EXHIBIT 10.26
ASSET PURCHASE AGREEMENT
BY AND AMONG
UNITED STATES FILTER CORPORATION
U.S. FILTER RECOVERY SERVICES (SOUTHWEST), INC.
XXXXXX ENVIRONMENTAL SERVICES, INC.
XXXXXX COMPANY, INC. AND
HYDROCARBON TECHNOLOGIES, INC.
April 25, 1997
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS; CONSTRUCTION.................................................1
1.1 DEFINITIONS..........................................................1
1.2 CONSTRUCTION.........................................................6
ARTICLE II
THE TRANSACTION...........................................................6
2.1 SALE AND PURCHASE OF ASSETS..........................................6
2.2 RETAINED ASSETS......................................................7
2.3 ASSUMPTION OF LIABILITIES............................................8
2.4 RETAINED LIABILITIES.................................................8
2.5 PURCHASE PRICE.......................................................9
2.6 CLOSING..............................................................9
2.7 PAYMENT OF PURCHASE PRICE............................................9
(a) AT CLOSING......................................................9
(b) AFTER CLOSING...................................................9
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT..............................10
2.9 CLOSING STATEMENTS..................................................10
(a) CLOSING BALANCE SHEET..........................................10
(b) ARBITRATION....................................................10
(c) FINAL CLOSING BALANCE SHEET....................................11
2.10 ALLOCATION OF PURCHASE PRICE........................................11
2.11 TITLE...............................................................11
2.12 CERTAIN CONSENTS....................................................11
2.13 EARNOUT.............................................................12
2.14 ESCROW; DELIVERY OF SHARES..........................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS ...............................13
3.1 ORGANIZATION........................................................13
3.2 AUTHORIZATION; ENFORCEABILITY.......................................13
3.3 NO SUBSIDIARIES.....................................................14
3.4 NO VIOLATION OF LAWS OR AGREEMENTS; CONSENTS........................14
3.5 FINANCIAL INFORMATION...............................................14
(a) RECORDS........................................................14
(b) FINANCIAL STATEMENTS...........................................14
3.6 UNDISCLOSED LIABILITIES.............................................15
3.7 NO CHANGES..........................................................15
3.8 TAXES...............................................................15
3.9 INVENTORY...........................................................16
3.10 RECEIVABLES.........................................................16
3.11 CONDITION OF ASSETS; TITLE; BUSINESS................................16
3.12 NO PENDING LITIGATION OR PROCEEDINGS................................17
3.13 CONTRACTS; COMPLIANCE...............................................17
3.14 PERMITS; COMPLIANCE WITH LAW........................................18
3.15 REAL PROPERTY.......................................................18
3.16 TRANSACTIONS WITH RELATED PARTIES...................................19
3.17 LABOR RELATIONS.....................................................19
3.18 PRODUCT LIABILITIES; WARRANTIES.....................................19
3.19 INSURANCE...........................................................20
3.20 INTELLECTUAL PROPERTY RIGHTS........................................20
3.21 EMPLOYEE BENEFITS...................................................20
(a) BENEFIT PLANS; SELLERS PLANS...................................20
(b) SELLERS GROUP MATTERS; FUNDING.................................20
(c) COMPLIANCE.....................................................21
(d) QUALIFIED PLANS................................................21
(e) DEFINED BENEFIT PLANS..........................................21
(f) MULTIEMPLOYER PLANS............................................21
(g) PROHIBITED TRANSACTIONS; FIDUCIARY DUTIES......................22
3.22 ENVIRONMENTAL MATTERS...............................................22
(a) COMPLIANCE; NO LIABILITY.......................................22
(b) TREATMENT; CERCLIS.............................................22
(c) NOTICES; EXISTING CLAIMS; CERTAIN REGULATED MATERIALS; STORAGE
TANKS..........................................................22
3.23 CUSTOMER RELATIONS..................................................23
3.24 FINDERS' FEES.......................................................23
3.25 INVESTMENT..........................................................23
3.26 DISCLOSURE..........................................................23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER..................................23
4.1 ORGANIZATION........................................................23
4.2 AUTHORIZATION AND ENFORCEABILITY....................................24
4.3 NO VIOLATION OF LAWS; CONSENTS......................................24
4.4 NO PENDING LITIGATION OR PROCEEDINGS................................24
4.5 CAPITALIZATION......................................................24
4.6 FINDERS' FEES.......................................................24
4.7 REGISTRATION STATEMENT AND INFORMATION..............................24
ARTICLE V
CERTAIN COVENANTS........................................................25
5.1 CONDUCT OF BUSINESS PENDING CLOSING.................................25
(a) ORDINARY COURSE; COMPLIANCE....................................25
(b) PROHIBITED TRANSACTIONS........................................25
(c) ACCESS, INFORMATION AND DOCUMENTS..............................25
5.2 PUBLICITY...........................................................26
5.3 FULFILLMENT OF AGREEMENTS...........................................26
5.4 CERTAIN TRANSITIONAL MATTERS........................................26
(a) COLLECTION OF ACCOUNTS RECEIVABLES.............................26
(b) ENDORSEMENT OF CHECKS..........................................26
(c) REMIT FUNDS....................................................26
(d) ASSUMED LIABILITIES CONTROLLED BY BUYER........................26
(e) USE OF NAMES...................................................26
5.5 INSURANCE...........................................................26
5.6 ASSISTANCE..........................................................27
5.7 NO SOLICITATION OF THE EMPLOYEES OF THE BUSINESS....................27
5.8 SEVERANCE AND TERMINATION PAYMENTS..................................27
5.9 SELLERS' EMPLOYEES..................................................27
5.10 WORKERS' COMPENSATION AND DISABILITY CLAIMS.........................28
(a) SELLERS' LIABILITY.............................................28
(b) BUYER'S LIABILITY..............................................28
5.11 COVENANT NOT TO COMPETE.............................................28
(a) RESTRICTION....................................................28
(b) ENFORCEMENT....................................................28
5.12 CERTAIN FEES........................................................29
5.13 SALE OF USF SHARES..................................................29
ARTICLE VI
CONDITIONS TO CLOSING; TERMINATION.......................................29
6.1 CONDITIONS PRECEDENT TO OBLIGATION OF BUYER.........................29
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS.........29
(b) LITIGATION.....................................................29
(c) NO MATERIAL ADVERSE CHANGE.....................................29
(d) CLOSING CERTIFICATE............................................29
(e) ARRANGEMENTS WITH EMPLOYEES....................................30
(g) CLOSING DOCUMENTS..............................................30
(h) TITLE INSURANCE................................................30
(i) OTHER DELIVERIES...............................................30
(j) ESTOPPEL CERTIFICATES..........................................30
(k) LISTING ON NYSE................................................31
(l) CONSENTS.......................................................31
(m) PERMITS........................................................31
6.2 CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS.......................31
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS.........31
(b) LITIGATION.....................................................31
(c) CLOSING CERTIFICATE............................................31
(d) LISTING ON NYSE................................................31
(e) CLOSING DOCUMENTS..............................................31
6.3 DELIVERIES AND PROCEEDINGS AT CLOSING...............................31
(a) DELIVERIES BY SELLERS..........................................32
(b) DELIVERIES BY BUYER............................................33
6.4 TERMINATION.........................................................33
(a) MUTUAL CONSENT; FAILURE OF CONDITIONS..........................33
(b) CASUALTY DAMAGE................................................34
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.............................34
7.1 SURVIVAL OF REPRESENTATIONS.........................................34
7.2 INDEMNIFICATION BY SELLERS..........................................34
7.3 INDEMNIFICATION BY BUYER............................................35
7.4 LIMITATION OF LIABILITY.............................................35
(a) THRESHOLD......................................................35
(b) CEILING........................................................35
(c) TIME PERIOD....................................................35
(d) FRAUD; INTENTIONAL MISREPRESENTATION...........................36
(e) WAIVER OF STATUTE OF LIMITATIONS...............................36
7.5 NOTICE OF CLAIMS....................................................36
7.6 THIRD PARTY CLAIMS..................................................36
7.7 GOOD FAITH EFFORTS TO SETTLE DISPUTES...............................37
7.8 ESCROW..............................................................37
(a) CREATION.......................................................37
(b) DISBURSEMENT FOR CLAIMS........................................37
(c) DIVIDENDS ON ESCROW............................................37
(d) TERMINATION....................................................37
7.9 PAYMENT.............................................................37
7.10 ARBITRATION.........................................................37
ARTICLE VIII
MISCELLANEOUS............................................................38
8.1 COSTS AND EXPENSES..................................................38
8.2 PRORATION OF EXPENSES...............................................38
8.3 FURTHER ASSURANCES..................................................38
8.4 NOTICES.............................................................38
8.5 CURRENCY............................................................40
8.6 OFFSET; ASSIGNMENT; GOVERNING LAW...................................40
8.7 AMENDMENT AND WAIVER; CUMULATIVE EFFECT.............................40
8.8 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES......................41
8.9 SEVERABILITY........................................................41
8.10 COUNTERPARTS........................................................41
INDEX OF SCHEDULES
Schedule
Reference Title of Schedule
--------- -----------------
1.1(p) Permitted Encumbrances
2.1(ii) Personal Property
2.1(iii) Inventory
2.1(vii) Leases of Personal Property
2.1(xi) Vehicle and Trailers
2.2 Retained Assets
2.3 Assumed Liabilities
2.9 Assumptions Relating to Pro Forma Financial Statements
and Final Closing Balance Sheet
2.10 Allocation of Purchase Price
2.13 Assumptions Relating to Earnout
3.3 Subsidiaries
3.4 Authorizations and Consents
3.6 Undisclosed Liabilities
3.7 Changes in Business
3.8 Taxes
3.9 Inventory Exceptions
3.10 Trade Accounts Receivable
3.11 Encumbrances of Purchased Assets
3.12 Pending Litigation
3.13 Contracts
3.14 Permits
3.15 Real Property
3.16 Transactions with Related Parties
3.17 Labor Relations
3.18 Products Liabilities; Warranties
3.19 Insurance
3.20 Intellectual Property
3.21 Employee Benefits
3.22 Environmental Matters
3.23(a) Two Percent Customers
3.23(b) Major Suppliers
3.24 Finder's Fee
5.1 Prohibited Transactions
5.12 Reimbursable Capital Expenditures
6.1 Material Leasehold Interests
INDEX OF EXHIBITS
Exhibit Description
------- -----------
A 6-30-96 Balance Sheet of the Business
B Audited Consolidated Financial Statements for MES
C Unaudited Consolidating Balance Sheet for Sellers at December 31, 1996
D Form of Legal Opinion of Xxxxx XxXxxxxxx & Oaks Xxxxxxxx
E Form of Noncompetition Agreement
F Form of Legal Opinion of Xxxxxx X. Xxxxxxxx, Esq.
Asset Purchase Agreement ("AGREEMENT"), dated as
of April 25, 1997, by and among XXXXXX
ENVIRONMENTAL SERVICES, INC., a Delaware
corporation ("MES"), XXXXXX COMPANY, INC., a Texas
corporation and a wholly owned subsidiary of MES
("XXXXXX"), HYDROCARBON TECHNOLOGIES, INC., a
Texas corporation and a wholly owned subsidiary of
MES ("HTI") (MES, Xxxxxx and HTI are together
referred to herein as the "SELLERS"), UNITED
STATES FILTER CORPORATION, a Delaware corporation
("USF"), and U.S. FILTER RECOVERY SERVICES
(SOUTHWEST), INC. ("BUYER"), a Delaware
corporation.
Sellers desire to sell and assign to Buyer, and Buyer desires to purchase
and assume from Sellers, substantially all of Sellers' operating assets and
certain of Sellers' liabilities on the terms and subject to the conditions set
forth below. In consideration of the representations, warranties, covenants and
agreements contained herein, Sellers, USF and Buyer, each intending to be
legally bound hereby, agree as set forth below.
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following terms have the
meanings specified in this SECTION 1.1. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.
"ACCOUNTING PRINCIPLES" has the meaning given that term in SECTION 2.9(a).
"AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such Person.
"AGREEMENT" means this Asset Purchase Agreement, as it may be amended from
time to time.
"ASSUMED LIABILITIES" has the meaning given that term in SECTION 2.3.
"ASSUMPTION AGREEMENT" has the meaning given that term in SECTION 2.3.
"AUDITORS" means KPMG Peat Marwick LLP.
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"BALANCE SHEET DATE" means June 30, 1996.
"BENEFIT PLAN" has the meaning given that term in SECTION 3.21(a).
"BUSINESS" means the oil/water and fuel/water processing, distillate fuels
production, absorbent and filter recycling and related activities of Sellers.
"BUYER" means U.S. Filter Recovery Services (Southwest), Inc., a Delaware
corporation, an ultimate subsidiary of USF.
"BUYER DAMAGES" has the meaning given that term in SECTION 7.2.
"BUYER INDEMNITEES" has the meaning given that term in SECTION 7.2.
"CERCLIS" means the United States Comprehensive Environmental Response
Compensation Liability Information System List pursuant to Superfund.
"CLOSING" has the meaning given that term in SECTION 2.6.
"CLOSING BALANCE SHEET" has the meaning given that term in SECTION 2.9.
"CLOSING DATE" has the meaning given that term in SECTION 2.6.
"CODE" means the United States Internal Revenue Code of 1986, as amended,
and the applicable rulings and regulations thereunder.
"COMMISSION" means the United States Securities and Exchange Commission.
"CONTRACT" and "CONTRACTS" have the respective meanings given those terms
in SECTION 3.13.
"DAMAGES" means Buyer Damages or Seller Damages, as the case may be.
"DEFINED BENEFIT PLAN" has the meaning given that term in SECTION 3.21(e).
"EARNOUT" has the meaning given that term in SECTION 2.13.
"ENCUMBRANCE" means any liability, debt, mortgage, deed of trust, pledge,
security interest, encumbrance, option, right of first refusal, agreement of
sale, adverse claim, easement, lien, assessment, restrictive covenant,
encroachment, burden or charge of any kind or nature whatsoever or any item
similar or related to the foregoing.
"ENVIRONMENTAL LAW" means any applicable Law relating to public health and
safety or protection of the environment, including common law nuisance, property
damage and similar common law theories.
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"ERISA" means the United States Employee Retirement Income Security Act of
1974, as amended, and the applicable rulings and regulations thereunder.
"ESCROW" has the meaning given that term in SECTION 7.8.
"ESCROW AGENT" has the meaning given that term in SECTION 7.8
"FASB" means the United States Financial Accounting Standards Board or its
successor.
"FINAL CLOSING BALANCE SHEET" has the meaning given that term in SECTION
2.9(c).
"FINANCIAL STATEMENTS" has the meaning given that term in SECTION 3.5(b).
"GAAP" means United States generally accepted accounting principles.
"GOVERNING DOCUMENTS" means, with respect to any Person who is not a
natural Person, the certificate or articles of incorporation, bylaws, deed of
trust, formation or governing agreement and other charter documents or
organization or governing documents or instruments of such Person.
