EXHIBIT 2.5
STOCK PURCHASE AGREEMENT
among
EMCON,
a California corporation
("EMCON"),
Organic Waste Technologies, Inc.
a Delaware corporation
("Buyer"),
NATIONAL EARTH PRODUCTS, INC.
a Pennsylvania corporation
(the "Company"),
and
CERTAIN STOCKHOLDERS OF THE COMPANY
("Sellers")
Dated April 30, 1997
43
TABLE OF CONTENTS
Page
1. Definitions........................................................ 1
"Agreement"........................................................ 1
"Best Efforts"..................................................... 1
"Breach"........................................................... 2
"Buyer"............................................................ 2
"Buyer's Disclosure Statement" .................................... 2
"CERCLA"........................................................... 2
"Closing".......................................................... 2
"Closing Date"..................................................... 2
"Code"............................................................ 2
"Common Shares".................................................... 2
"Company".......................................................... 2
"Company Financial Statements"..................................... 2
"Consent".......................................................... 2
"Contemplated Transactions"........................................ 3
"Damages".......................................................... 3
"Employee Plans"................................................... 3
"Employment Agreements"............................................ 3
"ERISA"............................................................ 3
"Exchange Act"..................................................... 3
"Family"........................................................... 3
"GAAP"............................................................. 4
"Governmental Authorization"....................................... 4
"Governmental Body"................................................ 4
"Hazardous Substances"............................................. 4
"IRS".............................................................. 4
"Knowledge"........................................................ 4
"Knowledge of the Company"......................................... 4
"Legal Requirement"................................................ 5
"Material Contracts"............................................... 5
"Material Interest................................................. 5
"Notes"............................................................ 5
"Order"............................................................ 5
"Ordinary Course of Business"...................................... 5
"Person"........................................................... 5
"Proceeding"....................................................... 5
"Purchase Price"................................................... 5
"Related Person"................................................... 5
"Representative"................................................... 6
"Securities Act"................................................... 6
"Sellers".......................................................... 6
"Sellers' Disclosure Schedule"..................................... 7
44
2. Sale, Transfer and Exchange of Shares and Options; Closing....... 7
2.1 Sale and Exchange....................................... 7
2.2 Purchase Price.......................................... 7
2.3 Closing................................................. 8
2.4 Closing Obligations..................................... 8
2.5 Employment Agreement.................................... 10
2.6 Employment Agreement.....................................10
3. Representations and Warranties of the Company.................... 10
3.1 Corporation Organization................................ 10
3.2 Capitalization.......................................... 11
3.3 Corporate Authority..................................... 11
3.4 Dissolution; Forfeiture................................. 12
3.5 The Company Financial Statements........................ 12
3.6 Absence of Unaccrued or Undisclosed Liabilities......... 12
3.7 Absence of Certain Changes.............................. 13
3.8 Taxes................................................... 13
3.9 Title to Properties; Accounts Receivable................ 14
3.10 Proprietary Rights...................................... 15
3.11 Customer Lists.......................................... 16
3.12 Benefit Plans and Arrangements.......................... 16
3.13 Compliance with Laws; Legal Proceedings................. 17
3.14 Contracts and Obligations .............................. 18
3.15 Employee Relations...................................... 19
3.16 Insurance............................................... 19
3.17 Environmental Compliance................................ 19
3.18 Advances; Related Party Transactions.................... 20
3.19 Powers of Attorney...................................... 21
3.20 No Brokers.............................................. 21
3.21 Other Agreements to Sell the Company.................... 21
3.22 Banking Relationships................................... 21
3.23 Ownership of Shares and Options......................... 22
3.24 Execution, Delivery and Enforceability of Agreement;
No Violation............................................ 22
3.25 Information Supplied.................................... 23
3.26 Residence and Domicile.................................. 23
4. [Reserved]
5. Representations and Warranties of Buyer and EMCON................ 23
5.1 Organization and Good Standing.......................... 23
5.2 Execution, Delivery and Enforceability of Agreement;
No Violation............................................ 23
5.3 Investment Intent....................................... 24
5.4 Certain Proceedings..................................... 24
5.5 Brokers or Finders...................................... 24
5.6 Information Supplied.................................... 24
45
5.7 No Material Change..................................... 24
6. Covenants of the Sellers Prior to Closing Date.................. 24
6.1 Conduct of Business Pending Closing.................... 24
6.2 Advice of Changes...................................... 26
6.3 Access and Information................................. 26
6.4 Reasonable Efforts..................................... 27
6.5 Supplements to Company Disclosure Schedule............. 27
7. Covenants of Buyer Prior to Closing Date........................ 27
7.1 Access to Information.................................. 27
7.2 Approvals of Governmental Bodies....................... 27
7.3 Supplements to Schedules............................... 28
7.4 Best Efforts........................................... 28
7.5 Advice of Changes...................................... 28
8. Conditions Precedent to Buyer's Obligation to Close............. 28
8.1 Accuracy of Representations............................ 28
8.2 Material Changes....................................... 29
8.3 Sellers' and the Company's Performance................. 29
8.4 Consents............................................... 29
8.5 Additional Documents................................... 29
8.6 No Proceedings......................................... 30
8.7 Sellers Disclosure Schedule............................ 30
8.8 Execution by Sellers................................... 30
8.9 Employment Agreement................................... 30
8.10 Notes.................................................. 30
8.11 Release of Suretyship Agreement.........................30
9. Conditions Precedent to Sellers' Obligation to Close............... 30
9.1 Accuracy of Representations............................... 31
9.2 Approval of this Agreement by Board of Directors.......... 31
9.3 Buyer's Performance....................................... 31
9.4 Consents.................................................. 31
9.5 No Material Adverse Change................................ 31
9.6 Buyer's Disclosure Schedule............................... 31
9.7 Additional Documents...................................... 31
9.8 No Proceedings............................................ 32
9.9 Execution................................................. 32
9.10 Employment Agreements..................................... 32
9.11 Indebtedness of the Company............................... 32
10. Covenants After the Closing Date................................... 32
10.1 Litigation Support........................................ 32
10.2 NEP Sand & Gravel Receivable.............................. 32
10.3 Mining License............................................ 32
46
10.4 S Corporation Matters................................... 32
11. Termination...................................................... 33
11.1 Termination Events...................................... 33
11.2 Effect of Termination................................... 34
12. Survival Remedies................................................ 35
12.1 Survival................................................ 35
12.2 Limitation of Liability..................................35
13. General Provisions............................................... 39
13.1 Expenses................................................ 39
13.2 Public Announcements.................................... 39
13.3 Confidentiality......................................... 39
13.4 Notices................................................. 40
13.5 Binding Arbitration; Service of Process................. 41
13.6 Further Assurances...................................... 42
13.7 Waiver.................................................. 42
13.8 Entire Agreement and Modification....................... 42
13.9 Sellers' Disclosure Schedule............................ 43
13.10 Assignments, Successors, and No Third Party Rights...... 43
13.11 Severability............................................ 43
13.12 Section Headings, Construction.......................... 43
13.13 Interpretation of Agreement..............................43
13.14 Time of Essence......................................... 44
13.15 Governing Law........................................... 44
13.16 Counterparts............................................ 44
Exhibit No. Document
A List of Management Stakeholders
B-1 Convertible Promissory Note to Xxxxxx Xxxxx
B-2 Convertible Promissory Note to Xxxxxxx Xxxxxxxx
C-1 Employment Agreement of Xxxxxx Xxxxx
C-2 Employment Agreement of Xxxxxxx Xxxxxxxx
D Certain Pre-Closing Employee Bonuses
47
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of April 30,
1997 among EMCON, a California corporation ("EMCON"), ORGANIC WASTE
TECHNOLOGIES, INC., a Delaware corporation ("Buyer"), and a wholly-owned
subsidiary of EMCON; NATIONAL EARTH PRODUCTS, INC., a Pennsylvania corporation
(the "Company"), and the undersigned selling shareholders of the Company (the
"Sellers").
RECITALS
A. The Sellers desire to sell and Buyer desires to buy all of the Common
Shares of the Company, held by the Sellers and set forth on Exhibit A hereto
(such Common Shares representing all of the equity interest in the Company) for
the consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. Definitions. For the purposes of this Agreement, the following terms
have the meanings specified or referred to in this Section 1:
"Agreement" -- as defined in the first paragraph hereof.
"Best Efforts" -- the efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to maximize, to the
extent reasonably practicable, the prospects that a result will occur; provided,
however, that an obligation to use Best Efforts under this Agreement does not
require that the Person subject to such obligation take such actions that would
result in a material adverse change to the benefits to such Person of this
Agreement and the Contemplated Transactions.
"Breach" -- a "Breach" of a representation, warranty,
covenant, obligation or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if there is
or has been any material inaccuracy in or breach of, or any material failure to
perform or comply with, such representation, warranty, covenant or obligation,
and the term "Breach" means any such inaccuracy, breach or failure.
"Buyer" -- as defined in the first paragraph hereof.
"Buyer's Disclosure Schedule" -- the disclosure schedule
delivered by the Buyer to the Company prior to the Closing and attached hereto
and made a part hereof, as required by Section 5, below.
"CERCLA" -- as defined in Section 3.17.
48
"Closing" -- as defined in Section 2.4.
"Closing Date" -- the date and time as of which the Closing
actually takes place.
"Code" -- the Internal Revenue Code of 1986, as amended, or
any successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"Common Shares" -- the issued or issuable shares of the Company's common
stock.
