.
(i) Company is a New York corporation duly organized, validly
existing and in good standing under the laws of the State of New York and
is now duly authorized, qualified and licensed under all laws,
regulations, ordinances and orders of public authorities to carry on its
businesses in the places and in the manner as conducted at the time such
activities were conducted except for where failure to be so authorized,
qualified or licensed would not have a material adverse affect on the
Business. Copies of the Company's Certificate of Incorporation (certified
by the Secretary of State of New York) and Bylaws (certified by the
Secretary of Company), each as amended, are attached hereto as Schedule
5.1(i).
(ii) Company has full legal right, power and authority (corporate
and otherwise) to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. All corporate action of
Company necessary to approve the sale of the Company Stock has been taken,
including director and shareholder approvals, if necessary.
(iii) Each Stockholder is competent and under no legal restraint or
duress and has the full legal right and capacity to enter into and perform
his obligations under this Agreement.
5.2 STOCK OWNERSHIP; ABSENCE OF ADVERSE CLAIMS. All of the issued and
outstanding shares of Company Stock are owned of record and beneficially by
Stockholders as set forth on Annex I and are free and clear of Adverse Claims,
except for restrictions on transfer imposed by federal and state securities
laws. This Agreement is the valid and binding obligation of Company and
Stockholders, enforceable against each of them in accordance with its terms.
5.3 CAPITALIZATION. The authorized capital stock of Company consists
solely of 200 shares of voting common stock, without par value, of which 100
shares are issued and outstanding. All of
-8-
the issued and outstanding shares of Company Stock have been duly authorized and
validly issued, are fully paid and nonassessable (subject to the provisions of
Section 630 of the New York Business Corporation Law), were offered, issued,
sold and delivered by Company in compliance with all state and federal laws
concerning the issuance of securities and none of such shares were issued in
violation of the preemptive rights of any past or present stockholder. The stock
transfer records provided by Stockholders and Company to Buyer correctly set
forth all issuances, acquisitions and retirements of Company Stock since the
inception of Company. No subscriptions, options, warrants, puts, calls,
conversion rights or other commitments of any kind exist which obligate Company
to issue any of its authorized but unissued capital stock or otherwise relate to
the sale or transfer by Company of any securities of Company (whether debt or
equity).
5.4 PREDECESSOR ENTITIES; TRADE NAMES. Company is not directly or
indirectly participating in any manner in any joint venture, partnership or
other noncorporate entity. Except as set forth on Schedule 5.4, Company was
formed principally to operate the Business and has never conducted any other
significant unrelated business or activity. Set forth on Schedule 5.4 is a list
of the names of all predecessors of Company, all prior corporate names of
Company, and all trade names and "doing business as" names of Company, including
the names of all entities substantially all of the assets of which were
previously acquired by Company.
5.5 NO SUBSIDIARIES. Except as set forth on Schedule 5.5, Company has
never owned or controlled and does not now own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any partnership, corporation,
association or other business entity other than those of Company.
5.6 FINANCIAL STATEMENTS. Attached as Schedule 5.6 are copies of the
following financial statements of Company (together, the "Financial
Statements"):
(a) Company's balance sheet as of December 31, 1997, and a statement
of income and retained earnings for the year then ended (the "Balance
Sheet Date");
(b) Company's balance sheet as of March 31, 1998, and a statement of
income and retained earnings for the quarter then ended.
Except as set forth on Schedule 5.6, each of the Financial Statements has
been prepared in accordance with GAAP, applied on a consistent basis throughout
the periods indicated. Each of the balance sheets presents fairly the financial
condition of Company as of the date indicated thereon and each of such
statements of income presents fairly on an accrual basis the results of the
operations of Company for the period indicated thereon. Except as noted thereon,
the Financial Statements are consistent in all material respects with the books
and records of Company.
-9-
5.7 NON-BALANCE SHEET LIABILITIES. Attached hereto as Schedule 5.7 is a
complete and accurate list as of the date hereof of all liabilities and
obligations of Company, excluding obligations arising under this Agreement,
which are not individually reflected in the Financial Statements dated the
Balance Sheet Date that are of the type required to be reflected as liabilities
on a balance sheet prepared in accordance with GAAP or described in the notes
thereto, except for liabilities incurred in the ordinary course of business
since the date of the Balance Sheet.
5.8 ACCOUNTS RECEIVABLE. Attached as Schedule 5.8 is a complete and
accurate list of all accounts and notes receivable of Company as of March 31,
1998, including receivables from and advances to employees and Stockholders and
also including all such accounts and notes receivable which are not reflected in
the Financial Statements, if any. Also attached as Schedule 5.8 is an aging of
all accounts receivable showing amounts due in 30 day aging categories.
5.9 PROPRIETARY RIGHTS; ENVIRONMENTAL DOCUMENTS.
(i) Attached as Schedule 5.9(i) is a complete and accurate list and
summary description as of the date noted thereon of all governmental
permits, titles, fuel permits, licenses, franchises, owned or held by
Company which are material to the operation of the principal business of
the Company, all of which are now valid, in good standing and in full
force and effect. Except as set forth on Schedule 5.9(i), such permits,
titles, licenses, and franchises, are adequate for the operation of the
Business as presently constituted.
(ii) The Company has, as of the date of this Agreement, made
available to Buyer for its inspection all presently held records,
correspondence, reports, notifications, permits, pending permit
applications, licenses and pending license applications, environmental
impact studies, assessments and audits and all written notifications from
governmental agencies and any other person or entity to Company of which
the Stockholders have knowledge relating to: (a) each actual and
threatened violation of Applicable Laws (hereinafter defined) by Company
or otherwise relating to the Land and all, if any, claims thereof; (b) the
present or past environmental compliance by Company; (c) the present or
past environmental condition of the Land; (d) the discharge, leakage,
spillage, transport, disposal or release of any material into the
environment by Company or otherwise relating to the Land; and (e) land use
and access approvals relative to any portion of the Land (collectively,
the "Environmental Documents").
(iii) The Company owns, or is validly licensed or otherwise has the
right to use, all patents, patent rights, trademarks, trademark rights,
trade names, trade name rights, service marks, service xxxx rights,
copyrights, know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, blue prints, and other proprietary intellectual property rights
(collectively,
-10-
"Intellectual Property Rights") that are material to the conduct of the
business of the Company. No claims are pending or, to the best of
Stockholders' knowledge, threatened that the Company is infringing or
otherwise adversely affecting the rights of any person with regard to any
Intellectual Property Right. To the best of Stockholders' knowledge, no
person is infringing the rights of the Company with the respect to any
Intellectual Property Right.
5.10 REAL PROPERTY; REPORTING.
(i) Except for land used to park vehicles and warehouse space at an
annual rent not exceeding $2,000, Company does not own, lease or otherwise
occupy, or have an interest in, or operate any real property other than
the Land. Company has good fee simple title to the Owned Land. Except as
set forth on Schedule 5.10(i):
(a) The Onondaga Land is, and at all times during operation of
the Facility has been, fully licensed, permitted and authorized for
the operation of the Facility under all Applicable Laws relating to
the protection of the environment, the Land and the conduct of the
Facility thereon (including, without limitation, all zoning
restrictions and land use requirements).
(b) The Jordan Land and the Owned Land are each fully
licensed, permitted and authorized for their respective current
uses.
(c) The Land is usable for its current uses and, to the best
of Stockholders' knowledge, can be used by Company after the Closing
for such uses without violating any Applicable Law or private
restriction, and such uses are legal conforming uses. There are no
proceedings or amendments pending and brought by or, to the best of
Stockholders' knowledge, threatened by, any third party which would
result in a change in the allowable uses of the Land or which would
modify the right of Company to use the Land for its current uses
after the Closing Date.
(d) Stockholders and Company have made available to Buyer all
engineering, geologic and other similar reports, documentation and
maps relating to the Land in the possession or control of
Stockholders or Company.
(e) To the best of Stockholders' knowledge, no third parties
have any rights to drill or explore for, collect, produce, mine,
excavate, deliver or transport oil, gas, coal, or other minerals in,
on, beneath, across, over, through, from or to any portion of the
Land.