"GOVERNMENTAL BODY" means any court, government (federal, state, local or
foreign), department, commission, board, bureau, agency, official or other
regulatory, administrative or governmental authority or instrumentality.
"INDEMNIFIED PARTY" has the meaning given that term in SECTION 7.5.
"INDEMNIFYING PARTY" has the meaning given that term in SECTION 7.5.
"INTELLECTUAL PROPERTY" has the meaning given that term in SECTION 3.20.
"IRS" means the United States Internal Revenue Service.
"LAW" means any applicable federal, state, municipal, local or foreign
statute, law, ordinance, rule, regulation, judgment or order of any kind or
nature whatsoever including any public policy, judgment or order of any
Governmental Body or principle of common law.
"LIABILITIES" with respect to any Person, means all debts, liabilities and
obligations of such Person of any nature or kind whatsoever, whether or not due
or to become due, accrued, fixed, absolute, matured, determined, determinable or
contingent and whether or not incurred directly by such Person or by any
predecessor of such Person, and whether or not arising out of any act, omission,
transaction, circumstance, sale of goods or service or otherwise.
"LITIGATION" has the meaning given that term in SECTION 3.12.
"MULTIEMPLOYER PLAN" has the meaning given that term in SECTION 3.21(f).
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"NYSE" means the New York Stock Exchange.
"OTHER AGREEMENT" means each other agreement or document contemplated
hereby to be executed and delivered in connection with the transactions
contemplated by this Agreement on or before Closing.
"PBGC" means the United States Pension Benefit Guaranty Corporation.
"PCBS" means polychlorinated biphenyls.
"PERMIT" and "PERMITS" have the respective meanings given those terms in
SECTION 3.14.
"PERMITTED ENCUMBRANCES" means (i) liens for current taxes not yet due; and
(ii) with respect to the Real Property, easements, covenants, rights-of-way,
zoning restrictions and other encumbrances or restrictions of record identified
on SCHEDULE 1.1(p); PROVIDED, HOWEVER, that any Encumbrances in clauses (i) and
(ii) do not or will not either individually or in the aggregate adversely affect
the value of the property encumbered or prohibit or interfere with the
operations of the Business.
"PERSON" means and includes a natural person, a corporation, an
association, a partnership, a limited liability company, a trust, a joint
venture, an unincorporated organization, a business, any other legal entity, and
a Governmental Body.
"POST-CLOSING PURCHASE PRICE ADJUSTMENT" means the post-closing adjustment
to the Purchase Price pursuant to SECTION 2.8.
"PURCHASE PRICE" has the meaning given that term in SECTION 2.5.
"PURCHASED ASSETS" has the meaning given that term in SECTION 2.1.
"QUALIFIED PLAN" has the meaning given that term in SECTION 3.21(d).
"REAL PROPERTY" has the meaning given that term in SECTION 3.15.
"RECEIVABLES" has the meaning given that term in SECTION 3.10.
"REGISTRATION STATEMENT" means USF's registration statement filed with the
Commission on Form S-4 with respect to the USF Shares.
"REGULATED MATERIAL" means any pollutant, contaminant, waste or chemical or
any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substance as defined by any Environmental Law and any other substance, waste or
material regulated by any applicable Environmental Law, including petroleum,
petroleum-related material, crude oil or any fraction thereof, PCBs and friable
asbestos.
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"RELATED PARTY" means (i) Sellers, (ii) any Affiliate of Sellers, (iii) any
officer or director of any Person identified in clauses (i) or (ii) preceding,
and (iv) any spouse, sibling, ancestor or lineal descendant of any natural
Person identified in any one of the preceding clauses.
"RETAINED ASSETS" has the meaning given that term in SECTION 2.2.
"RETAINED LIABILITIES" has the meaning given that term in SECTION 2.4.
"SECURITY RIGHT" means, with respect to any security, any option, warrant,
subscription right, preemptive right, other right, proxy, put, call, demand,
plan, commitment, agreement, understanding or arrangement of any kind relating
to such security, whether issued or unissued, or any other security convertible
into or exchangeable for any such security, including, without limitation, any
right relating to issuance, sale, assignment, transfer, purchase, redemption,
conversion, exchange, registration or voting and includes rights conferred by
statute, by the issuer's Governing Documents or by agreement.
"SECURITIES ACT" means the United States Securities Act of 1933, as
amended, together with the rules and regulations of the Commission thereunder.
"SELLERS" means Xxxxxx Environmental Services, Inc., a Delaware
corporation, Xxxxxx Company, Inc., a Texas corporation, and Hydrocarbon
Technologies, Inc., a Texas corporation, and, with respect to all of the
representations, warranties, covenants and agreements made herein, includes all
Subsidiaries.
"SELLERS DAMAGES" has the meaning given that term in SECTION 7.3.
"SELLERS INDEMNITEES" has the meaning given that term in SECTION 7.3.
"SELLERS GROUP" means a member, whether past or present, of Sellers'
affiliated group of corporations within the meaning of Code Section 1504(a).
"SELLERS PLAN" has the meaning given that term in SECTION 3.21(a).
"SUBSIDIARY" means any corporation, partnership, joint venture or other
entity in which Sellers own, directly or indirectly, more than 20% of the
outstanding voting securities or equity interests.
"SUPERFUND" means the United States Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 U.S.C. Sections 6901 ET SEQ., as
amended.
"TAX" means any domestic or foreign federal, state, county or local tax,
levy, impost or other charge of any kind whatsoever, including any interest or
penalty thereon or addition thereto, whether disputed or not.
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"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to any Tax, including any schedule or
attachment thereto, and including any amendment thereof.
"TOTAL OWNER'S EQUITY" has the meaning given to that term in SECTION 2.8.
"USF" means United States Filter Corporation.
"USF AVERAGE SHARE VALUE" means the average closing price for the USF
Common Stock as reported by the NYSE for the twenty consecutive trading days
ending on the sixth trading day immediately preceding the Closing Date.
"USF COMMON STOCK" means Buyer's common stock, par value $.01 per share.
"USF SHARES" has the meaning given that term in SECTION 2.7(a)(ii).
"6-30-96 BALANCE SHEET" means the pro forma balance sheet of the Business
as of June 30, 1996, a copy of which is attached hereto as EXHIBIT A.
1.2 CONSTRUCTION. As used herein, unless the context otherwise requires:
(i) references to "Article" or "Section" are to an article or section hereof;
(ii) all "Exhibits" and "Schedules" referred to herein are to Exhibits and
Schedules attached hereto and are incorporated herein by reference and made a
part hereof; (iii) "include", "includes" and "including" are deemed to be
followed by "without limitation" whether or not they are in fact followed by
such words or words of like import; and (iv) the headings of the various
articles, sections and other subdivisions hereof are for convenience of
reference only and shall not modify, define or limit any of the terms or
provisions hereof.
ARTICLE II
THE TRANSACTION
2.1 SALE AND PURCHASE OF ASSETS. At the Closing, Sellers shall sell and
transfer to Buyer, and Buyer shall purchase from Sellers, all of Sellers'
properties and business as a going concern and goodwill and assets of every
kind, nature and description existing on the Closing Date, wherever such
assets are located and whether real, personal or mixed, tangible or
intangible, in electronic form or otherwise, and whether or not any of such
assets have any value for accounting purposes or are carried or reflected on
or specifically referred to in Sellers' books or financial statements, except
those assets specifically excluded pursuant to SECTION 2.2, free and clear of
all Encumbrances other than Permitted Encumbrances. The properties, business,
goodwill and assets of Sellers to be transferred hereunder (collectively, the
"Purchased Assets") shall include, but not be limited to, the following:
(i) All those certain lots and pieces of ground, together with the
buildings, structures and other improvements erected thereon, and together
with all easements, rights and
6
privileges appurtenant thereto, of all Real Property owned by Sellers, which
Real Property is more particularly described in SCHEDULE 3.15;
(ii) All of Sellers' machinery, equipment, tooling, dies, jigs,
spare parts and supplies, including the items identified on SCHEDULE 2.1(ii);
(iii) All of Sellers' inventories of raw materials,
work-in-process, parts, subassemblies and finished goods, wherever located
and whether or not obsolete or carried on Sellers' books of account,
including the items identified on SCHEDULE 2.1(iii);
(iv) All of Sellers' other tangible assets, including office
furniture, office equipment and supplies, computer hardware and software
(except for Seller's Macola accounting software and other generally available
off the shelf software packages which are not assignable), leasehold
improvements and vehicles, including the items identified on SCHEDULE 2.1(ii);
(v) All of Sellers' trade and other notes and accounts
receivable, deposits, advance payments, prepaid items and expenses, deferred
charges, rights of offset and credits and claims for refunds relating to the
Business;
(vi) All of Sellers' books, records, manuals, documents, books
of account, work records, correspondence, sales and credit reports, customer
lists, literature, brochures, advertising material and the like relating to
the Business;
(vii) All of Sellers' rights under leases for real or personal
property set forth on SCHEDULES 2.1(vii) OR 3.15, and all of Sellers' rights
under all other leases, service or maintenance contracts, contracts to
perform work or provide services and all other agreements and purchase and
sale orders;
(viii) All of Sellers' claims, choses in action, causes of action
and judgments;
(ix) All of Sellers' goodwill and rights in and to the name
"Hydrocarbon Technologies, Inc." and in any other tradename, trademark,
fictitious name or service xxxx, or any variant of any of them, and any
applications therefor or registrations thereof, patents, invention reports,
industrial property rights and know how and any other forms of Intellectual
Property;
(x) All of Sellers' rights to the Business;
(xi) All of the outstanding capital stock of HTI Vehicle
Acquisition Corp., which shall own the vehicles and trailers set forth on
SCHEDULE 2.1(xi); and
(xii) To the extent not described above, all of the assets to be
reflected on the Final Closing Balance Sheet.
2.2 RETAINED ASSETS. Sellers shall retain and the Purchased Assets shall
not include the following assets (collectively, the "RETAINED ASSETS"):
(i) the consideration to be delivered to Sellers pursuant to
this Agreement;
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(ii) Sellers' other rights specifically granted hereunder;
(iii) Sellers' minute book, stock book and seal;
(iv) all claims, choses in action, causes of action and
judgments in respect of any Litigation matter identified on SCHEDULE 3.12 not
assumed by Buyer and with respect to any other Retained Liability; and
(v) all items identified on SCHEDULE 2.2.
2.3 ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall, pursuant to
an Assumption Agreement in a form agreed to by the parties (the "ASSUMPTION
AGREEMENT"), assume and agree to perform, pay or discharge, when due, to the
extent not theretofore performed, paid or discharged, the Liabilities listed on
SCHEDULE 2.3, and only such Liabilities (collectively, the "ASSUMED
LIABILITIES"), which Liabilities shall include: (i) liabilities specifically
accrued on the Final Closing Balance Sheet in the amounts shown thereon,
(ii) liabilities incurred in the ordinary course including ordinary course
contractual commitments of Sellers relating to the Business that do not exceed
the threshold limitations set forth in SECTION 3.13, and (iii) liabilities
incurred after the Closing Date and specified pursuant to the express terms of
the Contracts, other than for breach or nonperformance thereof that predates the
Closing; provided, however, that Buyer does not assume any obligations to
deliver goods, services or other items with respect to which payments were made
prior to the Closing Date unless Sellers have remitted the amount of such
payments to Buyer.
2.4 RETAINED LIABILITIES. Except for the Assumed Liabilities, Buyer
does not hereby and shall not assume or in any way undertake to pay, perform,
satisfy or discharge any other Liability of Sellers, whether existing on, before
or after the Closing Date or arising out of any transactions entered into, or
any state of facts existing on, prior to or after the Closing Date (the
"RETAINED LIABILITIES"), and Sellers agree to pay and satisfy when due all
Retained Liabilities. Without limiting the foregoing, except for the Assumed
Liabilities, the term "RETAINED LIABILITIES" shall include Liabilities:
(i) for or in connection with any dividends, distributions,
redemptions, or Security Rights with respect to any security of Sellers;
(ii) arising out of any transaction affecting Sellers or
obligations incurred by Sellers after the Closing (excluding matters
incorrectly directed to Sellers that are Assumed Liabilities hereunder);
(iii) for expenses, taxes or fees incident to or arising out of
the negotiation, preparation, approval or authorization of this Agreement and
the consummation of the transactions contemplated hereby, including, without
limitation, all legal and accounting fees and all brokers or finders fees or
commissions payable by Sellers except as otherwise provided in SECTION 5.12 ;
(iv) against which Sellers are insured or otherwise indemnified
or that would have been covered by insurance (or indemnification) but for a
claim by the issuer (or the indemnitor) that
8
the insured (or the indemnities) had breached its obligations under the policy
of insurance (or the contract of indemnity) or had committed fraud in the
insurance application;
(v) to any Related Party not arising out of this Agreement;
(vi) to indemnify Sellers' officers, directors, employees or
agents;
(vii) for any Taxes, including transfer Taxes, whether or not by
reason of, or in connection with, the transactions contemplated by this
Agreement;
(viii) for any product liability relating to any product
manufactured, distributed or sold by Sellers prior to the Closing Date
whether or not such Liability relates to products that are defective or
improperly designed or maintained or in breach of any express or implied
product warranty;
(ix) for any liability under Environmental Laws in any way
arising with respect to activities engaged in or circumstances existing prior
to the Closing Date;
(x) for any third party debt of Sellers or their Affiliates,
other than trade payables; and
(xi) for such salary and related expenses (such as employment
taxes, retirement contributions and withholdings and other amounts generally
withheld from salary payments by Sellers) attributable to periods prior to
Closing.
2.5 PURCHASE PRICE. The aggregate purchase price for the Purchased Assets
shall be $8,000,000, plus the assumption of the Assumed Liabilities (the
"PURCHASE PRICE"), subject to the Post-Closing Purchase Price Adjustment as
provided in SECTION 2.8 and the Earnout as provided in SECTION 2.13.
2.6 CLOSING. The consummation of the purchase and sale of the Purchased
Assets, the assumption of the Assumed Liabilities, and the consummation of the
other transactions contemplated hereby (the "CLOSING") shall take place at 10:00
a.m., local time, on the fifth day following the fulfillment of all conditions
in SECTION 6.1 AND 6.2, 1997 at the offices of Xxxxxxxxxx, Xxxxxx & Xxxxxxx,
L.L.P., 000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000, or at such other
time, date or place as the parties agree (the "Closing Date").
2.7 PAYMENT OF PURCHASE PRICE.
(a) AT CLOSING. At Closing, the Purchase Price shall be
paid by Buyer to Sellers as follows:
(i) by Buyer's assumption of the Assumed Liabilities pursuant
to the Assumption Agreement; and
(ii) by delivery (subject to SECTION 2.14) of that number of
shares of USF Common Stock equal to the result obtained by dividing
$8,000,000 by the USF Average Share Value
9
(the "USF SHARES"). The USF Shares shall be registered under the Securities Act
pursuant to a shelf registration on Form S-4.