"Company" -- as defined in the first paragraph hereof.
"Company Financial Statements" -- as defined in Section 3.5.
"Consent" -- any approval, consent, ratification, waiver or
other authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by this
Agreement, including:
(a) the sale to Buyers of the Common Shares held by the Sellers;
(b) the execution, delivery and performance of the Employment Agreements,
the Escrow Agreement, the Note Agreement and the Notes; and
(c) the performance by Buyer, the Company and Sellers of their respective
covenants and obligations under this Agreement.
"Damages" -- as defined in Section 12.2.
"Employee Plans" -- as defined in Section 3.12.
"Employment Agreements" -- as defined in Sections 2.5 and 2.6.
"ERISA" -- the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"Exchange Act" -- the Securities Exchange Act of 1934 or any
successor law, and the regulations or rules issued pursuant to such Act or any
successor law.
"Family" -- as defined in the definition of "Related Person."
"GAAP" -- generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the financial
statements referred to in Section 3.5 were prepared.
49
"Governmental Authorization" -- any approval, consent,
license, permit, waiver or other authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"Governmental Body" -- any
(a) nation, state, county, city, town, village, district or other
governmental jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official or entity and any court or
other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"Hazardous Substances" -- as defined in Section 3.17.
"IRS" -- the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"Knowledge" -- a Person will be deemed to have "Knowledge" of a particular
fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise become
aware of such fact in carrying out such individual's duties for the Company.
"Knowledge of the Company" -- shall mean Knowledge of any officer or
director of the Company about the affairs of the Company.
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational or other constitution, law, ordinance, principle of
common law, regulation, statute or treaty.
"Material Contracts" -- as defined in Section 3.14.
"Material Interest" -- as defined in the definition of "Related Person."
"Notes" -- as defined in Section 2.2(b).
50
"Order" -- any award, decision, injunction, judgment, order,
directive, ruling, decree, subpoena or verdict entered, issued, made or rendered
by any court, administrative agency, or other Governmental Body or by any
arbitrator.
"Ordinary Course of Business" -- an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if
such action is consistent with the past practices of such Person and is taken in
the ordinary course of the normal day-to-day operations of such Person.
"Person" -- any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization or other entity
or Governmental Body.
"Proceeding" -- any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"Purchase Price" -- as defined in Section 2.2.
"Related Person" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by any one or more
members of such individual's Family;
(c) any Person in which members of such individual's Family hold
(individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which one or more members of such
Individual's Family serves as a director, officer, partner, executor or trustee
(or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
and
51
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the first degree
and (iv) any other natural person who resides with such individual, and (b)
"Material Interest" means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or
other voting interests representing at least ten percent (10%) of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least ten percent (10%) of the outstanding equity
securities or equity interests in a Person.
"Representative" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Securities Act" -- the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Sellers" -- as defined in the first paragraph hereof.
"Sellers Disclosure Schedule" -- the disclosure schedule
delivered by the Sellers to Buyer prior to the Closing and attached hereto and
made a part hereof as required by Section 3 below.
2. Sale, Transfer and Exchange of Shares; Closing.
2.1 Sale and Exchange.
(a) At the Closing, the Sellers shall sell and transfer to Buyer and Buyer
shall purchase from the Sellers, the Common Shares held by such Sellers and set
forth opposite their names on Exhibit A hereto.
2.2 Purchase Price. The purchase price for the Common Shares being
purchased shall be paid as follows:
(a) At the Closing, Buyer shall pay the Sellers cash in the aggregate
amount of $860,789.81 by wire transfer ($431,253.98 to Xxxxxx X. Xxxxx and
$429,535.83 to Xxxxxxx X. Xxxxxxxx).
(b) At the Closing, Buyer shall deliver to Sellers EMCON's promissory notes
in the forms attached hereto as Exhibit B-1 and B-2 in the aggregate principal
amount of $800,000 (the "EMCON Notes"). The EMCON Notes shall bear interest at
the rate of 8% per annum, simple interest, payable quarterly, with all principal
and any unpaid interest due and payable in full at maturity (May 1, 2000 with
respect to the EMCON Note held by Xxxxxx Xxxxx and May 1, 2002 with respect to
the EMCON Note held by Xxxxxxx Xxxxxxxx). The principal balance of the EMCON
Notes shall be convertible, in part or in full, into EMCON Common Stock at the
election of the holders at a conversion rate of $6.50 per share.
52
(c) The Sellers shall be entitled to receive an earn out from Buyer tied to
the financial performance of the Company in each of the three twelve month
periods immediately following the Closing (the "Annual Earn Out") as follows:
The aggregate Annual Earn out shall equal 50% of Company's pre-tax profit earned
above the following base amounts for each twelve month period from May 1, 1997
through April 30, 2000:
Twelve Month Period Pre-Tax Profit
05/01/97 - 04/30/98 $500,000
05/01/98 - 04/30/99 $550,000
05/01/99 - 04/30/00 $600,000
(i) Calculation of the Company's pre-tax profits for purposes of
calculating the Annual Earn Out shall be based on the application of Generally
Accepted Accounting Principles, consistently applied, including the use of
accrual accounting. Until April 30, 2000, without the consent of the Sellers:
(A) neither EMCON nor OWT shall allocate any portion of their respective
corporate overhead to the Company for purposes of the above earnout calculation.
(that notwithstanding, to the extent either EMCON or OWT incurs expenses (e.g.
insurance, outside legal, etc.) directly for the benefit of the Company, such
amounts shall be charged to the Company for purposes of such calculation), (B)
EMCON and Buyer shall operate the Company in the ordinary course of business,
consistent with the Company's past practices, (C) EMCON and Buyer shall not
cause or permit the Company to engage in any fundamental transaction, such as
merger, consolidation, sale of substantially all of the Company's assets, or
sale of stock, (D) for purposes of the earnout calculation, EMCON and Buyer
shall not allocate any acquisition costs or expenses related to the transactions
contemplated by this Agreement to the Company (including without limitation
interest expense on funds used to acquire the Common Shares), (E) for purposes
of the earnout calculation, EMCON and Buyer shall not allocate any goodwill
amortization, where such goodwill arose pursuant to the transactions
contemplated by this Agreement, (F) for purposes of the earnout calculation, any
tax-sharing payments made by the Company to EMCON, Buyer or a Related Person of
EMCON and Buyer shall be considered tax payments (and not deducted from pre-tax
profits) even though such payments are made to EMCON, Buyer or a Related Person
of EMCON and Buyer and (G) for purposes of the earnout calculation, the interest
cost of any funds loaned to NEP by EMCON and/or OWT for any purpose, including
but not limited to paying off the existing NEP bank lines, shall be included as
an expense of NEP.
2.3 Closing. The closing of the purchase, sale and exchange (the "Closing")
provided for in this Agreement will take place at the offices of Kegel, Chesters
& Xxxxxx, LLP, 00 Xxxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxx effective the close
of business on April 30, 1997, or at such other date and time as may be approved
in writing by the parties hereto.
2.4 Closing Obligations. At the Closing:
53
(a) The Sellers, will deliver to Buyer:
(i) certificates representing the Common Shares held by the Sellers , duly
endorsed (or accompanied by duly executed stock powers), for transfer to Buyer;
(ii) a certificate executed by each of the Sellers representing and
warranting to Buyer that each of the representations and warranties by him, or
it in this Agreement was accurate in all material respects as of the date of
this Agreements and is accurate in all material respects as of the Closing Date
as if made on the Closing Date (giving full effect to any supplements to the
Sellers' Disclosure Schedule that were delivered by the Company to Buyer prior
to the Closing Date in accordance with Section 6.5); and
(iii) such other documents as are required to be provided pursuant to
Section 8; and
(b) Buyer will deliver to each Seller:
(i) the amount to be paid to each Sellers at the Closing as determined
pursuant to Section 2.2 above. Such amounts shall be paid by bank cashier's
check payable to each Seller.
(ii) a certificate executed by Buyer representing and warranting to each
Seller that each of Buyer's representations and warranties in this Agreement was
accurate in all material respects as of the date of this Agreement and is
accurate in all material respects as of the Closing Date as if made on the
Closing Date (giving full effect to any supplements to any schedules that were
delivered, pursuant to this Agreement, by the Buyer to the Sellers or the
Company prior to the Closing Date in accordance with Section 7.3);
(iii) such other documents as are required to be provided pursuant to
Section 9;
2.5 Xxxxx Employment Agreement. Concurrently herewith, Xxxxxx Xxxxx shall
execute and deliver an employment agreement with the Company and EMCON in the
form attached hereto as Exhibit C-1 (the "Xxxxx Employment Agreement"),
including the commitment of EMCON to grant an incentive stock option to purchase
10,000 shares of EMCON Common Stock at an exercise price per share equal to the
closing sales price of EMCON's Common Stock on the Closing Date.
2.6 Xxxxxxxx Employment Agreement. Concurrently herewith, Xxxxxxx Xxxxxxxx
shall execute and deliver an employment agreement with the Company and EMCON in
the form attached hereto as Exhibit C-2. (the "Xxxxxxxx Employment Agreement")
"), including the commitment of EMCON to grant an incentive stock option to
purchase 10,000 shares of EMCON Common Stock at an exercise price per share
equal to the closing sales price of EMCON's Common Stock on the Closing Date.