(f) Neither Company, Stockholders nor, to the best of
Stockholders'
-11-
knowledge the Land is involved in any litigation or administrative
proceeding seeking to impose fines, penalties or other liabilities
or seeking injunctive relief for violation of any Applicable Laws
relating to the environment.
(g) To the best of Stockholders' knowledge, no third party has
a present or future right to possession of all or any part of the
Owned Land.
(h) To the best of Stockholders' knowledge, no portion of the
Owned Land contains any areas that could be characterized as
disturbed, undisturbed or man made wetlands or as "waters of the
United States" pursuant to any Applicable Laws or the procedural
manuals of the Environmental Protection Agency, U.S. Army Corps of
Engineers or the Department of Natural Resources of the applicable
state, whether such characterization reflects current conditions or
historic conditions which have been altered without the necessary
permits or approvals.
(i) To the best of Stockholders' knowledge, there are no
mechanic's liens affecting the Land and no work has been performed
on the Land within 120 days of the date hereof for which a
mechanic's lien could be filed.
(j) There are no levied or pending special assessments
affecting all or any part of the Owned Land or Leased Land and, to
the best of Stockholders' knowledge, none is threatened.
(k) There are no pending or, to the best of Stockholders'
knowledge, threatened condemnation or eminent domain proceedings
affecting all or any part of the Land.
(ii) To the best of Stockholders' knowledge, Company has provided to
the government agencies requiring the same, all material reports, notices,
filings and other disclosures required by Applicable Laws and all such
reports, notices, filings and other documents were complete and accurate
in all material respects at the time provided to said government agencies.
5.11 PERSONAL PROPERTY; NEW PROJECTS.
(i) Attached as Schedule 5.11(i) is a complete and accurate list as
of the date noted thereon of all capital assets owned by Company and a
list of all lessors under leases providing for the payment of $5,000 or
more annually with respect to personal property of Company used in the
operation of the Business and including an indication as to which assets
were formerly owned by business or personal affiliates of Company. All of
the vehicles, machinery and other equipment of Company that are material
to the operation of the Business are in
-12-
good working order and repair in all material respects, normal wear and
tear excepted;
(ii) Company has good title to, or a valid leasehold interest in,
the properties and assets used by it shown on its balance sheet dated the
Balance Sheet Date or acquired after the date thereof (except for personal
property sold since the Balance Sheet Date in the ordinary course of
business), whether or not located on the Land, including, without
limitation, the items of personal property listed on Schedules 5.11(i),
free and clear of all security interests, liens or other Adverse Claims,
except for the Debt, liens for current taxes not yet due, and minor
encumbrances, if any, none of which is substantial in amount, materially
detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of the Company;
(iii) all leases referred to on Schedule 5.11(i) are in full force
and effect and constitute valid and binding agreements of the parties
thereto (and their successors) in accordance with their respective terms.
No default by Company, or, to the best of Stockholders' knowledge, any
other party to any of such leases, exists or would exist except for the
passage of time or delivery of a notice or both;
(iv) all fixed assets used by Company that are material to the
operation of the Business are either owned by Company or leased by Company
under an agreement indicated on Schedule 5.11(i). Company's combined fixed
assets (together with the real property assets) constitute all of the real
and personal property reasonably necessary for and material to the
operation of the Business both by Company and by Buyer immediately
following the Closing.
5.12 CONTRACTS. Attached as Schedule 5.12 is a complete and accurate list
as of the date hereof of all of the following types of contracts, commitments
and other agreements to which Company is a party or by which Company or its
properties are bound: the ten largest waste treatment and processing contracts
and lists of customers with accounts, joint venture or partnership agreements,
contracts or collective bargaining arrangements with any labor organizations,
loan agreements, powers of attorney not otherwise related to a contractual
relationship (each of which shall be cancelled at the Closing), indemnity or
guaranty agreements not otherwise related to a contractual relationship,
mortgages, options to purchase land, agreements for the employment of any
individual, written agreements under which Company has advanced or loaned any
amount to one another or to Stockholders or any employee, officer or director of
Company, any guaranties by Company of the indebtedness of another, any agreement
concerning noncompetition and any other agreement not entered into in the
ordinary course of business under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations or prospects of Company. None of the agreements listed on
Schedule 5.12 have been modified, altered, terminated or otherwise amended in
any material respect and there have been no
-13-
material waivers, oral agreements, representations or other statements with
relation to any such agreements except as described in Schedule 5.12. Except as
noted in Schedule 5.12, Company has complied in all material respects with all
obligations pertaining to it contained in such contracts, commitments and other
agreements, is not in material default thereunder and no notice of default has
been received nor will the consummation of the transactions contemplated by this
Agreement result in such a default. To the best of Stockholders' knowledge,
there is no default by any other party to any contract, commitment or other
agreement attached as Schedule 5.12.
5.13 INSURANCE POLICIES. Attached as Schedule 5.13 are complete and
accurate copies (except as noted thereon) as of the date hereof of all insurance
policies carried by Company. All insurance policies are in full force and effect
and shall remain in full force and effect through the Closing Date.
5.14 DIRECTORS, OFFICERS AND EMPLOYEES; COMPENSATION. Attached as Schedule
5.14 is a complete and accurate list of all officers, directors and employees of
Company and the rate of compensation (excluding bonus compensation) of each as
of the date hereof. Except as set forth on Schedule 5.12 or Schedule 5.14, each
employee of Company is an employee at will and there are no collective
bargaining agreements affecting any employee of Company. There is no pending or,
to the best of Stockholders' knowledge, threatened labor dispute involving
Company and any group of its employees nor has Company experienced any labor
interruptions over the past three years.
5.15 EMPLOYEE PLANS. Except as set forth on Schedule 5.12 or Schedule
5.15, Company has no group health plans, employee benefit plans, employee
welfare benefit plans, employee pension benefit plans, multi-employer plans or
multiple-employer welfare arrangements (as defined in Sections 3(3), (1), (2),
(37) and (40), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (collectively, "Plans") which are currently
maintained and/or sponsored by Company, or to which Company currently
contributes, or has an obligation to contribute in the future (including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements).
5.16 COMPLIANCE WITH ERISA. Neither Company, any Controlled Group Member
(as defined in Internal Revenue Code (the "Code") Section 414(n)(6)(B)), nor any
business, subsidiary, division or operation acquired by Company or a Controlled
Group Member in the last five years, ever have maintained or sponsored, or
contributed to, an employee pension benefit plan (as defined in ERISA Section
3(2)) which is subject to the provisions of Title IV of ERISA. Except for the
Plans, Company does not maintain or sponsor, nor is a contributing employer to,
a pension, profit-sharing, deferred compensation, stock option, employee stock
purchase or other employee benefit plan, employee welfare benefit plan, or any
other arrangement with its employees. Further, except as reflected in the
documents listed on Schedule 5.12 or Schedule 5.15:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without notice to
and approval by the Internal Revenue Service;
-14-
(ii) with respect to Plans which qualify as "group health plans"
under Section 4980B of the Internal Revenue Code and Section 607(1) of
ERISA and related regulations (relating to the benefit continuation rights
imposed by "COBRA"), Company has complied (and on the Closing Date will
have complied), in all material respects with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed
thereunder as and when applicable to such plans, and Company has no (and
will not incur any) direct or indirect liability and Company is not (and
will not be) subject to any loss, assessment, excise tax penalty, loss of
federal income tax deduction or other sanction, arising on account of or
in respect of any direct or indirect failure by Company any time prior to
the Closing Date to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted
before or after the Closing Date directly or indirectly against Company
with respect to such group health plans;
(iii) Company has no (and as a result of this transaction will not
incur any) retiree health care obligations to its employees;
(iv) Company has no (and as a result of this transaction will not
incur any) severance pay obligation to its employees and no severance pay
will be due to any employee of Company as a result of the transaction
contemplated herein; and
(v) with respect to any Plan which qualifies as a group health plan,
such plan is fully insured and all premiums have been paid on a timely
basis or, to the extent such plan is not fully insured, all self insured
obligations have been met as of the Closing Date and are fully reflected
in the plan's financial statements. To the extent that any of Company's
group health plans are retrospectively rated, there are no liabilities
capable of assertion against Company in respect of claims already
incurred.