(b) AFTER CLOSING.
(i) within five business days after the determination of the
Post-Closing Purchase Price Adjustment is made, Buyer or Sellers, as the case
may be, shall deliver the Post-Closing Purchase Price Adjustment by wire
transfer of federal funds, in the case of payments by Sellers, and in shares of
USF Common Stock equal to the result obtained by dividing the amount owed by the
USF Average Share Value (using the date of determination of the Post Closing
Purchase Price Adjustment in place of the Closing Date in determining the USF
Average Share Value), in case of payment by Buyer.
(ii) within five business days after the Earnout is computed pursuant
to Section 2.13, Buyer shall deliver the Earnout amount, if any, in Shares of
USF Common Stock equal to the result obtained by dividing the amount owed by
Buyer to Sellers by the USF Average Share Value (using the date of determination
of the Earnout in place of the Closing Date in determining the USF Average Share
Value).
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. If the Total Owner's Equity
at the close of business on the Closing Date is less than the Total Owner's
Equity as of June 30, 1996 as reflected on the 6-30-96 Balance Sheet
($15,086,000) by more than $500,000, then the Purchase Price shall be reduced by
the same percentage as the total percentage decrease in Total Owner's Equity .
If the Total Owner's Equity at the close of business on the Closing Date is
greater than the Total Owner's Equity as of June 30, 1996 as reflected on the
6-30-96 Balance Sheet by more than $500,000, then the Purchase Price shall be
increased by the same percentage as the total percentage increase in Total
Owner's Equity (the "Post Closing Purchase Price Adjustment"). "Total Owner's
Equity" means "Total Equity" as computed and reflected in the column headed
"Proforma Presentation - Assets and Liabilities sold to Buyer" on the December
31, 1996 consolidating balance sheet attached hereto as EXHIBIT C.
2.9 CLOSING STATEMENTS.
(a) CLOSING BALANCE SHEET. As soon as practicable following the
Closing, but in no event later than forty-five days following the Closing, Buyer
(in consultation with, and with such assistance as Buyer shall reasonably
request of Sellers) shall prepare a statement of assets acquired and liabilities
assumed as of the close of business on the Closing Date, reflecting Total
Owner's Equity (the "Closing Balance Sheet"). The Closing Balance Sheet shall
consist solely of the Purchased Assets and Assumed Liabilities and shall be
prepared in accordance with the Accounting Principles. As used herein,
"Accounting Principles" mean GAAP applied on a basis consistent with the 6-30-96
Balance Sheet, except that (i) only the Purchased Assets and the Assumed
Liabilities shall be included therein, (ii) no items shall fail to be included
therein or excluded therefrom on the basis of materiality, individually or
collectively, and (iii) the accounting conventions and assumptions described in
SCHEDULE 2.9 shall apply. Sellers and their representatives shall be provided
complete access to all work papers and other information used by Buyer in
preparing the Closing Balance Sheet. The Closing Balance Sheet, when delivered
by Buyer to
10
Sellers, shall be deemed conclusive and binding on the parties for purposes of
determining the Post-Closing Purchase Price Adjustment, unless Sellers notify
Buyer in writing within 10 business days after receipt of the Closing Balance
Sheet of its disagreement therewith, which notice shall state with reasonable
specificity the reasons for any disagreement and identify the items and amounts
in dispute.
(b) ARBITRATION. If any disagreement concerning the Post-Closing
Purchase Price Adjustment is not resolved by Buyer and Sellers within 30 days
following the receipt by Sellers of the Closing Balance Sheet, the undisputed
amount shall be paid in accordance with SECTION 2.7(b), and Buyer and Sellers
shall promptly engage (on standard terms and conditions for a matter of such
nature) a nationally recognized firm of certified public accountants to resolve
such dispute. The firm of certified public accountants shall be proposed in
writing by Buyer to Sellers. In the absence of prompt agreement on the identity
of the certified public accountants, the Houston office of the accounting firm
of Xxxxxx Xxxxxxxx, LLP shall be engaged by the parties. The engagement
agreement with the certified public accountants shall require the certified
public accountants to make their determination with respect to the items in
dispute within 90 days following the receipt by Sellers of the Closing Balance
Sheet. Buyer and Sellers shall each pay one-half of the cost of the fees and
expenses of such certified public accountants at the time of payment of the
Post-Closing Purchase Price Adjustment. The resolution by the certified public
accountants of any dispute concerning the Post-Closing Purchase Price Adjustment
shall be final, binding and conclusive upon the parties and shall be the
parties' sole and exclusive remedy regarding any dispute concerning the
Post-Closing Purchase Price Adjustment
(c) FINAL CLOSING BALANCE SHEET. The Closing Balance Sheet, as
modified by the parties' agreement and by any determination by the certified
public accountants as described in this SECTION 2.9, shall be the "Final Closing
Balance Sheet."
2.10 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Purchased Assets in accordance with the allocation set forth in
SCHEDULE 2.10. Buyer and Sellers shall report the federal, state and local
income and other tax consequences of the purchase and sale contemplated hereby
in a manner consistent with such allocation and shall not take any position
inconsistent therewith upon examination of any tax return, in any refund claim,
in any litigation, or otherwise. Any Post-Closing Purchase Price Adjustment
shall be allocated among the Purchased Assets in accordance with their
respective values shown on SCHEDULE 2.10.
2.11 TITLE. Title to all Purchased Assets shall pass from Sellers to Buyer
at Closing, subject to the terms and conditions of this Agreement. Buyer assumes
no risk of loss to the Purchased Assets prior to Closing.
2.12 CERTAIN CONSENTS. Nothing in this Agreement shall be construed as an
attempt to assign any contract, agreement, Permit, franchise, or claim included
in the Purchased Assets which is by its terms or in law nonassignable without
the consent of the other party or parties thereto, unless such consent shall
have been given, or as to which all the remedies for the enforcement thereof
enjoyed by Sellers would not, as a matter of law, pass to Buyer as an incident
of the assignments provided for by this Agreement. In order, however, to provide
Buyer with the full realization and value of every contract, agreement, Permit,
franchise and claim of the character
11
described in the immediately preceding sentence, Sellers agree that on and after
the Closing, it will, at the request and under the direction of Buyer, in the
name of Sellers or otherwise as Buyer shall specify take all reasonable action
(including without limitation the appointment of Buyer as attorney-in-fact for
Sellers) and do or cause to be done all such things as shall in the opinion of
Buyer or its counsel be necessary or proper (i) to assure that the rights of
Sellers under such contracts, agreements, Permits, franchises and claims shall
be preserved for the benefit of Buyer and (ii) to facilitate receipt of the
consideration to be received by Sellers in and under every such contract,
agreement, Permit, franchise and claim, which consideration shall be held for
the benefit of, and shall be delivered to, Buyer. Nothing in this Section shall
in any way diminish Sellers' obligations hereunder to obtain all consents and
approvals and to take all such other actions prior to or at Closing as are
necessary to enable Sellers to convey or assign valid title to all the Purchased
Assets to Buyer.
2.13 EARNOUT. In the event that the net operating earnings of the
Business, calculated based upon the accounting principles set forth in
subparagraph (d) below, exceed certain goals in the fiscal year commencing on
the first day of the month following the Closing Date and ending one year
thereafter ("Earnout Year 1998") or the year commencing one year after the first
day of the month following the Closing Date and ending one year thereafter
("Earnout Year 1999"), the Purchase Price will be increased (the "EARNOUT"), and
any amounts owed will be paid by Buyer as provided in SECTION 2.7(b). The
determination of the Earnout will be made following the end of each of Earnout
Year 1998 and Earnout Year 1999. Within forty-five days following the end of
each of Earnout Year 1998 and Earnout Year 1999, Buyer will deliver to Sellers a
Statement of Net Operating Earnings for the Business for the applicable year.
The Statement of Net Operating Earnings, when delivered by Buyer to Sellers,
shall be deemed conclusive and binding on the parties for purposes of computing
the Earnout, unless Sellers notify Buyer in writing within 10 days after receipt
of the Statement of Net Operating Earnings of its disagreement therewith, which
notice shall state with reasonable specificity the reasons for any disagreement
and identify the items and amounts in dispute. The aggregate maximum Earnout
available shall be $4 million as follows:
(a) In the event that the Business has net operating earnings equal
to or less than $500,000 in Earnout Year 1998 or Earnout Year 1999, then no
Earnout shall be paid with respect to such year.
(b) In the event that the Business has net operating earnings greater
than $500,000 but less than $1.6 million for Earnout Year 1998, then Sellers
shall be entitled to receive a percentage of the maximum Earnout of $4 million,
equal to the percentage of the amount in excess of $500,000 but less than $1.6
million earned by the Business. For example, if the Business earns $1,050,000,
it will have earned $550,000 (50%) of the total range of $1.1 million ($1.6
million less $500,000), and thus Sellers will receive 50% of the total $4
million maximum Earnout for Earnout Year 1998. The remaining $2 million will be
available to be earned in Earnout Year 1999 pursuant to subparagraph (c). If
the Business net operating earnings for Earnout Year 1998 are equal to or exceed
$1.6 million, Sellers shall receive the full amount of the total $4 million
maximum Earnout for Earnout Year 1998, and no Earnout will be available for
Earnout Year 1999.
(c) In the event that the Business has net operating earnings during
Earnout Year 1999 higher than the greater of (i) $500,000 or (ii) net operating
earnings for the Business for Earnout Year 1998 (the "1999 Base Amount"), then
Sellers shall be entitled to receive a percentage
12
of the maximum Earnout of $4 million, equal to the percentage of the amount in
excess of the 1999 Base Amount but less than $2 million earned by the Business.
For example, if the Business earns $1,200,000 in Earnout Year 1999 after having
earned $800,000 in Earnout Year 1998, it will have earned $400,000 (33.33%) of
the total range of $1,200,000 ($2,000,000-$800,000) and thus Sellers will
receive 33.33% of the total $4 million maximum Earnout. Notwithstanding the
calculation in this subsection (c), in no case will the aggregate Earnout for
Earnout Year 1998 and Earnout Year 1999 exceed $4,000,000. If th e combined
calculated payments under subparagraphs (b) and (c) exceed $4,000,000, then the
amount payable in Earnout Year 1999 shall be $4,000,000 less the amounts paid
for Earnout Year 1998. If net operating earnings for the Business for Earnout
Year 1999 are equal to or exceed $2 million, and no Earnout was paid for Earnout
Year 1998, Sellers shall be entitled to receive $4 million.
(d) The computations required in this SECTION 2.13 shall be made
utilizing the accounting conventions and assumptions set forth on SCHEDULE 2.13.
(e) If any disagreement concerning the Earnout is not resolved by
Buyer and Sellers within 30 days following the receipt by Sellers of the
applicable Statement of Net Operating Earnings, the undisputed amount shall be
paid in accordance with SECTION 2.7(b), and Buyer and Sellers shall promptly
engage (on standard terms and conditions for a matter of such nature) a
nationally recognized firm of independent accountants to resolve such dispute.
The firm of independent accountants shall be proposed in writing by Buyer to
Sellers. In the absence of prompt agreement on the identity of the independent
accountants, the Houston office of the accounting firm of Xxxxxx Xxxxxxxx, LLP
shall be engaged by the parties. The engagement agreement with the independent
accountants shall require the independent accountants to make their
determination with respect to the items in dispute within 90 days following the
receipt by Sellers of the applicable Statement of Net Operating Earnings. Buyer
and Sellers shall each pay one-half of the cost of the fees and expenses of such
independent accountants at the time of payment of the Earnout. The resolution by
the independent accountants of any dispute concerning the Earnout shall be
final, binding and conclusive upon the parties and shall be the parties' sole
and exclusive remedy regarding any dispute concerning the Earnout.
(f) Buyer shall provide Sellers with a good faith estimate of the
Earnout calculations on a quarterly basis, provided that such estimates shall
not be binding on either Buyer or Sellers and shall not affect the computation
of the Earnout as described in this SECTION 2.13.
2.14 ESCROW; DELIVERY OF SHARES. At Closing, Buyer shall deliver one
certificate for USF Shares equal to ten percent (10%) of the number computed
pursuant to SECTION 2.7(a)(ii) (the "Escrow Shares") to the Escrow Agent for the
Escrow established pursuant to SECTION 7.8. A second certificate for the
remaining USF Shares shall be delivered to Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
As an inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, Sellers, jointly and severally, represent and
warrant to Buyer on the date hereof and on the Closing Date as follows:
13
3.1 ORGANIZATION. Each of Sellers is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, and has the corporate power and authority to own or lease its
properties, carry on the Business as now conducted, enter into this Agreement
and the Other Agreements to which it is or is to become a party and perform its
obligations hereunder and thereunder.
3.2 AUTHORIZATION; ENFORCEABILITY. This Agreement and each Other
Agreement to which Sellers are a party has been duly executed and delivered by
and constitute the legal, valid and binding obligations of Sellers, enforceable
against it in accordance with their respective terms. Each Other Agreement to
which Sellers are to become a party pursuant to the provisions hereof, when
executed and delivered by Sellers, will constitute the legal, valid and binding
obligation of Sellers, enforceable against Sellers in accordance with the terms
of such Other Agreement. All actions contemplated by this Section have been
duly and validly authorized by all necessary proceedings by Sellers.
3.3 NO SUBSIDIARIES. Except as set forth on SCHEDULE 3.3, Sellers do not
have any Subsidiaries and the Purchased Assets do not contain any shares of
capital stock of or other equity interest in any corporation, partnership, joint
venture or other entity.
3.4 NO VIOLATION OF LAWS OR AGREEMENTS; CONSENTS. Neither the execution
and delivery of this Agreement or any Other Agreement to which Sellers are or
are to become parties, the consummation of the transactions contemplated hereby
or thereby nor the compliance with or fulfillment of the terms, conditions or
provisions hereof or thereof by Sellers will: (i) contravene any provision of
any Governing Document of Sellers; (ii) conflict with, result in a breach of,
constitute a default or an event of default (or an event that might, with the
passage of time or the giving of notice or both, constitute a default or event
of default) under any of the terms of, result in the termination of, result in
the loss of any right under, or give to any other Person the right to cause such
a termination of or loss under, any Purchased Asset or any other contract,
agreement or instrument to which Sellers are parties or by which any of their
assets may be bound or affected; (iii) result in the creation, maturation or
acceleration of any Assumed Liability or any other Liability of Sellers (or give
to any other Person the right to cause such a creation, maturation or
acceleration); (iv) violate any Law or violate any judgment or order of any
Governmental Body to which Sellers are subject or by which any of the Purchased
Assets or any of Sellers' other assets may be bound or affected; or (v) result
in the creation or imposition of any Encumbrance upon any of the Purchased
Assets or give to any other Person any interest or right therein. Except as
provided on SCHEDULE 3.4, no consent, approval or authorization of, or
registration or filing with, any Person is required in connection with the
execution and delivery by Sellers of this Agreement or any of the Other
Agreements to which they are or are to become parties pursuant to the provisions
hereof or the consummation by Sellers of the transactions contemplated hereby or
thereby.