54
3. Representations and Warranties of the Sellers. The Sellers each, jointly
and severally represent and warrant to Buyer, as of the Closing Date, that
except as set forth on the Sellers' Disclosure Schedule:
3.1 Corporation Organization.
(a) The Company is a corporation, duly incorporated, validly existing and
in good standing under the laws of the State of Pennsylvania. The Company has
all requisite corporate power to own, operate and lease its properties and to
conduct its business as now being conducted. The Company is duly qualified or
licensed to do business, and is in good standing as a foreign corporation, in
each state or other jurisdiction in which it owns or leases properties or where
the nature of its business or operations requires such qualification or
licensing, unless the failure to do so would not have a material adverse effect
on the Company's assets, business, operations or financial condition. The
Company has obtained all approvals, authorizations, consents, licenses,
clearances and orders of, and has currently effective all registrations with,
all governmental and regulatory authorities that are necessary to the conduct of
its business or operations as now being conducted, except where the failure to
do so would not have a material adverse effect on the Company.
3.2 Capitalization.
(a) The authorized capital stock of the Company consists solely of 10,000
shares of common stock, no par value. There are currently issued and outstanding
501 shares of common stock; all of which are held by the Sellers and listed
beside their names on Exhibit A attached hereto. All of the issued and
outstanding shares of the Company are duly authorized, validly issued, fully
paid and nonassessable except where failure to be so would not have a material
adverse effect on the business, financial position or operating results of the
Company. All such shares have been issued in accordance with federal and
applicable state securities laws concerning the issuance of securities. The
rights, preferences and privileges of the Company's capital stock are as stated
in the Company's Articles of Incorporation and Bylaws as heretofore amended.
(b) Except as otherwise set forth in the Sellers' Disclosure Schedule, no
options, warrants, conversion privileges, preemptive rights, rights to first
refusal or other rights, agreements or commitments (written or otherwise) by the
Company are currently outstanding to purchase or otherwise receive any of the
capital stock of the Company.
(c) The Sellers have delivered to the Buyer complete and accurate copies of
the Articles of Incorporation and Bylaws (including all amendments thereto) of
the Company. The Company has delivered to the Buyer copies of the minute books
of the Company containing minutes for all meetings of, and written consents
issued by the Company and executed by, the Company's stockholders, Board of
Directors and all committees of such Board since the date of organization of the
Company.
55
3.3 Corporate Authority. The Company has all requisite corporate authority
and power to execute and deliver this Agreement and the other agreements
referenced herein and to perform all of its obligations with respect to the
Contemplated Transactions. The execution, delivery and performance of this
Agreement and the other agreements referenced herein and the consummation of the
transactions contemplated hereby and thereby have been duly authorized, or prior
to the Closing will be duly authorized, by the Company's Board of Directors and,
if required, by its stockholders.
3.4 Dissolution; Forfeiture. No action at law or in equity and to the
Knowledge of the Sellers, no investigation or proceeding, whatsoever is now
pending or threatened to: (a) liquidate, dissolve or disincorporate the Company,
(b) declare any of the corporate rights, powers or privileges of the Company, to
be null and void or otherwise than in full force and effect, (c) declare that
the Company, or the Boards of Directors or any of their respective officers,
agents or employees has exceeded or violated any of their respective corporate
rights, powers or privileges, or (d) obtain any decree, order, judgment or other
judicial determination or administrative or other ruling that would or might
impede or detract from any of the corporate rights, powers or privileges now
vested in or claimed by the Company.
3.5 The Company Financial Statements. The consolidated financial statements
of the Company for the fiscal years ended September 30, 1995 and September 30,
1996 and the six (6) month period ended March 31, 1997 (the "Company Financial
Statements") have been prepared in accordance with GAAP and fairly present, in
all material respects, the financial position of the Company in accordance with
GAAP as at the dates thereof.
3.6 Absence of Unaccrued or Undisclosed Liabilities. Except for claims,
liabilities or obligations as provided for in the following, the Company does
not have any material liabilities whether absolute, accrued, unaccrued,
contingent or otherwise whether due or to become due:
(a) which were properly reflected or adequately reserved against in the
balance sheet included as part of the Financial Statements;
(b) which were incurred in the Ordinary Course of Business since March
31, 1997;
(c) which are listed on the Sellers' Disclosure Schedule; or
(d) which are less than $10,000 in any single case;
Except as set forth in paragraphs (a) through (d) of this Section 3.6, the
Sellers do not have Knowledge of and have no reasonable grounds to know of any
basis for any assertion against the Company of any material claims, liabilities
or obligations of any nature required by GAAP to be reflected in a corporate
balance sheet which have not been fully reflected or reserved against in the
Financial Statements; provided, however, that no limitation set forth in this
Section 3.6 shall in any way affect any other representation or warranty
contained in this Agreement.
56
3.7 Absence of Certain Changes. Since March 31, 1997 there has not been
any: (a) material adverse change in the business, financial condition or
operations of the Company, (b) recapitalization, amendment to the Articles of
Incorporation or Bylaws or any change in, authorization, creation, issuance or
agreement for issuance of, the capital stock or any securities convertible into,
or options, warrants or other rights to subscribe to any shares of capital stock
of the Company, or any declaration setting aside or payment of any dividend or
distribution (whether in cash, securities or property) with respect thereto,
except as contemplated hereby, (c) increase in the compensation, direct or
indirect, payable to any of the officers or employees of the Company, including
adoption of or increase in any bonus, insurance, pension or other employee
benefit plan, payment or arrangement, or any other agreement or arrangement with
its officers, employees or stockholders, except as contemplated hereby, (d)
unwaived default in respect of any Material Contracts, except for such defaults,
if any, which do not have a material adverse effect on the financial position,
business or operating results of the Company, (e) material change in the methods
and procedures employed in keeping the books and records of the Company or (f)
strike or labor dispute.
3.8 Taxes. All tax returns of the Company required by law (including,
without limitation, all income, unemployment compensation, worker's
compensation, Social Security, excise, privilege and franchise tax laws of the
United States or any state or municipal subdivision thereof) to be filed through
the Closing Date (true and complete copies of which have been delivered to the
Buyer) have been or will be duly and timely filed, and all taxes, assessments,
contributions, fees and governmental charges or impositions shown on said
returns or reports (other than those not yet due and payable or payable without
penalty or interest) have been paid, except where any failure to so file or pay
would, individually or in the aggregate, have a material adverse effect on the
Company, taken as a whole. The Company has not received any notice of assessment
of any federal, state, municipal or other tax upon or measured by its income
and, to the Sellers' knowledge, there is no basis for an additional assessment
of any such tax, except for those for which the Company has established adequate
reserves. The Company has not knowingly waived any law or regulation fixing, or
consented to the extension of, any period of time for the assessment of any tax
or other governmental imposition, or become committed so to do. There are no
audits of the Company pending and there are no matters under discussion with any
federal, state, local or foreign authorities with regard to the payment of any
taxes by the Company. There are no issues that have been raised by the IRS or
other taxing authority in connection with an examination or otherwise which by
application of similar principles could reasonably be expected to result in a
proposed deficiency for any period not examined.
3.9 Title to Properties; Accounts Receivable.
(a) Except for property and assets that the Company has disposed of in the
Ordinary Course of Business, the Company has, and will have at the Closing Date,
good and marketable title to all properties and assets shown or represented on
the balance sheet included as part of the Company Financial Statements or
acquired since March 31, 1997, free and clear of all mortgages, pledges, liens,
defects in title, conditional sale agreements and other encumbrances, except for
57
liens, encumbrances and defects in title in respect of property or assets of the
Company which: (i) are incidental to the conduct of the Company's business; (ii)
have arisen in the Company's Ordinary Course of Business; (iii) were not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than credit arrangements related to purchase money liens); and
(iv) do not in the aggregate materially detract from the property and assets of
the Company. The Company has performed all the obligations required to be
performed by it with respect to all assets leased by it through the date hereof,
except where the failure to perform would not have a material adverse effect on
the business or financial condition of the Company. The Company enjoys peaceful
and undisturbed possession of all of its offices, warehouses, buildings and all
other real property and related facilities, whether owned, leased or operated
(collectively, the "Facilities"), and, except as otherwise set forth in the
Sellers' Disclosure Schedule, such Facilities are not subject to any claims,
liens, pledges, options, charges, easements, security interests, rights-of-way,
encumbrances or other rights, or any encroachments, building or use
restrictions, exceptions, reservations or limitations which in any material
respect interfere with or impair the present and continued use thereof in the
usual and normal conduct of its business. There are no pending or to Sellers'
Knowledge threatened condemnation proceedings relating to any of the Facilities.
The Facilities and the real property improvements (including leasehold
improvements), equipment and other tangible assets owned or used by the Company
at the Facilities are insured in amounts believed by the Sellers to be adequate
and, are structurally sound with no material defects. Said items are not subject
to any commitment or other arrangement for their sale by the Company or use by
third parties other than commitments or arrangements entered into in the
Ordinary Course of Business. The assets are valued at or below the lower of fair
market value or actual cost less an adequate and proper depreciation charge. For
tax purposes, the Company has not depreciated any of the assets in any manner
inconsistent with applicable IRS guidelines, if any.
(b) All tangible property, real and personal, owned or leased by the
Company is in reasonable operating condition and repair, except for ordinary
wear and tear and any defects the cost of repairing which, singly or in the
aggregate, would not be material or are accrued for on the Company Financial
Statements. The Company has operated such property in conformity with all
applicable laws, ordinances, orders, regulations, rules and other requirements
(including applicable zoning, environmental, motor vehicle safety or standards,
occupational safety and health laws and regulations) currently in effect and
relating thereto, except where the failure to conform would not have a material
adverse effect on the business, operations or financial condition of the
Company.