5.17 COMPLIANCE WITH LAW; NO CONFLICTS.
(i) To the best of Stockholders' knowledge and except as set forth
on Schedule 5.17, Company has in the past complied with, and is now in
compliance with, all federal, state and local statutes, laws, rules,
regulations, orders, licenses, permits (including, without limitation,
zoning restrictions and land use requirements) and all administrative and
judicial judgments, rulings, decisions and orders of any body having
jurisdiction over Company, the Business or the Land (the "Applicable
Laws"), except for possible noncompliance that is not likely, individually
or in the aggregate, to have a material adverse effect on the Company or
the Business. Neither Company nor any of the Stockholders have received
any written notice that Company is under investigation or other form of
review for imposition of sanctions with respect to any Applicable Law; and
-15-
(ii) the execution, delivery and performance of this Agreement, the
consummation of any transactions herein referred to or contemplated hereby
and the fulfillment of the terms hereof and thereof will not:
(a) conflict with, or result in a breach or violation of the
Certificate of Incorporation or Bylaws of Company;
(b) except as set forth on Schedule 5.12, conflict with, or
result in a breach under any document, agreement or other instrument
listed on Schedule 5.12, or result in the creation or imposition of
any lien, charge or encumbrance on any properties of Company or any
of the Stockholders pursuant to: (A) any law or regulation to which
Company, or any of the Stockholders, or any of their respective
properties are subject, or (B) any judgment, order or decree to
which Company or any of the Stockholders is bound or any of their
respective properties are subject;
(c) provided the Company takes all actions required by
Applicable Law following the Closing Date, result in termination or
any impairment of any material permit, license, franchise,
contractual right or other authorization of Company; or
(d) require the consent of, or the filing with any
governmental authority or agency or any other third party prior to
the Closing Date in order to remain in full force and effect.
5.18 TAXES. Company has filed, or will file, in a timely manner all
federal, state, material local and other material tax returns due before the
Closing Date. Except as set forth on Schedule 5.18, there are no agreements to
extend the statutory period for the assessment of any taxes, examinations in
progress or claims against Company for federal, state, local and other taxes
(including penalties and interest) for any period or periods prior to and
including the date hereof and none shall exist as of the Closing Date. Except as
set forth on Schedule 5.18, no notice of any claim for taxes, whether pending or
threatened, has been received. The amounts shown as accruals for taxes on the
Financial Statements as of the respective dates thereof are sufficient in
accordance with GAAP as of such respective dates for the payment of all taxes of
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before such date. Copies of: (i) all tax examinations; (ii)
extensions of statutory limitations; and (iii) the federal, state, local and
other income tax returns and franchise tax returns of Company for its three
fiscal years ended December 31, 1996, are attached hereto as Schedule 5.18.
Company made a valid election under Subchapter S of the Code. Company has a
taxable year ended December 31. Company currently utilizes the accrual method of
accounting for income tax purposes.
5.19 LITIGATION. Except as set forth on Schedule 5.19, there is no claim,
litigation, action, suit
-16-
or proceeding, investigation, formal arbitration, informal arbitration or
mediation, administrative, judicial or other review, pending and of which the
Company or any Stockholder has received notice or, to the best of Stockholders'
knowledge, threatened against Company or any of the Stockholders at law or in
equity, before any federal, state or local court or regulatory agency, or other
governmental or private authority that if resolved adversely to the Company
would have a material adverse affect on the Business or the Company; no notice
of any of the above has been received by Company or any of the Stockholders.
Also listed on Schedule 5.19 are all instances where Company is the plaintiff,
or complaining or moving party, under any of the above types of proceedings or
otherwise.
5.20 ABSENCE OF PRICE RENEGOTIATION CONTRACTS. Company is not currently a
party to any governmental contracts subject to unilateral retroactive price
redetermination or renegotiation rights of the government entity.
5.21 CONDUCT OF BUSINESS SINCE BALANCE SHEET DATE. Since the Balance Sheet
Date, there has not been any:
(i) material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income and business or prospects of
Company;
(ii) damage, destruction or loss (whether or not covered by
insurance) which, singly or in the aggregate, materially and adversely
affects the properties (whether owned or leased) or business of Company;
(iii) any material increase from prior years in the compensation,
bonus, sales commissions or fee arrangements payable or to become payable
by Company to any of its officers, directors, employees, consultants or
agents above the amounts shown on Schedule 5.14;
(iv) sale or transfer of, or any agreement to sell or transfer, any
material assets, property or rights of Company to any person not in the
ordinary course of the business of Company, including, without limitation,
all agreements with Stockholders or with affiliates of Company other than
EBI;
(v) purchase or acquisition by any third party of, or any agreement,
plan or other arrangement by any third party to purchase or acquire, any
property, rights or assets of Company other than in the ordinary course of
business;
(vi) waiver of any material rights or claims of Company;
-17-
(vii) amendment to the Certificate of Incorporation or Bylaws of
Company;
(viii) any other material transaction outside the ordinary course of
business of Company; or
(ix) any action by Company, Stockholders, or any employee, officer
or agent of Company or Stockholders committing to do any of the foregoing.
5.22 BANK ACCOUNTS; DEPOSITORIES. Attached as Schedule 5.22 is a complete
and accurate list as of the date of this Agreement, of:
(i) the name of each financial institution in which Company has any
account or safe deposit box;
(ii) the names in which each account or box is held;
(iii) the type of each account; and
(iv) the name of each person authorized to draw on or have access to
each account or box.
5.23 HAZARDOUS MATERIALS. Except as set forth on Schedule 5.23, or in the
ordinary course of business of the Company in compliance in all material
respects with Applicable Law, Company has never owned, leased, had an interest
in, generated, transported, handled, recycled, reclaimed, disposed of, or
contracted for the disposal of, hazardous materials, hazardous wastes, hazardous
substances, toxic wastes or substances as those terms are defined by the
Resource Conservation and Recovery Act of 1976; the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"); the Clean Water Act; the
Toxic Substances Control Act; the Occupational Health and Safety Act; any
comparable or similar state statute affecting the Business; any other Applicable
Law; or the rules and regulations promulgated under any of the foregoing, as
each of the foregoing may have been amended (collectively, "Hazardous
Materials"). No liens with respect to environmental liability have been imposed
against Company or the Land under CERCLA, any comparable state statute affecting
the Business or other Applicable Law, and, to the best of Stockholders'
knowledge, no facts or circumstances exist which would give rise to the same. No
portion of the Land is listed on the CERCLIS list or the National Priorities
List of Hazardous Waste Sites or any similar list maintained by the State of New
York. Neither Company nor any Stockholder is listed as a potentially responsible
party under CERCLA, any comparable state statute or other Applicable Law, and
neither Company nor any Stockholder has received a written notice of such a
listing.
Set forth on Schedule 5.23 is a complete list of the names and addresses
of all disposal sites
-18-
at any time now or in the past utilized by Company, none of which sites is
listed on the CERCLIS list or the National Priorities List of hazardous waste
sites or any comparable state list.
There have been no material spills, leaks, deposits or other releases into
the environment or onto the Land by Company of any Hazardous Materials and, to
the best of Stockholders' knowledge, Company has no material direct or
contingent liability or obligation for or in connection with any claimed
release, discharge or leak of any substance into the environment.
5.24 STORAGE TANKS. Except as set forth on Schedule 5.24, the Company has
not placed and, to the best of Stockholders' knowledge, the Land does not
contain any underground or above-ground storage tanks or transformers containing
Hazardous Materials, petroleum products or wastes or other hazardous substances
regulated by 40 CFR 280 or other Applicable Laws. All above and below ground
tanks currently in use on the Owned Land or Leased Land are being used and
maintained in accordance with all Applicable Laws in all material respects.
5.25 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Company nor
Stockholders have ever made, offered or agreed to offer anything of value to any
employees of any customers of Company for the purpose of attracting business to
Company or any foreign or domestic governmental official, political party or
candidate for government office or any of their respective employees or
representatives, nor have they otherwise taken any action which would cause it
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended.