3.5 FINANCIAL INFORMATION.
(a) RECORDS. The books of account and related records of Sellers
reflect fairly the Purchased Assets and Assumed Liabilities.
14
(b) FINANCIAL STATEMENTS. Attached as EXHIBIT B are the audited
consolidated balance sheets, income statements and statements of cash flows for
MES at December 31, 1994, December 31, 1995 and December 31, 1996 and for the
years then ended (the "Consolidated Financial Statements'). Also attached
hereto as EXHIBIT A is the unaudited consolidated balance sheet for Sellers at
June 30, 1996, prepared on a pro forma basis, and, as EXHIBIT C, is the
unaudited consolidating balance sheet for Sellers at December 31, 1996, prepared
on a pro forma basis (collectively, the "Pro Forma Financial Statements"). The
Consolidated Financial Statements (i) are accurate, correct and complete in
accordance with the books of account and records of Sellers, (ii) have been
prepared in accordance with GAAP on a consistent basis throughout the indicated
periods, and (iii) fairly present in all material respects the consolidated
financial condition, assets and liabilities and results of operations of Sellers
at the dates and for the relevant periods indicated. The Pro Forma Financial
Statements (i) are accurate, correct and complete in all material respects in
accordance with the books of account and records of Sellers, (ii) have been
prepared in accordance with GAAP on a consistent basis throughout the indicated
periods, subject to the accounting conventions and assumptions described in
SCHEDULE 2.9, except that they contain no footnotes or audit adjustments, and
(iii) fairly present the Purchased Assets and Assumed Liabilities at the dates
indicated. The Final Closing Balance Sheet, when delivered, shall be accurate,
correct and complete in accordance with the books of account and records of
Sellers and shall fairly present the Purchased Assets and Assumed Liabilities as
of the Closing Date in accordance with the Accounting Principles. The Total
Owner's equity at June 30, 1996, as determined by reference to the 6-30-96
Balance Sheet, was $15,086,000.
3.6 UNDISCLOSED LIABILITIES. Sellers have no Liabilities, except: (i)
those reflected or reserved against on the 6-30-96 Balance Sheet in the amounts
shown therein; (ii) those not required under GAAP to be reflected or reserved
against in the 6-30-96 Balance Sheet that are expressly quantified and set forth
in the Contracts (including contractual commitments of Sellers related to the
Business incurred in the ordinary course of business that do not exceed the
threshold limitations set forth in SECTION 3.13); (iii) those disclosed on
SCHEDULE 3.6; (iv) Retained Liabilities; and (v) those of the same nature as
those set forth on the 6-30-96 Balance Sheet that have arisen in the ordinary
course of business of Sellers after the Balance Sheet Date through the date
hereof, all of which have been consistent in amount and character with past
practice and experience, and none of which, individually or in the aggregate,
has had or will have an adverse effect on the Business or the financial
condition or prospects of Sellers and none of which is a Liability for breach of
contract or warranty or has arisen out of tort, infringement of any intellectual
property rights, or violation of Law or is claimed in any pending or threatened
legal proceeding.
3.7 NO CHANGES. Except as disclosed on SCHEDULE 3.7, since December 31,
1996, Sellers have conducted the Business only in the ordinary course. Except
as disclosed on SCHEDULE 3.7, without limiting the generality of the foregoing
sentence, since the December 31, 1996, there has not been any: (i) material
adverse change in the financial condition, assets, Liabilities, net worth,
earning power, Business or prospects of Sellers; (ii) damage or destruction to
any asset of Sellers, whether or not covered by insurance; (iii) strike or other
labor trouble at Sellers; (iv) declaration or payment of any dividend or other
distribution on or with respect to or redemption or purchase by Sellers of any
shares of capital stock of Sellers; (v) increase in the salary, wage or bonus of
any employee of Sellers; (vi) asset acquisition, including capital expenditure,
in excess of $25,000 in the aggregate,
15
other than the purchase of inventory in the ordinary course of business; (vii)
change in any Sellers Plan; (viii) change in any method of accounting; (ix)
payment to or transaction with any Related Party, which payment or transaction
is not specifically disclosed on SCHEDULE 3.16; (x) disposition of any asset
(other than inventory in the ordinary course of business) for more than $25,000
in the aggregate or for less than fair market value; (xi) payment, prepayment or
discharge of any Liability other than in the ordinary course of business or any
failure to pay any Liability when due; (xii) write-offs or write-downs of any
assets of Sellers in excess of $25,000 in the aggregate; (xiii) creation,
termination or amendment of, or waiver of any right under, any material
agreement of Sellers; or (xiv) agreement or commitment to do any of the
foregoing.
3.8 TAXES. Sellers have filed or caused to be filed on a timely basis, or
will file or cause to be filed on a timely basis, all Tax Returns relating to
Sellers that are required to be filed by it prior to or on the Closing Date,
pursuant to the Law of each Governmental Body with taxing power over it. All
such Tax Returns were or will be, as the case may be, correct and complete.
Sellers have paid or will pay all Taxes that have or will become due as shown on
such Tax Returns or pursuant to any assessment received as an adjustment to such
Tax Returns, except (i) such Taxes, if any, as are being contested in good faith
and disclosed on SCHEDULE 3.8, (ii) such Taxes that are fully reserved against
on the 6-30-96 Balance Sheet, and (iii) Taxes accruing after the Balance Sheet
Date that are not yet due. Except as set forth on SCHEDULE 3.8, Sellers are not
currently the beneficiary of any extension of time within which to file any Tax
Return. No claim has been made by a taxing authority of a jurisdiction where
Sellers do not file Tax Returns that they are or may be subject to taxation in
that jurisdiction. Without limiting the foregoing, Sellers have no Liability for
any Tax except (x) Taxes disclosed on SCHEDULE 3.8, (y) Taxes fully reserved
against on the 6-30-96 Balance Sheet and (z) Taxes accrued after the Balance
Sheet Date and fully reserved on the Final Closing Balance Sheet. Sellers have
withheld and, except as to those liabilities assumed pursuant to SECTION 2.3,
paid all Taxes required to have been withheld in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party.
3.9 INVENTORY. All of the inventory included in the Purchased Assets is
valued on the books and records of Sellers and in the Financial Statements at
lower of cost or market, the cost thereof being determined on an average cost
basis in accordance with GAAP. All of the finished goods inventory included in
the Purchased Assets is in good, merchantable and usable condition and, except
as disclosed on SCHEDULE 3.9, is saleable in the ordinary course of the business
within a reasonable time and at normal profit margins for Sellers' industry
taking into account the posted price at the time of sale, and all of the raw
materials and work-in-process inventory of Sellers can reasonably be expected to
be consumed in the ordinary course of business within a reasonable period of
time. None of Sellers' inventory is obsolete, slow-moving, has been consigned to
others or is on consignment from others.
3.10 RECEIVABLES. SCHEDULE 3.10 discloses all trade and other accounts
receivable included in the Purchased Assets ("RECEIVABLES") outstanding as of
December 31, 1996 presented on an aged basis and separately identifies the name
of each account debtor and the total amount of each related Receivable. All
Receivables, whether reflected on the 6-30-96 Balance Sheet, disclosed on
SCHEDULE 3.10 or created after the Balance Sheet Date, arose from bona fide sale
transactions of Sellers, and no portion of any Receivable is subject to
counterclaim, defense or set-off or is otherwise in dispute.
16
Except to the extent of the recorded reserve for doubtful accounts specified on
the 12-31-96 Pro Forma Financial Statements, all of the Receivables are
collectible in the ordinary course of business and will be fully collected
within 90 days after having been created using commercially reasonable efforts.
In the event that any of the Receivables shall not have been collected by Buyer
in the ordinary course of business within 90 days of Closing, Buyer shall have
the option of either: (a) retaining the uncollected receivables and foregoing
any claim against Sellers for indemnification under this Section, or (b)
delivering to Sellers a list of such uncollected receivables, transferring title
to such receivables to Sellers and obtaining from Sellers a refund of the
Purchase Price in the amount of such uncollected receivables after deducting the
recorded reserve for bad debt.
3.11 CONDITION OF ASSETS; TITLE; BUSINESS. SCHEDULES 2.1(ii), 2.1(iii),
2.1(xi) AND 3.10 correctly describe all personal property with book value in
excess of $5,000 used in the Business included in the Purchased Assets. The
Purchased Assets are in good operating condition and repair and are suitable for
the purposes for which they are used in the Business. Sellers have good,
indefeasible and exclusive title to all of the Purchased Assets (which for
purposes of Real Property leased to Sellers shall mean a valid leasehold
interest in such assets); all of the Purchased Assets are reflected on the
6-30-96 Balance Sheet or, under GAAP, are not required to be reflected thereon;
the Purchased Assets include all assets that are necessary for use in and
operation of the Business; and except as disclosed on SCHEDULE 3.11, none of the
Purchased Assets is subject to any Encumbrance or impairment, whether due to its
condition, utility, collectability or otherwise, other than Permitted
Encumbrances, and all Encumbrances reflected on SCHEDULE 3.11 shall be removed
prior to Closing. Sellers are engaged in the Business and no other business.
3.12 NO PENDING LITIGATION OR PROCEEDINGS. Except as disclosed on SCHEDULE
3.12, no action, suit, investigation, claim or proceeding of any nature or kind
whatsoever, whether civil, criminal or administrative, by or before any
Governmental Body or arbitrator ("LITIGATION") is pending or, to the knowledge
of Sellers, threatened against or affecting Sellers, the Business, any of the
Purchased Assets, the Assumed Liabilities, the ability of Sellers to perform its
obligations under this Agreement or any of the transactions contemplated by this
Agreement or any Other Agreement, and, to Sellers' knowledge, there is no basis
for any such Litigation. Except as disclosed on SCHEDULE 3.12, Sellers have not
been a party to any other Litigation since December 31, 1993. Except as
disclosed on SCHEDULE 3.12, there is presently no outstanding judgment, decree
or order of any Governmental Body against or affecting Sellers, the Business,
any of the Purchased Assets, the Assumed Liabilities, or any of the transactions
contemplated by this Agreement or any Other Agreement. Except as disclosed on
SCHEDULE 3.12, Sellers have no pending Litigation in which Sellers' are the
plaintiffs against any third party.
3.13 CONTRACTS; COMPLIANCE. Disclosed on SCHEDULES 2.1(vii), 3.13, 3.15,
3.16 OR 3.21 is a brief description of each contract, lease, indenture,
mortgage, instrument, commitment or other agreement, arrangement or
understanding, oral or written, formal or informal, included in the Purchased
Assets (except for agreements specifically made herein) and that (i) is material
to the Business, individually or in the aggregate; (ii) involves the purchase,
sale or lease of any asset, materials, supplies, inventory or services in excess
of $25,000 per year; (iii) has an unexpired term of more than six months from
the date hereof, taking into account the effect of any renewal options; (iv)
relates to the borrowing or lending of any money or guarantee of any obligation
in excess of
17
$25,000; (v) limits the right of Sellers (or, after Closing, Buyer) to compete
in any line of business or otherwise restricts any right Sellers (or, after
Closing, Buyer) may have; (vi) is an employment or consulting contract involving
payment of compensation and benefits in excess of $25,000 per year; (vii)
involves sales, distribution or other similar issues and provides for payments
in excess of $10,000 per year; (viii) forms any partnership, joint venture or
other similar agreement; (ix) grants any option, license, franchise or similar
agreement; (x) is for the lease of any real property; or (xi) was not entered
into in the ordinary course (each, a "CONTRACT" and collectively, the
"CONTRACTS"). Each Contract is a legal, valid and binding obligation of Sellers
and is in full force and effect. Sellers and each other party to each Contract
has performed all obligations required to be performed by it thereunder and is
not in breach or default, and is not alleged to be in breach or default, in any
respect thereunder, and no event has occurred and no condition or state of facts
exists (or would exist upon the giving of notice or the lapse of time or both)
that would become or cause a breach, default or event of default thereunder,
would give to any Person the right to cause such a termination or would cause an
acceleration of any obligation thereunder. Sellers are not currently
renegotiating any Contract nor have Sellers received any notice of non-renewal
or price increase or sales or production allocation with respect to any
Contract.
3.14 PERMITS; COMPLIANCE WITH LAW. Except as reflected on SCHEDULE 3.14,
Sellers hold, and the Purchased Assets include, all permits, certificates,
licenses, franchises, privileges, approvals, registrations and authorizations
required under any applicable Law or otherwise advisable in connection with the
operation of the Purchased Assets and Business (each, a "PERMIT" and
collectively, "PERMITS"). Each Permit is valid, subsisting and in full force and
effect. Sellers are in material compliance with and have fulfilled and performed
its obligations under each Permit, and no event or condition or state of facts
exists (or would exist upon the giving of notice or lapse of time or both) that
could constitute a breach or default under any Permit. Except as set forth on
SCHEDULE 3.22, Sellers (relating to the Business) have not been since December
31, 1993 nor are they currently in violation of any Law and has received no
notice of any violation of Law, and to Seller's knowledge no event has occurred
or condition or state of facts exists that could give rise to any such
violation. Sellers have not received any notice of non-renewal of any Permit.
3.15 REAL PROPERTY. SCHEDULE 3.15 discloses and summarizes all real
properties currently owned, used or leased by Sellers or in which Sellers have
an interest that are included in the Purchased Assets (collectively, the "REAL
PROPERTY") and identifies the record title holder or tenant of all of the Real
Property. Except as disclosed on SCHEDULE 3.15, Sellers have good and
indefeasible fee simple title to all Real Property shown as owned by it on
SCHEDULE 3.15, free and clear of all Encumbrances other than Permitted
Encumbrances, and all Encumbrances reflected on SCHEDULE 3.15 shall be removed
prior to Closing. Sellers have the right to quiet enjoyment of all Real
Property in which it holds a leasehold interest for the full term, including all
renewal rights, of the lease or similar agreement relating thereto. Copies of
all title insurance policies written in favor of Sellers and all surveys
relating to the Real Property owned by Sellers have been delivered to Buyer. All
structures and other improvements on all Real Property owned by Sellers are
within the lot lines and do not encroach on the properties of any other Person,
and the use and operation of all Real Property conform to all applicable
building, zoning, safety and subdivision Laws, Environmental Laws and other
Laws, and all restrictive covenants and restrictions and conditions affecting
title. No portion of any Real Property is located in a flood plain, flood hazard
area or
18
designated wetlands area. Sellers have not received any written or oral notice
of assessments for public improvements against any Real Property or any written
or oral notice or order by any Governmental Body, any insurance company that has
issued a policy with respect to any of such properties or any board of fire
underwriters or other body exercising similar functions that relates to
violations of building, safety or fire ordinances or regulations, claims any
defect or deficiency with respect to any of such properties or requests the
performance of any repairs, alterations or other work to or in any of such
properties or in the streets bounding the same. Each parcel of Real Property
owned by Sellers is considered a separate parcel of land for taxing and
conveyancing purposes. There is no pending condemnation, expropriation, eminent
domain or similar proceeding affecting all or any portion of the Real Property
owned by Sellers. All public utilities (including water, gas, electric, storm
and sanitary sewage, and telephone utilities) required to operate the facilities
of Sellers are available to such facilities, and such utilities enter the
boundaries of such facilities through adjoining public streets, easements or
rights-of-way of record in favor of Sellers. Such public utilities are all
connected pursuant to valid permits, are all in good working order and are
adequate to service the operations of such facilities as currently conducted and
permit full compliance with all requirements of Law. Sellers have not received
any written notice of any proposed, planned or actual curtailment of service of
any utility supplied to any facility of Sellers. All Real Property used by
Sellers has access to a publicly open street.