(c) All accounts receivable of the Company shown on the Company Financial
Statements are valid, genuine and subsisting, arose in the Ordinary Course of
Business, and the aggregate amount thereof less the reserve for doubtful
accounts with respect thereto set forth in the Company Financial Statements,
are, to the Knowledge of the Sellers, current and collectible within customary
payment terms.
(d) The Company did not perform a title search or purchase title insurance
on the three properties on which it has license agreements, namely, the Moll,
Hinton and Xxxxx Refractories properties. As a consequence, Sellers take
exception for title defects in the respective owner's title to such properties
for those title defects of record or visible on the property; provided that,
Sellers represent that they have no actual knowledge, without independent
investigation, of any such defects which have adversely affected, or could
adversely affect, the Company's operations on such properties.
58
3.10 Proprietary Rights.
(a) The Company owns the rights to use all trademarks, trade secrets, trade
names, copyrights, processes, designs, formulas, know-how, inventions, licenses
and intellectual property rights used in connection with its business and the
same are believed by the Sellers to be sufficient to conduct such business as it
is now or heretofore has been conducted with no known or asserted conflict with
or infringement of the asserted or actual rights of others. The Sellers have no
Knowledge of any infringement by any third party in connection with any of the
foregoing and neither the Sellers nor the Company has taken or omitted to take
any action which would have the effect of waiving any of the Company's rights
thereunder, in each case except where such infringement or waiver would not have
a material adverse effect on the business, prospects, condition (financial or
otherwise) or results of operations of the Company. To the Knowledge of the
Sellers, no third party has filed or been issued or granted any applications for
patents, trademarks, trade names or registered copyrights relating to the
Company's assets.
(b) The Sellers' Disclosure Schedule lists all patents, patent
applications, trademarks, trade names and registered copyrights owned by the
Company. Except as set forth in the Sellers' Disclosure Schedule, the Company is
not required to pay any royalty, license fee or similar type of compensation in
connection with the conduct of its business as it is now or heretofore has been
conducted.
(c) The Company has obtained written agreements from all required parties
and entities assigning to the Company any material proprietary rights relating
to the Company's assets. Such agreements are currently valid and in full force
and effect and except as set forth in the Sellers' Disclosure Schedule, do not
contain any provisions or restrictions with regard to the rights granted to the
Buyer under this Agreement All material trade secrets of the Company are
currently protectable and are not part of the public knowledge or literature,
nor have they been used, divulged, or appropriated for the benefit of any past
or present employees or other persons, or to the detriment of, the Company.
3.11 Customer Lists. The Company has provided the Buyer a complete and
accurate list of each of the material customers of the Company. The
relationships between the Company and its active customers and suppliers are, in
the aggregate, in good standing, and since March 31, 1997, no material customer
or supplier has canceled or terminated, or, to the Knowledge of the Sellers,,
threatened to cancel, terminate or change its relationship with the Company in
any manner adverse to the Company.
3.12 Benefit Plans and Arrangements.
(a) Except as set forth in the Sellers' Disclosure Schedule, or as
otherwise contemplated by this Agreement, the consummation of the Contemplated
Transactions will not result in any payment (whether of severance pay or
otherwise) becoming due from the Company to any employee, consultant or other
third party.
59
(b) The Sellers' Disclosure Schedule lists all pension, retirement, stock
purchase, stock option, stock bonus, savings or profit sharing plan, individual
employment agreement, bonus or incentive compensation programs, deferred
compensation agreements, severance pay plans, consultant, bonus, or group
insurance contracts, or any other material incentive, welfare or employee
benefit plan, or similar arrangement, understanding or course of dealing,
including all employee benefit plans and employee pension benefit plans as
defined in Section 3(3) of ERISA (the "Employee Plans").
(c) With respect to the Employee Plans, the Company has delivered or made
available to the Buyer copies of any: (1) plans and related trust documents and
amendments thereto; (ii) the most recent summary plan descriptions and the most
recent annual report; (iii) annual reports on Form 5500 which were filed in each
of the most recent three (3) plan years, including, without limitation, all
schedules thereto and all financial statements with attached opinions of
independent accountants; (iv) Form PBGC-1 which was filed in each of the most
recent three (3) plan years; (v) the most recent actuarial valuation; and (vi)
the most recent determination letter received from the IRS. Such financial
statements fairly present the financial condition of each Employee Plan in
accordance with United States generally accepted accounting principles applied
on a consistent basis. All Employee Plans have been administered in substantial
compliance with their terms, ERISA to the extent applicable, and, where
applicable, Section 401 of the Code.
(d) No event of the type set forth in Section 4043(b) of ERISA has occurred
and is continuing with respect to Employee Plans except insofar as such an event
may arise as a result of the consummation of the Contemplated Transactions or
would not have a material adverse effect upon the Company's business, financial
position or operating results. There exists no material violation of ERISA with
respect to the filing of reports, documents, and notices regarding the Employee
Plan participants or beneficiaries. No action, suit, or proceeding is pending,
nor, to the Knowledge of the Company, is any threatened or imminent, with
respect to the assets of any of the trusts under any Employee Plan. All
amendments required to bring an Employee Plan into conformity, in all applicable
and material respects, with ERISA have been made. Any bonding with respect to an
Employee Plan required under ERISA is in full force and effect. The Company has
not incurred any liability, pursuant to Subtitle A of Title IV of ERISA, to the
Pension Benefit Guaranty Corporation.
(e) No breach of fiduciary responsibility has occurred with respect to any
of the Employee Plans other than such breach, if any, which would not have a
material adverse effect on the Company's business, financial position or
operating results. There is no suit, litigation or claim (other than routine
benefit claims) pending or, to the Knowledge of the Sellers, threatened against
the Company or any fiduciary of any Employee Plan involving any Employee Plan or
against any such plan or its assets by any employee or former employee (or
beneficiary thereof) of the Company which individually or in the aggregate would
adversely affect the financial condition of any such Employee Plan.
60
3.13 Compliance with Laws; Legal Proceedings.
(a) The Company is not in violation of, or in default with respect to, any
term or provision of (i) its Articles of Incorporation or Bylaws, or (ii) any
judgment, writ, order, injunction, or decree of any court or of any federal,
state, or municipal agency or authority in any case or proceeding expressly
naming the Company.
(b) The Company and its operations are in compliance with applicable
statutes, ordinances, regulations, requirements and orders of the federal
government and of all states, municipalities, and agencies thereof, and of all
other authorities having jurisdiction in respect of any of its assets or
operations (including any applicable foreign government or agency or subdivision
thereof), except where the failure to do so would not have a material adverse
effect on the Company.
(c) The Company has not been threatened with, nor is it a party to,
directly or indirectly, nor, to the Knowledge of the Sellers, is there any set
of facts that is likely to give rise to, any material legal action, governmental
investigation, or other proceeding (governmental or private), including
investigations, inquiries, citations, complaints, orders or stipulations by any
federal, state or local agency or governmental unit, and there are no judgments,
orders, restrictions or decrees of a continuing nature outstanding against the
Company. The Company has not been threatened with, nor, to the Knowledge of the
Sellers is there any set of facts that is likely to give rise to, a charge of
any material violation of any provision of any federal, state, local or other
law (including common law), or administrative regulations in respect of its
business or property.
3.14 Contracts and Obligations. The Sellers' Disclosure Schedule sets forth
a true and complete list of the following agreements and instruments to which
the Company is a party: (a) all executory contracts, agreements and instruments
having a total contract price in excess of $25,000; (b) all contracts,
agreements or instruments which are in the nature of teaming agreements, joint
venture agreements, non-compete agreements, franchise agreements, exclusive
license agreements or other similar agreements restricting access to any
business opportunity of the Company; (c) all loan or debt agreements,
guarantees, indemnities and bonding commitments; (d) all license or technology
transfer agreements; (e) all leases, subleases and equipment leases, having a
total contract price in excess of $25,000; (f) all agreements between the
Company, on the one hand, and any of the officers, directors or stockholders;
(g) all material agreements between the Company, on the one hand, and any other
employees of the Company on the other hand; (h) all material licenses or permits
issued by any government agency or authority for the benefit of the Company; (i)
any management or consultation agreement not terminable at will without
liability; (j) any contracts or agreements requiring the payment of fees or
commissions in connection with any sale of all or substantially all of the
Company's stock or assets or any sale of a substantial interest in the Company;
and (k) any other agreement which materially affects the Company's business,
financial position or operating results or which was entered into other than in
the Ordinary Course of Business (collectively, the "Material Contracts"). The
Company has delivered to the Buyer true and complete copies of each of the
Material Contracts. The Company is not in material violation of, or in default
61
with respect to, any Material Contract and the Material Contracts are valid,
binding and enforceable, subject only to applicable bankruptcy, insolvency and
similar laws affecting creditors rights generally and subject, as to
enforceability, to general principles of equity. The relationships between the
Company and the other parties to each of the Material Contacts are in good
standing, and no such other contract party has canceled or terminated, or
threatened to cancel, terminate or change in any manner adverse to the Company
such relationship or the terms of any Material Contract.