5.26 COMPLETE DISCLOSURE. This Agreement and the schedules hereto do not
and will not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading. If
Stockholders, or, prior to Closing, Company, becomes aware of any fact or
circumstance which would change a representation or warranty of Company or
Stockholders in this Agreement the party with such knowledge shall promptly give
written notice of such fact or circumstance to Buyer.
6. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT. Buyer and Parent
represent and warrant that the statements contained in this Section 6: (i) are
correct as of the date of this Agreement; (ii) will be correct as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this Section 6); and (iii) shall survive
the Closing.
6.1 CORPORATE ORGANIZATION. Buyer is duly incorporated, validly existing
and in good standing under the laws of the State of New York. Parent is duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Buyer and Parent are each duly authorized, qualified and licensed
under all applicable laws, regulations and ordinances of public authorities to
carry on their businesses in the places and in the manner as now conducted
except for where the
-19-
failure to be so authorized, qualified or licensed would not have a material
adverse affect on such businesses.
6.2 CORPORATE AUTHORITY. The officers of Buyer and Parent executing this
Agreement have the corporate authority to enter into and bind Buyer and Parent
to the terms of this Agreement and Buyer and Parent have taken all necessary
corporate action to authorize the execution, delivery and, subject to receipt of
required regulatory approvals, performance of this Agreement. All corporate
action by Buyer and Parent necessary to approve the transaction, including both
director and shareholder approvals (if required), has been taken.
6.3 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of any transactions herein referred to or
contemplated hereby and the fulfillment of the terms hereof and thereof will
not:
(i) conflict with, or result in a breach or violation of the
Articles of Incorporation or Bylaws of Buyer or Parent;
(ii) conflict with, or result in a material breach under any
document, agreement or other instrument to which Buyer or Parent is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any properties of Buyer or Parent pursuant to: (A) any law
or regulation to which Buyer or Parent, or their respective property is
subject, or (B) any judgment, order or decree to which Buyer or Parent is
bound or their respective property is subject; or
(iii) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of
Buyer or Parent.
6.4 BINDING AGREEMENT. This Agreement is the binding and valid obligation
of Buyer or Parent, enforceable against them in accordance with its terms.
6.5 PUBLIC FILINGS. Parent has timely filed with the Securities and
Exchange Commission (the "SEC") all forms, reports and other documents required
to be filed by Parent pursuant to the Act. As of their respective dates, no such
form, report or other document contained, as of the date of its filing, a
material misstatement of fact or omitted to disclose any material fact necessary
to cause the information disclosed therein not to be misleading. Since the date
of the information provided in the most recent filing, there has been no
material adverse change in the assets, liabilities, results of operations,
financial condition or business of Parent, taken as a whole.
6.6 PARENT STOCK. The Parent Stock to be delivered to Stockholders in
connection with this Agreement, when delivered in accordance with the terms of
this Agreement, will constitute valid and
-20-
legally issued shares, fully paid and nonassessable and will be registered and
free from any restriction on transfer other than restrictions imposed by the Act
or the regulations promulgated thereunder and the contractual restrictions set
forth in this Agreement.
7. COVENANTS.
7.1 ACCESS TO LAND AND RECORDS. Between the date of this Agreement and the
Closing Date, Stockholders will cause Company to afford to or obtain for the
officers and authorized representatives of Buyer access to all of the Land
(including, without limitation, for the purpose of performing all testing,
inspections and other procedures considered desirable by Buyer), sites, books
and records, including, without limitation, the Environmental Documents, at all
reasonable times and upon reasonable notice and will furnish Buyer with such
additional financial and operating data and other information as to the business
and properties, both current and former, of Company as Buyer may from time to
time reasonably request. Buyer agrees to repair all damage, if any, caused by
Buyer's entry onto the Land prior to Closing and to indemnify Company and
Stockholders from any claims, causes of action, liabilities or expenses of any
kind arising from the actions or omissions of Buyer, Parent or either of their
agents in entering onto the Land. Stockholders will cooperate, and will cause
Company to cooperate, with Buyer, its representatives, engineers, auditors and
counsel in the preparation of any documents or other material which may be
required in connection with any documents or materials required by any
governmental agency. Buyer will cause all information obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Article 14 hereof.
7.2 COMPANY ACTIVITIES PRIOR TO CLOSING. Between the date of this
Agreement and the Closing Date, Stockholders will cause Company:
(i) to carry on its business in substantially the same manner as it
has heretofore and not to introduce any material new method of management,
operation or accounting;
(ii) to maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) to perform its obligations under agreements relating to or
affecting its assets, properties or rights, including payment of debts as
they become due;
(iv) to keep in full force and effect present insurance policies or
other comparable insurance coverage with reputable insurers;
(v) to use reasonable efforts to maintain and preserve its business
organization intact, retain employees and maintain relationships with
suppliers, customers, consultants,
-21-
independent contractors and others having business relations with Company;
(vi) to maintain compliance with all Applicable Laws;
(vii) to maintain and perform present debt and lease instruments in
accordance with their terms and not enter into new or amended debt or
lease instruments, without the prior written consent of Buyer;
(viii) to pay and provide salaries and commissions for all officers,
directors, employees and agents at levels no higher than those in effect
at the Balance Sheet Date;
(ix) to provide the interim financial statements required by Section
5.6; and
(x) to provide all reasonable assistance to Buyer to provide for an
orderly transfer of operating control of Company to Buyer.
7.3 PROHIBITED ACTIVITIES PRIOR TO CLOSING. Between the date of this
Agreement and the Closing Date, and except as otherwise permitted by this
Agreement, Stockholders will cause Company not, without the prior written
consent of Buyer (which consent shall not be unreasonably withheld or delayed):
(i) to amend the Articles of Incorporation or Bylaws of Company;
(ii) to change the authorized capital of Company or the equity
ownership of Company or grant any options, warrants, puts, calls,
conversion rights or commitments relating to the equity interests of
Company;
(iii) to declare or pay any dividend of Company or directly or
indirectly purchase, redeem or otherwise acquire or retire for value or
issue any shares of stock of Company;
(iv) to enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures in excess of an
aggregate of $5,000;
(v) to increase the compensation payable or to become payable to any
officer, director, stockholder, employee, consultant or agent, or make any
bonus or management fee payment to any such person;
(vi) to create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now owned
or hereafter acquired;
-22-
(vii) to sell, assign, lease or otherwise transfer or dispose of any
property or equipment;
(viii) to negotiate to acquire any business or begin any new
business or project;
(ix) to merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(x) to waive any of its rights or claims;
(xi) to breach or permit a breach of, amend or terminate, any
material agreement, or any permit, license or other agreement or right to
which Company is a party;
(xii) to enter into any other transaction outside the ordinary
course of its business or otherwise prohibited hereunder;
(xiii) to make any oral or written public announcement concerning
this transaction except as may be required by law, all of which
announcements, if any, shall be forwarded to Buyer for review and comment
at least seven days prior to dissemination; or
(xiv) to allow any other action or omission, or series of actions or
omissions, by Company or Stockholders that would cause a representation
and warranty of Company and Stockholders made in Section 5.21 of this
Agreement to be untrue on the Closing Date.
7.4 CONTACT WITH GOVERNMENT OFFICIALS. Company and Stockholders shall each
use their reasonable best efforts (provided that neither Company nor
Stockholders will be required to expend any funds in connection with such
efforts) to cooperate with Buyer in making contact with the appropriate
governmental agencies and officials having information about or jurisdiction
over Company, the Stockholders or the Land, including, without limitation,
environmental and land use agencies and officials in order to assist Buyer in
completing its regulatory evaluation of Company and the Land.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY AND STOCKHOLDERS. The
obligations of Stockholders and Company hereunder are subject to the completion,
satisfaction, or at their option, waiver, on or prior to the Closing Date, of
the following conditions.
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Buyer and Parent contained in this Agreement shall be accurate on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; and each and all
-23-
of the terms, covenants and conditions of this Agreement to be complied with and
performed by Buyer or Parent on or before the Closing Date shall have been duly
complied with and performed.