3.16 TRANSACTIONS WITH RELATED PARTIES. No Related Party is or has been
since December 31, 1996 a party to any transaction, agreement or understanding
with Sellers except pursuant to arrangements disclosed on SCHEDULE 3.16 and
except for dividends properly reflected as such in the Financial Statements. No
Related Party uses any of the Purchased Assets except directly in connection
with the Business, and no Related Party owns or has any interest in any
Purchased Asset or other asset used in the Business. No Related Party has any
claim of any nature, including any inchoate claim, against any of the Purchased
Assets or the Business. Except as expressly provided herein or in any Other
Agreement or as otherwise may be mutually agreed after Closing, (i) no Related
Party will at any time after Closing for any reason, directly or indirectly, be
or become entitled to receive any payment or transfer of money or other property
of any kind from Buyer, and (ii) Buyer will not at any time after Closing for
any reason, directly or indirectly, be or become subject to any obligation to
any Related Party.
3.17 LABOR RELATIONS. SCHEDULE 3.17 sets forth a true and complete list of
the names, titles, annual salaries and other compensation of all employees of
the Business. The relations of Sellers with their employees are good. No
employee of Sellers is represented by any union or other labor organization. No
representation election, arbitration proceeding, grievance, labor strike,
dispute, slowdown, stoppage or other labor trouble is pending or, to the
knowledge of Sellers, threatened against, involving, affecting or potentially
affecting Sellers. No complaint against Sellers is pending or, to the knowledge
of Sellers, threatened before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any similar state or local agency, by or on
behalf of any employee of Sellers. Sellers have no Liability for sick leave,
vacation time, severance pay or any similar item not fully reserved on the
6-30-96 Balance Sheet, except as set forth on SCHEDULE 3.17. Sellers have no
Liability for any occupational disease of any of its employees, former employees
or others. Neither the execution and delivery of this Agreement, the performance
of the
19
provisions hereof nor the consummation of the transactions contemplated hereby
will trigger any severance pay obligation under any contract or under any Law.
3.18 PRODUCT LIABILITIES; WARRANTIES. Each of the products produced or
sold in connection with the Business is, and at all times up to and including
the Closing has been, (a) in compliance in all material respects with all
applicable federal, state, local and foreign laws and regulations and (b) fit
for the ordinary purposes for which it is intended to be used and conforms in
all material respects to any promises or affirmations of fact made on the
container or label for such product or in connection with its sale. There is no
design defect with respect to any of such products, and each of such products
contains adequate warnings, presented in a reasonably prominent manner, in
accordance with applicable laws, rules and regulations and current industry
practice with respect to its contents and use. SCHEDULE 3.18 discloses and
describes the terms of all express product warranties under which Buyer may have
Liability after the Closing Date.
3.19 INSURANCE. SCHEDULE 3.19 discloses all insurance policies on an
"occurrence" basis with respect to which Sellers is the owner, insured or
beneficiary. Such policies are commercially reasonable, in both scope and
amount, in light of the risks attendant to the Business and are comparable in
coverage to policies customarily maintained by others engaged in similar lines
of business. There is no claim pending under any of such policies as to which
coverage has been questioned, denied or disputed which relates to the Business.
3.20 INTELLECTUAL PROPERTY RIGHTS. SCHEDULE 3.20 discloses all of the
trademark and service xxxx rights, applications and registrations, trade names,
fictitious names, service marks, logos and brand names, copyrights, copyright
applications, letters patent, patent applications and licenses of any of the
foregoing owned or used by Sellers in or applicable to the Business. Sellers
have the entire right, title and interest in and to, or has the exclusive
perpetual royalty-free right to use, the intellectual property rights disclosed
on SCHEDULE 3.20 and all other processes, know-how, show-how, formulae, trade
secrets, inventions, discoveries, improvements, blueprints, specifications,
drawings, designs, and other proprietary rights necessary or applicable to or
advisable for use in the Business ("INTELLECTUAL PROPERTY"), free and clear of
all Encumbrances. SCHEDULE 3.20 separately discloses all Intellectual Property
under license. The Intellectual Property is valid and not the subject of any
interference, opposition, reexamination or cancellation. To the knowledge of
Sellers, no Person is infringing upon nor has any Person misappropriated any
Intellectual Property. Sellers are not infringing upon the intellectual
property rights of any other Person.
3.21 EMPLOYEE BENEFITS.
(a) BENEFIT PLANS; SELLERS PLANS. SCHEDULE 3.21 discloses all
written and unwritten "employee benefit plans" within the meaning of Section
3(3) of ERISA, and any other written and unwritten profit sharing, pension,
savings, deferred compensation, fringe benefit, insurance, medical, medical
reimbursement, life, disability, accident, post-retirement health or welfare
benefit, stock option, stock purchase, sick pay, vacation, employment,
severance, termination or other plan, agreement, contract, policy, trust fund or
arrangement for employees of the Business (each, a "BENEFIT PLAN"), whether or
not funded and whether or not terminated, (i) maintained or sponsored by Sellers
in which Sellers participate; (ii) with respect to which Sellers have or may
have Liability or is obligated to contribute; (iii) that otherwise covers any
of the current
20
or former employees of Sellers or their beneficiaries; or (iv) as to which any
such current or former employees of Sellers or their beneficiaries participated
or were entitled to participate or accrue or have accrued any rights thereunder
(each, a "SELLERS PLAN"). No Sellers Plan covers any employees of any member of
the Sellers Group in any foreign country or territory. With the exception of the
requirements of Section 4980B of the Code, no post-retirement benefits are
provided under any Sellers Plan that is a welfare benefit plan as described in
ERISA Section 3(1).
(b) SELLERS GROUP MATTERS; FUNDING. Neither Sellers nor any
corporation that may be aggregated with Sellers under Sections 414(b),(c), (m)
or (o) of the Code (the "SELLERS GROUP") has any obligation to contribute to or
any Liability under or with respect to any Benefit Plan of the type described in
Sections 4063 and 4064 of ERISA or Section 413(c) of the Code. Sellers do not
have any Liability, and after the Closing Buyer will not have any Liability,
with respect to any Benefit Plan of any other member of the Sellers Group,
whether as a result of delinquent contributions, distress terminations,
fraudulent transfers, failure to pay premiums to the PBGC, withdrawal Liability
or otherwise. No accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Code) exists nor has any funding waiver from the
IRS been received or requested with respect to any Sellers Plan or any Benefit
Plan of any member of the Sellers Group and no excise or other Tax is due or
owing because of any failure to comply with the minimum funding standards of the
Code or ERISA with respect to any of such plans.
(c) COMPLIANCE. Each Sellers Plan and all related trusts, insurance
contracts and funds have been created, maintained, funded and administered in
all respects in compliance with all applicable Laws and in compliance with the
plan document, trust agreement, insurance policy or other writing creating the
same or applicable thereto. No Sellers Plan is or is proposed to be under audit
or investigation, and no completed audit of any Sellers Plan has resulted in the
imposition of any Tax, fine or penalty.
(d) QUALIFIED PLANS. SCHEDULE 3.21 discloses each Sellers Plan that
purports to be a qualified plan under Section 401(a) of the Code and exempt from
United States federal income tax under Section 501(a) of the Code (a "QUALIFIED
PLAN"). With respect to each Qualified Plan, a current determination letter (or
opinion or notification letter, if applicable) has been received from the IRS
that such plan is qualified under Section 401(a) of the Code and exempt from
federal income tax under Section 501(a) of the Code. No Qualified Plan has been
amended since the date of the most recent such letter. No member of the Sellers
Group, nor any fiduciary of any Qualified Plan, nor any agent of any of the
foregoing, has done or failed to do anything that would adversely affect the
qualified status of a Qualified Plan or the qualified status of any related
trust.
(e) DEFINED BENEFIT PLANS. SCHEDULE 3.21 also discloses each Sellers
Plan that is a defined benefit plan as defined in Section 3(35) of ERISA (a
"DEFINED BENEFIT PLAN"). The present value of vested and nonvested accrued
benefits under each Defined Benefit Plan does not exceed the present fair market
value of the assets of such plan, based on the actuarial assumptions and
methodology used for funding purposes (i) as set forth in such plan's most
recent actuarial report; (ii) as required by the PBGC on a termination basis;
and (iii) as set forth in FASB 87. No Defined Benefit Plan sponsored by any
member of or covering any employee of the Sellers Group has been terminated or
partially terminated since September 1, 1974. No event has occurred and no
condition has existed that could constitute grounds under Section 4042 of ERISA
for termination
21
of or appointment of a trustee to administer any Defined Benefit Plan. No member
of the Sellers Group has transferred, in whole or in part, a Defined Benefit
Plan to a corporation that was at the time of transfer a member of a different
controlled group of corporations (within the meaning of Section 4001(a)(14) of
ERISA) than the transferor. Sellers have no Liability for any Sellers Plan that
is not accrued on the 6-30-96 Balance Sheet or, if arising after the Balance
Sheet Date and on and before the Closing, will not be accrued on the Final
Closing Balance Sheet.
(f) MULTIEMPLOYER PLANS. No Sellers Plan is a multiemployer plan
within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA (a
"MULTIEMPLOYER PLAN"). No member of the Sellers Group has withdrawn from any
Multiemployer Plan or incurred any withdrawal Liability to or under any
Multiemployer Plan.
(g) PROHIBITED TRANSACTIONS; FIDUCIARY DUTIES. No prohibited
transaction (within the meaning of Section 406 of ERISA and Section 4975 of the
Code) with respect to any Sellers Plan exists or has occurred that could subject
Sellers to any Liability or Tax under Part 5 of Title I of ERISA or Section 4975
of the Code. No member of the Sellers Group, nor any administrator or fiduciary
of any Sellers Plan, nor any agent of any of the foregoing, has engaged in any
transaction or acted or failed to act in a manner that will subject Sellers to
any Liability for a breach of fiduciary or other duty under ERISA or any other
applicable Law.
3.22 ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE 3.22:
(a) COMPLIANCE; NO LIABILITY. Sellers have operated the Business and
each parcel of Real Property in compliance with all applicable Environmental
Laws. Neither Sellers is subject to any Liability, penalty or expense
(including legal fees), and Buyer will not suffer or incur any loss, Liability,
penalty or expense (including legal fees) by virtue of any violation of any
Environmental Law with respect to the Business occurring prior to the Closing,
any environmental activity conducted on or with respect to any property at or
prior to the Closing or any environmental condition existing on or with respect
to any property at or prior to the Closing, in each case whether or not Sellers
permitted or participated in such act or omission.
(b) TREATMENT; CERCLIS. Except as part of Sellers' Business operated
in the ordinary course and not in violation of any Environmental Law, (i)
Sellers have not treated, stored, recycled or disposed of any Regulated Material
on any real property, and no other Person has treated, stored, recycled or
disposed of any Regulated Material on any part of the Real Property; (ii) there
has been no release of any Regulated Material at, on or under any Real Property;
and (iii) Sellers have not transported any Regulated Material or arranged for
the transportation of any Regulated Material to any location that is listed or
proposed for listing on the National Priorities List pursuant to Superfund, on
CERCLIS or any other location that is the subject of a federal, state or local
enforcement action or other investigation that may lead to claims against
Sellers for cleanup costs, remedial action, damages to natural resources, to
other property or for personal injury including claims under Superfund. None of
the Real Property is listed or, to the knowledge of Sellers, proposed for
listing on the National Priorities List pursuant to Superfund, CERCLIS or any
state or local list of sites requiring investigation or cleanup.
22
(c) NOTICES; EXISTING CLAIMS; CERTAIN REGULATED MATERIALS; STORAGE
TANKS. Sellers, with respect to the Business, have not received any request for
information, notice of claim, demand or other notification that they are or may
be potentially responsible with respect to any investigation, abatement or
cleanup of any threatened or actual release of any Regulated Material.
Sellers, with respect to the Business, are not required to place any notice or
restriction relating to the presence of any Regulated Material at any Real
Property or in any deed to any Real Property. Sellers have provided to Buyer a
list of all sites to which Sellers have transported any Regulated Material for
recycling, treatment, disposal, other handling or otherwise (as a part of
SCHEDULE 3.22). There has been no past, and there is no pending or contemplated,
claim by Sellers, with respect to the Business, under any Environmental Law or
Laws based on actions of others that may have impacted the Real Property, and
Sellers, with respect to the Business, have not entered into any agreement with
any Person regarding any Environmental Law, remedial action or other
environmental Liability or expense. Except as disclosed on SCHEDULE 3.22, there
are no underground storage tanks on the Real Property. All aboveground storage
tanks located on the Real Property are disclosed on SCHEDULE 3.22, and all such
tanks and associated piping are in sound condition and are not leaking and have
not leaked, except for leaks which would not cause a violation of any
Environmental Law.
3.23 CUSTOMER RELATIONS. SCHEDULES 3.23(a) AND 3.23(b) respectively, set
forth (a) the name of, and a brief description of the goods supplied to, each
customer of the Business whose purchases from Sellers during the twelve-month
period ending December 31, 1996 equaled or exceeded two percent of the net sales
of the Business during such period, and (b) the name of, and a brief description
of the goods or services supplied by, each supplier of goods or services to the
Business to whom Sellers paid $75,000 or more during the same period. There
exists no condition or state of facts or circumstances involving Sellers'
customers, suppliers, distributors or sales representatives that Sellers can
reasonably foresee could adversely affect the Business or the Purchased Assets
after the Closing Date.
3.24 FINDERS' FEES. Other than as set forth in SCHEDULE 3.24, neither
Sellers nor any of their officers, directors or employees has employed any
broker or finder or incurred any Liability for any brokerage fee, commission or
finders' fee in connection with any of the transactions contemplated hereby or
by any Other Agreement.
3.25 INVESTMENT. The Sellers have no intention of selling the USF Shares
or any interest therein in violation of the federal securities Laws or any
applicable state securities Laws. Prior to the date of this Agreement, each
Seller has received all information provided to it by Buyer and has had the
opportunity to ask questions of and receive answers from representatives of
Buyer concerning Buyer, USF and the USF Shares and to obtain certain additional
information requested of Buyer.