3.15 Employee Relations.
(a) The Company has no union or collective bargaining agreement, any
contract or other agreement with any labor organization or with any employee or
consultant which is not terminable at will by the Company, without liability,
and no such contract or agreement is under discussion by management of the
Company with any employee or consultant. There are no pending or threatened (i)
strikes, work stoppages, slowdowns or picketing respecting employees of the
Company, (ii) unfair labor practice complaints against the Company, or (iii)
statutes, contracts or agreements, domestic or foreign, which will obligate the
Company to make any severance payments as a consequence of the execution of this
Agreement or the consummation of the Contemplated Transactions.
(b) The Company has not received notice that there is any key employee who
intends to leave the Company's employ as a result of, or at the conclusion of,
the Contemplated Transactions. The Company's relationship with its employees, on
the whole, is consistent within industry norms.
3.16 Insurance. The properties and risks of the Company are covered by
valid and currently effective insurance policies issued in favor of the Company,
which policies are set forth on the Sellers' Disclosure Schedule, and the
Company is included as an insured party under such policies, with full rights as
loss payee. The Sellers' Disclosure Schedule contains a list and brief
description of each insurance policy (copies of which have been previously
provided to the Buyer) maintained with respect to the Company (or such
corporation's assets or operations), which provides continuing coverage as of
the date hereof. The Sellers' Disclosure Schedule also includes a list and brief
description of individual claims in excess of $10,000 now pending or made during
the 36-month period immediately preceding the date of this Agreement, by or on
behalf of the Company under any insurance policies.
3.17 Environmental Compliance.
(a) The Company has all material permits, licenses and other authorizations
required under applicable laws and regulations relating to pollution control and
protection of the environment necessary for the operation of its Facilities. The
Company is not in material violation of any of the terms or conditions of any
such permits, licenses, leases, or authorizations. The Company has not acted or
failed to act in violation of any law or regulation, order or other requirement
of governmental authorities with respect to the pollution of the atmosphere,
surface water, groundwater and noise, the handling of toxic or hazardous waste
material or other matters related to the environment. There are no pending or,
to the Knowledge of the Sellers, threatened civil or criminal actions, notices
of violations or administrative proceedings relating to pollution control or
protection of the environment that would have a material adverse effect on the
business or financial condition of the Company.
62
(b) There are no material conditions, circumstances, activities, practices,
incidents, actions or plans which would be reasonably likely to interfere with
or prevent compliance or continued compliance by the Company with any
environmental laws currently in force or with any existing regulation, code,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, or which may give rise to any common law or
other legal liability, including without limitation, liability under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or similar state, foreign or local laws, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, notice of violation, study or
investigation of or against the Company, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into the
workplace or the environment by the Company, or to the Company's Knowledge, by
any other third party, of any pollutant, contaminant, chemical, or industrial,
toxic or hazardous material, substance or waste on any properties owned or
leased by, or under the direct control of, the Company. Without in any way
limiting the foregoing, no release, emission or discharge to the environment of
any hazardous substance (as that term is currently defined under CERCLA or under
any applicable analogous state law ("Hazardous Substance") by the Company, or to
the Company's Knowledge, by any other third party has occurred or is currently
occurring in connection with any action or failure to act on any properties
owned or leased by, or under the direct control of, the Company which has or
could give rise to any liability of the Company.
3.18 Advances; Related Party Transactions.
(a) There are no receivables of the Company owing by any directors,
officers, employees or consultants of the Company or to any affiliate of any
such Company person or entity, other than advances by the Company in the
ordinary course of business to officers and employees for reimbursable business
expenses.
(b) No stockholder, officer, director or employee of the Company, nor any
member of the Family of any such stockholder, officer, director or employee
owns, or has owned, directly or indirectly, any interest exceeding five percent
(5%) in (a) any business, corporate or other, which is material party to any
material business arrangement with the Company or (b) any material property or
rights, tangible or intangible, used in the business of the Company. No
stockholder, officer, or director of the Company, owns, directly or indirectly,
any interest in, or is an officer or director of, any business, corporate or
other (other than as a stockholder of a public company), which competes with the
Company.
3.19 Powers of Attorney. The Sellers' Disclosure Schedule contains a
complete list of all powers of attorney (or similar instruments or
authorizations) granted by the Company to any person or entity. All such powers
of attorney (or similar instruments or authorizations) are subject to
termination or revocation by the Company at any time, without notice to any
other person or entity and without penalty.
63
3.20 No Brokers. Neither the Company nor the Sellers has entered into or
will enter into any contract, agreement or understanding with any Person, which
may result in the obligation of the Company or the Buyer to pay any finder's
fee, brokerage commission or similar payment in connection with the Contemplated
Transactions
3.21 Other Agreements to Sell the Company. Except as set forth herein, the
Company has no legal obligation, absolute or contingent, to any person or firm
to sell any capital stock of the Company or to effect any merger, consolidation
or other reorganization, or disposition of all or substantially all the assets,
of the Company.
3.22 Banking Relationships. The Sellers' Disclosure Schedule correctly and
completely lists all banks and accounts in such banks, with which the Company
has deposits, indicating the names of those authorized to sign documents with
respect to such accounts as of the date of the most recently approved banking
resolution with respect to each.
3.23 Ownership of Shares and Options. Except as set forth in the Sellers'
Disclosure Schedule, the Sellers own of record and beneficially the number of
Common Shares indicated opposite each such Seller's name in Exhibit A hereto, as
applicable, with full right and authority to sell or exchange, as applicable,
such securities hereunder, and upon delivery of such Common Shares hereunder,
the Buyer will receive good title thereto, free and clear of all mortgages,
pledges or security interests and not subject to any agreements or
understandings among any Persons with respect to the voting or transfer of such
securities other than those arising under agreements to which Buyer is a party
3.24 Execution, Delivery and Enforceability of Agreement; No Violation.
This Agreement has been duly executed and delivered by or on behalf of the
Company and each Seller, and at the Closing any other documents required
hereunder to be executed and delivered by or on behalf of the Company and each
Seller will have been duly executed and delivered. This Agreement constitutes
the legal, valid and binding obligation of the Company and each Seller,
enforceable against the Company and each Seller in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting
creditor's rights generally. Any other agreements or documents required
hereunder to be executed and delivered by the Company and each Seller at Closing
will constitute the legal, valid and binding agreements of the Company and each
Seller executing the same, enforceable against the Company and each Seller in
accordance with their respective terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other laws affecting creditor's rights generally. Neither the
execution of this Agreement nor the consummation of the Contemplated
Transactions by the Company and each Seller will violate, or constitute a
default under, or permit the acceleration of maturity of, except to the extent
waived, any indentures, mortgages, promissory notes, contracts or agreements to
which the Company and each Seller is a party or by which the Company and Seller
or the Company and each Seller's properties are bound.
3.25 Information Supplied. To the Knowledge of the Sellers, neither this
Agreement, the Company Financial Statements, the Sellers' Disclosure Schedule,
the Exhibits attached to this Agreement, nor any other certificate or document
furnished or to be furnished by the Company or the Sellers pursuant to the terms
of this Agreement, contains or will contain any untrue statement of a material
fact known to the Sellers or omits or will omit to state a material fact
necessary to make the statements contained in such information not misleading in
light of the circumstances under which such statements were made.
64
3.26 Residence and Domicile. The Sellers are residents of, and domiciled
in, the States indicated on Exhibit A hereto, as applicable, as being the
residence of each such Seller.
4. [Reserved]
5. Representations and Warranties of Buyer and EMCON. Buyer
and EMCON jointly and severally represent and warrant to Sellers and the
Company, as of the date hereof and except as set forth in the Buyer's Disclosure
Schedule, as follows:
5.1 Organization and Good Standing. Buyer and EMCON are corporations duly
organized, validly existing, and in good standing under the laws of the States
of Delaware and California, respectfully.
5.2 Execution, Delivery and Enforceability of Agreement; No Violation. This
Agreement has been duly executed and delivered by or on behalf of the Buyer and
EMCON, and at the Closing any other documents required hereunder to be executed
and delivered by or on behalf of the Buyer and EMCON will have been duly
executed and delivered. This Agreement constitutes the legal, valid and binding
obligation of the Buyer and EMCON, enforceable against Buyer and EMCON in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws affecting creditor's rights generally. Any other agreements required
hereunder to be executed and delivered by the Buyer and EMCON at Closing will
constitute the legal, valid and binding agreements of the Buyer and EMCON,
enforceable against the Buyer and EMCON in accordance with its respective terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting
creditor's rights generally. Neither the execution of this Agreement nor the
consummation of the transactions provided for herein by the Buyer and EMCON will
violate, or constitute a default under, or permit the acceleration of maturity
of, except to the extent waived, any indentures, mortgages, promissory notes,
contracts or agreements to which such respective party is a party or by which
such respective party or its properties are bound. Except as set forth in the
Buyer's Disclosure Schedule, Buyer and EMCON are not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
5.3 Investment Intent. Buyer is acquiring the Common Shares from the
Sellers for its own account and not with a view to their distribution within the
meaning of Section 2.11 of the Securities Act. Buyer is a sophisticated business
entity, experienced in the business of the Company and is able to evaluate the
merits and risks of acquiring the Common Shares.
65
5.4 Certain Proceedings. There is no pending Proceeding that has been
commenced against Buyer or EMCON that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
threatened.
5.5 Brokers or Finders. Buyer and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
5.6 Information Supplied. The EMCON Annual Report on Form 10-K for the
fiscal year ending December 31, 1996, does not contain any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained therein not misleading in light of the circumstances under which such
statements were made.
5.7 No Material Change. Since December 31, 1996, there has been no material
adverse change in the business, financial position or operations or Buyer or
EMCON.