8.2 CONSENTS. All necessary notices to, consents of and filings with any
governmental authority or agency or other third party relating to the
consummation of the Closing or the other transactions contemplated herein to be
made or obtained by Buyer shall have been obtained and made.
8.3 NO ADVERSE PROCEEDING. No action or proceeding before a court or any
other governmental agency or body shall have been instituted or, to the best of
Stockholders's knowledge, threatened to restrain or prohibit any of the
transactions contemplated by this Agreement.
8.4 NONCOMPETITION AGREEMENTS. Buyer shall have executed and delivered at
the Closing separate Noncompetition Agreements with each Stockholder (the
"Noncompetition Agreements"), in form and substance satisfactory to Buyer and
Stockholders.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND PARENT. The obligations of
Buyer and Parent hereunder are subject to the completion, satisfaction or, at
their option, waiver, on or prior to the Closing Date, of the following
conditions.
9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Stockholders and Company contained in this Agreement shall be accurate on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date, and Buyer shall have received a
certificate from Stockholders to that effect, or setting forth any discrepancies
in such representations and warranties which have arisen since the date of this
Agreement. The foregoing notwithstanding, Company and Stockholders agree that no
limitation of any representation or warranty concerning the knowledge of Company
or Stockholders or any qualification of such representations and warranties set
forth in the certificate contemplated in the first sentence of this Section 9.1
shall restrict Buyer's right to terminate this Agreement if any representation
or warranty of Stockholders or Company is inaccurate as of the Closing Date;
provided, however, that if Parent and Buyer close on the transactions
contemplated by this Agreement after receipt of a certificate containing
discrepancies between the representations and warranties provided in this
Agreement and the contents of the certificate, the representations and
warranties in this Agreement shall thereby be modified to conform to the
contents of the certificate.
9.2 COVENANTS. Each and all of the terms, covenants and conditions of this
Agreement to be complied with and performed by Stockholders and Company on or
before the Closing Date shall have been duly complied with and performed.
9.3 NO ADVERSE PROCEEDING. No action or proceeding before a court or any
other
-24-
governmental agency or body shall have been instituted or, to the best of
Buyer's knowledge, threatened to restrain or prohibit any of the transactions
contemplated by this Agreement, and no governmental agency or body shall have
taken any other action or made any request of Buyer as a result of which the
management of Buyer deems it inadvisable to proceed with the transactions
hereunder.
9.4 GENERAL RELEASE. Stockholders shall have delivered to Buyer an
instrument dated the Closing Date releasing Company, Parent and Buyer from any
and all claims of Stockholders against Company, Parent and Buyer arising out of
events which occurred prior to the Closing (but not including any claims
pursuant to this Agreement).
9.5 CONSENTS. All necessary notices to, consents of and filings with any
governmental authority or agency or other third party relating to the
consummation of the Closing or the other transactions contemplated herein to be
made or obtained by Company or Stockholders shall have been obtained and made.
9.6 RESIGNATIONS. Each officer and director of Company shall have
delivered to Buyer their written resignation.
9.7 GOOD STANDING CERTIFICATES. Stockholders shall have delivered to Buyer
certificates, dated as of a date no earlier than 10 days prior to the Closing
Date, duly issued by the appropriate governmental authority or authorities
showing that Company is in good standing in its state of incorporation.
9.8 UPDATED AGREEMENTS. Stockholders shall have delivered to Buyer a
schedule (Schedule 9.8) dated the Closing Date, listing all agreements entered
into by Company since the date of Schedule 5.12, which new agreements must have
been determined to be acceptable to Buyer.
9.9 NONCOMPETITION AGREEMENTS. The Noncompetition Agreements shall have
been executed and delivered by all parties thereto at the Closing.
9.10 DELIVERY OF COMPANY STOCK. Stockholders shall have delivered to Buyer
certificates representing all Company Stock, duly endorsed in blank by
Stockholders or accompanied by stock powers duly executed in blank and with all
necessary transfer tax and other revenue stamps affixed and cancelled at
Stockholders's expense, none of which certificates shall bear any restrictive
legend other than those related to compliance with the Act.
9.11 ENVIRONMENTAL REVIEW. Buyer, through its authorized representatives,
must have completed a review (including, without limitation, all testing,
inspections and other procedures, review of existing files of, and discussions
with, governmental agencies and officials having
-25-
jurisdiction over Company) of the Land and the environmental and land use
practices, procedures, operations and activities of Company; the results of
which review, without limiting the generality of the foregoing, reflects
compliance with all Applicable Laws governing the Land and the operations of
Company, discloses no actual or probable violations, compliance problems,
required capital expenditures or other substantive environmental, land use or
real estate related concerns and are otherwise satisfactory in all respects to
Buyer in its sole discretion.
9.12 TRANSFERABILITY OF PERMITS. Buyer shall have determined, in its sole
discretion, that prior to, or as a result of, this transaction, all of the
permits required for the operation of the Business and the Facility have been
transferred to Buyer or can be transferred to Buyer and all consents required by
Applicable Laws for Buyer's use of such permits after Closing have been
obtained.
9.13 GENERAL. All actions taken by Stockholders and Company in connection
with the consummation of the transactions contemplated hereby and all
certificates, opinions and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Buyer.
9.14 REAL ESTATE LEASE. Company shall have terminated the Jordan Lease and
Buyer shall have executed a lease for the that portion of the Jordan Land
("Leased Land") that is mutually acceptable to Buyer and Landlord and upon terms
mutually satisfactory to Buyer and Landlord (the "Real Estate Lease").
10. POST CLOSING COVENANTS.
10.1 TAXES. (i) Stockholders irrevocably agree to indemnify Buyer against,
and to hold Buyer harmless from:
(a) any and all federal, state, local, and other taxes of
Company not provided for in the Closing Balance Sheet arising from
the audit, examination, review or other adjustment of tax
liabilities made pursuant to applicable law by appropriate
governmental agencies for periods ending prior to the Closing Date;
and
(b) any and all taxes, interest, penalties, additions to tax
(or additional amounts imposed with respect to any such interest,
penalties, or additions to tax) imposed with respect to any federal,
state, local, or other taxes of Company for periods ending before
the Closing Date.
(ii) Stockholders agree that they shall be responsible, at their
sole expense, for the preparation of Company's federal, state, local and
other income and franchise tax returns required by Applicable Law for the
short tax period beginning January 1, 1998 and ending on the Closing Date.
Buyer agrees to cooperate with Stockholders in the preparation of and
-26-
cause the Company to execute such returns. Stockholders further agree that
they shall pay all taxes (including all penalties and interest, if any)
due for such tax period not provided for in the Closing Balance Sheet.
Prior to filing the returns provided for in this paragraph, Stockholders
agree to allow Buyer 10 business days to review and comment upon such
returns, approval of which will not unreasonably be withheld.
10.2 CLOSING DATE ACTIONS. Except as contemplated by this Agreement, Buyer
and Stockholders mutually agree that they shall not, and shall cause Company not
to, engage in an transaction outside the normal course of business on the
Closing Date.
10.3 FURTHER ASSURANCE. From time to time on and after the Closing and
without further consideration, the parties hereto shall each deliver or cause to
be delivered to any other party at such times and places as shall be reasonably
requested, such additional instruments as any of the others may reasonably
request for the purpose of carrying out this Agreement and the transaction
contemplated hereby. Stockholders, also without further consideration but also
without cost, agree to reasonably cooperate with Buyer and to use their
reasonable efforts to have the present officers and employees of Company
cooperate on and after the Closing Date in furnishing to Buyer information,
evidence, testimony, and other assistance in connection with obtaining all
necessary permits and approvals and in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date. Stockholders acknowledge and agree that, from
and after the Closing, Buyer shall be entitled to possession of all documents,
books, records (including tax records), agreements and financial and operating
data of any sort of Company. Buyer shall provide Stockholder access to the
records of the Company after Closing.
10.4 TRANSITION. Stockholders will not take any action that is designed or
intended to have the effect of discouraging any customer or business associate
of Company from maintaining the same business relationships with the Company
after the Closing that it maintained with Company before the Closing.