3.26 DISCLOSURE. None of the representations or warranties of Sellers
contained herein and none of the information contained in the Schedules referred
to in ARTICLE III is false or misleading in any material respect or omits to
state a fact herein or therein necessary to make the statements herein or
therein not misleading in any material respect, and all of such representations
and warranties of Sellers, disregarding all qualifications and exceptions
contained therein relating to
23
materiality, are true and correct with only such exceptions as would not in the
aggregate reasonably be expected to have a material adverse effect on the
Business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Sellers to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer and USF represent and warrant to Sellers
on the date hereof and on the Closing Date as follows:
4.1 ORGANIZATION. Each of USF and Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has the corporate power and authority to own or lease its properties, carry
on its business, enter into this Agreement and the Other Agreements to which it
is or is to become a party and perform its obligations hereunder and thereunder.
4.2 AUTHORIZATION AND ENFORCEABILITY. This Agreement and each Other
Agreement to which either Buyer or USF are a party have been duly executed and
delivered by and constitute the legal, valid and binding obligations of Buyer
and USF, enforceable against them in accordance with their respective terms.
Each Other Agreement to which Buyer or USF is to become a party pursuant to the
provisions hereof, when executed and delivered by Buyer or USF, will constitute
the legal, valid and binding obligation of Buyer or USF, enforceable against
Buyer or USF in accordance with the terms of such Other Agreement. All actions
contemplated by this Section have been duly and validly authorized by all
necessary proceedings by Buyer and USF.
4.3 NO VIOLATION OF LAWS; CONSENTS. Neither the execution and delivery of
this Agreement or any Other Agreement to which Buyer or USF is or is to become a
party, the consummation of the transactions contemplated hereby or thereby nor
the compliance with or fulfillment of the terms, conditions or provisions hereof
or thereof by Buyer or USF will: (i) contravene any provision of the Governing
Documents of Buyer or USF, or (ii) violate any Law or any judgment or order of
any Governmental Body to which Buyer or USF is subject or by which any of its
assets may be bound or affected. Except for listing of the USF Shares on the
NYSE, no consent, approval or authorization of, or registration or filing with,
any Person is required in connection with the execution or delivery by Buyer or
USF of this Agreement or any of the Other Agreements to which Buyer or USF is or
is to become a party pursuant to the provisions hereof or the consummation by
Buyer or USF of the transactions contemplated hereby or thereby.
4.4 NO PENDING LITIGATION OR PROCEEDINGS. No Litigation is pending or, to
the knowledge of Buyer or USF, threatened against or affecting Buyer or USF in
connection with any of the transactions contemplated by this Agreement or any
Other Agreement to which Buyer or USF is or is to become a party. There is
presently no outstanding judgment, decree or order of any Governmental Body
against or affecting Buyer or USF in connection with the transactions
contemplated by this Agreement or any Other Agreement to which Buyer or USF is
or is to become a party.
24
4.5 CAPITALIZATION. The authorized capital stock of USF consists of (i)
150,000,000 shares of USF Common Stock, $.01 par value, of which 69,986,221 were
issued and outstanding as of December 31, 1996, and (ii) 3,000,000 shares of
Preferred Stock, $0.10 par value, none of which are issued and outstanding. On
the Closing Date, all issued and outstanding shares of the USF Common Stock will
be, duly authorized, validly issued, fully paid and nonassessable. The USF
Shares to be issued to the Sellers pursuant to this Agreement will be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, USF's Certificate of Incorporation or
By-Laws or any agreement to which USF is a party or is bound.
4.6 FINDERS' FEES. Neither Buyer nor USF nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fee, commission or finder's fee in connection with
any of the transactions contemplated hereby.
4.7 REGISTRATION STATEMENT AND INFORMATION. The Registration Statement on
Form S-4 covering the USF Shares has been declared effective by the Commission.
All information provided by Buyer or USF to Sellers for use in Sellers
Information Statement was, when delivered, true and correct in all material
respects. USF meets the requirements for the use of Form S-3.
ARTICLE V
CERTAIN COVENANTS
5.1 CONDUCT OF BUSINESS PENDING CLOSING. From and after the date hereof
and until the Closing Date, unless Buyer shall otherwise consent in writing,
Sellers shall, and Sellers shall cause Sellers to conduct, its affairs as
follows:
(a) ORDINARY COURSE; COMPLIANCE. The Business shall be conducted
only in the ordinary course and consistent with past practice. Sellers shall
maintain the Purchased Assets and Assumed Liabilities consistent with past
practice and shall comply in a timely fashion with the provisions of all
Contracts and Permits and its other agreements and commitments. Sellers shall
use their best efforts to keep the Business organization intact, keep available
the services of their present employees and preserve the goodwill of its
suppliers, customers and others having business relations with it. Sellers shall
maintain in full force and effect their policies of insurance, subject only to
variations required by the ordinary operations of the Business, or else shall
obtain, prior to the lapse of any such policy, substantially similar coverage
with insurers of recognized standing.
(b) PROHIBITED TRANSACTIONS. Except as set forth on SCHEDULE 5.1,
Sellers shall not: (i) make any distribution with respect to its capital stock;
(ii) organize any subsidiary, acquire any capital stock or other equity
securities of any other corporation, or acquire any equity or ownership interest
in any business; (iii) cancel or waive any claim or right to sell, transfer,
distribute or otherwise dispose of any assets or properties, except in the
ordinary course of business; (iv) make any capital expenditures in excess of
$100,000 in the aggregate or make any new commitment for additions to property,
plant or equipment; (v) enter into any contract or commitment the performance of
which may extend beyond the Closing, except those made in the ordinary course of
business, the terms of which are consistent with past practice; (vi) enter into
any employment or consulting
25
contract or arrangement that is not terminable at will and without penalty or
continuing obligation; (vii) fail to pay any Liability or charge when due, other
than Liabilities contested in good faith by appropriate proceedings; (viii) take
any action that is reasonably likely to result in the occurrence of any event
described in SECTION 3.7; or (ix) take any action or omit to take any action
that will cause a breach or termination of any Permit or Contract, other than
termination by fulfillment of the terms thereunder.
(c) ACCESS, INFORMATION AND DOCUMENTS. Sellers shall give to Buyer
and to Buyer's employees and representatives (including accountants, actuaries,
attorneys, environmental consultants and engineers) access during normal
business hours to all of the properties, books, Tax returns, contracts,
commitments, records, officers, personnel and accountants (including independent
public accountants and their workpapers concerning Sellers) of Sellers and shall
furnish to Buyer all such documents and copies of documents and all information
with respect to the properties, Liabilities and affairs of Sellers as Buyer may
reasonably request, except to the extent providing any such materials would
violate an attorney/client privilege.
5.2 PUBLICITY. Sellers and Buyer shall not issue any press release or
otherwise make any announcements to the public or the employees of Sellers with
respect to this Agreement without the prior written consent of the other, except
as required by Law and the implementation of this Agreement and the Other
Agreements. This Section shall expire on the 10th day after the Closing Date.
5.3 FULFILLMENT OF AGREEMENTS. Each party hereto shall use its best
efforts to cause all of those conditions to the obligations of the other parties
under ARTICLE VI that are not beyond its reasonable control to be satisfied on
or prior to the Closing and shall use its best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement. Without limiting the foregoing, Sellers shall, prior to
Closing, obtain the consents identified in SCHEDULE 3.4
5.4 CERTAIN TRANSITIONAL MATTERS.
(a) COLLECTION OF ACCOUNTS RECEIVABLES. Sellers agree that Buyer,
from and after the Closing, shall have the right and authority to collect for
Buyer's own account all accounts receivable and other items which shall be
transferred to Buyer as provided herein.
(b) ENDORSEMENT OF CHECKS. From and after the Closing, Buyer shall
have the right and authority to retain and endorse without recourse the name of
Sellers on any check or any other evidences of indebtedness received by Buyer on
account of any of the Business and Purchased Assets transferred to Buyer
hereunder.
(c) REMIT FUNDS. After the Closing, Sellers shall promptly (but no
less frequently than weekly) transfer and deliver to Buyer any cash or other
property, if any, that Sellers may receive related to the Business or the
Purchased Assets.
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(d) ASSUMED LIABILITIES CONTROLLED BY BUYER. From and after the
Closing, Buyer shall have complete control over the payment, settlement or other
disposition of, or any dispute involving, any Assumed Liability, and Buyer shall
have the right to conduct and control all negotiations and proceedings with
respect thereto. Sellers shall notify Buyer immediately of any claim made with
respect to any Assumed Liability and shall not, except with the prior written
consent of Buyer, voluntarily make any payment of, or settle or offer to settle,
or consent to any compromise with respect to, any such Assumed Liability.
Sellers shall cooperate with Buyer in connection with any negotiations or
proceedings involving any Assumed Liability.
(e) USE OF NAMES. Promptly after the date hereof, Sellers shall no
longer use any name bearing a resemblance to Hydrocarbon Technologies, Inc.
Buyer shall be permitted to use the names Xxxxxx Environmental Services, Inc.
and Xxxxxx Company for a period ending 90 days after the Closing, after which
all rights to such names shall revert to Sellers.
5.5 INSURANCE. Following the Closing, Sellers shall, to the extent that
coverage under its insurance policies extends to include the Business in respect
of claims or occurrences concerning Sellers prior to the Closing, (i) take no
action to eliminate or reduce such coverage, other than normal elimination or
reduction of coverage as they occur by virtue of the filing of claims in the
ordinary course under such insurance policies, (ii) pay when due any premiums
under such policies for periods, including retrospective or retroactive premium
adjustments and (iii) use its best efforts to assist in filing and processing
claims under, and otherwise cooperate with Buyer (and their successors) to allow
them, in their own names, or on behalf of Sellers, to obtain all coverage
benefits applicable to the Business under such insurance policies, including the
execution of assignments or powers of attorney for the benefit of Buyer. Any
proceeds of insurance paid by an insurer to Sellers for claims of Buyer made in
accordance with this Section shall be promptly paid to Buyer. Nothing herein
shall require Sellers to extend any existing policy of insurance to provide
coverage for occurrences after the Closing Date.
5.6 ASSISTANCE. Sellers shall cooperate with and assist Buyer and its
authorized representatives in order to provide, to the extent reasonably
requested by Buyer, an efficient transfer of control of the Purchased Assets and
to avoid any undue interruption in the activities and operations of the Business
following the Closing Date.
5.7 NO SOLICITATION OF THE EMPLOYEES OF THE BUSINESS. For a period of
three years from and after the Closing Date, none of Sellers shall, directly or
indirectly through another person or entity, induce or seek to induce to leave
the employ of Buyer or any of its Affiliates, or, without the prior written
consent of Buyer, employ or otherwise use the services of, any employee employed
in the Business, other than any such employee whose employment is terminated by
Buyer or any of its Affiliates prior to such time.
5.8 SEVERANCE AND TERMINATION PAYMENTS. Sellers agree to pay, perform and
discharge any and all severance payments and other Liabilities with respect to
employees of Sellers which result from the transfer of the Purchased Assets
hereunder and the employment by Buyer of those employees and indemnify and hold
harmless Buyer and its directors, officers and Affiliates from and against any
and all losses, Liabilities, damages, costs and expenses, including reasonable
legal
27
fees and disbursements, that any of the aforesaid may suffer or incur by reason
of or relating to any Liabilities referred to in this SECTION 5.8. Buyer shall
be responsible for severance payments for all employees terminated by Buyer
following the Closing pursuant to USF's severance policies.
5.9 SELLERS' EMPLOYEES. Buyer shall have the right, but not the
obligation, to employ any or all of the employees of Sellers; provided,
however, that certain key employees of Sellers shall enter into employment or
consulting agreements with Buyer, on terms mutually acceptable to Buyer and such
individual managers. Such agreements shall provide for employment of such
Sellers' managers for a mutually acceptable period of time. Buyer shall give to
all employees of Sellers who are hired by Buyer credit for years of service with
Sellers in all Benefit Plans of Buyer as if such years of service had been in
the employ of Buyer, but only for purposes of eligibility and vesting and not
for benefit accrual.
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5.10 WORKERS' COMPENSATION AND DISABILITY CLAIMS.
(a) SELLERS' LIABILITY. Sellers shall remain liable for all
Liability for all workers' compensation, disability and occupational diseases of
or with respect to all of Sellers' employees to the extent attributable to
injuries, claims, conditions, events and occurrences occurring on or before the
Closing Date.
(b) BUYER'S LIABILITY. Buyer shall be liable for all Liability for
all workers' compensation, disability and occupational diseases of or with
respect to all employees of Sellers hired by Buyer to the extent attributable to
injuries, claims, conditions, events and occurrences occurring after the Closing
Date.
5.11 COVENANT NOT TO COMPETE.
(a) RESTRICTION. From and after the Closing Date, Sellers shall not,
directly or indirectly, own, manage, operate, join, control or participate in
the ownership, management, operation or control of, or be connected as an
officer, employee, stockholder, partner or otherwise with, any business
conducting business under any name similar to the name of Hydrocarbon
Technologies, Inc., United States Filter Corporation or United States Filter
Recovery Services (Southwest), Inc. For a period of five years from and after
the Closing Date, Sellers shall not, directly or indirectly, own, manage,
operate, join, control or participate in the ownership, management, operation or
control of, or be employed or otherwise connected as an officer, employer,
stockholder, partner or otherwise with, any business that at any relevant time
during such period directly or indirectly competes with the Business in
Arkansas, Louisiana, Mississippi, Oklahoma and Texas. Ownership of not more
than 2% of the outstanding stock of any publicly traded company shall not be a
violation of this Section.
(b) ENFORCEMENT. The restrictive covenant contained in this Section
is a covenant independent of any other provision of this Agreement and the
existence of any claim that Sellers may allege against any other party to this
Agreement, whether based on this Agreement or otherwise, shall not prevent the
enforcement of this covenant. Sellers agree that Buyer's remedies at law for
any breach or threat of breach by Sellers of the provisions of this Section will
be inadequate, and that Buyer shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Section and to enforce
specifically the terms and provisions hereof, in addition to any other remedy to
which Buyer may be entitled at law or equity. In the event of litigation
regarding this covenant not to compete, the prevailing party in such litigation
shall, in addition to any other remedies the prevailing party may obtain in such
litigation, be entitled to recover from the other party its reasonable legal
fees and out of pocket costs incurred by such party in enforcing or defending
its rights hereunder. The length of time for which this covenant not to compete
shall be in force shall not include any period of violation or any other period
required for litigation during which Buyer seeks to enforce this covenant.
Should any provision of this Section be adjudged to any extent invalid by any
competent tribunal, such provision will be deemed modified to the extent
necessary to make it enforceable.
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5.12 CERTAIN FEES. Sellers acknowledge that Buyer has reimbursed Sellers
for expenses incurred by Sellers in connection with Buyer's acquisition of
substantially all of the assets of PORI International, Inc. ("PORI") in the
amount of $250,000. Buyer shall also pay Sellers a fee of $10,000 per month
plus reasonable out of pocket expenses beginning February 1, 1997 until the
Closing as compensation for assistance provided by Sellers to Buyer in
connection with the operations of PORI. Buyers shall also reimburse Sellers for
certain capital expenditures set forth on SCHEDULE 5.12 in an amount not to
exceed $275,000.
