EXHIBIT 5
SHARING AGREEMENT
AGREEMENT dated March 31, 2000 between Compost America Holding
Company, Inc. ("CAHC"), Wasteco Ventures Limited ("Wasteco") and Xxxxxx X. Xxxxx
("Xxxxx").
WHEREAS, Wasteco and Xxxxx are holders and owners of all of
the Class A Preferred ("A Preferred") and Class C Preferred ("C Preferred")
Stock of CAHC, being a total of 130,000 shares of A Preferred and 70,000 shares
of C Preferred held by Wasteco and 39,000 shares of A Preferred and 21,000
shares of C Preferred held by Xxxxx; and
WHEREAS, the provisions of the certificate of Incorporation of
CAHC relating to such Class A Preferred and C Preferred Stock provide to Wasteco
and Xxxxx an option (the "Exchange Option") to exchange the CAHC "Surrender
Shares", hereinafter defined, for all of the issued and outstanding shares (the
"Exchange Shares") of Environmental Protection & Improvement Company Inc.
("EPIC") in defined circumstances. The CAHC Surrender Shares are all of the A
Preferred and C Preferred of CAHC acquired by Wasteco and Xxxxx by purchase on
or about November, 1997 as well as (i) 14,937,791 common shares of CAHC acquired
by them at that time (11,490,609 shares held by Wasteco and 3,447,182 shares
held by Xxxxx) (ii) 783,842 common shares acquired in a special distribution to
them in April, 1998 (602,955 shares held by Wasteco and 180,887 shares held by
Xxxxx) being a total of 12,093,564 common shares held by Wasteco and 3,628,069
common shares held by Xxxxx, but excluding any common shares acquired or to be
acquired by them as dividends on A Preferred and C Preferred; and
WHEREAS, CAHC has experienced financial difficulties; and
WHEREAS, CAHC acknowledges that Wasteco and Xxxxx currently
have rights to exercise the Exchange Option subject, however, to the provisions
of New Jersey law referred to below; and
WHEREAS, Wasteco and Xxxxx initially indicated to CAHC their
intent to exercise the Exchange Option; and
WHEREAS, after extended discussions and study, CAHC and
Wasteco and Xxxxx thereafter concluded that CAHC might be unable to operate its
business were the Exchange Option to be exercised and honored; and
WHEREAS, CAHC, Wasteco and Xxxxx, recognize the need to effect
a compromise that avoids impairing the operations of CAHC; and
WHEREAS, CAHC, with the consent of Wasteco and Xxxxx, has been
exploring a sale of all the stock of EPIC to deal with its financial
difficulties; and
WHEREAS, CAHC is now engaged in negotiations to sell all of
the stock of EPIC (the "Shares") to Synagro Technologies, Inc. (the "Sale")
pursuant to a stock purchase agreement ("SPA") and wishes to effect the Sale;
and
WHEREAS, the consummation of the Sale of the Shares of EPIC
and related simultaneous transactions is referred to hereinafter as the
"Closing"; and
WHEREAS, because of the existence of the Exchange Option, CAHC
is unable to effect the Sale without the agreement of Wasteco and Xxxxx; and
WHEREAS, CAHC has considered making a significant distribution
to Wasteco and Xxxxx to recognize their rights, subject only to the limitations
of New Jersey law relating to distributions with respect to stock; and
WHEREAS, CAHC, Wasteco and Xxxxx estimate that the Exchange
Option, were CAHC able to fulfill its obligations under it, would be valued at
$30-35 million less the current value of CAHC stock purchased by them (and to be
surrendered upon exercise of the option) for $26 million, the value of which
stock is now severely depressed; and
WHEREAS, Wasteco and Xxxxx recognize that, even if legally
proper, under the current circumstances, such a distribution might be
detrimental to the short term goals of Compost and its shareholders and
creditors; and
WHEREAS, Wasteco and Xxxxx are prepared to retain their CAHC
stock and forego appropriate compensation for the loss of the Exchange Option,
provided that CAHC is agreeable to the terms and conditions of this Agreement;
and
WHEREAS, the parties desire to record their agreement with
respect to the waiver of the Exchange Option and related matters;
WHEREAS, Wafra Acquisition Fund 7 L.P. signs this agreement as
beneficial owner of shares standing in the name of Wasteco solely to confirm
that it has no objection to Wasteco's action in entering into this Agreement.