Stockholders will refer all customer inquiries relating to the Business to
Company or Buyer from and after the Closing.
10.5 RELEASE OF PERSONAL GUARANTIES. Buyer agrees to use its reasonable
efforts to have each of the Stockholders released, as promptly as possible but
no later than 30 days after the Closing Date, from any personal obligations
entered into by such Stockholder in connection with Debt that is not paid in
full at the Closing. Parent shall indemnify, defend and hold harmless
Stockholders for any loss or other matter suffered as a result of such personal
guaranties prior to release. If Buyer cannot obtain a release within 60 days,
Buyer will pay off the underlying obligation in full.
10.6 FINANCIAL ASSURANCE. Promptly after the Closing Date, but no later
than 90 days after the Closing Date, Buyer will replace the current bonding by
Company (which is in the form of bonds)
-27-
with financial assurance of Buyer acceptable to the State of New York. Parent
shall indemnify, defend and hold harmless Stockholders and their spouses for any
loss or other matter suffered as a result of such financial assurances prior to
release.
10.7 SECURITIES INDEMNITY. For a period ending on the second anniversary
of the Closing Date, Parent will indemnify each Stockholder or transferee of
Parent Stock in a private transaction (each a "Holder"), and each person
controlling such Holder within the meaning of Section 15 of the Securities Act
of 1933 (the "Securities Act"), against all actual out-of-pocket expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, preliminary prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any registration
or qualification of Parent Stock or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading, unless any such statement or omission was made in reliance
upon, and in conformity with, written information furnished to the Parent by
such Holder; or any violation or any alleged violation by Parent of any rule or
regulation promulgated under the Securities Act or the Securities Exchange Act
of 1934 (the "Exchange Act") or any state securities law applicable to Parent in
connection with any registration or qualification of Parent Stock, and Parent
will reimburse each such Holder, each of its officers and directors, and each
person controlling such Holder, for any legal and any other actual out-of-pocket
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, as such expenses
are incurred. Parent shall not be liable to indemnify any Holder with respect to
any claims made against any Holder unless such Holder shall have notified Parent
in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon such Holder. Parent will be entitled to participate at its own expense in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, and if, Parent elects to assume the defense, such
defense shall be conducted by counsel chosen by it. In the event Parent elects
to assume the defense of any such suit and retain such counsel, Holder may
retain additional counsel but shall bear the fees and expenses of such counsel
unless (i) Parent shall have specifically authorized the retaining of such
counsel or (ii) the parties to such suit include such Holder and Parent and such
Holder have been advised by counsel that one or more legal defenses may be
available to such Holder which may not be available to Parent, in which case
Parent shall not be entitled to assume the defense of such suit notwithstanding
their obligation to bear the fees and expenses of such counsel. Parent shall not
be liable to indemnify any person for any settlement of any such claim effected
without Parent's written consent. Parent shall not without the prior written
consent of such Holder effect any settlement of any pending or threatened
proceeding in respect of which any Holder is or could have been a party and
indemnity could have been sought hereunder by such Holder, unless such
settlement includes an unconditional release of such Holder from all liability
on claims that are the subject matter
-28-
of such proceeding.
10.8 RULE 144 REPORTING. With a view to making available the exemption
provided by Rule 144 under the Securities Act, which may at any time permit the
sale of the Parent Stock to the public without registration in accordance with
such exemption, Parent agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times.
(b) File with the SEC in a timely manner all reports and other
documents required of Parent under the Exchange Act; and
(c) So long as a Holder owns any Parent Stock, to furnish to the
Holder forthwith upon request a written statement by Parent as to its
compliance with the reporting requirements of Rule 144 and of the Exchange
Act, a copy of the most recent annual or quarterly report of Parent, and
such other reports and documents of Parent and other information in the
possession of or reasonably obtainable by Parent as a Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing a Holder to sell any such securities without registration.
10.9 NO SECTION 338 ELECTION. Neither Buyer nor Parent nor the Company
shall make any election or deemed election under Section 338 of the Code, or
without the consent of Stockholders, under Section 338(h)(10) of the Code with
respect to the transactions contemplated by this Agreement. Buyer, Parent and
Stockholders agree that, for all tax purposes, none of them shall treat the
transactions contemplated by this Agreement as anything other than a sale by
Stockholders of all issued and outstanding capital stock of the Company.
10.10 POCONO GROW PROJECT. In the event that the Board does not approve
the Pocono Grow Project by May 15, 1998, Parent and Company mutually agree to
assign all rights to the Pocono Grow Project to Stockholders and permit
Stockholders to develop and operate the Pocono Grow Project and that such
operation shall be an exclusion to the Noncompetition Agreements. Company
further agrees that it shall supply the Pocono Grow Project with all sludge
generated from the Agreement dated July 19, 1996, between Company and the City
of Springfield, Massachusetts (the "Springfield Contract") for the entire term
of the Springfield Contract provided that: (i) the rate for sludge disposal does
not exceed $45.00 per ton; (ii) the rate paid by the City of Springfield to the
Company for disposal of sludge under the Springfield Contract is not less than
the rate as of the Closing Date; and (iii) the operating costs (including,
without limitation, transportation costs) shall not have increased in any
material manner so as to make continued delivery to the Pocono Grow Project
economically unfeasible.
-29-
10.11 SURVIVAL. The covenants in this Article 10 shall survive the
Closing.
11. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON STOCK.
11.1 REGISTERED STOCK. Parent represents and warrants to Stockholders that
all of the shares of Parent Stock to be delivered to Stockholders pursuant to
this Agreement will be registered under the Securities Act prior to delivery to
Stockholders and, except for the Contractually Restricted Stock, will be freely
transferable under the Securities Act.
11.2 CONTRACTUAL RESTRICTION. Notwithstanding the above, Stockholders
agree to not sell or transfer the Parent Stock described in Section 2.1 for the
applicable time periods set forth therein (the "Contractually Restricted
Stock").
11.3 CONTRACTUAL RESTRICTION LEGEND.
(a) All one year Contractually Restricted Stock shall bear the
following legend:
THE SALE OR OTHER TRANSFER OF THE SHARES REPRESENTED HEREBY HAS BEEN
CONTRACTUALLY RESTRICTED. THE HOLDER AGREES THAT SUCH SHARES MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF U S
LIQUIDS INC., UNTIL THE EXPIRATION OF SUCH RESTRICTION ON APRIL 20, 1999.
(b) All two year Contractually Restricted Stock shall bear the
following legend:
THE SALE OR OTHER TRANSFER OF THE SHARES REPRESENTED HEREBY HAS BEEN
CONTRACTUALLY RESTRICTED. THE HOLDER AGREES THAT SUCH SHARES MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF U S
LIQUIDS INC., UNTIL THE EXPIRATION OF SUCH RESTRICTION ON APRIL 20, 2000.
11.4 GENERAL LEGEND. All Parent Stock shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS
OF RULE 145(D) PROMULGATED UNDER THE SECURITIES ACT OF 1933, AND MAY NOT
BE TRANSFERRED OR DISPOSED OF BY THE HOLDER WITHOUT COMPLIANCE WITH SAID
RULE.
11.5 COMPLIANCE WITH LAW. Stockholders covenant, warrant and represent
that none of the
-30-
shares of Parent Stock will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except in full compliance with the Act and
the rules and regulations promulgated thereunder.
12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY STOCKHOLDERS AND COMPANY. Company and each
Stockholder agree that they will each, jointly and severally, indemnify, defend
(as to third party claims only), protect and hold harmless Buyer, its officers,
shareholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parent, agents, employees, successors and assigns from and against all
liabilities, claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, penalties, losses, costs and expenses whatsoever (including
specifically, but without limitation, court costs, reasonable attorneys' fees
and expenses and expenses of investigation) (collectively, "Damages") incurred
as a result of or incident to: (a) any breach of, misrepresentation in, untruth
in or inaccuracy in the representations and warranties by Company or any
Stockholder (including, without limitation, those relating to Company's
environmental compliance), set forth herein or in the Schedules, Exhibits or
certificates attached hereto or delivered pursuant hereto; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of
Stockholders or Company made in this Agreement; (c) the matters set forth in
Section 10.1; (d) the wrongful discharge claim of Xxxxxxx Xxxxxxx to the extent
the Damages exceed the amounts paid from the escrow described in Section 12.9;
or (e) if true, any claim by a third party that would mean that a condition for
indemnification set forth in subsections (a) through (d) of this Section 12.1
had been satisfied.