5.13 SALE OF USF SHARES. Following the Closing all sales of USF Shares by
the Sellers shall be made through Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation or such other broker as designated by Sellers and approved by Buyer.
All USF Shares disposed of by the Sellers shall be sold in agency sales or
ordinary brokerage transactions on the New York Stock Exchange and will not be
disposed of in any manner which is disruptive to the market for USF Common
Stock.
ARTICLE VI
CONDITIONS TO CLOSING; TERMINATION
6.1 CONDITIONS PRECEDENT TO OBLIGATION OF BUYER. The obligation of Buyer
to proceed with the Closing under this Agreement is subject to the fulfillment
prior to or at Closing of the following conditions, any one or more of which may
be waived in whole or in part by Buyer at Buyer's sole option:
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS. Each of
the representations and warranties of Sellers contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date, with
the same force and effect as though such representations and warranties had been
made on, as of and with reference to the Closing Date. Sellers shall have
performed in all respects all of the covenants and complied with all of the
provisions required by them Agreement to be performed or complied with by it at
or before the Closing.
(b) LITIGATION. No statute, regulation or order of any Governmental
Body shall be in effect that restrains or prohibits the transactions
contemplated hereby or that would limit or adversely affect Buyer's ownership of
the Purchased Assets or assumption of the Assumed Liabilities, and there shall
not have been threatened, nor shall there be pending, any action or proceeding
by or before any Governmental Body challenging the lawfulness of or seeking to
prevent or delay any of the transactions contemplated by this Agreement or any
of the Other Agreements or seeking monetary or other relief by reason of the
consummation of any of such transactions.
(c) NO MATERIAL ADVERSE CHANGE. Between the date hereof and the
Closing Date, there shall have been no material adverse change, regardless of
insurance coverage therefor, in the Business or any of the Purchased Assets,
results of operations, Liabilities, prospects or condition, financial or
otherwise, of Sellers.
(d) CLOSING CERTIFICATE. Sellers shall have delivered a certificate,
dated the Closing Date, in such detail as Buyer shall request, certifying to the
fulfillment of the conditions set
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forth in subparagraphs (a), (b) and (c) of this Section. Such certificate shall
constitute a representation and warranty of Sellers with regard to the matters
therein for purposes of this Agreement.
(e) ARRANGEMENTS WITH EMPLOYEES. Substantially all of Sellers'
employees shall have accepted employment with Buyer effective on the Closing
Date and Buyer shall have entered into arrangements with Xxxxxx Xxxxxx, Xxxxx
Xxxxxx, Xxxxxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxx Xxxxxxxx and Xxxx Xxxxx,
satisfactory to Buyer in its sole discretion.
(f) APPROVAL BY SELLERS' SHAREHOLDERS. Sellers' shareholders holding
a majority of the votes represented by the outstanding common stock of MES shall
have approved the transactions contemplated in connection with this Agreement in
accordance with applicable law.
(g) CLOSING DOCUMENTS. Buyer shall have received the other documents
referred to in SECTION 6.3(A). All agreements, certificates, opinions and other
documents delivered by Sellers to Buyer hereunder shall be in form and substance
satisfactory to Buyer.
(h) TITLE INSURANCE. Buyer shall have obtained for all Real Property
owned by Sellers and all material leasehold interests held by Sellers set forth
on SCHEDULE 6.1(H) final marked commitments to issue to Buyer owner's policies
of title insurance in accordance with the laws of the State of Texas in coverage
amounts equal to the fair market values of such Real Property or leasehold
interests, insuring good and indefeasible fee simple title to such Real Property
and good title to such leasehold interests with mechanic's liens coverage and
such endorsements as Buyer may have reasonably requested and with exceptions
only for applicable standard printed exceptions (other than mechanic's and
materialmen's liens and rights of possession), and Permitted Encumbrances.
(i) OTHER DELIVERIES. Buyer shall have received with respect to the
Real Property owned by Sellers:
(i) surveys of such property which conform to the standards set
forth in the ALTA/American Congress on Surveying and Mapping Minimum Standard
Detail Requirements for Land Title Surveys and which disclose no state of facts
inconsistent with the representations and warranties of Sellers set forth in
SECTION 3.15 hereof and are otherwise acceptable to Buyer;
(ii) ALTA extended coverage statements/affidavits in form and
substance satisfactory to Buyer's title insurer regarding title, mechanic's
liens and such other customary matters as may be reasonably requested by Buyer
or Buyer's title insurer; and
(iii) a certificate, duly executed and acknowledged by an officer
of Sellers under penalties of perjury, in the form prescribed by Treasury
Regulation Section 1.1445-2(b)(2)(iii), stating Sellers' names, addresses and
federal tax identification numbers, and that each is not a "foreign person"
within the meaning of Section 1445 of the Code.
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(j) ESTOPPEL CERTIFICATES. Buyer shall have received estoppel
certificates from each lessor of each leasehold estate included in the Purchased
Assets, in form and substance satisfactory to Buyer.
(k) LISTING ON NYSE. The USF Shares shall have been authorized for
listing on the NYSE, subject to official notice of issuance.
(l) CONSENTS. Sellers shall have received the consents, approvals
and actions of the Persons referred to in SCHEDULE 3.4.
(m) PERMITS. USF or Buyer shall have verified or obtained all
required or appropriate permits, licenses, franchises, authorizations and
approvals to conduct the business of Sellers as presently conducted.
6.2 CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS. The obligation of
Sellers to proceed with the Closing under this Agreement is subject to the
fulfillment prior to or at Closing of the following conditions, any one or more
of which may be waived in whole or in part by Sellers at Seller's sole option:
(a) BRINGDOWN OF REPRESENTATIONS AND WARRANTIES; COVENANTS. Each of
the representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date, with
the same force and effect as though such representations and warranties had been
made on, as of and with reference to the Closing Date. Buyer shall have
performed all of the covenants and complied in all respects with all of the
provisions required by this Agreement to be performed or complied with by it at
or before the Closing.
(b) LITIGATION. No statute, regulation or order of any Governmental
Body shall be in effect that restrains or prohibits the transactions
contemplated hereby, and there shall not have been threatened, nor shall there
be pending, any action or proceeding by or before any Governmental Body
challenging the lawfulness of or seeking to prevent or delay any of the
transactions contemplated by this Agreement or the Other Agreements or seeking
monetary or other relief by reason of the consummation of such transactions.
(c) CLOSING CERTIFICATE. Buyer shall have delivered a certificate,
dated the Closing Date, in such detail as Sellers shall request, certifying to
the fulfillment of the conditions set forth in subparagraphs (a) and (b) of this
SECTION 6.2. Such certificate shall constitute a representation and warranty of
Buyer with regard to the matters therein for purposes of this Agreement.
(d) LISTING ON NYSE. The USF Shares shall have been authorized for
listing on the NYSE, subject to official notice of issuance.
(e) CLOSING DOCUMENTS. Sellers shall also have received the other
documents referred to in SECTION 6.3(b). All agreements, certificates, opinions
and other documents delivered
32
by Buyer to Sellers hereunder shall be in form and substance satisfactory to
counsel for Sellers, in the exercise of such counsel's reasonable professional
judgment.
6.3 DELIVERIES AND PROCEEDINGS AT CLOSING.
(a) DELIVERIES BY SELLERS. Sellers shall deliver or cause to be
delivered to Buyer at the Closing:
(i) A general warranty deed or deeds to the Real Property owned
by Sellers included in the Purchased Assets in a form acceptable to Buyer duly
executed and acknowledged by Sellers.
(ii) A general warranty xxxx of sale and instrument of
assignment to the other Purchased Assets in a form acceptable to Buyer, duly
executed by Sellers.
(iii) Assignments of all transferable or assignable licenses,
Permits and warranties relating to the Purchased Assets and of any trademarks,
trade names, patents, patent applications, and other Intellectual Property, duly
executed and in forms acceptable to Buyer.
(iv) Stock certificates representing all of the outstanding stock
of HTI Vehicle Acquisition Corp.
(v) Certificates of the appropriate public officials to the
effect that each of Sellers is a validly existing corporation in good standing
in Texas and Delaware as of a date not more than 10 days prior to the Closing
Date.
(vi) Incumbency and specimen signature certificates dated the
Closing Date, signed by the officers of Sellers and certified by its Secretary.
(vii) True and correct copies of (A) the Governing Documents
(other than the bylaws) of Sellers as of a date not more than 10 days prior to
the Closing Date, certified by the Secretary of State of Texas or Delaware, as
applicable, and (B) the bylaws of Sellers as of the Closing Date, certified by
their respective Secretaries.
(viii) Certificates of the respective Secretaries of Sellers (A)
setting forth all resolutions of the Board of Directors of Sellers and, if
necessary, the stockholders of Sellers authorizing the execution and delivery of
this Agreement and the performance by Sellers of the transactions contemplated
hereby, and (B) to the effect that the Governing Documents of Sellers delivered
pursuant to SECTION 6.3(a)(vii) were in effect at the date of adoption of such
resolutions, the date of execution of this Agreement and the Closing Date.
(ix) General releases by all officers and directors of Sellers
and by Sellers of all Liability of Sellers to them and of any claim that they or
any of them may have against Sellers.
33
(x) The opinion of Xxxxx XxXxxxxxx & Oaks Xxxxxxxx, legal
counsel to Sellers, in substantially the form of EXHIBIT D.
(xi) Noncompetition Agreements in the form of EXHIBIT E executed
by Xxxx Xxxxxx, Xxx Xxxxxx and Xxxxx Xxxxxx.
(xii) Such other agreements and documents as Buyer may reasonably
request.
(b) DELIVERIES BY BUYER. Buyer shall deliver or cause to be
delivered to Sellers at the Closing:
(i) Stock certificates evidencing the USF Shares (subject to
SECTION 2.14) duly endorsed in the respective names of Sellers as may be
directed by Sellers and registered at the address of Sellers identified in
SECTION 8.5 using Sellers' federal tax identification numbers which shall be
00-0000000 for MES, 00-0000000 for Xxxxxx and 00-0000000 for HTI, and which
shall be delivered in accordance with instructions of Sellers.
(ii) The Assumption Agreement.
(iii) A certificate of the appropriate public official to the
effect that Buyer is a validly existing corporation in its state of
incorporation as of a date not more than 10 days prior to the Closing Date.
(iv) Incumbency and specimen signature certificates signed by the
officers of Buyer and certified by the Secretary of Buyer.
(v) True and correct copies of (A) the Governing Documents
(other than the bylaws) of Buyer as of a date not more than 10 days prior to the
Closing Date, certified by the Secretary of State of the state of Buyer's
incorporation and (B) the bylaws of Buyer as of the Closing Date, certified by
the Secretary of Buyer.
(vi) A certificate of the Secretary of Buyer (A) setting forth
all resolutions of the Board of Directors of Buyer authorizing the execution and
delivery of this Agreement and the performance by Buyer of the transactions
contemplated hereby, certified by the Secretary of Buyer and (B) to the effect
that the Governing Documents of Buyer delivered pursuant to SECTION 6.3(b)(v)
were in effect at the date of adoption of such resolutions, the date of
execution of this Agreement and the Closing Date.
(vii) The opinion of Xxxxxx X. Xxxxxxxx, Esq., General Counsel to
Buyer, in substantially the form of EXHIBIT F.
(viii) Such other agreements and documents as Sellers may
reasonably request.
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6.4 TERMINATION.
(a) MUTUAL CONSENT; FAILURE OF CONDITIONS. Except as provided in
SECTION 6.4(b), this Agreement may be terminated at any time prior to Closing
by: (i) mutual consent of Buyer and Sellers; (ii) Buyer, if any of the
conditions specified in SECTION 6.1 hereof shall not have been fulfilled by May
31, 1997 and shall not have been waived by Buyer; or (iii) Sellers, if any of
the conditions specified in SECTION 6.2 hereof shall not have been fulfilled by
May 31, 1997 and shall not have been waived by Sellers. In the event of
termination of this Agreement by either Buyer or Sellers pursuant to clause (ii)
or (iii) of the immediately preceding sentence, Buyer and Sellers shall be
liable to the other for any breach hereof by such party, which breach led to
such termination, and the rights and obligations of the parties set forth in
SECTIONS 7.2, 7.3 and 8.1 shall survive such termination. Buyer or Sellers
shall also be entitled to seek any other remedy to which it may be entitled at
law or in equity in the event of such termination, which remedies shall include
injunctive relief and specific performance. Notwithstanding the foregoing, in
the event that this Agreement is terminated by one party hereto pursuant to
clause (ii) or (iii) of the first sentence of this Section solely as a result of
a breach by the other party hereto of a representation or warranty of such other
party as of a date after the date of this Agreement, which breach could not have
been reasonably anticipated by such other party and was beyond the reasonable
control of such other party, then the remedy of the party terminating this
Agreement shall be limited solely to recovery of all of such party's costs and
expenses incurred in connection herewith.
(b) CASUALTY DAMAGE. Notwithstanding anything else herein to the
contrary, if prior to Closing the Purchased Assets (or any portion thereof) are
damaged by fire or any other cause, the reasonable estimate of the immediate
repair of which would cost more than $250,000, Seller at its option, which may
be exercised by written notice given to Buyer within thirty (30) business days
after Buyer's receipt of notice of such loss, may reduce the Purchase Price by
the amount of any insurance deductible and transfer the rights to insurance
coverage fully covering the amount of the loss to Buyer and proceed with the
transactions contemplated hereunder. If Seller does not so elect, Buyer may, at
its option, declare this Agreement null and void, or Buyer may close subject to
reduction of the Purchase Price by the amount of any applicable insurance
deductible which shall be paid by Buyer and assignment to Buyer of the proceeds
from any insurance carried by Sellers covering such loss. If prior to Closing
the Purchased Assets (or any portion thereof) are damaged by fire or any other
cause, the reasonable estimate of the repair of which would cost $250,000 or
less, such event shall not excuse Buyer from its obligations under this
Agreement, but the Purchase Price shall be reduced by an amount equal to the
amount of such cost.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS. All representations, warranties and
agreements made by any party in this Agreement or pursuant hereto shall survive
the Closing, but all claims for damages made by virtue of such representations,
warranties and agreements shall be made under, and subject to the limitations
set forth in, this ARTICLE VII. The representations and warranties set forth in
ARTICLES III and IV are cumulative, and any limitation or qualification set
forth in any one
35
representation and warranty therein shall not limit or qualify any other
representation and warranty therein.