NOW THEREFORE, the parties hereto agree as follows:
1. Effective upon Closing and completion of all transactions contemplated
hereunder to take place at the Closing, Wasteco and Xxxxx hereby waive
irrevocably and forever any right to the Exchange Option but only in order
to facilitate a sale of all of the Shares of EPIC to Synagro on or before
May 31, 2000 for a sale price of (1) not less than $37.5 million in cash
payable at Closing (subject to certain closing adjustments relating to
working capital) and (2) an Earn-Out Agreement ("EOA") providing for
payments of up to $6.2 million plus any applicable interest for late
payments.
2. All Note obligations payable to Wasteco and Xxxxx (including interest to the
date of payment) arising out of loans to EPIC and CAHC as shown on Schedule
A hereto shall be paid by CAHC in cash at Closing.
3. Reasonable legal fees and expenses of Wasteco and Xxxxx (but not in the
aggregate in excess of $1 million) in connection with the study of the
alternatives available to CAHC and negotiations with all parties to the
Closing (including but not limited to Lionhart, Xxxxx, Synagro and those
parties who have negotiated for settlements with CAHC during the period
January 1, 1999 to the Closing) shall be paid by CAHC in cash at the
Closing.
4. (a) At Closing CAHC shall grant to a designee of Wasteco and Xxxxx (the
"Designee") a first lien security interest including proceeds in (i) the EOA
and (ii) all of its membership interests in American Marine Rail LLC ("AMR")
as well as all rights it has under AMR's limited liability company agreement
and the AMR Investment Agreement dated as of August 31, 1997, as amended,
including the rights to purchase additional interests in AMR from AW Compost
and in all additional interests purchased. The lien granted under (i) shall
be limited to $6.2 million plus interest received for late payment, and the
lien granted under (ii) shall be limited to $3 million.
(b) In order to provide such first lien interests, CAHC shall fully exercise
its options to purchase all membership interests in AMR as soon as available
to it from proceeds from the EPIC sale transaction. Each such security
interest shall secure the obligations described in this paragraph 4.
(c) CAHC will make commercially reasonable efforts to sell, dispose or
otherwise monetize all of its rights in AMR within 36 months after Closing.
Upon any such sale or disposition, the net proceeds (but not more than the
maximum amount of the lien as described above) shall be held in a separate
account subject to the applicable security interest. Upon any collection of
funds under the EOA such funds shall also be held in a separate account
subject to the applicable security interest. CAHC agrees to hold the EOA to
May 15, 2003 or to that time that any Disputed Amounts (as defined in the
EOA) under the EOA are resolved. At each time when (1) cash or cash
equivalents are held in either of the separate accounts exceeding $1 million
or (2) all of the property originally held in either of the separate
accounts is sold, CAHC shall (i) redeem Class A preferred Stock in the
amount contained in the applicable account but not in the aggregate more
than $3 million as to proceeds arising as to the AMR interests and (ii)
redeem Class C preferred Stock in the amount contained in the applicable
account but not more than $6.2 million plus interest received for late
payment as to proceeds arising as to the EOA. Each security interest shall
be terminated whenever the maximum redemption described above arising
therefrom is achieved. Any redemption otherwise required hereunder that is
not permissible under applicable law shall be deferred to the extent
required to make such redemption hereunder when effective fully permissible
under applicable law. At Closing the Certificate of Incorporation provisions
governing the Class A and Class C preferred stock shall be amended to
provide for the redemption obligations described herein.
(d) CAHC shall provide prompt notice to the Designee of (i) any adjustment
of the EOA Amount (as defined in the EOA) (ii) receipt of any property in
any such separate account and (iii) any sale, disposition or other
transaction involving the property subject to the security interests.
5. (a) CAHC shall defend title to the security at its sole expense (including
the defense against any reduction in the EOA unless Wasteco and Xxxxx agree
that such defense is inappropriate). If CAHC shall fail to fulfill such
defense obligation the Designee may do so and shall be entitled to utilize
any amount held in any of the security accounts in the reasonable exercise
of its rights to defend.