12.2 INDEMNIFICATION BY BUYER. Parent and Buyer each agrees that it will
indemnify, defend, protect and hold harmless Stockholders, their respective
heirs, executors and personal representatives, from and against all Damages
incurred by Stockholders as a result of or incident to: (i) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties set forth herein, or in the Schedules or certificates attached hereto
or delivered pursuant hereto by Buyer; (ii) nonfulfillment or nonperformance of
any agreement, covenant or condition on the part of Buyer or Parent made in this
Agreement; incident to operations by Buyer and Parent after the Closing Date;
and (iv) any claim by a third party that, if true, would mean that a condition
for indemnification set forth in subsections (i) or (ii) of this Section 12.2
had been satisfied.
12.3 CALCULATION OF DAMAGES. The rights of an Indemnified Party (as
hereinafter defined) to indemnification and payment under Sections 10.1, 12.1
and 12.2 and the amount of any Damages incurred by an Indemnified Party shall be
reduced where the issue giving rise to any such Damages was provided or reserved
for in the Closing Balance Sheet or gave rise to the payment of a post-closing
adjustment amount as described in Section 2.4, by the amount of such reserve or
payment.
12.4 TIME LIMITATIONS. If the Closing occurs, no party will have no
liability (for
-31-
indemnification under Section 12.1 or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, other than those in Section 5.2 and
Section 5.18, unless on or before the date two years after the Closing Date an
Indemnified Party notifies an Indemnifying Party of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by the
Indemnified Party. A claim for indemnification under Section 12.1 with respect
to Section 5.2 and Section 5.18 or any covenant or obligation not to be
performed and complied with prior to the Closing Date, or a claim for
indemnification under Section 10.1, may be made at any time.
12.5 LIMITATIONS ON AMOUNT OF STOCKHOLDERS' LIABILITY.
(a) The indemnification obligations set forth in this Agreement
shall apply only after the aggregate amount of such obligations exceed
$92,000 when combined with the EBI Agreement (as defined in Section
15.15), at which time the indemnification obligations shall be effective
only as to such amounts in excess of $92,000 and shall in no event exceed
a maximum of $9,200,000, when combined with the EBI Agreement.
(b) The aggregate liability (for indemnification or otherwise) of
any Stockholder to all Indemnified Parties with respect to the matters
described in this Article 12 shall not exceed his proportionate share of
the maximum liability described in Section 12.5(a) above, which
proportionate share shall be determined based upon the proportionate share
of the Restricted Stock received by each Stockholder.
12.6 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY CLAIMS.
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
that may give rise to a claim for indemnification against any other party
to this Agreement (the "Indemnifying Party") or if any party who may make
a claim for indemnification under this Agreement otherwise becomes aware
of any matter that may give rise to such a claim or wishes to make such a
claim (whether or not related to a Third Party Claim), then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the extent)
the Indemnifying Party is thereby prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against a Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within a reasonable time
after the Indemnified Party has given notice of the Third Party Claim that
the
-32-
Indemnifying Party will indemnify the Indemnified Party from and against
the entirety of any adverse consequences (which will include, without
limitation, all losses, claims, liens, and attorneys' fees and related
expenses) the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii)
the Indemnifying Party provides the Indemnified Party with reasonable
evidence acceptable to the Indemnified Party that the Indemnifying Party
will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (iii) the Third
Party Claim involves only monetary damages and does not seek an injunction
or equitable relief or involve the possibility of criminal penalties, and
(iv) the Indemnifying Party conducts the defense of the Third Party Claim
diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 12.3(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim and (ii)
the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without
the prior written consent of the Indemnifying Party.
12.7 EXCLUSIVE REMEDY. Buyer and Parent acknowledge and agree that, from
and after the Closing, their sole and exclusive remedy with respect to any and
all claims relating to the subject matter of this Agreement shall be pursuant to
the indemnification provisions set forth in this Article 12. In furtherance of
the foregoing, Buyer and Parent hereby waive, from and after the Closing, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action they may have against the Stockholders relating to the subject
matter of this Agreement arising under or based upon any federal, state, local
or foreign statute, law, ordinance, rule or regulation or otherwise.
12.8 DELIVERY OF CONTRACTUALLY RESTRICTED STOCK TO SATISFY OBLIGATIONS OF
STOCKHOLDERS. Any Stockholder may, at the option of such Stockholder, deliver
Contractually Restricted Stock owned by such Stockholder to an Indemnified Party
to satisfy the liability of such Stockholder for Damages under this Article 12.
The value of any Contractually Restricted Stock delivered pursuant to this
Section 12.8 shall equal the market value of the Parent Stock as of the date of
payment.
12.9 ESCROW. Stockholders agree that $100,000 of the purchase price
otherwise payable pursuant to Section 2.1 hereof shall be held by Xxxxxx Beach &
Xxxxxx in escrow, to be applied by the Buyer toward all or part of any loss
incurred by the Company related to the wrongful discharge claim for which
Stockholders are indemnifying Buyer pursuant to Section 12.1(f) hereof. Any loss
to Buyer in excess of $100,000 shall remain the responsibility of the
Stockholders in accordance with this Article 12.
13. TERMINATION OF AGREEMENT.
-33-
13.1 TERMINATION BY BUYER. Buyer, by notice in the manner hereinafter
provided on or before the Closing Date, may terminate this Agreement in the
event of a breach by Stockholders or Company in the observance or in the due and
timely performance of any of the agreements or conditions contained herein on
their part to be performed, and such breach shall not have been cured on or
before the Closing Date.
13.2 TERMINATION BY STOCKHOLDERS. Stockholders may, by notice in the
manner hereinafter provided on or before the Closing Date, terminate this
Agreement in the event of a breach by Buyer in the observance or in the due and
timely performance of any of the covenants, agreements or conditions contained
herein on their part to be performed, and such breach shall not have been cured
on or before the Closing Date.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
14.1 NONDISCLOSURE BY STOCKHOLDERS. Stockholders recognize and acknowledge
that they have in the past, currently has, and in the future may possibly have,
access to certain confidential information of Company, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of Company and its businesses. Stockholders
agree that, except as may be required by Applicable Laws or other legal process
or in the course of their future employment by Company, they will not disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except to authorized
representatives of Parent unless such information becomes known to the public
generally through no fault of Stockholders. In the case of a disclosure required
by Applicable Laws or other legal process, Stockholders shall make no disclosure
without prior written notice to Parent. In the event of a breach or threatened
breach by Stockholders of the provisions of this Section, Parent shall be
entitled to an injunction restraining Stockholders from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting Parent from pursuing any other available remedy for such breach or
threatened breach, including, without limitation, the recovery of damages. The
provisions of this Section shall apply at all times prior to the Closing Date
and for a period of one year following the Closing.
14.2 NONDISCLOSURE BY PARENT. Parent recognizes and acknowledges that it
has in the past, currently has, and prior to the Closing Date, will have access
to certain confidential information of Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of Company and its businesses. Parent agrees that, except as
may be required by Applicable Laws or other legal process, it will not disclose
such confidential information to any person, firm, corporation, association, or
other entity for any purpose or reason whatsoever, prior to the Closing Date
without Stockholders's prior written consent. In the case of a disclosure
required by Applicable Laws or other legal process, Parent shall make no
disclosure without prior written notice to Stockholders. In the event of a
breach or threatened breach by Parent
-34-
of the provisions of this Section, Stockholders shall be entitled to an
injunction restraining Parent from disclosing, in whole or in part, such
confidential information. Nothing contained herein shall be construed as
prohibiting Stockholders from pursuing any other available remedy for such
breach or threatened breach, including, without limitation, the recovery of
damages. The provisions of this Section shall apply at all times prior to the
Closing Date and for a period of one year following the termination of this
Agreement without a Closing having occurred.