7.2 INDEMNIFICATION BY SELLERS. Sellers shall indemnify, defend, save and
hold Buyer and its officers, directors, employees, agents and Affiliates
(collectively, "BUYER INDEMNITEES") harmless from and against all demands,
claims, allegations, assertions, actions or causes of action, assessments,
losses, damages, deficiencies, Liabilities, costs and expenses (including
reasonable legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing and whether or not
any such demands, claims, allegations, etc., of third parties are meritorious;
collectively, "BUYER DAMAGES") asserted against, imposed upon, resulting to,
required to be paid by, or incurred by any Buyer Indemnitees, directly or
indirectly arising out of (i) a breach of any representation or warranty made
by Sellers in this Agreement, in any certificate or document furnished pursuant
hereto by Sellers or in any Other Agreement to which Sellers are or are to
become parties, (ii) a breach or nonfulfillment of any covenant or agreement
made by Sellers in or pursuant to this Agreement or in any Other Agreement to
which Sellers are or are to become parties, and (iii) any Retained Liability.
7.3 INDEMNIFICATION BY BUYER. Buyer and USF shall indemnify, defend, save
and hold Sellers and their officers, directors, employees, Affiliates and agents
(collectively, "SELLERS INDEMNITEES") harmless from and against any and all
demands, claims, allegations, assertions, actions or causes of action,
assessments, losses, damages, deficiencies, liabilities, costs and expenses
(including reasonable legal fees, interest, penalties, and all reasonable
amounts paid in investigation, defense or settlement of any of the foregoing and
whether or not any such demands, claims, allegations, etc., of third parties are
meritorious; collectively, "SELLERS DAMAGES") asserted against, imposed upon,
resulting to, required to be paid by, or incurred by any Sellers Indemnitees,
directly or indirectly arising out of (i) a breach of any representation or
warranty made by Buyer or USF in this Agreement or in any certificate or
document furnished pursuant hereto by Buyer or USF or in any Other Agreement to
which Buyer or USF is a party; (ii) a breach or nonfulfillment of any covenant
or agreement made by Buyer or USF in or pursuant to this Agreement or in any
Other Agreement to which Buyer or USF is a party; and (iii) any Assumed
Liability and (iv) any claim asserted by a third party (including a Governmental
Body) arising out of Buyer's or USF's operation of the Business after the
Closing Date unless such claim arises from a breach of a representation or
warranty by Sellers herein.
7.4 LIMITATION OF LIABILITY. Notwithstanding the foregoing, Sellers' or
Buyer's or USF's obligations to indemnify the other against any Damages shall
be subject to all of the following limitations:
(a) THRESHOLD. No indemnification shall be made under clause (i) of
SECTION 7.2 or clause (i) of SECTION 7.3 until the aggregate amount of Damages
thereunder exceeds $100,000, but if the aggregate amount of Damages thereunder
exceeds $100,000 in the aggregate, then indemnification shall be made by Sellers
thereunder to the full extent of the Buyer Damages or Seller Damages.
36
(b) CEILING. Each party's obligations to indemnify under clause (i)
of SECTION 7.2 or clause (i) of SECTION 7.3, as applicable, shall be limited to
an aggregate amount not to exceed four million dollars ($4,000,000).
(c) TIME PERIOD. An Indemnifying Party shall be obligated to
indemnify an Indemnified Party by virtue of clause (i) of SECTION 7.2 or clause
(i) of SECTION 7.3 only for those Damages as to which the Indemnified Party has
given the Indemnifying Party written notice thereof within two years after the
Closing Date; PROVIDED, HOWEVER, that with respect to any claim for Damages
sustained by reason of a breach of any representation or warranty relating to
those matters governed by SECTIONS 3.8 AND 3.22, Sellers' liability shall be
limited to Buyer Damages as to which such written notice shall have been given
within five years after the Closing Date.
(d) FRAUD; INTENTIONAL MISREPRESENTATION. The limitations set forth
in SECTIONS 7.4(a), (b) AND (c) shall not apply to Damages arising out of (i)
fraud, (ii) the breach of any representation or warranty contained herein or
pursuant hereto if such representation or warranty was made with actual
knowledge that it contained an untrue statement of a fact or omitted to state a
fact necessary to make the statements of facts contained therein not misleading,
(iii) negligent misrepresentation, or (iv) the breach by Sellers of the
agreements in SECTION 2.4 and the representations and warranties in SECTIONS
3.1, 3.2 AND 3.11.
(e) WAIVER OF STATUTE OF LIMITATIONS. Each party hereto waives any
applicable statute of limitations that may be applicable to Damages arising
under clause (iii) of SECTION 7.2 or clause (iii) of SECTION 7.3.
7.5 NOTICE OF CLAIMS. If any Buyer Indemnitee or Sellers Indemnitee (an
"INDEMNIFIED PARTY") believes that it has suffered or incurred or will suffer or
incur any Damages for which it is entitled to indemnification under this ARTICLE
VII, such Indemnified Party shall so notify the party or parties from whom
indemnification is being claimed (the "INDEMNIFYING PARTY") with reasonable
promptness and reasonable particularity in light of the circumstances then
existing. If any action at law or suit in equity is instituted by or against a
third party with respect to which any Indemnified Party intends to claim any
Damages, such Indemnified Party shall promptly notify the Indemnifying Party of
such action or suit. The failure of an Indemnified Party to give any notice
required by this Section shall not affect any of such party's rights under this
ARTICLE VII or otherwise except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.
7.6 THIRD PARTY CLAIMS. The Indemnifying Party shall have the right to
conduct and control, through counsel of its choosing, the defense of any third
party claim, action or suit, and the Indemnifying Party may compromise or settle
the same, provided that the Indemnifying Party shall give the Indemnified Party
advance notice of any proposed compromise or settlement. The Indemnifying Party
shall permit the Indemnified Party to participate in the defense of any such
action or suit through counsel chosen by the Indemnified Party, provided that
the fees and expenses of such counsel shall be borne by the Indemnified Party.
If the Indemnifying Party undertakes to conduct and control the conduct and
settlement of such action or suit, (i) the Indemnifying Party shall not thereby
permit to exist any Encumbrance upon any asset of the Indemnified Party; and
(ii)
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the Indemnifying Party shall not consent to any settlement that does not include
as an unconditional term thereof the giving of a complete release from liability
with respect to such action or suit to the Indemnified Party. To the extent the
Indemnifying Party elects not to defend such proceeding (and the Indemnifying
Party hereby agrees to give prompt notice of such decision to the Indemnified
Party) and the Indemnified Party defends against such proceeding or otherwise
deals with such proceeding, the Indemnified Party may retain counsel and
control, defend against, negotiate, settle or otherwise deal with such
proceeding, claim or demand. The costs of the Indemnified Party shall be
included in the indemnification obligation of the Indemnifying Party.
7.7 GOOD FAITH EFFORTS TO SETTLE DISPUTES. Buyer and Sellers agree that,
prior to commencing any litigation against the other concerning any matter with
respect to which such party intends to claim a right of indemnification in such
proceeding, the respective chief executive officers (or officers holding such
authority) of such parties shall meet in a timely manner and attempt in good
faith to negotiate a settlement of such dispute during which time such officers
shall disclose to the others all relevant information relating to such dispute.
7.8 ESCROW.
(a) CREATION. The Escrow Shares together with a stock power executed
in blank by Sellers shall be delivered by Buyer to PNC Bank, National
Association or such other financial institution as may be agreed upon by Sellers
and Buyer (the "ESCROW AGENT"). The fees payable to the Escrow Agent for
maintaining the Escrow (as hereinafter defined) shall be paid by Buyer. The
Escrow Shares shall be maintained by the Escrow Agent for a period beginning at
the Closing Date and ending on the first anniversary of the Closing Date, as an
escrow (the "ESCROW") available to satisfy the indemnification rights of Buyer
set forth in SECTION 7.2, pursuant to the terms of an escrow agreement in form
and substance reasonably satisfactory to Buyer and Sellers.
(b) DISBURSEMENT FOR CLAIMS. If Buyer gives a notice of claim
pursuant to SECTION 7.5, asserting a claim for indemnification pursuant to
SECTION 7.2, Sellers, within thirty (30) days following receipt of such notice
of claim, shall either (i) give Buyer and the Escrow Agent a counternotice with
respect to such notice of claim, or (ii) instruct the Escrow Agent to deliver to
Buyer Escrow Shares equal in value to the amount of such claim (based upon the
USF Average Share Value) from the Escrow Shares; provided, however, that if a
counternotice given by Sellers alleges that a notice of claim is only partially
invalid, Sellers, within thirty (30) days of receipt of such notice of claim,
shall instruct the Escrow Agent to deliver to Buyer Escrow Shares equal in value
to an amount equal to that portion of the amount specified in the notice of
claim as to which no objection is made.
(c) DIVIDENDS ON ESCROW. All cash dividends declared with respect to
the Escrow Shares shall be paid to Sellers.
(d) TERMINATION. The Escrow established pursuant to this SECTION 7.8
shall terminate on the first anniversary of the Closing Date; provided, however,
that the Escrow shall continue beyond such period to the extent that Buyer has
given Sellers a notice of claim prior to such time and the indemnification
claims asserted therein remain unsatisfied or unresolved. Upon
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termination of the Escrow, the remaining Escrow Shares (along with any dividends
and interest thereon) shall be delivered by the Escrow Agent to Seller.
7.9 PAYMENT. All indemnification payments under this ARTICLE VII shall be
made promptly
in cash.
7.10 ARBITRATION. After the Closing, any controversy or claim arising out
of or relating to this Agreement, including, without limitation, the
indemnification provisions of this ARTICLE 7, shall be settled by arbitration in
accordance with the then prevailing Commercial Arbitration Rules of the American
Arbitration Association. Such arbitration shall be held in Chicago, Illinois
before a panel of three (3) arbitrators, one selected by USF and one selected by
the Sellers and the third selected by mutual agreement of the first two
arbitrators. Judgment upon any award rendered by the arbitrators may be entered
in any court of competent jurisdiction.
ARTICLE VIII
MISCELLANEOUS
8.1 COSTS AND EXPENSES. Subject to SECTION 2.9(c), and SECTION 2.13(e),
Buyer and Sellers shall each pay its respective expenses, brokers' fees and
commissions, with Sellers paying all fees owed to Xxxxxxx & Co. Incorporated
and Sellers shall pay all of the pre-Closing expenses of Sellers incurred in
connection with this Agreement and the transactions contemplated hereby,
including all accounting, legal and appraisal fees and settlement charges. All
transfer taxes incurred as a result of the transfer of the Purchased Assets
shall be paid by Sellers.
8.2 PRORATION OF EXPENSES. All accrued expenses associated with the Real
Property included in the Purchased Assets, such as electricity, gas, water,
sewer, telephone, property taxes, security services and similar items, shall be
prorated between Buyer and Sellers as of the Closing Date. Buyer and Sellers
shall settle such amounts promptly following Closing.
8.3 FURTHER ASSURANCES. Sellers shall, at any time and from time to time
on and after the Closing Date, upon request by Buyer and without further
consideration, take or cause to be taken such actions and execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
instruments, documents, transfers, conveyances and assurances as may be required
or desirable for the better conveying, transferring, assigning, delivering,
assuring and confirming the Purchased Assets to Buyer.
8.4 NOTICES. All notices and other communications given or made pursuant
to this Agreement shall be in writing and shall be deemed to have been duly
given or made the second business day after the date of mailing, if delivered
by registered or certified mail, postage prepaid, upon delivery, if sent by
hand delivery, upon delivery, if sent by prepaid courier, with a record of
receipt, or the next day after the date of dispatch, if sent by cable,
telegram, facsimile or telecopy (with a copy simultaneously sent by registered
or certified mail, postage prepaid, return receipt requested), to the parties at
the following addresses:
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(i) if to Buyer, to:
United States Filter Corporation
00-000 Xxxx Xxxxxx
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Telecopy: (000) 000-0000
with a required copy to the General Counsel of Buyer at
the above address and telecopy number (000) 000-0000
(ii) if to Sellers, to:
Xxxxxx Environmental Services, Inc.
x/x Xxxxx XxXxxxxxx & Xxxx Xxxxxxxx
0000 Xxxxxxxx Plaza
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxxx X. Xxxx
Telecopy: (000) 000-0000
with a required copy to:
Xxxx Xxxx Xxxxxxxxx
Xxxxx XxXxxxxxx & Oaks Xxxxxxxx
0000 Xxxxxxxx Xxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Telecopy: (000) 000-0000
Any party hereto may change the address to which notice to it, or copies
thereof, shall be addressed, by giving notice thereof to the other parties
hereto in conformity with the foregoing.
8.5 CURRENCY. All currency references herein are to United States
dollars.
8.6 OFFSET; ASSIGNMENT; GOVERNING LAW. Buyer shall be entitled to offset
or recoup from any amounts due to Sellers from Buyer hereunder or under any
Other Agreement against any obligation of Sellers to Buyer hereunder or under
any Other Agreement. This Agreement and all the rights and powers granted
hereby shall bind and inure to the benefit of the parties hereto and their
respective permitted successors and assigns. This Agreement and the rights,
interests and obligations hereunder may not be assigned by any party hereto
without the prior written consent of the other parties hereto, except that Buyer
may make assignments to any Affiliate of Buyer provided that Buyer remains
liable hereunder. This Agreement shall be governed by and construed in
accordance with the laws of California without regard to its conflict of law
doctrines.
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8.7 AMENDMENT AND WAIVER; CUMULATIVE EFFECT. To be effective, any
amendment or waiver under this Agreement must be in writing and be signed by the
party against whom enforcement of the same is sought. Neither the failure of
any party hereto to exercise any right, power or remedy provided under this
Agreement or to insist upon compliance by any other party with its obligations
hereunder, nor any custom or practice of the parties at variance with the terms
hereof shall constitute a waiver by such party of its right to exercise any such
right, power or remedy or to demand such compliance. The rights and remedies of
the parties hereto are cumulative and not exclusive of the rights and remedies
that they otherwise might have now or hereafter, at law, in equity, by statute
or otherwise.
8.8 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement and
the Schedules and Exhibits to this Agreement, the Other Agreements, and the
items noted in SECTION 6.3 set forth all of the promises, covenants,
agreements, conditions and undertakings between the parties hereto with respect
to the subject matter hereof, and supersede all prior or contemporaneous
agreements and understandings, negotiations, inducements or conditions, express
or implied, oral or written, including the letter of intent. This Agreement is
not intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder, except the provisions of SECTIONS 7.2 AND 7.3 relating to
Buyer Indemnitees and Sellers Indemnitees.
8.9 SEVERABILITY. If any term or other provision of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal or incapable of
being enforced under any rule of Law in any particular respect or under any
particular circumstances, such term or provision shall nevertheless remain in
full force and effect in all other respects and under all other circumstances,
and all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the fullest
extent possible.
8.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall be deemed to be one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
XXXXXX ENVIRONMENTAL SERVICES, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------------
Title: Chairman of the Board
---------------------------------------
XXXXXX COMPANY, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------------
Title: Agent and Attorney-in-Fact
---------------------------------------
HYDROCARBON TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxxx
------------------------------------------
Title: Agent and Attorney-in-Fact
---------------------------------------
UNITED STATES FILTER CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Title: Vice President
---------------------------------------
UNITED STATES FILTER RECOVERY
SERVICES (SOUTHWEST), INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Title: Vice President
---------------------------------------
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