6. Covenants of the Sellers Prior to Closing Date.
6.1 Conduct of Business Pending Closing. Except as contemplated by this
Agreement or otherwise agreed to by the Buyer in writing, prior to Closing, the
Sellers hereby covenant and agree as follows:
(a) The Company will carry on its business in the Ordinary Course of
Business and, without limiting the generality of the foregoing, (i) not sell,
assign, lease, pledge, mortgage, encumber or otherwise dispose of or grant any
preferential rights in any of its assets, or incur or become obligated to pay,
any liabilities, except in the Ordinary Course of Business, (ii) not pay or
prepay any obligation or liability (fixed, contingent or otherwise), or
discharge or satisfy any lien or encumbrance, or settle any liability, claim,
dispute, proceeding, suit or appeal, pending or threatened against it or any of
its assets or properties, except for the pay off of all long term debt owed to
Xxxxxxx Xxxxxxxx in the approximate amount of $79,000 and current liabilities
included in the Company Financial Statements and current liabilities incurred
since March 31, 1997 in the Ordinary Course of Business or current non-material
liabilities, (iii) except for individual expenditures and commitments made in
the Ordinary Course of Business and involving amounts not exceeding $10,000, not
make any expenditure or commitment for the purchase, acquisition, construction
or improvement of a capital asset, (iv) use its Best Efforts to continue in
effect all existing policies of insurance (or comparable insurance) of or
relating to the Company, (v) keep proper books of record and account necessary
to prepare financial statements in accordance with GAAP and (vi) not amend or
terminate any Material Contract in a manner that would have a material adverse
effect on the business, financial position or operating results of the Company
or amend any contract, agreement or license to which it is a party, which
amendment would make it a Material Contract, unless such amendment would not
have a material adverse effect on the business, financial condition or operating
results of the Company and would not extend the term of such contract, agreement
or license by more than one year.
66
(b) No change will be made in the authorized or issued and outstanding
capital stock of the Company, and the Company shall not issue or commit to issue
any option, warrant, note, bond or other security convertible into shares of the
Company's capital stock.
(c) Except as set forth on Exhibit D, no increase will be made in the
compensation payable or to become payable by the Company to any of its
directors, officers, employees, agents, consultants or stockholders, including
any stock options, bonus payments or other benefits.
(d) The Company will not effect or agree to effect any amendment or
supplement to, or extension of, any Employee Plan.
(e) The Company will not acquire any equity securities or similar interest
in any other corporation, association, joint venture, partnership, business
trust or other business entity, or acquire the assets or liabilities of any of
the foregoing, or merge, consolidate or otherwise combine with any other
corporation or other business entity, or enter into any agreement providing for
any of the foregoing.
(f) The Company will not enter into or agree to enter into any other
contracts, licenses or other transactions other than in the Ordinary Course of
Business and, without limiting the generality of the foregoing, not enter into
or agree to enter into any contracts, agreements or instruments which are in the
nature of joint venture agreements, non-compete agreements, franchise
agreements, exclusive license agreements, or other similar agreements.
(g) Except as required by currently existing agreements, the Company will
not declare or pay any dividend on the outstanding shares of the Company's
capital stock in cash, stock or property or redeem, repurchase or otherwise
acquire any shares of the Company's capital stock or enter into any agreement
providing for any of the foregoing.
(h) The Company and the Sellers will not solicit or initiate proposals or
offers from any person relating to any acquisition or purchase of all or
substantially all of the assets of, or any equity interest in, the Company, or
any merger, consolidation, business combination or similar transaction with the
Company, or participate in any negotiations regarding, or furnish to any other
person any confidential information with respect to, or otherwise cooperate in
any way with, or participate in, facilitate or encourage, any effort or attempt
by any other person to do or seek any of the foregoing. The Company shall
promptly notify the Buyer if any such proposal or offer, or any inquiry or
contact with any person with respect thereto, is made.
(i) No change will be made with respect to the banking or safe deposit
arrangements of the Company:
(j) The Company will use its Best Efforts to keep intact the organization
of the Company; to keep available the services of the Company's present
employees; and to preserve the goodwill of its suppliers, customers and others
having business relations with the Company; and
67
(k) The Company will timely file all required material tax returns and
promptly pay all federal, state and local tax assessments and governmental
charges lawfully levied or assessed upon it or upon its properties, or upon any
part thereof, which have become due and payable, and the Company will withhold
from its employee's wages and pay over all federal and state taxes required to
be withheld and paid over.
6.2 Advice of Changes. Prior to the Closing Date, the Company will promptly
advise the Buyer in writing of (i) any known event occurring subsequent to the
date of this Agreement which would render any representation or warranty of the
Company contained in this Agreement, if made on and as of the date of such event
or the Closing Date, untrue or inaccurate in any material respect (other than an
event so affecting a representation or warranty which is expressly limited to a
state of facts existing at a time prior to the occurrence of such event), and
(ii) any material adverse change in the business, financial position or
operating results of the Company occurring subsequent to the date of this
Agreement.
6.3 Access and Information. The Company will, at all reasonable times prior
to the Closing Date and upon reasonable notice from Buyer, open its offices,
books, accounts and records, including policies, claims of creditors, and
obligations of the Company, and will, upon reasonable notice from Buyer, provide
free access to the Company's management to discuss the Company's business
operations, assets, liabilities, actual or potential litigation and claims,
properties and prospects, to working papers, files and records of its
accountants, each for full and unrestricted examination and inspection by the
Buyer, its officers, attorneys or accountants.
6.4 Reasonable Efforts. Subject to the terms and conditions herein
provided, the Company and each Seller shall use his, her or its Best Efforts to
(a) cause to be fulfilled and satisfied all of the conditions to the Closing to
be fulfilled and satisfied by him, her or it and (b) cause to be performed all
of the matters required of him, her or it at the Closing.
6.5 Supplements to Sellers' Disclosure Schedule. Sellers shall have the
right, from time to time, on or prior to the Closing, to supplement the material
set forth in the Sellers' Disclosure Schedule initially delivered by the Sellers
to Buyer. Any references to the Sellers' Disclosure Schedule in this Agreement
or in any other document entered into in connection with this Agreement shall
mean the Sellers' Disclosure Schedule as fully amended and supplemented on or
prior to the Closing Date.
7. Covenants of Buyer Prior to Closing Date.
7.1 Access to Information. Between the date of this Agreement and the
Closing Date, Buyer will afford Sellers and their Representatives full and free
access, upon the request of Sellers, to copies of EMCON's public filings under
the Securities Act, the Exchange Act, and other information as Sellers and their
Representatives shall reasonably request.
68
7.2 Approvals of Governmental Bodies. As promptly as practicable after the
date of this Agreement, Buyer will, and will cause each of its Related Persons
to, make all filings required by Legal Requirements to be made by them to
consummate the Contemplated Transactions. Between the date of this Agreement and
the Closing Date, Buyer will, and will cause each Related Person to (a)
cooperate with Sellers with respect to all filings that Sellers are required by
Legal Requirements to make in connection with the Contemplated Transactions, and
(b) cooperate with Sellers in obtaining all consents identified in the Sellers'
Disclosure Schedule.
7.3 Supplements to Schedules. Buyer shall have the right, from time to
time, on or prior to the Closing, to supplement the material set forth in any
schedule initially delivered to the Company or the Sellers pursuant to this
Agreement. Any references to the Buyer Disclosure Schedule in this Agreement or
in any other document entered into in connection with this Agreement shall mean
such schedules as fully amended and supplemented on or prior to the Closing
Date.
7.4 Best Efforts. Subject to the terms and conditions herein provided, the
Buyer and EMCON shall use their Best Efforts to (a) cause to be fulfilled and
satisfied by it all of the conditions to the Closing to be fulfilled or
satisfied by it and (b) cause to be performed all of the matters required of it
at Closing.
7.5 Advice of Changes. Prior to the Closing Date, the Buyer will promptly
advise all of the other parties hereto in writing of (i) any event occurring
subsequent to the date of this Agreement which would render any representation
or warranty of the Buyer and EMCON contained in this Agreement, if made on and
as of the date of such event or the Closing Date, untrue or inaccurate in any
material respect (other than an event so affecting a representation or warranty
which is expressly limited to a state of facts existing at a time prior to the
occurrence of such event), and (ii) any material adverse change in the business
affairs of the Buyer occurring subsequent to the date of this Agreement.
8. Conditions Precedent to Buyer's Obligation to Close. Buyer's obligation
to purchase the Common Shares from the Sellers and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
8.1 Accuracy of Representations. Each of the representations and warranties
in Section 3 of this Agreement, must have been accurate in all material respects
as of the date of this Agreement and must be accurate in all material respects
as of the Closing Date as if made on the Closing Date.
8.2 Material Changes. There shall be no material adverse changes to the
business, financial condition or operating results of the Company since the date
of this Agreement.
8.3 Sellers' and the Company's Performance.
69
(a) All of the covenants and obligations that the Sellers and the Company
are required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each Seller or the Company, as the case may be, must have delivered
each of the documents required to be delivered by such Seller pursuant hereto
and each of the other covenants and obligations in required to be performed by
Seller or the Company must have been performed and complied with in all material
respects.
8.4 Consents. Each of the Consents required to be obtained to consummate
the Contemplated Transactions must have been obtained and must be in full force
and effect.