15. GENERAL.
15.1 ASSIGNMENT; BINDING EFFECT; AMENDMENT. This Agreement and the rights
of the parties hereunder may not be assigned (except by operation of law or to
the transferee of Parent Stock in a private transaction among family members or
otherwise for estate planning purposes) and shall be binding upon and shall
inure to the benefit of the parties hereto, the successors of the corporate
parties hereto, and the respective heirs and legal representatives of
Stockholders. This Agreement, upon execution and delivery, constitutes a valid
and binding agreement of the parties hereto enforceable in accordance with its
terms and may be modified or amended only by a written instrument executed by
all parties hereto.
15.2 ENTIRE AGREEMENT. This Agreement is the final, complete and exclusive
statement and expression of the agreement among the parties hereto with relation
to the subject matter of this Agreement, it being understood that there are no
oral representations, understandings or agreements covering the same subject
matter as this Agreement. This Agreement supersedes, and cannot be varied,
contradicted or supplemented by evidence of any prior or contemporaneous
discussions, correspondence, or oral or written agreements of any kind.
15.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
15.4 NO BROKERS. Company and Stockholders represent and warrant to Buyer
and Buyer represents to Stockholders and Company that the warranting party has
had no dealings with any broker or agent so as to entitle such broker or agent
to a commission or fee in connection with the within transaction. If for any
reason a commission or fee shall become due, the party dealing with such agent
or broker shall pay such commission or fee and agrees to indemnify and save
harmless each of the other parties from all claims for such commission or fee
and from all attorneys' fees, litigation costs and other expenses relating to
such claim.
15.5 EXPENSES OF TRANSACTION. Whether or not the transactions herein
contemplated shall be consummated: (i) Buyer will pay the fees, expenses and
disbursements of Buyer and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this
-35-
Agreement and any amendments hereto and all other costs and expenses incurred in
the performance and compliance with all conditions to be performed by Buyer
under this Agreement; and (ii) Stockholders or the Company will pay personally
the fees, expenses and disbursements of Stockholders and Company and their
respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments hereto
and all other costs and expenses incurred in the performance and compliance with
all conditions to be performed by Stockholders and Company under this Agreement.
All such fees, expenses and disbursements of Stockholders and Company shall be
paid by Stockholders prior to the Closing so as not to become an obligation of
Buyer or shall be included as a current liability for purposes of the
calculation of Actual Net Working Capital set forth in Section 2.4. Stockholders
represents and warrants to Buyer that Stockholders has relied on his own
advisors for all legal, accounting, tax or other advice whatsoever with respect
to this Agreement and the transactions contemplated hereby.
15.6 NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, by overnight courier or
by delivering the same in person to such party.
(a) If to Buyer, addressed to it at:
U S Liquids Inc.
000 X. Xxx Xxxxxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000
ATTN: W. Xxxxxxx Xxx
with a copy to:
U S Liquids Inc.
000 X. Xxx Xxxxxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000
ATTN: Xxxxx Xxxxxx
and a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Xxxxx & Xxxxxxxxx LLP
3200 National City Center
0000 X. 0xx Xxxxxx
Xxxxxxxxx, XX 00000-0000
(b) If to Stockholders, addressed to them at:
C. Xxxxxx Xxxxxxx III
0000 Xxxx Xxxx
Xxxxxxx, XX 00000
C. Xxxxxx Xxxxxxx, Xx.
00 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxxxxx X. Xxxxxx
0 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
in each case with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx Beach & Xxxxxx LLP
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Notice shall be deemed given and effective the day personally delivered (if
delivered during normal business hours on a business day, or on the next
business day if not so delivered), the day after being sent by overnight
courier, subject to signature verification, and three business days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received, if
earlier. Any party may change the address for notice by notifying the other
parties of such change in accordance with this Section.
15.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
15.8 APPOINTMENT OF AGENT. Stockholders agrees to maintain an agent in the
State of New York to accept and acknowledge service of process for any New York
proceedings. Each Stockholder initially hereby appoints Xxxxxxx X. Xxxxxxx,
Esq., Xxxxxx Beach & Xxxxxx LLP, 000 Xxxx Xxxx Xxxxxx, Xxxxxxxxx, XX 00000, as
such agent and agrees to notify Buyer in the manner set forth in Section 15.8 of
any change in agent. Each party agrees that service of process or notice in any
such action, suit or proceeding shall be effective if in writing and delivered
to the address
-37-
provided in Section 15.8 for such party, in the manner prescribed in such
Section.
15.9 NO WAIVER. No delay of or omission in the exercise of any right,
power or remedy accruing to any party as a result of any breach or default by
any other party under this Agreement shall impair any such right, power or
remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of or in any similar breach or default occurring later;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach of default occurring before or after that waiver.
15.10 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
15.11 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
15.12 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall, to the extent possible, be modified
in such manner as to be valid, legal and enforceable but so as most nearly to
retain the intent of the parties. If such modification is not possible, such
provision shall be severed from this Agreement. In either case the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
15.13 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means including, without limitation. The parties intend that
representation, warranty and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) that the party has not
breached shall not detract from or mitigate the fact the party is in breach of
the first representation, warranty or covenant.
15.14 STANDSTILL AGREEMENT. Unless and until this Agreement is terminated
pursuant to Article 13 hereof without the Closing having taken place,
Stockholders will not directly or indirectly solicit offers for Company Stock or
the assets of Company or a merger or consolidation involving Company from, or
respond to inquiries from, share information with, negotiate with or in any way
facilitate inquiries or offers from, third parties who express or who have
heretofore expressed an interest in acquiring Company by merger, consolidation
or other combination or acquiring any of
Company's assets; nor will they permit Company to do any of the foregoing.
-38-
15.15 CONTEMPORANEOUS TRANSACTION REGARDING EARTH BLENDS, INC.
Stockholders, Parent and Buyer are contemporaneously with the execution and
delivery of this Agreement, entering into a Stock Purchase Agreement (the "EBI
Agreement") providing for the sale of all the capital stock of EBI. For the
purpose of this Agreement, matters shall be deemed material to the Company or
the Business only if they are material to the Company and EBI taken as a whole
or to the Business and the business of EBI taken as a whole.
15.16 SCHEDULES. The disclosures on any Schedule to this Agreement shall
be deemed disclosed for purposes of all Sections of and Schedules to this
Agreement to the extent that the relevance to such additional Section and/or
Schedule would be understood by a reasonable person familiar with this Agreement
and the Company reading the Schedules. The Balance Sheet and other historical
financial statements of the Company as of and for the year ended December 31,
1997 (including the notes thereto) are also incorporated by reference in all
Schedules. All matters set forth in such historical financial statements shall
be deemed disclosed for purposes of all Sections of and Schedules to this
Agreement to the extent that the relevance to such Section and/or Schedule would
be understood by a reasonable person familiar with this Agreement and the
Company reading such historical financial statements. The mere inclusion of a
matter on any Schedule shall not be deemed an admission by any Stockholder that
such matter (or any other matter of equal magnitude) represents a material fact,
event or circumstance or would result in a material adverse effect or material
adverse change. All matters referred to on the Schedules to the EBI Agreement
shall be deemed disclosed on the identically numbered Schedule to this
Agreement.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
-39-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
U S LIQUIDS NORTHEAST, INC.
By: XXXXX XXXXX
Its: Vice President
U S LIQUIDS INC.
By: XXXXX XXXXX
Its: Authorized Representative
WASTE STREAM ENVIRONMENTAL, INC.
(EIN: 161-326-628)
By: C. XXXXXX XXXXXXX III
Its: President
/s/ C. XXXXXX XXXXXXX III
C. Xxxxxx Xxxxxxx III
(SSN: ###-##-####)
/s/ C. XXXXXX XXXXXXX, XX.
C. Xxxxxx Xxxxxxx, Xx.
(SSN: ###-##-####)
/s/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx
(SSN: ###-##-####)
-40-