(b) In view of the obligations under paragraph 4, CAHC's ability to pay
preferred dividends other than in common stock is reduced. Accordingly, the
certificate of incorporation provisions governing the Class A and Class C
preferred shall be amended to provide that both Class A and Class C
preferred stock may pay dividends currently in common stock effective
November 1, 1999 at the current formula price specified in the Class A
Preferred Stock Certificate of Designation.
6. All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including telex and facsimile
communication) and shall be personally delivered or sent by certified mail,
postage prepaid, or overnight courier or facsimile, to the intended party at
the address or facsimile number of such party set forth below or at such
other address or facsimile number as shall be designated by such party in a
written notice to the other parties hereto. All such notices and
communications shall be effective (a) if personally delivered, when
received, (b) if sent by certified mail, four Business Days after having
been deposited in the mail, postage prepaid, (c) if sent by overnight
courier, two Business Days after having been given to such courier, unless
sooner received by the addressee and (d) if transmitted by facsimile, when
sent, upon receipt confirmed by telephone or electronic means. Notices and
communications sent hereunder on a day that is not a Business Day shall be
deemed to have been sent on the following Business Day.
If to Xxxxx:
Xxxxxx X. Xxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxx
with a copy to:
Xxxx Xxxxxxxxx & XxXxxx LLP
Xxx Xxxxxx Xxxxx
Xxxx Xxx, Xxx Xxxxxx 00000
If to Wasteco:
Wasteco Ventures Limited
Citco Building
Wickhams Cay
X.X. Xxx 000
Xxxx Xxxx
Xxxxxxx, B.V.I.
with a copy to:
c/o Wafra Partners
000 Xxxx Xxxxxx, 00xx Xx.
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxx X. Xxxx
If to CAHC:
Compost America Holding Company, Inc.
Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Office of the President c/o Xxxxx
Xxxxxxx
with a copy to:
Xxxxxxxxx Traurig
0000 Xxx Xxxxxxxx Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxx Xxxxx
7. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York. It sets forth the entire agreement with
respect to the matters described here. Neither party may assign the
obligations or benefits of this Agreement without the consent of the others
except as specifically permitted herein and shall bind successors by
operation of law.
8. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement. Delivery of a signature page to
this Agreement (whether by fax or manually executed) shall be effective as
if it were delivery of a manually executed counterpart of this Agreement.
9. (a) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of any
New York State court or federal court of the United States of America
sitting in New York City, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in any such New
York State court or, to the extent permitted by law, in such federal court.
Each of the parties hereto agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any New York
State or federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any
such court.
10. Each of the parties hereto hereby irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract,
tort or otherwise) arising out of or relating to this Agreement in the
negotiation, administration, performance or enforcement thereof.
IN WITNESS WHEREOF the parties have executed this Agreement as
of the date first written above.
COMPOST AMERICA HOLDING COMPANY INC.
By _________________________________________
WASTECO VENTURES LIMITED
By: ________________________________________
Name:
Title:
WAFRA ACQUISITION FUND 7, L.P.
By: WAFRA PARTNERS, L.P., its general partner
By: WAFRA PARTNERS, INC., in its capacity as
general partner of Wafra Partners, L.P.
By: _______________________________________
Name:
Title:
______________________________________
Xxxxxx X. Xxxxx
Additional Signatories for COMPOST AMERICA HOLDING COMPANY, INC.
OFFICE OF THE PRESIDENT
By:______________________
Xxxxxxxxxxx X. Xxxxxxx
By:______________________
Xxxxxx X. Xxxxxxx
Wasteco/Xxxxx Notes Worksheet
Interest (per annum) 10%
Accrued Interest Principal + Interest
Date Principal at 4/15/00 at 4/15/00
---- --------- ---------- ----------
Wasteco 5/4/99 1,250,000 118,101 $1,368,101
Xxxxx 5/4/99 360,000 34,013 394,013
Wasteco 12/9/99 250,000 8,480 258,480
12/29/99 130,000 3,700 133,700
1/20/00 200,000 4,552 204,552
2/4/00 150,000 2,846 152,846
----------
$2,511,692
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