8.5 Additional Document. Sellers must have caused the following documents
to be delivered to Buyer:
(a) resolution of the Boards of Directors of the Company authorizing the
Contemplated Transactions, certified by the Secretary of the Company;
(b) certificates of good standing from the state of incorporation for the
Company as of a date no more than ten (10) days prior to the Closing Date.
8.6 No Proceedings. Since the date of this Agreement, there must not have
been commenced or threatened in writing against Buyer or the Company, or against
any Person affiliated with Buyer or the Company, any Proceeding (a) involving
any material challenge to, or seeking material damages or injunctive relief in
connection with, any of the Contemplated Transactions, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the Contemplated Transactions.
8.7 Sellers' Disclosure Schedule. The Sellers shall have provided Buyer
full and complete and final copies of the Sellers' Disclosure Schedule which
shall reflect no material adverse changes in the Company's business or financial
condition from the date of this Agreement.
8.8 Execution by Sellers. All of the Sellers listed on Exhibit A hereto
shall have executed this Agreement.
8.9 Employment Agreement. The Xxxxx Employment Agreement and the Xxxxxxxx
Employment Agreement shall be in full force and effect.
8.10 Notes. The EMCON Notes shall have been executed and delivered by the
Buyer to the Sellers.
70
8.11 Release of Suretyship Agreement. The Company shall have received a
release of all further obligations of the Company relative to NEP Sand & Gravel,
Inc., under that certain Suretyship Agreement dated as of April 8, 1996.
9. Conditions Precedent to Sellers' Obligation to Close. Sellers'
obligations to sell their Common Shares, and to take the other actions required
to be taken by Sellers at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by Sellers).
9.1 Accuracy of Representations. All of Buyer's representations and
warranties in Section 5 must have been accurate in all material respects as of
the date of this Agreement and must be accurate in all material respects as of
the Closing Date as if made on the Closing Date.
9.2 Approval of this Agreement by Board of Directors. This Agreement and
the agreements referenced herein must be approved by the Boards of Directors of
the Buyer and EMCON.
9.3 Buyer's Performance.
(c) All of the covenants and obligations that Buyer is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing must
have been performed and complied with in all material respects.
(d) Buyer must have delivered each of the documents (including the EMCON
Notes) required to be delivered by Buyer and EMCON and must have made the cash
payments required to be made by Buyer pursuant to Section 2.
9.4 Consents. Each of the Consents required to be obtained to consummate
the Contemplated Transactions must have been obtained and must be in full force
and effect.
9.5 No Material Adverse Change. There shall have been no material adverse
change in Buyer's or EMCON's business, financial condition or operating results
from the date of this Agreement.
9.6 Buyer's Disclosure Schedule. The Buyer shall have provided the Company
full and complete copies of Buyer's Disclosure Schedule which shall reflect no
material adverse changes in Buyer's or EMCON's business, financial condition or
operating results from the date of this Agreement.
9.7 Additional Documents. Buyer and EMCON must have caused to be delivered
to Sellers:
(a) resolution of the Boards of Directors of the Buyer and EMCON
authorizing the Contemplated Transactions, certified by the Secretary of Buyer;
and
71
(b) Certificates of good standing for the Buyer and EMCON as of a date no
more than ten (10) days prior to the Closing Date.
9.8 No Proceedings. Since the date of this Agreement, there must not have
been commenced or threatened in writing against Buyer, the Company or any
Seller, or against any Person affiliated with Buyers, the Company or any Seller,
any Proceeding (a) involving any material challenge to, or seeking material
damages or injunctive relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions;
provided however that this Section 9.9 may not be relied upon by the Company or
Sellers and this condition will be deemed to have been waived by the Sellers and
the Company if Buyer agrees to proceed to close hereunder and to indemnify the
Company and Sellers in full against any damages that may be incurred by reason
of any claim described in this Section.
9.9 Execution. The Sellers listed on Exhibit A shall have executed this
Agreement.
9.10 Employment Agreements. The Xxxxx Employment Agreement and the Xxxxxxxx
Employment Agreement shall be in full force and effect.
9.11. Indebtedness of the Company. Buyer shall have arranged financing for
the Company such that as of the Closing Date, all corporate and personal
guarantees and suretyships of the Company's indebtedness shall be released and
discharged, including without limitation, the suretyships of the Company's
indebtedness by Sellers and NEP Sand & Gravel, Inc. Buyer shall have arranged
for the replacement of the two letters of credit issued by Dauphin Deposit Bank
and Trust Company on behalf of the Company for the benefit of the Pennsylvania
Department of Environmental Protection, in the amounts of $17,300 and $22,800.
Buyer shall have repaid indebtedness owed by the Company to Xxxxxxx X. Xxxxxxxx,
in the amount at April 30, 1997 (after the scheduled payment on April 15, 1997)
of approximately $72,249.99.
10. Covenants After the Closing Date.
10.1 Litigation Support. In the event and for so long as any party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with:
(a) any of the Contemplated Transactions; or
(b) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act or
transaction on or prior to the Closing Date involving the Company, then the
other party shall cooperate with it and its counsel in the defense or contest,
make available its personnel and provide such testimony and access to its books
and records as shall be necessary in connection with the defense or contest, all
at the sole cost and expense of the contesting or defending party.
72
10.2 NEP Sand & Gravel Receivable. Contemporaneous with the anticipated
closing of the sale of NEP Sand & Gravel, Inc. by the Sellers, the outstanding
receivable from NEP Sand & Gravel, Inc. to the Company shall be immediately
repaid in full. In the event such amount is not repaid on or before July 31,
1997, the amounts remaining outstanding and unpaid from NEP Sand & Gravel, Inc.
shall be offset against and reduce, on a pro rata basis, the principal balance
of the EMCON Notes.
10.3 Mining License. Explore, Inc., a Pennsylvania corporation of which
Sellers own fifty-one percent of the outstanding stock, used the Company's
mining license number to apply for a mining permit to mine dimension stone at
the Xxxxxxxxxx Property. Sellers expect that a mining permit for the Xxxxxxxxxx
Property will be issued in the Company's name. For a period of one year from the
Closing Date (or earlier upon the sale or discontinuance of the Xxxxxxxxxx
project), Buyer shall cause the Company, and the Company shall, allow Explore,
Inc. to continue using the Company's mining license as previously used by
Explore, Inc. and maintain the mining permit in the Company's name. The Company
shall, and Buyer agrees to cause the Company to, cooperate with Sellers and
Explore, Inc. (and take all steps reasonably necessary or appropriate) to have
the permit issued in the Company's name at no cost to the Company. The Company
shall, and Buyer agrees to cause the Company to, transfer (and take all steps
reasonably necessary or appropriate to transfer at no cost to the Company) the
mining permit to a person selected by Sellers. Sellers represent that Explore,
Inc. will not engage in mining activity under the mining permit. Sellers
represent that Explore, Inc.'s continued use of the Company's mining license and
the issuance, maintenance and transfer of the mining permit in the Company's
name shall not result in any cost or liability to the Company. In this regard,
Sellers agree to indemnify and hold harmless the Company against any
liabilities, damages, costs or expenses, arising from Explore, Inc.'s use of the
Company's mining license and the issuance, maintenance and transfer of the
mining permit in the Company's name.
10.4 S Corporation Matters. Sellers, the Company and Buyer acknowledge that
upon the transfer of the Common Shares by Sellers to Buyer, the S corporation
election of the Company will automatically terminate because Buyer is an
ineligible shareholder for the valid continuation of S corporation status. The
Sellers, the Company and Buyer also acknowledge that because more than fifty
percent (50%) of the stock of the Company stock will change ownership in the
current tax year, under I.R.C. ss 1362(e)(6)(D), normal tax accounting
methods, and not a pro rata allocation, will apply to the short S tax year and
short C tax year resulting from termination of the S corporation elections. Upon
execution of this Agreement and continuing after the transfer, Sellers, the
Company and Buyer agree, without further consideration, to execute and deliver
promptly to the requesting party such further assignment, endorsement, and other
documents and instruments, and to take all such further actions, as Seller, the
Company or Buyer may from time to time reasonably request with respect to the
preparation and submittal of tax returns, tax notices and other documents,
including without limitation, the execution and delivery of a consent to
termination date of the S corporation election of the Company.
10.5 Mountain View Job Bonus. If the pre-tax profit on [the Mountain View
Job] exceeds $60,000, then Buyer shall cause the Company to pay a $5,000
compensation bonus to Xxx Xxxxx. In calculating pre-tax profits on the Mountain
View Job, the Company shall use the per job profit calculation method used by
the Company prior to the Closing which would include, for example, not
allocating administrative overhead to the Job.
73
11. Termination.
11.1 Termination Event. This Agreement may also be terminated prior to the
Closing:
(a) by written notice delivered to the other parties hereto at or prior to
the Closing
(i) by (A) Buyer if a Breach of any provision of this Agreement has been
committed by any Seller or by the Company or (B) the Company and the Sellers if
a Breach of any provision of this Agreement has been committed by the Buyer, and
such Breach set forth in (A) or (B) has not been waived, or cured within ten
(10) days after receipt of written notice of such Breach by the party against
whom such Breach is alleged; or
(ii) by the Buyer if the supplements to the Sellers' Disclosure Schedule,
disclose a material adverse change in the business, financial position or
operating results of the Company, from that set forth on the Sellers' Disclosure
Schedule as delivered to the Buyer.
(b) by written notice delivered to the other parties hereto at or prior to
the Closing
(i) by Buyer if any of the conditions in Section 8 has not been satisfied
as of the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement) and Buyer has not waived such condition on or
before the Closing Date; or
(ii) by Sellers owning a majority of the Common Shares or the Company, if
any of the conditions in Section 9 has not been satisfied as of the Closing Date
or if satisfaction of such a condition is or becomes impossible (other than
through the failure of Sellers or the Company to comply with their obligations
under this Agreement) and Sellers and the Company have not waived such condition
on or before the Closing Date; or
(c) by mutual consent of Buyer and the Sellers.
11.2 Effect of Termination. Each party's right of termination under Section
11.1 in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 11.1, all further
obligations and liabilities of the parties under this Agreement will terminate,
except as follows:
(i) The obligations in Sections 13.1, 13.2 and 13.3 will survive;
74
(ii) If this Agreement is terminated by a party because of the Breach of
the Agreement by another party, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
12. Survival; Remedies.
12.1 Survival. Notwithstanding any investigation conducted before or after
the Closing Date, the parties hereto will be entitled to rely upon the
representations and warranties of the other parties hereto set forth in this
Agreement (as modified by each party's Disclosure Schedule attached as an
Exhibit to this Agreement). All representations and warranties in this Agreement
or in any instrument delivered pursuant to this Agreement will survive the
Closing.
12.2 Limitation of Liability. Sellers, the Company, EMCON or Buyer shall
have no liability with respect to a breach of this Agreement, including without
limitation a breach of a representation, warranty or covenant contained in this
Agreement, until the total of all such liabilities against such party exceeds
$25,000 (provided however, that this minimum shall not apply to breaches of
Section 3.2 of this Agreement). The parties agree that each Seller's aggregate
liability with respect to his breach(es) of this Agreement shall be limited to
the purchase price received by such Seller pursuant to Section 2.2; provided,
however, that no such limitation of liability will apply to Damages incurred by
Buyer or EMCON as a result of any intentional or grossly negligent
misrepresentation, action or failure to act by Seller(s).
12.3 Survival. Notwithstanding any investigation conducted before or after
the Closing, the parties hereto will be entitled to rely upon the
representations and warranties of the other parties hereto set forth in this
Agreement. All representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement will survive until the date one
(1) year after the Closing, at which time the representations and warranties set
forth in this Agreement and all liability of the parties hereto with respect to
those representations and warranties will terminate; provided, however, that
thereafter a party hereto will remain liable with respect to any claim of breach
of a representation or warranty provided such claim has been asserted in writing
(specifying in reasonable detail the basis and amount of such claim) on or
before the date one (1) year after the Closing until such time as said claim has
been finally decided, settled, or adjudicated.
13. General Provisions.
13.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party to the Agreement will bear his, her or its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants.
13.2 Public Announcements. No party shall issue any press release or make
any public announcement related to the subject matter of this Agreement prior to
the Closing without the prior written approval of the Sellers and the Buyer;
75
provided, however, that any party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning the publicly-traded securities of such party (in which case the
disclosing party will use its reasonable best efforts to advise the other party
prior to making the disclosure and consult with the other party regarding the
content thereof). The Sellers and Buyer will consult with each other concerning
the means by which the Company's employees, customers and suppliers and others
having dealings with the parties will be informed of the Contemplated
Transactions.
13.3 Confidentiality. Between the date of this Agreement and five (5) years
after the date hereof, Buyer, the Company, and Sellers will maintain in
confidence, and will cause the directors, officers, employees, agents, and
advisors of Buyer, the Company, and the Sellers to maintain in confidence, and
not use to the detriment of another party any written, oral, or other
information obtained in confidence from another party in connection with this
Agreement or the Contemplated Transactions, expressly including the reports of
all consultants retained pursuant to the terms of this Agreement, unless (a)
such information becomes publicly available through no fault of such party, (b)
the use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the party providing
such information may reasonably request.
13.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed within three (3) business days by registered mail, return receipt
requested, (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), or (d) three (3)
business days after being sent by registered or certified mail, return receipt
requested, in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
Sellers: To each Seller at the address set forth on Exhibits A
The Company: National Earth Products, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx
Fax No.: (000) 000-0000
76
Buyer: EMCON
000 X. Xx Xxxxxx Xxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: R. Xxxxxxx Xxxxxxxxx, Esq.
Fax No.: (000) 000-0000
13.5 Binding Arbitration; Service of Process. In the event of
a dispute between the parties related to or arising out of this Agreement, the
Agents and representatives of the Buyer and the Company will meet promptly in an
effort to resolve the dispute amicably. If such parties cannot agree upon a
resolution within thirty (30) days of any such party requesting a meeting for
resolution of a dispute, then the matter will promptly be submitted to binding
arbitration in accordance with this Section 13.5.
(a) Arbitration will be held in Philadelphia, Pennsylvania, in accordance
with the rules and regulations of the American Arbitration Association. The
number of arbitrators will be one and will be selected in accordance with the
rules and regulations of the American Arbitration Association. The determination
of the arbitrator will be conclusive and binding upon the parties, and any
determination by the arbitrator of an award may be filed with the clerk of a
court of competent jurisdiction as a final adjudication of the claim involved,
or application may be made to such court for judicial acceptance of the award
and an order of enforcement, as the case may be. Except to the extent otherwise
directed by the arbitrator, each party will bear its own expenses, including
legal and accounting fees, if any, with respect to the arbitration, and one-half
of the costs of the arbitrator and of the fees imposed by the American
Arbitration Association.
(b) In any arbitration hereunder, the demand for arbitration shall
specifically delineate the claims asserted and the material issues with respect
thereto. Within thirty (30) days after filing a demand for arbitration, claimant
shall provide to respondent a list of all fact witnesses known to claimant, the
names and curriculum vitae of each expert witness anticipated to be called by
claimant, and a copy of relevant documents. Within thirty (30) days after
receipt of the foregoing information, respondent shall provide to claimant a
list of all fact witnesses known to respondent, the names and curriculum vitae
of each expert witness anticipated to be called by respondent, and a copy of
relevant documents known to respondent. Within ten (10) days after discovery has
been closed by the arbitrator (but in no event later than sixty (60) days prior
to the arbitration hearing), claimant shall present to respondent a list of all
fact and expert witnesses anticipated to be called by claimant, a summary of the
substance of each such witness' testimony, and a list of all documents
anticipated to be introduced by claimant (and a copy of such documents if not
previously provided to respondent). Within thirty (30) days after receipt of the
foregoing information, respondent shall present to claimant a list of all fact
and expert witnesses anticipated to be called by respondent, a summary of the
substance of each such witness' testimony, and a list of all documents
anticipated to be introduced by respondent (and a copy of such documents if not
previously provided to claimant). Any award by the arbitrator shall be subject
to all dollar and other limitations set forth in this Agreement.
77
(c) A demand for arbitration may be served on Buyer or Sellers by certified
U.S. Mail, postage prepaid, or reliable overnight delivery service, to the
address set forth in Section 13.4 hereof.
13.6 Further Assurances. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
13.7 Waiver. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
13.8 Entire Agreement and Modification. This Agreement
supersedes all prior agreements between the parties with respect to its subject
matter and constitutes (along with the documents referred to in this Agreement)
a complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
13.9 Sellers' Disclosure Schedule.
(a) The disclosures in the Sellers' Disclosure Schedule, and those in any
Supplement thereto, must relate only to the representations and warranties in
the Section of the Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement, unless it is obvious, from the
disclosure, in light of the circumstances under which such disclosure is made,
that other representations and warranties are affected thereby.
(b) In the event of any inconsistency between the statements in the body of
this Agreement and those in the Sellers' Disclosure Schedule (other than an
exception expressly set forth as such in the Company Disclosure Schedule with
respect to a specifically identified representation or warranty), the statements
in the body of this Agreement will control.
13.10 Assignments, Successors, and No Third Party Rights. Neither party may
assign any of its rights under this Agreement without the prior consent of the
other parties, which will not be unreasonably withheld, except that Buyer may
assign any of its rights under this Agreement to any Subsidiary of Buyer but
Buyer will not be relieved of its obligations hereunder as a result of such
assignment. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of the successors and
78
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
13.11 Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
13.12 Section Headings, Construction. The headings of Sections
in this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Sections" refer to the
corresponding Sections of this Agreement. All words used in this Agreement will
be construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
13.13 Interpretation of Agreement. This Agreement has been
submitted to the scrutiny of all parties hereto and their respective counsel and
shall be given a fair and reasonable interpretation without consideration being
given to its having been drafted by either party or its counsel.
13.14 Time of Essence. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
13.15 Governing Law. This Agreement will be governed by and construed under
the laws of the State of Pennsylvania without regard to conflicts of laws
principles.
13.16 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
79
BUYER: EMCON
ORGANIC WASTE TECHNOLOGIES, INC., EMCON, a California corporation
a Delaware corporation
By: /s/R. Xxxxxxx Xxxxxxxxx By: /s/R. Xxxxxxx Xxxxxxxxx
--------------------------------- --------------------------
Its: Director Its: CFO & VP - Legal
-------------------------------- -------------------------
SELLERS: COMPANY
NATIONAL EARTH PRODUCTS, INC,
a Pennsylvania corporation
/s/Xxxxxx X. Xxxxx By: /s/Xxxxxx X. Xxxxx
------------------------------------- ------------------------------
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxx
/s/Xxxxxxx X. Xxxxxxxx Its: President
------------------------------------ ------------------------------
Xxxxxxx X. Xxxxxxxx
80
